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Intellectual Property Mortgage

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INTELLECTUAL PROPERTY
MORTGAGE AND SECURITY AGREEMENT


This Intellectual Property Mortgage and Security Agreement (this "Agreement") is made as of September 28, 2001 by and between Applied Imaging Corp., a Delaware corporation ("Debtor"), and Silicon Valley Bank, a California banking corporation ("Secured Party").


RECITALS
--------


A. Secured Party has agreed to lend to Debtor certain funds (the "Loans"), pursuant to a Loan and Security Agreement dated as of even date herewith (as amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement") and Debtor desires to borrow such funds from Secured Party.


B. In order to induce Secured Party to make the Loans, Debtor has agreed to grant a security interest in certain intangible property to Secured Party for purposes of securing the obligations of Debtor to Secured Party.


NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:


1. Mortgage and Grant of Security Interest. As collateral security for
--------------------------------------- the prompt and complete payment and performance of all of Debtor's present or future indebtedness, obligations and liabilities to Secured Party, Debtor hereby grants, transfers, and conveys a security interest and mortgage to Secured Party, as security, but not as an ownership interest, in and to Debtor's entire right, title and interest in, to and under the following (all of which shall collectively be called the "Collateral"):


(a) All of present and future United States registered copyrights and copyright registrations, including, without limitation, the registered copyrights, maskworks, software, computer programs and other works of authorship subject to United States copyright protection listed in Exhibit A-1 to this
----------- Agreement (and including all of the exclusive rights afforded a copyright registrant in the United States under 17 U.S.C. (S)106 and any exclusive rights which may in the future arise by act of Congress or otherwise) and all present and future applications for copyright registrations (including applications for copyright registrations of derivative works and compilations) (collectively, the "Registered Copyrights"), and any and all royalties, payments, and other amounts payable to Debtor in connection with the Registered Copyrights, together with all renewals and extensions of the Registered Copyrights, the right to recover for all past, present, and future infringements of the Registered Copyrights, and all computer programs, computer databases, computer program flow diagrams, source codes, object codes and all tangible property embodying or incorporating the Registered Copyrights, and all other rights of every kind whatsoever accruing thereunder or pertaining thereto.


(b) All present and future copyrights, maskworks, software, computer programs and other works of authorship subject to (or capable of becoming subject to) United States copyright protection which are not registered in the United States Copyright Office (the "Unregistered Copyrights"), whether now owned or hereafter acquired, including without limitation the Unregistered Copyrights listed in Exhibit A-2 to this Agreement, and any and all royalties,
----------- payments, and other amounts payable to Debtor in connection with the Unregistered Copyrights, together with all renewals and extensions of the Unregistered Copyrights, the right to recover for all past, present, and future infringements of the Unregistered Copyrights, and all computer programs, computer databases, computer program flow diagrams, source codes, object codes and all tangible property embodying or incorporating the Unregistered Copyrights, and all other rights of every kind whatsoever accruing thereunder or pertaining thereto. The Registered Copyrights and the Unregistered Copyrights collectively are referred to herein as the "Copyrights."


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(c) All right, title and interest in and to any and all present and future license agreements with respect to the Copyrights, including without limitation the license agreements listed in Exhibit A-3 to this Agreement (the
----------- "Licenses").


(d) All present and future accounts, accounts receivable and other rights to payment arising from, in connection with or relating to the Copyrights.


(e) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;


(f) Any and all design rights which may be available to Debtor now or hereafter existing, created, acquired or held;


(g) All patents, patent applications and like protections including, without limitation, improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, including without limitation the patents and patent applications set forth on Exhibit B attached hereto
--------- (collectively, the "Patents");


(h) Any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Debtor connected with and symbolized by such trademarks, including without limitation those set forth on Exhibit C
--------- attached hereto (collectively, the "Trademarks"); provided, however, that
-------- ------- Secured Party shall not acquire any interest in any intent to use a federal trademark application for a trademark, servicemark, or other mark filed on Debtor's behalf prior to the filing under applicable law of a verified statement of use (or equivalent) for such mark that is the subject of such application;


(i) Any and all claims for damages by way of past, present and future infringements of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;


(j) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;


(k) All amendments, extensions, renewals and extensions of any of the Copyrights, Trademarks or Patents; and


(l) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.


2. Authorization and Request. Debtor authorizes and requests that the
------------------------- Register of Copyrights and the Commissioner of Patents and Trademarks record this Agreement.


3. Covenants and Warranties. Debtor represents, warrants, covenants and
------------------------ agrees as follows:


(a) Debtor is now the sole owner of the Collateral, except for (i) non-exclusive licenses granted by Debtor to its customers in the ordinary course of business, and (ii) "Permitted Exclusive Assay Provider Licenses" (as such term is defined in the Loan Agreement).


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(b) Listed on Exhibits A-1 and A-2 are all copyrights owned by Debtor, in which Debtor has an interest, or which are used in Debtor's business.


(c) Each employee, agent and/or independent contractor who has participated in the creation of the property constituting the Collateral has either executed an assignment of his or her rights of authorship to Debtor or is an employee of Debtor acting within the scope of his or her employment and was such an employee at the time of said creation.


(d) [intentionally omitted]


(e) Debtor shall undertake all reasonable measures to cause its employees, agents and independent contractors to assign to Debtor all rights of authorship to any copyrighted material in which Debtor has or may subsequently acquire any right or interest.


(f) Performance of this Agreement does not conflict with or result in a breach of any agreement to which Debtor is bound, except to the extent that certain intellectual property agreements prohibit the assignment of the rights thereunder to a third party without the licensor's or other party's consent and this Agreement constitutes an assignment.


(g) During the term of this Agreement, Debtor will not transfer or otherwise encumber any interest in the Collateral, except for Permitted Liens (as such term is defined in the Loan Agreement) and non-exclusive licenses granted by Debtor in the ordinary course of business or as set forth in this Agreement;


(h) Each of the Patents, Trademarks, and Copyrights is valid and enforceable, and no part of the Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Collateral violates the rights of any third party;


(i) Debtor shall promptly advise Secured Party of any material adverse change in the composition of the Collateral, including but not limited to any subsequent ownership right of the Debtor in or to any Trademark, Patent or Copyright not specified in this Agreement;


(j) Debtor shall (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use its best efforts to detect infringements of the Trademarks, Patents and Copyrights and promptly advise Secured Party in writing of material infringements detected and (iii) not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Secured Party, which shall not be unreasonably withheld unless Debtor determines that reasonable business practices suggest that abandonment is appropriate;


(k) Section 9(3) of the Schedule to the Loan Agreement hereby is incorporated herein, mutatis mutandis;


(l) This Agreement creates, and in the case of after acquired Collateral, this Agreement will create at the time Debtor first has rights in such after acquired Collateral, in favor of Secured Party a valid and perfected first priority security interest (subject only to Permitted Liens (if any) that are specifically entitled pursuant to applicable law, or specifically acknowledged in writing by Secured Party, to have priority over Secured Party's security interests) in the Collateral in the United States securing the payment and performance of the obligations evidenced by the Loan Agreement upon making the filings referred to in clause (m) below;


(m) To its knowledge, except for, and upon, the filing with the United States


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Patent and Trademark office with respect to the Patents and Trademarks and the Register of Copyrights with respect to the Copyrights necessary to perfect the security interests and mortgage created hereunder and except as has been already made or obtained, no authorization, approval or other action by, and no notice to or filing with, any U.S. governmental authority or U.S. regulatory body is required either (i) for the grant by Debtor of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Debtor in the U.S. or (ii) for the perfection in the United States or the exercise by Secured Party of its rights and remedies thereunder;


(n) All information heretofore, herein or hereafter supplied to Secured Party by or on behalf of Debtor with respect to the Collateral is accurate and complete in all material respects.


(o) Debtor shall not enter into any agreement that would materially impair or conflict with Debtor's obligations hereunder without Secured Party's prior written consent, which consent shall not be unreasonably withheld. Debtor shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way prevent the creation of a security interest in Debtor's rights and interest in any property included within the definition of the Collateral acquired under such contracts, except that certain contracts may contain anti-assignment provisions that could in effect prohibit the creation of a security interest in such contracts.


(p) Upon any executive officer of Debtor obtaining actual knowledge thereof, Debtor will promptly notify Secured Party in writing of any event that materially adversely affects the value of any material Collateral, the ability of Debtor to dispose of any material Collateral or the rights and remedies of Secured Party in relation thereto, including the levy of any legal process against any of the Collateral.


4. Secured Party's Rights. Secured Party shall have the right, but not
---------------------- the obligation, to take, at Debtor's sole expense, any actions that Debtor is required under this Agreement to take but which Debtor fails to take, after fifteen (15) days' notice to Debtor. Debtor shall reimburse and indemnify Secured Party for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this section 4.


5. Inspection Rights. Debtor hereby grants to Secured Party and its
----------------- employees, representatives and agents the right to visit, during reasonable hours upon prior reasonable written notice to Debtor, and any of Debtor's plants and facilities that manufacture, install or store products (or that have done so during the prior six-month period) that are sold utilizing any of the Collateral, and to inspect the products and quality control records relating thereto upon reasonable written notice to Debtor and as often as may be reasonably requested, but not more than one (1) in every six (6) months; provided, however, nothing herein shall entitle Secured Party access to Debtor's trade secrets and other proprietary information.


6. Further Assurances; Attorney in Fact.
-------------------------------------


(a) Debtor will, subject to any prior licenses, encumbrances and restrictions and prospective licenses, make, execute, acknowledge and deliver, and file and record in the proper filing and recording places in the United States, all such instruments, including, appropriate financing and continuation statements and collateral agreements and filings with the United States Patent and Trademarks Office and the Register of Copyrights, and take all such action as may reasonably be deemed necessary or advisable, or as requested by Secured Party, to perfect Secured Party's security interest in all Copyrights, Patents and Trademarks and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to Secured Party the grant or perfection of a security interest in all Collateral.


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(b) Upon the occurrence and during the continuation of an Event of Default, Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact, with full authority in the place and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from time to time in Secured Party's good faith business judgment, upon Debtor's failure or inability to do so, to take any action and to execute any instrument which Secured Party may deem necessary or advisable in Secured Party's good faith business judgment to accomplish the purposes of this Agreement, including:


(i) To modify, in Secured Party's good faith business judgment, this Agreement without first obtaining Debtor's approval of or signature to such modification by amending Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C, thereof, as appropriate, to include reference to any right, title or interest
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