Exhibit 10.3

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

This INTELLECTUAL PROPERTY SECURITY AGREEMENT (this “Agreement”), dated as of
March 16, 2012, is made by Phototron Holdings, Inc., a Delaware corporation (the
“Company”), and all of the subsidiaries of the Company (together with the
Company, collectively, the “Grantors”), in favor of the holders of the Company’s
6% Senior Secured Convertible Notes issued or to be issued in the original
aggregate principal amount of up to $2,000,000 (collectively, the “Notes”)
pursuant to the Purchase Agreement (as defined herein) (collectively, together
with their endorsees, transferees and assigns, the “Lenders”).

RECITALS

WHEREAS, the Company and the Lenders are party to that certain Securities
Purchase and Exchange Agreement, dated on or about March 16, 2012 (the “Purchase
Agreement”), pursuant to which, the Company issued or is issuing the Notes,
among other things;

WHEREAS, contemporaneously herewith the Grantors are entering into a Security
Agreement (the “Security Agreement”), pursuant to which, each Grantor has
granted a security interest in its assets and properties to secure the
satisfaction of the Company’s obligations under the Notes, among other things;
and

WHEREAS, the Grantors are obligated under the Security Agreement to take such
further actions as the Secured Party Representative (as defined therein)
requests to further perfect the Lenders’ security interest granted under the
Security Agreement, including, without limitation, with respect to intellectual
property.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

1.                  Defined Terms.

(a)                Certain Defined Terms. As used in this Agreement, the
following terms shall have the meanings set forth below:

“Copyright” means copyrights and copyright registrations, including, without
limitation, the copyright registrations and recordings listed on Schedule I
attached hereto, if any, in which the Grantors have any right, title and
interest, and (i) all reissues, continuations, extensions or renewals thereof,
(ii) all income, royalties, damages and payments now and hereafter due and/or
payable under and with respect thereto, subject to payment to any co-owner of
its, his or her share thereof, 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 sue for past, present and
future infringements thereof, and (iv) all of the Grantors’ rights corresponding
thereto throughout the world.

“Intellectual Property Licenses” means rights under or interest in any patent,
trademark, copyright or other intellectual property, including software license
agreements with any other party, whether the Grantors are a licensee or licensor
under any such license agreement, and the right to use the foregoing in
connection with the enforcement of the Lenders’ rights pursuant to the Security
Agreement.

“Patent” means patents and patent applications, including, without limitation,
the patents and patent applications listed on Schedule I hereto and all
continuations, divisionals, provisionals, continuations in part, or reissues of
applications related to patents thereon, and (i) all renewals thereof, (ii) all
income, royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, subject to payment to any co-owner or inventor
of its, his or her share thereof, including, without limitation, payments under
all licenses entered into in connection therewith and damages and payments for
past or future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements thereof, and (iv) all of the Grantors’
rights corresponding thereto throughout the world.

“Trademark” means trademarks, trade names, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, including, without limitation, the registered trademarks listed on
Schedule I hereto, and (i) all renewals thereof, (ii) all income, royalties,
damages and payments now and hereafter due and/or payable under and with respect
thereto, subject to payment to any co-owner of its, his or her share thereof,
including, without limitation, payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iii) the right to sue for past, present and future
infringements and dilutions thereof, (iv) the goodwill of the Grantors’ business
symbolized by the foregoing and connected therewith, and (v) all of the
Grantors’ rights corresponding thereto throughout the world.

(b)               Terms Defined in the Purchase Agreement. Capitalized terms
used in this Agreement and not otherwise defined herein have the meanings
ascribed to them in the Purchase Agreement.

2.                  Grant of Security Interest in Intellectual Property
Collateral. Grantors hereby grant to Lenders a continuing first priority
security interest (as set forth in the Security Agreement) in all of Grantors’
right, title and interest in, to and under all of Grantors’ Intellectual
Property (as defined in the Security Agreement), including, without limitation,
the following, whether presently existing or hereafter created or acquired
(collectively, the “Intellectual Property Collateral”):

(a)                all of Grantors’ Patents and Grantors’ rights under all
Patent Intellectual Property Licenses to which it is a party, including those
patents referred to on Schedule I hereto, including:

                                                                     
(i)                   all registrations and applications in respect of the
foregoing, including continuations, divisionals, provisionals, continuations in
part, or reissues of applications and patents issuing thereon; and

                                                                   
(ii)                   all products and proceeds of the foregoing, including,
without limitation, any claim by Grantors against third parties for past,
present or future infringement of any Patent or any Patent licensed under any
Intellectual Property License;

(b)               all of Grantors’ Trademarks and Grantors’ rights under all
Trademark Intellectual Property Licenses to which it is a party, including those
trademarks referred to on Schedule I hereto, including:

                                                                     
(i)                   all registrations, applications, and renewals in respect
of the foregoing;

                                                                   
(ii)                   all goodwill of the business connected with the use of,
and symbolized by, each Trademark and each Trademark licensed under an
Intellectual Property License; and

                                                                 
(iii)                   all products and proceeds of the foregoing, including
without limitation any claim by Grantor against third parties for past, present
or future (A) infringement or dilution of any Trademark or any Trademark
licensed under any Intellectual Property License or (B) injury to the goodwill
associated with any Trademark or any Trademark licensed under any Intellectual
Property License; and

(c)                all of Grantors’ Copyrights and Grantors’ rights under all
Copyright Intellectual Property Licenses to which it is a party, including those
referred to on Schedule I hereto, including:

                                                                
(i)                        all registrations, applications, and renewals in
respect of the foregoing; and

                                                              
(ii)                        all products and proceeds of the foregoing,
including, without limitation, any claim by Grantors against third parties for
past, present or future infringement of any Copyright or any Copyright licensed
under any Intellectual Property License.

3.                  Security Agreement. The security interests granted pursuant
to this Agreement are granted in conjunction with the security interests granted
to Lenders pursuant to the Security Agreement. Grantors hereby acknowledge and
affirm that the rights and remedies of Lenders with respect to the security
interest in the Intellectual Property Collateral made and granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.

4.                  Authorization to Supplement. If Grantors shall obtain rights
to any new Intellectual Property, the provisions of this Agreement shall
automatically apply thereto. Grantors shall give Lenders prompt written notice
with respect to any such material new Intellectual Property. Grantors represent
that Schedule I is substantially accurate and complete but reserve the right
from time to time to correct inaccuracies and/or omissions by giving Lenders
written notice thereof. Without limiting Grantors’ obligations under this
Section 4, Grantors hereby authorize Lenders unilaterally to modify this
Agreement by amending Schedule I to include any such corrections and other
modifications and any such new Intellectual Property of Grantors.
Notwithstanding the foregoing, no failure to so modify this Agreement or amend
Schedule I shall in any way affect, invalidate or detract from Lenders’
continuing security interest in all Intellectual Property Collateral, whether or
not listed on Schedule I.

5.                  Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
In proving this Agreement in any judicial proceedings, it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought. Any signatures delivered by a party by
facsimile transmission or by e-mail transmission shall be deemed an original
signature hereto.

6. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of California applicable to contracts made
and to be performed entirely within the State of California. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the County of Los Angeles for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.

7. Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. A Lender may assign its rights hereunder in connection with
any private sale or transfer of its Notes, in which case the term “Lender” shall
be deemed to refer to such transferee as though such transferee were an original
signatory hereto. No Grantor may assign its rights or obligations under this
Agreement.

8. Multiple Closings. For clarification, the Grantors acknowledge and agree that
there may be more than one Closing under the Purchase Agreement and that this
Agreement creates a security interest in the Collateral in favor of all the
Lenders regardless of when (a) any Lender executes the Purchase Agreement or
whether such Lender executes this Agreement, it being understood that the
Secured Party Representative is acting as collateral agent for all Lenders, (b)
any Closing occurs or (c) any Notes are issued, without any need for the
Grantors to execute any further documentation or be notified of any Closing or
for any other action to occur.

(Signature Pages Follow)

 
 

IN WITNESS WHEREOF, each of the Grantors has caused this Intellectual Property
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.

Grantors: PHOTOTRON HOLDINGS, INC.

 

 

By: /s/ Craig Ellins

Name: Craig Ellins

Title: Chief Executive Officer

 

 

GROWLIFE, INC.

 

 

By /s/ Craig Ellins

Name: Craig Ellins

Title: Chief Executive Officer

 

 

PHOTOTRON, INC.

 

 

By: /s/ Craig Ellins

Name: Craig Ellins

Title: Chief Executive Officer

 

 

 

 
 

Accepted and acknowledged as of the date first set forth above:

 

Secured Party Representative: W-NET FUND I, L.P.

 

 

By: /s/ David Weiner

Name: David Weiner

Title: Manager of the General Partner

 

 

Lenders: W-NET FUND I, L.P.

 

 

By: /s/ David Weiner

Name: David Weiner

Title: Manager of the General Partner

 

 

EUROPA INTERNATIONAL INC.

 

 

By: /s/ Fred Knoll

Name: Fred Knoll

Title: Investment Manager

 

 

 

 

 
 

Accepted and acknowledged as of ________________________ ____, 20____ with
respect to an Additional Closing pursuant to Section 2.1(b) of the Purchase
Agreement:

 

Lenders:

 

If an Entity:

(Print Entity Name)

 

By (Sign):

Name (Print):

Title (Print):

 

If an Individual:

(Sign)

Name (Print):

 

Email Address of Lender: _____________________________________________

Facsimile Number of Lender: __________________________________________

Address of Lender:

________________________________________________

________________________________________________

 

 

 

 

 
 

SCHEDULE I
to
INTELLECTUAL PROPERTY SECURITY AGREEMENT

OWNED INTELLECTUAL PROPERTY TRADEMARK COUNTRY FILING DATE APPLICATION/ SERIAL
NO. Phototron USA 4/14/11 85295812 Grow Plus USA 3/29/11 85280580 Growlife USA
3/29/11 85280216         PATENT COUNTRY FILING DATE APPLICATION/ SERIAL NO.    
    COPYRIGHT COUNTRY FILING DATE APPLICATION/ SERIAL NO.                
LICENSED INTELLECTUAL PROPERTY