Document:

Unassociated Document

    AMENDED AND RESTATED
SECURITY AGREEMENT

    

    THIS AMENDED AND RESTATED SECURITY
AGREEMENT (this “Agreement”) is made as of the
__st  day
of June, 2010, by FUTURE NOW
GROUP, INC., a Delaware corporation, having a mailing address at 80
Mountain Laurel Road, Fairfield, CT, 06824 (the “Company”), GROK SOFTWARE, INC., a
Delaware corporation, having a mailing address at 80 Mountain Laurel Road,
Fairfield, CT, 06824 (“GROK”), FUTURE
NOW, INC., a Delaware corporation, having a mailing address at 80
Mountain Laurel Road, Fairfield, CT, 06824 (“FNI”), INTELLECTUAL
PROPERTY LICENSING GROUP, INC., a Delaware corporation, having a mailing
address at 80 Mountain Laurel Road, Fairfield, CT, 06824 ("IPLG"), ELEMENTAL
BUSINESS, INC., a Utah corporation, having a mailing address at 80
Mountain Laurel Road, Fairfield, CT, 06824 (“EBI”), FUTURE NOW CONSULTING, INC., a
Delaware corporation (“FNC” and together with the
Company, GROK, FNI, IPLG and EBI, individually and collectively, jointly and
severally, the “Debtors”) in favor of and for
the benefit and security of PROFESSIONAL OFFSHORE OPPORTUNITY
FUND, LTD., having a mailing address at 1400 Old Country Road, Suite 206,
Westbury, NY 11590 (the “Secured Party”).

     

    WHEREAS,
on or about October 30, 2007, the Company issued a Secured Convertible Debenture
in the original principal amount of (i) $1,666,667 to Secured Party and (ii)
$333,333 to Professional Traders Fund (which debenture was assigned to Secured
Party on June 2, 2010 (collectively, the “Debenture”), which Debenture was
secured by, amongst other things, that certain Security Agreement dated October
30, 2007, executed by FUTR in favor of Lender (“Security
Agreement”).

    

    WHEREAS,
on December 2, 2009, the Company issued that certain Note dated December 2, 2009
in favor of the Secured Party (the “Note”);

    

    WHEREAS,
FUTR is in default under the Security Agreement and the
Debenture.  The aforesaid default consists of FUTR's failure to make
certain payments to Secured Party when due and FUTR's failure to repay the
indebtedness evidenced by the Debenture following Secured Party's acceleration
thereof as set forth in more detail in Secured Party’s prior letter to Debtor
dated April 8, 2009.

    

    WHEREAS,
on or about June 23, 2010, Secured Party foreclosed on the following personal
property collateral and retain in partial satisfaction ($300,000) of the
Debenture of (i) 5,448,021 shares of capital stock issued by Future Now, Inc., a
Delaware corporation (“FNI”), in the name of Future Now Group, Inc., a Nevada
corporation, represented by certificate no. 23 (the “FNI Stock”) and which FNI
Stock represents 100% of the issued and outstanding shares of FNI;
(ii)  27,533 shares of capital stock issued by Elemental Business,
Inc., a Utah corporation (“EBI”), in the name of Future Now Group, Inc., a
Nevada corporation, represented by certificate no. 18 (the “EBI Stock”) and
which EBI Stock represents 100% of the issued and outstanding shares of EBI;
(iii) 36,681,883 shares of capital stock issued by Future Now Group, Inc., in
the name of Eisenberg Holdings, LLC and pledged to secured party under that
certain pledge agreement dated October 30, 2007 (the “FUTR Stock”) and (iv) that
certain demand note in the amount of $1,083,587 made by FNI in favor of Future
Now Group, Inc.  (the “FNI Loans”, together with the FNI Stock, the
FUTR Stock and the EBI Stock, the “Foreclosed Collateral”).

    

    
      
        
        

      

      
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    WHEREAS,
after the foreclosure in the preceding paragraph on the Foreclosed Collateral,
the outstanding amount of the Debenture (including all accrued and unpaid
interest) shall be $1,800,000;

    

    WHEREAS,
on or about June __, 2010, Debtor entered into a Reorganization Agreement with
Secured Party (the “Reorganization Agreement”) pursuant to which Debtor amended
and restated the Debenture by issuance of an amended and
restated  note in favor of Secured
Party (the “Amended and Restated Note,” together with the Note, the
“Notes”) in the amount of $1,800,000.

     

    WHEREAS,
the obligations of Debtor under the Notes are to be secured pursuant to this
Agreement;

     

    NOW,
THEREFORE, for and in consideration of any loan, advance or other financial
accommodation heretofore or hereafter made to or for the benefit of any Debtor
under or in connection with the Notes or any other Finance Documents (as defined
below), and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     

    ARTICLE
I

     

    CONSTRUCTION AND DEFINED
TERMS

     

    1.01           Article and
Section Headings.  Article and Section headings
and captions in this Agreement are for convenience only and shall not affect the
construction or interpretation of this Agreement.  Unless otherwise
expressly stated in this Agreement, references in this Agreement to
Sections shall be read as Sections of this Agreement.

     

    1.02           Schedules and
Exhibits.  The references in this Agreement to specific
Schedules and Exhibits shall be read as references to such specific
Schedules or Exhibits attached, or intended to be attached, to this
Agreement and any counterpart of this Agreement and regardless of whether they
are in fact attached to this Agreement, and including any amendments,
supplements and replacements to such Schedules and Exhibits from time to
time.

     

    1.03           Defined
Terms.  Unless otherwise expressly stated in this Agreement,
(a) capitalized terms which are not otherwise defined herein shall have the
respective meanings assigned thereto in the UCC (as defined below); and
(b) the following terms used in this Agreement shall have the following
meanings:

     

    “Collateral” means, with
respect to any Debtor, all property and rights of such Debtor in which a
security interest is granted hereunder.

     

    
      
        
        

      

      
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    “Computer Hardware and
Software” means, with respect to any Debtor, all of such Debtor's
rights (including rights as licensee and lessee) with respect to (i) computer
and other electronic data processing hardware, including all integrated computer
systems, central processing units, memory units, display terminals, printers,
computer elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware; (ii) all software
programs designed for use on the computers and electronic data processing
hardware described in clause
(i) above, including all operating system software, utilities and
application programs in whatsoever form (source code and object code in magnetic
tape, disk or hard copy format or any other listings whatsoever); (iii) any
firmware associated with any of the foregoing; and (iv) any documentation
for hardware, software and firmware described in clauses (i),
(ii) and (iii) above,
including flow charts, logic diagrams, manuals, specifications, training
materials, charts and pseudo codes.

     

    “Equity
Interest”  With respect to any Person, any ownership interest
in such Person, including shares, partnership interests, joint venture
interests, membership interests, limited liability company interests, unit
interests and any other equity or ownership interests of any kind, and any
subscriptions, options, warrants, commitments, purchase rights, preemptive
rights or agreements of any kind (including any stockholders’ or voting trust
agreements) for the issuance, sale, registration or voting of, or for securities
convertible into, any shares, partnership interests, joint venture interests,
membership interests, limited liability company interests, and any other equity
or ownership interests in such Person.

     

    “Finance Documents” mean,
collectively, the Note, the Amended and Restated Notes, the Reorganization
Agreement and any other documents or agreements executed in connection therewith
or herewith and pertaining to the Secured Obligations.

     

    “Lien”  Any security
interest (including security interest within the definition of “security
interest” in the UCC), encumbrance, lien (including any judgment lien, any
contract lien, any lien arising or resulting from nonpayment of any tax,
assessment, charge or other imposition, and any lien arising or resulting from
nonpayment for labor, materials, or supplies), security agreement (including any
agreement that creates or provides for a security interest), deed of trust,
mortgage, grant, pledge, assignment, hypothecation, title retention contract, or
other arrangement for security purposes, and any agricultural lien (including
any agricultural lien within the definition of “agricultural lien” in the UCC),
and including any of the foregoing arising by operation of statute or other law
or the application of equitable principles, whether perfected or unperfected,
avoidable or unavoidable, consensual or nonconsensual, and any financing
statement or other similar notice document, whether or not filed, and any
agreement to give a financing statement or other similar notice
document.

     

    “Lien
Proceeding”  Any action taken (including self help) or
proceeding (judicial or otherwise) commenced by any Person other than Secured
Party for the purpose of enforcing or protecting any actual or alleged Lien upon
any of the Collateral, and including any foreclosure, repossession, attachment,
execution or other process regarding any of the Collateral.

     

    “Permitted Lien” means those
Liens described on Schedule
3.07.

     

    
      
        
        

      

      
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    “Person”  Any natural
person, corporation, limited liability company, partnership, joint venture,
entity, association, joint-stock company, trust or unincorporated organization
and any Governmental Authority, including any receiver, debtor-in-possession,
trustee, custodian, conservator, or liquidator.

     

    “Secured Obligations” All
indebtedness, liabilities and obligations which are now or may at any time
hereafter be due, owing or incurred in any manner whatsoever to Secured Party by
any Debtor, whether under this Agreement, any Note, the Amended and Restated
Note or any other Finance Document, in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, whether at stated
maturity, by acceleration or otherwise (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the filing of a petition in bankruptcy or the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), including,
without limitation, all charges, fees, expenses, commissions, reimbursements,
premiums, indemnities and other payments related to or in respect of such
obligations.

     

     “UCC” means the Uniform
Com­mercial Code as in effect in the Commonwealth of Massachusetts on the
date of this Agreement, as may be amended or modified from time to time after
the date hereof; provided that, "UCC" shall also mean
the Uniform Commercial Code as in effect from time to time in any applicable
jurisdiction.

     

    ARTICLE
II

     

    SECURITY
INTEREST;  PERFECTION

     

    2.01           Security
Interest.  To secure the full and timely payment, performance
and satisfaction of the Secured Obligations, each Debtor hereby collaterally
assigns to Secured Party, and grants Secured Party a security interest in, all
of such Debtor’s property, whether now owned or hereafter existing or acquired,
regardless of where located including, without limitation, all of such
Debtor’s:

     

    (a)           Accounts;

     

    (b)           Chattel
Paper, including Electronic Chattel Paper;

     

    (c)           Computer
Hardware and Software and all rights with respect thereto, including, any and
all licenses, options, warranties, service contracts, program services, test
rights, maintenance rights, support rights, improvement rights, renewal rights
and indemnifications, and any substitutions, replacements, additions or model
conversions of any of the foregoing

     

    (d)           Commercial
Tort Claims now or hereafter identified on Schedule 2.01(d)
to this Agreement;

     

    (e)           Deposit
Accounts;

     

    (f)           Documents;

     

    
      
        
        

      

      
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    (g)           Financial
Assets;

     

    (h)           General
Intangibles;

     

    (i)           Goods
(including all of its Equipment, Fix­tures and Inventory), and all embedded
software, accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor);

     

    (j)           Instruments;

     

    (k)           Intellectual
Property;

     

    (l)           Investment
Property;

     

    (m)           Letter
of Credit Rights;

     

    (n)           money
(of every jurisdiction whatsoever);

     

    (o)           Security
Entitlements;

     

    (p)           Supporting
Obligations

     

    (q)           with
respect to each Person (as hereinafter defined) listed in Schedule 2.01(q)
hereto and each other corporation hereafter acquired or formed by such Debtor,
the Equity Interests from time to time issued and outstanding, including the
certificates, if any, representing the Equity Interests and any interest of such
Debtor in the entries on the books of the issuer thereof or any financial
intermediary pertaining to the Equity Interests, together with all dividends,
cash, options, warrants, rights, instruments, distributions, returns of capital
or principal, income, interest, profits and other property, interests (debt or
equity) or proceeds as a result of a split, revision, reclassification,
consolidation, merger or other like change of the Equity Interests or any issuer
thereof, from time to time received, receivable or otherwise distributed to such
Debtor in respect of or in exchange for any or all of the Equity
Interests;

     

    (r)           all
promissory notes or intercompany notes and and all certificates or instruments
evidencing such promissory notes or intercompany notes; and

     

    to the
extent not included in the foregoing, other personal property of any kind or
description, together with all books, records, writings, data bases, information
and other property relating to, used or useful in connection with, or
evidencing, embodying, incorporating or referring to any of the foregoing, and
all Proceeds, products, rents, issues, profits and returns of and from any of
the foregoing; provided that to the
extent that the provisions of any lease or license of Computer Hardware and
Software or Intellectual Property expressly prohibit (which prohibition is
enforceable under applicable law) the assignment thereof, and the grant of a
security interest therein, the Secured Party will not enforce its security
interest (other than in respect of the Proceeds thereof) for so long as such
prohibition continues, it being understood
that upon request of the Secured Party, such Debtor will in good faith use
reasonable efforts to obtain consent for the creation of a security interest in
favor of the Secured Party (and to Secured Party’s enforcement of such security
interest) in such Debtor's rights under such lease or license.

     

    
      
        
        

      

      
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    2.02           Deposit
Accounts; Control.  To further secure the Secured Obligations,
and to more fully protect the security interest of Secured Party against Liens
of other creditors of any Debtor, each Debtor hereby agrees that Secured Party
shall have the right to direct the disposition of funds in such Deposit Accounts
upon the occurrence and during the continuance of any Event of Default, without
further consent of Debtor and shall execute and deliver to Secured Party, and
shall use its best efforts to cause smu Bank with which such Deposit Account
identified on Schedule
2.02 is maintained (excluding any payroll or disbursement accounts) to
execute and deliver to Secured Party, such Deposit Account Control Agreements as
Secured Party may reasonably request, in a form reasonably satisfactory to
Secured Party, to further confirm and perfect Secured Party’s Lien upon such
Debtor’s Deposit Accounts (excluding any payroll or disbursement
accounts).

     

    2.03           Perfection
by Filing.

     

    (a)           Each
Debtor authorizes Secured Party to file any financing statement and agrees to
execute, in recordable form, and deliver to Secured Party any other document or
instrument, and to cause any third party to execute and deliver to Secured Party
any other document (including financing statement termination statements),
requested by Secured Party to perfect the security interests created under this
Agreement and to establish, maintain, and continue the first priority of the
security interests created under this Agreement.

     

    (b)           Each
Debtor hereby appoints Secured Party as such Debtor’s attorney-in-fact, with
power of substitution, which appointment is irrevocable and coupled with an
interest, to execute in the name of Debtor, and to transmit to, or file, record,
or register with, any Person, and at any time, any document or instrument that
Secured Party may deem necessary or advisable for the purpose of creating,
enforcing, defending, protecting, perfecting, continuing, or maintaining any
security interest, or the perfection or priority of any security interest,
created under this Agreement.

     

    (c)           Secured
Party shall not be required to obtain Debtor’s consent or authorization for
Secured Party to file, and Secured Party shall be entitled to file, with or
without execution by Debtor (or by Secured Party as Debtor’s attorney-in-fact),
any financing statement, amendment, or other record that Secured Party may be
authorized to file in accordance with the terms of the UCC with respect to the
security interests created under this Agreement.

     

    (d)           Any
financing statement or other document filed to perfect the security interests
evidenced by this Agreement may, at Secured Party’s option, describe or indicate
the Collateral in the manner that the Collateral is described in this Agreement,
or as all assets of Debtor, or as all personal property of Debtor, or by any
other description or indication of the Collateral that may be sufficient for a
financing statement under the UCC.

     

    
      
        
        

      

      
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    (e)           If
prior to Debtor’s execution of this Agreement, Secured Party shall have filed in
any jurisdiction, or with any governmental authority, any financing statement,
amendment, or other document describing or indicating the Collateral, or
containing a description or indication of all assets of Debtor or all personal
property of Debtor comprising the Collateral, or containing any other
description or indication of the Collateral, Debtor, by executing this
Agreement, irrevocably (i) authorizes, ratifies, confirms, and adopts
(A) each such previously filed financing statement, amendment or other
document, and (B) the filing of each such previously filed financing
statement, amendment, or other document, and (ii) agrees that each such
previously filed financing statement, amendment, or other document is valid and
effective as though it had been authorized by Debtor and filed with Debtor’s
authorization.

     

    2.04           Perfection
by Possession.  If Collateral is of a type as to which it is
necessary, desirable, or advisable, as determined by Secured Party, for Secured
Party to take possession of such Collateral in order to protect, perfect, or
maintain the first priority of Secured Party’s security interest or other Lien
(subject only to Permitted Security) in such (or any other) Collateral, then,
promptly upon Secured Party’s request, Debtor shall deliver such Collateral to
Secured Party.

     

    ARTICLE
III

     

    REPRESENTATIONS AND
WARRANTIES

     

    Debtor
makes the following representations and warranties to Secured Party, which shall
each be continuing and in effect at all times, and Secured Party shall be
entitled to rely upon the truth, accuracy, and completeness of the following
representations and warranties without regard to any other information that may
be now or hereafter known by or disclosed to Secured Party or any of Secured
Party’s directors, officers, employees, agents, attorneys or other
advisors:

     

    3.01           Debtor’s
Name and Identification Number.  The name of each Debtor set
forth on the first page and the signature page of this Agreement is Debtor’s
correct and complete legal name.  The street address for Debtor in
this Agreement is Debtor’s mailing address.  Such Debtor's chief
executive office and principal place of business are as set forth on Schedule 3.01 hereto
(and such Debtor has not maintained its chief executive office and principal
place of business at any other location during the five (5) years preceding the
date hereof, and each other location where such Debtor maintains a place of
business is also set forth on Schedule 3.01
hereto

     

    
      
        
        

      

      
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    3.02           Permitted
Liens; Collateral. (a) No financing statement (other than Permitted
Liens) covering any of such Debtor’s rights in the Collateral is on file in any
public office; (b) Secured Party’s security interest in the Collateral is a
first priority perfected security interest, subject to no Liens other than
Permitted Liens; (c) such Debtor is and will be the lawful owner of all
Collateral, free of all liens, claims, security interests and encumbrances
whatsoever, other than the security interest hereunder and Permitted Liens, with
full power and authority to execute this Agreement and perform such Debtor's
obligations hereunder, and to subject the Collateral to the security interest
hereunder and (d) all information with respect to the Collateral set forth in
any schedule, certificate or other writing at any time heretofore or hereafter
furnished by such Debtor to the Secured Party is and will be true and correct in
all material respects as of the date furnished.

     

    3.03           Authorization
and No Conflicts.  (a) Each Debtor is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation as listed on the first page of this Agreement; (b) the execution
and delivery of this Agreement and the performance by such Debtor of its
obligations hereunder are within such Debtor's corporate powers, have been duly
authorized by all necessary corporate action, have received all necessary
govern­mental approval (if any shall be required), and do not and will not
contravene or conflict with any provision of law or of the articles of
incorporation or by-laws of such Debtor or of any material agreement, indenture,
instrument or other document, or any material judgment, order or decree, which
is binding upon such Debtor; and (c) this Agreement is a legal, valid and
binding obligation of such Debtor, enforceable in accordance with its terms,
except that the enforceability of this Agreement may be limited by bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).

     

    3.04           Tangible
Collateral. Schedule 3.04 hereto
contains a complete listing of such Debtor’s tangible Collateral located with
any bailee, warehousemen or other third parties and all of such Debtor’s
Collateral which is subject to certificate of title
statutes.  

     

    3.05           Deposit
Accounts.  Except as listed on Schedule 2.02,
Debtor has no Deposit Accounts and is not a party to or otherwise bound by any
Deposit Account Agreement.

     

    3.06           Leases.  Except
as listed on Schedule 3.06
(which schedule contains a true, accurate and complete list and description of
all leases to which Debtor is a lessor, lessee, or other party or otherwise
bound), Debtor is not a lessor or lessee under, or a party to, or otherwise
bound by the terms of, any lease.

     

    3.07           Commercial
Tort Claims.  Except as listed on Schedule 2.01(d),
Debtor has no Commercial Tort Claims.

     

    3.08           Subsidiaries.  Schedule 3.08
lists all of the subsidiaries of Debtors.

     

    

    ARTICLE
IV

     

    AFFIRMATIVE
COVENANTS

     

    Debtor
covenants and agrees to the following:

     

    
      
        
        

      

      
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    4.01           Account
Debtors.  The Secured Party may, at any time that an Event of
Default exists, whether before or after any revocation of such power and
authority or the maturity of any of the Secured Obligations, notify an Account
Debtor or other Person obligated on Collateral to make payment or otherwise
render performance to or for the benefit of the Secured Party and enforce, by
suit or otherwise the obligations of an Account Debtor or other Person obligated
on Collateral and exercise the rights of such Debtor with respect to the
obligation of the Account Debtor or other Person obligated on Collateral to make
payment or otherwise render performance to such Debtor, and with respect to any
property that secures the obligations of the Account Debtor or other Person
obligated on the Collateral.  In connection with exercise of such
rights and remedies, the Secured Party may surrender, release or exchange all or
any part thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any indebtedness thereunder or evidenced
thereby.  Upon the request of the Secured Party during the existence
of an Event of Default, each Debtor will, at its own expense, notify any or all
parties obligated on any of the Collateral to make payment to the Secured Party
of any amounts due or to become due thereunder.  Upon request by the
Secured Party during the existence of an Event of Default, each Debtor will
forthwith, upon receipt, transmit and deliver to the Secured Party, in the form
received, all cash, checks, drafts and other instruments or writings for the
payment of money (properly endorsed, where required, so that such items may be
collected by the Secured Party) which may be received by such Debtor at any time
in full or partial payment or otherwise as proceeds of any of the
Collateral.  Except as the Secured Party may otherwise consent in
writing, any such items which may be so received by any Debtor will not be
commingled with any other of its funds or property, but will be held separate
and apart from its own funds or property and upon express trust for the Secured
Party until delivery is made to the Secured Party.  Each Debtor will
comply with the terms and conditions of any consent given by the Secured Party
pursuant to the foregoing sentence.

     

    
      
        
        

      

      
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    4.02           Additional
Covenants.  Each Debtor:

     

    (a) will,
at the Secured Party’s request, at any time and from time to time, execute and
deliver to the Secured Party such financing statements, amendments and other
documents and do such acts as the Secured Party deems necessary in order to
establish and maintain valid, attached and perfected first priority security
interests in the Collateral in favor of the Secured Party, free and clear of all
Liens and claims and rights of third parties whatsoever except Permitted Liens;
each Debtor hereby irrevocably authorizes the Secured Party at any time, and
from time to time, to file in any jurisdiction any initial financing statements
and amendments thereto that (i) indicate the Collateral (x) as all assets of
such Debtor or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the UCC
of the jurisdiction wherein such financing statement or amendment is filed, or
(y) as being of an equal or lesser scope or with greater detail;

     

    (b) will
keep all its Inventory at, and will not maintain any place of business at any
location other than, its address(es) shown on Schedule 3.01 hereto
or at such other addresses of which such Debtor shall have given the Secured
Party not less than 30 days' prior written notice;

     

    (c) will
keep its records concerning the Collateral in such a manner as will enable the
Secured Party or its designees to determine at any time the status of the
Collateral;

     

    (d) will
furnish the Secured Party such information concerning such Debtor, the
Collateral and the Account Debtors as the Secured Party may from time to time
reasonably request;

     

    (e) will
permit the Secured Party and its designees, from time to time, on reasonable
notice and at reasonable times and intervals during normal business hours (or at
any time without notice during the existence of an Event of Default) to inspect
such Debtor's Inventory and other Goods, and to inspect, audit and make copies
of and extracts from all records and other papers in the possession of such
Debtor pertaining to the Collateral and the Account Debtors, and will, upon
request of the Secured Party during the existence of an Event of Default,
deliver to the Secured Party all of such records and papers;

     

    (f) will,
upon request of the Secured Party, stamp on its records concerning the
Collateral, and add on all Chattel Paper and Instruments constituting a portion
of the Collateral, a notation, in form satisfactory to the Secured Party, of the
security interest of the Secured Party hereunder;

     

    (g)
except for the sale or lease of Inventory in the ordinary course of its business
and sales of Equipment which is no longer useful in its business or which is
being replaced by similar Equipment, will not sell, lease, assign or create or
permit to exist any Lien on any Collateral other than Permitted
Liens;

     

    
      
        
        

      

      
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    (h) will
at all times keep all of its Inventory and other Goods insured under policies
maintained with reputable, financially sound insurance companies against loss,
damage, theft and other risks to such extent as is customarily maintained by
companies similarly situated, and cause all such policies to provide that loss
thereunder shall be payable to the Secured Party as its interest may appear (it
being understood that (A) so long as no Event of Default shall be existing, the
Secured Party shall deliver any proceeds of such insurance which may be received
by it to such Debtor and (B) whenever an Event of Default shall be existing, the
Secured Party may apply any proceeds of such insurance which may be received by
it toward payment of the Secured Obligations, whether or not due, in such order
of application as the Secured Party may determine), and such policies or
certificates thereof shall, if the Secured Party so requests, be deposited with
or furnished to the Secured Party;

     

    (i) will
take such actions as are reasonably necessary to keep its Goods in good repair
and condition;

     

    (j) will
take such actions as are reasonably necessary to keep its Equipment in good
repair and condition and in good working order, ordinary wear and tear
excepted;

     

    (k) will
promptly pay when due all license fees, registration fees, taxes, assessments
and other charges which may be levied upon or assessed against the ownership,
operation, possession, maintenance or use of its Equipment and other
Goods;

     

    (l) will
take all steps reasonably necessary to protect, preserve and maintain all of its
rights in the Collateral and will keep all of the tangible Collateral in the
United States;

     

    (m)           will
promptly notify the Secured Party in writing upon acquiring or otherwise
obtaining any Collateral after the date hereof consisting of Deposit Accounts,
Investment Property, Letter-of-Credit Rights or Electronic Chattel Paper and,
upon the request of the Secured Party, will promptly execute such other
documents, and do such other acts or things deemed appropriate by the Secured
Party to confer upon the Secured Party control (as defined in the UCC) with
respect to such Collateral;

     

    (o)
promptly notify the Secured Party in writing upon acquiring or otherwise
obtaining any Collateral after the date hereof consisting of Documents or
Instruments and, upon the request of the Secured Party, will promptly execute
such other documents, and do such other acts or things deemed appropriate by the
Secured Party to deliver to the Secured Party possession of such Documents which
are negotiable and Instruments, and, with respect to nonnegotiable Documents, to
have such nonnegotiable Documents issued in the name of the Secured
Party;

     

    (p)
promptly notify the Secured Party in writing upon incurring or otherwise
obtaining a Commercial Tort Claim after the date hereof against any third party,
and, upon the request of the Secured Party, will promptly enter into an
amendment to this Agreement, and do such other acts or things deemed appropriate
by the Secured Party to give the Secured Party a security interest in such
Commercial Tort Claim; and

     

    
      
        
        

      

      
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    (q)
further agrees to take other action reasonably requested by the Secured Party to
insure the attachment, perfection and first priority of, and the ability of the
Secured Party to enforce, the security interests in any and all of the
Collateral including, without limitation, (i) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the UCC, to the extent, if any, that the Debtor’s signature thereon is required
therefor, (ii) complying with any provision of any statute, regulation or treaty
of the United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of the Secured
Party to enforce, the security interests in such Collateral, (iii) obtaining
governmental and other third party consents and approvals, including without
limitation any consent of any licensor, lessor or other Person obligated on
Collateral, (iv) obtaining waivers from mortgagees and landlords in form and
substance satisfactory to the Secured Party, and (v) taking all actions required
by the UCC in effect from time to time or by other law, as applicable in any
relevant UCC jurisdiction, or by other law as applicable in any foreign
jurisdiction.

     

    4.03           Taxes,
Assessments, Charges, and Other Impositions.   Debtor
shall pay and discharge promptly, on or before the date due, all taxes,
assessments, charges, and other impositions imposed by any governmental
authority on Debtor, or on the Collateral, relating to the ownership or use of
the Collateral, or relating to any sale, lease, license or other disposition of
the Collateral; provided, however, Debtor shall not be required to pay or
discharge, or to cause to be paid or discharged, any such tax, assessment,
charge, or other imposition so long as (a) the validity of such tax,
assessment, charge or other imposition is being contested in good faith by
Debtor by appropriate proceedings.

     

    4.04           Notice of
Lien Proceeding.   Debtor shall give Secured Party
immediate written notice of the threat by any Person to commence any proceedings
on a material portion of the Collateral or any other Lien
Proceeding.

     

    4.05           Delivery
of Certificated Equity Interests. All certificates, agreements or
instruments representing or evidencing the pledged Equity Interests, to the
extent not previously delivered to the Secured Party, shall promptly upon
receipt thereof by any Debtor be delivered to and held by the Secured Party
pursuant hereto. All such certificated Collateral shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Secured Party. Security Party shall have the right, at any
time after the occurrence and during the continuance of any Event of Default, to
exchange certificates representing or evidencing such pledged Equity Interests
for certificates of smaller or larger denominations.  If any issuer of
pledged Equity Intersets is organized in a jurisdiction which does not permit
the use of certificates to evidence equity ownership, or if any of such pledged
Equity Interests are at any time not evidenced by certificates of ownership,
then each applicable Debtor shall, to the extent permitted by applicable law,
record such pledge on the equityholder register or the books of the issuer,
execute any customary pledge forms or other documents necessary or appropriate
to complete the pledge and give the Secured Party the right to transfer such
pledged Equity Interests.

     

    
      
        
        

      

      
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    4.06           Voting
Rights: Distributions: etc.  So long as no Event of Default
shall have occurred and be continuing, (i) each Debtor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
pledged Equity Interests or any part thereof for any purpose not inconsistent
with the terms or purposes of this Agreement; provided, however, that no
Debtor shall in any event exercise such rights in any manner which may have an
adverse effect on the security intended to be provided by this Agreement and
(ii) each Debtor shall be entitled to receive and retain any and all
distributions with respect to such pledged Equity Interests.  Upon the
occurrence and during the continuance of any Event of Default, upon written
notice from the Secured Party, all rights of each Debtor to exercise such voting
and other consensual rights it would otherwise be entitled to exercise hereunder
and all rights of such Debtor to receive distributions otherwise permitted
hereunder shall cease, and all such rights shall thereupon become vested in the
Secured Party.  Any distributions which are received by any Debtor in
violation of the provisions of this Agreement shall be received in trust for the
benefit of the Secured Party, shall be segregated from other funds of such
Debtor and shall immediately be paid over to the Secured Party as Collateral in
the same form as so received (with any necessary endorsement).

     

    

    ARTICLE
V

     

    NEGATIVE
COVENANTS

     

    Debtor
covenants and agrees to the following:

     

    5.01           Identity.  Debtor
shall not change Debtor’s name or corporate structure.  If Debtor is
organized solely under the law of a single state or the United States and as to
which the state or the United States must maintain a public record showing the
organization to have been organized, Debtor shall not organize under the laws of
another jurisdiction.

     

    5.02           Deposit
Accounts.  Debtor shall not open or close any Deposit Account
or modify, terminate, or supplement any Deposit Account Control Agreement, or
waive any material rights under any Deposit Account Control Agreement, without
prior written notice to the Secured Party.

     

    5.03           Liens.  Debtor
shall not create, incur, assume or suffer to exist any Liens upon any Collateral
of Debtor other than Permitted Liens.

     

    ARTICLE
VI

     

    EVENT OF DEFAULT;
ENFORCEMENT OF SECURITY INTEREST

     

    6.01           Any
one or more of the following events (regardless of the reason therefor) shall
constitute an "Event of
Default" hereunder:

     

    (a)           Any
default or event of default shall occur under any of the Debenture or any other
Finance Documents.

    

    
      
        
        

      

      
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    (b)           Any
Debtor shall fail or neglect to perform, keep or observe any provision of this
Agreement or any other Finance Document and the same shall remain unremedied for
a period of ten (10) days after notice is given to such Debtor by the Secured
Party.

    

    (c)           The
Secured Party shall fail to have an enforceable first priority lien on and
security interest in the Collateral.

    

    (d)           Any
Debtor files a bankruptcy petition, a bankruptcy petition is filed against any
Debtor which remains undismissed or unstayed for 30 consecutive days, or any
Debtor makes a general assignment for the benefit of creditors.

    

    6.02           Right to
Enforce Claim;  Secured Party in Possession or Control. 

     

    (a)           Upon
the occurrence of an Event of Default and during the continuance thereof, and in
addition to such other rights and remedies as Secured Party may have under other
provisions of this Agreement or any other Finance Document, or under common or
statutory law, Secured Party may reduce a claim to judgment, foreclose, or
otherwise enforce the claim, security interest, or agricultural lien by any
available judicial procedure, and if the Collateral is Documents, Secured Party
may proceed either as to the Documents or as to the Goods the Documents
cover.

     

    (b)           If
Secured Party has possession of Collateral, (i) reasonable expenses, including
the cost of insurance and payment of taxes or other charges, incurred in the
custody, preservation, use, or operation of the Collateral are chargeable to
Debtor and are secured by the Collateral, (ii) the risk of accidental loss or
damage is upon Debtor to the extent of a deficiency in any effective insurance
coverage, (iii) Secured Party shall keep the Collateral identifiable, but
fungible Collateral may be commingled, and (iv) Secured Party may use or operate
the Collateral (A) for the purpose of preserving the Collateral or its value, or
(B) as permitted by an order of a court having competent jurisdiction, or (C)
for the purpose of transporting the Collateral, or (D) for the purposes of
demonstrating the use or operation of the Collateral.

     

    (c)           If
Secured Party has possession of Collateral or control of Collateral that is
Deposit Accounts, Electronic Chattel Paper, Investment Property, or
Letter-of-credit rights, then Secured Party (i) may hold as additional security
any Proceeds, except money or funds, received from the Collateral, (ii) shall
apply money or funds received from the Collateral to reduce the Secured
Obligations unless remitted to Debtor, and (iii) may create a security interest
in the Collateral.

     

    (d)           If
Secured Party has possession of Collateral that is Chattel Paper or an
Instrument, then as to any such Chattel Paper or Instrument, Secured Party shall
not be obligated to take any necessary steps to preserve rights against prior
parties.

     

    
      
        
        

      

      
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    6.03           Collection
and Enforcement. After the occurrence of an Event of Default and during
the continuance thereof (in accordance with the Facilities Agreement), Secured
Party may:

     

    (a)           notify
any Account Debtor or other Person obligated on Collateral to make payment or
otherwise render performance to or for the benefit of Secured
Party;

     

    (b)           take
any Proceeds to which Secured Party is entitled under Section 9-315 of
Article 9 of the UCC;

     

    (c)           enforce
the obligations of any Debtor or other Person obligated on Collateral and
exercise the rights of Debtor with respect to the obligations of the Debtor or
other Person obligated on Collateral to make payment or otherwise render
performance to Debtor, and with respect to any property that secures the
obligations of the Debtor or other Person obligated on the
Collateral;

     

    (d)           if
Secured Party is a Bank and holds a security interest in a Deposit Account
maintained with Secured Party, apply the balance of the Deposit Account to the
obligation secured by the Deposit Account; and

     

    (e)           if
Secured Party holds a security interest in a Deposit Account perfected by
control pursuant to an agreement among Debtor, Secured Party and the Bank with
which the Deposit Account is maintained, or if Secured Party becomes the Bank’s
customer with respect to the Deposit Account, instruct the Bank with which the
Deposit Account is maintained to pay the balance of the Deposit Account to or
for the benefit of Secured Party.

     

    6.04           Possession
of Collateral.

     

    (a)           After
the occurrence of an Event of Default and during the continuance thereof,
Secured Party may require Debtor to assemble the Collateral and make the
Collateral available to Secured Party at a place designated by Secured Party
which is reasonably convenient to Secured Party and Debtor.  If
Secured Party requires Debtor to assemble the Collateral and make the Collateral
available to Secured Party, as described in the preceding sentence, Debtor shall
do so promptly, and in any event within ten (10) days after Secured Party gives
Debtor a notice requesting Debtor to assemble the Collateral and make the
Collateral available to Secured Party at the place designated by Secured
Party.  Without limiting Secured Party’s right to designate any place
which is reasonably convenient to Debtor for making Collateral available to
Secured Party, Debtor agrees that any place designated by Secured Party and
located within one hundred (100) miles of any place where Debtor stores, uses,
sells, leases, licenses, or maintains Collateral in the ordinary course of
Debtor’s business shall be conclusively deemed to be a place reasonably
convenient to Debtor for making the Collateral available to Secured
Party.

     

    
      
        
        

      

      
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    (b)           After
the occurrence of an Event of Default and during the continuance thereof,
Secured Party may, pursuant to judicial process, or without judicial process if
Secured Party proceeds without breach of peace, (1) take possession of the
Collateral and, (2) without removal, render Equipment unusable and dispose
of Collateral on Debtor’s premises.

     

    6.05           Disposition
of Collateral.

     

    (a)           After
the occurrence of an Event of Default and during the continuance thereof,
Secured Party may sell, lease, license, or otherwise dispose of any or all of
the Collateral in its present condition or following any commercially reasonable
preparation or processing.

     

    (b)           Secured
Party may dispose of Collateral by public or private proceedings, by one or more
contracts, as a unit or in parcels, and at any time and place and on any
terms.

     

    (c)           Secured
Party may purchase Collateral (1) at a public disposition or (2) if the
Collateral is of a kind that is customarily sold on a recognized market or the
subject of widely distributed standard price quotations, at a private
disposition.

     

    (d)           A
contract for sale, lease, license, or other disposition includes the warranties
relating to title, possession, quiet enjoyment, and the like which by operation
of law accompany a voluntary disposition of property of the kind subject to the
contract; provided, however, Secured Party may disclaim or modify such
warranties (1) in a manner that would be effective to disclaim or modify
the warranties in a voluntary disposition of property of the kind subject to the
contract of disposition, or (2) by communicating to the purchaser a Record
evidencing the contract for disposition and including an express disclaimer or
modification of the warranties, and provided further that a Record is sufficient
to disclaim such warranties if such Record indicates “There is no warranty
relating to title, possession, quiet enjoyment, or the like in this disposition”
or uses words of similar import.

     

    (e)           Prior
to a disposition of Collateral, Secured Party shall give Debtor, and any other
parties required to receive notice under Article 9 of the UCC, notification
as required under Article 9 of the UCC before a sale, lease, license, or
other disposition of Collateral.

     

    6.06           Additional
Provisions Regarding Sales and Other Dispositions.  In the
event that Secured Party shall sell or otherwise dispose of the Collateral, or
any part thereof in accordance with this Agreement, the following additional
provisions shall be applicable to such sale or other disposition:

     

    
      
        
        

      

      
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    (a)           Such
sale or other disposition may be at public or private sale (or at any broker’s
board or on any securities exchange) for cash, upon credit or for future
delivery as Secured Party shall deem appropriate.  Secured Party shall
be authorized at any such sale (if Secured Party deems it advisable to do so
with regard to any type or item of Collateral) to restrict the prospective
bidders or purchasers to Persons who will represent and agree that they are
purchasing the Collateral for their own use (or for their own account for
investment, as applicable) and not with a view to the distribution or sale
thereof, and upon consummation of any such sale, Secured Party shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold.  Each such purchaser at any such sale shall hold
the property sold absolutely, free from any claim or right on the part of
Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Debtor now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted.  Secured Party shall give Debtor at least ten (10) days’
written notice (which Debtor agrees is reasonable notice) of Secured Party’s
intention to make any sale of Collateral owned by Debtor.  Such
notice, in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker’s board or on a securities exchange,
shall state the board or exchange at which such sale is to be made and the day
on which the Collateral, or portion thereof, will first be offered for sale at
such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as
Secured Party may fix and state in the notice of such sale, and Secured Party
shall not be obligated to make any sale of any Collateral if Secured Party shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given, and Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice to Debtor or anyone else, be
made at the time and place to which the same was so adjourned.

     

    (b)           In
case any sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by Secured Party until
the sale price is paid by the purchaser or purchasers thereof, but Secured Party
shall not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for Collateral so sold and, in case of any such failure,
such of the Collateral may be sold again upon notice to Debtor as set forth in
this Section.

     

    (c)           At
any public sale, Secured Party may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay or appraisal on the part of
Debtor (all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale and may
make payment on account thereof by using any claim then due and payable to
Secured Party from Debtor as a credit against the purchase price, and Secured
Party may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to Debtor therefor.

     

    (d)           For
purposes of any sale of Collateral in accordance with this Agreement, a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof.  Secured Party shall be free to carry out such sale
pursuant to such agreement, and Debtor shall not be entitled to the return of
the Collateral or any portion thereof subject thereto, notwithstanding the fact
that after Secured Party shall have entered into such an agreement, all Events
of Default shall have been remedied and the Secured Obligations paid in
full.

     

    
      
        
        

      

      
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    (e)           Upon
any sale of Collateral by Secured Party (including a sale pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of Secured
Party or of the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral being sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to Secured Party or such officer or be answerable in
any way for the misapplication thereof.

     

    ARTICLE
VII

     

    POWER OF
ATTORNEY

     

    7.01           Power of
Attorney;  Collections by Secured Party.

     

    (a)           Debtor
hereby appoints Secured Party as Debtor’s attorney-in-fact, with power of
substitution, which appointment is irrevocable and coupled with an interest, to
do each of the following in the name of Debtor or in the name of Secured Party
or otherwise, for the use and benefit of Secured Party, but at the cost and
expense of Debtor, and with or without notice to
Debtor:  (i) notify the Account Debtors and insurers to make
payments directly to Secured Party, and to take control of the cash and non-cash
Proceeds of any Collateral or insurance; (ii) renew, extend or compromise
any of the Collateral or deal with the same as Secured Party may deem advisable;
(iii) release, exchange, substitute, or surrender all or any part of the
Collateral; (iv) remove from Debtor’s places of business all Collateral
Records without cost or expense to Secured Party; (v) make such use of
Debtor’s places of business as may be reasonably necessary to administer,
control and collect the Collateral; (vi) repair, alter or supply Goods, if
any, necessary to fulfill in whole or in part the purchase order or similar
order of any Account Debtor; (vii) demand, collect, give receipt for, and
give renewals, extensions, discharges and releases of any of the Collateral;
(viii) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral; (ix) settle, renew,
extend, compromise, compound, exchange or adjust claims with respect to any of
the Collateral or any legal proceedings brought with respect thereto;
(x) indorse the name of Debtor upon any item of payment relating to the
Collateral or upon any proof of claim in bankruptcy against any Collateral; and
(xi) institute and prosecute legal and equitable proceedings to reclaim any
of the Goods sold to any Account Debtor obligated on an Account at a time when
such Account Debtor was insolvent.  Secured Party agrees that it shall
not exercise any power or authority granted under this power of attorney unless
an Event of Default has occurred and is continuing.  The foregoing
power of attorney is in addition to any other power of attorney that may be
granted to Secured Party under any Finance Document.

     

    
      
        
        

      

      
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    (b)           NONE
OF SECURED PARTY OR ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO DEBTOR FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

     

    ARTICLE
VIII

     

    GENERAL
PROVISIONS

     

    8.01           Remedies
Cumulative.  Upon the occurrence and during the continuance of
any Event of Default, and in addition to such other rights and remedies as
Secured Party may have under other provisions of this Agreement or any other
Finance Document, Secured Party may exercise any one or more of its rights and
remedies under common or statutory law.  No failure or delay on the
part of Secured Party in exercising any right, power or privilege hereunder or
under any other Finance Document and no course of dealing between Debtor or any
other Obligor or other Person and Secured Party shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Finance Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder.  The rights and remedies provided in this
Agreement are cumulative and not exclusive of any rights or remedies which
Secured Party would otherwise have and may be exercised
simultaneously.  No notice to or demand on Debtor in any case shall
entitle Debtor or any other obligor or any other Person to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Secured Party to any other or further action in any circumstances
without notice or demand.

     

    ARTICLE
IX

     

    MISCELLANEOUS

     

    9.01           Each
of the Debtors agrees to pay all expenses, including reasonable attorney's fees
and charges (including time charges of attorneys who are employees of Secured
Party) paid or incurred by Secured Party in endeavoring to collect the Secured
Obligations of such Debtor, or any part thereof, and in enforcing this Agreement
against such Debtor, and such obligations will themselves be Secured
Obligations.

     

    9.02           No
delay on the part of Secured Party in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by Secured Party
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.

     

    
      
        
        

      

      
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    9.03           This
Security Agreement shall remain in full force and effect until all Secured
Obligations have been paid in full.  If at any time all or any part of
any payment theretofore applied by the Secured Party to any of the Secured
Obligations is or must be rescinded or returned by the Secured Party for any
reason whatsoever (including the insolvency, bankruptcy or reorganization of any
Debtor), such Secured Obligations shall, for the purposes of this Agreement, to
the extent that such payment is or must be rescinded or returned, be deemed to
have continued in existence, notwithstanding such application by the Secured
Party, and this Agreement shall continue to be effective or be reinstated, as
the case may be, as to such Secured Obligations, all as though such application
by the Secured Party had not been made.

     

    9.04           The
rights and privileges of Secured Party hereunder shall inure to the benefit of
its successors and assigns.

     

    9.05           Secured
Party’s Rights to Release Obligors; etc.  Secured Party may
take or release other security, may release any party primarily or secondarily
liable for any Secured Obligations or other indebtedness to Secured Party, may
grant extensions, renewals or indulgences with respect to such Secured
Obligations or other indebtedness and may apply any other security therefor held
by Secured Party to the satisfaction of such Secured Obligations or other
indebtedness, all without prejudice to any of Secured Party’s rights under this
Agreement.

     

    9.06           Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon delivery, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, so long as it is properly addressed.  The addresses
and facsimile numbers for such communications shall be:

     

    If to any
Debtor:

    

    c/o Grok
Software, Inc.

    80
Mountain Laurel Road

    Fairfield,
CT 06824

    Attention:
Wilbert Schloth

    Telephone:

    Facsimile:

     

    If to the
Secured Party:

     

    Professional
Offshore Opportunity Fund, Ltd.

    1400 Old
Country Road, Suite 206

    Westbury,
NY 11590

    Attention:
Howard Berger

    Telephone:
(516) 228-0070

    Facsimile:
(516) 228-8083

    

    
      
        
        

      

      
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    9.07           Term.  The
term of this Agreement shall commence with the date of this Agreement and shall
continue in full force and effect and be binding upon Debtor until all Secured
Obligations of Debtor to Secured Party shall have been fully paid and satisfied
and Secured Party shall have given Debtor written notice of the termination of
this Agreement (excluding provisions that by their terms survive termination of
other provisions of this Agreement or survive the termination of the security
interest created under this Agreement). Secured Party shall not be obligated to
give Debtor written notice of termination of this Agreement, or to terminate any
financing statements or other Lien Notices, until all Secured Obligations of
Debtor to Secured Party shall have been fully paid and satisfied and there is no
commitment on the part of Secured Party to make an advance, incur an obligation
or otherwise give value, and Debtor shall have given Secured Party a written
demand requesting the termination of this Agreement and any financing statements
at which time Secured Party shall execute and deliver such documents, at
Debtor’s expense, as are necessary to release Secured Party’s liens in the
Collateral.  Notwithstanding anything to the contrary in this
Agreement or any other Finance Documents, this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by Secured Party in respect of the Secured Obligations is rescinded or
must otherwise be restored or returned by Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Debtor or upon the
appointment of any intervenor or conservator of, or trustee or similar official
for, Debtor or any substantial part of Debtor’s assets, or otherwise, all as
though such payments had not been made.

     

    9.08           Further
Assurances.  Debtor shall execute and deliver to Secured Party
such further assurances and take such other further actions as Secured Party may
from time to time request to further the intent and purpose of this Agreement
and to maintain and protect the rights and remedies intended to be created in
favor of Secured Party under this Agreement.

     

    9.09           Amendments,
Waivers and Consents;  Successors and
Assigns.  Neither this Agreement nor any other Finance Document
nor any of the terms hereof or thereof may be amended, modified, changed,
waived, discharged or terminated, nor shall any consent be given, unless such
amendment, modification, change, waiver, discharge, termination or consent is in
writing signed by Secured Party and Debtor.  This Agreement shall
create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until the Secured Obligations have been
fully paid and satisfied and this Agreement has been terminated, (ii) be
binding upon Debtor and its successors and assigns, and (iii) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and Secured Party’s successors, transferees and
assigns.  This Agreement may not be assigned by Debtor without prior
written consent of Secured Party, which consent may be withheld in Secured
Party’s sole discretion.

     

    9.10           Entire
Agreement.  This Agreement and any other Finance Documents are
a complete and exclusive expression of all the terms of the matters expressed
therein, and all prior agreements, statements, and representations, whether
written or oral, which relate thereto in any way are hereby superseded and shall
be given no force and effect.  No promise, inducement, or
representation has been made to Debtor which relates in any way to the matters
expressed in this Agreement and in any other Finance Documents, other than what
is expressly stated herein and in such Finance Documents.

     

    9.11           No Strict
Construction.  The parties hereto have participated jointly in
the negotiation and drafting of this Agreement.  In the event of any
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

    9.12           Governing
Law.  This Agreement and all related instruments and documents
and the rights and obligations of the parties hereunder and thereunder shall, in
all respects, be governed by, and construed in accordance with, the internal
laws of the Commonwealth of Massachusetts, without regard to conflicts of law
principles, regardless of the location of the Collateral, excepting, however,
that the Uniform Commercial Code (or decisional law) of a jurisdiction other
than the State of New York may provide the method of perfection, the effect of
perfection or non-perfection, or the priority of liens and security interests
created under this Agreement.

     

    9.13           DISPUTES
SUBJECT TO ARBITRATION.  The parties to this Agreement will
submit all disputes arising under it to arbitration in New York, New York before
a single arbitrator of the American Arbitration Association
(“AAA”).  The arbitrator shall be selected by application of the rules
of the AAA, or by mutual agreement of the parties, except that such arbitrator
shall be an attorney admitted to practice law in the State of New
York.  No party to this agreement will challenge the jurisdiction or
venue provisions as provided in this section.  Nothing in this section
shall limit the Secured Party’s right to obtain an injunction for a breach of
this Agreement from a court of law.

     

    9.14           Severability.  Any
provision of this Agreement, or of any other Finance Document, that is
prohibited by, or unenforceable under, the laws of any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.  To the extent permitted by applicable law, Debtor
hereby waives any provision of law which renders any provision of this Agreement
or any other Finance Document prohibited or unenforceable in any
respect.

     

    9.15           Counterparts.  This
Agreement may be executed in counterparts and each shall be effective as an
original, and a photocopy, facsimile or telecopy of this executed Agreement
shall be effective as an original.  In making proof of this Agreement,
it shall not be necessary to produce more than one counterpart, photocopy,
facsimile, or telecopy of this executed Agreement.

     

    9.16           Time.  Time
is of the essence of this Agreement.

     

    

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

    

    IN WITNESS WHEREOF, and
intending to be legally bound hereby, each Debtor has executed this Agreement as
of the date first above written.

    
       

      
        	 	
                DEBTOR:

                 

                
                  FUTURE
      NOW GROUP, INC.

                  

                  
                    By: _____________________________

                    Name: ___________________________

                    Title:
      ____________________________

GROK
      SOFTWARE, INC.

                

                

                By: _____________________________

                Name: ___________________________

                Title:
      ____________________________

                 

                FUTURE
      NOW, INC.

                

                
                  By: _____________________________

                  Name: ___________________________

                  Title:
      ____________________________

                INTELLECTUAL
      PROPERTY LICENSING GROUP, INC.

                

                
                  By: _____________________________

                  Name: ___________________________

                  Title:
      ____________________________

                ELEMENTAL
      BUSINESS, INC.

                

                
                  By: _____________________________

                  Name: ___________________________

                  Title:
      ____________________________

                FUTURE
      NOW CONSULTING, INC.

                 

                  By: _____________________________

                  Name: ___________________________

                  Title:
      ____________________________

                

              

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      
        
          	 	
                  SECURED
      PARTY:

                   

                  PROFESSIONAL  OFFSHORE
      OPPORTUNITY FUND, LTD

                   

                  
                    By: _____________________________

                    Name: ___________________________

                    Title:
      ____________________________

                  

                

        

         

        
          
            
            

          

          
            2a6344422ex10_20.htm

Exhibit 10.20

 

 

CopyTele, Inc. has redacted certain confidential information in this agreement in reliance upon its confidential treatment request that if filed with the Securities and Exchange Commission pursuant to Rule 24 b-2  under the Securities Exchange Act of 1934. In this agreement, we indicate each redaction by use of the following symbol  ***.

AMENDED AND RESTATED TECHNOLOGY LICENSE AGREEMENT

 

THIS AMENDED AND RESTATED TECHNOLOGY LICENSE AGREEMENT (the “Agreement”), made as of the 16th day of May, 2008, by and between CopyTele, Inc., a Delaware corporation having an address at 900 Walt Whitman Road, Melville, New York 11747 (“CopyTele”), and Videocon Industries Limited, a company existing under the laws of India, having its principal place of business at 2nd Floor Fort House, D.N. Road, Fort, Mumbai – 400 001 (INDIA) (“Videocon”).

 

W I T N E S S E T H:

 

WHEREAS CopyTele has developed and is the owner of technology (the “CopyTele Technology”), variously protected by patents, patent applications, know-how and trade secrets, relating to thin flat Low Voltage Phosphor displays (“Displays”); and

 

WHEREAS, Videocon is in the business of developing, manufacturing, and selling CRT, LCD and Plasma displays; and

 

WHEREAS, Videocon and CopyTele propose jointly to further develop the CopyTele Technology to make it suitable to be utilized in commercial applications such as television displays; and

 

WHEREAS, the Parties desire to set forth their agreement for manufacturing and selling Modules containing Displays; and

 

WHEREAS, Videocon desires to receive a transfer of the CopyTele Technology and a license under the CopyTele Technology for the manufacture and distribution of such Modules; and

 

WHEREAS, CopyTele is willing to transfer such CopyTele Technology and grant Videocon such a license, subject to the terms and conditions of this Agreement;

 

WHEREAS, CopyTele and Videocon had entered into a Technology License Agreement on 2nd November 2007 which will be amended, restated and replaced by this Agreement.

 

WHEREAS, Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion, Secretariat for Industrial Assistance (PAB – IL Section) has granted its approval to certain terms and conditions of this Agreement vide letter No. 27 (2008) / 7 (2008) / PAB – IL, which shall form an integral part of this Agreement and has been incorporated in this Agreement in the form of Exhibit F.

 

NOW, THEREFORE, in consideration of their mutual covenants herein contained, and for other good and valuable consideration, and intending to be legally bound hereby, the parties hereto agree as follows:

 

  

  

  

 

Article I.                      DEFINITIONS

 

Section 1.01                      “Copyright Rights” shall mean all rights in works of authorship, including diagrams, schematics, flow charts, manuals, and documentation, relating to the CopyTele Technology (all of the foregoing works being referred to herein as the “Works”), including registrations of copyright in the Works.

 

Section 1.02                      “CopyTele Technology” shall have the meaning set forth in the preamble, and shall include nanotube devices for use in displays, as well as thin film electron emitters and shall also include the technical information, know-how, manufacturing techniques, engineering data, specification of materials and other information in the possession of CopyTele relating to or in respect of manufacture and use of the Products and all or part of which may be necessary to enable Videocon to manufacture the Products to a standard and quality similar to the standard and quality of Modules.

 

Section 1.03                      “Dhoot Family” shall mean Mr. V.N. Dhoot, Mr. P.N. Dhoot, Mr. R.N. Dhoot and any of their spouses and children.

 

Section 1.04                      “Effective Date” shall mean May 16, 2008.

 

Section 1.05                      “Ex-Factory Price” shall have the meaning set forth in Exhibit E.

 

Section 1.06                      “Modules” shall have the meaning set forth in Exhibit A.

 

Section 1.07                      “Products” shall mean Modules that are (a) within the scope of any claim of the Patent Rights or (b) made with the use of or embody any of the Trade Secrets or the Works.

 

Section 1.08                      “Patent Rights” shall mean those United States and foreign patents and patent applications and design applications and registrations identified in Exhibit B, and patents and patent applications in the same and other countries having the same substantive disclosure and claiming the benefit of such applications, including continuations, divisionals, re-examinations, re-issues and extensions thereof.

 

Section 1.09                      “Trade Secrets” shall mean all confidential and proprietary technical information of CopyTele relating to the CopyTele Technology and disclosed by CopyTele to Videocon in connection with this Agreement.

 

Section 1.10                       “Videocon Group Company” shall mean a company in which Videocon, the Dhoot Family, or both hold either directly or indirectly at least 50% of the share capital or have management control.

 

Article II.                      LICENSE

 

Section 2.01                      CopyTele hereby grants to Videocon, subject to the provisions of Section 2.04 below, a non-transferable, worldwide, royalty-bearing right and license under the Patent Rights, the Trade Secrets, the Copyright Rights and other CopyTele Technology to manufacture, use, sell, and offer for sale Products or other Products that CopyTele and Videocon may mutually agree upon in writing.  CopyTele shall continue to have the right to produce and market, and to utilize the entities listed in Exhibit C to produce and market, Products utilizing the CopyTele Technology.

 

  

2

  

 

Section 2.02                      Joint agreement of CopyTele and Videocon in writing shall be necessary in case of grant of licenses to third parties under the CopyTele Technology, upon reasonable terms and conditions as agreed by CopyTele and Videocon.

 

Section 2.03                      The license granted herein does not include the right to have Products made by another.

 

Section 2.04                      Videocon shall be entitled to grant sublicense of the Patent Rights, Trade Secrets, Copyright Rights and other CopyTele Technology only to other Videocon Group Company/ies (any such Videocon Group Company to which Videocon has granted such a sublicense, a “Sublicensee”), and any such sublicense shall be subject to the terms and conditions of this Section 2.04.  In the event that Videocon sublicenses the Patent Rights, the Trade Secrets, the Copyright Rights or other CopyTele Technology to any Sublicensee, such Sublicensee shall be bound by the terms of this Agreement, including, without limitation, that it shall be liable to pay to CopyTele royalty for the Products sold by it on the same terms and at the same rate as provided in Article VI. In the event of any such sublicense, Videocon shall procure in writing from such Sublicensee a sublicense agreement confirming the payment of royalty and adherence of the terms and conditions of this Agreement as applicable to it, and shall provide to CopyTele a copy of such sublicense agreement.  Videocon shall give to CopyTele prompt written notice of such sublicense, setting forth the name and address of such Sublicensee, jurisdiction of incorporation or formation, and precise amount and nature of Videocon’s and the Dhoot Family’s ownership interest therein.  In the event any Sublicensee to whom such sub-license is granted ceases to qualify as Videocon Group Company, the sublicense granted to such Sublicensee shall forthwith stand terminated.  Videocon shall be responsible for the performance by any permitted Sublicensee, and any breach by any permitted Sublicensee shall be deemed a breach by Videocon.

 

Section 2.05                      The license granted herein includes the right only to sell and offer for sale completed Products, and not components or sub-assemblies thereof, to any third party or Videocon Group Company. However, Videocon or any Sublicensee shall be entitled to sell the components or sub-assemblies to any other Videocon Group Company.

 

Section 2.06                      The rights licensed under the Copyright Rights include the rights to copy and modify the Works for the internal use of Videocon in connection with the manufacture, use, sale and offer for sale of Products, but not the right to publish, distribute, transmit or publicly display the Works, or any combination thereof, in whole or in part.

 

Article III.                      DISCLOSURE AND TARGET JOINT DEVELOPMENT PROGRAM

 

Section 3.01                      CopyTele shall use its commercially reasonable efforts to disclose to Videocon the CopyTele Technology to the extent required for suitably qualified and experienced (in the reasonable judgment of CopyTele) personnel of Videocon to understand the CopyTele Technology. Such efforts shall consist of furnishing to Videocon such copies of existing documentation of the CopyTele Technology as CopyTele deems reasonable, and providing reasonable training of suitably qualified and experienced (in the reasonable judgment of CopyTele) Videocon personnel at CopyTele’s facility in Melville, New York, or at Videocon’s facilities at mutually agreeable times.

 

  

3

  

 

Section 3.02                      CopyTele and Videocon shall jointly cooperate, prior to production, to jointly implement the CopyTele Technology to produce prototypes of the Modules in accordance with the target task & schedule as indicated in Exhibit D. Any patent required to be registered in respect of such implementation of the CopyTele Technology shall be jointly applied for by CopyTele and Videocon.

 

Article IV.                       PRODUCTION

 

Section 4.01                   To prepare for the production and manufacture of the Products, Videocon, at Videocon’s sole expense, with the assistance of CopyTele, shall undertake the following:

 

	
(a)

	
Videocon shall provide all design and process engineering required to produce the    Products based on the CopyTele Technology.

 

	
(b)

	
CopyTele and Videocon shall hold joint design reviews as required from time to time.

 

	
(c)

	
CopyTele and Videocon shall jointly agree, in writing, concerning Product acceptance and testing criteria for engineering samples.

 

	
(d)

	
Videocon and CopyTele shall each record all progress and achievements in preparation for production and deliver progress reports to the other within one week after the end of each calendar month until the commencement of commercial production of the Products.

 

	
(e)

	
Videocon shall purchase, at its sole expense, all tooling and fixtures for the production of Products.

 

Section 4.02                      Throughout the term of this Agreement, Videocon shall deliver (and/or cause to be delivered by a Sublicensee) to CopyTele such information as CopyTele shall reasonably request regarding Videocon’s (or such Sublicensee’s) testing of the Products.

 

Section 4.03                      After commencement of commercial production of the Products, Videocon and any permitted Sublicensee shall provide CopyTele with production samples from time to time as may be reasonably requested by CopyTele.  Videocon and CopyTele shall hold joint reviews of such production as may be reasonably necessary to ensure quality of the Product from time to time.

 

Section 4.04                      Videocon may purchase raw materials for use in production of Products from any source, including CopyTele, as elected by Videocon.

 

Article V.                      IMPROVEMENTS

 

Section 5.01                      All developments and improvements subsequent to the Effective Date in the Products, design changes, modifications, revisions, additions and the like to CopyTele Technology (“Improvements”) developed, conceived or reduced to practice jointly or severally by employees of Videocon (or contractors or agents of Videocon), or employees of CopyTele  (or contractors or agents of CopyTele), shall be jointly owned, in equal undivided shares, by Videocon and CopyTele.  The parties shall decide jointly on seeking patent protection in any Improvements and in strategy in filing and prosecuting patent applications, and shall share equally in the expense of patent application preparation and prosecution, and patent maintenance.

 

  

4

  

 

Section 5.02                      Each party shall execute, and shall cause its employees, contractors and agents to execute, such assignments of patent applications, confirmatory licenses, and other documents that the other or its counsel may reasonably request to assure that the rights licensed and granted under this Article V fully vest in the other party.

 

Section 5.03                      Videocon represents, warrants and covenants that there now are and will be throughout the term of this Agreement valid and enforceable written agreements, between Videocon and its employees, contractors and agents, pursuant to which Videocon will have sole ownership of any Improvement and sole ownership of any contribution of such employee, contractor or agent to any Improvement, and further obligating such employees, contractors and agents to provide cooperation, execute documents, and otherwise perform those acts as may be required for Videocon to fulfill its obligations under Sections 5.01 and 5.02 hereof.  Videocon further warrants that the grant of Improvements to CopyTele shall be free of any claims for compensation by any Videocon employee, contractor or agent.

 

Article VI.                      PAYMENTS; INSEPCTION; REFERRAL

 

Section 6.01                      FEE AMOUNTS.  In consideration of the disclosure of CopyTele Technology under this Agreement, Videocon agrees to pay CopyTele the technology transfer fees (“Technology Transfer Fees”) in the amounts and on the dates set forth in Exhibit E.  In consideration of the license granted herein, Videocon agrees to pay CopyTele a royalty (the “Percentage Royalty”) equal to the Percentage Royalty Rate, as set forth in Exhibit E, of the Ex-Factory Price of all Products sold by Videocon or any permitted Sublicensee to any party.  In the event of any sublicense, Videocon shall ensure that such Sublicensee pays to CopyTele the Percentage Royalty as set forth in Exhibit E.

 

Section 6.02                      TIME OF PAYMENT.  Videocon shall pay to CopyTele the Technology Transfer Fees at the times set forth in Exhibit E.  Videocon shall pay, and cause each Sublicensee, as applicable, to pay, to CopyTele the Percentage Royalties with respect to sales in each calendar quarter on or before the 90th day following the end of such calendar quarter.

 

Section 6.03                      MANNER OF PAYMENT. Payments shall be made, in U.S. dollars, by electronic transfer to an account, designated by CopyTele in writing, no later than the due date.

 

Section 6.04                      LATE PAYMENTS; INTEREST. If Videocon or any Sublicensee fails to make any payment of Percentage Royalties, Technology Transfer Fees or other amount due under this Agreement to CopyTele within ten business days of its due date, Videocon or such Sublicensee shall, in addition to and without limitation of CopyTele’s other remedies hereunder, pay to CopyTele interest thereon from the date ten business days after its due date until paid at the annual rate equal to LIBOR then in effect plus 5% per annum; provided that in no event shall the rate of interest required hereunder exceed the maximum rate permitted under applicable law.

 

  

5

  

 

Section 6.05                      AUDIT.  Videocon shall deliver to CopyTele a statement of the royalty calculations as certified by its statutory auditors (and those of any Sublicensee that is liable to pay a royalty in accordance with this Article VI), stating the amount of the license fees payable to CopyTele under this Agreement. Such statement of royalty calculations shall be delivered by Videocon to CopyTele on or before 20th July for each period of January to June and on or before 20th January for each period of July to December.  In the event CopyTele requires any further details in respect of any amounts stated in the calculations statements, Videocon shall within 7 (seven) working days of such request  furnish such required details and/or invoice, as the case may be including extracts from its books of records duly certified by the statutory auditors. In the event Videocon and CopyTele are unable to resolve any differences as regards payment of royalty, the matter will be referred to CEO of CopyTele and Videocon. In the event the matter remains unresolved after such reference to CEOs of CopyTele and Videocon, the differences shall be referred to arbitration under the provisions of Section 15.09.  Such submission of accounts statement and furnishing of additional details, invoices and extracts, as the case may be  shall be at CopyTele’s expense, provided, however, that if underpayment by Videocon is determined to be more than 10% of the total payments owed for the relevant period, Videocon shall repay and/or reimburse to CopyTele the cost incurred for preparation of the accounts statement and furnishing of the required details, invoices and extracts.

 

Section 6.06                      COMPUTATION OF ROYALTIES.  Royalties shall be payable based on the invoicing of all Products, whether to third parties or to any Videocon Group Company, whether by Videocon or by any other Videocon Group Company, and whether or not for captive consumption by Videocon, at the Percentage Royalty rate as set forth in Exhibit E.

 

Section 6.07                      REFERRALS.  If CopyTele receives any orders for Products, it may, in its sole discretion, refer any such orders to Videocon.  Videocon shall use its best efforts to sell, or cause a Videocon Group Company to sell, in accordance with this Agreement, such Products as may be necessary to fulfill any orders referred to Videocon by CopyTele and any orders that CopyTele places provided, however, the price to be paid to Videocon (or the Sublicensee as the case may be), shall not be less than the price at which Videocon (or the Sublicensee, as the case may be) is selling the same product otherwise to other customers.

 

Article VII.                      EFFORTS TO MARKET

 

Videocon shall use its best efforts to exploit the rights granted to it hereby and to sell the Products therein consistent with the limitations of this Agreement. Videocon shall be entitled to advertise the manufacture and/or sale of the Products by them through any media as Videocon may deem appropriate.

 

Article VIII.                      TAXES

 

Any sales, use, rental, receipt, personal property, value-added, consumption, goods and services, customs, excise or other tax or duty which may be levied or assessed in connection with the licenses granted under this Agreement, the disclosure and/or transfer of CopyTele Technology, and/or the payment of fees under this Agreement, shall be the sole responsibility of Videocon or its Sublicensee as the case may be.  Videocon shall indemnify CopyTele from and against any charge or assessment for any such tax or duty.  Notwithstanding the foregoing, if the Government of India or of the country of any Sublicensees imposes a tax on royalties payable hereunder to CopyTele, then Videocon or such Sublicensee shall pay such tax on behalf of CopyTele, shall deduct and adjust such tax paid from the royalty payable to CopyTele and shall submit a Tax Deduction Certificate to CopyTele. In the event CopyTele requires any assistance in seeking credit or deduction of such payments made in connection with CopyTele’s taxes in the United States, Videocon or the Sublicensee as the case may be, shall render all its co-operation and  assistance therefore.

 

  

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Article IX.                      CONFIDENTIAL INFORMATION.

 

Section 9.01                      DEFINITION.  The Trade Secrets and all information communicated by either of CopyTele or Videocon (a “disclosing party”) to the other (a “receiving party”), in oral, written or electronic form, which is confidential to the disclosing party and provides value to the disclosing party at least in part by virtue of its confidential status, shall be deemed Confidential Information pursuant to this Agreement. In addition, and without limitation, the terms and conditions of this Agreement shall be deemed Confidential Information.

 

Section 9.02                      CONFIDENTIAL NATURE. Each party, as a receiving party, acknowledges that the Confidential Information of the disclosing party is valuable and confidential proprietary information of the disclosing party, and that the value of the Confidential Information derives at least in part from its confidential status.

 

Section 9.03                      MAINTENANCE OF CONFIDENTIALITY.  Each party, as a receiving party, agrees to engage in efforts to maintain Confidential Information of the disclosing party in strict confidence at least as stringent as the efforts that the receiving party engages in to protect its own confidential information, and in any event no less than commercially reasonable efforts.  Without limiting the foregoing, the receiving party shall restrict access to the Confidential Information of the disclosing party, by electronic security measures in the case of electronic files, and by physical security measures in the case of hard copies, to those employees who have a need to know such Confidential Information and shall advise those employees of the restrictions of this Agreement prior to any such disclosure.  The receiving party shall immediately advise the disclosing party of any threatened, actual or apprehended disclosure of any Confidential Information.

 

Section 9.04                      EXCEPTIONS.  As used in this Agreement, Confidential Information shall not include:

 

	
  

	
(a)

	
Information which is now available to the public or hereafter becomes available to the public without any violation of this Agreement;

 

	
  

	
(b)

	
Information disclosed in good faith to the receiving party by a third party legally entitled to disclose the same; and

 

	
  

	
(c)

	

Information is required to be disclosed to any government agency or any regulatory authority or a court of competent jurisdiction provided that the parties agree to use their best efforts to minimize the disclosure of such information and shall consult with and assist the other party.

 

  

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provided, however, that specific information shall not be deemed to be within any of the foregoing exceptions merely because it is in the scope of more general information within any such exceptions and a combination of features shall not be deemed to be within any such exceptions merely because individual features are within such exception.

 

Section 9.05                      DISCLOSURES.  Under no circumstances shall the receiving party, without the prior written approval of the disclosing party, acknowledge to any third party what is or is not a part of Confidential Information of the disclosing party.  In the event disclosure is required of the receiving party under provisions of any law or court order, the receiving party will notify the disclosing party of the obligation to make such disclosure upon receipt of such notification or order to disclose under any law or court order. The disclosing party may make necessary application to the concerned government department and/or court objecting to such disclosure of Confidential Information. However, in the event the receiving party is required to make disclosures irrespective of the outcome of any such application, it shall do so and notify the disclosing party accordingly.    In the event of required disclosure, the receiving party will assert confidentiality to all Confidential Information of the disclosing party not directly required to be disclosed.

 

Section 9.06                      PUBLIC DISCLOSURES.  Notwithstanding the foregoing, each receiving party shall be allowed to disclose Confidential Information of the disclosing party to make any necessary announcement or reporting required by the U.S. Securities and Exchange Commission, any stock exchange,  the NASDAQ Stock Market, the Securities and Exchange Board of India.  However, the party making the disclosure shall use reasonable efforts to notify the other party in advance of the contents of the announcement or the reporting.

 

Article X.                      MARKING.

 

Videocon and its permitted Sublicensees shall include proprietary markings on all Products, in a form reasonably specified by CopyTele in writing from time to time, and including a patent notice in the form “Pat. X,XXX,XXX” and/or “Pat. Pending.”

 

Article XI.                      TERM; TERMINATION

 

Section 11.01                                TERM.  The license and other rights herein granted shall commence upon the Effective Date and shall continue unless terminated by either party as provided in clause 11.02 hereafter; provided, however, that the parties’ obligations under Article IX shall commence immediately.

 

Section 11.02                                 TERMINATION.  This Agreement and the licenses and other rights granted hereunder may be terminated by either party by written notice upon: (a) a material breach by the other  party of its obligations hereunder, which material breach remains unremedied 90 (ninety) days after written notice thereof to the breaching party by the aggrieved party; (b) a filing by or against either party for protection, receivership, reorganization or dissolution under the Federal Bankruptcy Code or similar laws of any state or foreign country relating to insolvency, bankruptcy or the protection of debtors; (c) a cessation by either party of the conduct of its business in the ordinary course; (d) at any time prior to the Effective Date (and in such case, this Agreement shall be of no further force or effect, other than Articles IX and XII hereof, which shall continue); or (e) or as otherwise mutually decided by the parties.

 

  

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Article XII.                      RIGHTS AND DUTIES ON TERMINATION.

 

Upon the termination for any reason of the license and other rights herein granted, Videocon agrees immediately to, and to cause all permitted Sublicensees to: (a) cease and desist from any and all activities requiring use of the rights granted hereunder, including without limitation the manufacture, use, sale or offer for sale of Products, provided, however, that Videocon may sell in the ordinary course of business Products completely manufactured as of the effective date of termination, subject to all applicable terms and conditions of this Agreement; (b) destroy or return to CopyTele all papers, documents, notebooks, charts, computer programs, computer files, records and all other stored information in any form incorporating any portion of the Confidential Information; (c) direct any and all employees of Videocon and/or employees of Sublicensee who have or have had access to any portion of the Confidential Information not to make any further use or disclosure of any portion of the Confidential Information for any purpose; and (d) submit a certificate confirming having complied with (a), (b) and (c) above.

 

Article XIII.                      PATENT PROSECUTION AND MAINTENANCE; INFRINGEMENTS.

 

Section 13.01                                GENERAL.  The prosecution and maintenance of patents and applications within the Patent Rights shall be conducted by CopyTele at CopyTele’s sole expense, in the sole and absolution discretion of CopyTele, by counsel selected by CopyTele.

 

Section 13.02                                ACTIONS.  In the event that either party, or any permitted Sublicensee, becomes aware of an actual, apprehended or suspected infringement of any of the rights licensed hereunder, the parties shall promptly consult with respect thereto.  In event of an infringement, both parties must consent to any grant of a license to the infringer.  If either party refuses, in its sole and absolute discretion, to grant a license to the infringer, then both parties must join in an infringement suit; the parties shall jointly select counsel, shall jointly approve any settlement, and shall share equally in expenses and any recovery.  If either party refuses, in its sole and absolute discretion, to join in an infringement suit, then the other party may file suit for infringement and if necessary make the other party a party defendant at the cost of the party filing suit.  The party pursuing the suit shall select counsel, approve any settlement, and shall bear all of the costs of enforcement and retain any recovery in its entirety. The party not joining the suit shall, at the reasonable request and expense of the party pursuing the suit, provide such information, documents and assistance as may be deemed necessary or appropriate by the party pursuing the suit or its counsel in connection with enforcement against such infringement. 

 

Section 13.03                                NOTICES.  Videocon shall notify CopyTele immediately in writing of any infringement or possible infringements made known to Videocon or any permitted Sublicensee of any right of CopyTele.  Videocon shall provide at the reasonable request and expense of CopyTele and at CopyTele’s expense, such information, document and assistance as may be deemed necessary or appropriate by CopyTele or its counsel in connection with enforcement against such infringement.

 

  

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Article XIV.                      REPRESENTATIONS AND WARRANTIES.

 

Section 14.01                                NO CONFLICTS.  CopyTele represents and warrants that it has the right to enter into this Agreement, to grant the rights granted herein, and to perform its obligations hereunder, and that to do so will not violate or conflict with any agreement to which CopyTele is a party or by which CopyTele is bound, and that the Copyright Rights and Patent Rights do not violate the rights of any third party.

 

Section 14.02                                AUTHORITY.  Videocon represents and warrants that it has the right, power and authority to enter into this Agreement and to perform its obligations hereunder, and to do so will not violate or conflict with any agreement to which Videocon is a party or by which Videocon is bound.

 

Section 14.03                                NO OTHER WARRANTIES.  COPYTELE HEREBY DISCLAIMS ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, RELATING TO THE COPYTELE TECHNOLOGY AND THE RIGHTS GRANTED UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES OF VALIDITY, ENFORCEABILITY AND/OR NON-INFRINGEMENT.

 

Section 14.04                                NO INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES.  IN NO EVENT SHALL COPYTELE BE LIABLE TO VIDEOCON OR ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION WORK DELAYS OR LOST PROFITS, RESULTING FROM THE USE OF THE COPYTELE TECHNOLOGY AND/OR PRODUCTS.

 

Section 14.05                                INDEMNITY BY VIDEOCON.  Videocon shall indemnify and hold harmless CopyTele and its directors, officers, agents and employees from and against all claims, suits, and damages whatsoever, including but not limited to incidental costs, attorney’s fees and punitive damages, arising from or in connection with the breach or alleged breach by Videocon of any covenant, representation or warranty under this Agreement or the use of the CopyTele Technology by Videocon or any permitted Sublicensee, including the manufacture, distribution, marketing, sale and use of Products, and including without limitation all claims for false or misleading advertising, personal injury or property damage relating to Products; provided, however, that CopyTele shall (a) promptly notify Videocon in writing of such claims, and (b) provide to Videocon all reasonably available information, assistance and authority to defend, however, reserving unto CopyTele the right to:  participate in any defense to the extent that, in its judgment, CopyTele may be prejudiced thereby, and approve any settlement offer made by or to Videocon which may affect CopyTele’s rights or interests.

 

Section 14.06                                INDEMNITY BY COPYTELE.  CopyTele shall indemnify and hold harmless Videocon and its directors, officers, agents and employees from and against all claims, suits, and damages whatsoever, including but not limited to incidental costs, attorney’s fees and punitive damages, arising from or in connection with the breach or alleged breach by CopyTele of any covenant, representation or warranty under this Agreement or the use of CopyTele Technology by Videocon; provided, however, that Videocon shall (a) promptly notify CopyTele in writing of such claims, and (b) provide to CopyTele all reasonably available information, assistance and authority to defend, however, reserving unto Videocon the right to:  participate in any defense to the extent that, in its judgment, Videocon may be prejudiced thereby, and approve any settlement offer made by or to CopyTele which may affect Videocon’s rights or interests.

 

  

10

  

 

Section 14.07                                NOTICE OF ACTIONS.  Videocon agrees to notify CopyTele immediately of any actions, claims or demands brought or made against Videocon whose outcome may affect the rights of CopyTele in any of the rights licensed or otherwise granted under this Agreement.

 

Article XV.                      MISCELLANEOUS.

 

Section 15.01                                ENTIRE AGREEMENT; AMENDMENTS.  This Agreement is the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior or contemporaneous agreements, arrangements, and understandings, whether oral or written, regarding the subject matter hereof.  This Agreement may be amended only by a written instrument signed on behalf of the parties by their duly authorized representatives.

 

Section 15.02                                BINDING AGREEMENT; ASSIGNMENT.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, legal representatives and assigns.  This Agreement and the license herein granted shall be assignable and transferable by CopyTele, upon written notice to Videocon. Videocon shall have no right to assign this Agreement or the license granted herein except with the written consent of CopyTele.  For purposes of this Section 15.02, a change in control of Videocon or a merger in which Videocon does not survive shall be deemed an assignment.

 

Section 15.03                                RELATIONSHIP OF PARTIES.  In making and performing this Agreement, CopyTele and Videocon act and shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied to create an agency or partnership  relationship between the parties.  At no time shall either party make commitments or incur any charges or expenses for or in the name of the other.

 

Section 15.04                                SURVIVAL.  It is expressly understood and agreed that Article V (but only as to Improvements conceived, developed and reduced to practice prior to termination or cancellation), Article VI, Article VIII, Article IX, Article XII, Article XIV, and Article XV hereof shall survive the termination of this Agreement and of the license herein granted and shall remain in full force and effect.

 

Section 15.05                                GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the laws of India, without giving effect to conflict of laws.

 

Section 15.06                                APPROVAL.  Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion, Secretariat for Industrial Assistance (PAB – IL Section) has granted its approval to certain terms and conditions of this Agreement vide letter No. 27 (2008) / 7 (2008) / PAB – IL, which shall form an integral part of this Agreement  and has been incorporated in this Agreement in the form of Exhibit F.

 

Section 15.07                                NOTICES.  Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy or similar telecommunications equipment) against receipt to the party to whom it is to be given at the address of such party set forth for such party below (or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 15.07), with a copy to each of the other parties hereto.  Any notice shall be deemed given at the time of receipt thereof.

 

  

11

  

 

	  	
If to CopyTele:

	 	 
	  	
CopyTele, Inc.

	  	
900 Walt Whitman Road

	  	
Melville, New York 11747

	  	
United States of America

	  	
Attention:  Denis A. Krusos, Chairman & CEO

	  	
Fax:  631-549-3813

	 	 
	  	
If to Videocon:

	 	 
	  	
Videocon Industries Limited

	  	
2nd Floor, Fort House, D.N.Road

	  	
Fort, Mumbai 400 001, INDIA

	  	
Attention: Venugopal N. Dhoot, Director / Naveen Mandhana, Sr. Vice President

	  	
Fax:  91-22-66551985

 

Section 15.08                                SEVERABILITY.  If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

 

Section 15.09                                DISPUTES.  Any dispute, difference or controversy arising out of or relating to this Agreement, any document or instrument delivered pursuant to, in connection with, or simultaneously with this Agreement, or any breach of this Agreement or any such document or instrument, with the exception of an actual or apprehended unlawful disclosure or misappropriation of Confidential Information, shall be subject to settlement proceedings under the then-applicable International Chamber of Commerce (“ICC”) ADR Rules (or successor rules).  If the dispute has not been settled pursuant to the said Rules within 45 days following the filing of a Request for ADR or within such other period as the parties may agree in writing, such dispute shall be finally settled by arbitration under the then-applicable Rules of Arbitration of the ICC (or successor rules), by a proceeding conducted in London, England, United Kingdom, in the English language, by a single arbitrator appointed in accordance with the said Rules of Arbitration.  The arbitrator may grant injunctions or other relief in such dispute or controversy.  The decision of the arbitrator shall be final, conclusive, and binding on the parties to the arbitration.  Judgment may be entered on the arbitrator’s decision in any court having jurisdiction, and the parties irrevocably consent to the jurisdiction of the courts of the State of New York and of any federal court located in such State for this purpose.  In any such arbitration, the parties waive personal service of any process or other papers and agree that service thereof may be made in accordance with Section 15.07.  Each party shall pay one-half of the costs and expenses of such arbitration, and each shall separately pay its own attorneys’ fees and expenses.  Notwithstanding the foregoing, either party may apply to any court of the State of New York or any federal court located in such State for injunctive relief to maintain the status quo until the arbitration award is rendered or the controversy is otherwise resolved, and each party hereby consents to the exclusive jurisdiction and venue of such courts for such purpose.

 

  

12

  

 

Section 15.10                                INJUNCTIONS.  Each party agrees that any actual, apprehended or threatened disclosure of any portion of the Confidential Information of the other to any third party will actually, materially and irreparably damage the disclosing party, in an amount and a manner that is not capable of remedy by the payment of damages alone, and each party shall have the right to obtain injunctions, both permanent and preliminary or temporary restraining orders, either on notice or ex parte, without the need to post bond, against continuing any such violation or commencing any threatened violation.

 

Section 15.11                                WAIVER.  Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement.  The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.  Any waiver must be in writing.

 

Section 15.12                                COUNTERPARTS.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

Section 15.13                                HEADINGS.  The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above set forth.

 

	
COPYTELE, INC.

	  	
VIDEOCON INDUSTRIES LTD.

	  	  	  
	  	  	  
	  	  	 
	
By: /s/ Denis A. Krusos

	  	
By: /s/ Venugopal N. Dhoot

	
      Denis A. Krusos

	  	
       Venugopal N. Dhoot

	
      Chairman & CEO

	  	
       Chairman & Managing Director

 

  

13

  

 

EXHIBIT A

DEFINITION OF MODULES

CONFIDENTIAL

“Modules” means modules for thin flat Low Voltage Phosphor displays, each containing  ***  , (b) the attached associated driver circuits, and (c) controller circuits.  CopyTele and Videocon may mutually agree in writing, from time to time, on other types of Modules.

 

*  Confidential portions  have  been  omitted  and  filed  separately  with  the Commission).

 

  

14

  

 

EXHIBIT B

PATENT RIGHTS

CONFIDENTIAL

 

 

	

Title

	 	 	 	 	 	 	 	 
	

Domestic Partners

	 	

Patent No.

	 	

Issue Date

	 	

Filing Date

	 	Application No.
	 	 	 	 	 	 	 	 	 
	

1. Thin Film Planar Edge Emitter

	

6,590,320

	 	

July 8, 2003

	 	

Feb. 23, 2000

	 	

09/511,437

	

Field Emission Flat Panel Display (54)*

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	

2.  Field Emission  Display Based on

	 	 	 	 	 	 
	

Lateral Electron Reflections (60B)

	

6,614,149

	 	Sept. 2, 2003	 	 Mar. 20, 2002	 	 10/102,467
	 	 	 	 	 	 	 	 	 
	3. Field Emission Matrix Display	 	 	 	 	 	 	 
	Based on Electron Reflections (60A)	 6,674,242	 	 Jan. 6, 2004	 	 Mar. 20, 2002	 	 10/102,450
	 	 	 	 	 	 	 	 	 
	4. Reflective Edge Field Transmission 	 	 	 	 	 	 	 
	Pixel and Associated Display (70) 	 6,693,386	 	 Feb. 17, 2004	 	 Sept. 20, 2002	 	 10/243,894
	 	 	 	 	 	 	 	 	 
	5. Hybrid Active Matrix Thin Film 	 	 	 	 	 Feb. 19, 2004	 	 10/782,580
	Transistor Display (73) 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	6. Hybrid Active Matrix Thin Film 	 	 	 	 	 	 Oct. 27, 2004	 	 10/974,311
	Transistor Display (74) 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	7. Edge Emission Electron Source 	 	 	 	 	 	 Aug. 4, 2005	 	11/499,841
	and TFT Pixel Selection (76) 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	***	 	***
	8. *** 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	9. Flat Panel Display Incorporating 	 	 	 	 	 	 Mar. 17, 2006	 	 11/378,105
	Control Frame (79) 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	10. Low Volatage Phosphor with 	 	 	 	 	 	 	 	 
	Film Electrons Emitters Display Device (81) 	 	 	 	 	 	 May 4, 2006	 	 11/417,631

 

 

*  Confidential portions  have  been  omitted  and  filed  separately  with  the Commission).

 

  

15

  

 

	

Title

	 	 	 	 	 	 	 	 
	

Domestic Patents

	 	

Patent No.

	 	

Issue Date

	 	

Filing Date

	 	Application No.
	 	 	 	 	 	 	 	 	 
	

11.            Pixel Structure for an Edge-Emitter

	

7,129,626

	 	

Oct. 31, 2006

	 	

Mar. 20, 2002

	 	

10/102,472

	

Field-Emission Display (63)

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	

11A.   Pixel Structure for an Edge-Emitter

	 	 	 	 	 	 
	

Field-Emission Display (63A-CON))

	

 

	 	 	 	 Oct. 30, 2006	 	 11/589,630
	 	 	 	 	 	 	 	 	 
	12. ***	 	 	 	 	 ***	 	 ***
	 	 	 	 	 	 	 	 	 
	13. Apparatus and Method for Evacuating 	 	 	 	 	 	 	 
	a Field Emission Display (83)	 	 	 	 	Feb. 08, 2007	 	 11/704,173
	 	 	 	 	 	 	 	 	 
	14. Rapid Sealing Method 	 	 	 	 	Feb. 08, 2007	 	 11/704,170
	FED (84) 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	15. Flat Panel Display having a Control Frame 	 	 	 	 	 	Mar. 16, 2007	 	11/724,793
	Pedestal and Method of Making Same (85)	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	International Patents	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	16. Flat Panel Display Incorporating Control 	 	 	 	 	 	 	 	 
	Frame (79A)	 	 	 	 	 	 July 11, 2006	 	PCT/US2006/026761
	 	 	 	 	 	 	 	 	 
	17.  Flat Panel Display Incorporating a Control 	 	 	 	 	 	 	 	 
	Frame (78A)	 	 	 	 	 	 August 4, 2006	 	PCT/US2006/026760
	 	 	 	 	 	 	 	 	 
	18. Edge Emission Electron Source and TFT 	 	 	 	 	 	 	 	 
	Pixel Selection (76A) 	 	 	 	 	 	August 4, 2006	 	PCT/US2006/030937

 

  

16

  

 

EXHIBIT C

ENTITIES PERMITTED UNDER SECTION 2.01

CONFIDENTIAL

	
  

	
·

	
                ***

	
  

	
·

	
Volga Svet Ltd. of Saratov, Russia

_________________________________

*  Confidential portions  have  been  omitted  and  filed  separately  with  the Commission).

 

  

17

  

 

EXHIBIT D

TARGET JOINT DEVELOPMENT PROGRAM

CONFIDENTIAL

***

____________________________________________________________________

*  Confidential portions  have  been  omitted  and  filed  separately  with  the Commission).

 

  

18

  

 

EXHIBIT E

FEES

CONFIDENTIAL

	
  

	
(1)

	
Technology Transfer Fee.  Videocon shall pay CopyTele a non-refundable, non-creditable Technology Transfer Fee of US $11,000,000.00, as follows:

 

	
  

	
a.

	
US $2,000,000, 15 days after the Effective Date.

	
  

	
b.

	
US $1,500,000, nine (9) months after the Effective Date.

	
  

	
c.

	
US $2,500,000, eighteen (18) months after the Effective Date.

	
  

	
d.

	
US $5,000,000, twenty-seven (27) after the Effective Date.

 

	
  

	
(2)

	
Percentage Royalty.  Videocon shall pay CopyTele a royalty of (a) Six percent (the “Percentage Royalty Rate”) of the Ex-Factory Price of all Products sold by Videocon or any Sublicensee to any party up until the first US $5,000,000 in sales (at the Ex-Factory Price); in aggregate by Videocon and Sublicensees taken together, and (b) with respect to all sales of Products sold by Videocon or any Sublicensee to any party in excess of US $5,000,000 (at the Ex-Factory Price), (i) three percent of the Ex-Factory Price with respect to sales made on or prior to the seventh anniversary of the Effective Date and (ii) one percent of the Ex-Factory Price with respect to sales made after the seventh anniversary of the Effective Date, unless there shall have been significant improvements in the CopyTele Technology which, under then-market conditions, shall justify a higher royalty rate (in which case, the parties shall negotiate in good faith such higher royalty rate).    The CopyTele Technology indicated in   ***  in Exhibit D, if successfully implemented, is agreed between the parties to be significant improvements in the   ***   CopyTele Technology for the purposes of this paragraph.

If any amounts are received by Videocon or any Sublicensee in a currency other than U.S. dollars, for purposes of calculating the royalty amount, conversion shall be made at the exchange rate published in the Wall Street Journal on the last day of the calendar month in which such foreign currency amounts are received.

	
  

	
(3)

	
Definition of “Ex-Factory Price”.

“Ex-factory Price” means the selling price of the products/goods less any costs incidental to the delivery of the goods to the customer. The delivery costs would include all costs incurred subsequent to the point at which Videocon (or the Sublicensee, as the case may be) relinquishes ownership of the  products/goods to the purchaser.

_________________________________

*  Confidential portions  have  been  omitted  and  filed  separately  with  the Commission).

 

  

19

  

 

EXHIBIT F

APPROVAL

NO.:  27 (2008) / 7 (2008) / PAB-IL

 

Government of India

 

Ministry of Commerce & Industry

 

Department of Industrial Policy & Promotion

 

Secretariat For Industrial Assistance

 

(PAB – IL SECTION)

 

New Delhi, the April 07, 2008.

 

To

M/s. VIDEOCON INDUSTRIES LIMITED,

14 KM STONE, AURANGABAD – PAITHAN ROAD,

VILLAGE CHITEGAON TALUKA – PAITHAN,

AURANGABAD – 431005

MAHARASHTRA

 

	
SUBJECT:

	
Application for foreign collaboration (SIA Regn.

 

	
  

	
No. FTC. 7/2008 dated 30/01/2008)

 

Dear Sir,

 

I am directed to refer to the above mentioned application and to convey approval of the Government of India to your proposal, subject to the following terms and conditions:

 

	
1.           Name and address of foreign collaborator:

	
M/s CopyTele Inc.

900 Walt Whitman Road,

Melville, New York 11747

U.S.A.

2.           Item(s) of manufacture/activity cover by the foreign collaboration:

 

Development, manufacture & sale of (a) nanotube devices for use in displays and (b) modules for thin flat low voltage Phosphor displays – each containing a display    ***, driver circuits & controller circuits, for commercial applications in television, etc.

 

	
3.           Proposed Location:

	
14 KM Stone, Aurangabad – Paithan Road,

Village Chittegaon, Taluka Paithan

	
District:

	
AURANGABAD - 431005

	
State:

	
MAHARASHTRA

_________________________________

*  Confidential portions  have  been  omitted  and  filed  separately  with  the Commission).

 

  

20

  

 

4.           Payments authorised herein under:

 

	
  

	
(A).

	
Royalty payable both on Domestic sales and Exports, net of taxes, in the following manner:

 

	
  

	
(a)

	
@ 6% (Six Percent) of the Ex-factory sales price of all products sold by Videocon or any sub-licensee to any party up to first US $5,000,000 /- (Five Million) in sales volume; and

 

	
  

	
(b)

	
With respect to all sales of products exceeding beyond US $5 (Five) Million, the royalty rate shall be:

 

	
  

	
(i)

	
@ 3% (Three Percent) of ex-factory sales price with respect to sales made on or prior to the 7th (Seventh) anniversary of the Effective Date; and

 

	
  

	
(ii)

	
@ 1% (One Percent) of ex-factory sales price with respect to sales made after the 7th (Seventh) anniversary of the Effective Date.

 

	
  

	
 (B).

	
Lumpsum Payments:

 

Technical Know-how/License Fees:

 

US $11 (Eleven) Million, payable net of taxes in 4 (Four) installments, in the following manner:-

 

 (i)           US $2 (Two) million within 15 (Fifteen) days after the Effective Date;

 

	
  

	
(ii)

	
US $1,500,000/-  (One Million Five Hundred Thousand) within 9 (Nine) months after the Effective Date;

 

	
  

	
(iii)

	
US $2,500,000 (Two Million Five Hundred Thousand) within 18 (Eighteen) months after the Effective Date; and

 

	
  

	
(iv)

	
US $5 (Five) million within 27 (Twenty Seven) months after the Effective Date;

 

The above Royalty and Lumpsum payments shall be net of taxes.  The tax liability, if any, shall be borne by the Indian company.

 

5.           Duration of the agreement:  Duration of the Technical  Collaboration Agreement shall be for a period of 10 (Ten) years from the Effective Date OR 7 (Seven) years from the date of commencement of commercial production, whichever is earlier.

 

6.           The approval is subject to the condition that the Foreign Collaborator have had or have no previous financial/technical collaboration or trademark agreement in India in the same field for which the approval is being granted.  If this is not so, you shall not take steps to implement the project but submit the details to PAB-IL/Government in terms of Press Note No. 1 (2005 Series) dated 12th January, 2005 and subsequent clarification vide Press Note No. 3 (2005 series) dated 15th March, 2005, for prior approval.

 

[This condition will not be applicable, if it is not attracted].

 

7.           The approval is further subject to the condition that this new venture would not in any way adversely affect the interest of the existing technology or trademark arrangement (as may be applicable).

 

  

21

  

 

8.           Calculation of Royalty:

 

	
  

	
(i)

	
The royalty shall be payable in accordance with the provisions of Foreign Exchange Control Manual of RBI and other subsisting instructions of Government/Reserve Bank of India.

 

	
  

	
(ii)

	
The payment of Royalty will be restricted to the licensed capacity plus 25% in excess thereof for such items requiring industrial license.  In case of production in excess of the quantum, prior approval of Government will have to be obtained regarding the terms of payment of royalty in respect of such production.

 

	
  

	
(iii)

	
The royalty would not be payable beyond the period of the agreement, if the orders had not been executed during the period of agreement.  However, where the order has been booked during the period of agreement, but executed after the period of agreement, royalty would be payable only after the Chartered Accountant Certifies that the orders in fact have been firmly booked and execution began during the period of agreement and the technical assistance was available on a continuing basis even after the period of agreement.

 

9.            The lumpsum shall be paid in Installments as mentioned in Para – 4(b) above.

 

10.           In case the proposed activity is not exempted from the provisions of Industrial (Development & Regulation) Act, 1951 and the Foreign Exchange Management Act, 1999 it will be your responsibility to obtain such clearances as may be required under the said Acts.

 

11.           The location of the industrial projects, will be subject to Central or State Environmental laws or regulations including local zoning and land use laws and regulations.

 

12.           Adequate steps shall be taken on the satisfaction of the Government to prevent air, water and soil pollution.  Such anti-pollution measures to be installed should conform to the effluent and emission standards prescribe by the State Government in which the factory or the industrial undertaking is located.

 

13.           You shall not manufacture items reserved for the Small Scale Sector without prior approval of the Government as per the prescribed policy and procedure.

 

14.           Import of technical drawings, capital equipments, components and raw materials shall have to necessarily conform to the import policy and procedure.

 

15.           This approval letter is made a part of the foreign collaboration agreement to be executed between you and the foreign collaborator and only those provisions of the agreement which are covered by this letter or which are not in variance with the provisions of this letter shall be binding on the Government of India or Reserve Bank of India.

 

16.           The approval is valid for a period of two years from the date of issue.  Within this period, you are required to file the collaboration agreement with the Authorised Foreign Exchange Dealer.

 

17.           All remittances to the foreign collaborator shall be made as per the exchange rates prevailing on the day of remittance.

 

18.           The agreement shall be subject to Indian Laws.

 

19.           You may now proceed to finalise the agreement.

 

  

22

  

 

20.           The Administration Ministry for this Project is the Department of Information Technology (T&IPD) to whom a copy of this letter of approval is being forwarded.

 

21.           A copy of the collaboration agreement, signed by both parties may be furnished to the following authorities:

 

	
  

	
(A).

	
Concerned Administrative Ministry/Department as mentioned above.

 

	
  

	
(B).

	
Secretariat for Industrial Assistance (PAB-IL SECTION), Department of Industrial Policy & Promotion, Udyog Bhavan, New Delhi – 110011.

 

	
  

	
(C).

	
Department of Scientific and Industrial Research, Technology, New Mehrauli Road, New Delhi – 110016.

 

22.           You are required to confirm acceptance of the above terms and conditions to the Secretariat for Industrial Assistance (PAB-IL Section).

 

23.           All future correspondence for amendment/changes in terms and conditions of the approval letter or for extension of validity, etc., if required, may be addressed to the  Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy & Promotion, Udyog Bhavan, New Delhi – 110011.  ***

 

Yours faithfully

***

 

23

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