PATENT SECURITY AGREEMENT
THIS PATENT SECURITY AGREEMENT (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Agreement") made as
of December 31, 1995, by XXXXXX MANUFACTURING, INC. (the "Borrower), in favor of
SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation, under that certain
Loan and Security Agreement (as amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement") of even date herewith by and
between the Borrower and the Lender.
WITNESSETH:
WHEREAS, pursuant to the Loan Agreement, the Lender has, subject to
the satisfaction of certain conditions precedent, agreed to make loans and other
financial accommodations (collectively, the "Loans") to the Borrower; and
WHEREAS, Lender has required as a condition, among others, to the
making of the Loans to the Borrower, in order to secure the prompt and complete
payment, observance and performance of all of the Borrower's obligations and
liabilities under the Loan Agreement and under all of the other instruments,
documents and agreements executed by the Borrower and delivered to the Lender in
connection with the Loan Agreement including, without limitation, this Agreement
(all such obligations and liabilities being hereinafter referred to collectively
as the "Liabilities"), that the Borrower execute and deliver this Agreement to
the Lender;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower agrees as follows:
1. DEFINED TERMS.
(a) Unless otherwise defined herein, the capitalized terms used
herein which are defined in the Loan Agreement shall have the meanings specified
in the Loan Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. INCORPORATION OF THE LOAN AGREEMENT. The Loan Agreement and the
terms and provisions thereof are hereby incorporated herein in their entirety by
this reference thereto.
3. SECURITY INTEREST IN PATENTS AND LICENSES. To secure the prompt
and complete and timely payment, performance and satisfaction of all of the
Liabilities, the Borrower hereby grants to the Lender, a security interest in,
as and by way of a mortgage and security interest having priority over all other
security interests, except those listed on SCHEDULE C attached hereto, with
power of sale to the extent permitted by applicable law, all of the Borrower's
now owned or existing or hereafter acquired or arising:
(a) patents and patent applications, and the inventions and
improvements described and claimed therein, including, without limitation,
those patents and patent applications listed on SCHEDULE A attached hereto
and made a part hereof, and (i) the reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, (ii) all income,
royalties, damages and payments now or hereafter due and/or payable under
and with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and payments for
past or future infringements thereof, (iii) the right to xxx for past,
present and future infringements thereof, and (iv) the goodwill of the
Borrower's business symbolized by the foregoing and connected therewith,
and (v) all of the Borrower's rights corresponding thereto throughout the
world (all of the foregoing are sometimes hereinafter individually and/or
collectively referred to as the "Patents"); and
(b) rights under or interests in any patent license agreements with
any other party in connection with any of the Patents or such other party's
patents and patent applications, and the inventions and improvements
described and claimed therein, whether the Borrower is a licensor or
licensee under any such license agreement, including, without limitation,
those patent license agreements listed on SCHEDULE B attached hereto and
made a part hereof, and the right, upon the occurrence and during the
continuation of an Event of Default, to prepare and sell any and all
Inventory now or hereafter owned by the Borrower and now or hereafter
covered by such licenses, and all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts and
other computer materials and records) pertaining to any of the foregoing
(all of the foregoing are hereinafter referred to collectively as the
"Licenses").
4. RESTRICTIONS ON FUTURE AGREEMENTS. The Borrower will not,
without the prior written consent of the Lender, enter into any agreement,
including, without limitation, any license agreement which purports to transfer
or assign any interest in the Patents or Licenses to any other Person. The
Borrower will not take any action or fail to take any action, and will use its
best efforts to prevent any action by any Person, including licensees, which
would in any respect adversely affect the validity or enforceability of the
rights transferred to the Lender under this Agreement or the rights associated
with any of the Patents or Licenses.
5. NEW PATENTS AND LICENSES. The Borrower represents and warrants
that the Patents listed on SCHEDULE A include all of the patents and patent
applications now owned by the Borrower, that the Licenses listed on SCHEDULE B
include all of the patent license agreements held by the Borrower, and that
except as listed on SCHEDULE C, no other liens, claims or security
-2-
interests have been granted by the Borrower to any other Person in such Patents
and Licenses. If, prior to the termination of this Agreement, the Borrower
shall obtain rights to any new patentable inventions, or become entitled to the
reissue, division, continuation, renewal, extension or continuation-in-part of
any patent or improvement on any Patent or License, or enter into any new patent
license agreement, the provisions of SECTION 3 shall automatically apply
thereto, the Borrower shall promptly so notify the Lender in writing, and the
Borrower shall execute an amendment to add such new Patents and Licenses to
SCHEDULE A or B, as appropriate, upon the request of the Lender. The Borrower
hereby authorizes the Lender to unilaterally amend this Agreement to include any
such new or other Patents on SCHEDULE A and any such new or other Licenses on
SCHEDULE B and to take any action the Lender deems appropriate to perfect or
maintain the rights and interests of the Lender, the under this Agreement with
respect to such Patents and Licenses.
6. ROYALTIES. The Borrower hereby agrees that the use by the Lender
of the Patents and Licenses as authorized hereunder shall be coextensive with
the Borrower's rights thereunder and with respect thereto and without any
liability for royalties or other related charges from the Lender to the
Borrower.
7. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS.
The Lender shall have the right, at any reasonable time and from time to time,
to inspect the Borrower's premises and to examine the Borrower's books, records
and operations relating to the Patents or Licenses, including, without
limitation, the Borrower's quality control processes; provided that Lender shall
not unreasonably interfere with Borrower's business or operations during such
inspection. Notwithstanding the foregoing, after the occurrence and during the
continuation of an Event of Default, the Lender shall have the right to conduct
an inspection at such times as the Lender may, in its discretion, deem
appropriate. Any and all such visitations and inspections by the Lender shall
be at the Borrower's expense. The Borrower agrees not to sell or assign its
interest in, or grant any license under, the Patents or Licenses without the
prior written consent of the Lender.
8. TERMINATION OF THE LENDER'S SECURITY INTEREST. This Agreement is
made for collateral security purposes only. Upon payment in full of all of the
Liabilities and termination of all financing arrangements between the Lender and
the Borrower, this Agreement shall terminate and the Lender shall promptly
execute and deliver to the Borrower, at the Borrower's expense, all termination
statements and other instruments as may be necessary or proper to terminate the
Lender's security interest in the Patents or Licenses, subject to any
disposition thereof which may have been made by the Lender pursuant to this
Agreement or the Loan Agreement.
9. DUTIES OF THE BORROWER. The Borrower shall, (i) prosecute
diligently any patent application that is part of the Patents pending as of the
date hereof or thereafter until the termination of this Agreement, (ii) make
application on unpatented but patentable inventions as the Borrower deems
appropriate, and (iii) take all take reasonable steps to preserve and maintain
all of the Borrower's rights in the Patents and Licenses, including, without
limitation, making
-3-
timely filings with the United States Patent and Trademark Office or any similar
office or agency in any state, province or country for renewals and extensions
and diligently monitoring unauthorized use thereof. Anything herein to the
contrary notwithstanding, (a) the Borrower shall remain liable under the
contracts and agreements included in the Licenses to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Lender of any of the rights hereunder shall not release the Borrower from any of
its duties or obligations under the contracts and agreements included in the
Licenses, and (c) the Lender shall not have any obligation or liability under
the contracts and agreements included in the Licenses by reason of this
Agreement, nor shall the Lender be obligated to perform any of the obligations
or duties of the Borrower thereunder. Any expenses incurred in connection with
the foregoing shall be borne by the Borrower.
10. THE LENDER'S RIGHT TO XXX. After the occurrence and during the
continuation of an Event of Default, the Lender shall have the right, but shall
in no way be obligated, to bring suit in its own name to enforce the Patents or
Licenses and, if the Lender shall commence any such suit, the Borrower shall, at
the request of the Lender, do any and all lawful acts and execute any and all
proper documents required by the Lender in aid of such enforcement. The
Borrower shall, upon demand, promptly reimburse the Lender for all costs and
expenses incurred by the Lender in the exercise of such enforcement (including,
without limitation, reasonable fees and expenses of attorneys and paralegals for
the Lender).
11. WAIVERS. No course of dealing between the Borrower and the
Lender and no failure or delay on the part of the Lender to exercise, or delay
in exercising, any right, power or privilege hereunder, under the Loan Agreement
or under any other agreement, shall operate as a waiver of any of Lender's
rights, powers or privileges hereunder or under the Loan Agreement. No single
or partial exercise of any right, power or privilege hereunder, under the Loan
Agreement or under any other agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
12. EXERCISE OF RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT.
Notwithstanding anything set forth herein to the contrary, it is hereby
expressly agreed that upon the occurrence and during the continuation of an
Event of Default, the Lender may exercise any of the rights and remedies
provided in this Agreement, the Loan Agreement and any other agreement executed
by the Borrower and delivered to the Lender.
13. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except as specifically provided in SECTIONS 4 and 5 hereof
or by a writing signed by the Borrower and the Lender.
14. CUMULATIVE REMEDIES; POWER OF ATTORNEY. All of the rights and
remedies of the Lender with respect to the Patents or Licenses, whether
established hereby, by any other agreements or by law, shall be cumulative and
may be exercised singularly or concurrently. The Borrower hereby appoints the
Lender and all Persons the Lender may designate, in its sole and absolute
discretion, as the Borrower's attorney-in-fact, with full authority in the place
and stead
-4-
of the Borrower and in the name of the Borrower or otherwise, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Agreement, including without limitation, from
and after the occurrence and during the continuation of an Event of Default in
the Lender's sole discretion, (i) the endorsement of the Borrower's name on all
applications, documents, papers and instruments related to the Patents or
Licenses, (ii) the assignment, pledge, conveyance or other disposition of the
Patents or Licenses to anyone on commercially reasonable terms, (iii) the grant
or issuance of any exclusive or non-exclusive license under any of the Patents
or Licenses and (iv) the taking of any other actions with respect to the Patents
or Licenses as the Lender deems necessary or desirable. The Borrower hereby
ratifies all that such attorney-in-fact shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable until all of the Liabilities shall have been paid in full and all
financing arrangements between the Lender and the Borrower shall have been
terminated. The Borrower acknowledges and agrees that this Agreement is not
intended to limit or restrict in any way the rights and remedies of the Lender
under the Loan Agreement or any of the related agreements, but rather is
intended to facilitate the exercise of such rights and remedies. The Lender
shall have, in addition to all other rights and remedies given it by the terms
of this Agreement, all rights and remedies allowed by law and the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which the Patents or Licenses may be located or deemed located.
15. BINDING EFFECT; BENEFITS. This Agreement shall be binding upon
the Borrower and its successors and assigns, and shall inure to the Lender and
its respective nominees, successors and assigns. The Borrower's successors and
assigns shall include, without limitation, a receiver, trustee or debtor-in-
possession of or for the Borrower. The Borrower shall not assign its
obligations hereunder without the Lender's prior written consent.
16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (as opposed to conflicts of law provisions)
and decisions of the State of Illinois. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held
invalid or prohibited under applicable law, such provision shall be ineffective
only to the extent of such invalidity or prohibition, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
17. NOTICES. All notices or other communications required or desired
to be served, given or delivered hereunder shall be served, given or delivered
and shall be deemed to have been validly served, given or delivered in
accordance with SECTION 13.10 of the Loan Agreement.
18. DISCLAIMER OF DUTY OF THE LENDER. The Lender shall not be liable
for any act, omission, error of judgment or mistake of fact or law with respect
to the Patents or Licenses. Without limiting the generality of the foregoing,
the Lender shall not be under any obligation to take any action necessary to
preserve rights in the Patents or Licenses against any other Persons
-5-
but may do so at its option, and all expenses incurred in connection therewith
shall be for the sole account of the Borrower and added to the Liabilities
secured hereby.
19. SECTION HEADINGS. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
20. EXECUTION IN COUNTERPARTS. 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 one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
XXXXXX MANUFACTURING, INC.
By:/s/Xxxxx X Xxxxxx
___________________________
Name:Xxxxx X Xxxxxx
________________________
Its:President
___________________________
ATTEST:
By:/s/Xxxxxxx X. Xxxxxxx
___________________________
Secretary
Acknowledged and agreed to in
Chicago, Illinois, as of this
____ day of January, 1996
SANWA BUSINESS CREDIT CORPORATION
By:/s/Xxxxxx X. Xxxxx
____________________________
Name:Xxxxxx X. Xxxxx
__________________________
Its:Group Vice President
_____________________________
-0-
XXXXX XX XXXXXXXXX )
) SS
COUNTY OF XXXXXX )
The foregoing Patent Security Agreement was executed and acknowledged
before me this 11th day of January, 1996, by Xxxxx X. Xxxxxx, personally known
to me to be the President of Xxxxxx Manufacturing, Inc., on behalf of such
corporation.
(SEAL)
/s/Xxxx Xxxxxx
_____________________________
Notary Public
My commission expires:
Jan. 31, 2000
-7-
Schedule A
to
Patent Security Agreement
dated as of December 31, 1995
Patents
-------
Attached.
-8-
Schedule B
to
Patent Security Agreement
dated as of December 31, 1995
Licenses
---------
Attached.
-9-
Schedule C
to
Patent Security Agreement
dated as of December 31, 1995
Senior Lienholders
------------------
Attached.
-10-
