Exhibit 10.3
PATENT SECURITY AGREEMENT
THIS PATENT SECURITY AGREEMENT (this "Agreement"), dated as
of December , 1998 is made by QUANTUM NORTH AMERICA, INC., a Delaware
corporation ("Borrower"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation ("Lender").
RECITALS
A. Borrower and Lender have entered into that certain Loan and
Security Agreement, dated as of the date hereof (as amended, modified, renewed
or extended from time to time, the "Loan Agreement"), pursuant to which Lender
has agreed to make certain financial accommodations to Borrower, and pursuant to
which Borrower has granted to Lender a security interest in (among other things)
certain of the general intangibles of Borrower.
B. Pursuant to the Loan Agreement and as one of the conditions
precedent to the obligations of Lender under the Loan Agreement, Borrower 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, Borrower 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:
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C.ss.101 Et SEQ.), as amended, and any successor statute.
"EVENT OF DEFAULT" shall have the meaning ascribed to such
thereto in the Loan Agreement.
"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).
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"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 Borrower,
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 Borrower 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 Borrower 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.
"SECURED OBLIGATIONS" means all Obligations owing by Borrower
to Lender of any kind or description arising out of or outstanding under,
advanced or issued pursuant to, this Agreement or the other Loan Documents,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which Borrower
is required to pay pursuant to any of the foregoing, by law, or otherwise.
"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.
(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:
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(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 Loan 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 Borrower and supplemental rights and remedies in favor of
Lender (whether under California law or 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 Secured Obligations, Borrower
hereby grants, assigns,
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transfers, and conveys to Lender a continuing security interest in all of
Borrower's 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 Borrower in whole or in part,
including all existing U.S. patents and patent applications of
Borrower 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 Borrower, 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 xxx
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 Borrower 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. Borrower 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 LOAN AGREEMENT. This Agreement
shall be fully incorporated into the Loan Agreement and all understandings,
agreements and provisions contained in the Loan Agreement shall be fully
incorporated into this Agreement. Without limiting the foregoing, the Patent
Collateral described in this Agreement shall constitute part of the Collateral
in the Loan Agreement.
(d) LICENSES. Anything in the Loan Agreement or this
Agreement to the contrary notwithstanding, Borrower 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.
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3. FURTHER ASSURANCES; APPOINTMENT OF LENDER AS
ATTORNEY-IN-FACT. Borrower 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 Borrower 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 Borrower, or in the name of Lender or otherwise, without notice to
or assent by Borrower, and Borrower hereby irrevocably constitutes and appoints
Lender (and any of Lender's officers or employees or agents designated by
Lender) as Borrower's true and lawful attorney-in-fact with full power and
authority, (i) to sign the name of Borrower 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 Borrower, 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 Borrower 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, Borrower 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.
Nothing in this Agreement shall obligate Borrower to commence
any suit, proceeding or other action for infringement of any of the Patents that
are immaterial to Borrower's business.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender, in each case to the best of its knowledge, information, and
belief, as follows:
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(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 Borrower, 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
Borrower's knowledge, each of the Patents is valid and enforceable.
(c) OWNERSHIP OF PATENT COLLATERAL; NO VIOLATION. (i)
Borrower 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,
Borrower 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 Borrower not to xxx third
persons and (iii) with respect to any Patent for which Borrower 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, Borrower 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 Borrower to have any rights in or to any of the Patent Collateral.
To the best of Borrower's knowledge, the past, present and contemplated future
use of the Patent Collateral by Borrower 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 Borrower's knowledge,
no material infringement or unauthorized use presently is being made of any of
the Patent Collateral by any Person.
(e) POWERS. Borrower 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 Secured Obligations remain
unsatisfied, Borrower shall comply with all of the covenants, terms and
provisions of this Agreement, the Loan Agreement and the other Loan Documents,
and Borrower will 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 Borrower is a licensee.
6. FUTURE RIGHTS. Except as otherwise expressly agreed to in
writing by Lender, for so long as any of the Secured Obligations shall remain
outstanding, or, if earlier,
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until Lender shall have released or terminated, in whole but not in part, its
interest in the Patent Collateral, if and when Borrower 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 Borrower shall give to Lender
prompt notice thereof. Borrower 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. Borrower hereby authorizes Lender to modify, amend or
supplement the Schedules hereto and to re-execute this Agreement from time to
time on Borrower's 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 Loan 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. Borrower 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. Borrower 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
and during the continuation of an Event of Default with respect to (among other
things) any tangible asset of Borrower in which Lender has a security interest,
including Lender's rights to sell inventory, tooling or packaging which is
acquired by Borrower (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 Borrower or Lender, to
enforce or protect any of the Patent Collateral, in which event Borrower 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, Borrower, 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 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 Borrower and Lender and their respective
successors and assigns.
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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 Loan
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 Loan
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
14. LOAN AGREEMENT. Borrower 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 Loan Agreement and all
such rights and remedies are cumulative.
15. NO INCONSISTENT REQUIREMENTS. Borrower 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
Borrower agrees that
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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
Secured Obligations, including the cash collateralization, expiration, or
cancellation of all Secured 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 Borrower and at Borrower's
expense as shall be necessary to evidence termination of the security interest
granted by Borrower to Lender hereunder.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
QUANTUM NORTH AMERICA, INC.,
a Delaware corporation
By:
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Name:
------------------------------------------
Title:
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FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
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Name:
------------------------------------------
Title:
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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.
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Signature
[SEAL]
S-2
SCHEDULE A
to the Patent Security Agreement
UNITED STATES PATENTS
AND PATENT APPLICATIONS
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FILING PATENT FILING FILING
COUNTRY NUMBER DATE STATUS TITLE
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A-1
