fluid_8k-ex1003.htm


    Exhibit
      10.3

     

    
      SECURITY
        AGREEMENT

       

      THIS
        SECURITY AGREEMENT, dated as of  October 17, 2007 (this “Security
        Agreement”), is made by Fluid Media Networks, Inc., a Nevada
        corporation  (“Fluid”) and Trusonic, Inc., a Delaware corporation
        (“Trusonic”) (collectively, Fluid and Trusonic shall be referred to herein as
        the “Grantors”), in favor of those persons listed on the signature pages
        attached hereto (each, a “Secured Party,” and collectively, the “Secured
        Parties”).

      


       

      RECITALS

       

      WHEREAS,
        concurrently with this Security Agreement, a stock purchase agreement (the
        “Stock Purchase Agreement”) is entered into by and among Fluid, Trusonic and the
        Secured Parties;

      


      WHEREAS,
        pursuant to the Stock Purchase Agreement, Fluid is purchasing all of the
        issued
        and outstanding shares of capital stock of Trusonic held by the Secured Parties
        (“Shares”);

      


      WHEREAS,
        Fluid has issued to each Secured Party one or more Secured Promissory Notes
        (each, a “Note,” and collectively, the “Notes”), of even date herewith, as
        partial payment for the Shares, to be secured by the Collateral (as defined
        below);  and

      


      WHEREAS,
        as a condition to the performance by Fluid of the conditions and obligations
        under the Note(s), Grantors are required to execute and deliver this Security
        Agreement.

      


      NOW,
        THEREFORE, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, Grantors and Secured Parties
        agree
        as follows:

      


       

      AGREEMENT

       

      ARTICLE
        I.  
Definitions.

       

      Section
        1.1.    Certain Terms. The following terms when used
        in this Security Agreement, including its preamble and recitals, shall have
        the
        following meanings (such definitions to be equally applicable to the singular
        and plural forms thereof):

       

      “Collateral”
        is defined in Section 2.1.

      


      “Event
        of Default” is defined in Section 5.1.

      


      “Fluid”
is
        defined in the
        recitals.

      


      “Grantors”
        is defined in the recitals.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      “Note
        Obligations” shall mean all indebtedness, obligations and liabilities of
        Grantor to the Secured Parties arising under or in connection with the Note(s),
        including, without limitation, principal and interest.

      


      “Note(s)”
        is defined in the recitals.

      


      “Person”
        means an individual, corporation, limited liability company, partnership,
        trust,
        unincorporated association, joint venture, joint-stock company, governmental
        authority or any other entity.

      


      “Secured
        Part(ies)” is defined in the recitals.

      


      “Security
        Agreement” is defined in the recitals.

      


      “Shares”
        is defined in the recitals.

      


      “Stock
        Purchase Agreement” is defined in the recitals.

      


      “Termination
        Date” means the date on which the Note Obligations have been paid in
        full.

      


      “Trusonic”
        is defined in the recitals.

      


      “UCC”
        means the California Uniform Commercial Code, as amended, including its preamble
        and recitals.

      


      UCC
        Definitions.  Unless otherwise defined herein or in the Note(s) or
        the context otherwise requires, terms for which meanings are provided in
        the UCC
        are used in this Security Agreement (whether or not capitalized herein),
        including its preamble and recitals, with such meanings.

       

      ARTICLE
        II.     Security
        Interest.

       

      Section
        2.1.  Grant of Security Interest.  Each of the
        Grantors hereby assigns, pledges, hypothecates, charges, mortgages, delivers
        and
        transfers to the Secured Parties, for their benefit, and hereby grants to
        the
        Secured Parties, for their benefit, a continuing security interest in all
        such
        Grantor’s right, title and interest in and to the following (as security for the
        performance of the Note Obligations):  all inventory, documents of
        title covering inventory, returned goods, rights as an unpaid seller, accounts,
        accounts receivable, money, deposits, deposit accounts, brokerage accounts,
        equipment, furniture, fixtures, machinery, contract rights, royalties,
        commissions, rights to payment, rights to refunds, tax refunds, general
        intangibles, chattel paper, copyrights, trademarks, trade names, patents,
        instruments, securities, equity interests, books, records, computer data,
        computer storage materials and goodwill, now owned or hereafter acquired,
        wherever located, in whatever form, and all proceeds and products thereof,
        and
        all substitutions, additions, accessions and replacements therefor or thereto
        (collectively the "Collateral").

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      Section
        2.2.  Security for Obligations.  This Security
        Agreement and the Collateral in which the Secured Parties are granted a security
        interest hereunder by the Grantor secures the payment of all Note Obligations
        now or hereafter existing.

       

      Section
        2.3.   Security Interest Absolute, etc.  This
        Security Agreement shall in all respects be a continuing, absolute,
        unconditional and irrevocable grant of security interest, and shall remain
        in
        full force and effect until the Termination Date.  All rights of the
        Secured Parties and the security interests granted to the Secured Parties
        for
        their benefit hereunder, and all obligations of the Grantor hereunder, shall,
        in
        each case, be absolute, unconditional, final and irrevocable irrespective
        of:

       

      (a)
        the
        failure of the Secured Parties:

       

      (i)           to
        assert any claim or demand or to enforce any right or remedy against any
        obligor
        or any other Person, or

       

      (ii)           to
        exercise any right or remedy against any guarantor of, or Collateral securing,
        any Note Obligations.

       

      (b) any
        change in the time, manner or place of payment of, or in any other term of,
        all
        or any part of the Note Obligations, or any other extension, compromise or
        renewal of any Note Obligation;

       

      (c) any
        reduction, limitation, impairment or termination of any Note Obligations
        for any
        reason, including any claim of waiver, release, surrender, alteration or
        compromise, and shall not be subject to (and Grantor hereby waives any right
        to
        or claim of) any defense or setoff, counterclaim, recoupment or termination
        whatsoever by reason of the invalidity, illegality, nongenuineness,
        irregularity, compromise, unenforceability of, or any other event or occurrence
        affecting, any Note Obligations or otherwise;

       

      (d) any
        addition, exchange or release of any Collateral or of any Person that is
        (or
        will become) a guarantor of the Note Obligations, or any surrender or
        non-perfection of any Collateral, or any amendment to or waiver or release
        or
        addition to, or consent to or departure from, any other guaranty held by
        the
        Secured Parties securing any of the Note Obligations; or

       

      (e) any
        other circumstance which might otherwise constitute a defense available to,
        or a
        legal or equitable discharge of, any obligor, any surety or any
        guarantor.

       

      Section
        2.4.  Perfection; UCC Filing.  Upon the execution of
        this Security Agreement, the Secured Parties shall have the right to, and
        Grantors shall join in executing and paying the filing fees required to,
        file
        any and all necessary financing statements, amendments to existing financing
        statements and any other forms convenient or required, in the Secured Parties’
sold and absolute discretion, to perfect the security interest granted
        herein.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        III.    Representations and
        Warranties.

       

      Section
        3.1.  In order to induce the Secured Parties to enter into and perform
        the Note Obligations, the Grantors represent and warrant to the Secured Parties
        that, as of the date of this Agreement:

       

      (a) Grantors,
        are applicable, are the legal and beneficial owner of such
        Collateral;

       

      (b) the
        granting of the security interest pursuant to the terms of this Security
        Agreement, together with the filing of appropriate financing statements,
        creates
        a valid and perfected first lien on and security interest in such Collateral
        in
        favor of the Secured Parties;

       

      (c) none
        of such Collateral is subject to any existing claim, lien, charge, security
        interest or other encumbrance of any kind whatsoever, except for the perfected
        first security interest therein granted to the Secured Parties hereby, and
        as
        otherwise permitted pursuant to the terms of this Security
        Agreement;

       

      (d) the
        execution of this Security Agreement, the compliance with its terms and the
        granting of the security interest set forth herein does not violate any contract
        between the Grantor and any other party; and

       

      (e) this
        Security Agreement does not violate any agreement, instrument, document,
        judgment, injunction or writ by which Grantor or its assets is
        bound.

       

       

      ARTICLE
        IV.    
Covenants.

       

      Section
        4.1.  Miscellaneous Covenants.

       

      (a) The
        Grantors shall, at their expense, make, procure, execute and deliver such
        financing statements and assignments of lien, or amendments thereof or
        supplements thereto, or other instruments, certificates and supplemental
        writings and assurances as the Secured Parties may from time to time reasonably
        require in order to comply with the UCC, or any other applicable law, and
        to
        preserve and protect the security interest granted herein.  In the
        event, for any reason, that the law of any jurisdiction other than the State
        of
        California becomes or is applicable to the Collateral, or any part thereof,
        or
        to any of the Note Obligations, the Grantors agree to execute and deliver
        all
        such instruments and to do all such other things as may be reasonably necessary
        or appropriate to preserve, protect and enforce the security interest granted
        herein under the law of such other jurisdiction, to at least the same extent
        as
        such security interest would be protected under the UCC.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (b) Grantors
        hereby agree (i) to do all acts that may be necessary to maintain, preserve
        and
        protect the Collateral; (ii) not to use or permit any Collateral to be used
        unlawfully or in violation of this Security Agreement; (iii) to pay promptly
        when due all taxes, assessments, charges, encumbrances and liens now or
        hereafter imposed upon or affecting any Collateral, except to the extent
        that
        such items are being contested in good faith or are otherwise permitted pursuant
        to this Security Agreement; (iv) not to cause or permit any waste or unusual
        or
        unreasonable depreciation of the collateral; (v) not to surrender or lose
        possession (other than to the Secured Parties), sell, encumber, lease, rent
        or
        otherwise dispose of or transfer any Collateral or right or interest therein
        other than in the ordinary course of the Grantors’ business and, to keep the
        Collateral free and clear of all levis and security interests or other liens
        or
        charges except those expressly authorized by this Security Agreement; and
        (vi)
        to preserve and defend the rights of the Secured Parties hereunder against
        all
        claims of third parties.

       

      (c) At
        any time and from time to time upon the occurrence and during the continuance
        of
        an Event of Default (i) upon the request of the Secured Parties, the Debtor
        shall promptly, at its expense, deliver to the Secured Parties, with appropriate
        endorsement or assignment, all instruments, chattel paper, documents, checks,
        notes, drafts and other evidence of indebtedness, or other property in the
        nature of items of payment representing proceeds of any of the Collateral
        which
        are then in, or may thereafter come into, the Grantor’s possession, and (B) upon
        the request of the Secured Parties, the Grantors shall promptly, at their
        own
        expense, direct all parties obligated on any of the Collateral to make all
        payments due or to become due thereon directly to the Secured Parties or
        to such
        other entity as may be specified by the Secured Parties.

       

      (d) The
        Grantors shall perform, at its sole cost and expense, any and all steps,
        and
        shall pay the amount of all reasonable expenses necessary to obtain, preserve,
        perfect, defend and enforce the security interest granted herein, collect
        indebtedness under the accounts receivable, and preserve, defend, enforce
        and
        collect the Collateral.

       

      (e) The
        Grantor shall punctually pay the Note Obligations in accordance with the
        terms
        of the Notes and will promptly furnish the Secured Parties with any information
        or writings which the Secured Parties may reasonably request concerning the
        Collateral.

       

      (f) The
        Grantors shall promptly notify the Secured Parties of any claim, action or
        proceeding affecting title to any of the Collateral, which Collateral, together
        with all other Collateral subject to such claim, action or proceeding, has
        an
        aggregate value in excess of $10,000 and, at the request of the Secured Parties,
        appear in and defend, at the Grantor’s expense, any such action or
        proceeding.

       

      (g) Should
        the Collateral, or any part thereof, be in any manner converted into another
        type of property or money or other proceeds paid or delivered to the Grantors
        as
        a result of Grantors’ rights in the Collateral, then, in any such event, all
        such property, money or other proceeds shall become part of the Collateral,
        and
        the Grantors covenant to forthwith pay and deliver to the Secured Parties
        all of
        the same, which are acceptable for delivery and, at the same time, if the
        Secured Party deems it necessary and so requests, the Grantors will properly
        endorse or assign the same.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Section
        4.2.  Further Encumbrances; Subordination.  Except as
        otherwise set forth in this Section 4.2, Grantors shall not, without the
        prior
        written consent of any Secured Party, enter into any agreement or execute
        any
        document or perform or permit the performance of any act that would result
        in,
        give rise to or create any senior or pari passu lien, claim, or
        encumbrance on such Secured Party’s Collateral (other than those created in
        favor of each of the Secured Parties).  Notwithstanding anything to
        the contrary contained in this Agreement, Fluid may, in its sole and absolute
        discretion, and from time to time, grant a security interest in the Collateral
        owned by Fluid that is senior to the security interest granted to Secured
        Parties hereunder; provided, however, that such security interest shall be
        granted only to secure bank or other financial institution debt, or any working
        capital facility, up to a maximum principal amount of Two Million Five Hundred
        Thousand Dollars ($2,500,000) in the aggregate.  In such event,
        Secured Parties agree to make any filings necessary, including any filing
        any
        termination statements under the UCC or otherwise, and execute any documents
        reasonably required, in order to effect the foregoing
        subordination.

       

      Section
        4.3.  Further Assurances, etc.  Each party agrees
        that, from time to time, at its own expense, it will promptly execute and
        deliver all further instruments and documents, and take all further action,
        that
        may be necessary or that may be reasonably required, in order to perfect,
        preserve, protect and subordinate any security interest granted or purported
        to
        be granted hereby or to enable such party to exercise and enforce his, her
        or
        its rights and remedies hereunder.

       

       

      ARTICLE
        V.    Events of
        Default.

       

      Section
        5.1.  Events of Default.  Each of the following
        occurrences shall constitute an event of default under this Security Agreement
        (herein called “Event of Default”): (a) an event of Default shall occur under
        the Note; or (b) Grantors shall fail to observe or perform any covenant or
        agreement contained herein.

       

      Section
        5.2.  Remedies upon Event of Default.  Grantors
        hereby irrevocably appoint the Secured Parties as their respective
        attorney-in-fact to do (but the Secured Parties shall not be obligated to
        and
        shall incur no liability to Grantors or any third party for failure to do
        so),
        with full irrevocable power and authority in the place and stead of Grantors
        and
        in the name of the Grantors or in the name of Secured Parties, from time
        to time
        after the occurrence of and during the continuance of an Event of Default,
        in
        the Secured Parties discretion, for the purpose of carrying out  any
        act which such Grantor is obligated by this Security Agreement to do, and
        to
        exercise such rights and powers as Grantors might exercise with respect to
        the
        Collateral, including, without limitation any one or more of the following
        rights and remedies:

       

      (a) exercise
        and enforce any or all rights and remedies available upon default to a secured
        party under the UCC, including but not limited to the right to take possession
        of such Collateral, proceeding without judicial process or by judicial process
        (without a prior hearing or notice thereof, which the Grantors hereby expressly
        waive), and the right to sell, lease or otherwise dispose of any or all of
        such
        Collateral, and in connection therewith, the Secured Parties may require
        the
        Grantors to make such Collateral available to the Secured Parties at a place
        to
        be designated by the Secured Parties which is reasonably convenient to both
        parties, and if notice to the Grantors of any intended disposition of Collateral
        or any other intended action is required by law in a particular instance,
        such
        notice shall be deemed commercially reasonable if given (in the manner specified
        in Section 6.3), at least ten (10) calendar days prior to the date
        of intended disposition or other action, and any such disposition of such
        Collateral may be made by way of one or more contracts and at such disposition
        it shall not be necessary to exhibit the Collateral;

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (b) take
        all actions reasonably necessary to take possession of the Collateral, and
        shall
        not be liable to the Grantors for damages to, or destruction of, property
        in
        connection therewith, and shall in no way be liable to the Grantors for any
        consequential damages (or whatsoever be deemed the proximate cause thereof)
        of
        any kind;

       

      (c) apply
        by appropriate judicial proceedings for appointment of a receiver for the
        Collateral, or any part thereof, and the Grantors hereby expressly consents
        to
        any such appointment;

       

      (d) notify
        any or all parties obligated on any of the Collateral to make all payments
        due
        or to become due thereon directly to the Secured Parties, or such other person
        or officer as the Secured Parties may require, whereupon the power and authority
        of the Grantors to collect the same in the ordinary course of its business
        shall
        be deemed to be immediately revoked and terminated, and with or without such
        general notification, the Secured Parties may take or bring all steps, actions,
        suits or proceedings reasonably deemed by the Secured Parties as necessary
        or
        desirable to effect possession or collection of the Collateral, may make
        allowance or adjustments related to the Collateral, may compromise any claims
        related to the Collateral, may remove from the Grantors’ premises all documents,
        instruments, records, files or other items relating to the Collateral and
        may
        administer, collect and dispose of the Collateral; provided, however, that
        the
        Secured Parties shall not be liable for its failure to collect or for its
        failure to exercise diligence in the collection, possession of all or any
        part
        of the Collateral or of sums due or paid thereon, nor shall it be under any
        obligation whatsoever to anyone by virtue of this Security Agreement;
        and

       

      (e) issue
        a receipt to any person obligated to pay any amounts on account of any
        Collateral, which shall be a full and complete release, discharge and
        acquittance to such person to the extent of any amount so paid to the Secured
        Parties; and the Secured Parties may, and is hereby authorized and empowered
        on
        behalf of the Grantors, and is hereby granted an irrevocable power of attorney,
        which grant is coupled with an interest, to endorse the name of the Grantors
        upon any check, draft, instrument, receipt, instruction or other document
        or
        items, including all items evidencing payment upon any account receivable
        or
        other indebtedness constituting Collateral.

       

      The
        Grantors hereby ratify all that said attorney shall lawfully do or cause
        to be
        done by virtue hereof.  This power of attorney is coupled with an
        interest and shall be irrevocable.  The powers conferred upon the
        Secured Parties are solely to protect the Secured Parties’ interest in the
        Collateral and shall not impose any duty upon the Secured Parties to exercise
        any such powers. The Secured Parties shall be entitled to apply the proceeds
        of
        any sale, liquidation, foreclosure or other disposition of or realization
        from
        the Collateral and the payments received by the Secured Parties with respect
        to
        any of the Collateral, first to the payment of all the Secured Parties’
reasonable expenses, including reasonable attorneys’ fees and legal expenses,
        incurred in holding and preparing the Collateral, or any part thereof, for
        sale
        or other disposition, in arranging for such sale or other disposition, and
        in
        actually selling the same, next, to payment of the Obligations, in such order
        of
        application as the Secured Party may determine.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        VI.  
 Miscellaneous.

       

      Section
        6.1.  Binding on Successors, Transferees and Assigns;
        Assignment.  This Security Agreement shall remain in full force
        and effect until the Termination Date has occurred, shall be binding upon
        the
        Grantor and its successors, transferees and assigns, and shall inure to the
        benefit of and be enforceable by the Secured Parties and their successors,
        transferees and assigns.

       

      Section
        6.2.  Amendments, etc.  No amendment to or waiver of
        any provision of this Security Agreement, nor consent to any departure by
        Grantor from its obligations under this Security Agreement, shall in any
        event
        be effective unless the same shall be in writing and signed by the Secured
        Party
        to be bound thereby and the Grantor.

       

      Section
        6.3.  Notices.  Any notice or other communication
        required or permitted to be given hereunder shall be in writing and shall
        be
        mailed by certified mail, return receipt requested (or by the most nearly
        comparable method if mailed from or to a location outside of the United States
        of America) or by Federal Express, Express Mail, or mail nationally recognized
        overnight delivery or courier service, or delivered in person or by facsimile,
        or similar telecommunications equipment, against receipt therefor at the
        address
        of such party set forth in this Section (or to such other address as the
        party
        shall have furnished in writing in accordance with the provisions of this
        Section 6.3).

       

      Secured
        Party:[see
        address as set forth on signatures pages hereto]

      


      


      Grantor:                  Fluid
        Media Networks, Inc.

      5813
        Uplander Way, Unit
        #A

      Culver
        City, CA 
90230-6607

      Attention:

      Facsimile:

      


      Such
        addresses may be changed by notice given as provided in this
        subsection.  Notices shall be effective upon the date of receipt;
        provided,  however, that a notice sent via telecopier shall be deemed
        effective upon the date indicated on proof of transmittal; notice sent via
        overnight delivery shall be deemed effective two (2) business days after
        deposit
        with such delivery service; and notice sent by U.S. certified mail shall
        be
        deemed effective five (5) business days after deposit with the U.S.
        mail.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      Section
        6.4.  Termination; Release of Liens.  Upon the
        Termination Date, the security interests granted herein shall automatically
        terminate with respect to the Collateral.  Upon any such termination,
        each Secured Party will promptly deliver to the Grantor all Collateral, if
        any,
        held by such Secured Party, and execute and deliver to the Grantor such
        documents as the Grantor shall reasonably request to evidence such termination,
        including without limitation any termination statements required under the
        UCC
        or otherwise. Following the Termination Date, the Secured Parties hereby
        irrevocably appoint Grantor as their attorney-in-fact, with full authority
        in
        the place and stead of the Secured Parties and in the name of each of them,
        following the Termination Date to take any action and to execute any instrument
        which the Grantor may deem necessary or advisable to accomplish the termination
        of this Security Agreement with respect to the Collateral.

       

      Section
        6.5.  Headings.  The various headings of this
        Security Agreement are inserted for convenience only and shall not affect
        the
        meaning or interpretation of this Security Agreement or any provisions
        thereof.

       

      Section
        6.6.  Severability.  Any provision of this Security
        Agreement, which is prohibited or unenforceable in any jurisdiction, shall,
        as
        to such provision and such jurisdiction, be ineffective to the extent of
        such
        prohibition or unenforceability without invalidating the remaining provisions
        of
        this Security Agreement or affecting the validity or enforceability of such
        provision in any other jurisdiction.

       

      Section
        6.7.  Governing Law; Jurisdiction and Venue.  THIS
        SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED
        BY
        THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, EXCEPT TO THE EXTENT THAT THE
        VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
        HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS
        OF A
        JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.   Any
        controversy, dispute or claim of any nature whatsoever arising out of, in
        connection with or in relation to this Security Agreement or the transaction
        contemplated herein will be resolved by final and binding arbitration in
        accordance with the Streamlined Rules of and by a retired judge at JAMS,
        Inc. in
        Los Angeles and all parties hereto consent to the personal jurisdiction of
        the
        State of California for such arbitration and enforcement of any award by
        JAMS.  The prevailing party in any dispute will be entitled to recover
        all reasonable attorney’s fees, costs and expenses in addition to other
        allowable costs.

       

      Section
        6.8.  Entire Agreement. The Stock Purchase Agreement, this
        Security Agreement and the Note(s) constitute the entire understanding among
        the
        parties hereto with respect to the subject matter hereof and thereof and
        supersede any prior or contemporaneous agreements, written or oral, with
        respect
        thereto.

       

      Section
        6.9.  Counterparts.  This Security Agreement may be
        executed by the parties hereto in several counterparts, each of which shall
        be
        deemed to be an original and all of which shall constitute together but one
        and
        the same agreement.

       

      Section
        6.10.  Power of Attorney.  Each Secured Party hereby
        irrevocably makes, constitutes and appoints Joseph J. Tebo the true and lawful
        attorney-in-fact of such Secured Party, with full power and authority, in
        the
        name and on behalf of each Secured Party, with respect to all matters arising
        out of or in connection with this Security Agreement.  This power of
        attorney and all authority conferred hereby shall be coupled with an interest
        and irrevocable and shall not be terminated by any act of any Secured Party
        or
        by operation of law, whether by the bankruptcy, dissolution, liquidation,
        death,
        disability or incapacity of a Secured Party or by the occurrence of any other
        event or events.

       

      


       

      [Signature
        Page to follow]

       

      


      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, each of the parties
        hereto has this Security Agreement as of the date first above
        written.

      


      
        


        


        
          	 	 
	 	
                  GRANTORS:

                
	 	 
	 	 
	 	
                  Fluid
                    Media Networks, Inc., a Nevada corporation

                
	 	 
	 	
                  By:
                    /s/ Justin F. Beckett            

                
	 	 
	 	
                  Name:
                    Justin Beckett

                
	 	 
	 	
                  Title:
                    CEO

                
	 	 
	 	
                  Trusonic,
                    Inc., a Delaware corporation

                
	 	 
	 	
                  By:
                    /s/ Justin F. Beckett            

                
	 	 
	 	
                  Name:
                    Justin Beckett

                
	 	 
	 	
                  Its:
                    

                
	 	 
	 	
                  SECURED
                    PARTIES:

                


        

        


        
          	
                  ALCOY
                    INVESTMENTS, LLC, a

                  California
                    limited liability company

                   

                  By: /s/
                    Victor Vilplana            

                  Name:
                    Victor Vilplana

                  Its: Managing
                    Member

                  Address:    

                	 	
                   

                   

                   

                  /s/
                    Catherine Eikel            

                  CATHERINE
                    EIKEL

                   

                  Address:    

                   

                   

                
	 	 	 
	
                  /s/
                    Clement J. O'Neill            

                  CLEMENT
                    J. O’NEILL, Trustee of the O’Neill Family Trust dated July 4,
                    1995

                   

                  Address:    

                   

                   

                	 	
                  
                    /s/
                      Daniel K. O'Neill            

                    DANIEL
                      K. O’NEILL, Trustee of the Daniel K. O’Neill Trust dated May 1,
                      1995

                  

                   

                  Address:                          

                
	 	 	 


        

         

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

        
 

        
          	 	 	 
	
                  
                    /s/
                      Todd Felton            

                    TODD
                      FELTON

                  

                   

                  Address:   
                    4503 Hawley Rd.

                  San
                    Diego, CA 92116

                	 	
                  
                    /s/
                      Kenneth Elsberry            

                    KENNETH
                      ELSBERRY

                     

                  

                  Address:    7180
                    Encelia Dr.

                  La
                    Jolla, CA 92037

                  San
                    Diego, CA 92116

                
	 	 	 
	
                  GRIFFEN,
                    LLC

                   

                  By: 
                    /s/ Thomas R. Lafleur            

                  Name:  Thomas
                    R. Lafleur

                  Its:  President

                   

                  Address:   

                   

                   

                	 	
                  
                     

                     

                    /s/
                      James J. Tebo            

                    JAMES
                      J. TEBO

                  

                   

                  Address:    

                
	 	 	 
	
                  
                    /s/
                      Jean Cote            

                    JEAN
                      COTE

                  

                   

                  
                    /s/
                      Randa Cote            

                    RANDA
                      COTE

                  

                   

                  Address:  

                   

                   

                	 	
                  
                    /s/
                      Joseph J. Tebo            

                    JOSEPH
                      J. TEBO, Trustee of the Tebo Family Trust dated September 30,
                      1994

                  

                   

                  Address:    

                
	 	 	 
	
                  
                    /s/
                      David McAnulty         

                    DAVID
                      McANULTY

                  

                   

                  Address:   

                	 	
                  
                    /s/
                      Catherine Mullican        

                    CATHERINE
                      MULLICAN

                  

                   

                  Address:    

                   

                   

                
	 	 	 
	
                  
                    /s/
                      Derrick Oien            

                    DERRICK
                      OIEN

                  

                   

                  Address:    

                   

                   

                	 	
                  
                    /s/
                      Robert Eikel            

                    ROBERT
                      EIKEL

                  

                   

                  Address:    

                
	 	 	 


        

         

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

        
 

        
          	 	 	 
	
                  
                    /s/
                      Neil T. Hadfield            

                    NEIL
                      T. HADFIELD, Co-Trustee of the Neil T. Hadfield & Margaret A. Jackson
                      Trust U/A/D 8/25/98

                  

                   

                  
                    /s/
                      Margaret A. Jackson        

                    MARGARET
                      A. JACKSON, Co-Trustee of the Neil T. Hadfield & Margaret A. Jackson
                      Trust U/A/D 8/25/98

                  

                   

                  Address:   

                   

                   

                	 	
                  
                    /s/
                      Robert E. Eikel            

                    ROBERT
                      E. EIKEL, Trustee of the Robert and Mary Eikel Trust dated
                      2/25/98

                  

                   

                  Address:    

                
	 	 	 
	
                  
                    /s/
                      Scott Annett            

                    SCOTT
                      ANNETT

                  

                   

                  Address:    

                   

                   

                	 	
                  
                    /s/
                      Scott Bjerke            

                    SCOTT
                      BJERKE

                  

                   

                  Address:   

                
	 	 	 
	
                  
                    /s/
                      Michelle Lazenby            

                    SHELLEY
                      LAZENBY

                  

                   

                  
                    /s/
                      Jeff Lazenby                

                    JEFF
                      LAZENBY

                  

                   

                  Address:    

                   

                   

                	 	
                  
                    /s/
                      Danny Sterne            

                    DANNY
                      STERNE

                  

                   

                  Address:   

                
	 	 	 
	
                  
                    /s/
                      Tim Ward                

                    TIMOTHY
                      WARD

                  

                   

                  Address:   

                   

                   

                	 	
                  
                    /s/
                      Eric Wennas            

                    ERIC
                      WENNAS

                  

                   

                  Address:    

                
	 	 	 
	
                  
                    /s/
                      Dave Whitaker            

                    DAVE
                      WHITAKER

                  

                   

                  Address:    

                	 	 


        

        
 

        12