Exhibit 10.3

 

AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

 

AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of July 19, 2012
(this "Agreement"), made by VRINGO, INC., a Delaware corporation (the
"Company"), and each of its existing "Subsidiaries" (as defined in the Note
defined below) as named on the signature pages hereto (collectively, the
"Existing Subsidiaries") and each other Subsidiary of the Company hereafter
becoming party hereto (each individually referred to herein as a "New
Subsidiary" and collectively as the "New Subsidiaries," together with the
Company and the Existing Subsidiaries, each a "Grantor" and, collectively, the
"Grantors"), in favor of Hudson Bay Master Fund Ltd. (the "Buyer").

 

WITNESSETH:

 

WHEREAS, Innovate/Protect, Inc., a Delaware corporation formerly known as
Labrador Search Corporation ("I/P"), and the Buyer are parties to the
Subscription Agreement, dated as of June 22, 2011 (as amended, restated,
supplemented or otherwise modified from time to time, the "Subscription
Agreement"), pursuant to which I/P sold, and the Buyer purchased the Senior
Secured Note in the original principal amount of $3,200,000 (as such note may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, the "Note");

 

WHEREAS, pursuant to a Pledge and Security Agreement dated as of June 22, 2011
(as amended or supplemented prior to the date hereof, the "Existing Security
Agreement"), I/P, I/P Engine, Inc., a Virginia corporation formerly known as
Smart Search Labs, Inc. ("I/P Engine"), I/P Labs, Inc., a Delaware corporation
formerly known as Scottish Terrier Capital, Inc. ("I/P Labs" and together with
I/P, I/P Engine, each individually referred to herein as an "Existing Grantor"
and collectively as the "Existing Grantors"), granted liens and security
interests in the collateral described therein to the Buyer as security for the
Existing Grantors' obligations under, among other things, the Subscription
Agreement, the Note issued pursuant thereto and the other "Transaction
Documents" (as defined in the Subscription Agreement), and has agreed to
continue to secure certain of the Existing Grantor's obligations thereunder
pursuant to this amended and restated Agreement;

 

WHEREAS, the Company, I/P and VIP Merger Sub, Inc. ("Merger Sub"), a
wholly-owned subsidiary of the Company, have entered into that certain Agreement
and Plan of Merger, dated as of March 12, 2012 (the "Merger Agreement") pursuant
to which, among other things, I/P shall be merged with and into Merger Sub (the
"Merger Transaction");

 

WHEREAS, the Company, as part of the Merger Transaction, has agreed to grant
liens on and security interest in the collateral described hereunder, and the
Company has agreed to cause Vringo, Ltd., an Israeli corporation ("Vringo
Israel"), and Vringo Israel has agreed, to grant liens on and security interest
in the collateral described hereunder;

 

 

 

 

WHEREAS, it is a condition precedent to the Buyer entering into certain
transactions more fully described in the Merger Agreement that (i) the Existing
Grantors confirm, ratify and reaffirm the liens on and security interests
granted pursuant to the Existing Security Agreement in all personal property of
each of the Existing Grantors to secure the obligations under the Note, and the
other Note Transaction Documents, and (ii) the Company and each of the New
Subsidiaries (each individually referred to herein as a "New Grantor" and
collectively as the "New Grantors"), grant to the Buyer a security interest in
all personal property of each of the New Subsidiaries to secure I/P's
obligations under the Note and the other Note Transaction Documents, and that
each future Subsidiary of the Company becomes a party to this Agreement;

 

WHEREAS, each of the Existing Subsidiaries, the Company and each other Grantor
are or will be mutually dependent on each other in the conduct of their
respective businesses as an integrated operation, with the credit needed from
time to time by one often being provided through financing obtained by the other
and the ability to obtain such financing being dependent on the successful
operations of each of the Existing Subsidiaries, the Company and each other
Grantor and the Note; and

 

WHEREAS, the Company and each other Grantor has determined that the execution,
delivery and performance of this Agreement directly benefits, and are in the
best interest of the Company and each other Grantor; and

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Buyer to perform under the Debt Assumption Agreement,
each Grantor agrees with the Buyer as follows:

 

Section 1.          Definitions.

 

(a)          Reference is hereby made to the Note for a statement of the terms
thereof. All terms used in this Agreement and the recitals hereto which are
defined in the Note or in Articles 8 or 9 of the Uniform Commercial Code (the
"Code") as in effect from time to time in the State of New York, and which are
not otherwise defined herein shall have the same meanings herein as set forth
therein; provided that terms used herein which are defined in the Code as in
effect in the State of New York on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as the Buyer may otherwise determine.

 

(b)          The following terms shall have the respective meanings provided for
in the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort
Claim", "Commodity Account", "Commodity Contracts", "Deposit Account",
"Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights",
"Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes",
"Security", "Record", "Security Account", "Software", and "Supporting
Obligations".

 

(c)          As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

 

"Collateral" shall have the meaning set forth in Section 2 hereof.

 

-2-

 

 

"Copyright Licenses" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to use or sell any works covered by any copyright
(including, without limitation, all Copyright Licenses set forth in Schedule II
hereto).

 

"Copyrights" means all domestic and foreign copyrights, whether registered or
not, including, without limitation, all copyright rights throughout the universe
(whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

 

"Event of Default" means (i) any defined event of default under any one or more
of the Note Transaction Documents, in each instance, after giving effect to any
notice, grace, or cure periods provided for in the applicable Note Transaction
Document, (ii) the failure by the Company to pay any amounts when due under the
Note or any other Note Transaction Document, or (iii) the breach of any
representation, warranty or covenant by any Grantor under this Agreement.

 

"Existing Issuer" has the meaning specified therefor in the definition of the
term "Pledged Shares".

 

"Guaranty" means the Amended and Restated Guaranty, dated as of the date hereof,
by the Existing Subsidiaries in favor of the Buyer.

 

"Insolvency Proceeding" means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United
States Code) or under any other bankruptcy or insolvency law, assignments for
the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

 

"Intellectual Property" means the Copyrights, Trademarks and Patents.

 

"Licenses" means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.

 

"Lien" means any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential
arrangement of any nature, including, without limitation, any conditional sale
or title retention arrangement, any capitalized lease and any assignment,
deposit arrangement or financing lease intended as, or having the effect of,
security.

 

"Obligations" shall have the meaning set forth in Section 3 hereof.

 

-3-

 

 

"Patent Licenses" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule
II hereto).

 

"Patents" means all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, of
any Grantor, now existing or hereafter acquired (including, without limitation,
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how and
formulae described in Schedule II hereto), all applications, registrations and
recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office, or in any
similar office or agency of the United States or any other country or any
political subdivision thereof), and all reissues, divisions, continuations,
continuations in part and extensions or renewals thereof.

 

"Permitted Liens" shall have the meaning as ascribed to such term in the Note.

 

"Pledged Debt" means the indebtedness described in Schedule VII hereto and all
indebtedness from time to time owned or acquired by a Grantor, the promissory
notes and other Instruments evidencing any or all of such indebtedness, and all
interest, cash, Instruments, Investment Property, financial assets, securities,
capital stock, other equity interests, stock options and commodity contracts,
notes, debentures, bonds, promissory notes or other evidences of indebtedness
and all other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness.

 

"Pledged Interests" means, collectively, (a) the Pledged Debt, (b) the Pledged
Shares and (c) all security entitlements in any and all of the foregoing.

 

"Pledged Issuer" has the meaning specified therefor in the definition of the
term "Pledged Shares".

 

"Pledged Shares" means (a) the shares of capital stock or other equity interests
described in Schedule VIII hereto, whether or not evidenced or represented by
any stock certificate, certificated security or other Instrument, issued by the
Persons described in such Schedule VIII (the "Existing Issuers"), (b) the shares
of capital stock or other equity interests at any time and from time to time
acquired by a Grantor of any and all Persons now or hereafter existing (such
Persons, together with the Existing Issuers, being hereinafter referred to
collectively as the "Pledged Issuers" and each individually as a "Pledged
Issuer"), whether or not evidenced or represented by any stock certificate,
certificated security or other Instrument, and (c) the certificates representing
such shares of capital stock, all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
Instruments, Investment Property, financial assets, securities, capital stock,
other equity interests, stock options and commodity contracts, notes,
debentures, bonds, promissory notes or other evidences of indebtedness and all
other property (including, without limitation, any stock dividend and any
distribution in connection with a stock split) from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such capital stock.

 

-4-

 

 

"Trademark Licenses" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by any Grantor and now or hereafter covered
by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).

 

"Trademarks" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a's,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.

 

Section 2.          Grant of Security Interest. As collateral security for all
of the Obligations, each New Grantor hereby pledges and assigns to the Buyer and
grants to the Buyer a continuing security interest in, all personal property of
such Grantor, wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired, of every kind and description, tangible or
intangible (collectively, the "Collateral"), including, without limitation, the
following:

 

(a)          all Accounts;

 

(b)          all Chattel Paper (whether tangible or electronic);

 

(c)          the Commercial Tort Claims specified on Schedule VI hereto;

 

(d)          all Deposit Accounts (including, without limitation, all cash, and
all other property from time to time deposited therein and the monies and
property in the possession or under the control of the Buyer or any affiliate,
representative, agent or correspondent of the Buyer;

 

(e)          all Documents;

 

(f)          all Equipment;

 

-5-

 

 

(g)         all Fixtures;

 

(h)         all General Intangibles (including, without limitation, all Payment
Intangibles);

 

(i)          all Goods;

 

(j)          all Instruments (including, without limitation, Promissory Notes
and each certificated Security);

 

(k)         all Inventory;

 

(l)          all Investment Property;

 

(m)        all Copyrights, Patents and Trademarks, and all Licenses;

 

(n)         all Letter-of-Credit Rights;

 

(o)         all Supporting Obligations;

 

(p)         all Pledged Interests;

 

(q)         all other tangible and intangible personal property of such Grantor
(whether or not subject to the Code), including, without limitation, all bank
and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of such Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by such Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of such Grantor or any other Person from time to
time acting for such Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and

 

(r)          all Proceeds, including all Cash Proceeds and Noncash Proceeds, and
products of any and all of the foregoing Collateral; in each case howsoever such
Grantor's interest therein may arise or appear (whether by ownership, security
interest, claim or otherwise).

 

Each Existing Grantor hereby confirms, ratifies and reaffirms that the liens on
and security interests granted pursuant to the Existing Security Agreement are
continuing and are and shall remain unimpaired and continue to constitute fully
perfected, first priority Liens in favor of the Buyer, with the same force,
effect and priority in effect both immediately prior to and after entering into
this Security Agreement and the other Transaction Documents entered into on or
as of the date hereof. Each Existing Grantor hereby confirms and agrees that
such Liens granted pursuant to the Existing Security Agreement will continue to
secure all of the Obligations.

 

-6-

 

 

Section 3.          Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred
(collectively, the "Obligations"):

 

(a)          the prompt payment by each Grantor, as and when due and payable (by
scheduled maturity, required prepayment, acceleration, demand or otherwise), of
all amounts from time to time owing by it in respect of the Note, the Guaranty
and the other Note Transaction Documents, including, without limitation, (A) all
principal of and interest on the Note (including, without limitation, all
interest that accrues after the commencement of any Insolvency Proceeding of any
Grantor, whether or not the payment of such interest is unenforceable or is not
allowable due to the existence of such Insolvency Proceeding), and (B) all
amounts from time to time owing by such Grantor under the Guaranty; and

 

(b)          the due performance and observance by each Grantor of all of its
other obligations from time to time existing in respect of any of the Note
Transaction Documents for so long as the Note are outstanding.

 

Section 4.          Representations and Warranties. Each Grantor (that is not an
Existing Grantor) represents and warrants as to itself as follows:

 

(a)          Schedule I hereto sets forth (i) the exact legal name of such
Grantor, and (ii) the organizational identification number of such Grantor or
states that no such organizational identification number exists.

 

(b)          There is no pending or written notice threatening any action, suit,
proceeding or claim affecting such Grantor before any governmental authority or
any arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that may adversely affect the grant by such Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Buyer of any of its rights or remedies
hereunder.

 

(c)          All Federal, state and local tax returns and other reports required
by applicable law to be filed by such Grantor have been filed, or extensions
have been obtained, and all taxes, assessments and other governmental charges
imposed upon such Grantor or any property of such Grantor (including, without
limitation, all federal income and social security taxes on employees' wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with generally accepted accounting principles
consistently applied ("GAAP").

 

-7-

 

 

(d)          All Equipment, Fixtures, Goods and Inventory of such Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of such Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Schedule III hereto, except that such Grantor will give the Buyer
not less than 30 days' prior written notice of any change of the location of any
such Collateral, other than to locations set forth on Schedule III and with
respect to which the Buyer has filed financing statements and otherwise fully
perfected its Liens thereon, subject to Section 5(n) hereof. Such Grantor's
chief place of business and chief executive office, the place where such Grantor
keeps its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of (i) each Promissory Note, Security and other Instrument owned by
each Grantor and (ii) each Deposit Account, Securities Account and Commodities
Account of each Grantor, together with the name and address of each institution
at which each such Account is maintained, the account number for each such
Account and a description of the purpose of each such Account. Set forth in
Schedule II hereto is a complete and correct list of each trade name used by
each Grantor and the name of, and each trade name used by, each person from
which such Grantor has acquired any substantial part of the Collateral.

 

(e)          Such Grantor has delivered or made available to the Buyer complete
and correct copies of each License described in Schedule II hereto, including
all schedules and exhibits thereto, which represents all of the Licenses
existing on the date of this Agreement. Each such License sets forth the entire
agreement and understanding of the parties thereto relating to the subject
matter thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby or the
rights of such Grantor or any of its affiliates in respect thereof. Each
material License now existing is, and any material License entered into in the
future will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, suretyship or other similar laws and equitable principles
(regardless of whether enforcement is sought in equity or in law). No default
under any material License by any such party has occurred, nor does any defense,
offset, deduction or counterclaim exist thereunder in favor of any such party.

 

(f)          Such Grantor owns and controls, or otherwise possesses adequate
rights to use, all Trademarks, Patents and Copyrights, which are the only
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity necessary to
conduct its business in substantially the same manner as conducted as of the
date hereof. Schedule II hereto sets forth a true and complete list of all
registered copyrights, issued patents, Trademarks (including, without
limitation, any Internet domain names and the registrar of each such Internet
domain name), and Licenses annually owned or used by such Grantor as of the date
hereof. To the best knowledge of each Grantor, all such Intellectual Property of
such Grantor is subsisting and in full force and effect, has not been adjudged
invalid or unenforceable, is valid and enforceable and has not been abandoned in
whole or in part. Except as set forth in Schedule II, no such Intellectual
Property is the subject of any licensing or franchising agreement. Such Grantor
has no knowledge of any conflict with the rights of others to any Intellectual
Property and, to the best knowledge of such Grantor, such Grantor is not now
infringing or in conflict with any such rights of others in any material
respect, and to the best knowledge of such Grantor, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by such Grantor. Such Grantor has not received
any notice that it is violating or has violated the trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity or other intellectual property rights of
any third party.

 

-8-

 

 

(g)          Such Grantor is and will be at all times the sole and exclusive
owner of, or otherwise has and will have adequate rights in, the Collateral free
and clear of any Liens, except for Permitted Liens on any Collateral. No
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording or filing office
except (A) such as may have been filed in favor of the Buyer relating to this
Agreement, subject to Section 5(n) hereof, and (B) such as may have been filed
to perfect any Permitted Liens.

 

(h)          The exercise by the Buyer of any of its rights and remedies
hereunder will not contravene any law or any contractual restriction binding on
or otherwise affecting such Grantor or any of its properties and will not result
in or require the creation of any Lien, upon or with respect to any of its
properties.

 

(i)          No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body, or any
other Person, is required for (i) the grant by such Grantor or any perfection of
the security interest which may be created hereby in the Collateral pursuant to
Section 5(n), or (ii) the exercise by the Buyer of any of its rights and
remedies hereunder, except (A) for the filing under the Uniform Commercial Code
as in effect in the applicable jurisdiction of any financing statements which
may be filed pursuant to Section 5(n) hereof.

 

(j)          This Agreement creates in favor of the Buyer a legal, valid and
enforceable (except to the extent such enforceability may be affected by the
fact that it is not perfected) security interest in the Collateral, as security
for the Obligations.

 

(k)          As of the date hereof, such Grantor does not hold any Commercial
Tort Claims nor is aware of any such pending claims, except for such claims
described in Schedule VI.

 

Section 5.          Covenants as to the Collateral. Subject in all respects to
Section 5(n), so long as any of the Obligations shall remain outstanding, unless
the Buyer shall otherwise consent in writing:

 

-9-

 

 

(a)          Further Assurances. Each Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Buyer may reasonably request in
order to: (i) perfect and protect the security interest purported to be created
hereby; (ii) enable the Buyer to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise effect the purposes
of this Agreement, including, without limitation: (A) marking conspicuously all
Chattel Paper and each License and, at the request of the Buyer, each of its
Records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Buyer, indicating that such Chattel Paper, License or
Collateral is subject to the security interest created hereby, (B)  delivering
and pledging to the Buyer hereunder each Promissory Note, Security, Chattel
Paper or other Instrument, now or hereafter owned by such Grantor, duly endorsed
and accompanied by executed instruments of transfer or assignment, all in form
and substance satisfactory to the Buyer, (C) executing and filing (to the
extent, if any, that such Grantor's signature is required thereon) or
authenticating the filing of, such financing or continuation statements, or
amendments thereto, as may be necessary or desirable or that the Buyer may
request in order to perfect and preserve the security interest purported to be
created hereby, (D) furnishing to the Buyer from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral in each case as the Buyer may
reasonably request, all in reasonable detail, (E) if any Collateral shall be in
the possession of a third party, notifying such Person of the Buyer's security
interest created hereby and obtaining a written acknowledgment from such Person
that such Person holds possession of the Collateral for the benefit of the
Buyer, which such written acknowledgement shall be in form and substance
satisfactory to the Buyer, (F) if at any time after the date hereof, such
Grantor acquires or holds any Commercial Tort Claim, promptly notifying the
Buyer in a writing signed by such Grantor setting forth a brief description of
such Commercial Tort Claim and granting to the Buyer a security interest therein
and in the proceeds thereof, which writing shall incorporate the provisions
hereof and shall be in form and substance satisfactory to the Buyer, (G) upon
the acquisition after the date hereof by such Grantor of any motor vehicle or
other Equipment subject to a certificate of title or ownership (other than a
Motor Vehicle or Equipment that is subject to a purchase money security
interest), causing the Buyer to be listed as the lienholder on such certificate
of title or ownership and delivering evidence of the same to the Buyer; and
(H) taking all actions required by any earlier versions of the Uniform
Commercial Code or by other law, as applicable, in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.

 

(b)          Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory at the locations specified therefor in Section 4(g)
hereof or, upon not less than thirty (30) days' prior written notice to the
Buyer accompanied by a new Schedule V hereto indicating each new location of the
Equipment and Inventory, at such other locations in the United States.

 

(c)          Condition of Equipment. Each Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment of
such Grantor within a commercially reasonable time after the occurrence thereof,
make or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Buyer may reasonably request to such end. Such Grantor
will promptly furnish to the Buyer a statement describing in reasonable detail
any such loss or damage in excess of $25,000 to any Equipment.

 

(d)          Taxes, Etc. Each Grantor agrees to pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside
for the payment thereof.

 

-10-

 

 

(e)          Insurance.

 

(i)          Each Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any governmental authority having jurisdiction
with respect thereto or as is carried by such Grantor as of the date hereof and
in any event, in amount, adequacy and scope reasonably satisfactory to the
Buyer. Each such policy for liability insurance shall provide for all losses to
be paid on behalf of the Buyer and such Grantor as their respective interests
may appear, and each policy for property damage insurance shall provide for all
losses to be adjusted with, and paid directly to, the Buyer. Each such policy
shall in addition (A) name the Buyer as an additional insured party thereunder
(without any representation or warranty by or obligation upon the Buyer) as
their interests may appear, (B) contain an agreement by the insurer that any
loss thereunder shall be payable to the Buyer on its own account notwithstanding
any action, inaction or breach of representation or warranty by such Grantor,
(C) provide that there shall be no recourse against the Buyer for payment of
premiums or other amounts with respect thereto, and (D) provide that at least 30
days' prior written notice of cancellation, lapse, expiration or other adverse
change shall be given to the Buyer by the insurer. Such Grantor will, if so
requested by the Buyer, deliver to the Buyer original or duplicate policies of
such insurance and, as often as the Buyer may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Such Grantor will
also, at the request of the Buyer, execute and deliver instruments of assignment
of such insurance policies and cause the respective insurers to acknowledge
notice of such assignment.

 

(ii)         Reimbursement under any liability insurance maintained by a Grantor
pursuant to this Section 5(e) may be paid directly to the Person who shall have
incurred liability covered by such insurance. In the case of any loss involving
damage to Equipment or Inventory, any proceeds of insurance maintained by a
Grantor pursuant to this Section 5(e) shall be paid to the Buyer (except as to
which paragraph (iii) of this Section 5(e) is not applicable), such Grantor will
make or cause to be made the necessary repairs to or replacements of such
Equipment or Inventory, and any proceeds of insurance maintained by such Grantor
pursuant to this Section 5(e) shall be paid by the Buyer to such Grantor as
reimbursement for the costs of such repairs or replacements.

 

(iii)        All insurance payments in respect of such Equipment or Inventory
shall be paid to the Buyer and applied as specified in Section 7(b) hereof.

 

(f)          Provisions Concerning the Accounts and the Licenses.

 

(i)          Each Grantor will (A) give the Buyer at least 30 days' prior
written notice of any change in such Grantor's name, identity or organizational
structure, (B) maintain its jurisdiction of incorporation as set forth in
Section 4(b) hereto, (C) immediately notify the Buyer upon obtaining an
organizational identification number, if on the date hereof such Grantor did not
have such identification number, and (D) keep adequate records concerning the
Accounts and Chattel Paper and permit representatives of the Buyer during normal
business hours on reasonable notice to such Grantor, to inspect and make
abstracts from such Records and Chattel Paper.

 

-11-

 

 

(ii)         Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, such Grantor
may (and, at the Buyer's direction, will) take such action as such Grantor or
the Buyer may deem necessary or advisable to enforce collection or performance
of the Accounts; provided, however, that the Buyer shall have the right at any
time, upon the occurrence and during the continuance of an Event of Default, to
notify the account debtors or obligors under any Accounts of the assignment of
such Accounts to the Buyer and to direct such account debtors or obligors to
make payment of all amounts due or to become due to such Grantor thereunder
directly to the Buyer or its designated agent and, upon such notification and at
the expense of such Grantor and to the extent permitted by law, to enforce
collection of any such Accounts and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as such Grantor
might have done. After receipt by a Grantor of a notice from the Buyer that the
Buyer has notified, intends to notify, or has enforced or intends to enforce a
Grantor's rights against the account debtors or obligors under any Accounts as
referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including Instruments) received by such Grantor in respect
of the Accounts shall be received in trust for the benefit of the Buyer
hereunder, shall be segregated from other funds of such Grantor and shall be
forthwith paid over to the Buyer in the same form as so received (with any
necessary endorsement) to be held as cash collateral and applied as specified in
Section 7(b) hereof, and (B) such Grantor will not adjust, settle or compromise
the amount or payment of any Account or release wholly or partly any account
debtor or obligor thereof or allow any credit or discount thereon. In addition,
upon the occurrence and during the continuance of an Event of Default, the Buyer
may (in its sole and absolute discretion) direct any or all of the banks and
financial institutions with which such Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Buyer by wire transfer (to such account as the Buyer shall
specify, or in such other manner as the Buyer shall direct) all or a portion of
such securities, cash, investments and other items held by such institution. Any
such securities, cash, investments and other items so received by the Buyer
shall (in the sole and absolute discretion of the Buyer) be held as additional
Collateral for the Obligations or distributed in accordance with Section 7
hereof.

 

(iii)        Upon the occurrence and during the continuance of any breach or
default under any material License referred to in Schedule II hereto by any
party thereto other than a Grantor, the Grantor party thereto will, promptly
after obtaining knowledge thereof, give the Buyer written notice of the nature
and duration thereof, specifying what action, if any, it has taken and proposes
to take with respect thereto and thereafter will take reasonable steps to
protect and preserve its rights and remedies in respect of such breach or
default, or will obtain or acquire an appropriate substitute License.

 

(iv)        Each Grantor will, at its expense, promptly deliver to the Buyer a
copy of each notice or other communication received by it by which any other
party to any material License referred to in Schedule II hereto purports to
exercise any of its rights or affect any of its obligations thereunder, together
with a copy of any reply by such Grantor thereto.

 

-12-

 

 

(v)         Each Grantor will exercise promptly and diligently each and every
right which it may have under each material License (other than any right of
termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Buyer, cancel, terminate, amend or
otherwise modify in any respect, or waive any provision of, any material License
referred to in Schedule II hereto.

 

(g)          Transfers and Other Liens.

 

(i)          No Grantor will sell, assign (by operation of law or otherwise),
lease, license, exchange or otherwise transfer or dispose of any of the
Collateral, except (A) Inventory in the ordinary course of business, (B)
worn-out or obsolete assets not necessary to the business, and (C) Accounts
solely in accordance with the terms and conditions of the Factoring Agreement.

 

(ii)         No Grantor will create, suffer to exist or grant any Lien upon or
with respect to any Collateral other than a Permitted Lien.

 

(h)          Intellectual Property.

 

(i)          Except as otherwise set forth herein, if applicable, each Grantor
shall, upon the Buyer's written request, duly execute and delivered the
applicable Assignment for Security in the form attached hereto as Exhibit A.
Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force and free from any claim of abandonment for non-use, and such Grantor
will not (nor permit any licensee thereof to) do any act or knowingly omit to do
any act whereby any Intellectual Property may become invalidated; provided,
however, that so long as no Event of Default has occurred and is continuing,
such Grantor shall not have an obligation to use or to maintain any Intellectual
Property (A) that relates solely to any product or work, that has been, or is in
the process of being, discontinued, abandoned or terminated, (B) that is being
replaced with Intellectual Property substantially similar to the Intellectual
Property that may be abandoned or otherwise become invalid, so long as the
failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by
this Agreement or (C) that is substantially the same as another Intellectual
Property that is in full force, so long the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this Agreement.
Each Grantor will cause to be taken all necessary steps in any proceeding before
the United States Patent and Trademark Office and the United States Copyright
Office or any similar office or agency in any other country or political
subdivision thereof to maintain each registration of the Intellectual Property
(other than the Intellectual Property described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees in the ordinary course of
business. If any Intellectual Property (other than Intellectual Property
described in the proviso to the first sentence of subsection (i) of this clause
(h)) is infringed, misappropriated, diluted or otherwise violated in any
material respect by a third party, such Grantor shall (x) upon learning of such
infringement, misappropriation, dilution or other violation, promptly notify the
Buyer and (y) to the extent such Grantor shall deem appropriate under the
circumstances, promptly sue for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as such Grantor shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Buyer from time to time upon its request statements and
schedules further identifying and describing the Intellectual Property and
Licenses and such other reports in connection with the Intellectual Property and
Licenses as the Buyer may reasonably request, all in reasonable detail and
promptly upon request of the Buyer, following receipt by the Buyer of any such
statements, schedules or reports, such Grantor shall modify this Agreement by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and authenticate such documents and do
such acts as shall be necessary or, in the judgment of the Buyer, desirable to
subject such Intellectual Property and Licenses to the Lien and security
interest created by this Agreement. Notwithstanding anything herein to the
contrary, upon the occurrence and during the continuance of an Event of Default,
such Grantor may not abandon or otherwise permit any Intellectual Property to
become invalid without the prior written consent of the Buyer, and if any
Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, such Grantor will take such
action as the Buyer shall deem appropriate under the circumstances to protect
such Intellectual Property.

 

-13-

 

 

(ii)         In no event shall a Grantor, either itself or through any agent,
employee, licensee or designee, file an application for the registration of any
Trademark or Copyright or the issuance of any Patent with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Buyer prior
written notice thereof. Upon request of the Buyer, but except as otherwise set
forth herein, each Grantor shall execute, authenticate and deliver any and all
assignments, agreements, instruments, documents and papers as the Buyer may
reasonably request to evidence the Buyer's security interest hereunder in such
Intellectual Property and the General Intangibles of such Grantor relating
thereto or represented thereby, and such Grantor hereby appoints the Buyer its
attorney-in-fact to execute and/or authenticate and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the indefeasible payment in full in cash of all obligations under the Note
(together with any matured indemnification obligations as of the date of such
payment, but excluding any inchoate or unmatured contingent indemnification
obligations).

 

(iii)        Upon the Buyer's request, each Grantor shall cause each domain
registrar where any of such Grantor's Internet domain names are registered,
whether as of the date of this Agreement or at any time hereafter, to execute
and deliver to the Buyer a domain name control agreement, in form and substance
reasonably satisfactory to the Buyer, duly executed by such Grantor and such
domain registrar, or enter into other arrangements in form and substance
satisfactory to the Buyer, pursuant to which such domain registrar shall
irrevocably agree, inter alia, that (i) it will comply at any time with the
instructions originated by the Buyer to such domain registrar directing
substitution of the Buyer or its designee as the registered owner of such
Internet domain names, without further consent of such Grantor, which
instructions the Buyer will not give to such domain registrar in the absence of
a continuing Event of Default.

 

-14-

 

 

(i)          Deposit, Commodities and Securities Accounts. Upon the Buyer's
request, each Grantor shall cause each bank and other financial institution with
an account referred to in Schedule IV hereto to execute and deliver to the Buyer
a control agreement, in form and substance reasonably satisfactory to the Buyer,
duly executed by such Grantor and such bank or financial institution, or enter
into other arrangements in form and substance satisfactory to the Buyer,
pursuant to which such institution shall irrevocably agree, inter alia, that
(i) it will comply at any time with the instructions originated by the Buyer to
such bank or financial institution directing the disposition of cash, Commodity
Contracts, securities, Investment Property and other items from time to time
credited to such account, without further consent of such Grantor, which
instructions the Buyer will not give to such bank or other financial institution
in the absence of a continuing Event of Default, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of such Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Buyer, (iii) any right of set off, banker's
Lien or other similar Lien, security interest or encumbrance shall be fully
waived as against the Buyer, and (iv) upon receipt of written notice from the
Buyer during the continuance of an Event of Default, such bank or financial
institution shall immediately send to the Buyer by wire transfer (to such
account as the Buyer shall specify, or in such other manner as the Buyer shall
direct) all such cash, the value of any Commodity Contracts, securities,
Investment Property and other items held by it. Without the prior written
consent of the Buyer, such Grantor shall not make or maintain any Deposit
Account, Commodity Account or Securities Account except for the accounts set
forth in Schedule IV hereto. The provisions of this paragraph 5(i) shall not
apply to (i) Deposit Accounts for which the Buyer is the depositary and (ii)
Deposit Accounts specially and exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of a Grantor's
salaried employees.

 

(j)          Motor Vehicles.

 

(i)          Upon the Buyer's written request, each Grantor shall deliver to the
Buyer originals of the certificates of title or ownership for all motor vehicles
owned by it with the Buyer listed as lienholder.

 

(ii)         Each Grantor hereby appoints the Buyer as its attorney-in-fact,
effective the date hereof and terminating upon the termination of this
Agreement, for the purpose of (A) executing on behalf of such Grantor title or
ownership applications for filing with appropriate state agencies to enable
motor vehicles now owned or hereafter acquired by such Grantor to be retitled
and the Buyer listed as lienholder thereof, (B) filing such applications with
such state agencies, and (C) executing such other documents and instruments on
behalf of, and taking such other action in the name of, such Grantor as the
Buyer may deem necessary or advisable to accomplish the purposes hereof
(including, without limitation, for the purpose of creating in favor of the
Buyer a perfected Lien on the motor vehicles and exercising the rights and
remedies of the Buyer hereunder). This appointment as attorney-in-fact is
coupled with an interest and is irrevocable until the indefeasible payment in
full in cash of all obligations under the Note (together with any matured
indemnification obligations as of the date of such payment, but excluding any
inchoate or unmatured contingent indemnification obligations).

 

-15-

 

 

(iii)        Any certificates of title or ownership delivered pursuant to the
terms hereof shall be accompanied by odometer statements for each motor vehicle
covered thereby.

 

(iv)        So long as no Event of Default shall have occurred and be
continuing, upon the request of such Grantor, the Buyer shall execute and
deliver to such Grantor such instruments as such Grantor shall reasonably
request to remove the notation of the Buyer as lienholder on any certificate of
title for any motor vehicle; provided, however, that any such instruments shall
be delivered, and the release effective, only upon receipt by the Buyer of a
certificate from such Grantor stating that such motor vehicle is to be sold or
has suffered a casualty loss (with title thereto passing to the casualty
insurance company therefor in settlement of the claim for such loss) and the
amount that such Grantor will receive as sale proceeds or insurance proceeds.
Any proceeds of such sale or casualty loss shall be paid to the Buyer hereunder
immediately upon receipt, to be applied to the Obligations then outstanding.

 

(k)          Control. Each Grantor hereby agrees to take any or all action that
may be necessary or desirable or that the Buyer may request in order for the
Buyer to obtain control in accordance with Sections 9-105 – 9-107 of the Code
with respect to the following Collateral: (i) Electronic Chattel Paper, (ii)
Investment Property, (iii) Pledged Interests and (iv) Letter-of-Credit Rights.

 

(l)          Inspection and Reporting. Each Grantor shall permit the Buyer, or
any agent or representatives thereof or such professionals or other Persons as
the Buyer may designate, not more than once a year in the absence of an Event of
Default, (i) to examine and make copies of and abstracts from such Grantor's
records and books of account, (ii) to visit and inspect its properties, (iii) to
verify materials, leases, Instruments, Accounts, Inventory and other assets of
such Grantor from time to time, (iii) to conduct audits, physical counts,
appraisals and/or valuations, examinations at the locations of such Grantor.
Each Grantor shall also permit the Buyer, or any agent or representatives
thereof or such professionals or other Persons as the Buyer may designate to
discuss such Grantor's affairs, finances and accounts with any of its officers
subject to the execution by the Buyer or its designee(s) of a mutually agreeable
confidentiality agreement.

 

(m)          Future Subsidiaries. If any Grantor shall hereafter create or
acquire any Subsidiary, simultaneously with the creation of acquisition of such
Subsidiary, such Grantor shall cause such Subsidiary to become a party to this
Agreement as an additional "Grantor" hereunder, and to duly execute and/or
deliver such opinions of counsel and other documents, in form and substance
acceptable to the Buyer, as the Buyer shall reasonably request with respect
thereto.

 

(n)          The Company and Vringo Israel. Notwithstanding anything contained
in this Agreement, the Company and Vringo Israel shall not be required to take
any action, including, without limitation, to perfect any lien on or security
interest in, or otherwise protect or enforce the rights of the Buyer in, the
Collateral, provided that, on and after the Default Date and so long as an Event
of Default is continuing, the Buyer, in its sole discretion, may require the
Company or Vringo Israel to take any and all actions necessary or desirable in
order to perfect its liens on and security interests in the Collateral and
otherwise, to comply with the other covenants related to actions to be taken in
respect of further insuring the attachment, perfection and priority of, or the
ability of the Buyer to enforce the security interests in, the Collateral.

 

-16-

 

 

Section 6.          Additional Provisions Concerning the Collateral. Subject to
Section 5(n)

 

(a)          Each Grantor hereby (i) authorizes the Buyer to file one or more
Uniform Commercial Code financing or continuation statements, and amendments
thereto, relating to the Collateral, and (ii) ratifies such authorization to the
extent that the Buyer has filed any such financing or continuation statements,
or amendments thereto, prior to the date hereof. A photocopy 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.

 

(b)          Each Grantor hereby irrevocably appoints the Buyer as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in the
Buyer's discretion, so long as an Event of Default shall have occurred and is
continuing, to take any action and to execute any instrument which the Buyer may
deem necessary or advisable to accomplish the purposes of this Agreement
(subject to the rights of such Grantor under Section 5 hereof), including,
without limitation, (i) to obtain and adjust insurance required to be paid to
the Buyer pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue
for, recover, compound, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any Collateral, (iii) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper in connection with clause (i) or (ii) above, (iv) to file any claims or
take any action or institute any proceedings which the Buyer may deem necessary
or desirable for the collection of any Collateral or otherwise to enforce the
rights of the Buyer with respect to any Collateral, and (v) to execute
assignments, licenses and other documents to enforce the rights of the Buyer
with respect to any Collateral. This power is coupled with an interest and is
irrevocable until the indefeasible payment in full in cash of all obligations
under the Note (together with any matured indemnification obligations as of the
date of such payment, but excluding any inchoate or unmatured contingent
indemnification obligations).

 

-17-

 

 

(c)          For the purpose of enabling the Buyer to exercise rights and
remedies hereunder, at such time as the Buyer shall be lawfully entitled to
exercise such rights and remedies upon and during an Event of Default, and for
no other purpose, each Grantor hereby grants to the Buyer, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to such Grantor) to use, assign, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, wherever the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
Notwithstanding anything contained herein to the contrary, so long as no Event
of Default shall have occurred and be continuing, such Grantor may exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of its
business. In furtherance of the foregoing, unless an Event of Default shall have
occurred and be continuing, the Buyer shall from time to time, upon the request
of a Grantor, execute and deliver any instruments, certificates or other
documents, in the form so requested, which such Grantor shall have certified are
appropriate (in such Grantor's judgment) to allow it to take any action
permitted above (including relinquishment of the license provided pursuant to
this clause (c) as to any Intellectual Property). Further, upon the indefeasible
payment in full in cash of all obligations under the Note (together with any
matured indemnification obligations as of the date of such payment, but
excluding any inchoate or unmatured contingent indemnification obligations), the
Buyer (subject to Section 10(e) hereof) shall release and reassign to such
Grantor all of the Buyer's right, title and interest in and to the Intellectual
Property, and the Licenses, all without recourse, representation or warranty
whatsoever. The exercise of rights and remedies hereunder by the Buyer shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by such Grantor in accordance with the second sentence of this clause
(c). Each Grantor hereby releases the Buyer from any claims, causes of action
and demands at any time arising out of or with respect to any actions taken or
omitted to be taken by the Buyer under the powers of attorney granted herein
other than actions taken or omitted to be taken through the Buyer's gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.

 

(d)          If a Grantor fails to perform any agreement contained herein, the
Buyer may itself perform, or cause performance of, such agreement or obligation,
in the name of such Grantor or the Buyer, and the expenses of the Buyer incurred
in connection therewith shall be payable by such Grantor pursuant to Section 8
hereof and shall be secured by the Collateral.

 

(e)          The powers conferred on the Buyer hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the Buyer shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.

 

(f)          Anything herein to the contrary notwithstanding (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed,
(ii) the exercise by the Buyer of any of its rights hereunder shall not release
such Grantor from any of its obligations under the Licenses or otherwise in
respect of the Collateral, and (iii) the Buyer shall not have any obligation or
liability by reason of this Agreement under the Licenses or with respect to any
of the other Collateral, nor shall the Buyer be obligated to perform any of the
obligations or duties of such Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

 

-18-

 

 

Section 7.          Remedies Upon Event of Default. If any Event of Default
shall have occurred and be continuing:

 

(a)          The Buyer may exercise in respect of the Collateral, in addition to
any other rights and remedies provided for herein or otherwise available to it,
all of the rights and remedies of a secured party upon default under the Code
(whether or not the Code applies to the affected Collateral), and also may
(i) take absolute control of the Collateral, including, without limitation,
transfer into the Buyer's name or into the name of its nominee or nominees (to
the extent the Buyer has not theretofore done so) and thereafter receive, for
the benefit of the Buyer, all payments made thereon, give all consents, waivers
and ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require each Grantor to, and
each Grantor hereby agrees that it will at its expense and upon request of the
Buyer forthwith, assemble all or part of its respective Collateral as directed
by the Buyer and make it available to the Buyer at a place or places to be
designated by the Buyer that is reasonably convenient to both parties, and the
Buyer may enter into and occupy any premises owned or leased by such Grantor
where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Buyer's rights and remedies
hereunder or under law, without obligation to such Grantor in respect of such
occupation, and (iii) without notice except as specified below and without any
obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Buyer's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the Buyer may
deem commercially reasonable and/or (B) lease, license or dispose of the
Collateral or any part thereof upon such terms as the Buyer may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of sale
or any other disposition of its respective Collateral shall be required by law,
at least ten (10) days' notice to such Grantor of the time and place of any
public sale or the time after which any private sale or other disposition of its
respective Collateral is to be made shall constitute reasonable notification.
The Buyer shall not be obligated to make any sale or other disposition of any
Collateral regardless of notice of sale having been given. The Buyer may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Each Grantor hereby waives any
claims against the Buyer arising by reason of the fact that the price at which
its respective Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Buyer accepts the first offer
received and does not offer such Collateral to more than one offeree, and waives
all rights that such Grantor may have to require that all or any part of such
Collateral be marshalled upon any sale (public or private) thereof. Each Grantor
hereby acknowledges that (i) any such sale of its respective Collateral by the
Buyer shall be made without warranty, (ii) the Buyer may specifically disclaim
any warranties of title, possession, quiet enjoyment or the like, and (iii) such
actions set forth in clauses (i) and (ii) above shall not adversely effect the
commercial reasonableness of any such sale of Collateral. In addition to the
foregoing, (1) upon written notice to any Grantor from the Buyer, such Grantor
shall cease any use of the Intellectual Property or any trademark, patent or
copyright similar thereto for any purpose described in such notice; (2) the
Buyer may, at any time and from time to time, upon 10 days' prior notice to such
Grantor, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner, as
the Buyer shall in its sole discretion determine to the extent consistent with
any restrictions or conditions imposed upon such Grantor with respect to such
Intellectual Property by license or other contractual arrangement; and (2) the
Buyer may, at any time, pursuant to the authority granted in Section 6 hereof
(such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of such Grantor, one or
more instruments of assignment of the Intellectual Property (or any application
or registration thereof), in form suitable for filing, recording or registration
in any country.

 

-19-

 

 

(b)          Any cash held by the Buyer as Collateral and all Cash Proceeds
received by the Buyer in respect of any sale of or collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Buyer, be held by the Buyer as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Buyer pursuant
to Section 8 hereof) in whole or in part by the Buyer against, all or any part
of the Obligations in such order as the Buyer shall elect. Any surplus of such
cash or Cash Proceeds held by the Buyer and remaining after the indefeasible
payment in full in cash of all obligations under the Note (together with any
matured indemnification obligations as of the date of such payment, but
excluding any inchoate or unmatured contingent indemnification obligations)
shall be paid over to whomsoever shall be lawfully entitled to receive the same
or as a court of competent jurisdiction shall direct.

 

(c)          In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Buyer is legally
entitled, each Grantor shall be liable for the deficiency, together with
interest thereon at the highest rate specified in any of the applicable Note
Transaction Documents for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection
and the reasonable fees, costs, expenses and other client charges of any
attorneys employed by the Buyer to collect such deficiency.

 

(d)          Each Grantor hereby acknowledges that if the Buyer complies with
any applicable state, provincial, or federal law requirements in connection with
a disposition of the Collateral, such compliance will not adversely affect the
commercial reasonableness of any sale or other disposition of the Collateral.

 

(e)          The Buyer shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the Buyer's rights hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights, however existing or arising. To the extent that
each Grantor lawfully may, such Grantor hereby agrees that it will not invoke
any law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Buyer's rights under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, such Grantor hereby irrevocably waives the benefits of all such
laws.

 

Section 8.          Indemnity and Expenses.

 

(a)          Each Grantor agrees, jointly and severally, to defend, protect,
indemnify and hold the Buyer harmless from and against any and all claims,
damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and
disbursements of such Person's counsel) to the extent that they arise out of or
otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting solely and
directly from such Person's gross negligence or willful misconduct, as
determined by a final judgment of a court of competent jurisdiction.

 

-20-

 

 

(b)          Each Grantor agrees, jointly and severally, to upon demand pay to
the Buyer the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Buyer and of any
experts and agents (including, without limitation, any collateral trustee which
may act as agent of the Buyer), which the Buyer may incur in connection with
(i) the preparation, negotiation, execution, delivery, recordation,
administration, amendment, waiver or other modification or termination of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral, (iii) the exercise
or enforcement of any of the rights of the Buyer hereunder, or (iv) the failure
by any Grantor to perform or observe any of the provisions hereof.

 

Section 9.          Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered, if to a
Grantor at its address specified below and if to the Buyer to it, at its address
specified below; or as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 9. All such notices and other
communications shall be effective (a) if sent by certified mail, return receipt
requested, when received or five days after deposited in the mails, whichever
occurs first, (b) if telecopied, when transmitted (during normal business hours)
and confirmation is received, otherwise, the day after the notice was
transmitted if confirmation is received, or (c) if delivered, upon delivery.

 

Section 10.         Miscellaneous.

 

(a)          No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by each Grantor and the Buyer, and no waiver
of any provision of this Agreement, and no consent to any departure by a Grantor
therefrom, shall be effective unless it is in writing and signed by the Buyer,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

 

(b)          No failure on the part of the Buyer to exercise, and no delay in
exercising, any right hereunder or under any of the other Note Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Buyer provided
herein and in the other Note Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of the Buyer under any of the other Note Transaction Documents against
any party thereto are not conditional or contingent on any attempt by such
Person to exercise any of its rights under any of the other Note Transaction
Documents against such party or against any other Person, including but not
limited to, any Grantor.

 

-21-

 

 

(c)          To the extent permitted by applicable law, each Grantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and this Agreement and any requirement that
the Buyer exhaust any right or take any action against any other Person or any
Collateral. Each Grantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated herein and that the waiver
set forth in this Section 10(c) is knowingly made in contemplation of such
benefits. The Grantors hereby waive any right to revoke this Agreement, and
acknowledge that this Agreement is continuing in nature and applies to all
Obligations, whether existing now or in the future.

 

(d)          No Grantor may exercise any rights that it may now or hereafter
acquire against any other Grantor that arise from the existence, payment,
performance or enforcement of any Grantor's obligations under this Agreement,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Buyer against any Grantor or any Collateral, whether or
not such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from any
Grantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security solely on account of such claim, remedy or
right, unless and until the indefeasible payment in full in cash of all
obligations under the Note (together with any matured indemnification
obligations as of the date of such payment, but excluding any inchoate or
unmatured contingent indemnification obligations). If any amount shall be paid
to a Grantor in violation of the immediately preceding sentence at any time
prior to the indefeasible payment in full in cash of all obligations under the
Note (together with any matured indemnification obligations as of the date of
such payment, but excluding any inchoate or unmatured contingent indemnification
obligations), such amount shall be held in trust for the benefit of the Buyer
and shall forthwith be paid to the Buyer to be credited and applied to the
Obligations and all other amounts payable under the Note Transaction Documents,
whether matured or unmatured, in accordance with the terms of the Note
Transaction Documents, or to be held as Collateral for any Obligations or other
amounts payable under the Note Transaction Documents thereafter arising.

 

(e)          Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
portions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction.

 

(f)          This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of all obligations under the Note (together with any
matured indemnification obligations as of the date of such payment, but
excluding any inchoate or unmatured contingent indemnification obligations), and
(ii) be binding on each Grantor and all other Persons who become bound as debtor
to this Agreement in accordance with Section 9-203(d) of the Code and shall
inure, together with all rights and remedies of the Buyer hereunder, to the
benefit of the Buyer and its respective permitted successors, transferees and
assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to any Grantor, the Buyer may assign or
otherwise transfer its rights and obligations under this Agreement and any of
the other Note Transaction Documents, to any other Person and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted to the Buyer herein or otherwise. Upon any such assignment or transfer,
all references in this Agreement to the Buyer shall mean the assignee of the
Buyer. None of the rights or obligations of any Grantor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Buyer, and any such assignment or transfer without the consent of the Buyer
shall be null and void.

 

-22-

 

 

(g)          Upon the indefeasible payment in full in cash of all obligations
under the Note (together with any matured indemnification obligations as of the
date of such payment, but excluding any inchoate or unmatured contingent
indemnification obligations), (i) this Agreement and the security interests
created hereby shall terminate and all rights to the Collateral shall revert to
the respective Grantor that granted such security interests hereunder, and (ii)
the Buyer will, upon such Grantor's request and at such Grantor's expense, (A)
return to such Grantor such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof, and (B) execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination, all without any representation, warranty
or recourse whatsoever.

 

(h)          THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.

 

(i)          ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.

 

(j)          EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT) THE HOLDER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER NOTE TRANSACTION DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.

 

-23-

 

 

(k)          Nothing contained herein shall affect the right of the Buyer to
serve process in any other manner permitted by law or commence legal proceedings
or otherwise proceed against any Grantor or any property of such Grantor in any
other jurisdiction.

 

(l)          Each Grantor irrevocably and unconditionally waives any right it
may have to claim or recover in any legal action, suit or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.

 

(m)         Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.

 

(n)          This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.

 

(o)          The parties hereto hereby acknowledge and agree that this Agreement
shall amend, restate, modify, extend, renew and continue the terms and
provisions contained in the Existing Security Agreement and shall not extinguish
or release any Grantor from any liability under the Existing Security Agreement
or otherwise constitute a novation of its obligations thereunder.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

-24-

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

 

  VRINGO, INC., a Delaware corporation         By: /s/ Andrew Perlman      Name:
Andrew Perlman     Title: CEO         Address for Notices:   44 West 28th Street
  Suite 1414   New York, NY 10001   Facsimile: (646) 214-7946        
INNOVATE/PROTECT, INC., a Delaware corporation formerly known as VIP Merger Sub,
Inc.         By:   /s/ Andrew Perlman      Name: Andrew Perlman     Title: CEO  
      Address for Notices:   380 Madison Avenue   22nd Floor   New York, NY
10023   Facsimile: (646) 532-6775

 

Vringo Pledge and Security Agreement

 

 

 

 

  I/P LABS, INC., a Delaware corporation formerly known as Scottish Terrier
Capital, Inc.         By:   /s/ Alexander R. Berger      Name: Alexander R.
Berger     Title: Secretary and Chief Operating Officer         Address for
Notices:   c/o Innovate/Protect, Inc.   380 Madison Avenue   22nd Floor   New
York, NY 10023   Facsimile: (646) 532-6775         I/P ENGINE, INC., a Virginia
corporation formerly known as Smart Search Labs, Inc.         By: /s/ Andrew
Perlman      Name: Andrew Perlman     Title: Secretary and Chief Operating
Officer         Address for Notices:   c/o Innovate/Protect, Inc.   380 Madison
Avenue   22nd Floor   New York, NY 10023   Facsimile: (646) 532-6775

 

Vringo Pledge and Security Agreement

 

 

 

 

  VRINGO, LTD., an Israeli corporation         By:   /s/ Ellen Cohl      Name:
Ellen Cohl     Title: CFO         Address for Notices:   44 West 28th Street  
Suite 1414   New York, NY 10001   Facsimile: (646) 214-7946

 

Vringo Pledge and Security Agreement

 

 

 

 

ACCEPTED BY:           HUDSON BAY MASTER FUND LTD.,   By: Hudson Bay Capital
Management LP, as its Investment Manager         By: /s/ Yoav Roth     Name:
Yoav Roth     Title: Authorized Signatory     Address:  777 Third Avenue, 30th
Floor       New York, NY 10017