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Exhibit 10.6
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL
PROPERTY SECURITY AGREEMENT (this “ Agreement
”), effective as of June 2, 2008, by and among
Pediatric Prosthetics, Inc., an Idaho corporation (“
Parent
”) and Pediatric Prosthetics, Inc., a Texas corporation
(the "Subsidiary") (hereinafter the Parent and then Subsidiary
shall collectively be referred to as the “ Company
”) and the secured parties signatory hereto and their
respective endorsees, transferees and assigns (the
“ Secured
Party ”).
W
I T N E S S E T H:
WHEREAS,
pursuant to a Securities Purchase Agreement, dated the date
hereof, between Parent and the Secured Party (the “
Purchase Agreement ”), Parent has agreed to issue to
the Secured Party and the Secured Party has agreed to purchase from
Parent certain of Parent’s 6% Callable Secured Convertible
Notes, due three years from the date of issue (the “
Notes ”), which are convertible into shares of
Company’s Common Stock, par value $.001 per share (the
“
Common Stock ”). In connection therewith,
Parent shall issue the Secured Party certain Common Stock purchase
warrants (the “
Warrants ”); and
WHEREAS , pursuant to a Securities Purchase Agreement, dated
the date hereof, between Parent and the Secured Party (the “
Purchase
Agreement ”), Parent has agreed to issue to the
Secured Party and the Secured Party has agreed to purchase from
Parent certain of Parent’s 6% Callable Secured Convertible
Notes, due three years from the date of issue (the “
Notes
”), which are convertible into shares of Company’s
Common Stock, par value $.001 per share (the “ Common
Stock ”). In connection therewith, Parent
shall issue the Secured Party certain Common Stock purchase
warrants (the “ Warrants
”); and
WHEREAS , the Parent has been, and is now, engaged as a
national provider of specialized pediatric prosthetics for both
upper and lower limbs; and
WHEREAS , in order to induce the Secured Party to purchase
the Notes, Company has agreed to execute and deliver to the Secured
Party this Agreement for the benefit of the Secured Party and to
grant to it a first priority security interest in certain
Intellectual Property (defined below) of Company to secure the
prompt payment, performance and discharge in full of all of
Company’s obligations under the Notes and exercise and
discharge in full of Company’s obligations under the
Warrants; and
WHEREAS , in light of the foregoing, the Company expects to
derive substantial benefit from the Purchase Agreement and sale of
the Notes and the transactions contemplated thereby and, in
furtherance thereof, has agreed to execute and deliver this
Agreement.
NOW,
THEREFORE, in consideration of the agreements
herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as
follows:
1.
Defined
Terms . Unless otherwise defined herein,
terms which are defined in the Purchase Agreement and used
herein are so used as so defined; and the following terms
shall have the following meanings:
“
Software
Intellectual Property ” shall
mean:
(a) all
software programs (including all source code, object code and
all related applications and data files), whether now owned,
upgraded, enhanced, licensed or leased or hereafter acquired
by the Company, above;
(b) all
computers and electronic data processing hardware and firmware
associated therewith;
(c) all
documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect to such software,
hardware and firmware described in the preceding clauses (a)
and (b); and
(d) all
rights with respect to all of the foregoing, including,
without limitation, any and all upgrades, modifications,
copyrights, licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support
rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions,
or model conversions of any of the foregoing.
“
Copyrights
” shall mean (a) all copyrights, registrations and
applications for registration, issued or
filed, including any reissues, extensions or renewals thereof,
by or with the United States Copyright Office or any similar
office or agency of the United States, any state thereof, or
any other country or political subdivision thereof, or
otherwise, including, all rights in and to the material
constituting the subject matter thereof, including, without
limitation, any referred to in Schedule
B hereto, and (b) any rights in any material which is
copyrightable or which is protected by common law, United
States copyright laws or similar laws or any law of any State,
including, without limitation, any thereof referred to in
Schedule
B hereto.
“
Copyright
License ” shall mean any agreement, written or
oral, providing for a grant by the Company of any right in any
Copyright, including, without limitation, any thereof referred
to in Schedule
B hereto.
“
Intellectual
Property ” shall means, collectively, the
Software Intellectual Property, Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks, Trademark
Licenses and Trade Secrets.
“
Obligations
” means all of the Company’s obligations under
this Agreement and the Notes, in each case, whether now or
hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later
decreased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or
any part of such payment is avoided or recovered directly or
indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time.
“
Patents
” shall mean (a) all letters patent of the United States
or any other country or any political subdivision thereof, and
all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule
B hereto, and (b) all applications for letters patent
of the United States and all divisions, continuations and
continuations-in-part thereof or any other country or any
political subdivision, including, without limitation, any
thereof referred to in Schedule
B hereto.
“
Patent
License ” shall mean all agreements, whether
written or oral, providing for the grant by the Company of any
right to manufacture, use or sell any invention covered by a
Patent, including, without limitation, any thereof referred to
in Schedule
B hereto.
“
Security
Agreement ” shall mean the a Security Agreement,
dated the date hereof between Company and the Secured
Party.
“
Trademarks
” shall mean (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or
business identifiers, and the goodwill associated therewith,
now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any
political subdivision thereof, or otherwise, including,
without limitation, any thereof referred to in Schedule
B hereto, and (b) all reissues, extensions or renewals
thereof.
“
Trademark
License ” shall mean any agreement, written or
oral, providing for the grant by the Company of any right to
use any Trademark, including, without limitation, any thereof
referred to in Schedule
B hereto.
“
Trade
Secrets ” shall mean common law and statutory
trade secrets and all other confidential or proprietary or
useful information and all know-how obtained by or used in or
contemplated at any time for use in the business of the
Company (all of the foregoing being collectively called a
“ Trade
Secret ”), whether or not such Trade Secret has
been reduced to a writing or other tangible form, including
all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses,
including each Trade Secret license referred to in Schedule
B hereto, and including the right to sue for and to
enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
2.
Grant of
Security Interest. In accordance with
Section 3(m) of the Security Agreement, to secure the complete
and timely payment, performance and discharge in full, as the
case may be, of all of the Obligations, the Company hereby,
unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing security
interest in, a continuing first lien upon, an unqualified
right to possession and disposition of and a right of set-off
against, in each case to the fullest extent permitted by law,
all of the Company’s right, title and interest of
whatsoever kind and nature in and to the Intellectual Property
(the “ Security
Interest ”).
3.
Representations
and Warranties . The Company hereby
represents and warrants, and covenants and agrees with, the
Secured Party as follows:
(a) The
Company has the requisite corporate power and authority to
enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and
performance by the Company of this Agreement and the filings
contemplated therein have been duly authorized by all
necessary action on the part of the Company and no further
action is required by the Company. This Agreement
constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditor’s rights generally.
(b) The
Company represents and warrants that it has no place of
business or offices where its respective books of account and
records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where the Intellectual
Property is stored or located, except as set forth on
Schedule
A attached hereto;
(c) The
Company is the sole owner of the Intellectual Property (except
for non-exclusive licenses granted by the Company in the
ordinary course of business), free and clear of any liens,
security interests, encumbrances, rights or claims, and is
fully authorized to grant the Security Interest in and to
pledge the Intellectual Property. There is not on
file in any governmental or regulatory authority, agency or
recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the
foregoing (other than those that have been filed in favor of
the Secured Party pursuant to this Agreement) covering or
affecting any of the Intellectual Property. So long
as this Agreement shall be in effect, the Company shall not
execute and shall not knowingly permit to be on file in any
such office or agency any such financing statement or other
document or instrument (except to the extent filed or recorded
in favor of the Secured Party pursuant to the terms of this
Agreement), except for a financing statement covering assets
acquired by the Company after the date hereof.
(d) The
Company shall at all times maintain its books of account and
records relating to the Intellectual Property at its principal
place of business and its Intellectual Property at the
locations set forth on Schedule
A attached hereto and may not relocate such books of
account and records unless it delivers to the Secured Party at
least 30 days prior to such relocation (i) written notice of
such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that the
necessary documents have been filed and recorded and other
steps have been taken to perfect the Security Interest to
create in favor of the Secured Party valid, perfected and
continuing first priority liens in the Intellectual Property
to the extent they can be perfected through such
filings.
(e) This
Agreement creates in favor of the Secured Party a valid
security interest in the Intellectual Property securing the
payment and performance of the Obligations and, upon making
the filings required hereunder, a perfected first priority
security interest in such Intellectual Property to the extent
that it can be perfected through such filings.
(f)
Upon request of the Secured Party, the Company shall execute
and deliver any and all agreements, instruments, documents,
and papers as the Secured Party may request to evidence the
Secured Party’s security interest in the Intellectual
Property and the goodwill and general intangibles of the
Company relating thereto or represented thereby, and the
Company hereby appoints the Secured Party its attorney-in-fact
to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is
irrevocable until the Obligations have been fully satisfied
and are paid in full.
(g) The
execution, delivery and performance of this Agreement does not
conflict with or cause a breach or default, or an event that
with or without the passage of time or notice, shall
constitute a breach or default, under any agreement to which
the Company is a party or by which the Company is
bound. No consent (including, without limitation,
from stock holders
or creditors of the Company) is required for the Company to
enter into and perform its obligations hereunder.
(h) The
Company shall at all times maintain the liens and Security
Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Intellectual
Property to the extent they can be perfected by filing in
favor of the Secured Party until this Agreement and the
Security Interest hereunder shall terminate pursuant to
Section 11. The Company hereby agrees to defend the
same against any and all persons. The Company shall
safeguard and protect all Intellectual Property for the
account of the Secured Party. Without limiting the
generality of the foregoing, the Company shall pay all fees,
taxes and other amounts necessary to maintain the Intellectual
Property and the Security Interest hereunder, and the Company
shall obtain and furnish to the Secured Party from time to
time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the
priority of the Security Interest hereunder.
(i) The
Company will not transfer, pledge, hypothecate, encumber,
license (except for non-exclusive licenses granted by the
Company in the ordinary course of business), sell or otherwise
dispose of any of the Intellectual Property without the prior
written consent of the Secured Party, which consent will not
be unreasonably withheld.
(j) The
Company shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Party promptly, in sufficient
detail, of any substantial change in the Intellectual
Property, and of the occurrence of any event which would have
a material adverse effect on the value of the Intellectual
Property or on the Secured Party’s security interest
therein.
(k) The
Company shall permit the Secured Party and its representatives
and agents to inspect the Intellectual Property at any time,
and to make copies of records pertaining to the Intellectual
Property as may be requested by the Secured Party from time to
time.
(l) The
Company will take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights,
claims, causes of action and accounts receivable in respect of
the Intellectual Property.
(m) The
Company shall promptly notify the Secured Party in sufficient
detail upon becoming aware of any attachment,
garnishment, execution or other legal process levied against
any Intellectual Property and of any other information
received by the Company that may materially affect the value
of the Intellectual Property, the Security Interest or the
rights and remedies of the Secured Party
hereunder.
(n) All
information heretofore, herein or hereafter supplied to the
Secured Party by or on behalf of the Company with respect to
the Intellectual Property is accurate and complete in all
material respects as of the date furnished.
(o)
Schedule
A attached hereto contains a list of all of the
subsidiaries of Company.
(p)
Schedule
B attached hereto includes all Licenses, and all
Patents and Patent Licenses, if any, owned by the Company in
its own name as of the date hereof. Schedule
B hereto includes all Trademarks and Trademark
Licenses, if any, owned by the Company in its own name as of
the date hereof. Schedule
B hereto includes all Copyrights and Copyright
Licenses, if any, owned by the Company in its own name as of
the date hereof. Schedule
B hereto includes all Trade Secrets and Trade Secret
Licenses, if any, owned by the Company as of the date
hereof. To the best of the Company’s
knowledge, each License, Patent, Trademark, Copyright and
Trade Secret is valid, subsisting, unexpired, enforceable and
has not been abandoned. Except as set forth in
Schedule
B , none of such Licenses, Patents, Trademarks,
Copyrights and Trade Secrets is the subject of any licensing
or franchise agreement. To the best of the
Company’s knowledge, no holding, decision or judgment
has been rendered by any Governmental Body which would limit,
cancel or question the validity of any License, Patent,
Trademark, Copyright and Trade Secrets . No action
or proceeding is pending (i) seeking to limit, cancel or
question the validity of any License, Patent,
Trademark,
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