Security Agreement And Mortgage

SECURITY AGREEMENT AND MORTGAGE -
TRADEMARKS AND PATENTS


AGREEMENT made this 29th day of March, 1996 among AURORA ELECTRONICS GROUP, INC., a California corporation (the "Borrower"), AURORA ELECTRONICS, INC., a Delaware corporation ("Holdings"; Holdings and the Borrower are each sometimes referred to herein as a "Debtor" and collectively as the "Debtors"), each having an office at 2030 Main Street, Suite 1120, Irvine, California 92714, and CHEMICAL BANK, a New York banking corporation having an office at 633 Third Avenue, New York, New York 10017, as agent (referred to herein as the "Secured Party") for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated as of the date hereof, among the Debtors, the guarantors named therein (the "Guarantors"), the Lenders and the Secured Party (as amended, modified or supplemented from time to time in accordance with its terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of Credit.


A. The Debtors have adopted the terms and designs described in Schedule A annexed hereto and made a part hereof.


B. The Debtors are the owners and holders of the patents listed on Schedule B hereto.


C. The Secured Party and the Lenders have agreed to extend Loans and certain other financial accommodations including, without limitation, the issuance of Letters of Credit to the Borrower pursuant to, and subject to the terms and conditions of, the Credit Agreement. The obligation of the Lenders to extend such Loans and of the Secured Party to issue Letters of Credit under the Credit Agreement is conditioned on the execution and delivery by the Debtors of a security agreement in the form hereof to secure the following: (i) the Obligations (including, without limitation, the due and punctual payment and performance of (a) the principal of and interest on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (b) Indebtedness at any time and from time to time under the Letters of Credit), (ii) all obligations of the Debtors at any time and from time to time under this Agreement and (iii) all obligations of the Debtors and the Guarantors at any time and from time to time under the Credit Agreement and the other Loan Documents (the foregoing being herein referred to as the "Secured Obligations").


NOW, THEREFORE, IT IS AGREED that, for and in consideration of the Loans and other financial accommodations to be made under the Credit Agreement, and other good and valuable consideration, the receipt of which is hereby acknowl- 2 edged, and as collateral security for the full and prompt payment and performance of all Secured Obligations, as hereinafter defined, the Debtors do hereby mortgage to and pledge with the Secured Party for its own benefit and the benefit of the Lenders, and grant to the Secured Party a security interest in, all of its right, title and interest in and to (i) each of the Trademarks (as hereinafter defined), and the goodwill of the business symbolized by each of the Trademarks, all customer lists and other records of the Debtors relating to the distribution of products bearing the Trademarks and each of the registrations described in Schedule A; (ii) each of the Patents (as hereinafter defined) and each of the registrations listed on Schedule B hereto; and (iii) any and all proceeds of the foregoing, including, without limitation, any claims by the Debtors against third parties for infringement of the Trademarks or the Patents (collectively, the "Collateral").


1. Terms defined in the Credit Agreement and not otherwise defined herein, shall have the meaning set forth in the Credit Agreement. As used in this Agreement, unless the context otherwise requires:


"Patents" shall mean (i) all letters patent of the United States or any other country, all right, title and interest therein and thereto, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by a Debtor, including, but not limited to, those described in Schedule B annexed hereto and made a part hereof, and (ii) all reissues, continuations, continuations-in-part, extensions or divisional thereof and all licenses thereof.


"Trademarks" shall mean (i) all trademarks, trade names, trade styles, service marks, prints and labels on which said trademarks, trade names, trade styles and service marks have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all right, title and interest therein and thereto, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by a Debtor, including, but not limited to, those described in Schedule A annexed hereto and made a part hereof, and (ii) all reissues, extensions or renewals thereof and all licenses thereof.


2 3
2. Each Debtor hereby represents, warrants, covenants and agrees as follows:


(a) Such Debtor has the sole, full and clear title to the registered U.S. Trademarks in which it is granting a security interest hereunder for the goods and services covered by the registrations thereof and such registrations are valid and subsisting and in full force and effect.


(b) Each Debtor will perform all acts and execute all documents, including, without limitation, assignments for security in form suitable for filing with the United States Patent and Trademark Office, substantially in the forms of Exhibits 1 and 2 hereof, respectively, reasonably requested by the Secured Party at any time to evidence, perfect, maintain, record and enforce the Secured Party's interest in the Collateral or otherwise in furtherance of the provisions of this Agreement, and each Debtor hereby authorizes the Secured Party to execute and file one or more financing statements (and similar documents) or copies thereof or of this Agreement with respect to the Collateral signed only by the Secured Party.


(c) Each Debtor (either itself or through licensees) will continue to use its Trademarks on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademarks in full force free from any claim of abandonment for nonuse and no Debtor will (nor will it permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated, except to the extent that such Debtor, in the exercise in good faith of its commercially reasonable business judgment, decides in the ordinary course of business to discontinue the sale and/or production of particular products bearing any such Trademark.


(d) Such Debtor has the sole, full and clear title to each of the Patents shown on Schedule B hereto and the registrations thereof are valid and subsisting and in full force and effect. None of the Patents has been abandoned or dedicated, and, except to the extent that a Debtor, in the exercise in good faith of its commercially reasonable business judgment, decides that such Patent is no longer useful with respect to the business of such Debtor, no Debtor will do any act, or omit to do any act, whereby its Patents may become abandoned or dedicated and shall notify the Secured Party immediately if it knows of any reason or has reason to know that any application or registration may become abandoned or dedicated.


(e) The Debtors will promptly pay the Secured Party for any and all reasonable sums, costs, and expenses which the Secured Party may pay or incur pursuant to the provisions of this Agreement or in enforcing the Secured Obligations, the Collateral or the security interest granted hereunder, including, but not limited to, all


3 4 filing or recording fees, court costs, collection charges, travel, and reasonable attorneys' fees, all of which together with interest at the highest rate then payable on the Secured Obligations shall be part of the Secured Obligations and be payable on demand.


(f) In no event shall any Debtor, either itself or through any agent, employee, licensee or designee, (i) file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office or any similar office or agency of the United States, any State thereof, any other country or any political subdivision thereof or (ii) file any assignment of any patent or trademark, which such Debtor may acquire from a third party, with the United States Patent and Trademark Office or any similar office or agency of the United States, any State thereof, any other country or any political subdivision thereof, unless such Debtor shall, on or prior to the date of such filing, notify the Secured Party thereof, and, upon request of the Secured Party, execute and deliver any and all assignments, agreements, instruments, documents and papers as the Secured Party may reasonably request to evidence the Secured Party's interest in such Patent or Trademark and the goodwill and general intangibles of such Debtor relating thereto or represented thereby, and each Debtor hereby constitutes the Secured Party its attorney-in- fact to execute and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power being coupled with an interest is irrevocable until the Secured Obligations are paid in full.


(g) Each Debtor has the right and power to make the assignment and to grant the security interest herein granted; and the Collateral is not now, and at all times hereafter will not be, subject to any Liens, mortgages, assignments, security interests or encumbrances of any nature whatsoever, except (x) Liens in favor of the Secured Party and (y) Liens of a type described in Section 7.01(c) of the Credit Agreement, and to the best knowledge of the Debtors none of the Collateral is subject to any claim.


(h) Except to the extent that the Secured Party, upon prior written notice from any Debtor, shall consent, no Debtor will assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security interest in or lien upon, encumber, grant an exclusive or non-exclusive license, or otherwise dispose of any of the Collateral, and nothing in this Agreement shall be deemed a consent by the Secured Party to any such action except as expressly permitted herein or in the Credit Agreement.


(i) As of the date hereof no Debtor nor any affiliate or subsidiary thereof owns any Patents or Trademarks or has any Patents or Trademarks registered in, or the subject of pending applications in, the United States Patent and Trademark Office or any similar office or agency of the United States, any State thereof, any other


4 5 country or any political subdivision thereof, other than those described in Schedules A and B hereto.


(j) Each Debtor will take all necessary steps in any proceeding before the United States Patent and Trademark Office or any similar office or agency of the United States, any State thereof, any other country or any political subdivision thereof, to maintain each application and registration of the Trademarks and Patents, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings (except to the extent that dedication, abandonment or invalidation is permitted under paragraphs 2(c) and 2(d) hereof).


(k) Each Debtor assumes all responsibility and liability arising from the use of the Trademarks, and the Debtors hereby jointly and severally indemnify and hold the Secured Party harmless from and against any claim, suit, loss, damage or expense (including reasonable attorneys' fees) arising out of any alleged defect in any product manufactured, promoted or sold by any Debtor (or any affiliate or subsidiary thereof) in connection with any Trademark or out of the manufacture, promotion, labeling, sale or advertisement of any such product by such Debtor (or any affiliate or subsidiary thereof). Each Debtor agrees that the Secured Party does not assume, and shall have no responsibility for, the payment of any sums due or to become due under any agreement or contract included in the Collateral or the performance of any obligations to be performed under or with respect to any such agreement or contract by any Debtor, and the Debtors hereby jointly and severally agree to indemnify and hold the Secured Party harmless with respect to any and all claims by any person relating thereto unless such claims shall be due to the gross negligence or wilful misconduct of the Secured Party as finally determined by a court of competent jurisdiction after the exhaustion of all possible appeals in respect of such determination (including by reason of lapse of time).


(l) The Secured Party may, in its sole discretion, pay any amount or do any act required of Debtor hereunder or requested by Secured Party to preserve, defend, protect, maintain, record or enforce Debtor's obligations contained herein, the Secured Obligations, the Collateral, or the right, title and interest granted Secured Party herein, and which any Debtor fails to do or pay, and any such payment shall be deemed an advance by the Secured Party to the Debtors and shall be payable on demand together with intere ...