SECURITY AGREEMENT
between
AURA SYSTEMS, INC.,
AURA CERAMICS, INC.,
AURASOUND, INC.
AURA MEDICAL SYSTEMS, INC.,
ELECTROTEC PRODUCTIONS, INC.,
DS OSCILLATOR, INC.,
PHILIPS SOUND LABS, INC.
and
ELECTROTEC AUDIO LEASE LIMITED
and
HW PARTNERS, LP,
as Agent for the Funds
Dated as of February 22, 2000
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement"), dated as of February 22,
2000, between AURA SYSTEMS, INC., a Delaware corporation (the "Company") and
each of AURA CERAMICS, INC., a Delaware corporation ("Aura Ceramics"),
AURASOUND, INC., a Delaware corporation ("AuraSound"), AURA MEDICAL SYSTEMS,
INC., a Delaware corporation ("Aura Medical"), ELECTROTEC PRODUCTIONS, INC., a
California corporation ("Electrotec Productions"), DS OSCILLATOR, INC., a
California corporation ("DS Oscillator"), PHILIPS SOUND LABS, INC., a Nevada
corporation ("Philips Sound") and ELECTROTEC AUDIO LEASE LIMITED, a corporation
organized and existing under the laws of England ("Electrotec Audio" and
together with the Company, Aura Ceramics, AuraSound, Aura Medical, Electrotec
Productions, DS Oscillator, and Philips Sound, each an "Assignor" and
collectively, the "Assignors") and HW PARTNERS, LP, as Agent (the "Assignee" or
the "Agent") for the benefit of the Funds (as defined herein). Unless otherwise
defined in Article IX hereof, terms used herein and defined in the Secured Notes
(as defined below) shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, each of Infinity Investors Limited, Glacier Capital
Limited, Global Growth Limited and Summit Capital Limited (collectively, the
"Funds"), is the holder of certain of the Company's Variable Interest Rate
Convertible Notes due September 30, 1998 (the "Original Notes") which are
secured by certain assets of the Company as specified in that certain Pledge
Agreement dated September 30, 1997;
WHEREAS, on the date hereof the Company will issue and deliver
Secured Notes of even date herewith in an aggregate amount of $12,500,000.00 (as
modified, supplemented or amended from time to time, the "Secured Notes") to the
Funds in exchange for the Original Notes held by the Funds after giving effect
to the Assignment (the "Exchange");
WHEREAS, it is a condition to the Exchange that the Assignors
shall have executed and delivered this Agreement (this Agreement, together with
the Secured Notes, the Exchange Agreement, the Guaranty, the Stock Pledge
Agreement, and all other documents, certificates and instruments executed and
delivered in connection with any of the foregoing, the "Transaction Documents");
and
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to the Assignors, the receipt and sufficiency of which are
hereby acknowledged, each Assignor hereby makes the following representations
and warranties to the Agent and the Funds and hereby covenants and agrees with
the Agent and each of the Fund as follows:
ARTICLE I
SECURITY INTERESTS
1.1 Grant of Security Interests.
(a) As security for the prompt and complete payment and
performance when due of all of its Obligations, each Assignor does hereby grant
to the Agent for the benefit of the Funds, a continuing security interest in all
of the right, title and interest of such Assignor in, to and under all of the
following, whether now existing or hereafter from time to time acquired: (i)
each and every Receivable, (ii) all Contracts, together with all Contract Rights
arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all Marks,
together with the registrations and right to all renewals thereof, and the
goodwill of the business of such Assignor symbolized by the Marks, (vi) all
Patents and Copyrights and all reissues, renewals or extensions thereof, (vii)
all computer programs of such Assignor and all intellectual property rights
therein and all other proprietary information of such Assignor, including, but
not limited to, Trade Secret Rights, (viii) all insurance policies, (ix) all
Permits, (x) all other Goods, General Intangibles, Chattel Paper, Documents,
Instruments and Investment Property, and (xi) all Proceeds and products of any
and all of the foregoing (all of the above collectively, the "Collateral");
provided however, that the Collateral shall not include the assets of the
Company or AuraSound licensed to (A) Daewoo Electronics Co., Ltd. pursuant to
that certain License Agreement dated August 19, 1996 (the "Daewoo License
Agreement") only to the extent a security interest in such Collateral is
prohibited under the original terms of the Daewoo License Agreement, and (B)
Speaker Acquisition Sub pursuant to that certain Assignment and License
Agreement dated July 15, 1999 (the "Algo License Agreement") only to the extent
a security interest in such Collateral is prohibited under the original terms of
the Algo License Agreement.
(b) The security interest of the Agent under this Agreement
extends to all Collateral of the kind which is the subject of this Agreement
which the Assignors may acquire at any time during the continuation of this
Agreement.
1.2 Power of Attorney. Each Assignor hereby constitutes and
appoints the Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of an Event of Default (which has not been cured in
accordance with the terms of the Secured Notes) in the name of such Assignor or
otherwise to act, require, demand, receive, compound and give acquittance for
any and all moneys and claims for moneys due or to become due to such Assignor
under or arising out of the Collateral, to endorse any checks or orders in
connection therewith and to file any claims or take any action or institute any
proceedings which the Agent may deem to be necessary or advisable in the
premises to protect and preserve the Collateral, including, without limitation,
the endorsement of any draft or order which may be payable to such Assignor and
the protection and prosecution of all rights included in the Collateral, which
appointment as attorney is coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1 Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by such Assignor to the Agent hereby in respect of all
the Collateral have been accomplished and the security interest granted to the
Agent pursuant to this Agreement in and to the Collateral constitutes a valid
and enforceable security interest therein superior and prior to the rights of
all other Persons therein and subject to no other Liens (except that the
Collateral may be subject to Permitted Liens) and the Agent is entitled to all
the rights, priorities and benefits afforded by the UCC or other relevant law as
enacted in any relevant jurisdiction to perfected security interests; provided,
however, the Assignor will not, and will not permit any of its Subsidiaries to,
nor shall any such Person allow any other Person to, file or record any
assignment, Lien, security interest, encumbrance or other right, title or
interest, of any Person, upon or with respect to any of the Proprietary Rights
of the Assignor with the United States Patent and Trademark Office. Nothing
herein shall be deemed or construed as an argument or admission that the Liens
upon certain Proprietary Rights of the Assignor created pursuant to the Security
Documents are impaired or unperfected nor shall this Agreement impair or
prohibit the Company from asserting that failure to record at the United States
Patent and Trademark Office results in the Liens upon such Proprietary Rights
being unperfected.
2.2 No Liens. Except as otherwise provided herein or in the
Stock Pledge Agreement, the Assignor is, and as to Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Permitted Liens), and such Assignor
shall defend the Collateral against all claims and demands of all Persons at any
time claiming the same or any interest therein adverse to the Agent.
2.3 Other Financing Statements. As of the date hereof, there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) covering or purporting to cover any interest
of any kind in the Collateral (other than Permitted Liens) and so long as any
Secured Note remains unpaid or any of the Obligations remain unpaid, such
Assignor will not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements filed or to be filed in respect of the Permitted Liens (but
not including any filing with the United States Patent and Trademark Office) and
covering the security interests granted hereby by such Assignor.
2.4 Chief Executive Office; Records. As of the date hereof,
the chief executive office of each Assignor is located as set forth in Schedule
2.4 hereof. The Assignor shall give 30 days' prior written notice to the Agent
of its intention to move its chief executive office to another location;
provided, however, that any such change of location shall only be made after the
Agent shall have received evidence that such Assignor shall have taken all
actions, reasonably satisfactory to the Agent, subject to Section 2.1 hereof, to
maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect in the
jurisdiction where the chief executive office of such Assignor is to be
relocated. The originals of all documents evidencing all relating to the
Collateral and the only original books of account and records of such Assignor
relating thereto are, and will continue to be, kept at such chief executive
office. If for any reason any Collateral or such other books and records shall
be located in any other location, the Assignor shall, with respect to such new
location, take, or shall have taken, all action, reasonably satisfactory to the
Agent, subject to Section 2.1 hereof, to maintain the security interest of the
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect in any event within the time period
provided for the taking of such action required by applicable law.
2.5 Location of Bank Accounts, Inventory and Equipment. All
bank accounts (including account numbers, and name and address of the financial
institutions), Inventory and Equipment held on the date hereof by the Assignor
are located at one of the locations shown on Annex A attached hereto. The
Assignor agrees that all bank accounts, Inventory and Equipment now held or
subsequently acquired or created by it shall be kept at (or shall be in
transport to or from) any one of the locations shown on Annex A hereto. If, for
any reason, any bank accounts, Inventory or Equipment shall be located in any
other location, the Assignor shall immediately notify the Agent and, with
respect to such new location, take, or shall have taken, all actions reasonably
satisfactory to the Agent to maintain the security interest of the Agent in the
Collateral intended to be granted hereby at all times fully perfected and in
full force and effect in any event within the time period provided for the
taking of such action required by applicable law; provided however, that failure
of the Assignors to give notice to the Agent herein with respect to bank
accounts created after the Closing Date containing, in the aggregate, less than
$100,000 shall not constitute an Event of Default under the Secured Notes.
2.6 Trade Names; Change of Name. As of the date hereof, the
Assignor does not have or operate in any jurisdiction under, or in the preceding
12 months has not had or has not operated in any jurisdiction under, any trade
names, fictitious names or other names (including, without limitation, any names
of divisions or operations) except its legal name. The Assignor shall not change
its legal name or assume or operate in any jurisdiction under any trade,
fictitious or other name except those names listed above without giving the
Agent 30 days' prior written notice thereof, which notice shall contain the
proposed names to be used and jurisdictions in which it proposes to operate
under such names.
2.7 Recourse. This Agreement is made with full recourse to
each Assignor and pursuant to and upon all the warranties, representations,
covenants, and agreements on the part of such Assignor contained herein, and
otherwise in writing in connection herewith or therewith.
ARTICLE III
SPECIAL PROVISIONS CONCERNING INVESTMENT PROPERTY;
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1 Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and, in all respects, are what
they purport to be, and that all papers and documents (if any) relating thereto
(i) will represent the genuine, legal, valid and binding obligation of the
account debtor evidencing indebtedness unpaid and owed by the respective account
debtor arising out of the performance of labor or services or the sale or lease
and delivery of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the account debtor
named therein (other than copies created for general accounting purposes), (iii)
will evidence true and valid obligations, enforceable in accordance with their
respective terms and (iv) will be in compliance and will conform with all
applicable federal, state and local laws and applicable laws of any relevant
foreign jurisdiction.
3.2 Maintenance of Records. Each Assignor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, and such Assignor will make the same available to the Agent for
inspection, at any and all reasonable times upon reasonable prior notice to such
Assignor. If requested by the Agent after an Event of Default has occurred which
has not been cured in accordance with the Secured Notes, each Assignor shall, at
its own cost and expense, deliver all tangible evidence of its Receivables and
Contract Rights (including, without limitation, copies of all documents
evidencing the Receivables and all Contracts) and such books and records to the
Agent or to its representatives (copies of which evidence and books and records
may be retained by such Assignor). If the Agent so directs, each Assignor shall
legend, in form and manner reasonably satisfactory to the Agent, the Receivables
and Contracts, as well as books, records and documents of such Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that the Agent has a security interest in such Receivables
and Contracts.
3.3 Modification of Terms; etc. Each Assignor shall not
rescind or cancel any indebtedness evidenced by any Receivable or under any
Contract, or modify any term thereof or make any adjustment with respect
thereto, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto, or sell any
Receivable or Contract, or interest therein, without the prior written consent
of the Agent, except as permitted by Section 3.4 hereof.
3.4 Collection. Each Assignor shall endeavor in accordance
with its customary business practices to cause to be collected from the account
debtor named in each of its Receivables or obligor under any Contract, as and
when due (including, without limitation, amounts which are delinquent, such
amounts to be collected in accordance with generally accepted lawful collection
procedures) any and all amounts owing under or on account of such Receivable or
Contract, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Receivable or under such Contract,
except that, so long as no Event of Default has occurred (which has not been
cured in accordance with the terms of the Secured Notes) in respect of which the
Agent has given notice that this exception is no longer applicable, such
Assignor may allow in the ordinary course of business as adjustments to amounts
owing under its Receivables and Contracts (i) an extension or renewal of the
time or times of payment, or settlement for less than the total unpaid balance,
which such Assignor finds appropriate in accordance with sound business judgment
and (ii) a refund or credit due as a result of returned or damaged merchandise
or improperly performed services. The reasonable costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by any
Assignor or the Agent, shall be borne by the Assignor or the applicable account
debtor.
3.5 Instruments. If any Assignor owns or acquires any
Instrument or Investment Property, such Assignor will, within ten (10) days
thereof, notify the Agent and deliver such Instrument or Investment Property to
the Agent appropriately endorsed to the order of the Agent as further security
hereunder, provided that an Assignor may transfer an Instrument to the Company
whereupon the Company shall deliver immediately such Instrument to the Agent in
accordance with this Section 3.5.
3.6 Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Agent from time
to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments, Investment Property
and other property or rights covered by the security interest hereby granted, as
the Agent may reasonably require to give effect to the purposes of this
Agreement.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1 Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of all right, title
and interest in and to the United States Patent and Trademark Office
registrations, and applications for registrations, of the Marks listed in Annex
B attached hereto and that Annex B lists all the United States Patent and
Trademark Office, or the equivalent office thereof in any foreign country,
registrations and applications for registrations, of the Marks that such
Assignor now owns or uses in connection with its business and which are material
in the conduct of such Assignor's business. Each Assignor represents and
warrants that except with respect to those licensed marks set forth in Annex B,
it owns, is licensed to use or otherwise has the right to use all Marks that it
uses. Each Assignor further warrants that it is aware of no third party claim
that any aspect of such Assignor's present or contemplated business operations
infringes or will infringe any ▇▇▇▇. Except as set forth on Annex B, each
Assignor represents and warrants that it is the true and lawful owner of or
otherwise has the right to use all trademark registrations and applications
listed in Annex C hereto and that said registrations are valid, subsisting, have
not been canceled and that such Assignor is not aware of any third-party claim
that any of said registrations or applications for registration with respect to
a ▇▇▇▇ is invalid or unenforceable or is not aware that there is any reason that
any of said registrations or applications for registration with respect to a
▇▇▇▇ is invalid or unenforceable.
4.2 Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right under a ▇▇▇▇ other than in the ordinary course of
business absent prior written approval of the Agent.
4.3 Infringements. Each Assignor agrees, promptly upon
learning thereof, to notify the Agent in writing of the name and address of, and
to furnish such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating in any of such Assignor's
rights in and to any ▇▇▇▇, or with respect to any party claiming that such
Assignor's use of any ▇▇▇▇ violates any property right of that party. Each
Assignor further agrees to prosecute diligently any Person infringing any ▇▇▇▇
owned by such Assignor in a manner consistent with its past practice and in
accordance with reasonable business practices. Notwithstanding anything herein
to the contrary, such Assignor may exercise its business judgment hereunder in
respect of any ▇▇▇▇ used in connection with the Company's Non-Core Assets;
provided however, that such Assignor shall give timely notice thereof to the
Agent, and that the Agent and/or the Funds (if such Assignor declines to protect
such Marks) may take such actions as reasonably necessary at their own expense
to protect such Marks.
4.4 Preservation of Marks. Each Assignor agrees to use or
license the use of its Marks in interstate commerce during the time in which
this Agreement is in effect, sufficiently to preserve such Marks as trademarks
or service marks registered under the laws of the United States or the relevant
foreign jurisdiction. Notwithstanding anything herein to the contrary, such
Assignor may exercise its business judgment hereunder in respect of any ▇▇▇▇
used in connection with such Assignor's Non-Core Assets; provided however, that
such Assignor shall give prompt notice thereof to the Agent, and that the Agent
and/or the Funds (if such Assignor declines to protect such Marks) may take such
actions as reasonably necessary at their own expense to protect such Marks.
4.5 Maintenance of Registration. Each Assignor shall, at its
own expense, diligently process all documents required to maintain trademark
registrations, including but not limited to affidavits of use and applications
for renewals of registration in the United States Patent and Trademark Office or
equivalent governmental agency in any foreign jurisdiction for all of its Marks
(excluding unregistered Marks), and shall pay all fees and disbursements in
connection therewith, and shall not abandon any such filing of affidavit of use
or any such application of renewal prior to the exhaustion of all administrative
and judicial remedies without prior written consent of the Agent (which consent
shall not be unreasonably withheld). Notwithstanding anything herein to the
contrary, such Assignor may exercise its business judgment hereunder in respect
of any ▇▇▇▇ used in connection with such Assignor's Non-Core Assets; provided
however, that such Assignor shall give prompt notice thereof to the Agent, and
that the Agent and/or the Funds (if such Assignor declines to protect such
Marks) may take such actions as reasonably necessary at their own expense to
protect such Marks.
4.6 Future Registered Marks. If any ▇▇▇▇ registration issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office or equivalent
governmental agency in any foreign jurisdiction, such Assignor shall, within
thirty (30) days of receipt of such certificate, deliver a copy of such
certificate, and a grant of security in such ▇▇▇▇ to the Agent, confirming the
grant thereof hereunder, the form of such confirmatory grant to be substantially
the same as the form hereof.
4.7 Remedies. If an Event of Default shall occur (which has
not been cured in accordance with the terms of the Secured Notes), the Agent
may, by written notice to the Assignors, exercise any or all remedies under this
Agreement, the UCC or any other applicable law.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
TRADE SECRET RIGHTS, PATENTS AND COPYRIGHTS
5.1 Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of all right, title
and interest in and to (i) all Trade Secret Rights, (ii) the Patents of such
Assignor listed in Annex C attached hereto and that said Patents constitute all
the patents and applications for patents that such Assignor now owns and which
are material in the conduct of its business and (iii) the Copyrights of such
Assignor listed in Annex D attached hereto and that said Copyrights constitute
all the registered copyrights and applications for copyright registrations that
such Assignor now owns and which are material in the conduct of its business.
Each Assignor represents and warrants that it owns all Patents and Copyrights
that it owns, uses or practices under. Each Assignor further warrants that it is
aware of no third party claim that any aspect of such Assignor's present or
contemplated business operations infringes or will infringe any material patent
or any material copyright or that such Assignor has misappropriated any material
Trade Secret Rights.
5.2 Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right, title or interest under any Patent or Copyright
(other than those Patents and Copyrights with respect to Non-Core Assets in
accordance with the Secured Notes) absent prior written approval of the Agent.
5.3 Infringements. Each Assignor agrees, promptly upon
learning thereof, to furnish the Agent in writing with all pertinent information
available to such Assignor with respect to any infringement or other violation
of such Assignor's rights in any Patent or Copyright, or with respect to any
claim that the practice of any Patent or the use of any Copyright violates any
property right of a third party or with respect to any misappropriation of any
material Trade Secret Right or any claim that the practice of any Trade Secret
Right violates any property right of a third party. Each Assignor further agrees
to prosecute diligently any Person infringing any Patent or Copyright owned by
such Assignor or any Person misappropriating any Trade Secret Right.
Notwithstanding anything herein to the contrary, such Assignor may exercise its
business judgment hereunder in respect of any Patent or Copyright used in
connection with such Assignor's Non-Core Assets; provided however, that such
Assignor shall give prompt notice thereof to the Agent, and that the Agent
and/or the Funds (if such Assignor declines to protect such Patents or
Copyrights) may take such actions as reasonably necessary at their own expense
to protect such Patents or Copyrights.
5.4 Maintenance of Patents or Copyrights. At its own expense,
each Assignor shall make timely payment of all post-issuance fees required to
maintain in force rights under each of its Patents and Copyrights.
Notwithstanding anything herein to the contrary, such Assignor may exercise its
business judgment hereunder in respect of any Patent or Copyright used in
connection with such Assignor's Non-Core Assets; provided however, that such
Assignor shall give prompt notice thereof to the Agent, and that the Agent
and/or the Funds (if such Assignor declines to protect such Patents or
Copyrights) may take such actions as reasonably necessary at their own expense
to protect such Patents or Copyrights.
5.5 Prosecution of Patent or Copyright Application. At its own
expense, each Assignor shall diligently prosecute all applications for (i)
Patents listed on Annex C hereto and (ii) Copyrights listed on Annex D hereto,
and, in each case, shall not abandon any such application prior to exhaustion of
all administrative and judicial remedies, absent written consent of the Agent
(which consent shall not be unreasonably withheld). Notwithstanding anything
herein to the contrary, such Assignor may exercise its business judgment
hereunder in respect of any Patent or Copyright used in connection with such
Assignor's Non-Core Assets; provided however, that such Assignor shall give
prompt notice thereof to the Agent, and that the Agent and/or the Funds (if such
Assignor declines to protect such Patents or Copyrights) may take such actions
as reasonably necessary at their own expense to protect such Patents or
Copyrights.
5.6 Other Patents and Copyrights. Within thirty (30) days of
the acquisition or issuance of a Patent or Copyright registration, or of filing
of an application for a Patent or Copyright registration, each Assignor shall
deliver to the Agent a copy of said Patent or Copyright registration, as the
case may be, with a grant of security as to such Patent or Copyright, as the
case may be, confirming the grant thereof hereunder, the form of such
confirmatory grant to be substantially the same as the form hereof.
5.7 Remedies. If an Event of Default shall occur (which has
not been cured in accordance with the Secured Notes), the Agent may by written
notice to an Assignor take any or all remedies under this Agreement, the UCC or
any other applicable law.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1 No Impairment. Each Assignor shall do nothing to impair
the rights of the Agent in the Collateral except as set forth in the Transaction
Documents and subject to Section 2.1 hereof.
6.2 Financing Statements. Each Assignor agrees to execute and
deliver to the Agent such financing statements, in form acceptable to the Agent,
as the Agent may from time to time reasonably request or as are reasonably
necessary or desirable in the reasonable opinion of the Agent to establish and
maintain a valid, enforceable and perfected security interest in the Collateral
as provided herein (subject to Section 2.1 hereof and Permitted Liens) and the
other rights and security contemplated hereby all in accordance with the UCC as
enacted in any and all relevant jurisdictions or any other relevant law. Each
Assignor will pay any applicable filing fees, recordation taxes and related
expenses. Each Assignor hereby authorizes the Agent to file any such financing
statements without the signature of such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1 Remedies; Obtaining the Collateral Upon Default. Each
Assignor agrees that, if any Event of Default shall have occurred (which has not
been cured in accordance with the terms of the Secured Notes), then and in every
such case, subject to any mandatory requirements of applicable law then in
effect, the Agent, in addition to any rights now or hereafter existing under
applicable law, shall have all rights as a secured creditor under the UCC in all
relevant jurisdictions or any other applicable law and may, without limitation:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof and/or any documents
or instruments relating thereto, from such Assignor or any other Person
who then has possession of any part thereof with or, to the extent
permitted by applicable law, without notice or process of law, and for
that purpose may, in accordance with applicable laws, enter upon such
Assignor's premises where any of the Collateral is located and remove
the same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Contracts) constituting or relating to the Collateral to make any
payment required by the terms of such instrument or agreement directly
to the Agent;
(iii) sell, assign or otherwise liquidate, or direct such
Assignor to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof, and take possession of the proceeds of
any such sale or liquidation; and
(iv) take possession of the Collateral or any part thereof
and/or any documents or instruments relating thereto, by directing such
Assignor in writing to deliver the same to the Agent at any place or
places reasonably designated by the Agent, in which event such Assignor
shall at its own expense:
(A) forthwith cause the same to be moved to the place
or places so designated by the Agent and there delivered to
the Agent,
(B) store and keep any Collateral so delivered to the
Agent at such place or places pending further action by the
Agent as provided in Section 7.2, and
(C) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition,
it being understood that such Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Agent shall be entitled to a decree
requiring specific performance by such Assignor of said obligation.
7.2 Remedies; Disposition of the Collateral. Upon the
occurrence of an Event of Default (which has not been cured in accordance with
the terms of the Secured Notes), any Collateral repossessed by the Agent under
or pursuant to Section 7.1 and any other Collateral whether or not so
repossessed by the Agent, may be sold, assigned, leased or otherwise disposed of
under one or more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in general in such
manner, at such time or times, at such place or places and on commercially
reasonable terms. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the Agent
or after any commercially reasonable overhaul or repair. Any such disposition
which shall be a private sale or other private proceedings permitted by such
requirements shall be made upon not less than ten (10) days' written notice to
such Assignor specifying the time at which such disposition is to be made and
the intended sale price or other consideration therefor, and shall be subject,
for the ten (10) days after the giving of such notice, to the right of such
Assignor or any nominee of such Assignor to acquire the Collateral involved at a
price or for such other consideration at least equal to the intended sale price
or other consideration so specified. Any such disposition which shall be a
public sale permitted by such requirements shall be made upon not less than ten
(10) days' written notice to such Assignor specifying the time and place of such
sale and, in the absence of applicable requirements of law, shall be by public
auction (which may, at the Agent's option, be subject to reserve), after
publication of notice of such auction not less than ten (10) days prior thereto
in two newspapers in general circulation in Los Angeles, California. To the
extent permitted by any such requirement of law, the Agent, the Funds, or
certain of them, may bid for and become the purchaser (by bidding in the
Obligations or otherwise) of the Collateral or any item thereof, offered for
sale in accordance with this Section without accountability to such Assignor
(except to the extent of surplus money received as provided in Section 7.4). If,
under mandatory requirements of applicable law, the Agent shall be required to
make disposition of the Collateral within a period of time which does not permit
the giving of notice to such Assignor as hereinabove specified, the Agent need
give such Assignor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of applicable law. Each
Assignor agrees to do or cause to be done all such other acts and things as may
be reasonably necessary to make such sale or sales of all or any portion of the
Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrations or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at such Assignor's expense.
7.3 Waiver. If the Agent seeks to exercise its remedies hereunder and take
possession of any of the Collateral by court process, EACH ASSIGNOR HEREBY
IRREVOCABLY WAIVES (A) ANY BOND AND ANY SURETY OR SECURITY RELATING THERETO
REQUIRED BY LAW AS AN INCIDENT TO SUCH POSSESSION, (B) ANY DEMAND FOR POSSESSION
PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER POSSESSION THEREOF
AND (C) ANY REQUIREMENT THAT THE AGENT RETAIN POSSESSION OF, AND NOT DISPOSE OF,
ANY SUCH COLLATERAL UNTIL AFTER TRIAL OR FINAL JUDGMENT.
THE FAILURE OF THE AGENT AT ANY TIME OR TIMES TO REQUIRE ASSIGNOR TO
STRICTLY COMPLY WITH ANY OF THE PROVISIONS OF THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT SHALL NOT WAIVE OR DIMINISH ANY RIGHT OF THE AGENT LATER TO
DEMAND AND RECEIVE STRICT COMPLIANCE THEREWITH. ANY WAIVER OF ANY DEFAULT SHALL
NOT WAIVE OR AFFECT ANY OTHER DEFAULT, WHETHER PRIOR OR SUBSEQUENT, AND WHETHER
OR NOT SIMILAR. NONE OF THE PROVISIONS OF THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT SHALL BE DEEMED TO HAVE BEEN WAIVED BY ANY ACT OR KNOWLEDGE
OF THE AGENT OR ITS AGENTS OR EMPLOYEES, BUT ONLY BY A SPECIFIC WRITTEN WAIVER
SIGNED BY AN AUTHORIZED OFFICER OF THE AGENT AND DELIVERED TO THE ASSIGNOR. EACH
ASSIGNOR WAIVES DEMAND, PROTEST, NOTICE OF PROTEST AND NOTICE OF DEFAULT OR
DISHONOR, NOTICE OF PAYMENT AND NONPAYMENT, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY COMMERCIAL PAPER, INSTRUMENT, ACCOUNT, GENERAL
INTANGIBLE, DOCUMENT, CHATTEL PAPER, INVESTMENT PROPERTY OR GUARANTY AT ANY TIME
HELD BY THE AGENT OR THE FUNDS ON WHICH ASSIGNOR IS OR MAY IN ANY WAY BE LIABLE,
AND NOTICE OF ANY ACTION TAKEN BY THE AGENT, UNLESS EXPRESSLY REQUIRED BY THIS
AGREEMENT, AND NOTICE OF ACCEPTANCE THEREOF.
7.4 Application of Proceeds.
(a) All moneys collected by the Agent upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Agent hereunder, shall be applied as follows:
(i) to the payment of any and all expenses and fees (including
reasonable attorneys' fees) incurred by the Agent in obtaining, taking
possession of, or removing, insuring, repairing, storing and disposing
of Collateral and any and all amounts incurred by the Agent in
connection therewith;
(ii) next, any surplus then remaining to the payment of the
Obligations under the Secured Notes in the following order of priority:
(A) all accrued and unpaid interest on overdue principal and interest;
(B) all other accrued and unpaid interest; and
(C) all outstanding principal; and
(iii) next, any surplus then remaining to the payment of any
other Obligations under this Agreement or any other Transaction Document.
(b) It is understood that each Assignor shall remain liable to
the extent of any deficiency between (i) the amount of the Obligations for which
it is liable that are satisfied with proceeds of the Collateral and (ii) the
aggregate outstanding amount of such Obligations.
7.5 Remedies Cumulative. Each and every right, power and
remedy hereby specifically given to the Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement or the
other Transaction Documents or now or hereafter existing at law or in equity or
by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time or
simultaneously and as often and in such order as may be deemed expedient by the
Agent. All such rights, powers and remedies shall be cumulative and the exercise
or the beginning of exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy nor shall be construed
to be a waiver of any Event of Default or an acquiescence therein. In the event
that the Agent shall bring any suit to enforce any of its rights hereunder and
shall be entitled to judgment, then in such suit the Agent may recover expenses,
including attorneys' fees, and the amounts thereof shall be included in such
judgment.
7.6 Discontinuance of Proceedings. In case the Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, then and in every such case, the Assignors, the Agent
and each holder of any of the Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights, remedies and
powers of the Agent shall continue as if no such proceeding had been instituted
(except to the extent of a determination adverse to the Agent in such a
proceeding).
ARTICLE VIII
INDEMNITY
8.1 Indemnity.
(a) Except with respect to litigation concerning the priority
of Permitted Liens or assertions by the Company in accordance with the last
sentence of Section 2.1 hereof, each Assignor agrees to indemnify, reimburse and
hold the Agent, each Fund and their respective successors, permitted assigns,
directors, officers, Affiliates, employees, attorneys, agents and servants
(hereinafter in this Section 8.1 referred to individually as "Indemnitee," and
collectively as "Indemnitees") harmless from any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, suits,
judgments and any and all reasonable costs and expenses, including reasonable
attorneys' fees and expenses (for the purposes of this Section 8.1, the
foregoing are collectively called "Expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any other Transaction Document or
the documents executed in connection herewith and therewith or in any other way
connected with the enforcement of any of the terms of, or the preservation of,
any rights hereunder or thereunder, or in any way relating to or arising out of
the manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), or the violation by such Assignor
of the laws of any country, state or other governmental body or unit, any tort
(including, without limitation, claims arising or imposed under the doctrine of
strict liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or property damage), or contract claim; provided
that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for
Expenses to the extent caused by the gross negligence or willful misconduct of
such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee
of the assertion of such an Expense, such Assignor shall assume full
responsibility for the defense thereof if such Assignor would have an
indemnification obligation under this Section 8.1(a). The Indemnitee agrees to
use its best efforts to promptly notify such Assignor of any such assertion of
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a), each
Assignor agrees, jointly and severally, to pay, or reimburse the Agent for (if
the Agent shall have incurred fees, costs or expenses because such Assignor
shall have failed to comply with its obligations under this Agreement or any
other Transaction Document), any and all reasonable fees, costs and expenses of
whatever kind or nature incurred in connection with the creation, preservation
or protection of the Agent's Liens on, and security interest in, the Collateral
granted hereunder, including, without limitation, all fees and taxes in
connection with the recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or Liens upon or in respect of the
Collateral and all other reasonable fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Agent's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 8.1(a) or (b),
each Assignor agrees to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of any misrepresentation by such Assignor
in this Agreement, or in any statement or writing contemplated by or made or
delivered pursuant to or in connection with this Agreement.
(d) If and to the extent that the obligations of an Assignor
under this Section 8.1 are unenforceable for any reason, such Assignor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2 Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under this Agreement shall constitute Obligations secured by the
Collateral. The indemnity obligations of the Company contained in this Article
VIII shall continue in full force and effect notwithstanding the full payment of
all the Secured Notes, and the payment of all of the other Obligations and
notwithstanding the discharge thereof.
8.3 Non-Core Assets. The entirety of this Article VIII
notwithstanding, so long as no Event of Default shall occur and has not been
cured in accordance with the terms of the Secured Notes, all indemnifications,
security interests, liens and claims of the Agent hereunder in respect of the
Non-Core Assets which are sold by an Assignor in accordance with its rights
under the Transaction Documents shall be released concurrently with the closing
of such sale, and the Agent and the Funds shall execute all documents reasonably
required by the purchaser of such Non-Core Assets to so evidence.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified
unless the context otherwise requires. Such definitions shall be equally
applicable to the singular and plural forms of the terms defined.
"Agent" shall have the meaning specified in the first paragraph of this
Agreement.
"Agreement" shall mean this Security Agreement as the same may
be modified, supplemented or amended from time to time.
"Assignor" or "Assignors" shall have the meaning specified in
the first paragraph of this Agreement.
"Chattel Paper" shall have the meaning assigned that term
under the UCC as in effect on the date hereof in the State of New York.
"Collateral" shall have the meaning provided in Section 1.1(a).
"Contract Rights" shall mean all rights of the Assignor
(including, without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between the Assignor and one or more
additional parties.
"Copyrights" shall mean any United States or foreign copyright
owned by the Assignor now or hereafter, including any registration of any
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign country, as well as any application for a United States or foreign
copyright registration now or hereafter made with the United States Copyright
Office or the equivalent thereof in any foreign jurisdiction by the Assignor.
"Documents" shall have the meaning assigned that term under
the UCC as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is
defined in the UCC as in effect on the date hereof in the State of New York, now
or hereafter owned by the Assignor and, in any event, shall include, but shall
not be limited to, all machinery, equipment, furnishings now or hereafter owned
by such Assignor and any and all additions, substitutions and replacements of
any of the foregoing, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto, including "fixtures" as such term is defined in the UCC as in effect on
the date hereof in the State of New York.
"Funds" shall have the meaning provided in the first whereas
clause of this Agreement.
"General Intangibles" shall have the meaning assigned that
term under the UCC as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning assigned that term under the
UCC as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1.
"Instrument" shall have the meaning assigned that term under
the UCC as in effect on the date hereof in the State of New York.
"Inventory" shall mean merchandise, inventory and goods, and
all additions, substitutions and replacements thereof, wherever located,
together with all goods, supplies, incidentals, packaging materials, labels,
materials and any other items used or usable in manufacturing, processing,
packaging or shipping same; in all stages of production -- from raw materials
through work-in-process to finished goods -- and all products and proceeds of
whatever sort and wherever located and any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Agent from the Assignor's
customers, and shall specifically include all "inventory" as such term is
defined in the UCC as in effect on the date hereof in the State of New York, now
or hereafter owned by the Assignor, but shall exclude Equipment.
"Investment Property" shall have the meaning assigned that
term under the UCC as in effect on the date hereof in the State of New York
(excluding the Pledged Stock).
"Marks" shall mean all right, title and interest in and to any
United States or foreign trademarks, service marks and trade names now held or
hereafter acquired by the Assignor, including any registration or application
for registration of any trademarks and service marks now held or hereafter
acquired by the Assignor, which are registered in the United States Patent and
Trademark Office or the equivalent thereof in any State of the United States or
in any foreign country, as well as any unregistered marks used by the Assignor,
and any trade dress including logos, designs, company names, business names,
fictitious business names and other business identifiers used by the Assignor in
the United States or any foreign country.
"Obligation" shall mean: (a) all indebtedness, obligations and
liabilities (including, without limitation, guarantees and other contingent
liabilities) of the Assignor to the Funds or the Agent arising under or in
connection with the Secured Notes or any other Transaction Document; (b) any and
all sums advanced by the Agent in order to preserve the Collateral or preserve
its security interest in the Collateral; and (c) in the event of any proceeding
for the collection or enforcement of any indebtedness, obligations or
liabilities of the Assignor, after an Event of Default shall have occurred
(which has not been cured in accordance with the terms of the Secured Notes),
the reasonable expenses of re-taking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the Collateral, or of any
exercise by the Agent of its rights hereunder, together with reasonable
attorneys' fees and court costs.
"Patents" shall mean any United States or foreign patent to
which the Assignor now or hereafter has title and any divisions or continuations
thereof, as well as any application for a United States or foreign patent now or
hereafter made by such Assignor.
"Permits" shall mean, to the extent permitted to be assigned
by the terms thereof or by applicable law, all licenses, permits, rights,
orders, variances, franchises or authorizations of or from any governmental
authority or agency.
"Pledged Stock" shall have the meaning assigned that term in
the Stock Pledge Agreement.
"Proceeds" shall have the meaning assigned that term under the
UCC as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Agent or the Assignor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Assignor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
governmental authority) and (iii) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined
in the UCC as in effect on the date hereof in the State of New York, now or
hereafter owned by the Assignor and, in any event, shall include, but shall not
be limited to, all of such Assignor's rights to payment for goods sold or leased
or services performed by such Assignor, whether now in existence or arising from
time to time hereafter, including, without limitation, rights evidenced by an
account, note, contract, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (a) all security pledged, assigned,
hypothecated or granted to or held by such Assignor to secure the foregoing, (b)
all of such Assignor's right, title and interest in and to any goods, the sale
of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) evidences of the filing of financing statements and other
statements and the registration of other instruments in connection therewith and
amendments thereto, all notices to other creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.
"Trade Secret Rights" shall mean the rights of the Assignor in
any Trade Secret it holds.
"Trade Secrets" means any secretly held existing engineering
and other data, information, production procedures and other know-how relating
to the design, manufacture, assembly, installation, use, operation, marketing,
sale and servicing of any products or business of an Assignor worldwide whether
written or not written.
ARTICLE X
MISCELLANEOUS
10.1. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section 11.4 prior to 4:30 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified below later than 4:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The addresses for such
communications shall be:
If to the Assignors: c/o Aura Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ Froch, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇, Diamant & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Agent: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
c/o HW Partners LP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: White & Case LLP
4900 First Union Financial Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
10.2 Waiver; Amendment. This Agreement may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. No delay on the part of the Agent in exercising any of its rights,
remedies, powers and privileges hereunder or partial or single exercise thereof,
shall constitute a waiver thereof. No notice to or demand on the Assignor shall
constitute a waiver of any of the rights of the Agent to any other or further
action without notice or demand.
10.3 Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Transaction
Document except as specifically set forth in a waiver granted pursuant to the
restrictions of Section 10.2 hereof; or (c) any amendment to or modification of
any other Transaction Document or any security for any of the Obligations,
whether or not such Assignor shall have notice or knowledge of any of the
foregoing. The rights and remedies of the Agent herein provided are cumulative
and not exclusive of any rights or remedies which the Agent would otherwise
have.
10.4 Successors and Assigns. This Agreement shall be binding
upon each Assignor and its successors and assigns and shall inure to the benefit
of the Agent and the Funds and their respective successors and assigns. All
agreements, statements, representations and warranties made by such Assignor
herein or in any certificate or other instrument delivered by such Assignor or
on its behalf under this Agreement shall be considered to have been relied upon
by the Agent and the Funds and shall survive the execution and delivery of this
Agreement and the other Transaction Documents, regardless of any investigation
made by the Agent or the Funds or on their behalf.
10.5 Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
10.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.7 Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the law of the State of New York.
10.8 Assignors' Duties. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that each Assignor shall
remain liable to perform all of the Obligations assumed by it under this
Agreement or any other Transaction Document with respect to the Collateral, and
the Agent and the Funds shall not have any obligations or liabilities with
respect to any Collateral by reason of or arising out of this Agreement or any
other Transaction Document, nor shall the Agent or the Funds be required or
obligated in any manner to perform or fulfill any of the obligations of the
Assignor under or with respect to any Collateral.
10.9 Termination; Release. After all the Obligations have been
paid in full in accordance with the Transaction Documents, this Agreement and
the security interests created hereby shall terminate (provided that all
indemnities set forth herein including, without limitation, in Section 8.1
hereof shall survive such termination), and the Agent, at the request and
expense of the Assignor, will promptly execute and deliver to such Assignor a
proper instrument or instruments (including UCC termination statements on form
UCC-3) acknowledging the termination of this Agreement and will duly assign,
transfer and deliver to such Assignor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Agent and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement.
10.10 Entire Agreement. This Agreement, together with the
exhibits, annexes and schedules hereto, and the other Transaction Documents
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters.
10.11 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Assignor, the Funds and the Agent.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE]
[SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officer or agent
as of the date first indicated above.
AURA SYSTEMS, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
AURA CERAMICS, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
By:
Name: ▇▇▇▇▇▇▇ Froch
Title: Secretary
AURASOUND, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
By:
Name: ▇▇▇▇▇▇▇ Froch
Title: Secretary
AURA MEDICAL SYSTEMS, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
By:
Name: ▇▇▇▇▇▇▇ Froch
Title: Secretary
ELECTROTEC PRODUCTIONS, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
By:
Name: ▇▇▇▇▇▇▇ Froch
Title: Secretary
DS OSCILLATOR, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
By:
Name: ▇▇▇▇▇▇▇ Froch
Title: Secretary
PHILIPS SOUND LABS, INC., as Assignor
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
By:
Name: ▇▇▇▇▇▇▇ Froch
Title: Secretary
ELECTROTEC AUDIO LEASE LIMITED, as Assignor
By:
Name:
Title:
HW PARTNERS, LP, as Assignee and Agent
for the Funds
By: HW Finance, LLC
Its Managing Partner
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:Senior Vice President
SCHEDULE OF EQUIPMENT AND INVENTORY LOCATIONS
Location Inventory Equipment
ANNEX B
TO
SECURITY AGREEMENT
SCHEDULE OF MARKS
ANNEX C
TO
SECURITY AGREEMENT
SCHEDULE OF PATENTS AND PATENT APPLICATIONS
ANNEX D
TO
SECURITY AGREEMENT
SCHEDULE OF COPYRIGHTS AND COPYRIGHT APPLICATIONS
(ii)
(i)
TABLE OF CONTENTS
Page
ARTICLE I
SECURITY INTERESTS....................................................2
1.1 Grant of Security Interests..................................2
1.2 Power of Attorney............................................2
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.....................3
2.1 Necessary Filings............................................3
2.2 No Liens.....................................................3
2.3 Other Financing Statements...................................3
2.4 Chief Executive Office; Records..............................3
2.5 Location of Inventory and Equipment..........................4
2.6 Trade Names; Change of Name..................................4
2.7 Recourse.....................................................4
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS.............................4
3.1 Additional Representations and Warranties....................4
3.2 Maintenance of Records.......................................5
3.3 Modification of Terms; etc...................................5
3.4 Collection...................................................5
3.5 Instruments..................................................6
3.6 Further Actions..............................................6
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS..............................6
4.1 Additional Representations and Warranties....................6
4.2 Licenses and Assignments.....................................6
4.3 Infringements................................................6
4.4 Preservation of Marks........................................7
4.5 Maintenance of Registration..................................7
4.6 Future Registered Marks......................................7
4.7 Remedies.....................................................7
ARTICLE V
SPECIAL PROVISIONS CONCERNING
TRADE SECRET RIGHTS, PATENTS AND COPYRIGHTS...........................8
5.1 Additional Representations and Warranties....................8
5.2 Licenses and Assignments.....................................8
5.3 Infringements................................................8
5.4 Maintenance of Patents or Copyrights.........................8
5.5 Prosecution of Patent or Copyright Application...............9
5.6 Other Patents and Copyrights.................................9
5.7 Remedies.....................................................9
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL..................................9
6.1 No Impairment................................................9
6.2 Financing Statements.........................................9
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT.........................10
7.1 Remedies; Obtaining the Collateral Upon Default.............10
7.2 Remedies; Disposition of the Collateral.....................11
7.3 Waiver......................................................11
7.4 Application of Proceeds.....................................12
7.5 Remedies Cumulative.........................................13
7.6 Discontinuance of Proceedings...............................13
ARTICLE VIII
INDEMNITY 13
8.1 Indemnity...................................................13
8.2 Indemnity Obligations Secured by Collateral; Survival.......14
ARTICLE IX
DEFINITIONS..........................................................15
ARTICLE X
MISCELLANEOUS........................................................18
10.1. Notices.....................................................18
10.2 Waiver; Amendment...........................................19
10.3 Obligations Absolute...............................19
10.4 Successors and Assigns......................................19
10.5 Headings Descriptive........................................19
10.6 Severability................................................19
10.7 Governing Law...............................................20
10.8 Assignors'Duties............................................20
10.9 Termination; Release........................................20
10.10 Entire Agreement............................................20
10.11 Counterparts................................................20
ANNEX A Schedule of Equipment and Inventory Locations
ANNEX B Schedule of Marks
ANNEX C Schedule of Patents and Applications
ANNEX D Schedule of Copyrights and Applications