INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

                  INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement"

dated as of November 18, 2005, by and among Safetek International, 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% 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 $.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;

 

                           (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 D. 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, except as set forth on

Schedule D. 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 as set forth on Schedule D or 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.

 

 

 

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                           (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 D, 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.

 

 

 

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                           (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 . Except as set forth in

Schedule B, 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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                           (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