INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

 

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

                  Intellectual  Property  Security  Agreement (this  "Agreement"

dated as of  September  10,  2004,  by and among ROO  Group,  Inc.,  a  Delaware

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  Company  and the  Secured  Party (the  "Purchase  Agreement"),

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

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

Notes, due two years from the date of issue (the "Notes"), which are convertible

into shares of Company's  Common Stock,  par value $.0001 per share (the "Common

Stock"). In connection therewith,  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 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

 

      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.

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      "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.

 

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      "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;

 

 

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            (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,  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 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.

 

 

                                       4

<PAGE>

 

            (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, 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,  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.

 

 

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<PAGE>

 

      (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