Document:

Exhibit 10.3

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”) is made and
entered into effective as of June 30, 2006, by and between Coming Home
Studios, LLC, a California limited liability company (“Debtor”), and SRS Labs, Inc.,
a Delaware corporation (“Secured Party”).

R E C I T A L S:

A.            Debtor has issued a promissory note in the principal
amount of One Hundred and Seventy Five Thousand Dollars ($175,000) (the “Note,”
and together with this Security Agreement, the “Loan Documents”) executed by
Debtor in favor of Secured Party.

B.            It is a condition precedent to the consummation of the
transactions contemplated by the Note that Debtor execute this Security
Agreement, granting to Secured Party a security interest in certain collateral
of Debtor.

C.            The loan evidenced by the Note and Loan Documents is a
part of a Termination Agreement in which SRS is willing to sell and CHS
is willing to purchase all of SRS Membership Interest in the CHC/SRS, LLC (the “Company”)
representing a 50% equity interest in the Company (the “Membership Interest”).

NOW, THEREFORE, in
consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of where are
hereby acknowledged, the parties hereby agree as follows:

1.             Uniform Commercial Code. Any
terms used in this Security Agreement that are defined in the Uniform
Commercial Code (the “Code”) shall be construed and defined as set forth in the
Code unless otherwise defined herein, provided, however, that to the extent
that the Code is used to define any term herein and such term is defined
differently in different Articles of the Code, the definition of such term
contained in Article 9 shall govern.

2.             Security Interest. Debtor
hereby grants to Secured Party a continuing security interest in and to and a
lien upon, the following personal property and other assets and interests in
property of Debtor (the “Collateral”) in order to secure prompt
repayment of any and all of the Obligations in accordance with the terms and
conditions of the Loan Documents and in order to secure prompt performance by
Debtor of its covenants and duties under the Loan Documents:

(a)           (i)            All of
Debtor’s now owned or hereafter acquired right, title and interest in and to
each of the following:

(1)           Production agreement between Coming
Home Studios, LLC and Duran Duran Ltd. dated March 1, 2004;

 

(2)           Production agreement between Coming
Home Studios, LLC and Godsmack Partnership dated March 18, 2004;

(3)           Production agreement between Coming
Home Studios, LLC and Gray Cat Records, Inc. dated as of April 11,
2003 and executed August 18, 2003; and

(4)           Distribution Agreement between Coming
Home Studios, LLC and Ideal Entertainment dated May 21, 2004
(collectively, the “Designated Contracts”); and [Insert other production and
distribution agreements]

(ii)        All of Debtor’s now owned or hereafter
acquired right, title and interest in and to any Accounts, Books, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, and Supporting Obligations (all as defined in the Code)
with respect to the Designated Contracts, including present and future
inventory and merchandise, all present and future goods held for sale or lease
or to be furnished under a contract of service, all raw materials, work in
process and finished goods, all packing materials, supplies and containers  relating to or used in connection with any of
the foregoing, and all bills of lading, warehouse receipts or documents of title
relating to any of the following; and

(b)           all proceeds and products, whether
tangible or intangible, of any of the foregoing, including, without limitation,
the proceeds of insurance covering any or all of the foregoing, and any
proceeds resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds and products thereof. As used in
this Security Agreement, “proceeds” means: whatever is acquired upon the sale,
lease, license, exchange or other disposition of Collateral; whatever is
collected on, or distributed on account of Collateral; and any rights arising
out of Collateral.

3.             Obligations Secured. This
Security Agreement secures the prompt payment and performance of all
obligations of Debtor now or hereafter existing under the Note, whether for
principal, interest (including any interest that, but for the
commencement of an insolvency proceeding, would have accrued), fees, expenses or otherwise, and all
obligations, covenants and duties of any kind or description of Debtor now or
hereafter existing under this Security Agreement, in each case, irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent,  due or to become due, now
existing or hereinafter arising (“Obligations”). Any reference in this
Agreement or in the Loan Documents to the Obligations shall include all
extensions, modifications, renewals, or alterations thereof, both prior and
subsequent to any insolvency proceeding.

4.             Representations and Warranties.
To induce the Secured Party to make its extension of credit to the Debtor
pursuant to the Note, the Debtor hereby represents and warrants to the Secured
Party that:

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(a)           The Debtor (i) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization as set forth in Schedule 1, (ii) has the
power and authority, and the legal right, to conduct the business in which it
is currently engaged, (iii) is duly qualified as a foreign corporation and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification, and (d) is in compliance with all requirements of law
applicable to the conduct of its business.

(b)           The description of the Designated
Contracts set forth in this Security Agreement 
completely and accurately describes all of Debtor’s right, title and
interest in and to the Designated Contracts and any related agreements, rights
and understandings with respect thereto.

(c)           The Debtor has the requisite legal
capacity to own its assets, to borrow money, to execute, deliver and perform
each of the Loan Documents and all other documents, certificates and
instruments delivered in connection therewith, and to effect and carry out the
transactions contemplated herein and therein. Each Loan Document has been duly
authorized and, when executed and delivered, will be a valid and legally
binding instrument enforceable against Debtor in accordance with its terms. The
execution and delivery of the Loan Documents and the consummation of the
transactions contemplated thereby (a) will not (immediately or with the
passage of time, or the giving of notice) violate (i) any law, order, rule or
regulation or determination of an arbitrator, a court, or other governmental
agency, applicable or binding upon the Debtor or any of the Debtor’s property
or as to which the Debtor or any of the Debtor’s property is subject; or (ii) any
provision of any agreement, instrument, or undertaking to which the Debtor is a
party or by which the Debtor or any of the Debtor’s property is bound and (b) will
not result in the creation or imposition of any lien upon any of the property
of the Debtor, other than those in favor of the Secured Party pursuant to the
Loan Documents.

(d)           No consents, approvals or other
authorizations or notices, other than those which have been obtained and are in
full force and effect, are required by any state or federal regulatory
authority or other person or entity in connection with the execution and
delivery of the Loan Documents, the perfection of the security interest of
Secured Party, and the performance of any obligations contemplated thereby.

(e)           The grant of the security interest in
the Collateral by the Debtor pursuant to the Security Agreement creates a valid
and perfected first priority security interest in the Collateral in favor of
the Secured Party. The Debtor is the owner of, or has contractual rights to,
the Collateral subject to no pledge, lien, mortgage, hypothecation, security
interest, charge, option, or other encumbrance whatsoever, except the
liens and security interests created by the Loan Documents.

(f)            The Debtor is not subject to any
contractual obligation restricting or limiting the ability of the Debtor to
grant the security interest in the Collateral pursuant to the Security
Agreement.

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5.             Further Assurances.

(a)           Debtor agrees that from time to time,
at the expense of Debtor, Debtor will promptly execute and deliver all further
instruments and documents, and take all further action, that Secured Party may
reasonably deem necessary or desirable, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.

(b)           Debtor hereby authorizes Secured
Party to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral. A carbon, photographic
or other reproduction of this Security Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.

(c)           Debtor will furnish to Secured
Party from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Secured Party may reasonably request, all in reasonable detail.

6.             Additional
Agreements.

(a)           Debtor shall not enter any additional
agreements, arrangements or understandings in respect of the Designated
Contracts with any party other than Secured Party without the prior written
consent of Secured Party. If Secured Party consents to Debtor’s formation of a
limited liability company or other entity in respect of any Designated
Contract, Debtor shall pledge its entire interest in such entity to Secured
Party within seven days of the formation of such entity by means of a pledge
agreement substantially in the form of Schedule 3.

7.             Default. An “Event of Default” under the Note,
Debtor’s failure to perform the obligations set forth under Sections 4, 5 and 6
of this Security Agreement shall be deemed an Event of Default for purposes of
this Security Agreement.

8.             Remedies of the Secured Party in the Event of Default.
Upon the occurrence and during the continuance of an Event of Default, Secured
Party shall have the following rights and remedies:

(a)           In addition to any other rights and
remedies contained in this Security Agreement, all of the rights and remedies
of a secured party under the Uniform Commercial Code or other similar
applicable law, all of which rights and remedies shall be cumulative and
nonexclusive, to the extent permitted by law;

(b)           The right to collect any and all
amounts due Debtor from any account debtor to the extent such account is
included in the definition of Collateral;

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(c)           Require Debtor to assign any
copyright interest it has under the Designated Contracts to the Secured Party;

(d)           The right to:  (i) do all acts and things necessary, in
Secured Party’s sole discretion, to fulfill Debtor’s obligations under this
Security Agreement; (ii) endorse the name of Debtor upon any chattel
paper, documents, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Collateral; and (iii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Collateral to which Debtor has
access; and

(e)           The right to:  (i) sell or to otherwise dispose of all
or any Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Secured
Party, in its sole discretion, may deem advisable; (ii) adjourn such sales
from time to time with or without notice; and (iii) conduct such sales on
Debtor’s premises or elsewhere and use Debtor’s premises without charge for
such sales for such time or times as Secured Party may see fit. Secured Party
is hereby granted a license or other right to use, without charge, Debtor’s
labels, copyrights, right of use of any name, trade secrets, patents, trade
names, trademarks and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in advertising for sale and selling of
Collateral and Debtor’s rights under all licenses and all franchise agreements
shall inure to Secured Party’s benefit. Secured Party shall have the right to
sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Secured Party may purchase all or
any part of the Collateral at public or, if permitted by law, private sale and,
in lieu of actual payment of such purchase price, may set off the amount of
such price against the Obligations. The proceeds realized from the sale of any
Collateral shall be applied first to the reasonable costs, expenses and
attorneys’ fees and expenses incurred by Secured Party for collection and for
acquisition, completion, protection, removal, storage, sale and delivery of the
Collateral; second to interest due upon any of the Obligations; and third to
the principal of the Obligations. If any deficiency shall arise, Debtor shall
remain liable to Secured Party therefor.

9.             Waiver by Debtor. Debtor
hereby waives presentment, notice of dishonor and protest of any instrument at
any time held by Secured Party on which Debtor is in any way liable, and waives
notice of action taken by Secured Party except where required hereby.

10.           Discretionary Rights of Secured
Party. Exercise of or omission to exercise any right of Secured Party shall
not affect any other subsequent right of Secured Party to exercise the same and
the waiver of any Event of Default by Secured Party shall not be deemed a
waiver of any subsequent Event of Default.

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11.           Waiver by Secured Party. Upon
the occurrence of an Event of Default, Secured Party may waive in writing its
right to receive the benefits of the remedies to which Secured Party is
entitled pursuant to this Security Agreement.

12.           Secured Party Appointed
Attorney-In-Fact. Debtor hereby irrevocably nominates and appoints Secured
Party as its attorney-in-fact for the following purposes: (a) to do all
acts and things which Secured Party may deem necessary or advisable to perfect
and continue perfected the security interests created by this Agreement and,
upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral, provided,
however, that Debtor has failed to do so promptly after demand by Secured
Party; (b) upon the occurrence and during the continuance of an Event of
Default, to do any and every act which Debtor is obligated to do under this
Security Agreement, at the expense of Debtor so obligated and without any
obligation to do so, provided, however, that Debtor has failed to do so
promptly after demand by Secured Party; (c) to prepare, sign, file and/or
record, for Debtor in the name of Debtor, any financing statement, application
for registration, and like papers and to take any other action deemed by
Secured Party necessary or desirable in order to perfect the security interests
granted hereby, provided, however, that Debtor has failed to do so promptly
after demand by Secured Party; and (d) upon the occurrence and during the
continuance of an Event of Default to execute any and all papers and
instruments and do all other things necessary or desirable to preserve and
protect the Collateral and to protect Secured Party’s security interests
therein, provided however, that Debtor has failed to do so promptly after
demand by Secured Party. Secured Party shall notify Debtor of any action taken
pursuant to this Paragraph 16.

13.           Duties of Secured Party. The
powers conferred on Secured Party hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon Secured Party to exercise
any such powers. Except for the safe custody of any Collateral in Secured Party’s
possession and the accounting for monies actually received by Secured Party
hereunder, Secured Party shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.

14.           Miscellaneous.

(a)           Descriptive Headings. The
descriptive headings of this Security Agreement are inserted for convenience
only and do not affect the meaning of any provisions herein.

(b)           Governing Law. This Security
Agreement shall be governed by and construed in accordance with the internal
laws (and not the law of conflicts) of the State of California.

(c)           Arbitration. Any unresolved
controversy or claim arising from or relating to this Security Agreement or
breach thereof shall be settled by arbitration administered by the American
Arbitration Association in accordance with its Commercial

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Arbitration Rules, then in effect. The decision of
arbitration unless clearly erroneous, shall be final and conclusive upon the
parties, and judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction. The arbitration proceedings shall
be held in Santa Ana, California. The arbitration proceedings shall be conducted
before one (1) neutral arbitrator who shall be a member of the
California Bar who has been actively engaged in the practice of corporate and
business law for at least fifteen (15) years, and shall proceed under any
expedited procedures of the Commercial Arbitration Rules. The arbitrator shall
have authority to award only (i) money damages, (ii) attorneys’ fees,
costs and expert witness fees to the prevailing party, and (iii) sanctions
for abuse or frustration of the arbitration process. The arbitrator’s
compensation, and the administrative costs of the arbitration, shall be borne
by the parties in the manner set forth in the arbitration award, as determined
by the arbitrator. Notwithstanding the foregoing provisions of this Section 18(c),
the parties are not required to arbitrate any issue for which injunctive relief
is sought by any party hereto and both parties may seek injunctive relief in
any federal or state court having jurisdiction.

(d)           Notices. All notices and other
communications under or in connection with this Security Agreement shall be in
writing and shall be deemed given (a) if delivered personally, upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:

(a)           If to Secured Party,
addressed to:

SRS
Labs, Inc.

2909 Daimler Street

Santa Ana, California 92705

Attention:  Ulrich Gottschling

                  Chief
Financial Officer

Facsimile:  (949) 852-1099

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(b)           If to Debtor, addressed to:

Coming
Home Studios, LLC,
5540 Hollywood Blvd.

Hollywood, California  90028

Attention:  Daniel E. Catullo III

                 Manager

Facsimile:  (323) 467-6400

With an additional copy
to:

Troy &
Gould PC

1801 Century Park East, Suite 1600

Los Angeles, California  90067

Attn:  David L. Ficksman

Facsimile:  (310) 789-1490

(e)           Costs. If any action or other
proceeding is brought for the enforcement of this Security Agreement, or for
Secured Party to perfect or enforce its rights hereunder, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Security Agreement, the successful or prevailing
party or parties shall be entitled to recover reasonable fees, including
attorneys’ fees, and other costs incurred in that action or proceeding, in
addition to any other relief to which it or they may be entitled.

(f)            Final Agreement. This
Security Agreement, the Note and the other documents executed in connection
therewith constitute the final agreement of the parties concerning the matters
herein, and supersede all prior and contemporaneous agreements and
understandings.

(g)           Amendment. This Security
Agreement may be amended by an instrument in writing executed by Debtor and
Secured Party.

(h)           Counterparts. This Security
Agreement may be executed in two counterparts, either one of which need not
contain the signatures of both parties, but both of which counterparts when
taken together shall constitute one and the same Security Agreement.

[SIGNATURES ON FOLLOWING PAGE]

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[SIGNATURE PAGE TO SECURITY AGREEMENT]

IN
WITNESS WHEREOF, the parties have executed this Security Agreement to be effective
as of the date first above written.

	
  

  	
  “Debtor”

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMING HOME STUDIOS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Daniel E. Catullo III

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  “Secured Party”

  
	
   

  	
   

  
	
   

  	
  SRS LABS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

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Schedule 1

Name:                     Coming Home Studios, LLC

Type:                      Limited Liability Company

Number:                 200108710092

State:                      California

 10Exhibit
10.4

ASSIGNMENT

For valuable
consideration, receipt of which is hereby acknowledged, SRS Labs, Inc. (“SRS”)
hereby assigns, transfers and conveys to Coming Home Studios LLC (“CHS”) all of
the membership interest of SRS in CHS/SRS, LLC (the “Company”) representing a
50% equity interest in the Company (the “Membership Interest”).

	
  Coming Home Studios LLC

  	
   

  	
  SRS Labs, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By

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