Exhibit 10.5
SECURITY AGREEMENT
(INTELLECTUAL PROPERTY)
THIS SECURITY
AGREEMENT (INTELLECTUAL PROPERTY) (the “Agreement”), is
made as of the 30 th
day of
March, 2007, by and among MICRONETICS, INC., a Delaware corporation
with an executive office at 26 Hampshire Drive, Hudson, New
Hampshire 03051 (the “Borrower”); MICROWAVE &
VIDEO SYSTEMS, INC., a Connecticut corporation with an executive
office at 160B Shelton Road, Monroe, Connecticut 06468, ENON
MICROWAVE, INC., MICROWAVE CONCEPTS, INC., and STEALTH MICROWAVE,
INC., each a Delaware corporation with an executive office at 26
Hampshire Drive, Hudson, New Hampshire 03051 (individually, a
“Guarantor”, and collectively, the
“Guarantors”, and the Borrower and each Guarantor are
sometimes referred to individually, together with any successors to
and assigns of any or all of its present or future interests in the
Intellectual Property Collateral, as hereinafter defined, other
than the Secured Party, as hereinafter defined, as the
“Debtor”), and CITIZENS BANK NEW HAMPSHIRE, a guaranty
savings bank chartered under the laws of the State of New
Hampshire, with a place of business at 875 Elm Street, Manchester,
New Hampshire 03101 (the “Secured Party”).
This Agreement is being executed
pursuant to (i) a Commercial Loan Agreement of near or even
date between Borrower, Guarantors, and Secured Party (the
“Loan Agreement”) whereby the Secured Party has
extended to the Borrower certain credit facilities consisting of a
Revolving Line of Credit Loan in the principal amount of up to
$5,000,000 and a Term Loan in the principal amount of up to
$6,500,000 (collectively, the “Loans”), all as set
forth and described in the Loan Agreement, and (ii) a Security
Agreement of even date among Secured Party, Borrower, and
Guarantors (the “Security Agreement”) whereby the
Borrower and Guarantors have each granted to the Secured Party a
Lien on inventory, accounts, goods, equipment, machinery, general
intangibles and other assets referred to therein relating to goods
and services manufactured, sold, licensed and marketed under the
Intellectual Property Collateral to secure the Loans from the
Secured Party to the Borrower, whereby the Secured Party shall have
the right to foreclose on such assets in the event of an Event of
Default. The intent and purpose of this Agreement is to secure all
of the Borrower’s and Guarantors’ obligations to the
Secured Party arising under and pursuant to the terms of the Loan
Agreement and the Security Agreement, subject to the terms and
conditions thereof.
Certain terms are used in this
Agreement as specifically defined herein. These definitions are set
forth or referred to in Section 9 hereof. Any and all terms
not described herein shall have the meaning ascribed to them in the
Loan Agreement.
1. Granting Clause; Intellectual
Property Collateral; Assignments .
1.1 Granting Clause . For
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Debtor hereby grants to the Secured
Party, a first security interest in the Intellectual Property
Collateral, to secure the Secured Obligations and Borrower’s
and Guarantors’ obligations under the Loan Agreement and the
other Loan Documents. Upon
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(IP) – Micronetics et al .
the occurrence of an Event of Default, the
Secured Party shall have the right under Section 1.3 to
execute an assignment for and on behalf of the Debtor that sells,
assigns and transfers to the Secured Party the Intellectual
Property Collateral as security for the Secured Obligations and
Debtor’s obligations under the Loan Agreement and the
Security Agreement. For the avoidance of doubt, the foregoing
provisions of this Section 1.1 constitute only a current grant
of a security interest in the Intellectual Property Collateral but
do not convey a current assignment or ownership interest in the
Intellectual Property Collateral.
1.2 Intellectual Property
Collateral . As used herein, the term “Intellectual
Property Collateral” shall mean all now owned or hereafter
acquired or arising:
(a) (i) patents and patent
applications, including, without limitation, those listed on
Schedule 1.2(a) hereto and the inventions and improvements
described and claimed therein, and patentable inventions,
(ii) the reissues, divisions, continuations,
continuations-in-part, renewals and extensions of any of the
foregoing, (iii) all income, royalties, damages or payments
now or hereafter due and/or payable under any of the foregoing or
with respect to any of the foregoing, including without limitation,
damages or payments for past or future infringements of any of the
foregoing, (iv) the right to sue for past, present and future
infringements of any of the foregoing, and (v) all rights
corresponding to any of the foregoing throughout the world
(collectively, the “Patents”);
(b) (i) trademarks, service
marks, trademark registrations, service mark registrations, trade
names, collective marks and certification marks, and trademark and
servicemark applications, and trade dress, including logos and/or
designs, in connection with any of the foregoing including, without
limitation, those listed on Schedule 1.2(b) hereto, (ii) all
renewals of any of the foregoing, (iii) all income, royalties,
damages and payments now or hereafter due and/or payable under any
of the foregoing or with respect to any of the foregoing, including
without limitation, damages or payments for past or future
infringements of any of the foregoing, (iv) the right to sue
for past, present and future infringements of any of the foregoing,
(v) all rights corresponding to any of the foregoing
throughout the world, and (vi) the goodwill of the
Debtor’s business connected with and symbolized by any of the
foregoing (collectively, the “Marks”);
(c) (i) trade secrets, including,
without limitation, patentable inventions, any and all product
formulae, manufacturing techniques, product specifications,
financial information, customer lists, computer data and programs,
and marketing and business plans, (ii) all income, royalties,
damages and payments now or hereafter due and/or payable under any
of the foregoing or with respect to any of the foregoing, including
without limitation, damages or payments for past or future
infringements of any of the foregoing, (iii) the right to sue
for past, present and future infringements of any of the foregoing,
and (iv) all rights corresponding to any of the foregoing
throughout the world (collectively, the “Trade
Secrets”).
(d) (i) copyrights, copyright
registrations, and copyright applications, including, without
limitation, those listed on Schedule 1.2(d) hereto and copyrights
for computer programs and all tangible property embodying the
copyrights, (ii) the reissues, renewals and extensions
of
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any of the foregoing, (iii) all income,
royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing or with respect to any of the foregoing,
including without limitation, damages or payments for past or
future infringements of any of the foregoing, (iv) the right
to sue for past, present and future infringements of any of the
foregoing, and (v) all rights corresponding to any of the
foregoing throughout the world (collectively, the
“Copyrights”);
(e) subject to the provisions of
each license or license agreement or as otherwise permitted under
the provisions of Article 9 of the Uniform Commercial Code as
adopted by the State of New Hampshire, all licenses and license
agreements, whether as a licenser or licensee, with any other
Person, including, without limitation, the licenses of the Debtor
listed on Schedule 1.2(e) hereto, relating to the use of any
Patents, Marks, Trade Secrets or Copyrights, and all rights of
Debtor under any of the foregoing, including the right to
(i) prepare for sale, (ii) sell, and (iii) advertise
for sale, all inventory now or hereafter owned by Debtor and now or
hereafter covered by such license (collectively, the
“Licenses”);
together with all proceeds (cash and
non-cash) and products of the foregoing.
1.3 Assignments . In order to
duly perfect the Secured Party’s interests in the
Intellectual Property Collateral and/or to notify interested third
parties of the Secured Party’s interests therein, upon an
Event of Default, the Secured Party may exercise its rights under
the power of attorney granted under Section 8.2 to execute in
the name of the Debtor, and the Secured Party may then file, with
the U.S. Patent and Trademark Office (the “PTO”) or the
U.S. Copyright Office (the “Copyright Office”), as
appropriate, and any appropriate state and local filing offices, a
written assignment (in each case, an “Assignment”) of
Patents, Marks or Copyrights owned by such Debtor, each to be in
substantially the form of Exhibits A, B and C, respectively,
hereto; provided, however, Debtor shall not be required to assign
any application for an intent-to-use a trademark or service mark,
and further provided that no Assignment shall be executed,
effective, exercised or filed by the Secured Party with the PTO or
Copyright Office unless and until the occurrence of an Event of
Default. THE INTEREST IN THE INTELLECTUAL PROPERTY COLLATERAL BEING
GRANTED HEREUNDER IS NOT AND SHALL NOT BE CONSTRUED AS A CURRENT
ASSIGNMENT.
2. General Provisions
.
Debtor hereby represents and
warrants to and covenants with the Secured Party as
follows:
2.1 Title to Security; First
Lien .
(a) The Intellectual Property
Collateral listed on the Schedules (and any amendments thereto)
hereto constitute all property rights of the Debtor described in
Sections 1.2(a) through (d) hereof to which the Debtor has any
right, title or interest (including any license right); provided
that the parties recognize that for confidentiality purposes, none
of the Debtor’s Trade Secrets are described or identified on
such Schedules and none of Debtor’s non-registered
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copyrights are listed. As of the effective date
of this Agreement, all of such Intellectual Property Collateral is
subsisting, unrevoked and uncancelled and none of the foregoing has
been adjudged unenforceable, in whole or in part. As of the
effective date of this Agreement, the Debtor, to its actual
knowledge, is the owner or is licensed to use or practice under all
trademarks, service marks, patents, trade secrets and copyrights
used in its business.
(b) Except as provided below, and
except for non-exclusive licenses granted by the Debtor in the
ordinary course of business, Debtor is the true and lawful sole and
exclusive owner of the Intellectual Property Collateral, including
any Intellectual Property Collateral acquired or arising after the
date hereof, and the Intellectual Property Collateral is subject to
no Lien, including covenants by the Debtor not to sue third
Persons, other than Permitted Encumbrances and, except for the
foregoing, no financing statement, security agreement, assignment,
license, covenant not to sue, shop rights or other Lien instrument
covering all or any part of the Intellectual Property Collateral is
on file in any public office; and the Debtor will not execute or
authorize to be filed in any public office any of the foregoing
except in favor of the Secured Party or with respect to a Permitted
Encumbrance. Notwithstanding the foregoing, the parties understand
that in certain instances, discrete portions of the Intellectual
Property Collateral may be jointly owned with third parties, or
required to be assigned to such third party, either now or in the
future, particularly with respect to any licenses, alliances, or
other agreements covering or related to the development of
intellectual property or improvements thereto.
(c) Upon (i) the giving of
value to the Debtor by the Secured Party, (ii) the delivery to
the Secured Party of any Intellectual Property Collateral
consisting of Instruments or other collateral possession of which
is required for perfection, (iii) the filing of proper
financing statements on form UCC-1 (or other comparable form) in
the appropriate filing offices, (iv) upon the filing of any
notices of a security interest in the appropriate filing offices,
and (v) the taking by the Secured Party of any other actions
that may be required at law for the purpose of perfecting a
security interest in intellectual property, the Secured Party will
obtain a valid, enforceable first priority perfected Lien and
security interest in the Intellectual Property Collateral except to
the extent of any Liens or Permitted Encumbrances permitted hereby
or under the Loan Agreement or related Loan
documentation.
2.2 New Intellectual Property
Collateral . Any Intellectual Property Collateral acquired or
developed by any of the Debtor’s officers, directors, or
employees in the course of the Debtor’s business shall be
owned by the Debtor and shall be automatically subject to
Section 1 hereof. Notwithstanding the foregoing, the parties
understand that in certain instances, discrete portions of the
Intellectual Property Collateral may be jointly owned with third
parties, or required to be assigned to such third party, either now
or in the future, particularly with respect to any licenses,
alliances, or other agreements covering or related to the
development of intellectual property or improvements
thereto.
2.3 Chief Executive Office;
Intellectual Property Collateral Locations . The Debtor’s
chief executive office and the office where the Debtor keeps its
books and records relating to the Intellectual Property Collateral,
is located at the address first set forth above. The Debtor will
not move its chief executive office unless (i) it shall have
given to the Secured Party not less than
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thirty (30) days’ prior written
notice of its intention so to do, clearly describing such new
location and providing such other information in connection
therewith as the Secured Party may reasonably request and
(ii) with respect to such new location, it shall have taken
all action satisfactory to the Secured Party to maintain the
security interest of the Secured Party in the Intellectual Property
Collateral to be granted hereby at all times fully perfected and in
full force and effect. The originals of all documents evidencing
the Intellectual Property Collateral and the only original records
of the Debtor relating thereto are and will continue to be kept at
such locations.
2.4 General Duties of the
Debtor . Except to the extent that the Debtor determines that
it is not commercially reasonable or necessary to do so and the
same would not have a Material Adverse Effect, the Debtor shall use
commercially reasonable efforts to (i) prosecute any patent,
trademark, service mark or copyright application pending as of the
date hereof or thereafter until the Secured Obligations shall have
been paid in full, (ii) make application at the federal level
on unpatented but patentable inventions that Debtor determines not
to maintain as trade secrets and on trademarks, service marks and
copyrights, in each case as Debtor in its reasonable discretion
deems appropriate, (iii) preserve and maintain all rights in
the Patents, Marks, Trade Secrets, Copyrights and Licenses, in each
case as Debtor in its reasonable discretion deems appropriate, and
(iv) fulfill its obligations under any and all Licenses,
except with the prior written consent of the Secured Party or
except where breach of a License is necessary to contest the scope
or validity of a patent licensed to Debtor thereunder or to
otherwise reduce or eliminate any royalty or other license fee
payable by Debtor to a third party thereunder. Any expenses
incurred in connection with the foregoing shall be borne by the
Debtor, including, without limitation, any and all maintenance
fees. Except to the extent that the Debtor determines that it is
not commercially reasonable or necessary to do so and the same
would not have a Material Adverse Effect, the Debtor shall not
discontinue the payment of any maintenance fees without the prior
written consent of the Secured Party.
2.5 Recording and Filing .
Upon written request of Secured Party, the Debtor shall reimburse
Secured Party for all recording, filing or other taxes, fees and
other charges incurred by Secured Party with respect to any notices
of security interest, financing statements and continuation
statements filed or recorded by Secured Party with respect to the
Intellectual Property Collateral, and shall comply with all such
statutes and regulations, as may be required by law in order to
establish, preserve, perfect and protect the first Lien (subject to
the Permitted Encumbrances, if any) of the Secured Party in the
Intellectual Property Collateral (including, without limitation,
any interests acquired after the execution hereof) and the rights
of the Secured Party thereunder.
2.6 Restrictions on Future
Agreements . Debtor agrees that until the Secured Obligations
shall have been paid in full, the Debtor will not, without the
Secured Party’s prior written consent, sell, assign, pledge,
encumber or otherwise transfer to any Person other than the Secured
Party, any of the Debtor’s rights in its present or future
Patents, Marks, Trade Secrets, Copyrights or Licenses, or enter
into any other agreement, including, without limitation, a license
agreement, which is inconsistent with the Debtor’s
obligations under this Agreement, except (i) licenses by
Debtor in the ordinary course of business or in connection with
development of new
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business lines, development agreements, or
strategic alliances, (ii) so-called end-user, non-exclusive
licenses granted to the Debtor’s customers in the ordinary
course of its business, and (iii) Liens in favor of the
Secured Party pursuant hereto or in respect of the Permitted
Encumbrances or other Liens permitted hereby or by the Loan
Agreement or other Loan documents. Debtor further agrees that
except as otherwise expressly provided in Section 2.4, it will
not take any action, or permit any action to be taken by any
affiliate of the Debtor or any other Person subject to the
Debtor’s control, or fail to take any action, which would
affect the validity or enforcement of the rights transferred to the
Secured Party under this Agreement. Notwithstanding the foregoing,
the parties understand that in certain instances, discrete portions
of the Intellectual Property Collateral may be jointly owned with
third parties, or required to be assigned to such third party,
either now or in the future, particularly with respect to any
licenses, alliances, or other agreements covering or related to the
development of intellectual property or improvements
thereto.
2.7 Infringements . To
Debtor’s actual knowledge, there is no pending or threatened
claim, action, suit or proceeding against the Debtor with respect
to any alleged infringement by the Debtor’s business or
operations of any trademark, service mark, patent, trade secret or
copyright. Debtor agrees, promptly upon learning thereof, to notify
the Secured Party in writing of the name and address of, and to
furnish such pertinent information that may be available with
respect to, any Person who may be infringing or otherwise violating
any of the Debtor’s rights in and to any Intellectual
Property Collateral, or with respect to any Person claiming that
the Debtor’s use or practice of any Intellectual Property
Collateral violates any property right of that Person. Except to
the extent that the Debtor determines that it is not commercially
reasonable or necessary to do so and the same would not have a
Material Adverse Effect, Debtor further agrees, unless otherwise
agreed by the Secured Party, diligently to prosecute and/or enjoin
permanently any Person infringing any such rights, or to otherwise
grant a license to such third party.
2.8 Amendments. Etc. Except
to the extent that the Debtor determines that it is commercially
reasonable or necessary to do so and the same would not have a
Material Adverse Effect, and except as otherwise expressly
permitted under Section 2.4, the Debtor shall not and shall
not permit any documents, instruments, chattel paper, guarantees
and contracts constituting or evidencing any Intellectual Property
Collateral hereunder to be materially amended, modified or changed
in any way without the prior written consent of the Secured Party.
For the avoidance of doubt, the Secured Party recognizes that
trademark, copyright or patent applications may be amended,
modified or changed, either in a material or a non-material way, in
the course of prosecuting such applications, and the Secured Party
hereby expressly agrees that such amendments, modifications or
changes are not prohibited hereunder and may be effected without
the Secured Party’s consent.
2.9 Direction to Third Parties;
Etc. Upon the occurrence of an Event of Default, the Debtor
agrees (i) to cause payments, if any, on account of the
Licenses with respect to which the Debtor is the licensor receiving
such payments to be made directly to a cash collateral account
established by the Secured Party and (ii) that the Secured
Party may, at its option, directly notify the obligors with respect
to any Licenses to make any payments with respect thereto as
provided in the preceding clause. Except with respect to any such
payments which are provided for the
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benefit of a third party (for example, a senior
licensor), without notice to or assent by the Debtor, the Secured
Party may apply any or all amounts therein, or thereafter deposited
in, any cash collateral account in the manner provided in
Section 8.7 hereof. The costs and expenses (including
attorneys’ fees) of collection, wh
