**Exhibit10.3**

 

**PATENTSECURITY AGREEMENT**

 

This**PATENT SECURITY AGREEMENT** (this “Agreement”), dated asof June 26, 2002, is made by and between **ELGAR ELECTRONICS CORPORATION**,a California corporation (“Debtor) in favor of **ABLECO FINANCE LLC**, aDelaware limited liability company, as the collateral agent for thebelow-defined Lender Group (in such capacity, together with its successors, ifany, in such capacity, “Collateral Agent”).

 

**RECITALS**

 

**WHEREAS**, Elgar Holdings, Inc., a Delawarecorporation (“Parent”) and Debtor are parties to that certain FinancingAgreement (the “Financing Agreement”), of even date herewith, with theLenders (as defined below), Ableco Finance LLC, a Delaware limited liabilitycompany as administrative agent for the Lender Group (in such capacity,together with its successors, if any, in such capacity, “AdministrativeAgent”), and Collateral Agent, pursuant to which the Lender Group hasagreed to make certain financial accommodations to Debtor;

 

**WHEREAS**, Parent, Debtor, and the Collateral Agent,for the benefit of the Lender Group, are entering into that certain SecurityAgreement, of even date herewith (the “Security Agreement”) pursuant towhich Parent and Debtor are granting to the Collateral Agent, for the benefitof the Lender Group, a security interest in, among other things, all orsubstantially all of the general intangibles of Debtor; and

 

**WHEREAS**, pursuant to the Financing Agreement andthe Security Agreement, and as one of the conditions precedent to theobligations of the Lenders under the Financing Agreement, Debtor has agreed toexecute and deliver this Agreement to the Collateral Agent for filing with thePTO (as defined below) and with any other relevant recording systems in anyjurisdiction, and as further evidence of and to effectuate Collateral Agent’sexisting security interests in the Patent Collateral (as defined below).

 

**AGREEMENT**

 

**NOW,THEREFORE,**forvaluable consideration, the receipt and adequacy of which is herebyacknowledged, Debtor hereby agrees in favor of the Collateral Agent, asfollows:

 

# 1.             Definitions; Interpretation.

 

## (a)           Certain Defined Terms. As usedin this Agreement, the following terms shall have the following meanings:

 

----

 

“Administrative Agent” shall have the meaning ascribed to suchterm in the Recitals to this Agreement.

 

“Agreement” shall have the meaning ascribed to such term in theintroductory paragraph hereto.

 

“Bankruptcy Code” means the United States Bankruptcy Code (11U.S.C. §101 etseq.), as amended, and any successor statute.

 

“Collateral Agent” shall have the meaning ascribed to such termin the introductory paragraph hereto.

 

“Debtor” shall have the meaning ascribed to such term in theintroductory paragraph of this Agreement.

 

“Event of Default” shall have the meaning ascribed to such termin the Financing Agreement.

 

“Financing Agreement” shall have the meaning ascribed to suchterm in the Recitals to this Agreement.

 

“Lender Group” means collectively the Lenders, AdministrativeAgent and Collateral Agent.

 

“Lenders” means, individually and collectively, each of thelenders identified on the signature pages of the Financing Agreement, and anyother Person made a party thereto in accordance with the provisions of Section12.07 thereof (together with their respective successors and assigns).

 

“Parent” shall have the meaning ascribed to such term in theRecitals to this Agreement.

 

“Patent Collateral” has the meaning set forth in Section 2.

 

“Patents” has the meaning set forth in Section 2.

 

“Proceeds” means whatever is receivable or received from or uponthe sale, lease, license, collection, use, exchange or other disposition,whether voluntary or involuntary, of any Patent Collateral, including“proceeds” as defined at UCC Section 9–102(a)(64), and all proceeds ofproceeds.  Proceeds shall include(i) any and all accounts, chattel paper, instruments, general intangibles,cash and other proceeds, payable to or for the account of Debtor, from time totime with respect to any of the Patent Collateral, (ii) any and allproceeds of any insurance, indemnity, warranty or guaranty payable to or forthe account of Debtor from time to time with respect to any of the PatentCollateral, (iii) any and all

 

2

----

 

claims and payments (in any form whatsoever) made ordue and payable to Debtor from time to time in connection with any requisition,confiscation, condemnation, seizure or forfeiture of all or any part of thePatent Collateral by any Person acting under color of governmental authority,and (iv) any and all other amounts from time to time paid or payable underor in connection with any of the Patent Collateral or for or on account of anydamage or injury to or conversion of any Patent Collateral by any Person.

 

“PTO” means the United States Patent and Trademark Office andany successor thereto.

 

“Secured Obligations” shall mean all liabilities, obligations,or undertakings owing by Debtor of any kind or description arising out of oroutstanding under, advanced or issued pursuant to, or evidenced by theFinancing Agreement, the Security Agreement, this Agreement, or any of theother Loan Documents to which Debtor is a party, irrespective of whether forthe payment of money, whether direct or indirect, absolute or contingent, dueor to become due, voluntary or involuntary, whether now existing or hereafterarising, and including all interest (including interest that accrues after thefiling of a case under the Bankruptcy Code) and any and all costs, fees(including attorneys fees), and expenses which Debtor is required to paypursuant to any of the foregoing.

 

“Security Agreement” shall have the meaning ascribed to suchterm in the Recitals to this Agreement.

 

“UCC” means the Uniform Commercial Code as in effect from timeto time in the State of New York.

 

“United States” and “U.S.” each mean the United States ofAmerica.

 

## (b)           Terms Defined in UCC.  Where applicable and except as otherwisedefined herein, terms used in this Agreement shall have the meanings ascribedto them in the UCC.

 

## (c)           Terms Defined in the FinancingAgreement.  Capitalized terms usedherein and not otherwise defined herein shall have the meanings ascribed tothem in the Financing Agreement.

 

## (d)           Interpretation.  In this Agreement, except to the extent thecontext otherwise requires:

 

### (i)            Anyreference to a Section or a Schedule is a reference to a section hereof, or aschedule hereto, respectively, and to a subsection or a clause is, unlessotherwise stated, a reference to a subsection or a clause of the Section orsubsection in which the reference appears.

 

3

----

 

### (ii)           Thewords “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer tothis Agreement as a whole and not merely to the specific Section, subsection,paragraph or clause in which the respective word appears.

 

### (iii)          Themeaning of defined terms shall be equally applicable to both the singular andplural forms of the terms defined.

 

### (iv)          Thewords “including,” “includes” and “include” shall be deemed to be followed bythe words “without limitation.”

 

### (v)           Referencesto agreements and other contractual instruments shall be deemed to include allsubsequent amendments and other modifications thereto.

 

### (vi)          Referencesto statutes or regulations are to be construed as including all statutory andregulatory provisions consolidating, amending or replacing the statute or regulationreferred to.

 

### (vii)         Anycaptions and headings are for convenience of reference only and shall notaffect the construction of this Agreement.

 

### (viii)        In the event of a direct conflict between the terms andprovisions of this Agreement and the Financing Agreement, it is the intentionof the parties hereto that both such documents shall be read together andconstrued, to the fullest extent possible, to be in concert with eachother.  In the event of any actual, irreconcilableconflict that cannot be resolved as aforesaid, the terms and provisions of theFinancing Agreement shall control and govern; provided, however,that the inclusion herein of additional obligations on the part of Debtor andsupplemental rights and remedies in favor of the Collateral Agent for thebenefit of the Lender Group (whether under New York law or applicable federallaw), in each case in respect of the Patent Collateral, shall not be deemed aconflict with the Financing Agreement.

 

# 2.             Security Interest.

 

## (a)           Assignment and Grant of Securityin Respect of the Secured Obligations. As security for the prompt payment and performance of the SecuredObligations, Debtor hereby grants, assigns, transfers, and conveys to theCollateral Agent, for the benefit of the Lender Group, continuing securityinterests in all of Debtor’s right, title and interest in, to and under thefollowing property, whether now existing or hereafter acquired or arising(collectively, the “Patent Collateral”):

 

### (i)            allletters patent of the U.S. or any other country, all registrations andrecordings thereof, and all applications for letters patent of the U.S.

 

4

----

 

### or any other country, owned, held, or used by Debtor in wholeor in part, including all existing U.S. patents and patent applications ofDebtor which are described in Schedule A and Schedule B hereto,as the same may be amended or supplemented pursuant hereto from time to time,and together with and including all patent licenses held by Debtor, includingsuch patent licenses which are described in Schedule A and Schedule Bhereto, together with all reissues, divisions, continuations, renewals,extensions and continuations-in-part thereof and the inventions disclosedtherein, and all rights corresponding thereto throughout the world, includingthe right to make, use, lease, sell and otherwise transfer the inventionsdisclosed therein, and all proceeds thereof, including all license royaltiesand proceeds of infringement suits (collectively, the “Patents”);

 

### (ii)           allclaims, causes of action and rights to sue for past, present and futureinfringement or unconsented use of any of the Patents and all rights arisingtherefrom and pertaining thereto;

 

### (iii)          allgeneral intangibles (as defined in the UCC) and all intangible intellectual orother similar property of Debtor of any kind or nature, whether now owned orhereafter acquired or developed, associated with or arising out of any of thePatents and not otherwise described above; and

 

### (iv)          allproducts and Proceeds of any and all of the foregoing.

 

## (b)           Certain Exclusions from Grant ofSecurity Interest.  Anythingcontained in this Agreement and the other Loan Documents to the contrarynotwithstanding, the term “Patent Collateral” shall not include any item ofPatent Collateral that is now or hereafter held by Debtor as lessee, licensee,or debtor under purchase money secured financing, in the event that:  (1) as a result of the grant of asecurity interest therein, Debtor would be deemed to have breached theapplicable lease, license, or other agreement that governs such asset pursuantto restrictions contained in the applicable lease, license or other agreement;and (2) any such restriction is effective and enforceable under applicablelaw; provided, further, however, that the term “PatentCollateral” shall include, at any time that the restrictions in the lease,license, or other agreement are no longer effective and enforceable (includingas a result of the exercise of an option to purchase or the repayment of thesecured financing) or at any time that the applicable lessor, licensor or otherapplicable party’s consent is obtained to the grant of a security interest inand to such asset in favor of the Collateral Agent, for the benefit of theLender Group, (A) any and all Proceeds of such Patent Collateral, and (B) suchPatent Collateral.

 

## (c)           Continuing Security Interests.  Debtor agrees that this Agreement shallcreate continuing security interests in the Patent Collateral which shallremain in effect until terminated in accordance with Section 16.

 

5

----

 

## (d)           Incorporation into FinancingAgreement. This Agreement shall be fully incorporated into the FinancingAgreement and all understandings, agreements and provisions contained in theFinancing Agreement shall be fully incorporated into this Agreement. Without limitingthe foregoing, the Patent Collateral described in this Agreement shallconstitute part of the Collateral in the Financing Agreement.

 

## (e)           Licenses. Anything in theFinancing Agreement or this Agreement to the contrary notwithstanding, so longas no Event of Default has occurred and is continuing, Debtor may engage inPermitted Dispositions of the Patent Collateral.

 

# 3.             Further Assurances; Appointmentof Collateral Agent as Attorney-in-Fact. Debtor at its expense shall execute and deliver, or cause to be executedand delivered, to the Collateral Agent any and all documents and instruments,in form and substance reasonably satisfactory to the Collateral Agent, in itsreasonable discretion, and take any and all action, which the Collateral Agentmay reasonably request from time to time, to perfect and continue perfected,maintain the priority of or provide notice of the security interests in thePatent Collateral held by Collateral Agent for the benefit of the Lender Groupand to accomplish the purposes of this Agreement.  If Debtor refuses to execute and deliver, or fails timely toexecute and deliver, any of the documents it is reasonably requested to executeand deliver by Collateral Agent in accordance with the foregoing, theCollateral Agent shall have the right to, in the name of Debtor, or in the nameof Collateral Agent or otherwise, without notice to or assent by Debtor, andDebtor hereby irrevocably constitutes and appoints Collateral Agent (and any ofCollateral Agent’s officers or employees or agents designated by CollateralAgent) as Debtor’s true and lawful attorney-in-fact with full power andauthority, (i) to sign the name of Debtor on all or any of such documents orinstruments, and perform all other acts, that Collateral Agent reasonably deemsnecessary or advisable in order to perfect or continue perfected, maintain thepriority or enforceability of or provide notice of the security interests inthe Patent Collateral held by Collateral Agent for the benefit of the LenderGroup, and (ii) to execute any and all other documents and instruments, and toperform any and all acts and things for and on behalf of Debtor, whichCollateral Agent reasonably may deem necessary or advisable to maintain,preserve and protect the Patent Collateral and to accomplish the purposes ofthis Agreement, including (A) upon the occurrence and during the continuance ofany Event of Default, to defend, settle, adjust or institute any action, suitor proceeding with respect to the Patent Collateral, (B) upon the occurrenceand during the continuance of any Event of Default, to assert or retain anyrights under any license agreement for any of the Patent Collateral, includingany rights of Debtor arising under Section 365(n) of the Bankruptcy Code, and(C) upon the occurrence and during the continuance of any Event of Default, toexecute any and all applications, documents, papers and instruments forCollateral Agent to use the Patent Collateral, to grant or issue any exclusiveor non-exclusive license with respect to any Patent Collateral, and to assign,convey or otherwise transfer title in or dispose of the Patent Collateral.  The power of attorney set forth in this Section3, being coupled with an interest, is irrevocable so long as

 

6

----

 

# this Agreement shall not haveterminated in accordance with Section 16.  Nothing herein shall be construed as requiring Debtor to maintainany Patent such as by paying maintenance fees, undertaking any patentprosecution action, or otherwise if such Patent is not being used by Debtor.

 

# 4.             Representations and Warranties.  Debtor represents and warrants to eachmember of the Lender Group as follows:

 

## (a)           No Other Patents.  A true and correct list of all materialPatents owned, held (whether pursuant to a license or otherwise), or used byDebtor, in whole or in part, as of the date hereof, is set forth in ScheduleA and Schedule B; *provided*, that Schedule B onlylists those Patents pending as of the date hereof.

 

## (b)           Validity.  Each of the Patents listed on Schedule Aand Schedule B is subsisting and has not been adjudged invalid orunenforceable, in whole or in part, all maintenance fees required to be paid onaccount of any such Patents have been paid for maintaining such Patents inforce, and, to Debtor’s knowledge, each of such Patents is valid andenforceable, except such nonpayment of maintenance fees as reasonably couldnot, individually or in the aggregate, be expected to have a Material AdverseEffect.

 

## (c)           Title.  (i) Debtor has rights in and good title tothe existing Patent Collateral, (ii) with respect to the Patent Collateralshown on Schedule A and Schedule B hereto as owned by it, Debtoris the sole and exclusive owner thereof, free and clear of any Liens and rightsof others (other than (A) Liens in favor of Collateral Agent, for the benefitof the Lender Group, and (B) Permitted Liens), (iii) with respect to any Patentset forth in Schedule A and Schedule B for which Debtor is eithera licensor or a licensee pursuant to a license or licensee agreement regardingPatent, each such license or licensing agreement is in full force and effect,Debtor is not in default of any of its material obligations thereunder and,other than (A) the parties to such licenses or licensing agreements, or (B) inthe case of any non-exclusive license or license agreement entered into byDebtor or any such licensor regarding such Patent Collateral, the parties toany other such non-exclusive licenses or license agreements entered into byDebtor or any such licensor with any other Person, no other Person is known byDebtor to have any rights in or to any such Patent Collateral.

 

## (d)           No Infringement.  To Debtor’s knowledge, (i) no materialinfringement or unauthorized use presently is being made of any of the PatentCollateral by any Person, and (ii) the past, present and contemplated futureuse of any material item of the Patent Collateral by Debtor has not, does notand will not infringe upon or violate any right, privilege or license agreementof or with any other Person.

 

## (e)           Powers.  Debtor has the unqualified right, power andauthority to pledge and to grant to Collateral Agent security interests in allof the Patent Collateral

 

7

----

 

##  pursuant to this Agreement, and to execute, deliver and performits obligations in accordance with the terms of this Agreement, without theconsent or approval of any other Person except as already obtained.

 

# 5.             Covenants.  Debtor covenants that so long as thisAgreement shall be in effect, Debtor shall:

 

## (a)           comply with all of the covenants,terms and provisions of this Agreement, the Financing Agreement and the otherLoan Documents to which Debtor is a party;

 

## (b)           promptly give Collateral Agentwritten notice of the occurrence of any event that reasonably could be expectedto have a Material Adverse Effect on (i) any of the Patents listed in ScheduleA and Schedule B or (ii) the Patent Collateral, including anypetition under the Bankruptcy Code filed by or against any licensor of any suchPatents for which Debtor is a licensee;

 

## (c)           on a continuing basis, make, execute,acknowledge and deliver, and file and record in the proper filing and recordingplaces, all such instruments and documents, including appropriate financing andcontinuation statements and security agreements, and take all such action asmay be necessary or may be reasonably requested by Collateral Agent, in itsreasonable discretion, to carry out the intent and purposes of this Agreement,or for assuring, confirming or protecting the grant or perfection of thesecurity interests granted or purported to be granted hereby, to ensureDebtor’s compliance with this Agreement or to enable Collateral Agent toexercise and enforce its rights and remedies hereunder with respect to thePatent Collateral.  Without limiting thegenerality of the foregoing sentence, Debtor:

 

### (i)            herebyauthorizes Collateral Agent, in its reasonable discretion, if Debtor refuses toexecute and deliver, or fails timely to execute and deliver, any of thedocuments it is reasonably requested to execute and deliver by CollateralAgent, to modify this Agreement without first obtaining Debtor’s approval of orsignature to such modification by amending Schedule A and Schedule Bhereof to include a reference to any right, title or interest in any existingmaterial Patent Collateral or Patent Collateral acquired or developed by Debtorafter the execution hereof, or to delete any reference to any right, title orinterest in any Patent Collateral in which Debtor no longer has or claims anyright, title or interest; and

 

### (ii)           herebyauthorizes Collateral Agent, in its reasonable discretion, to file one or morefinancing or continuation statements, if Debtor refuses to execute and deliver,or fails timely to execute and deliver, any such amendment thereto it isreasonably requested to execute and deliver by Collateral Agent, any

 

8

----

 

### amendments thereto, relative to all or any portion of thePatent Collateral, without the signature of Debtor where permitted by law;

##  

## (d)           comply, in all material respects,with all applicable statutory and regulatory requirements in connection withany and all of the Patent Collateral, the failure to comply with which couldreasonably be expected to have a Material Adverse Effect, and give such noticeof patent, prosecute such material claims, and do all other acts and take allother measures which, in Debtor’s reasonable business judgment, may benecessary to preserve, protect and maintain the Patent Collateral and all ofDebtor’s rights therein, including diligently prosecute any material patentapplication pending as of the date of this Agreement or thereafter;

 

## (e)           comply with each of the terms andprovisions of this Agreement and the Financing Agreement, and not enter intoany agreement (for example, a license agreement) which is inconsistent with theobligations of Debtor under this Agreement and the Financing Agreement withoutCollateral Agent’s prior written consent; and

 

## (f)            not permit the inclusion in anycontract to which Debtor becomes a party of any provision that would impair orprevent the creation of a security interest in favor of Collateral Agent, forthe benefit of the Lender Group, in Debtor’s rights and interest in anyproperty included within the definition of Patent Collateral acquired undersuch contracts.

 

# 6.             Future Rights.  If and when Debtor shall obtain rights toany new patentable inventions (with respect to which Debtor, in its reasonablebusiness judgment, endeavors to register with the PTO), or become entitled tothe benefit of any Patent, or any reissue, division, continuation, renewal,extension or continuation-in-part of any Patent or Patent Collateral or anyimprovement thereof (whether pursuant to any license or otherwise), theprovisions of this Agreement shall automatically apply thereto and Debtor shallgive to Collateral Agent notice thereof in accordance with Section 12.01of the Financing Agreement.  Debtorshall do all things deemed necessary or advisable by Collateral Agent, in itsdiscretion, to ensure the validity, perfection, priority and enforceability ofthe security interests of Collateral Agent in such future acquired PatentCollateral.  Debtor hereby authorizesCollateral Agent to modify, amend or supplement the Schedules hereto and tore-execute this Agreement from time to time on Debtor’s behalf and as itsattorney-in-fact to include any future Patents which are or become PatentCollateral and to cause such re-executed Agreement or such modified, amended orsupplemented Schedules to be filed with the PTO.

 

# 7.             Remedies.  Upon the occurrence and during thecontinuance of an Event of Default, the Lender Group and Collateral Agent onbehalf thereof shall have all rights and remedies available to it under theFinancing Agreement and applicable law (which rights and remedies arecumulative) with respect to the security interests in any of the Patent

 

9

----

 

# Collateral or any otherCollateral.  Debtor agrees that suchrights and remedies include the right of Collateral Agent as a Collateral Agentto sell or otherwise dispose of its Collateral after default, pursuant to UCCSection 9-610.  Debtor agrees thatCollateral Agent shall at all times have such royalty free licenses, to theextent permitted by law, for any Patent Collateral that is reasonably necessaryto permit the exercise of any of Collateral Agent’s rights or remedies upon theoccurrence and during the continuation of an Event of Default with respect to(among other things) any tangible asset of Debtor in which Collateral Agent hasa security interest, including Collateral Agent’s rights to sell inventory,tooling or packaging which is acquired by Debtor (or its successor, assignee ortrustee in bankruptcy).  In addition toand without limiting any of the foregoing, upon the occurrence and during thecontinuance of an Event of Default, Collateral Agent shall have the right butshall in no way be obligated to bring suit, or to take such other action asCollateral Agent deems necessary or advisable, in the name of Debtor orCollateral Agent, to enforce or protect any of the Patent Collateral, in whichevent Debtor shall, at the reasonable request of Collateral Agent, do any andall lawful acts and execute any and all documents required by Collateral Agentin aid of such enforcement.  To theextent that Collateral Agent shall elect not to bring suit to enforce suchPatent Collateral, Debtor, in the exercise of its reasonable business judgment,agrees to use all reasonable measures and its diligent efforts, whether byaction, suit, proceeding or otherwise, to prevent the infringement,misappropriation or violations thereof by others and for that purpose agreesdiligently to maintain any action, suit or proceeding against any Personnecessary to prevent such infringement, misappropriation or violation.  Nothing herein shall permit the CollateralAgent to assert any of the rights, claims or causes of action contemplated by Section2(a)(ii), except after the occurrence and during the continuance of anEvent of Default.

 

# 8.             Binding Effect.  This Agreement shall be binding upon, inureto the benefit of and be enforceable by Debtor and Collateral Agent for thebenefit of the Lender Group and their respective successors and assigns.

 

# 9.             Notices.  All notices and other communicationshereunder shall be in writing and shall be mailed, sent or delivered inaccordance with the Financing Agreement.

 

# 10.           Governing Law.  This Agreement shall be governed by, andconstrued and enforced in accordance with, the laws of the State of New York,except to the extent that the validity or perfection of the security interestshereunder in respect of the Patent Collateral are governed by federal law, inwhich case such choice of New York law shall not be deemed to depriveCollateral Agent of such rights and remedies as may be available under federallaw.

 

# 11.           Entire Agreement; Amendment.  This Agreement and the Financing Agreement,together with the Schedules hereto and thereto, contain the entire agreement ofthe parties with respect to the subject matter hereof and supersedes all priordrafts and communications relating to such subject matter.  Neither this Agreement nor any provision

 

10

----

 

# hereof may be modified, amended orwaived except by the written agreement of the parties, as provided in theFinancing Agreement.  Notwithstandingthe foregoing, Collateral Agent may re-execute this Agreement or modify, amendor supplement the Schedules hereto as provided in Section 6 hereof.

 

# 12.           Severability.  If one or more provisions contained in thisAgreement shall be invalid, illegal or unenforceable in any respect in anyjurisdiction or with respect to any party, such invalidity, illegality orunenforceability in such jurisdiction or with respect to such party shall, tothe fullest extent permitted by applicable law, not invalidate or renderillegal or unenforceable any such provision in any other jurisdiction or withrespect to any other party, or any other provisions of this Agreement.

 

# 13.           Counterparts; TelefacsimileExecution.  This Agreement may beexecuted in any number of counterparts and by different parties hereto inseparate counterparts, each of which when so executed shall be deemed to be anoriginal and all of which taken together shall constitute but one and the sameagreement.  Delivery of an executed counterpart of this Agreement by telefacsimileshall be equally as effective as delivery of an original executed counterpartof this Agreement.  Any party deliveringan executed counterpart of this Agreement by telefacsimile also shall deliveran original executed counterpart of this Agreement but the failure to deliveran original executed counterpart shall not affect the validity, enforceability,and binding effect of this Agreement.

 

# 14.           Financing Agreement.  Debtor acknowledges that the rights andremedies of Collateral Agent with respect to the security interests in thePatent Collateral granted hereby are more fully set forth in the SecurityAgreement and Financing Agreement and all such rights and remedies arecumulative.

 

# 15.           No Inconsistent Requirements.  Debtor acknowledges that this Agreement andthe other Loan Documents may contain covenants and other terms and provisionsvariously stated regarding the same or similar matters, and Debtor agrees thatall such covenants, terms and provisions are cumulative and all shall beperformed and satisfied in accordance with their respective terms.

 

# 16.           Termination.  Upon the indefeasible payment in full incash of the Secured Obligations, including the cash collateralization,expiration, or cancellation of all Secured Obligations, if any, consisting ofletters of credit, and the full and final termination of any commitment toextend any financial accommodations under the Financing Agreement, thisAgreement and the security interests granted hereunder shall terminate andCollateral Agent shall execute and deliver such documents and instruments andtake such further action reasonably requested by Debtor and at Debtor’s expenseas shall be necessary to evidence termination of the security interests grantedby Debtor to Collateral Agent for the benefit of the Lender Group hereunder.

 

11

----

 

[Signature page follows]

 

12

----

 

**IN WITNESS WHEREOF**, the parties hereto have duly executed thisAgreement, as of the date first above written.

 
|   | **ELGAR  ELECTRONICS CORPORATION,**a California  corporation |
|--------|--------------------------------------------------------------|
|   |                                                         |   |
|   | By:                                                          | /s/ Joseph A. Stroud |   |
|   | Name:                                                        | Joseph A. Stroud |
|   | Title:                                                       | Chief Financial Officer |

 

 

S-1

----

 
|   | **ABLECO  FINANCE LLC,**a Delaware  limited liability company |
|--------|---------------------------------------------------------------|
|   |                                                          |   |
|   | By:                                                           | /s/ Kevin Genda |   |
|   | Name:                                                         | Kevin Genda |
|   | Title:                                                        | Senior Vice President |

 

 

S-2

----

 

SCHEDULE Ato the Patent Security Agreement

 

ISSUED PATENTS ASOF THE DATE HEREOF

 
| **Owner**                                                    |   | **Patent**                                                                  |   | **Patent  Number** |
|--------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------------------|
|                                                         |   |                                                                        |   |               |
| Elgar  Electronics Corporation                               |   | “Overvoltage  Protection Circuit”                                 |   | 6,239,961          |
|                                                         |   |                                                                        |   |               |
| Elgar  Electronics Corporation                               |   | “Optimal and  Adaptive Control of Variable Speed AC Motor Drives” |   | 4,387,421          |
|                                                         |   |                                                                        |   |               |
| Elgar  Electronics Corporation (formerly owned by Power Ten) |   | “Internally  Programmable Modular Power Supply Method”            |   | 5,917,719          |

 

A-1

----

 

SCHEDULE Bto the Patent Security Agreement

 

PENDING PATENTS AS OF THEDATE HEREOF

 

 

NONE.

 

B-1

 

----