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Sample Business Contracts

Patent and Trademark Security Agreement - Select Comfort Corp., Select Comfort Retail Corp., Select Comfort Direct Corp. Select Comfort SC Corp., Direct Call Centers Inc., Selectcomfort.com Corp. and Medallion Capital Inc.

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                     PATENT AND TRADEMARK SECURITY AGREEMENT

     This  Patent  and  Trademark  Security  Agreement  is  entered  into  as of
September 28, 2001 by and among each of SELECT COMFORT CORPORATION,  a Minnesota
corporation  (the  "Company"),  AND SELECT  COMFORT RETAIL  CORPORATION,  SELECT
COMFORT DIRECT CORPORATION,  SELECT COMFORT SC CORPORATION, DIRECT CALL CENTERS,
INC.,   AND   SELECTCOMFORT.COM   CORPORATION,   all  of  which  are   Minnesota
corporations,  (the  "Subsidiaries")  (the  Company and the  Subsidiaries  being
individually  and  collectively  referred to herein as "Debtor"),  and MEDALLION
CAPITAL, INC. ("Secured Party").

     Whereas, the execution and delivery of this Agreement is a condition to the
Secured Party extending credit to Debtor;

     Now, therefore, each Debtor jointly and severally agrees with Secured Party
as follows:

     1.  DEFINITIONS.  All  terms  defined  in the Loan  Agreement  of even date
herewith between the Debtor and Secured Party (the "Loan  Agreement")  which are
not  otherwise  defined  herein  shall  have  the  meanings  stated  in the Loan
Agreement. In addition, the following terms have the meanings set forth below:

     "Obligations" means each and every debt,  liability and obligation of every
type and  description  arising under or in connection with any Loan Document (as
defined in the Loan Agreement) which the Debtor may now or at any time hereafter
owe to the Secured Party,  whether such debt, liability or obligation now exists
or is  hereafter  created  or  incurred  and  whether  it is or may be direct or
indirect,  due or to become due,  absolute or contingent,  primary or secondary,
liquidated or unliquidated, independent, joint, several or joint and several.

     "Patents"  means all of the  Debtor's  right,  title and interest in and to
patents or applications for patents, fees or royalties with respect to each, and
including without  limitation the right to sue for past infringement and damages
therefor,  and  licenses  thereunder,  all as  presently  existing or  hereafter
arising or acquired,  including without limitation the patents listed on Exhibit
A  and  any  divisions,   continuations,   continuations-in-part,   reissues  or
corresponding foreign patents and patent applications.

     "Trademarks"  means all of the Debtor's right, title and interest in and to
trademarks,  service marks,  collective  membership  marks, any registrations or
applications for registration  therefor,  together with the respective  goodwill
associated with each, fees or royalties with respect to each,  including without
limitation  the right to sue for past  infringement  and damages  therefor,  and
licenses thereunder, all as presently existing or hereafter arising or acquired,
including,  without limitation,  the marks listed on Exhibit B and any divisions
or  renewals  thereof  or  corresponding  foreign  trademark  registrations  and
applications.




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     2. SECURITY INTEREST. The Debtor hereby irrevocably pledges and assigns to,
and grants to the Secured Party a security  interest,  with power of sale to the
extent  permitted by law,  (the  "Security  Interest") in the Patents and in the
Trademarks to secure payment and performance of the Obligations. As set forth in
greater  detail  in  the  Security  Agreement,  the  Security  Interest  in  the
Trademarks  is coupled  with a security  interest  in  substantially  all of the
assets (without regard to real property) of the Debtor.

     3.   REPRESENTATIONS,   WARRANTIES  AND   AGREEMENTS.   The  Debtor  hereby
represents, warrants and agrees as follows:

          (a) EXISTENCE,  AUTHORITY.  The Debtor is a  corporation,  having full
     power to and authority to make and deliver this  Agreement.  The execution,
     delivery  and  performance  of this  Agreement by the Debtor have been duly
     authorized by all necessary action of the Debtor's board of directors,  and
     if  necessary  its  stockholders,  and do not  and  will  not  violate  the
     provisions of, or constitute a default under, any presently  applicable law
     or its  articles  of  incorporation  or bylaws or any  agreement  presently
     binding on it. This  Agreement  has been duly executed and delivered by the
     Debtor and constitutes the Debtor's lawful, binding and legally enforceable
     obligation.  The  correct  legal  name of the Debtor is as set forth at the
     beginning of this Agreement. Except for any financing statement required to
     be filed under the applicable  Uniform  Commercial Code (the "UCC") and any
     filing or recording  of this  Agreement  in the U.S.  Patent and  Trademark
     Office,  the  authorization,  execution,  delivery and  performance of this
     Agreement do not require  notification to, registration with, or consent or
     approval by, any federal,  state or local regulatory body or administrative
     agency.

          (b) PATENTS.  All of the Patents  identified in Exhibit A are owned or
     controlled  by the  Debtor as of the date  hereof  and the  information  in
     Exhibit A  accurately  reflects  the  existence  and status of the  Patents
     listed therein as of the date hereof.

          (c)  TRADEMARKS.  All of the  Trademarks  identified  in Exhibit B are
     owned or controlled by the Debtor as of the date hereof and the information
     in Exhibit B accurately  reflects the  existence  and status of  Trademarks
     listed therein as of the date hereof.

          (d) TITLE.  Except as set forth in Exhibit C, the Debtor has  absolute
     title to each  Patent and each  Trademark  listed on Exhibits A and B, free
     and clear of all security  interests,  liens and  encumbrances,  except the
     Security  Interest.  Except as set forth in  Exhibit C, the Debtor (i) will
     have,  at the time the Debtor  acquires  ownership in Patents or Trademarks
     hereafter  arising,  absolute title to each such Patent or Trademark,  free
     and clear of all security  interests,  liens and  encumbrances,  except the
     Security  Interest,  and (ii) except for licenses entered into hereafter in
     the  ordinary  course of business for fair  consideration  and which do not
     cause  material harm to the Secured Party as holder of the Note,  will keep
     all Patents and Trademarks free and clear of all security interests,  liens
     and encumbrances except the Security Interest.



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<PAGE>

          (e) NO SALE.  The  Debtor  will not sell or  otherwise  dispose of the
     Patents or Trademarks, or any interest therein, without the Secured Party's
     prior written  consent,  except (i) as permitted in Section 3(d)(ii) above,
     and (ii) sale or  disposition  of Patents  or  Trademarks  that  provide no
     material continuing benefit to Debtor.

          (f) DEFENSE.  The Debtor will at its own  expense,  and using its best
     efforts,  protect and defend the Patents and Trademarks  against all claims
     or demands of all persons other than the Secured  Party,  which would cause
     material harm to the Secured Party.

          (g)  MAINTENANCE.  The Debtor  will at its own  expense  maintain  the
     Patents  and the  Trademarks  to the  extent  reasonably  advisable  in its
     business including, but not limited to, filing all applications to register
     or obtain letters  patent,  file all  affidavits and renewals,  and pay all
     annuities   and   maintenance   fees   possible   with  respect  to  issued
     registrations  and letters  patent.  The Debtor  covenants that it will not
     abandon nor fail to pay any  maintenance  fee or annuity due and payable on
     any  Patent  or  Trademark  (except  for those  that  provide  no  material
     continuing  benefit to Debtor),  nor fail to file any required affidavit in
     support thereof,  without first providing the Secured Party: (i) sufficient
     written  notice  to  allow  the  Secured  Party  to  timely  pay  any  such
     maintenance  fees or annuity or take such other action which may become due
     on any of said Patents or Trademarks, or to file any affidavit with respect
     thereto,   and  (ii)  a  separate   written  power  of  attorney  or  other
     authorization to pay such  maintenance  fees or annuities,  or to file such
     affidavit,  or  take  such  other  action,  should  such  be  necessary  or
     desirable.

          (h)  SECURED  PARTY'S  RIGHT TO TAKE  ACTION.  If the Debtor  fails to
     perform or observe any of its  covenants  or  agreements  set forth in this
     Section 3, and if such failure  continues for a period of ten (10) calendar
     days after the Secured Party gives the Debtor  written  notice thereof (or,
     in the case of the agreements contained in subsection (g), immediately upon
     the occurrence of such failure, without notice or lapse of time), or if the
     Debtor  notifies  the Secured  Party that it intends to abandon a Patent or
     Trademark,  the Secured  Party may (but need not)  perform or observe  such
     covenant  or  agreement  on behalf and in the name,  place and stead of the
     Debtor (or, at the Secured Party's option, in the Secured Party's own name)
     and may (but need not) take any and all  other  actions  which the  Secured
     Party may reasonably deem necessary to cure or correct such failure.

          (i) COSTS AND  EXPENSES.  Except to the extent that the effect of such
     payment  would be to render any loan or  forbearance  of money  usurious or
     otherwise  illegal  under any  applicable  law,  the  Debtor  shall pay the
     Secured Party on demand the amount of all moneys expended and all costs and
     expenses  (including  reasonable  attorneys'  fees) incurred by the Secured
     Party in  connection  with or as a result  of the  Secured  Party's  taking
     action under  subsection  (h) or  exercising  its rights  under  Section 6,
     together  with  interest  thereon from the date expended or incurred by the
     Secured  Party  at  the  highest  rate  then   applicable  to  any  of  the
     Obligations.



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<PAGE>

          (j) POWER OF ATTORNEY. To facilitate the Secured Party's taking action
     under  subsection (h) and exercising its rights under Section 6, the Debtor
     hereby irrevocably appoints (which appointment is coupled with an interest)
     the Secured Party, or its delegate,  as the  attorney-in-fact of the Debtor
     with the right  (but not the duty)  from time to time to  create,  prepare,
     complete,  execute,  deliver, endorse or file, in the name and on behalf of
     the Debtor,  any and all instruments,  documents,  applications,  financing
     statements,  and other  agreements  and  writings  required to be obtained,
     executed,  delivered  or endorsed by the Debtor  under this  Section 3, or,
     necessary for the Secured Party,  after an Event of Default,  to enforce or
     use the  Patents  or  Trademarks  or to  grant or issue  any  exclusive  or
     non-exclusive  license  under the Patents or Trademarks to any third party,
     or to sell, assign, transfer,  pledge, encumber or otherwise transfer title
     in or dispose of the Patents or Trademarks  to any third party.  The Debtor
     hereby  ratifies all that such  attorney  shall  lawfully do or cause to be
     done by virtue hereof. The power of attorney granted herein shall terminate
     upon the payment and performance of all Obligations.

     4.  DEBTOR'S-USE  OF THE  PATENTS  AND  TRADEMARKS.  The  Debtor  shall  be
permitted to control and manage the Patents and Trademarks,  including the right
to exclude others from making, using or selling items covered by the Patents and
Trademarks  and any  licenses  thereunder,  in the same manner and with the same
effect as if this  Agreement  had not been entered  into, so long as no Event of
Default occurs and remains unwaived or uncured.

     5. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called "Event of Default"):  (a) a
Default, as defined in the Loan Agreement,  shall occur; or (b) the Debtor shall
fail promptly  (including any applicable grace period) to observe or perform any
covenant or agreement herein binding on it; or (c) any of the representations or
warranties  contained  in Section 3 shall  prove to have been  incorrect  in any
material respect when made.

     6.  REMEDIES.  Upon the  occurrence  of an Event of Default and at any time
thereafter  during its continuance,  the Secured Party may, at its option,  take
any or all of the following actions:

          (a) The Secured Party may exercise any or all remedies available under
     the Loan Agreement.

          (b) The Secured Party may sell, assign, transfer,  pledge, encumber or
     otherwise dispose of the Patents and Trademarks.

          (c) The Secured Party may enforce the Patents and  Trademarks  and any
     licenses  thereunder,  and if the Secured Party shall commence any suit for
     such enforcement, the Debtor shall, at the request of the Secured Party, do
     any and all lawful acts and execute any and all proper  documents  required
     by the Secured Party in aid of such enforcement.



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<PAGE>

     7.  MISCELLANEOUS.  This  Agreement and Secured  Party's  rights under this
Agreement  or under  applicable  law may be  enforced by Secured  Party,  at its
discretion,  against any one or more of the parties  referred to above which are
encompassed  within the term Debtor,  without any need to bring any  enforcement
action  against the other  parties who are  encompassed  within the term Debtor.
This  Agreement has been duly and validly  authorized  by all necessary  action,
corporate  or  otherwise.  This  Agreement  can be  waived,  modified,  amended,
terminated  or  discharged,  and the Security  Interest  can be  released,  only
explicitly  in a writing  signed by the Secured  Party.  A waiver  signed by the
Secured  Party shall be  effective  only in the  specific  instance  and for the
specific  purpose  given.  Mere delay or failure to act shall not  preclude  the
exercise or  enforcement of any of the Secured  Party's rights or remedies.  All
rights  and  remedies  of the  Secured  Party  shall  be  cumulative  and may be
exercised  singularly or  concurrently,  at the Secured Party's option,  and the
exercise  or  enforcement  of any one such  right or remedy  shall  neither be a
condition to nor bar the exercise or enforcement of any other. The Secured Party
shall not be obligated to preserve any rights the Debtor may have against  prior
parties,  to realize on the Patents and  Trademarks at all or in any  particular
manner or order,  or to apply any cash proceeds of Patents and Trademarks in any
particular order of application.  This Agreement shall be binding upon and inure
to the  benefit  of the  Debtor  and the  Secured  Party  and  their  respective
participants,  successors  and  assigns and shall take effect when signed by the
Debtor and delivered to the Secured  Party,  and the Debtor waives notice of the
Secured Party's  acceptance hereof. The Secured Party may execute this Agreement
if appropriate  for the purpose of filing,  but the failure of the Secured Party
to  execute  this  Agreement   shall  not  affect  or  impair  the  validity  or
effectiveness of this Agreement. A carbon, photographic or other reproduction of
this Agreement or of any financing statement signed by the Debtor shall have the
same force and effect as the original for all purposes of a financing statement.
This Agreement shall be governed by the internal law of Minnesota without regard
to  conflicts  of law  provisions.  If any  provision  or  application  of  this
Agreement is held unlawful or unenforceable  in any respect,  such illegality or
unenforceability  shall not affect other provisions or applications which can be
given  effect  and this  Agreement  shall be  construed  as if the  unlawful  or
unenforceable  provision  or  application  had never  been  contained  herein or
prescribed  hereby.  All  representations  and  warranties   contained  in  this
Agreement  shall  survive  the  execution,  delivery  and  performance  of  this
Agreement and the creation and payment of the Obligations.

        THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS AGREEMENT.



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<PAGE>


     In Witness  Whereof,  the parties have  executed  this Patent and Trademark
Security Agreement as of the date first written above.


SELECT COMFORT CORPORATION                         MEDALLION CAPITAL, INC.

                                              
By:  /s/ Mark A. Kimball                           By:  /s/ Dean R. Pickerell
     ------------------------------------------         --------------------------------------
     Mark A. Kimball, Senior Vice President             Dean R. Pickerell, Executive Vice President


SELECT COMFORT RETAIL CORPORATION

By:  /s/ Mark A. Kimball
     ------------------------------------------
     Mark A. Kimball, Senior Vice President

SELECT COMFORT DIRECT CORPORATION

By:  /s/ Mark A. Kimball
     ------------------------------------------
     Mark A. Kimball, Senior Vice President


SELECT COMFORT SC CORPORATION

By:  /s/ Mark A. Kimball
     ------------------------------------------
     Mark A. Kimball, Senior Vice President


DIRECT CALL CENTERS, INC.

By:  /s/ Mark A. Kimball
     ------------------------------------------
     Mark A. Kimball, Senior Vice President


SELECTCOMFORT.COM CORPORATION

By:  /s/ Mark A. Kimball
     ------------------------------------------
     Mark A. Kimball, Senior Vice President





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<PAGE>

STATE OF MINNESOTA    )
                      )
COUNTY OF HENNEPIN    )

     The  foregoing  instrument  was  acknowledged  before  me this  28th day of
September,  2001, by Mark A. Kimball,  the Senior Vice  President of each of the
foregoing Minnesota corporations, on behalf of each such corporation.


                                              /s/ Laura L. Krenz
                                              ----------------------------------
Notary Public


STATE OF MINNESOTA    )
                      )
COUNTY OF HENNEPIN    )

     The  foregoing  instrument  was  acknowledged  before  me this  28th day of
September, 2001, by Dean R. Pickerell, the Executive Vice President of Medallion
Capital, Inc.


                                              /s/ Laura L. Krenz
                                              ----------------------------------
Notary Public



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