INTELLECTUAL PROPERTY SECURITY AGREEMENT
AND ASSIGNMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT AND ASSIGNMENT (this
"AGREEMENT") is made this 18th day of August, 2000 by MERLIN SOFTWARE
TECHNOLOGIES INTERNATIONAL, INC., (the "BORROWER" or the "GRANTOR") in favor of
the Holders (as set forth in Schedule V hereto) of the Notes (as hereinafter
defined) (each a "SECURED PARTY" and collectively the "SECURED PARTIES").
W I T N E S S E T H:
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WHEREAS, the Borrower and the Secured Parties have entered into the Note
and Warrant Purchase Agreement dated of even date hereof (the "PURCHASE
AGREEMENT"), for the purchase of an aggregate of up to Two Million One Hundred
Thousand Dollars ($2,100,000) principal amount of Series A 10% Senior Secured
Convertible Notes (the "NOTES") and up to a total of 1,520,000 Series A Warrants
to Purchase Common Stock;
WHEREAS, under the terms of the Notes and the Purchase Agreement, Grantor
desires, pursuant to this Agreement, to grant to the Secured Parties a security
interest in the assets described herein; and
WHEREAS, a material part of the consideration given in connection with and
as an inducement to the execution and delivery of the Purchase Agreement by the
Secured Parties was the obligation of the Grantor to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. GRANT OF SECURITY. The Grantor hereby grants (subject to existing
liens) a continuing security interest in and collaterally assigns to the Secured
Parties, all of the following (collectively, the "COLLATERAL"):
(a) Patents. All of the Grantor's right, title and interest, whether
now owned or hereafter acquired, in and to all United States issued patents and
patent applications (including without limitation the patents and patent
applications identified on Schedule I attached hereto and incorporated herein by
reference) and including the right to recover for all past, present and future
infringements thereof and all reissues, divisions, continuations,
continuations-in-part, substitutes, renewals, and extensions thereof, all
improvements thereon, and all other rights of any kind whatsoever of the Grantor
accruing thereunder or pertaining thereto (collectively, the "PATENTS").
(b) Trademarks. All of the Grantor's right, title and interest,
whether now owned or hereafter acquired, in and to all United States trademarks,
trade names, trade dress, domain names, service marks, trademark and service
▇▇▇▇ registrations, and applications for trademark or service ▇▇▇▇ registration
and any renewals thereof (including without limitation each trademark, trade
name, trade dress, domain name, registration and application identified in
Schedule II attached hereto and incorporated herein by reference) and including
all income, royalties, damages and payments now and hereafter due and/or payable
with respect thereto (including without limitation damages for past or future
infringements thereof), the right to ▇▇▇ or otherwise recover for all past,
present and future infringements thereof, all rights corresponding thereto
throughout the world (but only such rights as now exist or may come to exist
under applicable local law) and all other rights of any kind whatsoever of the
Grantor accruing thereunder or pertaining thereto, together in each case with
the goodwill of the business connected with the use of, and symbolized by, each
such trademark and service ▇▇▇▇ (collectively, the "TRADEMARKS").
(c) Copyrights. All of the Grantor's right, title and interest,
whether now owned or hereafter acquired, in and to all United States copyrights
and copyright applications (including without limitation the copyrights and
copyright applications identified on Schedule III attached hereto and
incorporated herein by reference) and including the right to recover for all
past, present and future infringements thereof and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind whatsoever
of the Grantor accruing thereunder or pertaining thereto (collectively, the
"COPYRIGHTS").
(d) Licenses. All license agreements regarding Patents, Trademarks or
Copyrights (other than "off the shelf" software) with any other party, whether
the Grantor is a licensor or licensee under any such license agreement
(including without limitation the licenses listed on Schedule IV attached hereto
and incorporated herein by reference), and the right to prepare for sale, sell
and advertise for sale, all inventory now or hereafter owned by the Grantor and
now or hereafter covered by such licenses (collectively, the "LICENSES")).
(e) All proceeds of any of the foregoing.
In addition, the Grantor has executed in blank and delivered to the Secured
Parties an assignment of the Licenses and federally registered Patents,
Trademarks and Copyrights (the "IP ASSIGNMENT") owned by it in the form of
Exhibit A hereto. The Grantor hereby authorizes the Secured Parties to complete
as Assignee and record with the United States Patent and Trademark Office (the
"PATENT AND TRADEMARK OFFICE") and the United States Copyright Office (the
"COPYRIGHT OFFICE") each IP Assignment upon the occurrence of an Event of
Default (as such term is defined herein) that is continuing at the time of
filing. "EVENT OF DEFAULT" shall have the meaning set forth in Section 2 of the
Notes.
2. SECURITY FOR OBLIGATIONS. The security interests granted under this
Agreement (the "SECURITY INTERESTS") by the Grantor secure the payment of all
Obligations of the Borrower (as such
term is defined herein). The "OBLIGATIONS" of the Borrower shall mean the
prompt payment when due or within any applicable grace period, whether at stated
maturity, by acceleration or otherwise and at all times thereafter of any and
all obligations of the Borrower owed to the Secured Parties under the Purchase
Agreement, the Notes and the Related Documents irrespective of any change of the
time, manner, or place of payment.
The Security Interests granted by this Agreement are granted in conjunction
with the security interests granted to the Secured Parties in other assets of
the Grantor under the Security Agreement dated even date hereof.
3. COLLATERAL ASSIGNMENT. In addition to, and not in limitation of,
the grant of the Security Interests in the Patents, Trademarks, Copyrights and
Licenses in Section 1 above, the Grantor hereby grants, assigns, transfers,
conveys and sets over to the Secured Parties, the Grantor's entire right, title
and interest in and to the Patents, Trademarks, Copyrights and Licenses;
provided, that such grant, assignment, transfer and conveyance shall become
effective only at the election of the Secured Parties after the occurrence of an
Event of Default that is continuing at the time of such election. The Grantor
hereby agrees that after the effectiveness of such grant, assignment, transfer
and conveyance of any of the Patents, Trademarks, Copyrights and License, the
use by the Secured Parties of any of such Patents, Trademarks, Copyrights and
Licenses shall be without any liability for royalties or other related charges
from the Secured Parties to the Grantor.
4. FURTHER ASSURANCES.
(a) The Grantor agrees that from time to time, at the expense of the
Grantor, the Grantor will promptly execute and deliver all further instruments
and documents and take all further actions that may be necessary or desirable in
the Secured Parties' reasonable determination, or that the Secured Parties may
reasonably request, in order to (i) continue, perfect and protect any Security
Interest granted or purported to be granted hereby, (ii) enable the Secured
Parties, for the benefit of the Secured Parties, to exercise and enforce their
rights and remedies hereunder with respect to any part of the Collateral.
Without limiting the generality of the foregoing, the Grantor will execute and
file (with the appropriate governmental offices, authorities, agencies and
regulatory bodies in the United States) such supplements to this Agreement and
such financing or continuation statements, or amendments thereto, and such other
instruments or notices, including executed IP Assignments, with the Patent and
Trademark Office and the Copyright Office, as may be necessary or desirable, or
as the Secured Parties may reasonably request, in order to perfect and preserve
the Security Interests granted hereby.
(b) The Grantor hereby authorizes the Secured Parties, upon the
occurrence and during the continuation of an Event of Default, to file, where
permitted by law, one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of the Grantor. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) The Grantor will furnish to the Secured Parties, from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Parties may
reasonably request, all in reasonable detail.
(d) The Grantor agrees that should it have or obtain an ownership
interest in any United States patent or patent application that is not now
identified on Schedule I, any trademark or trademark application that is not now
identified on Schedule II or any copyright or copyright application that is not
now identified on Schedule III or any license agreement in respect of any
patent, trademark or copyright that is not now identified on Schedule IV: (i)
the provisions of this Agreement shall automatically apply to such item, and
such item shall automatically become part of the Collateral; (ii) the Grantor
shall, within three months after acquiring or becoming aware of such ownership
interest, (A) give written notice thereof to the Secured Parties, (B) with
respect to Trademarks and Patents, cause such Trademarks and Patents to be
properly registered with the Patent and Trademark Office, (C) with respect to
Copyrights, cause such Copyrights to be registered with the Copyright Office,
and (D) file all documents that are known by the Grantor to be necessary or that
the Secured Parties reasonably request in order to perfect the Security Interest
of the Secured Parties therein; provided, however, that so long as no Event of
Default shall have occurred and be continuing, the registration obligations of
the Borrower pursuant to subsections (ii)(B) and (ii)(C) of this Section 4(d)
shall be limited to those that are consistent with the Grantor's business
judgement and actual use of such Trademarks, Patents and Copyrights.
(e) The Grantor agrees: (i) to take all necessary steps in any
proceeding before the Patent and Trademark Office, the Copyright Office or in
any court, to maintain and pursue each patent application now or hereafter
included in the Collateral and to maintain each material patent, trademark or
copyright now or hereafter included in the Collateral, including the filing of
divisional, continuation, continuation-in-part and substitute applications, the
filing of applications for reissue, renewal or extensions, the payment of
maintenance fees, and the participation in interference, reexamination,
opposition and cancellation proceedings; (ii) to take corresponding steps with
respect to material unpatented inventions on which the Grantor is now or
hereafter becomes entitled to seek protection; (iii) to bear any expenses
incurred in connection with such activities; and (iv) not to abandon any right
to file a material patent application, or abandon any material pending
application with respect to any of the Collateral, without the prior written
consent of the Secured Parties; provided, however, that so long as no Event of
Default shall have occurred and be continuing, the requirements of the Grantor
pursuant to subsections (i) and (ii) of this Section 4(e) shall be governed by
the Grantor's business judgement and actual use of such Trademarks, Patents and
Copyrights.
(f) The Grantor shall not do any act or omit to do any act whereby any of
the Collateral may become dedicated or abandoned, except where such dedication
or abandonment (i) will not materially adversely affect the business, condition
(financial or
otherwise), operations, performance, or properties of the Grantor and its
Subsidiaries taken as a whole, and (ii) is in the ordinary course of the
Grantor's business. The Grantor agrees to notify the Secured Parties promptly
and in writing if it learns that any of the Collateral may become abandoned or
dedicated or of any adverse determination or any development (including without
limitation the institution of any proceeding in the Patent and Trademark Office,
the Copyright Office, or any court) regarding any material part of the
Collateral.
(g) The Grantor agrees that in the event that any of the Collateral as
to which it has granted the Security Interests is infringed or misappropriated
by a third party, the Grantor shall promptly notify the Secured Parties and
shall take all reasonable steps to terminate the infringement or
misappropriation, and take such other actions as the Grantor shall deem
appropriate under the circumstances to protect such Collateral; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, the termination of infringement or misappropriation obligations of
the Grantor described in this sentence shall be limited to those that are
consistent with the Grantor's business judgement and actual use of such
Collateral. Any expense incurred in connection with such activities shall be
borne by the Grantor.
(h) The Grantor agrees (i) to maintain the quality of any and all
products in connection with which the Collateral is used, consistent with the
quality standards established by the Grantor for said products as of the date of
determination, and (ii) to provide the Secured Parties, quarterly, with a
certificate of an officer of the Grantor certifying the Grantor's compliance
with the foregoing subsections 4(a)through 4(i).
(i) The Grantor shall continue to ▇▇▇▇ its products as required by
statute with the numbers of all appropriate Patents.
5. GENERAL REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants as follows:
(a) It has the unqualified right to enter into this Agreement and to
perform its terms and to grant all the rights, titles and interests granted
herein.
(b) No authorization, consent, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any other
Person is required either (i) for the grant by the Grantor of the Security
Interests granted hereby (excluding such licenses which, by their terms,
required the consent of the licensor to assign the license but as to which the
Grantor represents and warrants such consent has been made in writing, copies of
which have been delivered to the Secured Parties) or for the execution, delivery
or performance of this Agreement by the Grantor, or (ii) for the perfection of
or the exercise by the Secured Parties, of their rights and remedies hereunder,
except for the filing of this Agreement with the Patent and Trademark Office,
the Copyright Office and the filings required by the Uniform Commercial Code or
the British Columbia Personal Property Security Act of the State or province,
respectively, in which the Grantor maintains its chief
executive office, and except to the extent that the exercise of rights and
remedies may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally
or by general principles of equity.
(c) The execution, delivery and performance by the Grantor of this
Agreement does not and will not contravene any contractual restriction binding
on or affecting the Grantor or any of its properties that has a reasonable
likelihood of having a Material Adverse Effect.
(d) This Agreement has been duly executed and delivered by the Grantor
and is a legal, valid and binding obligation of the Grantor enforceable against
the Grantor in accordance with its terms except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally or by general equity
principles.
(e) To the best of the Grantor's knowledge, the Collateral does not
infringe any rights owned or possessed by any third party.
(f) To the best of the Grantor's knowledge, there are no claims,
judgments or settlements to be paid by the Grantor or pending claims or
litigation relating to the Collateral.
(g) Set forth on Schedule IV is a list, which is complete and accurate
in all material respects as of the date hereof, of Licenses of the Grantor
necessary for the conduct of its business as currently conducted or used in the
selling or marketing of the Grantor's products, including the expiration date of
such Licenses.
(h) Each License of the Grantor identified on Schedule IV is validly
subsisting and has not been adjudged invalid or unenforceable, in whole or in
part, and is, to the Grantor's knowledge, valid and enforceable. No action or
proceeding is pending or, to the Grantor's knowledge, threatened seeking to
limit, cancel or question the validity of Collateral.
(i) The Grantor's products have been marked as required by statute with
respect to the Collateral.
(j) The actions contemplated under or in connection with the Related
Documents (as defined in the Purchase Agreement) will not impair the legal right
of the Grantor to use any of the Collateral.
(k) Except as disclosed to the Secured Parties in writing prior to the date
of this Agreement, the Grantor has no knowledge of the existence of any right
under any patent, trademark, license agreement, trade name, trade secret,
know-how, confidential research, development and commercial information, or
other proprietary information held by any other Person that would preclude the
Grantor from publishing, distributing, marketing, selling, or
using any product currently made by it, being made for it or sold or used
by it, imported by it or exported by it, as the case may be, or to use any
processes currently used by it (except, in each case, to the extent that the
Grantor has granted an exclusive license to another Person), or materially
interfere with the ability of the Grantor to carry on its business as currently
carried on, and the Grantor has no knowledge of any claim to the contrary that
is likely to be made.
(l) The Grantor has used consistent standards of quality in
manufacturing, distribution and marketing of each product sold and provision of
each service provided under any Trademark.
6. PATENT REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants as follows:
(a) It is the sole legal and beneficial owner of the Patents set forth
opposite its name on Schedule I hereto, free and clear of any lien, security
interest, option, charge, pledge, assignment (whether conditional or not), or
any other encumbrance except for the Security Interests created or permitted by
this Agreement or the Purchase Agreement, the Notes, the Related Documents and
certain Licenses and registered user agreements described on Schedule IV and no
effective financing statement or other instrument similar in effect covering all
or any part of such Collateral is on file in any recording office, except such
as may have been filed in favor of the Secured Parties.
(b) Set forth on Schedule I is a list of all of the Patents owned by
the Grantor necessary for the conduct of its business as currently conducted or
used in the selling or marketing of the Grantor's products.
(c) Each Patent of the Grantor identified on Schedule I hereto is
subsisting and has not been adjudged unpatentable, invalid or unenforceable, in
whole or in part, and to the knowledge of the Grantor is patentable, valid and
enforceable, and each of such Patent applications has been filed in conformity
with applicable rules and procedures of the Patent and Trademark Office and will
be diligently prosecuted in conformity therewith so as not to become improperly
abandoned; provided, however, that so long as no Event of Default shall have
occurred and be continuing, the filing and prosecution obligations of the
Grantor described in this Section 6(c) shall be limited to those that are
consistent with the Grantor's business judgement and actual use of such
Collateral.
7. TRADEMARK REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(a) It is the sole, legal and beneficial owner of the entire right, title
and interest in and to the Trademarks purported to be granted by it hereunder,
free and clear of any lien, security interest, option, charge, pledge,
registered user agreement, assignment (whether conditional or not), or covenant,
or any other encumbrance, except for the Security Interests
created or permitted by this Agreement or the Purchase Agreement, the
Notes, the Related Documents and certain Licenses and registered user agreements
described on Schedule IV. No effective financing statement or other instrument
similar in effect covering all or any part of the Trademarks purported to be
granted by the Grantor hereunder is on file in any recording office, including,
without limitation, the Patent and Trademark Office, except such as may have
been filed in favor of the Secured Parties.
(b) Set forth on Schedule II is a list of all of the Trademarks owned
by the Grantor necessary for the conduct of its business as currently conducted
or used in the selling or marketing of the Grantor's products.
(c) Each Trademark of the Grantor identified on Schedule II is validly
subsisting and has not been abandoned or adjudged invalid, unregistrable or
unenforceable, in whole or in part, and is, to the Grantor's knowledge, valid,
registrable and enforceable.
8. COPYRIGHT REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(a) It is the sole, legal and beneficial owner of the entire right,
title and interest in and to the Copyrights purported to be granted by it
hereunder, free and clear of any lien, security interest, option, charge,
pledge, registered user agreement, assignment (whether conditional or not), or
covenant, or any other encumbrance, except for the Security Interests created or
permitted by this Agreement or the Purchase Agreement, the Notes, the Related
Documents and certain Licenses and registered user agreements described on
Schedule IV. No effective financing statement or other instrument similar in
effect covering all or any part of the Copyrights purported to be granted by the
Grantor hereunder is on file in any recording office, including, without
limitation, the Copyright Office, except such as may have been filed in favor of
the Secured Parties.
(b) Set forth on Schedule III is a list of all of the Copyrights owned
by the Grantor necessary for the conduct of its business as currently conducted
or materially used in the selling or marketing of the Grantor's products.
(c) Each Copyright of the Grantor identified on Schedule III is validly
subsisting and has not been abandoned or adjudged invalid, unregistrable or
unenforceable, in whole or in part, and is, to the Grantor's knowledge, valid
and enforceable.
9. TRANSFERS AND OTHER LIENS. The Grantor shall not:
(a) sell, assign (except by operation of law) or otherwise dispose of any
of, or grant any option with respect to, the Collateral, except as permitted by
the Purchase Agreement, the Notes and the Related Documents, except that the
Grantor may license the Collateral (i) in the ordinary course of the Grantor's
business, provided that such license is necessary or desirable in the conduct of
the Grantor's business, or (ii) in connection with a
sale of assets in compliance with the Purchase Agreement, the Notes and
Related Documents, provided that such license shall be on terms reasonably
expected to maximize the gain to the Grantor resulting from the granting of such
license. The Secured Parties shall execute any documents that the Grantor may
reasonably request in order to permit the Grantor to exercise its right
hereunder to license the Collateral, provided that the Secured Parties shall not
be required to do anything that may, in the reasonable judgment of the Secured
Parties, adversely affect the validity of the Security Interests; or
(b) take any other action in connection with any of the Collateral that
would impair the value of the interest or rights of the Grantor in the
Collateral taken as a whole or that would impair the interest or rights of the
Secured Parties.
10. SECURED PARTIES APPOINTED ATTORNEY-IN-FACT. Without limiting any
other provision of this Agreement, upon the occurrence and during the
continuance of an Event of Default, the Grantor hereby irrevocably appoints the
Secured Parties, as the Grantor's attorney-in-fact, with full authority in the
place and stead of the Grantor and in the name of the Grantor or otherwise, from
time to time in the Secured Parties discretion, to take any action and to
execute any instrument that the Secured Parties may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to ask, demand, collect, ▇▇▇ for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to file any claims or take any action or institute any proceedings
that the Secured Parties may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Secured Parties, with respect to any of the Collateral; and
(d) to execute, in connection with the sale provided for in Section 13
hereof, any endorsement, assignments, or other instruments of conveyance or
transfer with respect to the Collateral.
11. SECURED PARTIES MAY PERFORM.
(a) If the Grantor fails to perform any agreement contained herein, the
Secured Parties may itself perform, or cause performance of, such agreement, and
the expenses of the Secured Parties incurred in connection therewith shall be
payable by the Grantor to the fullest extent permitted by applicable law.
(b) The Secured Parties or their designated representatives shall have
the right to the extent reasonably requested and upon reasonable prior notice,
at any reasonable time during normal business hours of the Grantor and from time
to time, to inspect the Grantor's premises and to examine the Grantor's books,
records and operations relating to the Collateral.
12. THE SECURED PARTIES' DUTIES. The powers conferred on the Secured
Parties, hereunder are solely to protect the interest of the Secured Parties in
the Collateral and shall not impose any duty upon them to exercise any such
powers. Except for the safe custody of any Collateral in their possession and
the accounting for moneys actually received by them hereunder no Secured Party
shall have any duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against other parties or any other rights pertaining to
any Collateral. Each Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which such party
accords its own similar property.
13. REMEDIES UPON AN EVENT OF DEFAULT. If an Event of Default shall
have occurred and be continuing:
(a) The Secured Parties may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party upon default under the
Uniform Commercial Code as in effect in the State of New York (the "UCC") and
also may (i) exercise any and all rights and remedies of the Grantor under, in
connection with, or otherwise in respect of, such Collateral, including the
completion and filing of the IP Assignment, (ii) require the Grantor to, and the
Grantor hereby agrees that it will at its expense and upon request of the
Secured Parties forthwith, assemble all or part of the documents embodying such
Collateral as directed by the Secured Parties and make it available to the
Secured Parties, at a place to be designated by the Secured Parties that is
reasonably convenient to both the Secured Parties and the Grantor, (iii) occupy
any premises owned or leased by the Grantor where documents embodying such
Collateral or any part thereof are assembled for a reasonable period in order to
effectuate the Secured Parties' rights and remedies hereunder or under
applicable law, without obligation to the Grantor in respect of such occupation,
(iv) license such Collateral or any part thereof, (v) with notice as specified
below, sell such Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Secured Parties' offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Secured
Parties may deem commercially reasonable, and (vi) without prior notice to the
Grantor, direct any licensee of any Collateral to pay all royalties and other
payments which may be or which may thereafter become payable to the Grantor
directly to the Secured Parties or any designee of the Secured Parties, but the
Secured Parties shall give notice to the Grantor of any such direction no later
than five (5) business days after giving any such direction. The Grantor agrees
that at least ten (10) days' business notice to the Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Parties shall not be
obligated to make any sale of the
Collateral regardless of notice of sale having been given. The Secured
Parties may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, with further notice to
the Grantor, be made at the time and place to which it was so adjourned.
(b) All payments received by the Grantor under or in connection with
the Collateral shall be received in trust for the benefit of the Secured
Parties, shall be segregated from other funds of the Grantor and shall be
immediately paid over to the Secured Parties in the same form as so received
(with any necessary endorsement).
(c) All payments made under or in connection with or otherwise in
respect of the Collateral, and all cash proceeds received by the Secured Parties
in respect of any sale of, collection from, or other realization upon all or any
part of such Collateral may, in the discretion of the Secured Parties, be held
by the Secured Parties, as collateral for, and then or at any time thereafter
applied for the ratable benefit of the Secured Parties against all or any part
of the Obligations. Any sale or other disposition of the Collateral and the
possession thereof by the Secured Parties shall be in compliance with all
provisions of applicable law (including applicable provisions of the UCC).
14. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement nor consent to any departure by the Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Parties, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
15. CONTINUING SECURITY INTEREST.
(a) This Agreement shall create a continuing Security Interest in the
Collateral and shall remain in full force and effect until terminated in
accordance with the provisions of Section 22 hereof.
(b) Except as permitted hereby or by the Purchase Agreement and the
Notes, the Grantor shall not sell, lease, transfer or otherwise dispose of any
item of Collateral during the term of this Agreement without the prior written
consent of the Secured Parties to such sale, lease, transfer or other
disposition.
(c) Upon the termination of this Agreement in accordance with Section
22 hereof, the Collateral shall be automatically released from the liens created
hereby, all rights to the Collateral shall automatically revert to the Grantor,
and this Agreement and all obligations of the Grantor hereunder shall terminate
without delivery of any instrument or performance of any act by any party. Upon
such termination of this Agreement, the Secured Parties shall reassign and
redeliver such Collateral then held by or for the Secured Parties and execute
and deliver to the Grantor such documents as Grantor shall reasonably request to
evidence such termination.
16. DEFINITIONS. All terms used herein and not specifically defined
shall be defined in accordance with the appropriate definitions appearing in the
Purchase Agreement and the Notes, and such definitions are hereby incorporated
herein by reference and made a part hereof.
17. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
18. FURTHER ASSURANCES. The Grantor agrees at its own expense to do
such further acts and things, and to execute and deliver such additional
conveyances, assignments, financing statements, agreements and instruments, as
the Secured Parties may at any time reasonably request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm unto the Secured
Parties their rights, powers and remedies hereunder. The Grantor hereby
consents and agrees that the issuers of or obligors in respect of the Collateral
shall be entitled to accept the provisions hereof as conclusive evidence of the
right of the Secured Parties, to exercise their rights hereunder with respect to
the Collateral, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by the Grantor or any other Person to any of such
issuers or obligors.
19. BINDING AGREEMENT; ASSIGNMENT. This Agreement, and the terms,
covenants, conditions, rights and remedies hereof, shall be binding upon and
inure to the benefit of the parties hereto, and to their respective heirs, legal
representatives, successors and assigns; provided, however, that the Grantor
shall be permitted to assign any of its rights, powers, duties or obligations
under this Agreement or any interest herein or in the Collateral, or any part
thereof, or otherwise pledge, encumber or grant any option with respect to the
Collateral, or any part thereof, or any cash or property held by the Secured
Parties as Collateral under this Agreement, with the prior written consent of
the Secured Parties which consent shall not be unreasonably withheld.
20. SEVERABILITY. If any term or provision of this Agreement is or
shall become illegal, invalid or unenforceable in any jurisdiction, all other
terms and provisions of this Agreement shall remain legal, valid and enforceable
in such jurisdiction and such illegal, invalid or unenforceable provision shall
be legal, valid and enforceable in any other jurisdiction.
21. COUNTERPARTS; FACSIMILE SIGNATURES. 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 when taken together shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
22. TERMINATION. This Agreement and all obligations of the Grantor
hereunder shall terminate once the Obligations have been paid in full.
23. NOTICES. Any notice, request or consent required hereunder or in
connection herewith shall be deemed satisfactorily given if in writing
(including facsimile transmissions) and delivered by hand, U.S. mail (registered
or certified mail) or recognized overnight courier to the parties at their
respective addresses or telecopier number set forth in the Purchase Agreement or
such other addresses or telecopier numbers as may be given by any party to the
others in writing.
24. GOVERNING LAW. This Agreement shall be governed as to its
validity, interpretation and effect in accordance with the laws of the state of
Nevada, except as required by mandatory provisions of law and except if the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular collateral are governed by the laws of a
jurisdiction other than Nevada.
25. WAIVER OF JURY TRIAL. Debtor and Secured Party hereby waive trial
by jury in any judicial proceeding to which they are parties involving, directly
or indirectly, any matter (whether in tort, contract or otherwise) in any way
arising out of, related to, or connected with this Agreement and the
relationships established hereunder.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have duly executed this Intellectual
Property Security Agreement and Assignment on the day and year first written
above.
SECURED PARTIES: GRANTOR:
NARRAGANSETT I, L.P. MERLIN SOFTWARE TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Member Title: President
NARRAGANSETT OFFSHORE LTD.
by its Investment Manager,
▇▇▇ Holding, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
PEQUOT SCOUT FUND, L.P.
by its Investment Advisor,
Pequot Capital Management, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Accounting Officer
SDS MERCHANT FUND, L.P.
by its Managing Member,
SDS Capital Partners, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Member
INTELLECTUAL PROPERTY SECURITY AGREEMENT
SIGNATURE PAGE ▇ ▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ )
)ss.
CANADA )
Before me, the undersigned, a Notary Public in and for the county aforesaid
on this 21st day of August 2000, personally appeared ▇▇▇▇▇▇ ▇▇▇▇▇▇ to me known
personally, and who, being by me duly sworn, deposes and says that he is the
President of Merlin Software Technologies International, Inc., and that
foregoing instrument was signed on behalf of said corporation by authority of
its Board of Directors, and said ▇▇▇▇▇▇ ▇▇▇▇▇▇ acknowledged said instrument to
be the free act and deed of said corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Notary Public
My commission expires: NA
▇▇▇▇▇▇ ▇. ▇▇▇▇
Barrister & Solicitor
▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
INTELLECTUAL PROPERTY SECURITY AGREEMENT
SIGNATURE PAGE 2 OF 2
SCHEDULE I
Patents and Patent Applications
-------------------------------
Country Patent No. Status
SCHEDULE II
Trademarks and Trademark Applications
-------------------------------------
Registered Trade Marks
------------------------
Other Trademarks - Pending:
------------------------------
Related Trademarks
-------------------
Domain Names
-------------
SCHEDULE III
Copyrights
----------
SCHEDULE IV
License Agreements
------------------
SCHEDULE V
Holders
-------
Narragansett I, L.P.
Narragansett Offshore Ltd.
Pequot Scout Fund, L.P.
SDS Merchant Fund, L.P.
EXHIBIT A
---------
ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
THIS ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES (this
"AGREEMENT") is made as of this 18th day of August, 2000 by MERLIN SOFTWARE
TECHNOLOGIES INTERNATIONAL, INC. (the "BORROWER" or the "GRANTOR") in favor of
the Holders (as set forth in Annex V hereof) of the Notes (as hereinafter
defined) (each a "SECURED PARTY" and collectively, the "SECURED PARTIES").
W I T N E S S E T H:
-----------------------------
WHEREAS, pursuant to the Note and Warrant Purchase Agreement (the "PURCHASE
AGREEMENT") dated of even date hereof the Secured Parties have purchased an
aggregate of up to Two Million One Hundred Thousand Dollars ($2,100,000)
principal amount of Series A 10% Senior Secured Convertible Notes (the "NOTES")
and up to a total of 1,520,000 Series A Warrants to Purchase Common Stock from
the Borrower; and
WHEREAS, pursuant to the terms of the Purchase Agreement and the Notes, the
Grantor has entered into an Intellectual Property Security Agreement and
Assignment (the "IP SECURITY AGREEMENT") dated of even date herewith, pursuant
to which the Grantor has granted to the Secured Parties a security interest in
the Trademarks, Copyrights, Licenses and Patents defined below in order to
secure its obligations under the Notes; and
WHEREAS, the Grantor (a) has adopted and used and is using the trademarks,
service marks and domain names (the "TRADEMARKS") identified on Annex I hereto,
and is the owner of the registrations of and pending registration applications
for such Trademarks in the United States Patent and Trademark Office identified
on Annex I hereto, (b) is the owner of and uses the copyrights, copyright
registrations and pending registration applications set forth on Annex II hereto
(the "COPYRIGHTS"), (c) is a party to and has rights under the licenses and
license agreements listed on Annex III hereto (the "LICENSES") and (d) is the
owner of and uses the patents, patent registrations and pending registration
applications set forth on Annex IV hereto (the "PATENTS" and together with the
Trademarks, the Copyrights and the Licenses, the "COLLATERAL"); and
WHEREAS, the Secured Parties desire to acquire the Trademarks, the
Copyrights, the Licenses and the Patents and the registrations thereof and
registration applications therefor, as applicable, in connection with the
exercise of their remedies after the occurrence of an Event of Default, as such
term is defined within the IP Security Agreement, under the IP Security
Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, the Grantor does hereby assign, sell and transfer unto the Secured
Parties all right, title and interest in and to the Trademarks, Copyrights,
Licenses and Patents, together with
(i) the registrations of and registration applications therefor, as
applicable, (ii) the goodwill of the business symbolized by and associated with
the Trademarks and the registrations thereof, (iii) the right to ▇▇▇ and recover
for, and the right to profits or damages due or accrued arising out of or in
connection with, any and all past, present or future infringements or dilution
of or damage or injury to the Trademarks, Copyrights, Patents or the
registrations thereof or such associated goodwill, and (iv) all rights of the
Grantor to enforce all Licenses.
The Grantor hereby grants to the Secured Parties, and notice is hereby
given that the Grantor has granted to the Secured Parties, a first priority
security interest in the Collateral to secure the payment and performance in
full of all of the obligations of the Borrower under the Notes.
This Assignment is made pursuant to and subject to the terms of the IP
Security Agreement, which is deemed incorporated herein by this reference and
shall constitute part of this Assignment as if fully set forth herein.
This Assignment is intended to and shall take effect as a sealed instrument
at such time as the Secured Parties shall complete this instrument by signing
its acceptance of this Assignment below.
The parties agree to promptly execute and deliver all further instruments
necessary or desirable to carry out the purposes of this Agreement.
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 when taken together
shall constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the parties have duly executed this Assignment of
Patents, Trademarks, Copyrights and Licenses on the day and year first written
above.
GRANTOR:
MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
The foregoing assignment of the Patents, Trademarks, Copyrights and
Licenses and the registrations thereof and registration applications therefor by
the Assignee and the Secured Parties is hereby accepted as of the 18th day of
August, 2000.
SECURED PARTIES:
NARRAGANSETT I, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
NARRAGANSETT OFFSHORE LTD.
by its Investment Manager,
▇▇▇ Holding, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
PEQUOT SCOUT FUND, L.P.
by its Investment Advisor,
Pequot Capital Management, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Accounting Officer
SDS MERCHANT FUND, L.P.
by its Managing Member,
SDS Capital Partners, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Member
PROVINCE OF BRITISH COLUMBIA )
)ss.
CANADA )
Before me, the undersigned, a Notary Public in and for the county aforesaid
on this 21st day of August 2000, personally appeared ▇▇▇▇▇▇ ▇▇▇▇▇▇ to me known
personally, and who, being by me duly sworn, deposes and says that he is the
President of Merlin Software Technologies International, Inc., and that
foregoing instrument was signed on behalf of said corporation by authority of
its Board of Directors, and said ▇▇▇▇▇▇ ▇▇▇▇▇▇ acknowledged said instrument to
be the free act and deed of said corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Notary Public
My commission expires: NA
▇▇▇▇▇▇ ▇. ▇▇▇▇
Barrister & Solicitor
▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
ANNEX I
Registered Trade Marks Registration No. Registration Date
---------------------- ---------------- -----------------
Other Trademarks - Pending Serial No. Filing Date
----------------------------- ---------- -----------
Registered Domain Name Registration No. Registration Date
---------------------- ---------------- -----------------
ANNEX II
Copyrights
----------
ANNEX III
License Agreements
------------------
ANNEX IV
Registrations
-------------
United States Patent and Trademark Office
-----------------------------------------
Patent Registration No. Registration Date
------ ----------------- ------------------
Pending Patent Applications
---------------------------
United States Patent and Trademark Office
-----------------------------------------
Patent Serial No. Filing Date
------ ----------- ------------
ANNEX V
Holders
-------
Narragansett I, L.P.
Narragansett Offshore Ltd.
Pequot Scout Fund, L.P.
SDS Merchant Fund, L.P.
