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Exhibit 10.4
 

 
BONDS.COM GROUP, INC.
 
AMENDED AND RESTATED SECURITY AGREEMENT

This Amended and Restated Security Agreement (the “Agreement”) is made as of
April 30, 2009, by and between Bonds.com Group, Inc. (the “Company”), Bonds.com
Holdings, Inc., and Insight Capital Management, LLC (collectively, the
“Debtor”), in favor of each of the parties listed on and attached hereto as
Exhibit A (each a “Secured Party,” and collectively, the “Secured Parties”).
 
RECITALS
 
WHEREAS, pursuant to the Secured Convertible Note and Warrant Purchase Agreement
dated as of September 24, 2008 (the “2008 Purchase Agreement”), entered into
between the Company and the parties (the “Initial Secured Parties”) listed on
Exhibit A thereto, the Initial Secured Parties purchased certain promissory
notes (the “2008 Notes”) from the Company.
 
WHEREAS, the Debtor and the Initial Secured Parties entered into a Security
Agreement dated as of September 24, 2008 (the “Security Agreement”), in order
that the Debtor’s obligations to repay the Note be secured by all of the assets
of the Debtor.
 
WHEREAS, the Debtor and the Initial Secured Parties to the Security Agreement
entered into an amendment dated February 3, 2009, to, among other things, remove
Bonds.com, Inc. as a “Debtor” under the Security Agreement.
 
WHEREAS, on or about the date hereof and continuing up to and through June 30,
2009, the Company intends offer to certain additional investors (the “Additional
Secured Parties”) secured convertible notes of the Company, in the aggregate
principal amount of up to $2,500,000 (the “2009 Notes” and together with the
2008 Notes, the “Notes”), due on April 30, 2011, with 25% warrant coverage,
pursuant to the terms of a Secured Convertible Note and Warrant Purchase
Agreement on or about the date hereof (the “2009 Purchase Agreement” and
together with the 2008 Purchase Agreement, the “Purchase Agreements”).
 
WHEREAS, the Debtor and the Initial Secured Parties would like to amend the
Security Agreement to, among other things, incorporate the Additional Secured
Parties as Secured Parties under the Security Agreement.
 
WHEREAS, the Company issued a Grid Secured Promissory Note to Valhalla
Investment Partners (“Valhalla”), dated as of April 24, 2008, and amended on
July 8, 2008 (the “Valhalla Note”), pursuant to which the Company granted
Valhalla a security interest (the “First Priority Domain Name Security
Interest”) in all of the Company’s right, title and interest in and to the
domain name “bonds.com” (the “Domain Name”).
 
WHEREAS,  the Debtor and the Secured Parties would further like to amend the
terms of the Security Agreement to, among other things, clarify that Valhalla
shall have a first priority security interest in the Domain Name with respect to
the indebtedness owed by the Company under the Valhalla Note, and the Secured
Parties under the Security Agreement with respect to the indebtedness acquired
pursuant to the 2008 Purchase Agreement and the 2009 Purchase Agreement (on a
pari passu basis) shall have a subordinated security interest in the Domain
Name.
 

 
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AGREEMENT
 
In consideration of the purchase of the Notes by the Secured Parties and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Debtor hereby agrees with the Secured Parties as
follows:
 
1.           Grant of Security Interest.
 
(a)           To secure the Debtor’s full and timely performance of the
Obligations, the Debtor hereby grants to the Secured Parties a continuing Lien
on and security interest (the “Security Interest”) in, all of the Debtor’s
right, title and interest in and to all of its personal property and assets
(both tangible and intangible), including, without limitation, the following,
whether now owned or hereafter acquired and wherever located: (a) all
Receivables; (b) all Equipment; (c) all Fixtures; (d) all General Intangibles;
(e) all Inventory; (f) all Investment Property; (g) all Deposit Accounts; (h)
all Cash; (i) all other Goods of the Debtor; (j) all Intellectual Property; and
(k) all Proceeds of each of the foregoing and all accessions to, and
replacements for, each of the foregoing (collectively, the “Collateral”).  The
Security Interest shall be a first and prior interest in all of the Collateral
other than with respect to (i) the First Priority Domain Name Security Interest,
(ii) Permitted Bank Loans, and (iii) those given higher priority by valid
operation of relevant law.
 
(b)           The following terms shall have the following meanings for purposes
of this Agreement:
 
“Account” means any “Account,” as such term is defined in the UCC now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest and, in any event, shall include, without limitation, all
accounts receivable, book debts, rights to payment and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to the Debtor whether or not arising out of goods or software
sold or services rendered by the Debtor or from any other transaction, whether
or not the same involves the sale of goods or services by the Debtor and all of
the Debtor’s rights in, to and under all purchase orders or receipts now owned
or hereafter acquired by it for goods or services, and all of the Debtor’s
rights to any goods represented by any of the foregoing, and all monies due or
to become due to the Debtor under all purchase orders and contracts for the sale
of goods or the performance of services or both by the Debtor or in connection
with any other transaction (whether or not yet earned by performance on the part
of the Debtor), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
 
“Cash” means all cash, money, currency, and liquid funds, wherever held, in
which the Debtor now or hereafter acquires any right, title, or interest.
 

 
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“Chattel Paper” means any “Chattel paper,” as such term is defined in the UCC,
now owned or hereafter acquired by the Debtor or in which the Debtor now holds
or hereafter acquires any interest.
 
“Commercial Tort Claim” shall have the meaning given to that term in Section
4(l) of this Agreement.
 
“Deposit Accounts” means any “Deposit accounts,” as such term is defined in the
UCC, and includes any checking account, savings account, or certificate of
deposit, now owned or hereafter acquired by the Debtor or in which the Debtor
now holds or hereafter acquires any interest.
 
“Documents” means any “Documents,” as such term is defined in the UCC, now owned
or hereafter acquired by the Debtor or in which the Debtor now holds or
hereafter acquires any interest.
 
“Electronic Chattel Paper” means any “Electronic chattel paper,” as such term is
defined in the UCC, now owned or hereafter acquired by the Debtor or in which
the Debtor now holds or hereafter acquires any interest.
 
“Equipment” means any “Equipment,” as such term is defined in the UCC, now owned
or hereafter acquired by the Debtor or in which the Debtor now holds or
hereafter acquires any interest and any and all additions, upgrades,
substitutions and replacements of any of the foregoing, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto, now owned or hereafter acquired by the Debtor or in which the
Debtor now holds or hereafter acquires interest.
 
“Fixtures” means any “Fixtures,” as such term is defined in the UCC, together
with all right, title and interest of the Debtor in and to all extensions,
improvements, betterments, accessions, renewals, substitutes, and replacements
of, and all additions and appurtenances to any of the foregoing property, and
all conversions of the security constituted thereby, immediately upon any
acquisition or release thereof or any such conversion, as the case may be, now
owned or hereafter acquired by the Debtor or in which the Debtor now holds or
hereafter acquires any interest.
 
“General Intangible” means any “General intangible,” as such term is defined in
the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor
now holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all right, title and interest that the Debtor may now or
hereafter have in or under any contracts, rights to payment, payment
intangibles, confidential information, interests in partnerships, limited
liability companies, corporations, joint ventures and other business
associations, permits, goodwill, claims in or under insurance policies,
including unearned premiums and premium adjustments, uncertificated securities,
deposit, checking and other bank accounts, but shall not include any
Intellectual Property (including the right to receive all proceeds and damages
therefrom), rights to receive tax refunds and other payments and rights of
indemnification.
 

 
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“Goods” means any “Goods,” as such term is defined in the UCC, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest.
 
“Instruments” means any “Instrument,” as such term is defined in the UCC, now
owned or hereafter acquired by the Debtor or in which the Debtor now holds or
hereafter acquires any interest.
 
“Intellectual Property” means, collectively, all rights, priorities and
privileges of the Debtor relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, inventions, patents, patent licenses,
trademarks, trademark licenses and trade secrets (including customer lists),
domain names, Web sites, domain names (including without limitation
www.bonds.com) and know-how.
 
“Inventory” means any “Inventory,” as such term is defined in the UCC, now owned
or hereafter acquired by the Debtor or in which the Debtor now holds or
hereafter acquires any interest, and, in any event, shall include, without
limitation, all inventory, goods and other personal property that are held by or
on behalf of the Debtor for sale or lease or are furnished or are to be
furnished under a contract of service or that constitute raw materials, work in
process or materials used or consumed or to be used or consumed in the Debtor’s
business, or the processing, packaging, promotion, delivery or shipping of the
same, and all finished goods, whether or not the same is in transit or in the
constructive, actual or exclusive possession of the Debtor or is held by others
for the Debtor’s account, including, without limitation, all goods covered by
purchase orders and contracts with suppliers and all goods billed and held by
suppliers and all such property that may be in the possession or custody of any
carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or
other Persons.
 
“Investment Property” means any “Investment property,” as such term is defined
in the UCC, and includes certificated securities, uncertificated securities,
money market funds and U.S. Treasury bills or notes, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
 
“Letter of Credit Right” means any “Letter of credit right,” as such term is
defined in the UCC, now owned or hereafter acquired by the Debtor or in which
the Debtor now holds or hereafter acquires any interest, including any right to
payment or performance under any letter of credit.
 
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
against any property, any conditional sale or other title retention agreement,
any lease in the nature of a security interest, and the filing of any financing
statement (other than a precautionary financing statement with respect to a
lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
 
“Obligations” shall mean and include all loans, advances, debts, liabilities and
obligations, howsoever arising, owed by the Debtor to the Secured Parties of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising pursuant to
the terms of the Purchase Agreements and the Notes including without limitation
all interest, fees, charges, expenses, attorneys’ fees and accountants’ fees
chargeable to the Debtor or payable by the Debtor thereunder.
 

 
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“Permitted Bank Loans” shall mean debt issued to commercial banks and other
similar financial institutions; provided the principal amount of such debt does
not exceed five hundred thousand dollars ($500,000); provided, further that such
debt is: (i) not issued in connection with the issuance of any equity securities
(including warrants and other convertible securities) other than Permitted
Warrants or (ii) otherwise convertible into or exercisable for equity.
 
“Permitted Liens” shall mean (i) Liens created by operation of law such as
materialmen’s liens, mechanic’s liens and other similar liens; (ii) deposits,
pledges or Liens securing obligations incurred in respect of workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits; (iii)  Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good faith by
appropriate proceedings with the establishment of adequate reserves on the
balance sheet of Debtor; (iv) Liens securing Permitted Bank Loans; (v) Liens
that are subordinate in all respects to the Liens held by the Secured Parties,
and (vi) Liens deemed “Permitted Liens” under the Purchase Agreements.
 
“Permitted Warrants” shall mean warrants to purchase Common Stock of the Debtor
that are issued to the commercial bank or other similar financial institution
issuing a Permitted Bank Loan to the Debtor, provided that such warrants are:
(i) exercisable for a price no less than the then current fair market value of
the Debtor’s Common Stock and (ii) are exercisable for no greater number of
shares of Common Stock of the Debtor than ten percent (10%) of the quotient
obtained by dividing: (A) the principal amount of such Permitted Bank Loan by
(B) the exercise price of such Permitted Warrant.
 
“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).
 
“Proceeds” means “Proceeds,” as such term is defined in the UCC and, in any
event, shall include, without limitation, (a) any and all Accounts, Chattel
Paper, Instruments, cash or other forms of money or currency or other proceeds
payable to the Debtor from time to time in respect of the Collateral, (b) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Debtor from time to time with respect to any of the Collateral, (c) any and
all payments (in any form whatsoever) made or due and payable to the Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental authority), (d) the
proceeds, damages, or recovery based on any claim of the Debtor against third
parties (i) for past,

 
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present or future infringement of any copyright, patent or patent license or
(ii) for past, present or future infringement or dilution of any trademark or
trademark license or for injury to the goodwill associated with any trademark,
trademark registration or trademark licensed under any trademark license and (e)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
 
“Receivables” means all of the Debtor’s Accounts, Instruments, Documents,
Chattel Paper, Supporting Obligations, and letters of credit and Letter of
Credit Rights.
 
“Supporting Obligation” means any “Supporting obligation,” as such term is
defined in the UCC, now owned or hereafter acquired by the Debtor or in which
the Debtor now holds or hereafter acquires any interest.
 
“UCC” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Secured Parties’ Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of New York, the term “UCC” shall mean
the Uniform Commercial Code as enacted and in effect, from time to time, in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.
 
Unless otherwise defined herein, all capitalized terms used herein and defined
in the Purchase Agreements shall have the respective meaning given to those
terms in the Purchase Agreements, and terms that are defined in the UCC and used
herein shall have the meanings given to them in the UCC.
 
2.           Agreement Among the Secured Parties.
 
(a)           Payment Pro Rata.  Payment to the Secured Parties under the Notes
shall be made in proportion to the principal and accrued interest then
outstanding on any such date of payment to each, until such obligations are paid
or retired in full.
 
(b)           Sharing of Payments.  If any Secured Party shall at any time
receive any payment of principal, interest or other charge arising under the
Notes, or upon any other obligation of Debtor arising from or in connection with
the Purchase Agreements or any sums by virtue of counterclaim, offset, or other
lien that may be exercised, or from any security, other than payments made on
the same date to all Secured Parties, such Secured Party shall share such
payment or payments ratably with the other Secured Parties as to maintain as
near as possible the unpaid balance of the loans pro rata according to the
Secured Parties’ aggregate proportionate interests.
 
(c)           Sharing of Collateral. Subject to the First Priority Domain Name
Security Interest, upon the occurrence of any Event of Default, as defined in
Section 5, and if the Secured Parties proceed to exercise any rights with
respect to the Collateral, the Secured Parties shall share the Collateral and
the proceeds of such Collateral ratably.
 
(d)           Appointment of Agent.  The Secured Parties agree that Secured
Parties holding a majority in interest of the principal amount of the Notes, in
the aggregate, outstanding may act together as the agent of all Secured Parties
to execute and deliver in their names such instruments, documents, statements
and amendments thereto as may be necessary or appropriate to perfect or continue
the perfection of the security interest granted in this Agreement.
 

 
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(e)           Enforcement.  Enforcement of the Secured Parties’ rights hereunder
shall be taken by Secured Parties holding a majority in interest of the
principal amount of the Notes, in the aggregate, outstanding acting together as
the agent for all of the Secured Parties.  The action of such percentage taken
in accordance with the preceding sentence, shall in each case bind all the
Secured Parties.  Each of the Secured Parties agrees that any Secured Party
acting under Sections 2(d) and 2(e) shall not be liable for any acts taken in
good faith in enforcing the rights of the Secured Parties hereunder.
 
(f)            First Priority Domain Name Security Interest.  For the avoidance
of doubt, Valhalla (or its successor) has been given a first priority security
interest in and to the Domain Name with respect to any amounts owing or due
under the Valhalla Note, prior to the other Secured Parties, and all of the
Secured Parties rights’ shall be subrogated to the rights of Valhalla to receive
any payments or distributions resulting from or in connection with the Domain
Name for any and all amounts owing or due under the Valhalla Note.  The rights
in this section shall exist until such time that the Valhalla Note has been
fully paid and satisfied.  In addition, the Debtor shall take any and all action
or omit any action, as Valhalla may reasonably direct in writing, at Debtor’s
sole cost and expense, cause Valhalla to have perfected first priority security
interest in the Doman Name, and promptly execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, to Valhalla from time to time
such supplements hereto and such other instruments and documents as may be
reasonably requested by Valhalla to protect and preserve the Domain Name,
Valhalla’s first priority security interest therein, and/or Valhalla’s rights
and remedies thereunder.
 
3.           Representations and Warranties.  The Debtor hereby represents and
warrants to the Secured Parties that:
 
(a)           Ownership of Collateral.  The Debtor is the legal and beneficial
owner of the Collateral (or, in the case of after-acquired Collateral, at the
time the Debtor acquires rights in the Collateral, will be the legal and
beneficial owner thereof).  Except for the Security Interest granted to the
Secured Parties pursuant to this Agreement, the Debtor has rights in or the
power to transfer the Collateral free and clear of any adverse Lien, security
interest or encumbrance except as created by this Security Interest, except for
Permitted Liens and the First Priority Domain Name Security Interest.
 
(b)           Valid Security Interest.  Subject to the First Priority Domain
Name Security Interest, the Security Interest granted pursuant to this Agreement
will constitute a valid and continuing first priority security interest in favor
of the Secured Parties in the Collateral for which perfection is governed by the
UCC or filing with the United States Copyright Office or United States Patent
and Trademark Office.  Such Security Interest will be prior to all other Liens
on the Collateral other then the First Priority Domain Name Security Interest.
 

 
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(c)           Organization and Good Standing.  The Debtor has been duly
incorporated, and is validly existing and in good standing, under the laws of
the State of Delaware.
 
(d)           Location, State of Organization and Name of the Debtor.  The
Debtor’s state of organization is Delaware and the Debtor’s exact legal name as
it appears in the official filings in the State of Delaware is as set forth in
the first paragraph of this Agreement.  The Debtor has only one jurisdiction of
organization.
 
(e)           Location of Equipment and Inventory.  All Equipment and Inventory
are (i) located at 1515 S. Federal Boulevard, Boca Raton, FL, (ii) in transit to
such locations or (iii) in transit to a third party purchaser which will become
obligated on a Receivable to the Debtor upon receipt.  Except for Equipment and
Inventory referred to in clauses (ii) and (iii) of the preceding sentence, the
Debtor has exclusive possession and control of the Inventory and Equipment in
each case having a value in excess of $20,000.

(f)           Delivery of Items.  The Company has no (other than checks received
in the ordinary course of business), letter-of-credit rights, Electronic Chattel
paper and Chattel Paper of the Debtor as of the date hereof.
 
(g)           Receivables.  To the best of the Debtor’s knowledge, each
Receivable is genuine and enforceable against the party obligated to pay the
same (an “Account Debtor”) free from any right of rescission, defense, setoff or
discount.
 
(h)            Insurance.  Each insurance policy maintained by the Debtor is
validly existing and is in full force and effect.  The Debtor is not in default
in any material respect under the provisions of any insurance policy, and there
are no facts which, with the giving of notice or passage of time (or both),
would result in such a default under any material provision of any such
insurance policy.
 
(i)            This Agreement is effective to create a valid and continuing Lien
upon the Collateral.  All action by the Debtor necessary or desirable to protect
and perfect such Lien on each item of the Collateral has been duly taken.
 
4.           Covenants.  The Debtor covenants and agrees with the Secured
Parties that, from and after the date of this Agreement until the Obligations
are paid in full:
 
(a)           Other Liens.  Except for the Security Interest, the First Priority
Domain Name Security Interest and the Permitted Liens, the Debtor has rights in
or the power to transfer the Collateral and its title and will be able to do so
hereafter free from any adverse Lien, security interest or encumbrance, and the
Debtor will defend the Collateral against the claims and demands of all persons
at any time claiming the same or any interest therein, except as otherwise
approved by the Requisite Holders (as defined in subsection (h) below).
 
(b)           Further Documentation.  At any time and from time to time, upon
the writ­ten request of the Secured Parties, and at the sole expense of the
Debtor, the Debtor will promptly and duly authenticate and deliver such further
instruments and documents and take such further action as the Secured Parties
may reasonably request for the
 

 
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purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted including, without limitation, filing any
financing or continuation statements under the UCC in effect with respect to the
Liens created hereby.  The Debtor also hereby authorizes the Secured Parties to
file any such financing, amendment or continuation statement without the
authentication of the Debtor to the extent permitted by applicable law.  A
reproduction of this Agreement shall be sufficient as a financing statement (or
as an exhibit to a financing statement on form UCC-1) for filing in any
jurisdiction.
 
(c)           Indemnification.  The Debtor agrees to defend, indemnify and hold
harmless the Secured Parties against any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (“Liabilities”):
(i) with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, and (ii) with respect to, or resulting from,
any delay in complying with any law, rule, regu­lation or order of any
governmental authority applicable to any of the Collateral.
 
(d)           Maintenance of Records.  The Debtor will keep and maintain at its
own expense complete and satisfactory, in all material respects, records of the
Collateral.
 
(e)           Inspection Rights.  The Secured Parties shall have full access
during normal business hours, and upon reasonable prior notice, to all the
books, corre­spondence and other records of the Debtor relating to its ownership
of the Collateral.  The Secured Parties or their respective repre­sentatives may
examine such records and make photocopies or otherwise take extracts from such
records.
 
(f)           Compliance with Laws, etc.  The Debtor (i) will comply with all
laws, rules, regulations and orders of any governmental authority applicable to
any part of the Collateral or to the operation of the Debtor’s business, the
failure of which to comply with will have a Material Adverse Effect on the
Debtor, and (ii) shall not use or permit any Collateral to be used in material
violation of any provision of the Purchase Agreements or the Notes, any law,
rule or obligation or order of any governmental authority, or any policy of
insurance covering the Collateral.
 
(g)           Payment of Obligations.  The Debtor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or with respect to any of its income or profits derived from the
Collateral, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral.
 
(h)           Limitation on Liens on Collateral.  Without the prior written
consent of the holders of at least a majority of the principal amount of the
Notes, in the aggregate (the “Requisite Holders”), the Debtor will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is  necessary to remove, any Lien or claim on or to the
Collateral, other than the Security Interest and Permitted Liens, and will
defend the right, title and interest of the Secured Parties in and to any of the
Collateral against the claims and demands of all other persons.
 

 
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(i)            Limitations on Dispositions of Collateral and Mergers.  Without
the prior written consent of the Requisite Holders, the Debtor will not: (a)
sell, transfer, lease, or otherwise dispose of any material portion of the
Collateral, or attempt, offer or contract to do so other than dispositions of
Inventory in the ordinary course of the Debtor’s business; provided, however
that the Debtor will be allowed to grant licenses to its products and related
documentation in the ordinary course of business and to establish or provide for
escrows of related intellectual property in connection therewith or (b) merge
with or into or consolidate with any other corporation, person or entity (other
than a wholly-owned subsidiary corporation or a merger effected exclusively for
the purpose of changing the domicile of the Debtor).
 
(j)            Further Identification of Collateral.  The Debtor will furnish to
the Secured Parties from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Secured Parties may reasonably request.
 
(k)           Notice of Change of State of Incorporation.  Without 30 days’
prior written notice to the Secured Parties, the Debtor shall not (i) change the
Debtor’s name, state of incorporation or organization, organizational
identification number or place of business (or, if the Debtor has more than one
place of business, its chief executive office), or the office in which the
Debtor’s records relating to Receivables are kept, (ii) keep Collateral
consisting of Chattel Paper and documents at any location other than listed in
Section 2(e) above, or (iii) keep Collateral consisting of Equipment, Inventory
or other goods at any location other than the locations listed in Section 2(e)
above or any other premises owned or leased by Debtor, provided, however, Debtor
notifies Secured Parties at least twenty-one (21) days prior to locating such
equipment or inventory at such other premises owned or leased by Debtor and with
respect to any collateral with a fair market value greater with an aggregate
market value greater than $100,000, and (iv) file any UCC financing statements
necessary to perfect the Secured Parties interests in such collateral.
 
(l)            [Intentionally Omitted]
 
(m)          Collection of Receivables.  The Debtor shall collect, enforce and
receive delivery of the Receivables in accordance with past practice.
 
(n)           Insurance. The Debtor shall (i) maintain and keep in force
insurance of the types and in amounts customarily carried from time to time
during the term of this Agreement in its lines of business, and (ii) deliver to
the Secured Parties from time to time, as the Secured Parties may request,
schedules setting forth all insurance then in effect. All proceeds of any
property insurance paid after the occurrence and during the continuance of an
Event of Default, as defined in the Purchase Agreements, as the case may be,
shall be paid to the Secured Parties to be held as collateral and applied as
provided herein or, at the election of the Secured Parties, returned to the
Debtor.
 
(o)           Electronic Chattel Paper.  If requested in writing by the
Requisite Holders, the Debtor shall take all steps  necessary to grant the
Secured Parties control of all Electronic Chattel Paper in accordance with the
UCC and all “transferable records” as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.
 

 
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(p)           Intellectual Property Matters.  The Debtor shall notify the
Secured Parties immediately if it knows or has reason to know (i) that any
application or registration relating to any of its Intellectual Property that is
material to the operation of its business may become abandoned or dedicated, or
(ii) of any adverse determination or development (including the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any court)
regarding the Debtor’s ownership of any Intellectual Property that is material
to the operation of its business, its right to register the same, or to keep and
maintain the same.
 
(q)           Intellectual Property Applications.  In no event shall the Debtor,
either itself or through any agent, employee, licensee or designee, file an
application for the registration of any patent, trademark or copyright with the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency without giving the Secured Parties written notice
thereof, and, upon request of the Secured Parties, the Debtor shall execute and
deliver any and all security documents as the Secured Parties may reasonably
request to evidence the Secured Parties’ Lien on such Intellectual Property and
the general intangibles of the Debtor relating thereto or represented
thereby.  The Debtor hereby authorizes the Secured Parties to amend this
Agreement (without any further action or consent from the Debtor) to include any
such patent, trademark or copyright as Collateral hereunder.
 
(r)            Intellectual Property Abandonment.  The Debtor shall take all
actions commercially reasonably necessary to obtain, maintain and pursue each
Intellectual Property application material to the operation of its business.
 
(s)           Protection of Intellectual Property.  Unless otherwise determined
by the Requisite Holders, in the event that any of the Debtor’s Intellectual
Property is materially infringed upon, or misappropriated or diluted by a third
party, the Debtor shall notify the Secured Parties promptly after the Debtor
learns thereof, unless the Board of Directors of the Company reasonably
determines that such infringement, misappropriation or dilution is in no way
material to the conduct of the Debtor’s business or operations.  The Debtor
shall, unless it shall reasonably determine that such Intellectual Property is
in no way material to the conduct of its business or operations, promptly sue
for, and seek recovery of any and all damages resulting from such infringement,
misappropriation or dilution, and shall take such other actions as reasonably
appropriate or desirable under the circumstances to protect such Intellectual
Property.
 
(t)            Limitation on Filing of Financing Statements.  The Debtor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of the Requisite Holders and agrees that it
will not do so without the prior written consent of the Requisite Holders,
subject to the Debtor’s rights under Section 9509(d)(2) of the UCC.
 
5.           Intentionally Omitted.
 

 
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6.           Performance by the Secured Parties of the Debtor’s Obligations.  If
the Debtor fails to per­form or comply with any of its agreements or covenants
contained in this Agreement and the Secured Parties perform or comply, or
otherwise causes performance or compliance, with such agreement or covenant in
accordance with the terms of this Agreement, then the expenses of the Secured
Parties incurred in connection with such performance or compliance shall be
payable by the Debtor to the Secured Parties on demand and shall constitute
Obligations secured by this Agreement.
 
7.           Remedies.  If an Event of Default (as defined in the Purchase
Agreements) has occurred and is continuing, the Secured Parties may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement relating to the Obligations, all rights and
remedies of a secured party under the UCC.  Without limiting the foregoing, the
Secured Parties, without demand of performance or other demand, present­ment,
protest, advertisement or notice of any kind (except any notice required by law)
to or upon the Debtor or any other person (all of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
collect, receive, appropriate and realize upon any or all of the Collateral,
and/or may sell, lease, assign, give an option or options to purchase, or
otherwise dispose of and deliver any or all of the Collateral (or contract to do
any of the foregoing), in one or more parcels at a public or private sale or
sales, at any exchange, broker’s board or office of any Secured Party or
elsewhere upon such terms and conditions as the Secured Parties may deem
advisable, for cash or on credit or for future delivery without assumption of
any credit risk.  The Secured Parties shall have the right upon any such public
sale or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase all or any part of the Collateral so sold, free of any right
or equity of redemption in the Debtor, which right or equity is hereby waived or
released.  Subject to Section 2(f), the Secured Parties shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable expenses incurred therein or in
connection with the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Parties under this
Agreement (including, without limitation, reasonable attorneys’ fees and
expenses) to the payment in whole or in part of the Obligations, in such order
as the Secured Parties may elect, and only after such application and after the
payment by the Secured Parties of any other amount required by any provision of
law, need the Secured Parties account for the surplus, if any, to the
Debtor.  To the extent permitted by applicable law, the Debtor waives all
claims, damages and demands it may acquire against the Secured Parties arising
out of the exercise by the Secured Parties of any of their respective rights
hereunder.  If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least ten days before such sale or other disposition.  The Debtor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Secured Parties to
collect such deficiency.
 
8.           Limitation on Duties Regarding Preservation of Collateral.  Each
Secured Party’s sole duty with respect to the custody, safekeeping and
preservation of the Collateral, under Section 9207 of the UCC or otherwise,
shall be to deal with it in the same manner as such Secured Party deals with
similar property for its own account.  Neither the Secured Parties nor any of
their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so other than as a result of the gross negligence or
willful misconduct of the same or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Debtor or otherwise.
 
9.           Powers Coupled with an Interest.  All authorizations and agencies
contained in this Agreement with respect to the Collateral are irrevocable and
are powers coupled with an interest.
 
10.         No Waiver; Cumulative Remedies.  The Secured Parties shall not by
any act (except by a written instrument pursuant to Section 12(a) hereof or as
otherwise provided herein), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have acquiesced in any
default under the Notes, as the case may be, or in any breach of any of the
terms and conditions of this Agreement.  No failure to exer­cise, nor any delay
in exercising, on the part of the Secured Parties, any right, power or privilege
hereunder shall operate as a waiver thereof.  No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.  A
waiver by the Secured Parties of any right or remedy under this Agreement on any
one occasion shall not be construed as a bar to any right or remedy which the
Secured Parties would otherwise have on any subsequent occasion.  The rights and
remedies provided in this Agreement are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
 
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11.         Termination of Security Interest.  Upon satisfaction of the Debtor’s
obligations pursuant to the Notes, as the case may be, or conversion of all of
the Notes, as the case may be, into shares of the Debtor’s equity securities
pursuant to the terms of the Notes, as the case may be, the security interest
granted herein shall terminate and all rights to the Collateral shall revert to
the Debtor.  Upon any such termination, the Secured Parties shall authenticate
and deliver to the Debtor such documents as the Debtor may reasonably request to
evidence such termination.
 
12.         Miscellaneous.
 
(a)           Amendments and Waivers.  Any term of this Agreement may be amended
or waived with the written consent of the Debtor and the Requisite Holders or
their respective successors and assigns.  Any amendment or waiver effected in
accordance with this Section 12(a) shall be binding upon the Parties and their
respective successors and assigns.
 
(b)           Transfer; Successors and Assigns.  The terms and conditions of
this Agreement shall be binding upon the Debtor and its successors and assigns,
as well as all persons who become bound as a debtor to this Agreement and inure
to the benefit of the Secured Parties and its successors and assigns.  Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the Parties hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
 
(c)           Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the Parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Florida, without giving effect to principles of conflicts of law.
 
(d)           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
 
(e)           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
 
(f)           Notices.  Any notice required or permitted by this Agreement shall
be to the addresses and pursuant to the Procedure set forth in the Purchase
Agreements, as the case may be.
 
(g)           Severability.  If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable.  In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
 
(h)            Entire Agreement.  This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto concerning such subject matter are expressly
canceled.
 
(i)            Additional Holders.  In the event that after the date hereof
Exhibit A of either of the Purchase Agreements, as the case may be, is amended
or modified to include additional persons or entities thereon, the Debtor is
hereby authorized to amend Exhibit A hereto to reflect such additional persons
or entities without any action of the Secured Parties.
 
[Signature Page Follows]
 

 
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The Debtor and the Secured Parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
 

 

   
DEBTOR:
         
BONDS.COM GROUP, INC.
         
By.
             
Name:
             
Title:
             
Address:
 

 

   
BONDS.COM HOLDINGS, INC.
         
By.
             
Name:
             
Title:
             
Address:
 

 

   
INSIGHT CAPITAL MANAGEMENT, LLC
         
By.
             
Name:
             
Title:
             
Address:
 

 

 

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SECURED PARTIES:
               
By.
             
Name:
             
Title:
             
Address:
                     
Facsimile Number: