INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

                  Intellectual Property Security Agreement (this "Agreement"

dated as of February 28th, 2005, by and among Insynq, Inc., a Nevada corporation

(the "Company"), and the secured parties signatory hereto and their respective

endorsees, transferees and assigns (collectively, 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 the Company and the Secured Party (the "Purchase Agreement"),

the Company has agreed to issue to the Secured Party and the Secured Party has

agreed to purchase from the Company certain of the Company's 8% Secured

Convertible Notes, due three years from the date of issue (the "Notes"), which

are convertible into shares of the Company's Common Stock, par value $.001 per

share (the "Common Stock") and shares of the Company's Series B Convertible

Preferred Stock (the "Preferred Stock" and collectively with the Notes, the

"Convertible Securities"). In connection therewith, the Company shall issue the

Secured Party certain Common Stock purchase warrants (the "Warrants"); and

 

         WHEREAS, in order to induce the Secured Party to purchase the

Convertible Securities, the 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 security interest in certain Intellectual Property (defined below) of

the Company to secure the prompt payment, performance and discharge in full of

all of the Company's obligations under the Convertible Securities and exercise

and discharge in full of the Company's obligations under the Warrants; and

 

         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

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(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 Convertible Securities, 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 Security

Agreement, dated the date hereof between

Company and the Secured Party.

 

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                           "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, subject to the Pre-Existing Liens (as defined below) 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

 

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          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, except

         for the security interests of the Secured Party that have been granted

         prior to the date hereof (the "Pre-Existing Liens") 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, provided that the value of the Intellectual Property covered by

         this Agreement along with the Collateral (as defined in the Security

         Agreement) is equal to at least 150% of the Obligations.

 

(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 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 reasonably 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

 

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          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 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.

 

(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 during

         reasonable business hours, and to make copies of records pertaining to

         the Intellectual Property as may be requested by the Secured Party from

         time to time, so long as the Secured Party provides the Company with

         reasonable prior notice.

 

(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.

 

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(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,

         Copyright or Trade Secret, or (ii) which, if adversely determined,

         would have a material adverse effect on the value of any License,

         Patent, Trademark, Copyright or Trade Secret. The Company has used and

         will continue to use for the duration of this Agreement, proper

         statutory notice in connection with its use of the Patents, Trademarks

         and Copyrights and consistent standards of quality in products leased

         or sold under the Patents, Trademarks and Copyrights.

 

(q)      With respect to any Intellectual Property:

 

(i)      such Intellectual Property is subsisting and has not been adjudged

         invalid or unenforceable, in whole or in part;

 

(ii)     such Intellectual Property is valid and enforceable;

 

(iii)    the Company has made all necessary filings and recordations to protect

         its interest in such Intellectual Property, including, without

         limitation, recordations of all of its interests in the Patents, Patent

         Licenses, Trademarks and Trademark Licenses in the United States Patent

         and Trademark Office and in corresponding offices throughout the world

         and its claims to the Copyrights and Copyright Licenses in the United

         States Copyright Office and in corresponding offices throughout the

         world;

 

(iv)     other than as set forth in Schedule B, the Company is the exclusive

         owner of the entire and unencumbered right, title and interest in and

         to such Intellectual Property and no claim has been made that the use

         of such Intellectual Property infringes on the asserted rights of any

         third party; and

 

(v)      the Company has performed and will continue to perform all acts and has

         paid all required fees and taxes to maintain

 

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          each and every item of Intellectual Property in full force and effect

          throughout the world, as applicable.

 

(r)      Except with respect to any Trademark or Copyright that the Company

         shall reasonably determine is of negligible economic value to the

         Company, the Company shall:

 

(i)      maintain each Trademark and Copyright in full force free from any claim

         of abandonment for non-use, maintain as in the past the quality of

         produ