INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

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Exhibit 10.6    Intellectual Property Security Agreement dated as of March 17,

                2005 between the Registrant and the secured parties named

                therein

 

                          INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement" dated as of March

17, 2005, by and among Conectisys Corporation, a Colorado 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% Callable Secured Convertible

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

convertible into shares of Company's Common Stock, no par value 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.

 

"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 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, except as set forth on Schedule B.  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 or a security agreement prior

to the date hereof) covering or affecting any of the Intellectual Property,

except as set forth on Schedule B.  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 or a security agreement

prior to the date hereof), except for a financing statement covering assets

acquired by the Company after the date hereof or as set forth on Schedule B,

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) Except as set forth on Schedule B, 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.

 

(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.

 

(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;