Patent Security Agreement, dated February 5, 2004



 Exhibit 10.6 
  
 PATENT SECURITY AGREEMENT 
  
 PATENT SECURITY AGREEMENT, dated as of February 5, 2004, among NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware
corporation, TIETEK TECHNOLOGIES, INC., a Texas corporation, and TieTek LLC, a Delaware limited liability company (collectively and jointly and severally, “Debtor”), and Tie Investors, LLC, a Texas limited liability company (the
“Secured Party”). 
  
 Debtor and Secured Party
hereby agree as follows: 
  
 1. Definitions; Interpretation. 
  
 (a) Terms Defined in Loan Agreement or Security Agreement. All
capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement and Security Agreement of even date between the parties. 
  
 (b) Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings: 
  
 “Collateral” has the meaning set forth in Section 2. 
  
 “Loan Agreement” means the Construction Loan Agreement of even date herewith between Secured Party and Debtor pursuant to which the Loan is being made. 
  
 “Obligations” means all of the obligations of the Debtor to
the Secured Party pursuant to the Loan Documents and all other obligations and liabilities of the Debtor under this Agreement. 
  
 “PTO” means the United States Patent and Trademark Office. 
  
 “Security Agreement” means the agreement of even date herewith granting to Secured Party a first lien on
the assets of Debtor executed pursuant to and defined in the Loan Agreement. 
  
 “UCC” means the Uniform Commercial Code as in effect in the state of Texas. 
  
 (c) Terms Defined in the UCC. Where applicable in the context of this Agreement and except as otherwise defined herein, terms used in this
Agreement shall have the meanings assigned to them in the UCC. 
  
 (d) Construction. In this Agreement, the following rules of construction and interpretation shall be applicable: (i) no reference to “proceeds” in this Agreement authorizes any sale, transfer or other disposition of any
Collateral by Debtor; (ii) “includes” and “including” are not limiting; (iii) “or” is not exclusive; and (iv) “all” includes “any” and “any” includes “all.” To 







 the extent not inconsistent with the foregoing, the rules of construction and interpretation applicable to the Security
Agreement shall also be applicable to this Agreement and are incorporated herein by this reference. 
  
 2. Security Interest. 
  
 (a) Grant of Security Interest. As security for the payment and performance of the Obligations, Debtor hereby assigns, transfers, and conveys to
Secured Party, and grants to Secured Party a security interest in all of Debtor’s right, title, and interest in, to, and under the following property, in each case whether now or hereafter existing or arising or in which Debtor now has or
hereafter owns, acquires or develops an interest and wherever located (collectively, the “Collateral”): 
  
 (i) all patents and patent applications, domestic or foreign, all licenses relating to any of the foregoing and all income and royalties with
respect to any licenses, including, but not limited to, that certain license agreement entered into in May 2001, and granting rights to Oz-Tex Solutions Pty Ltd. with respect to the Australian/New Zealand market areas (the “Australian
License”) (including such patents and patent applications as described in Exhibit A), all rights to sue for past, present or future infringement thereof, all rights arising therefrom and pertaining thereto and all reissues,
divisions, continuations, renewals, extensions, and continuations-in-part-thereof; 
  
 (ii) all intangible intellectual or other similar property of Debtor of any kind or nature, associated with or arising out of any of the aforementioned properties and assets now or hereafter owned or acquired
and not otherwise described above; 
  
 (iii) all trademarks
or trade names, including but not limited to, the mark “TieTek” as described on Exhibit A; and (iv) all proceeds of any and all of the foregoing Collateral (including license royalties, rights and payment, accounts and
proceeds of infringement suits) and, to the extent not otherwise included, all payments under insurance (whether or not Secured Party is the loss payee thereof) or any indemnity, warranty or guaranty payable by reason of loss or damage to or
otherwise with respect to the foregoing Collateral (collectively, the “Collateral”). 
  
 (b) Continuing Security Interest. Debtor agrees that this Agreement shall create a continuing security interest in the Collateral which shall
remain in effect until terminated in accordance with Section 11. 
  
 3. Supplement to Security Agreement. This Agreement has been entered into in conjunction with the security interests granted to Secured Party under the Security Agreement or other security documents referred to in the Loan Documents.
The rights and remedies of Secured Party with respect to the security interests granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement or any other security documents referred to in the Loan
Documents, all terms and provisions of which are incorporated herein by reference. 
  
 4. Representation and Warranties. Debtor represents and warrants to Secured Party that a true and correct list of all the existing Collateral, consisting of U.S. patents and patent applications or
registrations, trademarks, and trade names owned by Debtor, in whole or 







 in part, is set forth in Exhibit A. Debtor also represents and warrants to Secured Party that it has good and
merchantable title to the patents identified in Exhibit A, that such patents are free and clear of any security interests, liens or other encumbrances except as set forth on Exhibit B, that such patents have been properly maintained in
effect by Debtor and that such patents do not infringe on other patents. Debtor also represents and warrants that it has not granted any license to third parties with respect to the Collateral other than the Australian License. 
  
 5. Protection of Collateral. Debtor shall take all steps required to
preserve and protect the Collateral including, but not limited to, timely paying all royalties, license fees, filing fees or registration fees and diligently defending all threats of infringement thereon and upon challenges to the validity thereof.
In the Secured Party’s discretion, if the Debtor fails to do so, the Secured Party may take any of the foregoing steps and make any of the foregoing payments. The Debtor agrees to reimburse the Secured Party on demand for all expenditures so
made. These expenses will bear interest from the date of the advance at the rate of eighteen percent (18%) per annum and are payable on demand at the place where the Obligations are payable. These expenses and interest are part of the Obligations
and are secured by this Agreement. The Secured Party shall have no obligation to Debtor to make any such expenditures, nor shall the making thereof be construed as the waiver or cure of any Event of Default. 
  
 6. Further Acts. On a continuing basis, Debtor shall make, execute,
acknowledge, and deliver, and file and record in the proper filing and recording places, all such instruments and documents, and take all such action as may be necessary or advisable or may be requested by Secured Party to carry out the intent and
purposes of this Agreement, or for assuring, confirming or protecting the grant or perfection of the security interest granted or purported to be granted hereby, to ensure Debtor’s compliance with this Agreement or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to the Collateral, including any documents for filing with the PTO or any applicable state office. Secured Party may record this Agreement, an abstract thereof, or any other
document describing Secured Party’s interest in the Collateral with the PTO, at the expense of Debtor. In addition, Debtor authorizes Secured Party to file financing statements describing the Collateral in any UCC filing office deemed
appropriate by Secured Party. If Debtor shall at any time hold or acquire a commercial tort claim arising with respect to the Collateral, Debtor shall immediately notify Secured Party in a writing signed by Debtor of the brief details thereof and
grant to Secured Party in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Secured Party. 
  
 7. Authorization to Supplement. If Debtor shall obtain rights to any
new patentable inventions or become entitled to the benefit of any patent application or patent for any reissue, division, or continuation, of any patent, the provisions of this Agreement shall automatically apply thereto. Debtor shall give prompt
notice in writing to Secured Party with respect to any such new patent rights. Without limiting Debtor’s obligations under this Section 7, Debtor authorizes Secured Party unilaterally to modify this Agreement by amending Exhibit A to
include any such new patent rights. Notwithstanding the foregoing, no failure to so modify this Agreement or amend Exhibit A shall in any way affect, invalidate or detract from Secured Party’s continuing security interest in all
Collateral, whether or not listed on Exhibit A. 







 8. Binding Effect. This Agreement shall be binding upon the parties and their respective
successors and assigns. Debtor may not, however, assign, transfer, hypothecate or other wise convey its rights, benefits, obligations, or duties hereunder except as specifically permitted in writing by Secured Party. 
  
 9. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the state of Texas, except as required by mandatory provisions of law or to the extent the perfection or priority of the security interests hereunder, or the remedies hereunder, in respect of any Collateral are
governed by the law of a jurisdiction other than the State of Texas. 
  
 10. Entire Agreement; Amendment. This Agreement and the Security Agreement, and the other security documents referred to in the Loan Documents, together with schedules hereto and thereto, contains the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior drafts and communications relating to such subject matter. Neither this Agreement nor any provision hereof may be modified, amended or waived except by the written agreement of the
parties. Notwithstanding the foregoing, Secured Party unilaterally may modify, amend or supplement Exhibit A hereto as provided in Section 6 hereof. To the extent that any provision of this Agreement conflicts with any provision of the
Security Agreement or Loan Documents, the provision giving Secured Party greater rights or remedies shall govern, it being understood that the purpose of this Agreement is to add to, and not detract from, the rights granted to Secured Party under
the Security Agreement and Loan Documents. 
  
 11.
Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed counterpart of this Agreement by facsimile shall be equally as effective as delivery of a manually executed counterpart. Any party hereto delivering a counterpart of this Agreement
by facsimile shall also deliver a manually executed counterpart, but the failure to so deliver a manually executed counterpart shall not affect the validity, enforceability or binding effect hereof. 
  
 12. Termination. Upon payment and performance in full of all
Obligations, the security interests created by this Agreement shall terminate and Secured Party (at Debtor’s expense) shall promptly execute and deliver to Debtor such documents and instruments reasonably requested by Debtor as shall be
necessary to evidence termination of all such security interests given by Debtor to Secured Party hereunder, including cancellation of this Agreement by written notice from Secured Party to the PTO. 
  
 13. No Inconsistent Requirements. Debtor acknowledges that this
Agreement and the other documents, agreements, and instruments entered into or executed in connection herewith may contain covenants and other terms, and provisions variously stated regarding the same or similar matters, and Debtor agrees that all
such covenants, terms and provisions are cumulative and all shall be performed and satisfied in accordance with their respective terms. 
  
 14. Severability. If one or more provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect in any
jurisdiction or with respect to any party 







 such invalidity, illegality or unenforceability in such jurisdiction or with respect to such party shall, to the fullest
extent permitted by applicable law, not invalidate or render illegal or unenforceable any such provision in any other jurisdiction or with respect to any other party, or any other provision of this Agreement. 
  
 15. Notices. All notices and other communications hereunder shall be
in writing and shall be mailed, sent or delivered in accordance with the Settlement Agreement. 
  
 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the date first above written. 
  

							
	 	 	 	 	 DEBTOR:

			
	 Attest:
	 	  

	 	NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware corporation
				
	 	 	 	 	 By:
	 	 /s/ Kevin C. Maddox


	 	 	 	 	 Name:
	 	 Kevin C. Maddox


	 	 	 	 	 Its:
	 	 CEO


			
	 Attest:
	 	  

	 	 TIETEK TECHNOLOGIES, INC., a Texas corporation

				
	 	 	 	 	 By:
	 	 /s/ Henry W. Sullivan


	 	 	 	 	 Name:
	 	 Henry W. Sullivan


	 	 	 	 	 Its:
	 	 President


			
	 	 	 	 	 TIETEK LLC, a Delaware limited liability company

				
	 Attest:
	 	  

	 	 By:
	 	 /s/ Henry W. Sullivan


	 	 	 	 	 Name:
	 	 Henry W. Sullivan


	 	 	 	 	 Its:
	 	 President


			
	 	 	 	 	 SECURED PARTY:

			
	 Attest:
	 	  

	 	 TIE INVESTORS, LLC, a Texas limited liability company

			
	 	 	 	 	 By: Sammons VPC, Inc., a Delaware corporation, manager

				
	 	 	 	 	 By:
	 	 /s/ John H. Washburn


	 	 	 	 	 Name:
	 	 John H. Washburn


	 	 	 	 	 Title:
	 	 Vice President










 EXHIBIT A 
 TO THE PATENT SECURITY AGREEMENT 
  
 Issued U.S. Patents of Debtor: 
  

					
	 Patent No.

	 	 Issue Date

	 	 Title


	 5,886,078
	 	March 23, 1999	 	Polymeric Compositions and methods for making construction materials from them

  
 Pending U.S. Patent Applications of Debtor: 
  

					
	 Published Application No.

	 	 Application Date

	 	 Title


	 20020123553
	 	March 5, 2001	 	Railroad Tie and method for making same

  
 Registered Trademarks and Trade
Names: 
  

					
	 Registration No.

	 	 Issue Date

	 	 Mark


	 2467881
	 	 July 10, 2001
	 	 TieTek









 EXHIBIT B 
 TO THE PATENT SECURITY AGREEMENT 
  
 Security Interests, Liens or Encumbrances 
  
 The Collateral is
subject to the obligations to pay royalties under the NATK Royalty Agreement and the TieTek Royalty Agreement, as such terms are defined in the Loan Agreement.