EXHIBIT 10.5
PATENT AND TRADEMARK SECURITY AGREEMENT
This Agreement, dated as of December 1, 2006, is made by and
between Emrise Corporation, a Delaware corporation having a business location at
the address set forth below next to its signature (the "Debtor"), and Wells
Fargo Bank, National Association (the "Secured Party"), acting through its Wells
Fargo Business Credit operating division, and having a business location at the
address set forth below next to its signature.
RECITALS
The Debtor, Emrise Electronics Corporation, RO Associates
Incorporated, and CXR Larus Corporation (collectively, the "Borrowers") and the
Secured Party are parties to a Credit and Security Agreement of even date
herewith (as the same may hereafter be amended, supplemented or restated from
time to time, the "Credit Agreement") setting forth the terms on which the
Secured Party may now or hereafter extend credit to or for the account of the
Borrowers.
As a condition to extending credit to or for the account of
the Borrowers, the Secured Party has required the execution and delivery of this
Agreement by the Debtor.
ACCORDINGLY, in consideration of the mutual covenants
contained in the Loan Documents and herein, the parties hereby agree as follows:
1. DEFINITIONS. All terms defined in the Recitals hereto or in the Credit
Agreement that are not otherwise defined herein shall have the meanings given to
them therein. In addition, the following terms have the meanings set forth
below:
"Patents" means all of the Debtor's right, title and interest in and to
patents or applications for patents, fees or royalties with respect to each, and
including without limitation the right to sue for past infringement and damages
therefor, and licenses thereunder, all as presently existing or hereafter
arising or acquired, including without limitation the patents listed on Exhibit
A.
"Security Interest" has the meaning given in Section 2.
"Trademarks" means all of the Debtor's right, title and interest in and
to: (i) trademarks, service marks, collective membership marks, registrations
and applications for registration for each, and the respective goodwill
associated with each, (ii) licenses, fees or royalties with respect to each,
(iii) the right to sue for past, present and future infringement, dilution and
damages therefor, and (iv) licenses thereunder, all as presently existing or
hereafter arising or acquired, including, without limitation, the marks listed
on Exhibit B.
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2. SECURITY INTEREST. The Debtor hereby irrevocably pledges and assigns to, and
grants the Secured Party a security interest (the "Security Interest") with
power of sale to the extent permitted by law, in the Patents and in the
Trademarks to secure payment of the Indebtedness. As set forth in the Credit
Agreement, the Security Interest is coupled with a security interest in
substantially all of the personal property of the Debtor. This Agreement grants
only the Security Interest herein described, is not intended to and does not
affect any present transfer of title of any trademark registration or
application and makes no assignment and grants no right to assign or perform any
other action with respect to any intent to use trademark application, unless
such action is permitted under 15 U.S.C. ss. 1060.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The Debtor represents, warrants
and agrees as follows:
3.1 EXISTENCE; AUTHORITY. The Debtor is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and this Agreement has been duly and validly authorized by all
necessary corporate action on the part of the Debtor.
3.2 PATENTS. Exhibit A accurately lists all Patents owned or controlled by
the Debtor as of the date hereof, or to which the Debtor has a right as of the
date hereof to have assigned to it, and accurately reflects the existence and
status of applications and letters patent pertaining to the Patents as of the
date hereof. If after the date hereof the Debtor owns, controls or has a right
to have assigned to it any Patents not listed on Exhibit A, or if Exhibit A
ceases to accurately reflect the existence and status of applications and
letters patent pertaining to the Patents, then the Debtor shall within 60 days
provide written notice to the Secured Party with a replacement Exhibit A, which
upon acceptance by the Secured Party shall become part of this Agreement.
3.3 TRADEMARKS. Exhibit B accurately lists all Trademarks owned or
controlled by the Debtor as of the date hereof and accurately reflects the
existence and status of Trademarks and all applications and registrations
pertaining thereto as of the date hereof; provided, however, that Exhibit B need
not list common law marks (i.e., Trademarks for which there are no applications
or registrations) which are not material to the Debtor's or any Affiliate's
business(es). If after the date hereof the Debtor owns or controls any
Trademarks not listed on Exhibit B (other than common law marks which are not
material to the Debtor's or any Affiliate's business(es)), or if Exhibit B
ceases to accurately reflect the existence and status of applications and
registrations pertaining to the Trademarks, then the Debtor shall promptly
provide written notice to the Secured Party with a replacement Exhibit B, which
upon acceptance by the Secured Party shall become part of this Agreement.
3.4 AFFILIATES. As of the date hereof, no Affiliate owns, controls, or has
a right to have assigned to it any items that would, if such item were owned by
the Debtor, constitute Patents or Trademarks. If after the date hereof any
Affiliate owns, controls, or has a right to have assigned to it any such items,
then the Debtor shall promptly either: (i) cause such Affiliate to assign all of
its rights in such item(s) to the Debtor; or (ii) notify the Secured Party of
such item(s) and cause such Affiliate to execute and deliver to the Secured
Party a patent and trademark security agreement substantially in the form of
this Agreement.
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3.5 TITLE. The Debtor has absolute title to each Patent and each Trademark
listed on Exhibits A and B, free and clear of all Liens except Permitted Liens.
The Debtor (i) will have, at the time the Debtor acquires any rights in Patents
or Trademarks hereafter arising, absolute title to each such Patent or Trademark
free and clear of all Liens except Permitted Liens, and (ii) will keep all
Patents and Trademarks free and clear of all Liens except Permitted Liens.
3.6 NO SALE. Except as permitted in the Credit Agreement, the Debtor will
not assign, transfer, encumber or otherwise dispose of the Patents or
Trademarks, or any interest therein, without the Secured Party's prior written
consent.
3.7 DEFENSE. The Debtor will at its own expense and using commercially
reasonable efforts, protect and defend the Patents and Trademarks against all
claims or demands of all Persons other than those holding Permitted Liens.
3.8 MAINTENANCE. The Debtor will at its own expense maintain the Patents
and the Trademarks to the extent reasonably advisable in its business,
including, but not limited to, filing all applications to obtain letters patent
or trademark registrations and all affidavits, maintenance fees, annuities, and
renewals possible with respect to letters patent, trademark registrations and
applications therefor. The Debtor covenants that it will not abandon nor fail to
pay any maintenance fee or annuity due and payable on any Patent or Trademark,
nor fail to file any required affidavit or renewal in support thereof, without
first providing the Secured Party: (i) sufficient written notice, of at least 30
days, to allow the Secured Party to timely pay any such maintenance fees or
annuities which may become due on any Patents or Trademarks, or to file any
affidavit or renewal with respect thereto, and (ii) a separate written power of
attorney or other authorization to pay such maintenance fees or annuities, or to
file such affidavit or renewal, should such be necessary or desirable.
3.9 SECURED PARTY'S RIGHT TO TAKE ACTION. If the Debtor fails to perform or
observe any of its covenants or agreements set forth in this Section 3, and if
such failure continues for a period of ten (10) calendar days after the Secured
Party gives the Debtor written notice thereof (or, in the case of the covenants
and agreements contained in subsection 3.8, immediately upon the occurrence of
such failure, without notice or lapse of time), or if the Debtor notifies the
Secured Party that it intends to abandon a Patent or Trademark, the Secured
Party may (but need not) perform or observe such covenant or agreement or take
steps to prevent such intended abandonment on behalf and in the name, place and
stead of the Debtor (or, at the Secured Party's option, in the Secured Party's
own name) and may (but need not) take any and all other actions which the
Secured Party may reasonably deem necessary to cure or correct such failure or
prevent such intended abandonment.
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3.10 COSTS AND EXPENSES. Except to the extent that the effect of such
payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, the Debtor shall pay the Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by the Secured
Party in connection with or as a result of the Secured Party's taking action
under subsection 3.9 or exercising its rights under Section 6, together with
interest thereon from the date expended or incurred by the Secured Party at the
Default Rate.
3.11 POWER OF ATTORNEY. To facilitate the Secured Party's taking action
under subsection (i) and exercising its rights under Section 6, the Debtor
hereby irrevocably appoints (which appointment is coupled with an interest) the
Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the
right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file, in the name and on behalf of the Debtor, any
and all instruments, documents, applications, financing statements, and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Debtor under this Section 3, or, necessary for the Secured Party, after
an Event of Default, to enforce or use the Patents or Trademarks or to grant or
issue any exclusive or non-exclusive license under the Patents or Trademarks to
any third party, or to sell, assign, transfer, pledge, encumber or otherwise
transfer title in or dispose of the Patents or Trademarks to any third party.
The Debtor hereby ratifies all that such attorney shall lawfully do or cause to
be done by virtue hereof. The power of attorney granted herein shall terminate
upon the termination of the Credit Agreement as provided therein and the payment
and performance of all Indebtedness.
4. DEBTOR'S USE OF THE PATENTS AND TRADEMARKS. The Debtor shall be permitted to
control and manage the Patents and Trademarks, including the right to exclude
others from making, using or selling items covered by the Patents and Trademarks
and any licenses thereunder, in the same manner and with the same effect as if
this Agreement had not been entered into, so long as no Event of Default occurs
and remains uncured.
5. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called "Event of Default"): (a) an
Event of Default, as defined in the Credit Agreement, shall occur; or (b) the
Debtor shall fail promptly to observe or perform any covenant or agreement
herein binding on it; or (c) any of the representations or warranties contained
in Section 3 shall prove to have been incorrect in any material respect when
made.
6. REMEDIES. Upon the occurrence of an Event of Default and at any time
thereafter, the Secured Party may, at its option, take any or all of the
following actions:
6.1 The Secured Party may exercise any or all remedies available under the
Credit Agreement.
6.2 The Secured Party may sell, assign, transfer, pledge, encumber or
otherwise dispose of the Patents and Trademarks.
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6.3 The Secured Party may enforce the Patents and Trademarks and any
licenses thereunder, and if Secured Party shall commence any suit for such
enforcement, the Debtor shall, at the request of Secured Party, do any and all
lawful acts and execute any and all proper documents required by Secured Party
in aid of such enforcement.
7. MISCELLANEOUS. This Agreement can be waived, modified, amended, terminated or
discharged, and the Security Interest can be released, only explicitly in a
writing signed by the Secured Party. A waiver signed by the Secured Party shall
be effective only in the specific instance and for the specific purpose given.
Mere delay or failure to act shall not preclude the exercise or enforcement of
any of the Secured Party's rights or remedies. All rights and remedies of the
Secured Party shall be cumulative and may be exercised singularly or
concurrently, at the Secured Party's option, and the exercise or enforcement of
any one such right or remedy shall neither be a condition to nor bar the
exercise or enforcement of any other. All notices to be given to Debtor under
this Agreement shall be given in the manner and with the effect provided in the
Credit Agreement. The Secured Party shall not be obligated to preserve any
rights the Debtor may have against prior parties, to realize on the Patents and
Trademarks at all or in any particular manner or order, or to apply any cash
proceeds of Patents and Trademarks in any particular order of application. This
Agreement shall be binding upon and inure to the benefit of the Debtor and the
Secured Party and their respective participants, successors and assigns and
shall take effect when signed by the Debtor and delivered to the Secured Party,
and the Debtor waives notice of the Secured Party's acceptance hereof. The
Secured Party may execute this Agreement if appropriate for the purpose of
filing, but the failure of the Secured Party to execute this Agreement shall not
affect or impair the validity or effectiveness of this Agreement. A carbon,
photographic or other reproduction of this Agreement or of any financing
statement signed by the Debtor shall have the same force and effect as the
original for all purposes of a financing statement. This Agreement shall be
governed by the internal laws of the State of California without regard to
conflicts of law provisions. If any provision or application of this Agreement
is held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other provisions or applications which can be
given effect and this Agreement shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein or
prescribed hereby. All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Indebtedness.
8. ARBITRATION
8.1 ARBITRATION. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination.
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8.2 GOVERNING RULES. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any
similar applicable state law.
8.3 NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The
arbitration requirement does not limit the right of any party (if not otherwise
restricted by the terms and conditions of this Agreement) to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
8.4 ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
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8.5 DISCOVERY. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
dispute with the AAA. Any requests for an extension of the discovery periods, or
any discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party's
presentation and that no alternative means for obtaining information is
available.
8.6 CLASS PROCEEDINGS AND CONSOLIDATIONS. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
8.7 PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
8.8 REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
8.9 MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
[signatures continued on next page]
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IN WITNESS WHEREOF, the parties have executed this Patent and Trademark
Security Agreement as of the date written above.
Address (of Debtor):
c/o Emrise Corporation EMRISE CORPORATION
9485 Haven Avenue, Suite 100
Rancho Cucamonga, California 91730
Fax: (909) 987-9228
Attention: Carmine T. Oliva By ________________________________
E-mail: ctoliva@emrise.com Print Name:
Title:
Wells Fargo Bank, National Association WELLS FARGO BANK, NATIONAL
245 S. Los Robles Avenue, Suite 700 ASSOCIATION
Pasadena, California 91101 By ________________________________
Telecopier: 626-844-9063 ________________________________
Attention: Vincent Maddela Its Vice President
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
The foregoing instrument was acknowledged before me this 1st day of December,
2006, by _______________, the _______________ of ______________________________,
a _________________ corporation, on behalf of the corporation.
______________________________
Notary Public
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
The foregoing instrument was acknowledged before me this 1st day of
December, 2006, by _________________________________, a Vice President of Wells
Fargo Bank, National Association, on behalf of the national association.
______________________________
Notary Public
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EXHIBIT A
Patents:
FILING PATENT ISSUE
TITLE JURISDICTION SERIAL NUMBER DATE STATUS NUMBER DATE
----- ------------ ------------- ------- ------ ------ ------
Low Profile Rotary Switch Brazil PI0215831-0 8/29/02 Pending
Low Profile Rotary Switch Canada 2494641 11/5/02 Pending
Low Profile Rotary Switch Europe 02778749.8 11/5/02 Pending
Low Profile Rotary Switch Japan 2004-532550 11/5/02 Pending
Low Profile Rotary Switch PCT PCT/US02/35610 11/5/02 Superceded
Low Profile Rotary Switch US 10/523342 1/27/05 Pending
Low Profile Rotary Switch With Brazil PI0314134-9 7/17/03 Pending
Detent in the Bushing
Low Profile Rotary Switch With Canada 2496034 7/17/03 Pending
Detent in the Bushing
Low Profile Rotary Switch With Europe 03811194.4 7/17/03 Pending
Detent in the Bushing
Low Profile Rotary Switch With Japan 2004-551425 7/17/03 Pending
Detent in the Bushing
Low Profile Rotary Switch With PCT PCT/US03/22523 7/17/03 Superceded
Detent in the Bushing
Low Profile Rotary Switch With US 10/522700 1/27/05 Issued 7109430 9/19/06
Detent in the Bushing
Low Profile Rotary Switch With US 11/485249 7/11/06 Pending
Detent in the Bushing
Rotary Switch with Crown Detent Brazil 10/5/04 Pending
Rotary Switch with Crown Detent Canada 2548604 10/5/04 Pending
Rotary Switch with Crown Detent Europe 04821443.1 10/5/04 Pending
Rotary Switch with Crown Detent Japan 10/5/04 Pending
Rotary Switch with Crown Detent PCT PCT/US04/32797 10/5/04 Pending
Rotary Circuit Selection with US 10/581240 6/2/06 Pending
Crown Detent
EXHIBIT B
UNITED STATES ISSUED TRADEMARKS, SERVICE MARKS
AND COLLECTIVE MEMBERSHIP MARKS
Trademarks:
FILING REGISTRATION ISSUE
TITLE JURISDICTION SERIAL NUMBER DATE STATUS NUMBER DATE
----- ------------ ------------- ---- ------ ------ ----
VLP Australia 1024618 6/22/04 Issued 6/22/2004
VLP Hungary 832836 6/22/04 Issued 6/2/2005
VLP Ireland 832836 6/22/04 Issued 4/22/2005
VLP Israel 173032 6/27/04 Issued 10/9/2005
VLP India 1292840 6/22/04 Pending 6/28/2004
VLP Iran Z1231066 6/22/04 Issued 6/22/2004
VLP Japan 832836 6/22/04 Issued 6/22/2004
VLP Singapore T04/17097E 6/22/04 Issued
VLP Turkey 832836 6/22/04 Issued 2/25/2005
VLP Taiwan 01163599 6/30/04 Issued 7/16/2005
VLP United Kingdom 6/22/04 Issued 3/23/2005
VLP US 78/346552 12/30/03 Issued 2913348 12/21/2004
EMRISE Europe 004496253 6/17/05 Allowed N/A
EMRISE Japan 2005-109295 11/21/05 Pending N/A
EMRISE US 78/636436 5/24/05 Pending N/A