PLEDGE AND SECURITY AGREEMENT

 

PLEDGE AND SECURITY AGREEMENT, dated as of July 27, 2016 (this “Agreement”),
made by Enerpulse Technologies, Inc., a Nevada corporation (the “Company”),
Enerpulse, Inc., a Delaware corporation (“Enerpulse”) and each other Subsidiary
of the Company hereafter becoming party hereto (together with the Company and
Enerpulse, each a “Grantor” and, collectively, the “Grantors”), in favor of
Passaic River Capital LLC, in its capacity as collateral agent (in such
capacity, the “Collateral Agent”) for the Buyers (as defined below) party to the
Securities Purchase Agreements, dated as of even date herewith (as amended,
restated, supplemented or otherwise modified from time to time, the “Securities
Purchase Agreements”).

 

W  I  T  N  E  S  S  E  T  H:

 

WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of
Buyers (as such schedule may be amended, restated or otherwise modified from
time to time) attached thereto, (together with their respective successors and
assigns, each a “Buyer”, and collectively, the “Buyers”) are parties to the
Securities Purchase Agreements, pursuant to which the Company shall be required
to sell, and the Buyers shall purchase or have the right to purchase, the
“Notes” (as defined in the Securities Purchase Agreements);

 

WHEREAS, it is a condition precedent to the Buyers consummating the transactions
contemplated by the Securities Purchase Agreement that the Grantors execute and
deliver to the Collateral Agent this Agreement providing for the grant to the
Collateral Agent for the benefit of the Buyers of a security interest in all
personal property of the Grantors to secure all of the Company’s obligations
under the Securities Purchase Agreements and the “Notes” (as defined therein)
issued pursuant thereto (as such Notes may be amended, restated, replaced or
otherwise modified from time to time in accordance with the terms thereof,
collectively, the “Notes”) and the other Secured Transaction Documents (as
defined below);

 

WHEREAS, the Grantors (i) are mutually dependent on each other in the conduct of
their respective businesses as an integrated operation, with the credit needed
from time to time by one often being provided through financing obtained by the
other Grantors and the ability to obtain such financing being dependent on the
successful operations of the Grantors and (ii) will receive a mutual benefit
from the proceeds received by the Company in respect of the issuance of the
Notes; and

 

WHEREAS, each Grantor has determined that the execution, delivery and
performance of this Agreement directly benefits, and are in the best interest of
the Company and such Grantor.

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Buyers to perform under the Securities Purchase
Agreements, each Grantor agrees with the Collateral Agent, for the benefit of
the Buyers, as follows:

 

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Section 1. Definitions.

 

(a) Reference is hereby made to the Securities Purchase Agreements and the Notes
for a statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Securities Purchase Agreements, the
Notes or in Articles 8 or 9 of the Uniform Commercial Code (the “Code”) as in
effect from time to time in the State of New York, and which are not otherwise
defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in
the State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the
Collateral Agent may otherwise determine.

 

(b) The following terms shall have the respective meanings provided for in the
Code: “Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort Claim”,
“Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”,
“Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”,
“Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Noncash
Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Security”,
“Record”, “Security Account”, “Software”, and “Supporting Obligations”.

 

(c) As used in this Agreement, the following terms shall have the respective
meanings indicated below, such meanings to be applicable equally to both the
singular and plural forms of such terms:

 

“Collateral” shall have the meaning set forth in Section 2 hereof.

 

“Copyright Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to use or sell any works covered by any copyright
(including, without limitation, all Copyright Licenses set forth in Schedule II
hereto).

 

“Copyrights” means all domestic and foreign copyrights, whether registered or
not, including, without limitation, all copyright rights throughout the universe
(whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

 

“Event of Default” means (i) any defined event of default under any one or more
of the Secured Transaction Documents, in each instance, after giving effect to
any notice, grace, or cure periods provided for in the applicable Secured
Transaction Document, (ii) the failure by the Company to pay any amounts when
due under the Notes or any other Secured Transaction Document, (iii) the breach
of any representation, warranty by any Grantor under this Agreement in any
material respect, or (iv) the breach of any covenant by any Grantor under this
Agreement except, in the case of a breach of a covenant which is curable, only
if such breach continues for a period of at least five (5) consecutive Business
Days.

 

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“Excluded Collateral” means (i) any right under any lease, license or other
contract or agreement, but only to the extent that the granting of a security
interest therein or an assignment thereof would violate any applicable law or
would result in an invalidation thereof or constitute a breach or violation of
such lease, license or other contract or agreement, as applicable (other than
any contractual prohibition on the assignment of accounts or payment intangibles
that is unenforceable under the UCC or any other applicable law), provided that
to the extent such security interest at any time hereafter shall no longer be
prohibited by law or agreement, and/or immediately upon such provision no longer
being enforceable, as the case may be, such assets shall automatically and
without any further action shall no longer constitute Excluded Collateral, (ii)
any voting equity interests in any foreign Subsidiary in excess of 65% of all
such voting equity interest of such foreign Subsidiary, (iii) any assets as to
which the Collateral Agent and any Grantor shall agree in writing that (A) the
cost of obtaining a security interest is excessive in relation to the value of
the security to be afforded thereby or (B) obtaining such security interest is
not commercially practical, and (iv) any trademark applications on the basis of
such Grantor’s “intent-to-use” such trademark to the extent that granting a
security interest in such trademark application prior to such filing would
adversely affect the enforceability or validity or result in the voiding of such
trademark application.

 

“Existing Issuer” has the meaning specified therefor in the definition of the
term “Pledged Shares”.

 

“Guaranty” means the Guaranty, dated as of the date hereof, by Enerpulse in
favor of the Buyers and the Collateral Agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United
States Code) or under any other bankruptcy or insolvency law, assignments for
the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

 

“Intellectual Property” means the Copyrights, Trademarks and Patents.

 

“Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.

 

“Lien” means any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential
arrangement of any nature, including, without limitation, any conditional sale
or title retention arrangement, any capitalized lease and any assignment,
deposit arrangement or financing lease intended as, or having the effect of,
security.

 

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“Obligations” shall have the meaning set forth in Section 3 hereof.

 

“Patent Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule
II hereto).

 

“Patents” means all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, of
any Grantor, now existing or hereafter acquired (including, without limitation,
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how and
formulae described in Schedule II hereto), all applications, registrations and
recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office, or in any
similar office or agency of the United States or any other country or any
political subdivision thereof), and all reissues, divisions, continuations,
continuations in part and extensions or renewals thereof.

 

“Permitted Liens” shall have the meaning set forth in the Notes.

 

“Pledged Debt” means the indebtedness described in Schedule VII hereto and all
indebtedness from time to time owned or acquired by a Grantor, the promissory
notes and other Instruments evidencing any or all of such indebtedness, and all
interest, cash, Instruments, Investment Property, financial assets, securities,
capital stock, other equity interests, stock options and commodity contracts,
notes, debentures, bonds, promissory notes or other evidences of indebtedness
and all other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness.

 

“Pledged Interests” means, collectively, (a) the Pledged Debt, (b) the Pledged
Shares and (c) all security entitlements in any and all of the foregoing.

 

“Pledged Issuer” has the meaning specified therefor in the definition of the
term “Pledged Shares”.

 

“Pledged Shares” means (a) the shares of capital stock or other equity interests
described in Schedule VIII hereto, whether or not evidenced or represented by
any stock certificate, certificated security or other Instrument, issued by the
Persons described in such Schedule VIII (the “Existing Issuers”), (b) the shares
of capital stock or other equity interests at any time and from time to time
acquired by a Grantor of any and all Persons now or hereafter existing (such
Persons, together with the Existing Issuers, being hereinafter referred to
collectively as the “Pledged Issuers” and each individually as a “Pledged
Issuer”), whether or not evidenced or represented by any stock certificate,
certificated security or other Instrument, and (c) the certificates representing
such shares of capital stock, all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
Instruments, Investment Property, financial assets, securities, capital stock,
other equity interests, stock options and commodity contracts, notes,
debentures, bonds, promissory notes or other evidences of indebtedness and all
other property (including, without limitation, any stock dividend and any
distribution in connection with a stock split) from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such capital stock.

 

 - 4 - 

 

 

“Trademark Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by any Grantor and now or hereafter covered
by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).

 

“Trademarks” means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a’s,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a’s, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.

 

“Secured Transaction Documents” means, collectively, the Securities Purchase
Agreement, the Notes (as defined in the Securities Purchase Agreements) and the
Security Documents (as defined in the Securities Purchase Agreement).

 

Section 2. Grant of Security Interest. As collateral security for all of the
Obligations, each Grantor hereby pledges and assigns to the Collateral Agent for
the benefit of the Buyers, and grants to the Collateral Agent for the benefit of
the Buyers a continuing security interest in, all personal property of such
Grantor, wherever located and whether now or hereafter existing and whether now
owned or hereafter acquired, of every kind and description, tangible or
intangible (collectively, but in any case, excluding any Excluded Collateral,
the “Collateral”), including, without limitation, the following:

 

(a) all Accounts;

 

(b) all Chattel Paper (whether tangible or electronic);

 

(c) the Commercial Tort Claims specified on Schedule VI hereto;

 

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(d) all Deposit Accounts (including, without limitation, all cash, and all other
property from time to time deposited therein and the monies and property in the
possession or under the control of the Collateral Agent or a Buyer or any
affiliate, representative, agent or correspondent of the Collateral Agent or a
Buyer;

 

(e) all Documents;

 

(f) all Equipment;

 

(g) all Fixtures;

 

(h) all General Intangibles (including, without limitation, all Payment
Intangibles);

 

(i) all Goods;

 

(j) all Instruments (including, without limitation, Promissory Notes and each
certificated Security);

 

(k) all Inventory;

 

(l) all Investment Property;

 

(m) all Copyrights, Patents and Trademarks, and all Licenses;

 

(n) all Letter-of-Credit Rights;

 

(o) all Supporting Obligations;

 

(p) all Pledged Interests;

 

(q) all other tangible and intangible personal property of such Grantor (whether
or not subject to the Code), including, without limitation, all bank and other
accounts and all cash and all investments therein, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by such Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of such Grantor or any other Person from time to
time acting for such Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and

 

(r) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products
of any and all of the foregoing Collateral;

 

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in each case, howsoever such Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

 

Section 3. Security for Obligations. The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the following
obligations, whether now existing or hereafter incurred (collectively, the
“Obligations”):

 

(a) the prompt payment by each Grantor, as and when due and payable (by
scheduled maturity, required prepayment, acceleration, demand or otherwise), of
all amounts from time to time owing by it in respect of the Securities Purchase
Agreement, the Notes, the Guaranty and the other Secured Transaction Documents,
including, without limitation, (A) all principal of and interest on the Notes
(including, without limitation, all interest that accrues after the commencement
of any Insolvency Proceeding of any Grantor, whether or not the payment of such
interest is unenforceable or is not allowable due to the existence of such
Insolvency Proceeding), (B) all amounts from time to time owing by such Grantor
under the Guaranty, and (C) all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any of the
Secured Transaction Documents; and

 

(b) the due performance and observance by each Grantor of all of its other
obligations from time to time existing in respect of any of the Secured
Transaction Documents for so long as the Notes are outstanding.

 

Section 4. Representations and Warranties. Each Grantor represents and warrants
as of the date hereof as follows:

 

(a) Schedule I hereto sets forth (i) the exact legal name of such Grantor, and
(ii) the organizational identification number of such Grantor or states that no
such organizational identification number exists.

 

(b) There is no pending or written notice threatening any action, suit,
proceeding or claim affecting such Grantor before any governmental authority or
any arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that could reasonably be expected to materially and adversely affect
the grant by such Grantor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or the exercise by the Collateral Agent
of any of its rights or remedies hereunder.

 

(c) All Federal, state and local tax returns and other reports required by
applicable law to be filed by such Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon such Grantor or any property of such Grantor (including, without
limitation, all federal income and social security taxes on employees’ wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with United States generally accepted accounting
principles consistently applied (“GAAP”).

 

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(d) All material Equipment, Fixtures, Goods and Inventory of such Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of such Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Schedule III hereto, except that such Grantor will give the
Collateral Agent not less than 10 days’ prior written notice of any change of
the location of any such Collateral, other than to locations set forth on
Schedule III and with respect to which the Collateral Agent has filed financing
statements and otherwise fully perfected its Liens thereon. Such Grantor’s chief
place of business and chief executive office, the place where such Grantor keeps
its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of (i) each Promissory Note, Security and other Instrument owned by
each Grantor and (ii) each Deposit Account, Securities Account and Commodities
Account of each Grantor, together with the name and address of each institution
at which each such Account is maintained, the account number for each such
Account and a description of the purpose of each such Account.

 

(e) Each material License now existing is, and any material License entered into
in the future will be, the legal, valid and binding obligation of the parties
thereto, enforceable against such parties in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, suretyship or other similar laws and
equitable principles (regardless of whether enforcement is sought in equity or
in law). No default under any material License by any such party has occurred,
nor does any defense, offset, deduction or counterclaim exist thereunder in
favor of any such party.

 

(f) Such Grantor owns and controls, or otherwise possesses adequate rights to
use, all Trademarks, Patents and Copyrights necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. Schedule II
hereto sets forth a true and complete list of all registered copyrights, issued
patents, and Trademarks (including, without limitation, any Internet domain
names and the registrar of each such Internet domain name), annually owned or
used by such Grantor as of the date hereof. To the best knowledge of each
Grantor, all such Intellectual Property of such Grantor is subsisting and in
full force and effect, has not been adjudged invalid or unenforceable, is valid
and enforceable and has not been abandoned in whole or in part except as could
not reasonably be expected to have a Material Adverse Effect. Except as set
forth in Schedule II, no such Intellectual Property is the subject of any
licensing or franchising agreement. Such Grantor has no knowledge of any
conflict with the rights of others to any Intellectual Property and, to the best
knowledge of such Grantor, such Grantor is not now infringing or in conflict
with any such rights of others in any material respect, and to the best
knowledge of such Grantor, no other Person is now infringing or in conflict in
any material respect with any such properties, assets and rights owned or used
by such Grantor except as could not reasonably be expected to have a Material
Adverse Effect. Such Grantor has not received any notice that it is violating or
has violated the trademarks, patents, copyrights, inventions, trade secrets,
proprietary information and technology, know-how, formulae, rights of publicity
or other intellectual property rights of any third party except as could not
reasonably be expected to have a Material Adverse Effect.

 

 - 8 - 

 

 

(g) Such Grantor is and will be at all times the sole and exclusive owner of, or
otherwise has and will have adequate rights in, the Collateral free and clear of
any Liens, except for Permitted Liens on any Collateral. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office except (A) such as may
have been filed in favor of the Collateral Agent relating to this Agreement, and
(B) such as may have been filed to perfect any Permitted Liens.

 

(h) [Intentionally omitted]

 

(i) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or other regulatory body, or any other Person,
is required for (i) the grant by such Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or (ii) the
exercise by the Collateral Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements, all of which financing
statements, have been duly filed and are in full force and effect, (B) with
respect to the perfection of the security interest created hereby in the
Intellectual Property, for the recording of the appropriate Assignment for
Security, substantially in the form of Exhibit A hereto, as applicable, in the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, (C) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to the Intellectual Property and Licenses,
(D) with respect to the perfection of the security interest created hereby in
titled Collateral, for the submission of an appropriate application requesting
that the Lien of the Collateral Agent be noted on the certificate of title or
certificate of ownership, completed and authenticated by the applicable Grantor,
together with the certificate of title or certificate of ownership, with respect
to such titled Collateral, to the appropriate Governmental Authority, (E) with
respect to any action that may be necessary to obtain control of Collateral
constituting Electronic Chattel Paper, Investment Property or Letter-of-Credit
Rights, the taking of such actions, and (F) the Collateral Agent’s having
possession of all Documents, Chattel Paper, Instruments and cash constituting
Collateral.

 

(j) This Agreement creates in favor of the Collateral Agent a legal, valid and
enforceable security interest in the Collateral, as security for the
Obligations. The Collateral Agent’s having possession of all Instruments and
cash constituting Collateral from time to time, the recording of the appropriate
Assignment for Security executed pursuant hereto in the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, and the
filing of the financing statements and the other filings and recordings, as
applicable, described in Schedule V hereto and, with respect to the Intellectual
Property hereafter existing and not covered by an appropriate Assignment for
Security, the recording in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, of appropriate instruments of
assignment, result in the perfection of such security interests, in each case,
as and to the extent such security interests can be perfected by taking all
actions required to be taken pursuant to the terms of this Agreement. Such
security interests in such Collateral are, or in the case of Collateral in which
such Grantor obtains rights after the date hereof, will be, perfected, first
priority security interests, subject only to Permitted Liens and the recording
of such instruments of assignment, in each case, as and to the extent such
security interests can be perfected by taking all actions required to be taken
pursuant to the terms of this Agreement. Such recordings and filings and all
other action necessary or desirable to perfect and protect such security
interest have been duly taken, except for the Collateral Agent’s having
possession of Instruments and cash constituting Collateral after the date hereof
and the other filings and recordations described in Section 4(i) hereof.

 

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(k) As of the date hereof, such Grantor does not hold any Commercial Tort Claims
nor is such Grantor aware of any such pending claims, except for such claims
described in Schedule VI.

 

(l) Each of the Grantors (other than the Company) is a wholly-owned Subsidiary
of the Company and are the only Subsidiaries of the Company, as of the date
hereof.

 

Section 5. Covenants as to the Collateral. So long as any of the Obligations
(other than contingent obligations for which no claim has been asserted) shall
remain outstanding, unless the Collateral Agent shall otherwise consent in
writing:

 

(a) Further Assurances. Each Grantor will at its expense, at any time and from
time to time, promptly execute and deliver all further instruments and documents
and take all further action that the Collateral Agent may reasonably request in
order to: (i) perfect and protect the security interest purported to be created
hereby; (ii) enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder in respect of the Collateral; or (iii) otherwise effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously all Chattel Paper and each License and, at the request of the
Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) delivering and pledging to the Collateral Agent
hereunder each Promissory Note, Security, Chattel Paper or other Instrument, now
or hereafter owned by such Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent, (C) executing and filing (to the extent, if any, that such
Grantor’s signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or desirable or that the Collateral Agent may request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral in each case as the Collateral Agent may reasonably request,
all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent’s security interest
created hereby and obtaining a written acknowledgment from such Person that such
Person holds possession of the Collateral for the benefit of the Collateral
Agent, which such written acknowledgement shall be in form and substance
satisfactory to the Collateral Agent, (F) if at any time after the date hereof,
such Grantor acquires or holds any Commercial Tort Claim having a value of
$25,000 or more in any proceeding in a court of competent jurisdiction, promptly
notifying the Collateral Agent in a writing signed by such Grantor setting forth
a brief description of such Commercial Tort Claim and granting to the Collateral
Agent a security interest therein and in the proceeds thereof, which writing
shall incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) if requested by the Collateral Agent,
upon the acquisition after the date hereof by such Grantor of any motor vehicle
or other Equipment having a value of $25,000 or more, subject to a certificate
of title or ownership (other than a Motor Vehicle or Equipment that is subject
to a purchase money security interest), causing the Collateral Agent to be
listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with the
Securities Purchase Agreement; and (H) taking all actions required by any
earlier versions of the Uniform Commercial Code or by other law, as applicable,
in any relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in any foreign jurisdiction.

 

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(b) Location of Equipment and Inventory. Each Grantor will keep the Equipment
and Inventory (other than as may be out for repair or refurbishment, or in the
possession of employees or customers in the ordinary course of business) at the
locations specified therefor in Section 4(g) hereof or, upon not less than ten
(10) days’ prior written notice to the Collateral Agent accompanied by a new
Schedule V hereto indicating each new location of the Equipment and Inventory,
at such other locations in the United States.

 

(c) Condition of Equipment. Each Grantor will maintain or cause the Equipment
(necessary or useful to its business) to be maintained and preserved in good
condition, repair and working order, ordinary wear and tear excepted, and will
forthwith, or in the case of any loss or damage to any material Equipment of
such Grantor within a commercially reasonable time after the occurrence thereof,
make or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may reasonably request to such end. Such
Grantor will promptly furnish to the Collateral Agent a statement describing in
reasonable detail any such loss or damage to any such Equipment.

 

(d) Taxes, Etc. Each Grantor agrees to pay promptly when due all material
property and other material taxes, assessments and governmental charges or
levies imposed upon the Equipment and Inventory, except to the extent the
validity thereof is being contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves in accordance with GAAP have
been set aside for the payment thereof.

 

(e) Insurance.

 

(i) Each Grantor will, at its own expense, maintain insurance (including,
without limitation, commercial general liability and property insurance) with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with responsible and reputable insurance companies or associations
as is required by any governmental authority having jurisdiction with respect
thereto or as is carried by such Grantor as of the date hereof and in any event,
in amount, adequacy and scope reasonably satisfactory to the Collateral Agent.
Unless otherwise agreed to by the Collateral Agent, each such policy for
liability insurance shall provide for all losses to be paid on behalf of the
Collateral Agent and such Grantor as their respective interests may appear, and
each policy for property damage insurance shall provide for all losses to be
adjusted with, and paid directly to, the Collateral Agent. Unless otherwise
agreed to by the Collateral Agent, each such policy shall in addition (A) name
the Collateral Agent as an additional insured party thereunder (without any
representation or warranty by or obligation upon the Collateral Agent) as their
interests may appear, (B) contain an agreement by the insurer that any loss
thereunder shall be payable to the Collateral Agent on its own account
notwithstanding any action, inaction or breach of representation or warranty by
such Grantor, (C) provide that there shall be no recourse against the Collateral
Agent for payment of premiums or other amounts with respect thereto, and (D)
provide that at least 30 days’ prior written notice of cancellation, lapse,
expiration or other adverse change shall be given to the Collateral Agent by the
insurer. Such Grantor will, if so reasonably requested by the Collateral Agent,
deliver to the Collateral Agent original or duplicate policies of such insurance
and, as often as the Collateral Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Such Grantor will
also, at the reasonable request of the Collateral Agent, execute and deliver
instruments of assignment of such insurance policies and cause the respective
insurers to acknowledge notice of such assignment.

 

 - 11 - 

 

 

(ii) Reimbursement under any liability insurance maintained by a Grantor
pursuant to this Section 5(e) may be paid directly to the Person who shall have
incurred liability covered by such insurance.

 

(iii) All insurance payments received by any Grantor during the continuation of
any Event of Default in respect of such Equipment or Inventory shall be paid to
the Collateral Agent and applied as specified in Section 7(b) hereof.

 

(f) Provisions Concerning the Accounts and the Licenses.

 

(i) Each Grantor will (A) give the Collateral Agent at least ten (10) days’
prior written notice of any change in such Grantor’s name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation as set
forth in Section 4(b) hereto, (C) immediately notify the Collateral Agent upon
obtaining an organizational identification number, if on the date hereof such
Grantor did not have such identification number, and (D) keep adequate records
concerning the Accounts and Chattel Paper.

 

(ii) Each Grantor will, except as otherwise provided in this subsection (f),
continue to use commercially reasonable efforts to collect, at its own expense,
all amounts due or to become due under the Accounts. In connection with such
collections, such Grantor may (and, at the Collateral Agent’s direction, will)
take such action as such Grantor or the Collateral Agent may deem necessary or
advisable to enforce collection or performance of the Accounts; provided,
however, that the Collateral Agent shall have the right at any time, upon the
occurrence and during the continuance of an Event of Default, to notify the
account debtors or obligors under any Accounts of the assignment of such
Accounts to the Collateral Agent and to direct such account debtors or obligors
to make payment of all amounts due or to become due to such Grantor thereunder
directly to the Collateral Agent or its designated agent and, upon such
notification and at the expense of such Grantor and to the extent permitted by
law, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by a Grantor of a notice
from the Collateral Agent that the Collateral Agent has notified, intends to
notify, or has enforced or intends to enforce a Grantor’s rights against the
account debtors or obligors under any Accounts as referred to in the proviso to
the immediately preceding sentence, (A) all amounts and proceeds (including
Instruments) received by such Grantor in respect of the Accounts shall be
received in trust for the benefit of the Collateral Agent hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary
endorsement) to be held as cash collateral and applied as specified in Section
7(b) hereof, and (B) such Grantor will not adjust, settle or compromise the
amount or payment of any Account or release wholly or partly any account debtor
or obligor thereof or allow any credit or discount thereon. In addition, upon
the occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which such Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall (in the sole and absolute
discretion of the Collateral Agent) be applied to the repayment of the
Obligations or distributed in accordance with Section 7 hereof.

 

 - 12 - 

 

 

(iii) Upon the occurrence and during the continuance of any material breach or
default under any material License by any party thereto other than a Grantor,
the Grantor party thereto will, promptly after obtaining knowledge thereof, give
the Collateral Agent written notice of the nature and duration thereof,
specifying what action, if any, it has taken and proposes to take with respect
thereto and thereafter will take reasonable steps to protect and preserve its
rights and remedies in respect of such breach or default, or will obtain or
acquire an appropriate substitute License.

 

(iv) [Intentionally omitted]

 

(v) Each Grantor will, in accordance with its reasonable business judgment,
exercise promptly and diligently each and every right which it may have under
each material License (other than any right of termination) and will duly
perform and observe in all respects all of its obligations under each material
License and will take all action reasonably necessary to maintain such Licenses
in full force and effect.

 

(g) Transfers and Other Liens.

 

(i) No Grantor will sell, assign (by operation of law or otherwise), lease,
license, exchange or otherwise transfer or dispose of any of the Collateral,
except (A) Inventory in the ordinary course of business, (B) worn-out or
obsolete assets not necessary to the business, (C) dispositions not otherwise
permitted hereunder which are made for fair market value; provided, that (i) at
the time of any disposition, no Event of Default shall exist or shall result
from such disposition, (ii) 100% of the aggregate sales price from such
disposition shall be paid in cash, and (iii) the aggregate fair market value of
all assets so sold by the Grantors, together, shall not exceed in any $25,000 in
any 12 month period, (D) dispositions of cash equivalents for fair market value,
(E) dispositions among Grantors, (F) discounting, sale, write-off or
forgiveness, without recourse, of delinquent accounts receivable in the ordinary
course of business, but only in connection with the compromise or collection
thereof, (G) any disposition to the extent caused by any involuntary loss,
destruction, damage or other casualty or any condemnation, seizure or taking, by
exercise of the power of eminent domain or otherwise, or confiscation or
requisition of use of any property, (H) the lapse or disposition of registered
Patents, Trademarks and other Intellectual Property of any Grantor to the extent
determined by such Grantor to no longer be material to the conduct of its
business, (I) non-exclusive licenses and sublicenses granted by a Grantor and
leases or subleases (by a Grantor as lessor or sublessor) to third parties not
materially interfering with the business of the Grantors, (J) exclusive licenses
and sublicenses granted by a Grantor to third parties solely for exploitation
and use outside of North America and not materially interfering with the
business of the Grantors, (K) the contemporaneous exchange of property for
property of a like kind, to the extent that the property received in such
exchange is of a value equivalent to the value of the property exchanged and (L)
sales of accounts receivables of a Grantor in connection with a factoring
facility provided to a Grantor by a third party that is not an affiliate of the
Company or any Grantor; provided, that any such sale of accounts receivable
shall be made (1) on a non-recourse basis to the Company and its Subsidiaries,
(2) at a discount of no more than 10%, and (3) otherwise on customary market
terms.

 

 - 13 - 

 

 

(ii) No Grantor will create, suffer to exist or grant any Lien upon or with
respect to any Collateral other than a Permitted Lien.

 

(h) Intellectual Property.

 

(i) If applicable, each Grantor shall, upon the Collateral Agent’s written
request, duly execute and deliver the applicable Assignment for Security in the
form attached hereto as Exhibit A. Each Grantor (either itself or through
licensees) will, and will cause each licensee thereof to, in accordance with its
reasonable business judgment, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force and free from any claim of abandonment for non-use, and such Grantor
will not (nor permit any licensee thereof to) do any act or knowingly omit to do
any act whereby any Intellectual Property may become invalidated; provided,
however, that so long as no notice to the contrary has been given by the
Collateral Agent during the continuance of any Event of Default, such Grantor
shall not have an obligation to use or to maintain any Intellectual Property (A)
that relates solely to any product or work, that has been, or is in the process
of being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as another Intellectual Property
that is in full force, so long the failure to use or maintain such Intellectual
Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such other Intellectual Property is subject
to the Lien and security interest created by this Agreement. Each Grantor will,
in accordance with its reasonable business judgment, cause to be taken all
necessary steps in any proceeding before the United States Patent and Trademark
Office and the United States Copyright Office or any similar office or agency in
any other country or political subdivision thereof to maintain each registration
of the Intellectual Property (other than the Intellectual Property described in
the proviso to the immediately preceding sentence), including, without
limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
payment of maintenance fees, filing fees, taxes or other governmental fees in
the ordinary course of business. If any material Intellectual Property (other
than Intellectual Property described in the proviso to the first sentence of
subsection (i) of this clause (h)) is infringed, misappropriated, diluted or
otherwise violated in any material respect by a third party, such Grantor shall
(x) upon learning of such infringement, misappropriation, dilution or other
violation, promptly notify the Collateral Agent and (y) to the extent such
Grantor shall deem appropriate under the circumstances, promptly sue for
infringement, misappropriation, dilution or other violation, seek injunctive
relief where appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as
such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from
time to time upon its reasonable request statements and schedules further
identifying and describing the Intellectual Property and Licenses and such other
reports in connection with the Intellectual Property and Licenses as the
Collateral Agent may reasonably request, all in reasonable detail and promptly
upon request of the Collateral Agent, following receipt by the Collateral Agent
of any such statements, schedules or reports, such Grantor shall modify this
Agreement by amending Schedule II hereto, as the case may be, to include any
Intellectual Property which becomes part of the Collateral under this Agreement
and shall execute and authenticate such documents and do such acts as shall be
necessary or, in the judgment of the Collateral Agent, desirable to subject such
Intellectual Property to the Lien and security interest created by this
Agreement.

 

 - 14 - 

 

 

(ii) [Intentionally omitted]

 

(iii) [Intentionally omitted]

 

(i) Deposit, Commodities and Securities Accounts. Upon the Collateral Agent’s
request and unless otherwise agreed by the Collateral Agent, each Grantor shall
cause each bank and other financial institution with an account referred to in
Schedule IV hereto to execute and deliver to the Collateral Agent a control
agreement, in form and substance reasonably satisfactory to the Collateral
Agent, duly executed by such Grantor and such bank or financial institution, or
enter into other arrangements in form and substance reasonably satisfactory to
the Collateral Agent, pursuant to which such institution shall irrevocably
agree, inter alia, that (unless otherwise agreed by the Collateral Agent) (i) it
will comply at any time with the instructions originated by the Collateral Agent
to such bank or financial institution directing the disposition of cash,
Commodity Contracts, securities, Investment Property and other items from time
to time credited to such account, without further consent of such Grantor, which
instructions the Collateral Agent will not give to such bank or other financial
institution in the absence of a continuing Event of Default, (ii) all cash,
Commodity Contracts, securities, Investment Property and other items of such
Grantor deposited with such institution shall be subject to a perfected, first
priority security interest in favor of the Collateral Agent, (iii) any right of
set off, banker’s Lien or other similar Lien, security interest or encumbrance
shall be fully waived as against the Collateral Agent, and (iv) upon receipt of
written notice from the Collateral Agent during the continuance of an Event of
Default, such bank or financial institution shall immediately send to the
Collateral Agent by wire transfer (to such account as the Collateral Agent shall
specify, or in such other manner as the Collateral Agent shall direct) all such
cash, the value of any Commodity Contracts, securities, Investment Property and
other items held by it. Without prior written notice to the Collateral Agent,
such Grantor shall not make or maintain any Deposit Account, Commodity Account
or Securities Account except for the accounts set forth in Schedule IV hereto.
The provisions of this paragraph 5(i) shall not apply to (i) Deposit Accounts
for which the Collateral Agent is the depositary, (ii) Deposit Accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of a Grantor’s salaried
employees, and (iii) Deposit Accounts not having in excess of $25,000 in any
three (3) consecutive business days.

 

(j) [Intentionally omitted.]

 

(k) Control. Each Grantor hereby agrees to take any or all action that may be
necessary or desirable or that the Collateral Agent may reasonably request in
order for the Collateral Agent to obtain control in accordance with Sections
9-105 – 9-107 of the Code with respect to the following Collateral having a
value in excess of $25,000: (i) Electronic Chattel Paper, (ii) Investment
Property, (iii) Pledged Interests and (iv) Letter-of-Credit Rights.

 

(l) Inspection and Reporting. Each Grantor shall permit the Collateral Agent, or
any agent or representatives thereof or such professionals or other Persons as
the Collateral Agent may designate, not more than once a year in the absence of
an Event of Default, (i) to examine and make copies of and abstracts from such
Grantor’s records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory
and other assets of such Grantor from time to time, (iii) to conduct audits,
physical counts, appraisals and/or valuations, examinations at the locations of
such Grantor. Each Grantor shall also permit the Collateral Agent, or any agent
or representatives thereof or such professionals or other Persons as the
Collateral Agent may designate to discuss such Grantor’s affairs, finances and
accounts with any of its officers subject to the execution by the Collateral
Agent or its designee(s) of a mutually agreeable confidentiality agreement.

 

(m) Future Subsidiaries. If any Grantor shall hereafter create or acquire any
Subsidiary (other than joint ventures for which the Grantors, taken as a whole,
control less than 50% of the ordinary voting power with respect to the equity
interests of such joint venture), simultaneously with the creation of
acquisition of any such Subsidiary, such Grantor shall cause such Subsidiary to
become a party to this Agreement as an additional “Grantor” hereunder and to
become a party to the Guaranty as an additional “Guarantor” thereunder, and to
duly execute and/or deliver such opinions of counsel and other documents, each
in form and substance acceptable to the Collateral Agent, as the Collateral
Agent shall reasonably request with respect thereto.

 

 - 15 - 

 

 

Section 6. Additional Provisions Concerning the Collateral.

 

(a) Each Grantor hereby (i) authorizes the Collateral Agent to file one or more
Uniform Commercial Code financing or continuation statements, and amendments
thereto, relating to the Collateral (including, without limitation, financing
statements describing the Collateral as “all assets” or “all personal property”
or words of similar effect) and (ii) ratifies such authorization to the extent
that the Collateral Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

 

(b) Each Grantor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in the
Collateral Agent’s discretion, so long as an Event of Default shall have
occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of such Grantor under Section
5 hereof), including, without limitation, (i) to obtain and adjust insurance
required to be paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the collection of
any Collateral or otherwise to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral. This power is coupled with an
interest and is irrevocable until the complete conversion of all of the
Company’s obligations under the Notes to equity securities of the Company and/or
payment in full in cash of all obligations under the Notes (together with any
matured indemnification obligations as of the date of such conversion and/or
payment, but excluding any inchoate or unmatured contingent indemnification
obligations).

 

(c) For the purpose of enabling the Collateral Agent to exercise rights and
remedies hereunder, at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies upon and during an Event of
Default, and for no other purpose, each Grantor hereby grants to the Collateral
Agent, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Grantor)
to use, assign, license or sublicense any Intellectual Property now owned or
hereafter acquired by such Grantor, wherever the same may be located, including
in such license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for the
compilation or printout thereof. Notwithstanding anything contained herein to
the contrary, but subject to the provisions of the Securities Purchase Agreement
that limit the right of such Grantor to dispose of its property and Section 5(h)
hereof, so long as no written notice to the contrary has been given to Grantors
by the Collateral Agent during any Event of Default, such Grantor may exploit,
use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of its
business. In furtherance of the foregoing, unless an Event of Default shall have
occurred and be continuing, the Collateral Agent shall from time to time, upon
the request of a Grantor, execute and deliver any instruments, certificates or
other documents, in the form so requested, which such Grantor shall have
certified are appropriate (in such Grantor’s judgment) to allow it to take any
action permitted above (including relinquishment of the license provided
pursuant to this clause (c) as to any Intellectual Property). Further, upon the
complete conversion of all of the Company’s obligations under the Notes to
equity securities of the Company and/or payment in full in cash of all
obligations under the Notes (together with any matured indemnification
obligations as of the date of such conversion and/or payment, but excluding any
inchoate or unmatured contingent indemnification obligations), the Collateral
Agent (subject to Section 10(e) hereof) shall be automatically released and
reassigned to such Grantor all of the Collateral Agent’s right, title and
interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever. The exercise of rights and
remedies hereunder by the Collateral Agent shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by such Grantor in
accordance with the second sentence of this clause (c).

 

 - 16 - 

 

 

(d) If a Grantor fails to perform any agreement contained herein, the Collateral
Agent may during an Event of Default itself perform, or cause performance of,
such agreement or obligation, in the name of such Grantor or the Collateral
Agent, and the expenses of the Collateral Agent incurred in connection therewith
shall be payable by such Grantor pursuant to Section 8 hereof and shall be
secured by the Collateral.

 

(e) The powers conferred on the Collateral Agent hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the Collateral
Agent 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.

 

(f) Anything herein to the contrary notwithstanding (i) each Grantor shall
remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Collateral Agent of any of its rights hereunder shall not
release such Grantor from any of its obligations under the Licenses or otherwise
in respect of the Collateral, and (iii) the Collateral Agent shall not have any
obligation or liability by reason of this Agreement under the Licenses or with
respect to any of the other Collateral, nor shall the Collateral Agent be
obligated to perform any of the obligations or duties of such Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

 

Section 7. Remedies Upon Event of Default. If any Event of Default shall have
occurred and be continuing:

 

 - 17 - 

 

 

(a) The Collateral Agent may exercise in respect of the Collateral, in addition
to any other rights and remedies provided for herein or otherwise available to
it, all of the rights and remedies of a secured party upon default under the
Code (whether or not the Code applies to the affected Collateral), and also may
(i) take absolute control of the Collateral, including, without limitation,
transfer into the Collateral Agent’s name or into the name of its nominee or
nominees (to the extent the Collateral Agent has not theretofore done so) and
thereafter receive, for the benefit of the Collateral Agent, all payments made
thereon, give all consents, waivers and ratifications in respect thereof and
otherwise act with respect thereto as though it were the outright owner thereof,
(ii) require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or part
of its respective Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent at a place or places to be designated by the
Collateral Agent that is reasonably convenient to both parties, and the
Collateral Agent may enter into and occupy any premises owned or leased by such
Grantor where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Collateral Agent’s rights and
remedies hereunder or under law, without obligation to such Grantor in respect
of such occupation, and (iii) without notice except as specified below and
without any obligation to prepare or process the Collateral for sale, (A) sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms as
the Collateral Agent may deem commercially reasonable and/or (B) lease, license
or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to
the extent notice of sale or any other disposition of its respective Collateral
shall be required by law, at least ten (10) days’ notice to such Grantor of the
time and place of any public sale or the time after which any private sale or
other disposition of its respective Collateral is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale or other disposition of any Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against the Collateral Agent
and the Buyers arising by reason of the fact that the price at which its
respective Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree, and waives all rights that such Grantor may have to require that all or
any part of such Collateral be marshalled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale of its
respective Collateral by the Collateral Agent shall be made without warranty,
(ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in
clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing, (1)
upon written notice to any Grantor from the Collateral Agent, such Grantor shall
cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (2) the Collateral
Agent may, at any time and from time to time, upon 10 days’ prior notice to such
Grantor, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner, as
the Collateral Agent shall in its sole discretion determine to the extent
consistent with any restrictions or conditions imposed upon such Grantor with
respect to such Intellectual Property by license or other contractual
arrangement; and (2) the Collateral Agent may, at any time, pursuant to the
authority granted in Section 6 hereof (such authority being effective upon the
occurrence and during the continuance of an Event of Default), execute and
deliver on behalf of such Grantor, one or more instruments of assignment of the
Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.

 

 - 18 - 

 

 

(b) Any cash held by the Collateral Agent as Collateral and all Cash Proceeds
received by the Collateral Agent in respect of any sale of or collection from,
or other realization upon, all or any part of the Collateral may, in the
discretion of the Collateral Agent, be held by the Collateral Agent as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in
whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with
the provisions of the Securities Purchase Agreement. Any surplus of such cash or
Cash Proceeds held by the Collateral Agent and remaining after the complete
conversion of all of the Company’s obligations under the Notes to equity
securities of the Company and/or payment in full in cash of all obligations
under the Notes (together with any matured indemnification obligations as of the
date of such conversion and/or payment, but excluding any inchoate or unmatured
contingent indemnification obligations) shall be paid over to whomsoever shall
be lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.

 

(c) In the event that the proceeds of any such sale, collection or realization
are insufficient to pay all amounts to which the Collateral Agent and the Buyers
are legally entitled, each Grantor shall be liable for the deficiency, together
with interest thereon at the highest rate specified in any of the applicable
Secured Transaction Documents for interest on overdue principal thereof or such
other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees, costs, expenses and other client charges of
any attorneys employed by the Collateral Agent to collect such deficiency.

 

(d) Each Grantor hereby acknowledges that if the Collateral Agent complies with
any applicable state, provincial, or federal law requirements in connection with
a disposition of the Collateral, such compliance will not adversely affect the
commercial reasonableness of any sale or other disposition of the Collateral.

 

(e) The Collateral Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the Collateral Agent’s rights hereunder and in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that each Grantor lawfully may, such Grantor hereby agrees that it
will not invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent’s rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, such Grantor hereby irrevocably waives the
benefits of all such laws.

 

 - 19 - 

 

 

Section 8. Indemnity and Expenses.

 

(a) Each Grantor agrees, jointly and severally, to defend, protect, indemnify
and hold the Collateral Agent and each of the Buyers, jointly and severally,
harmless from and against any and all claims, damages, losses, liabilities,
obligations, penalties, fees, costs and expenses (including, without limitation,
reasonable legal fees, costs, expenses, and disbursements of such Person’s
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from such Person’s
gross negligence or willful misconduct, as determined by a final judgment of a
court of competent jurisdiction.

 

(b) Each Grantor agrees, jointly and severally, to, upon demand, pay to the
Collateral Agent the amount of any and all reasonable costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for
the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral
Agent), which the Collateral Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent hereunder, or (iv) the failure by any
Grantor to perform or observe any of the provisions hereof.

 

Section 9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied or delivered, if to a Grantor
at its address specified below and if to the Collateral Agent to it, at its
address specified below; or as to any such Person, at such other address as
shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (a) if sent by certified mail, return
receipt requested, when received or five days after deposited in the mails,
whichever occurs first, (b) if telecopied or sent by electronic mail, when
transmitted (during normal business hours), or (c) if delivered, upon delivery.

 

Section 10. Miscellaneous.

 

(a) No amendment of any provision of this Agreement shall be effective unless it
is in writing and signed by each Grantor and the Collateral Agent, and no waiver
of any provision of this Agreement, and no consent to any departure by a Grantor
therefrom, shall be effective unless it is in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

 

 - 20 - 

 

 

(b) No failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right hereunder or under any of the other Secured Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Agent or
any Buyer provided herein and in the other Secured Transaction Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Collateral Agent or any Buyer under any of
the other Secured Transaction Documents against any party thereto are not
conditional or contingent on any attempt by such Person to exercise any of its
rights under any of the other Secured Transaction Documents against such party
or against any other Person, including but not limited to, any Grantor.

 

(c) To the extent permitted by applicable law, each Grantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Obligations and this Agreement and any requirement that the
Collateral Agent exhaust any right or take any action against any other Person
or any Collateral. Each Grantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated herein and that
the waiver set forth in this Section 10(c) is knowingly made in contemplation of
such benefits. The Grantors hereby waive any right to revoke this Agreement, and
acknowledge that this Agreement is continuing in nature and applies to all
Obligations, whether existing now or in the future.

 

(d) No Grantor may exercise any rights that it may now or hereafter acquire
against any other Grantor that arise from the existence, payment, performance or
enforcement of any Grantor’s obligations under this Agreement, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Collateral Agent against any Grantor or any Collateral, whether or
not such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from any
Grantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security solely on account of such claim, remedy or
right, unless and until the complete conversion of all of the Company’s
obligations under the Notes to equity securities of the Company and/or payment
in full in cash of all obligations under the Notes (together with any matured
indemnification obligations as of the date of such conversion and/or payment,
but excluding any inchoate or unmatured contingent indemnification obligations).
If any amount shall be paid to a Grantor in violation of the immediately
preceding sentence at any time prior to the complete conversion of all of the
Company’s obligations under the Notes to equity securities of the Company and/or
payment in full in cash of all obligations under the Notes (together with any
matured indemnification obligations as of the date of such conversion and/or
payment, but excluding any inchoate or unmatured contingent indemnification
obligations), such amount shall be held in trust for the benefit of the
Collateral Agent and shall forthwith be paid to the Collateral Agent to be
credited and applied to the Obligations and all other amounts payable under the
Secured Transaction Documents, whether matured or unmatured, in accordance with
the terms of the Secured Transaction Documents, or to be held as Collateral for
any Obligations or other amounts payable under the Secured Transaction Documents
thereafter arising.

 

 - 21 - 

 

 

(e) Any provision of this Agreement that 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 portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

 

(f) This Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until the complete conversion of
all of the Company’s obligations under the Notes to equity securities of the
Company and/or payment in full in cash of all obligations under the Notes
(together with any matured indemnification obligations as of the date of such
conversion and/or payment, but excluding any inchoate or unmatured contingent
indemnification obligations), and (ii) be binding on each Grantor and all other
Persons who become bound as debtor to this Agreement in accordance with Section
9-203(d) of the Code and shall inure, together with all rights and remedies of
the Collateral Agent and the Buyers hereunder, to the benefit of the Collateral
Agent and the Buyers and their respective permitted successors, transferees and
assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to any Grantor, the Collateral Agent and the
Buyers may assign or otherwise transfer their rights and obligations under this
Agreement and any of the other Secured Transaction Documents, to any other
Person and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Collateral Agent and the Buyers
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Collateral Agent or any such Buyer shall mean the assignee
of the Collateral Agent or such Buyer. None of the rights or obligations of any
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
without the consent of the Collateral Agent shall be null and void.

 

(g) Upon receipt or delivery by any Grantor of any notice in accordance with the
terms of this Agreement unless the Company has in good faith determined that the
matters relating to such notice do not constitute material, nonpublic
information relating to the Company or its Subsidiaries, the Company shall
within two (2) Business Days after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains
material, nonpublic information relating to the Company or its Subsidiaries, the
Company so shall indicate to the Collateral Agent and the Buyers
contemporaneously with delivery of such notice, and in the absence of any such
indication, the Collateral Agent and any Buyer shall be allowed to presume that
all matters relating to such notice do not constitute material, nonpublic
information relating to the Company or its Subsidiaries.

 

(h) Upon the complete conversion of all of the Company’s obligations under the
Notes to equity securities of the Company and/or payment in full in cash of all
obligations under the Notes (together with any matured indemnification
obligations as of the date of such conversion and/or payment, but excluding any
inchoate or unmatured contingent indemnification obligations), (i) this
Agreement and the security interests created hereby shall automatically
terminate and all rights to the Collateral shall automatically revert to the
respective Grantor that granted such security interests hereunder, and (ii) the
Collateral Agent will, upon such Grantor’s request and at such Grantor’s
expense, (A) return to such Grantor such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms hereof, and
(B) execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination, all without any representation,
warranty or recourse whatsoever.

 

 - 22 - 

 

 

(i) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR
THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY
INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.

 

(j) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.

 

(k) EACH PARTY AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE
COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER SECURED TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.

 

(l) Nothing contained herein shall affect the right of the Collateral Agent to
serve process in any other manner permitted by law or commence legal proceedings
or otherwise proceed against any Grantor or any property of such Grantor in any
other jurisdiction.

 

(m) Each Party irrevocably and unconditionally waives any right it may have to
claim or recover in any legal action, suit or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.

 

(n) Section headings herein are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.

 

(o) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 - 23 - 

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

 

  ENERPULSE TECHNOLOGIES, INC., a Nevada corporation         By:     Name:    
Title:

 

  Address for Notices:   2451 Alamo Ave. NE,   Albuquerque, New Mexico 87106  
Attention: Bryan Templeton,                      Chief Financial Officer  
Telephone: (505) 842-5201   Facsimile: (505) 213-0013

 

  ENERPULSE, INC., a Delaware corporation         By:     Name:     Title:

 

  Address for Notices:   2451 Alamo Ave. NE,   Albuquerque, New Mexico 87106  
Attention: Bryan Templeton,                      Chief Financial Officer  
Telephone: (505) 842-5201   Facsimile: (505) 213-0013

 

Pledge and Security Agreement

 

   

 

 

ACCEPTED BY:         Passaic River Capital LLC   as Collateral Agent         By:
      Name:     Title:     Address:  

 

Pledge and Security Agreement

 

   

 

 

SCHEDULE I

 

LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR
JURISDICTION OF ORGANIZATION

 

Legal Name:   State of Organization:   Type of Organization:   Organizational
Identification Number: Enerpulse Technologies, Inc.   Nevada   Corporation  
[_________]               Enerpulse, Inc.   Delaware   Corporation   [_________]

 

 Sched. I-1 

 

 

SCHEDULE II

INTELLECTUAL PROPERTY AND LICENSES; TRADE NAMES

 

A. COPYRIGHTS

 

1.Registered Copyrights

 

[____________]

 

2.Copyright Applications

 

[____________]

 

3.Copyright Licenses

 

[____________]

 

B. PATENTS

 

1.Patents    

[____________]

 

2.Patent Applications

 

[____________]

 

3.Patent Licenses

 

[____________]

 

C. TRADEMARKS

 

1.Registered Trademarks

 

[____________]

 

2.Trademark Applications

 

[____________]

 

3.Trademark Licenses

 

[____________]

 

D. OTHER PROPRIETARY RIGHTS

 

[____________]

 

E. TRADE NAMES

 

[____________]

 

F. NAME OF, AND EACH TRADE NAME USED BY, EACH PERSON FROM WHICH A GRANTOR HAS
ACQUIRED ANY SUBSTANTIAL PART OF THE COLLATERAL WITHIN THE PRECEDING FIVE YEARS

 

[____________]

 

 Sched. II-1 

 

 

SCHEDULE III

 

LOCATIONS

 

Grantor:   Location:   Description: Enerpulse Technologies, Inc.   2451 Alamo
Ave. NE,
Albuquerque, New Mexico 87106   Chief Executive Office           Enerpulse, Inc.
  2451 Alamo Ave. NE,
Albuquerque, New Mexico 87106   Chief Executive Office

 

 Sched. III-1 

 

 

SCHEDULE IV

 

PROMISSORY NOTES, SECURITIES, DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS
AND COMMODITIES ACCOUNTS

 

A. Promissory Notes:

 

[_____________]

 

B. Securities and Other Instruments:

 

[_____________]

 

C. Deposit Accounts, Securities Accounts and Commodities Accounts:

 

Grantor:   Name and Address
of Institution
Maintaining
Account:   Account Number:   Type of Account: [_________]   [_________]  
[_________]   [_________]               [_________]   [_________]   [_________]
  [_________]

 

 Sched. IV-1 

 

 

SCHEDULE V

 

UCC-1 FINANCING STATEMENTS

 

Name of Grantor:   Secretary of State: Enerpulse Technologies, Inc.   Nevada    
  Enerpulse, Inc.   Delaware

 

 Sched. V-1 

 

 

SCHEDULE VI

 

COMMERCIAL TORT CLAIMS

 

[_____________]

 

 Sched. VI-1 

 

 

SCHEDULE VII

 

PLEDGED DEBT

 

[_____________]

 

 Sched. VII-1 

 

 

SCHEDULE VIII

 

PLEDGED SHARES

 

Grantor:   Name of Pledged Issuer:   Number of Shares/Units:   Percentage of
Outstanding Shares/Units:   Class:   Certificate Number: Enerpulse Technologies,
Inc.   Enerpulse, Inc.   [______]   [100]   Common Stock   [_______]            
         

 

 Sched. VIII-1 

 

 

EXHIBIT A

 

ASSIGNMENT FOR SECURITY

 

[TRADEMARKS] [PATENTS] [COPYRIGHTS]

 

WHEREAS, ______________________________ (the “Assignor”) [has adopted, used and
is using, and holds all right, title and interest in and to, the trademarks and
service marks listed on the annexed Schedule 1A, which trademarks and service
marks are registered or applied for in the United States Patent and Trademark
Office (the “Trademarks”)] [holds all right, title and interest in the letter
patents, design patents and utility patents listed on the annexed Schedule 1A,
which patents are issued or applied for in the United States Patent and
Trademark Office (the “Patents”)] [holds all right, title and interest in the
copyrights listed on the annexed Schedule 1A, which copyrights are registered in
the United States Copyright Office (the “Copyrights”)];

 

WHEREAS, the Assignor has entered into a Pledge and Security Agreement, dated as
of July 15, 2016 (as amended, restated or otherwise modified from time to time
the “Security Agreement”), in favor of Passaic River Capital LLC, as collateral
agent for certain buyers (the “Assignee”);

 

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the
Assignee and granted to the Assignee for the benefit of the Buyers (as defined
in the Security Agreement) a continuing security interest in all right, title
and interest of the Assignor in, to and under the [Trademarks, together with,
among other things, the good-will of the business symbolized by the Trademarks]
[Patents] [Copyrights] and the applications and registrations thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof and any and all damages
arising from past, present and future violations thereof (the “Collateral”), to
secure the payment, performance and observance of the “Obligations” (as defined
in the Security Agreement);

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee for
the benefit of the Buyers a continuing security interest in the Collateral to
secure the prompt payment, performance and for the benefit of the Buyers
observance of the Obligations.

 

The Assignor does hereby further acknowledge and affirm that the rights and
remedies of the Assignee with respect to the Collateral are more fully set forth
in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.

 

 Exh. A-1 

 

 

IN WITNESS WHEREOF, the Assignor has caused this Assignment for Security to be
duly executed by its officer thereunto duly authorized as of _____________,
20__.

 

  [GRANTOR]         By:       Name:     Title:

 

 Exh. A-2 

 

 

SCHEDULE 1A TO ASSIGNMENT FOR SECURITY

 

[Trademarks and Trademark Applications]

[Patent and Patent Applications]

[Copyright and Copyright Applications]

Owned by ______________________________

 

 Exh. A-3