EXHIBIT 10.7
PATENT SECURITY AGREEMENT
(HOLDINGS)
THIS PATENT SECURITY AGREEMENT (this "Agreement"), dated as of December ,
1998 is made by NATIONAL MEDIA CORPORATION, a Delaware corporation ("Holdings"),
in favor of FOOTHILL CAPITAL CORPORATION, a California corporation ("Lender").
RECITALS
A. Borrower and Secured Party are contemporaneously herewith entering into
that certain Loan and Security Agreement dated as of the date hereof (as
amended, restated, modified, supplemented, refinanced, renewed, or extended from
time to time, the "Loan Agreement"), pursuant to which Secured Party has agreed
to make certain financial accommodations to Holdings.
B. Holdings has executed in favor of Secured Party that certain General
Continuing Guaranty, dated as of the date hereof (the "Guaranty"), in favor of
Secured Party, respecting certain obligations of Borrower owing to Secured Party
under the Loan Agreement.
C. Holdings and Secured Party are contemporaneously herewith entering into
that certain Security Agreement, dated as of the date hereof (the "Security
Agreement"), pursuant to which Holdings has granted to Secured Party a security
interest in (among other things) all general intangibles of Holdings.
D. As one of the conditions precedent to the obligations of Lender under
the Loan Agreement, Holdings has agreed to execute and deliver this Agreement to
Lender for filing with the PTO and with any other relevant recording systems in
any domestic or foreign jurisdiction, and as further evidence of and to
effectuate Lender's existing security interests in the patents and other general
intangibles described herein.
ASSIGNMENT
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which is hereby acknowledged, Holdings hereby agrees in favor of Lender as
follows:
1. DEFINITIONS; INTERPRETATION.
(a) CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
-1-
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
Section 101 ET SEQ.), as amended, and any successor statute.
"BORROWER" means Quantum North America, Inc., a Delaware corporation.
"EVENT OF DEFAULT" shall have the meaning ascribed to such thereto in
the Security Agreement.
"GUARANTIED OBLIGATIONS" shall have the meaning ascribed thereto in
the Guaranty.
"LIEN" means any pledge, security interest, assignment, charge or
encumbrance, lien (statutory or other), or other preferential arrangement
(including any agreement to give any security interest).
"PATENT COLLATERAL" has the meaning set forth in SECTION 2.
"PATENTS" has the meaning set forth in SECTION 2.
"PROCEEDS" means whatever is receivable or received from or upon the
sale, lease, license, collection, use, exchange or other disposition,
whether voluntary or involuntary, of any Patent Collateral, including
"proceeds" as defined at UCC Section 9306, and all proceeds of proceeds.
Proceeds shall include (i) any and all accounts, chattel paper,
instruments, general intangibles, cash and other proceeds, payable to or
for the account of Holdings, from time to time in respect of any of the
Patent Collateral, (ii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to or for the account of Holdings from time to
time with respect to any of the Patent Collateral, (iii) any and all claims
and payments (in any form whatsoever) made or due and payable to Holdings
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Patent
Collateral by any Person acting under color of governmental authority, and
(iv) any and all other amounts from time to time paid or payable under or
in connection with any of the Patent Collateral or for or on account of any
damage or injury to or conversion of any Patent Collateral by any Person.
"PTO" means the United States Patent and Trademark Office and any
successor thereto.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of California.
"UNITED STATES" and "U.S." each mean the United States of America.
-2-
(b) TERMS DEFINED IN UCC. Where applicable and except as otherwise
defined herein, terms used in this Agreement shall have the meanings ascribed to
them in the UCC.
(c) INTERPRETATION. In this Agreement, except to the extent the
context otherwise requires:
(i) Any reference to a Section or a Schedule is a reference to a
section hereof, or a schedule hereto, respectively, and to a subsection or
a clause is, unless otherwise stated, a reference to a subsection or a
clause of the Section or subsection in which the reference appears.
(ii) The words "hereof," "herein," "hereto," "hereunder" and the like
mean and refer to this Agreement as a whole and not merely to the specific
Section, subsection, paragraph or clause in which the respective word
appears.
(iii) The meaning of defined terms shall be equally applicable to both
the singular and plural forms of the terms defined.
(iv) The words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation."
(v) References to agreements and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications
thereto.
(vi) References to statutes or regulations are to be construed as
including all statutory and regulatory provisions consolidating, amending
or replacing the statute or regulation referred to.
(vii) Any captions and headings are for convenience of reference only
and shall not affect the construction of this Agreement.
(viii) Capitalized words not otherwise defined herein shall have the
respective meanings ascribed to them in the Security Agreement.
(ix) In the event of a direct conflict between the terms and
provisions of this Agreement and the Loan Agreement, it is the intention of
the parties hereto that both such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of the Loan Agreement shall
control and govern; PROVIDED, HOWEVER, that the inclusion herein of
additional obligations on the part of the Holdings and supplemental rights
and remedies in favor of Lender (whether under California law or
-3-
applicable federal law), in each case in respect of the Patent Collateral,
shall not be deemed a conflict with the Loan Agreement.
2. SECURITY INTEREST.
(a) ASSIGNMENT AND GRANT OF SECURITY INTEREST. As security for the
payment and performance of the Guarantied Obligations, Holdings hereby grants,
assigns, transfers, and conveys to Lender a continuing security interest in all
of Holdings' right, title and interest in, to and under the following property,
whether now existing or hereafter acquired or arising (collectively, the "Patent
Collateral"):
(i) all letters patent of the U.S. or any other country, all
registrations and recordings thereof, and all applications for letters
patent of the U.S. or any other country, owned, held, or used by Holdings
in whole or in part, including all existing U.S. patents and patent
applications of Holdings which are described in SCHEDULE A hereto, as the
same may be amended or supplemented pursuant hereto from time to time, and
together with and including all patent licenses held by Holdings, including
such patent licenses which are described in SCHEDULE A hereto, together
with all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof and the inventions disclosed therein, and all
rights corresponding thereto throughout the world, including the right to
make, use, lease, sell and otherwise transfer the inventions disclosed
therein, and all proceeds thereof, including all license royalties and
proceeds of infringement suits (collectively, the "Patents");
(ii) all claims, causes of action and rights to ▇▇▇ for past, present
and future infringement or unconsented use of any of the Patents and all
rights arising therefrom and pertaining thereto;
(iii) all general intangibles (as defined in the UCC) and all
intangible intellectual or other similar property of Holdings of any kind
or nature, whether now owned or hereafter acquired or developed, associated
with or arising out of any of the Patents and not otherwise described
above; and
(iv) all products and Proceeds of any and all of the foregoing.
(b) CONTINUING SECURITY INTEREST. Holdings agrees that this Agreement
shall create a continuing security interest in the Patent Collateral which shall
remain in effect until terminated in accordance with SECTION 16.
(c) INCORPORATION INTO SECURITY AGREEMENT. This Agreement shall be
fully incorporated into the Security Agreement and all understandings,
agreements and provisions contained in the Security Agreement shall be fully
incorporated into this
-4-
Agreement. Without limiting the foregoing, the Patent Collateral described in
this Agreement shall constitute part of the Collateral in the Security
Agreement.
(d) LICENSES. Anything in the Security Agreement or this Agreement to
the contrary notwithstanding, Holdings may grant non-exclusive licenses of the
Patent Collateral (subject to the security interest (if any) of Lender therein)
in the ordinary course of business and consistent with past practice.
3. FURTHER ASSURANCES; APPOINTMENT OF LENDER AS ATTORNEY-IN-FACT.
Holdings at its expense shall execute and deliver, or cause to be executed and
delivered, to Lender any and all documents and instruments, in form and
substance satisfactory to Lender, and take any and all action, which Lender may
reasonably request from time to time, to perfect and continue perfected,
maintain the priority of or provide notice of Lender's security interest in the
Patent Collateral and to accomplish the purposes of this Agreement. If Holdings
refuses to execute and deliver, or fails timely to execute and deliver, any of
the documents it is requested to execute and deliver by Lender in accordance
with the foregoing, Lender shall have the right to, in the name of Holdings, or
in the name of Lender or otherwise, without notice to or assent by Holdings, and
Holdings hereby irrevocably constitutes and appoints Lender (and any of Lender's
officers or employees or agents designated by Lender) as Holdings' true and
lawful attorney-in-fact with full power and authority, (i) to sign the name of
Holdings on all or any of such documents or instruments, and perform all other
acts, that Lender deems necessary or advisable in order to perfect or continue
perfected, maintain the priority or enforceability of or provide notice of
Lender's security interest in, the Patent Collateral, and (ii) to execute any
and all other documents and instruments, and to perform any and all acts and
things for and on behalf of Holdings, which Lender may deem necessary or
advisable to maintain, preserve and protect the Patent Collateral and to
accomplish the purposes of this Agreement, including (A) upon the occurrence and
during the continuance of any Event of Default, to defend, settle, adjust or
institute any action, suit or proceeding with respect to the Patent Collateral,
(B) upon the occurrence and during the continuance of any Event of Default, to
assert or retain any rights under any license agreement for any of the Patent
Collateral, including any rights of Holdings arising under Section 365(n) of the
Bankruptcy Code, and (C) upon the occurrence and during the continuance of any
Event of Default, to execute any and all applications, documents, papers and
instruments for Lender to use the Patent Collateral, to grant or issue any
exclusive or non-exclusive license with respect to any Patent Collateral (it
being understood that so long as no Event of Default has occurred and is
continuing, Holdings may grant or issue non-exclusive licenses in the ordinary
course of business and consistent with past practice with respect to the Patent
Collateral and subject to the security interest (if any) of Lender therein), and
to assign, convey or otherwise transfer title in or dispose of the Patent
Collateral. The power of attorney set forth in this SECTION 3, being coupled
with an interest, is irrevocable so long as this Agreement shall not have
terminated in accordance with SECTION 16.
-5-
Nothing in this Agreement shall obligate Holdings to commence any
suit, proceeding or other action for infringement of any of the Patents that are
immaterial to Holdings' business.
4. REPRESENTATIONS AND WARRANTIES. Holdings represents and warrants to
Lender, in each case to the best of its knowledge, information, and belief, as
follows:
(a) NO OTHER PATENTS. A true and correct list of all of the existing
Patents owned, held (whether pursuant to a license or otherwise) or used by
Holdings, in whole or in part, is set forth in SCHEDULE A.
(b) VALIDITY. Each of the Patents listed on SCHEDULE A is subsisting
and has not been adjudged invalid or unenforceable, in whole or in part, all
maintenance fees required to be paid on account of any Patents have been timely
paid for maintaining such Patents in force, and, to the best of Holdings'
knowledge, each of the Patents is valid and enforceable.
(c) OWNERSHIP OF PATENT COLLATERAL; NO VIOLATION. (i) Holdings has
rights in and good title to the existing Patent Collateral, (ii) with respect to
the Patent Collateral shown on SCHEDULE A hereto as owned by it, Holdings is the
sole and exclusive owner thereof, free and clear of any Liens and rights of
others (other than the security interest created hereunder), including licenses,
shop rights and covenants by Holdings not to ▇▇▇ third persons and (iii) with
respect to any Patent for which Holdings is either a licensor or a licensee
pursuant to a license or licensee agreement regarding such Patent, each such
license or licensing agreement is in full force and effect, Holdings is not in
default of any of its obligations thereunder and, other than the parties to such
licenses or licensing agreements, no other Person is known by Holdings to have
any rights in or to any of the Patent Collateral. To the best of Holdings'
knowledge, the past, present and contemplated future use of the Patent
Collateral by Holdings has not, does not and will not infringe upon or violate
any right, privilege or license agreement of or with any other Person.
(d) NO INFRINGEMENT. To the best of Holdings' knowledge, no material
infringement or unauthorized use presently is being made of any of the Patent
Collateral by any Person.
(e) POWERS. Holdings has the unqualified right, power and authority to
pledge and to grant to Lender a security interest in all of the Patent
Collateral pursuant to this Agreement, and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person except as already obtained.
5. COVENANTS. So long as any of the Guarantied Obligations remain
unsatisfied, Holdings shall comply with all of the covenants, terms and
provisions of this Agreement, the Security Agreement and the other Loan
Documents, and Holdings will
-6-
promptly give Lender written notice of the occurrence of any event that could
have a material adverse effect on any of the Patents or the Patent Collateral,
including any petition under the Bankruptcy Code filed by or against any
licensor of any of the Patents for which Holdings is a licensee.
6. FUTURE RIGHTS. Except as otherwise expressly agreed to in writing
by Lender, for so long as any of the Guarantied Obligations shall remain
outstanding, or, if earlier, until Lender shall have released or terminated, in
whole but not in part, its interest in the Patent Collateral, if and when
Holdings shall obtain rights to any new patentable inventions, or become
entitled to the benefit of any Patent, or any reissue, division, continuation,
renewal, extension or continuation-in-part of any Patent or Patent Collateral or
any improvement thereof (whether pursuant to any license or otherwise), the
provisions of SECTION 2 shall automatically apply thereto and Holdings shall
give to Lender prompt notice thereof. Holdings shall do all things deemed
necessary or advisable by Lender to ensure the validity, perfection, priority
and enforceability of the security interests of Lender in such future acquired
Patent Collateral. Holdings hereby authorizes Lender to modify, amend or
supplement the Schedules hereto and to re-execute this Agreement from time to
time on Holdings' behalf and as its attorney-in-fact to include any future
patents which are or become Patent Collateral and to cause such re-executed
Agreement or such modified, amended or supplemented Schedules to be filed with
the PTO.
7. REMEDIES. Upon the occurrence and during the continuance of an
Event of Default, Lender shall have all rights and remedies available to it
under the Security Agreement and applicable law (which rights and remedies are
cumulative) with respect to the security interests in any of the Patent
Collateral or any other Collateral. Holdings agrees that such rights and
remedies include the right of Lender as a Lender to sell or otherwise dispose of
its Collateral after default, pursuant to UCC Section 9504. Holdings agrees that
Lender shall at all times have such royalty free licenses, to the extent
permitted by law, for any Patent Collateral that is reasonably necessary to
permit the exercise of any of Lender's rights or remedies upon the occurrence of
an Event of Default with respect to (among other things) any tangible asset of
Holdings in which Lender has a security interest, including Lender's rights to
sell inventory, tooling or packaging which is acquired by Holdings (or its
successor, assignee or trustee in bankruptcy). In addition to and without
limiting any of the foregoing, upon the occurrence and during the continuance of
an Event of Default, Lender shall have the right but shall in no way be
obligated to bring suit, or to take such other action as Lender deems necessary
or advisable, in the name of Holdings or Lender, to enforce or protect any of
the Patent Collateral, in which event Holdings shall, at the request of Lender,
do any and all lawful acts and execute any and all documents required by Lender
in aid of such enforcement. To the extent that Lender shall elect not to bring
suit to enforce such Patent Collateral, upon the occurrence and during the
continuation of an Event of Default, Holdings, in the exercise of its reasonable
business judgment, agrees to use all reasonable measures and its diligent
efforts, whether by action, suit, proceeding or otherwise, to prevent the
infringement, misappropriation or violations thereof by others and for that
purpose agrees
-7-
diligently to maintain any action, suit or proceeding against any Person
necessary to prevent such infringement, misappropriation or violation.
8. BINDING EFFECT. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by Holdings and Lender and their respective
successors and assigns.
9. NOTICES. All notices and other communications hereunder shall be in
writing and shall be mailed, sent or delivered in accordance with the Loan
Agreement.
10. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, except to the
extent that the validity or perfection of the security interests hereunder in
respect of the Patent Collateral are governed by federal law, in which case such
choice of California law shall not be deemed to deprive Lender of such rights
and remedies as may be available under federal law.
11. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Security Agreement,
together with the Schedules hereto and thereto, contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
drafts and communications relating to such subject matter. Neither this
Agreement nor any provision hereof may be modified, amended or waived except by
the written agreement of the parties, as provided in the Security Agreement.
Notwithstanding the foregoing, Lender may re-execute this Agreement or modify,
amend or supplement the Schedules hereto as provided in SECTION 6 hereof.
12. SEVERABILITY. If one or more provisions contained in this Agreement
shall be invalid, illegal or unenforceable in any respect in any jurisdiction or
with respect to any party, such invalidity, illegality or unenforceability in
such jurisdiction or with respect to such party shall, to the fullest extent
permitted by applicable law, not invalidate or render illegal or unenforceable
any such provision in any other jurisdiction or with respect to any other party,
or any other provisions of this Agreement.
13. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of this Agreement by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
telefacsimile also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement
-8-
14. SECURITY AGREEMENT. Holdings acknowledges that the rights and remedies
of Lender with respect to the security interest in the Patent Collateral granted
hereby are more fully set forth in the Security Agreement and all such rights
and remedies are cumulative.
15. NO INCONSISTENT REQUIREMENTS. Holdings acknowledges that this Agreement
and the other Loan Documents may contain covenants and other terms and
provisions variously stated regarding the same or similar matters, and Holdings
agrees that all such covenants, terms and provisions are cumulative and all
shall be performed and satisfied in accordance with their respective terms.
16. TERMINATION. Upon the indefeasible payment in full of the Guarantied
Obligations, including the cash collateralization, expiration, or cancellation
of all Guarantied Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
accommodations under the Loan Agreement, this Agreement shall terminate and
Lender shall execute and deliver such documents and instruments and take such
further action reasonably requested by Holdings and at Holdings' expense as
shall be necessary to evidence termination of the security interest granted by
Holdings to Lender hereunder.
[Remainder of page intentionally left blank]
-9-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
NATIONAL MEDIA CORPORATION,
a Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
S-1
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On _______________, 1998, before me, ______________________________,
Notary Public, personally appeared ________________________, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------------
Signature
[SEAL]
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On _________________, 1998, before me, ______________________________,
Notary Public, personally appeared ___________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------------
Signature
[SEAL]
S-2
SCHEDULE A
to the Patent Security Agreement
UNITED STATES PATENTS, PATENT APPLICATIONS, AND PATENT LICENSE
---------------- --------------- ----------- ------------ -------------------------------------------------------
FILING PATENT FILING FILING
COUNTRY NUMBER DATE STATUS TITLE
---------------- --------------- ----------- ------------ -------------------------------------------------------
A-1