exv10w5






Exhibit 10.5




EXHIBIT E




SECURITY AGREEMENT




     This SECURITY AGREEMENT, dated as of December 30, 2008 (this “Agreement”), is among T3
Motion, Inc., a Delaware corporation (the “Company”), all of the Subsidiaries of the
Company (such subsidiaries, the “Guarantors” and together with the Company, the
“Debtors”) and the holders of the Company’s 10% Secured Convertible Debentures due one year
following their issuance, in the original aggregate principal amount of $2,200,000 (collectively,
the “Debentures”) signatory hereto, their endorsees, transferees and assigns (collectively,
the “Secured Parties”).



WITNESSETH:




     WHEREAS, pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to extend the loans to the Company evidenced by the Debentures;



     WHEREAS, pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
“Guarantee”), the Guarantors have jointly and severally agreed to guarantee and act as
surety for payment of such Debentures; and



     WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties this Agreement and
to grant the Secured Parties, pari passu with each other Secured Party and through
the Agent (as defined in Section 18 hereof), a security interest in certain property of such Debtor
to secure the prompt payment, performance and discharge in full of all of the Company’s obligations
under the Debentures and the Guarantors’ obligations under the Guarantee.



     NOW, THEREFORE, in consideration of the agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:



     1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings
set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”,
“deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and
“supporting obligations”) shall have the respective meanings given such terms in Article 9 of the
UCC.




     (a) “Collateral” means the collateral in which the Secured Parties are granted
a security interest by this Agreement and which shall include the following personal
property of the Debtors, whether presently owned or existing or hereafter acquired or
coming into existence, wherever situated, and all



 









 







additions and accessions thereto and all substitutions and replacements thereof, and
all proceeds, products and accounts thereof, including, without limitation, all proceeds
from the sale or transfer of the Collateral and of insurance covering the same and of any
tort claims in connection therewith, and all dividends, interest, cash, notes, securities,
equity interest or other property at any time and from time to time acquired, receivable or
otherwise distributed in respect of, or in exchange for, any or all of the Pledged
Securities (as defined below):




     (i) All goods, including, without limitation, (A) all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control devices and other
equipment of every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all additions and
accessions thereto, replacements therefor, all parts therefor, and all substitutes
for any of the foregoing and all other items used and useful in connection with any
Debtor’s businesses and all improvements thereto; and (B) all inventory;




     (ii) All contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock or other
securities, rights under any of the Organizational Documents, agreements related to
the Pledged Securities, licenses, distribution and other agreements, computer
software (whether “off-the-shelf”, licensed from any third party or developed by
any Debtor), computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications, copyrights, and
income tax refunds;




     (iii) All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising, goods,
equipment, motor vehicles and trucks which any of the same may represent, and all
right, title, security and guaranties with respect to each account, including any
right of stoppage in transit;




     (iv) All documents, letter-of-credit rights, instruments and chattel paper;




     (v) All commercial tort claims;




     (vi) All deposit accounts and all cash (whether or not deposited in such
deposit accounts);




     (vii) All investment property;




     (viii) All supporting obligations; and



 









 






     (ix) All files, records, books of account, business papers, and computer
programs; and




     (x) the products and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(ix) above.




     Without limiting the generality of the foregoing, the “Collateral”
shall include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation, the
shares of capital stock and the other equity interests listed on Schedule H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests of any
other direct or indirect subsidiary of any Debtor obtained in the future, and, in
each case, all certificates representing such shares and/or equity interests and,
in each case, all rights, options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or distributed in respect of,
or exchanged for, any of the foregoing and all rights arising under or in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.




     Notwithstanding the foregoing, nothing herein shall be deemed to constitute an
assignment of any asset which, in the event of an assignment, becomes void by
operation of applicable law or the assignment of which is otherwise prohibited by
applicable law (in each case to the extent that such applicable law is not
overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by
applicable law, this Agreement shall create a valid security interest in such asset
and, to the extent permitted by applicable law, this Agreement shall create a valid
security interest in the proceeds of such asset.




     (b) “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without limitation, (i) all
copyrights arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published or
unpublished, all registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and applications in
the United States Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions thereof, and all
applications for letters patent of the United States or any other country and all
divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business names, trade
dress, service marks, logos, domain names and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter



 









 







adopted or acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether 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, or otherwise, and all common law rights related thereto,
(iv) all trade secrets arising under the laws of the United States, any other country or
any political subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all
causes of action for infringement of the foregoing.




     (c) “Majority in Interest” means, at any time of determination, the majority
in interest (based on then-outstanding principal amounts of Debentures at the time of such
determination) of the Secured Parties.




     (d) “Necessary Endorsement” means undated stock powers endorsed in blank or
other proper instruments of assignment duly executed and such other instruments or
documents as the Agent (as that term is defined below) may reasonably request.




     (e) “Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several, but not including any liabilities or
obligations incurred pursuant to that certain Securities Purchase Agreement, dated March
24, 2008 by and among the Company and the purchasers signatory thereto) due or to become
due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor
to the Secured Parties, including, without limitation, all obligations under this
Agreement, the Debentures, the Guarantee and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute
or contingent, liquidated or unliquidated, whether or not jointly owed with others, and
whether or not from time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or indirectly from
any of the Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from time to
time. Without limiting the generality of the foregoing, the term “Obligations” shall
include, without limitation: (i) principal of, and interest on the Debentures and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and
liabilities of the Debtors from time to time under or in connection with this Agreement,
the Debentures, the Guarantee and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the foregoing that
would be payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the



 









 







existence of a bankruptcy, reorganization or similar proceeding involving any Debtor.




     (f) “Organizational Documents” means with respect to any Debtor, the documents
by which such Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of preferred equity) and
which relate to the internal governance of such Debtor (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).




     (g) “Pledged Interests” shall have the meaning ascribed to such term in
Section 4(j).




     (h) “Pledged Securities” shall have the meaning ascribed to such term in
Section 4(i).




     (i) “UCC” means the Uniform Commercial Code of the State of New York and or
any other applicable law of any state or states which has jurisdiction with respect to all,
or any portion of, the Collateral or this Agreement, from time to time. It is the intent
of the parties that defined terms in the UCC should be construed in their broadest sense so
that the term “Collateral” will be construed in its broadest sense. Accordingly if there
are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.



     2. Grant of Security Interest in Collateral. As an inducement for the Secured Parties to
extend the loans as evidenced by the Debentures and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a
security interest in and to, a lien upon and a right of set-off against all of their respective
right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security
Interest” and, collectively, the “Security Interests”).



     3. Delivery of Certain Collateral. Contemporaneously or prior to the execution of this
Agreement, each Debtor shall deliver or cause to be delivered to the Agent (a) any and all
certificates and other instruments representing or evidencing the Pledged Securities, and (b) any
and all certificates and other instruments or documents representing any of the other Collateral,
in each case, together with all Necessary Endorsements. The Debtors are, contemporaneously with
the execution hereof, delivering to Agent, or have previously delivered to Agent, a true and
correct copy of each Organizational Document governing any of the Pledged Securities.



 









 





     4. Representations, Warranties, Covenants and Agreements of the Debtors. Except as set forth
under the corresponding section of the disclosure schedules delivered to the Secured Parties
concurrently herewith (the “Disclosure Schedules”), which Disclosure Schedules shall be
deemed a part hereof, each Debtor represents and warrants to, and covenants and agrees with, the
Secured Parties as follows:




     (a) Each Debtor has the requisite corporate, partnership, limited liability company
or other power and authority to enter into this Agreement and otherwise to carry out its
obligations hereunder. The execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly authorized by all necessary
action on the part of such Debtor and no further action is required by such Debtor. This
Agreement has been duly executed by each Debtor. This Agreement constitutes the legal,
valid and binding obligation of each Debtor, enforceable against each Debtor in accordance
with its terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of equity.




     (b) The Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located, except as set forth on
Schedule A attached hereto. Except as specifically set forth on Schedule
A, each Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property except for
Permitted Liens (as defined in the Debentures). Except as disclosed on Schedule A,
none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent
or processor.




     (c) Except for Permitted Liens (as defined in the Debentures) and except as set forth
on Schedule B attached hereto, the Debtors are the sole owner of the Collateral
(except for non-exclusive licenses granted by any Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights or claims,
and are fully authorized to grant the Security Interests. Except as set forth on
Schedule C attached hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those that will be
filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting any
of the Collateral. Except as set forth on Schedule C attached hereto and except
pursuant to this Agreement, as long as this Agreement shall be in effect, the Debtors shall
not execute and shall not knowingly permit to be on file in any such office or agency any
other financing statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Parties pursuant to the terms of this Agreement).




     (d) No written claim has been received that any Collateral or any Debtor’s use of any
Collateral violates the rights of any third party. There has



 









 







been no adverse decision to any Debtor’s claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to any Debtor’s right to keep and
maintain such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before any court,
judicial body, administrative or regulatory agency, arbitrator or other governmental
authority.




     (e) Each Debtor shall at all times maintain its books of account and records relating
to the Collateral at its principal place of business and its Collateral at the locations
set forth on Schedule A attached hereto and may not relocate such books of account
and records or tangible Collateral unless it delivers to the Secured Parties at least 30
days prior to such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that appropriate
financing statements under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security Interests to create in
favor of the Secured Parties a valid, perfected and continuing perfected lien in the
Collateral.




     (f) This Agreement creates in favor of the Secured Parties a valid security interest
in the Collateral, subject only to Permitted Liens (as defined in the Debentures) securing
the payment and performance of the Obligations. Upon making the filings described in the
immediately following paragraph, all security interests created hereunder in any Collateral
which may be perfected by filing Uniform Commercial Code financing statements shall have
been duly perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation of the
Intellectual Property Security Agreement (as defined in Section 4(p) hereof) with respect
to copyrights and copyright applications in the United States Copyright Office referred to
in paragraph (m), the execution and delivery of deposit account control agreements
satisfying the requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors, and the delivery of the certificates and other instruments provided
in Section 3, no action is necessary to create, perfect or protect the security interests
created hereunder. Without limiting the generality of the foregoing, except for the filing
of said financing statements, the recordation of said Intellectual Property Security
Agreement, and the execution and delivery of said deposit account control agreements, no
consent of any third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is required for (i)
the execution, delivery and performance of this Agreement, (ii) the creation or perfection
of the Security Interests created hereunder in the Collateral or (iii) the enforcement of
the rights of the Agent and the Secured Parties hereunder.




     (g) Each Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing and recording
agencies in any jurisdiction deemed proper by it.



 









 






     (h) The execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor or any
judgment, decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing any Debtor’s debt or otherwise) or other
understanding to which any Debtor is a party or by which any property or asset of any
Debtor is bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter into and
perform its obligations hereunder have been obtained.




     (i) The capital stock and other equity interests listed on Schedule H hereto
(the “Pledged Securities”) represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other equity interests
owned, directly or indirectly, by the Company. All of the Pledged Securities are validly
issued, fully paid and nonassessable, and the Company is the legal and beneficial owner of
the Pledged Securities, free and clear of any lien, security interest or other encumbrance
except for the security interests created by this Agreement and other Permitted Liens (as
defined in the Debentures).




     (j) The ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”) by their
express terms do not provide that they are securities governed by Article 8 of the UCC and
are not held in a securities account or by any financial intermediary.




     (k) Except for Permitted Liens (as defined in the Debentures), each Debtor shall at
all times maintain the liens and Security Interests provided for hereunder as valid and
perfected liens and security interests in the Collateral in favor of the Secured Parties
until this Agreement and the Security Interest hereunder shall be terminated pursuant to
Section 14 hereof. Each Debtor hereby agrees to defend the same against the claims of any
and all persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Secured Parties. At the request of the Agent, each Debtor will sign and
deliver to the Agent on behalf of the Secured Parties at any time or from time to time one
or more financing statements pursuant to the UCC in form reasonably satisfactory to the
Agent and will pay the cost of filing the same in all public offices wherever filing is, or
is deemed by the Agent to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, each Debtor shall
pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security
Interests hereunder, and each Debtor shall obtain and furnish to the Agent from time to
time, upon demand, such releases



 









 







and/or subordinations of claims and liens which may be required to maintain the
priority of the Security Interests hereunder.




     (l) No Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by a Debtor in
its ordinary course of business and sales of inventory by a Debtor in its ordinary course
of business) without the prior written consent of a Majority in Interest.




     (m) Each Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate any such
Collateral (or cause to be operated or located) in any area excluded from insurance
coverage.




     (n) Each Debtor shall maintain with financially sound and reputable insurers,
insurance with respect to the Collateral, including Collateral hereafter acquired, against
loss or damage of the kinds and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated and in such amounts as
are customarily carried under similar circumstances by other such entities and otherwise as
is prudent for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof. Each Debtor shall cause each insurance policy issued in
connection herewith to provide, and the insurer issuing such policy to certify to the
Agent, that (a) the Agent will be named as lender loss payee and additional insured under
each such insurance policy; (b) if such insurance be proposed to be cancelled or materially
changed for any reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least thirty (30) days
after receipt by the Agent of such notice, unless the effect of such change is to extend or
increase coverage under the policy; and (c) the Agent will have the right (but no
obligation) at its election to remedy any default in the payment of premiums within thirty
(30) days of notice from the insurer of such default. If no Event of Default (as defined
in the Debentures) exists and if the proceeds arising out of any claim or series of related
claims do not exceed $100,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with respect to which the
loss was incurred to the extent reasonably feasible, and any loss payments or the balance
thereof remaining, to the extent not so applied, shall be payable to the applicable Debtor;
provided, however, that payments received by any Debtor after an Event of
Default occurs and is continuing or in excess of $100,000 for any occurrence or series of
related occurrences shall be paid to the Agent on behalf of the Secured Parties and, if
received by such Debtor, shall be held in trust for the Secured Parties and immediately
paid over to the Agent unless otherwise directed in writing by the Agent. Copies of such
policies or the related certificates, in each case, naming the Agent as lender loss payee
and additional insured shall be delivered to the Agent at least annually and at the time
any new policy of insurance is issued.



 









 






     (o) Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any material adverse change in the
Collateral, and of the occurrence of any event which would have a material adverse effect
on the value of the Collateral or on the Secured Parties’ security interest, through the
Agent, therein.




     (p) Each Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other instruments,
documents, certificates and assurances and take such further action as the Agent may from
time to time request and may in its sole discretion deem necessary to perfect, protect or
enforce the Secured Parties’ security interest in the Collateral including, without
limitation, if applicable, the execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property (“Intellectual Property Security
Agreement”) in which the Secured Parties have been granted a security interest
hereunder, substantially in a form reasonably acceptable to the Agent, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject to all of the
terms and conditions hereof.




     (q) Each Debtor shall permit the Agent and its representatives and agents to inspect
the Collateral during normal business hours and upon reasonable prior notice, and to make
copies of records pertaining to the Collateral as may be reasonably requested by the Agent
from time to time.




     (r) Each Debtor shall take all steps reasonably necessary to diligently pursue and
seek to preserve, enforce and collect any rights, claims, causes of action and accounts
receivable in respect of the Collateral.




     (s) Each Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process levied
against any Collateral and of any other information received by such Debtor that may
materially affect the value of the Collateral, the Security Interest or the rights and
remedies of the Secured Parties hereunder.




     (t) All information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is accurate and complete in all
material respects as of the date furnished.




     (u) The Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises material to its
business.




     (v) No Debtor will change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides



 









 







at least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue the perfection of the Security Interests
granted and evidenced by this Agreement.




     (w) Except in the ordinary course of business, no Debtor may consign any of its
inventory or sell any of its inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the Agent which shall not be
unreasonably withheld.




     (x) No Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and so long as,
at the time of such written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue the perfection of the Security Interests
granted and evidenced by this Agreement.




     (y) Each Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule D attached hereto, which
Schedule D sets forth each Debtor’s organizational identification number or, if any
Debtor does not have one, states that one does not exist.




     (z) (i) The actual name of each Debtor is the name set forth in Schedule D
attached hereto; (ii) no Debtor has any trade names except as set forth on Schedule
E attached hereto; (iii) no Debtor has used any name other than that stated in the
preamble hereto or as set forth on Schedule E for the preceding five years; and
(iv) no entity has merged into any Debtor or been acquired by any Debtor within the past
five years except as set forth on Schedule E.




     (aa) At any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the secured
party to perfect the security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Agent.




     (bb) Each Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Agent regarding the Pledged Interests consistent with the terms
of this Agreement without the further consent of any Debtor as contemplated by Section
8-106 (or any successor section) of the UCC. Further, each Debtor agrees that it shall not
enter into a similar agreement (or one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.




     (cc) Each Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause such tangible
chattel paper to contain a legend noting that it is subject to the security interest
created by this Agreement. To the extent that any Collateral consists of electronic
chattel paper, the applicable Debtor shall cause the



 









 







underlying chattel paper to be “marked” within the meaning of Section 9-105 of the UCC
(or successor section thereto).




     (dd) If there is any investment property or deposit account included as Collateral
that can be perfected by “control” through an account control agreement, the applicable
Debtor shall cause such an account control agreement, in form and substance in each case
satisfactory to the Agent, to be entered into and delivered to the Agent for the benefit of
the Secured Parties.




     (ee) To the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to consent to
an assignment of the proceeds thereof to the Secured Parties.




     (ff) To the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party of the Secured
Parties’ security interest in such Collateral and shall use its best efforts to obtain an
acknowledgement and agreement from such third party with respect to the Collateral, in form
and substance reasonably satisfactory to the Agent.




     (gg) If any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such Debtor of the
particulars thereof and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to the Agent.




     (hh) Each Debtor shall immediately provide written notice to the Secured Parties of
any and all accounts which arise out of contracts with any governmental authority and, to
the extent necessary to perfect or continue the perfected status of the Security Interests
in such accounts and proceeds thereof, shall execute and deliver to the Agent an assignment
of claims for such accounts and cooperate with the Agent in taking any other steps
required, in its judgment, under the Federal Assignment of Claims Act or any similar
federal, state or local statute or rule to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof.




     (ii) Each Debtor shall cause each subsidiary of such Debtor to immediately become a
party hereto (an “Additional Debtor”), by executing and delivering an Additional Debtor
Joinder in substantially the form of Annex A attached hereto and comply with the
provisions hereof applicable to the Debtors. Concurrent therewith, the Additional Debtor
shall deliver replacement schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement, as applicable, which replacement schedules shall supersede,
or supplements shall modify, the Schedules then in effect. The Additional Debtor shall
also deliver such opinions of counsel, authorizing resolutions, good standing certificates,



 









 







incumbency certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably request. Upon delivery of the
foregoing to the Agent, the Additional Debtor shall be and become a party to this Agreement
with the same rights and obligations as the Debtors, for all purposes hereof as fully and
to the same extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the date of
execution and delivery of such Additional Debtor Joinder, and all references herein to the
“Debtors” shall be deemed to include each Additional Debtor.




     (jj) Each Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Debentures.




     (kk) Each Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities to
register the pledge of the applicable Pledged Securities in the name of the Secured Parties
on the books of such issuer. Further, except with respect to certificated securities
delivered to the Agent, the applicable Debtor shall deliver to Agent an acknowledgement of
pledge (which, where appropriate, shall comply with the requirements of the relevant UCC
with respect to perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (a) it has registered the pledge on
its books and records; and (b) at any time directed by Agent during the continuation of an
Event of Default, such issuer will transfer the record ownership of such Pledged Securities
into the name of any designee of Agent, will take such steps as may be necessary to effect
the transfer, and will comply with all other instructions of Agent regarding such Pledged
Securities without the further consent of the applicable Debtor.




     (ll) In the event that, upon an occurrence of an Event of Default, Agent may sell all
or any of the Pledged Securities to another party or parties (herein called the
“Transferee”) or shall purchase or retain all or any of the Pledged Securities,
each Debtor shall, to the extent applicable: (i) deliver to Agent or the Transferee, as the
case may be, the articles of incorporation, bylaws, minute books, stock certificate books,
corporate seals, deeds, leases, indentures, agreements, evidences of indebtedness, books of
account, financial records and all other Organizational Documents and records of the
Debtors and their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the Debtors and their
direct and indirect subsidiaries, if so requested; and (iii) use its best efforts to obtain
any approvals that are required by any governmental or regulatory body in order to permit
the sale of the Pledged Securities to the Transferee or the purchase or retention of the
Pledged Securities by Agent and allow the Transferee or Agent to continue the business of
the Debtors and their direct and indirect subsidiaries.




     (mm) Without limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly (i) cause to be registered at the



 









 







United States Copyright Office all of its material copyrights, (ii) cause the security
interest contemplated hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark Office to be duly
recorded at the applicable office, and (iii) give the Agent notice whenever it acquires
(whether absolutely or by license) or creates any additional material Intellectual
Property.




     (nn) Each Debtor will from time to time, at the joint and several expense of the
Debtors, promptly execute and deliver all such further instruments and documents, and take
all such further action as may be necessary or desirable, or as the Agent may reasonably
request, in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Parties to exercise and enforce their rights and
remedies hereunder and with respect to any Collateral or to otherwise carry out the
purposes of this Agreement.




     (oo) Schedule F attached hereto lists all of the patents, patent applications,
trademarks, trademark applications, registered copyrights, and domain names owned by any of
the Debtors as of the date hereof. Schedule F lists all material licenses in favor
of any Debtor for the use of any patents, trademarks, copyrights and domain names as of the
date hereof. All material patents and trademarks of the Debtors have been duly recorded at
the United States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.




     (pp) Except as set forth on Schedule G attached hereto, none of the account
debtors or other persons or entities obligated on any of the Collateral is a governmental
authority covered by the Federal Assignment of Claims Act or any similar federal, state or
local statute or rule in respect of such Collateral.



     5. Effect of Pledge on Certain Rights. If any of the Collateral subject to this Agreement
consists of nonvoting equity or ownership interests (regardless of class, designation, preference
or rights) that may be converted into voting equity or ownership interests upon the occurrence of
certain events (including, without limitation, upon the transfer of all or any of the other stock
or assets of the issuer), it is agreed that the pledge of such equity or ownership interests
pursuant to this Agreement or the enforcement of any of Agent’s rights hereunder shall not be
deemed to be the type of event which would trigger such conversion rights notwithstanding any
provisions in the Organizational Documents or agreements to which any Debtor is subject or to which
any Debtor is party.



     6. Defaults. The following events shall be “Events of Default”:




     (a) The occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;



 









 






     (c) The failure by any Debtor to observe or perform any of its obligations hereunder
for five (5) Trading Days after delivery to such Debtor of notice of such failure by or on
behalf of a Secured Party unless such default is capable of cure but cannot be reasonably
cured within such time frame and such Debtor is using best efforts to cure same in a timely
fashion; or




     (d) If any provision of this Agreement shall at any time for any reason be declared
to be null and void, or the validity or enforceability thereof shall be contested by any
Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority
having jurisdiction over any Debtor, seeking to establish the invalidity or
unenforceability thereof, or any Debtor shall deny that any Debtor has any liability or
obligation purported to be created under this Agreement.



     7. Duty To Hold In Trust.




     (a) Upon the occurrence of any Event of Default and at any time thereafter, each
Debtor shall, upon receipt of any revenue, income, dividend, interest or other sums subject
to the Security Interests, whether payable pursuant to the Debentures or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing an obligation to
pay any such sum, hold the same in trust for the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured Parties,
pro-rata in proportion to their respective then-currently outstanding principal amount of
Debentures for application to the satisfaction of the Obligations (and if any Debenture is
not outstanding, pro-rata in proportion to the initial purchases of the remaining
Debentures).




     (b) If any Debtor shall become entitled to receive or shall receive any securities or
other property (including, without limitation, shares of Pledged Securities or instruments
representing Pledged Securities acquired after the date hereof, or any options, warrants,
rights or other similar property or certificates representing a dividend, or any
distribution in connection with any recapitalization, reclassification or increase or
reduction of capital, or issued in connection with any reorganization of such Debtor or any
of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise),
such Debtor agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold
the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to
deliver any and all certificates or instruments evidencing the same to Agent on or before
the close of business on the fifth business day following the receipt thereof by such
Debtor, in the exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.



     8. Rights and Remedies Upon Default.



 









 






     (a) Upon the occurrence of any Event of Default and at any time thereafter, the
Secured Parties, acting through the Agent, shall have the right to exercise all of the
remedies conferred hereunder and under the Debentures, and the Secured Parties shall have
all the rights and remedies of a secured party under the UCC. Without limitation, the
Agent, for the benefit of the Secured Parties, shall have the following rights and powers:




     (i) The Agent shall have the right to take possession of the Collateral and,
for that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the same,
and each Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at such Debtor’s premises
or elsewhere, and make available to the Agent, without rent, all of such Debtor’s
respective premises and facilities for the purpose of the Agent taking possession
of, removing or putting the Collateral in saleable or disposable form.




     (ii) Upon notice to the Debtors by Agent, all rights of each Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall cease.
Upon such notice, Agent shall have the right to receive, for the benefit of the
Secured Parties, any interest, cash dividends or other payments on the Collateral
and, at the option of Agent, to exercise in such Agent’s discretion all voting
rights pertaining thereto. Without limiting the generality of the foregoing, Agent
shall have the right (but not the obligation) to exercise all rights with respect
to the Collateral as it were the sole and absolute owner thereof, including,
without limitation, to vote and/or to exchange, at its sole discretion, any or all
of the Collateral in connection with a merger, reorganization, consolidation,
recapitalization or other readjustment concerning or involving the Collateral or
any Debtor or any of its direct or indirect subsidiaries.




     (iii) The Agent shall have the right to operate the business of each Debtor
using the Collateral and shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private sale
or otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such time or
times and at such place or places, and upon such terms and conditions as the Agent
may deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice to
any Debtor or right of redemption of a Debtor, which are hereby expressly waived.
Upon each such sale, lease, assignment or other transfer of



 









 







Collateral, the Agent, for the benefit of the Secured Parties, may, unless
prohibited by applicable law which cannot be waived, purchase all or any part of
the Collateral being sold, free from and discharged of all trusts, claims, right of
redemption and equities of any Debtor, which are hereby waived and released.




     (iv) The Agent shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Agent, on behalf of the Secured Parties, and to enforce the
Debtors’ rights against such account debtors and obligors.




     (v) The Agent, for the benefit of the Secured Parties, may (but is not
obligated to) direct any financial intermediary or any other person or entity
holding any investment property to transfer the same to the Agent, on behalf of the
Secured Parties, or its designee.




     (vi) The Agent may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Parties or
any designee or any purchaser of any Collateral.




     (b) The Agent shall comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties. If the Agent sells
any of the Collateral on credit, the Debtors will only be credited with payments actually
made by the purchaser. In addition, each Debtor waives any and all rights that it may have
to a judicial hearing in advance of the enforcement of any of the Agent’s rights and
remedies hereunder, including, without limitation, its right following an Event of Default
to take immediate possession of the Collateral and to exercise its rights and remedies with
respect thereto.




     (c) For the purpose of enabling the Agent to further exercise rights and remedies
under this Section 8 or elsewhere provided by agreement or applicable law, each Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured Parties, an
irrevocable, nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an Event of Default,
any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the
same may be located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software and programs used for
the compilation or printout thereof.



     9. Applications of Proceeds. The proceeds of any such sale, lease or other disposition of the
Collateral hereunder or from payments made on account of any



 









 







insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of
retaking, holding, storing, processing and preparing for sale, selling, and the like (including,
without limitation, any taxes, fees and other costs incurred in connection therewith) of the
Collateral, to the reasonable attorneys’ fees and expenses incurred by the Agent in enforcing the
Secured Parties’ rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the Secured Parties (based
on then-outstanding principal amounts of Debentures at the time of any such determination), and to
the payment of any other amounts required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or other disposition
of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured
Parties are legally entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 15% per annum or the lesser amount permitted by applicable law (the
“Default Rate”), and the reasonable fees of any attorneys employed by the Secured Parties
to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all
claims, damages and demands against the Secured Parties arising out of the repossession, removal,
retention or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject to further appeal)
of a court of competent jurisdiction.



     10. Securities Law Provision. Each Debtor recognizes that Agent may be limited in its ability
to effect a sale to the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or state securities laws
(collectively, the “Securities Laws”), and may be compelled to resort to one or more sales
to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities
for their own account, for investment and not with a view to the distribution or resale thereof.
Each Debtor agrees that sales so made may be at prices and on terms less favorable than if the
Pledged Securities were sold to the public, and that Agent has no obligation to delay the sale of
any Pledged Securities for the period of time necessary to register the Pledged Securities for sale
to the public under the Securities Laws. Each Debtor shall cooperate with Agent in its attempt to
satisfy any requirements under the Securities Laws (including, without limitation, registration
thereunder if requested by Agent) applicable to the sale of the Pledged Securities by Agent.



     11. Costs and Expenses. Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and
expenses incurred in connection with any filing required hereunder, including without limitation,
any financing statements pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches reasonably required by the
Agent. The Debtors shall also pay all other claims and charges which in the reasonable opinion of
the Agent is reasonably likely to prejudice, imperil or otherwise affect the Collateral or the
Security Interests therein. The Debtors will also, upon demand, pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Agent, for the benefit of the Secured Parties, may reasonably incur
in connection with the creation, perfection, protection, satisfaction, foreclosure, collection or
enforcement of the Security Interest and the



 









 







preparation, administration, continuance, amendment or enforcement of this Agreement and pay to the
Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which the Agent, for the benefit of the Secured Parties,
and the Secured Parties may incur in connection with (i) the enforcement of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from, or other realization upon, any of
the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties
under the Debentures. Until so paid, any fees payable hereunder shall be added to the principal
amount of the Debentures and shall bear interest at the Default Rate.



     12. Responsibility for Collateral. The Debtors assume all liabilities and responsibility in
connection with all Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) neither the Agent nor any
Secured Party (i) has any duty (either before or after an Event of Default) to collect any amounts
in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor shall
remain obligated and liable under each contract or agreement included in the Collateral to be
observed or performed by such Debtor thereunder. Neither the Agent nor any Secured Party shall
have any obligation or liability under any such contract or agreement by reason of or arising out
of this Agreement or the receipt by the Agent or any Secured Party of any payment relating to any
of the Collateral, nor shall the Agent or any Secured Party be obligated in any manner to perform
any of the obligations of any Debtor under or pursuant to any such contract or agreement, to make
inquiry as to the nature or sufficiency of any payment received by the Agent or any Secured Party
in respect of the Collateral or as to the sufficiency of any performance by any party under any
such contract or agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been assigned to the Agent or
to which the Agent or any Secured Party may be entitled at any time or times.



     13. Security Interests Absolute. All rights of the Secured Parties and all obligations of the
Debtors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Debentures or any agreement entered into in connection
with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place
of payment or performance of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of
the Collateral, or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any
action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense available to a Debtor,
or a discharge of all or any part of the Security



 









 







Interests granted hereby. Until the Obligations shall have been paid and performed in full, the
rights of the Secured Parties shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or bankruptcy. Each
Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and
demand for performance. In the event that at any time any transfer of any Collateral or any payment
received by the Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to any party other
than the Secured Parties, then, in any such event, each Debtor’s obligations hereunder shall
survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior
payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. Each Debtor waives all
right to require the Secured Parties to proceed against any other person or entity or to apply any
Collateral which the Secured Parties may hold at any time, or to marshal assets, or to pursue any
other remedy. Each Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.



     14. Term of Agreement. This Agreement and the Security Interests shall terminate on the date
on which all payments under the Debentures have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all indemnities of the Debtors
contained in this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of this Agreement.



     15. Power of Attorney; Further Assurances.




     (a) Each Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent and its officers, agents, successors or assigns with full power of substitution, as
such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent or
such Debtor, to, after the occurrence and during the continuance of an Event of Default,
(i) endorse any note, checks, drafts, money orders or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of the Agent; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or express bill, bill of
lading, storage or warehouse receipts, drafts against debtors, assignments, verifications
and notices in connection with accounts, and other documents relating to the Collateral;
(iii) to pay or discharge taxes, liens, security interests or other encumbrances at any
time levied or placed on or threatened against the Collateral; (iv) to demand, collect,
receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to
transfer any Intellectual Property or provide licenses respecting any Intellectual
Property; and (vi) generally, at the option of the Agent, and at the expense of the
Debtors, at any time, or from time to time, to execute and deliver any and all documents
and instruments and to do all acts and things which the Agent deems necessary to protect,
preserve and




 












 






realize upon the Collateral and the Security Interests granted therein in order to
effect the intent of this Agreement and the Debentures all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies 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 for the term of this Agreement and thereafter as long
as any of the Obligations shall be outstanding. The designation set forth herein shall be
deemed to amend and supersede any inconsistent provision in the Organizational Documents or
other documents or agreements to which any Debtor is subject or to which any Debtor is a
party. Without limiting the generality of the foregoing, after the occurrence and during
the continuance of an Event of Default, each Secured Party is specifically authorized to
execute and file any applications for or instruments of transfer and assignment of any
patents, trademarks, copyrights or other Intellectual Property with the United States
Patent and Trademark Office and the United States Copyright Office.




     (b) On a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies in any
jurisdiction, including, without limitation, the jurisdictions indicated on Schedule
C attached hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Agent, to perfect the
Security Interests granted hereunder and otherwise to carry out the intent and purposes of
this Agreement, or for assuring and confirming to the Agent the grant or perfection of a
perfected security interest in all the Collateral under the UCC.




     (c) Each Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor and in the
name of such Debtor, from time to time in the Agent’s discretion, to take any action and to
execute any instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law, which financing
statements may (but need not) describe the Collateral as “all assets” or “all personal
property” or words of like import, and ratifies all such actions taken by the Agent. This
power of attorney is coupled with an interest and shall be irrevocable for the term of this
Agreement and thereafter as long as any of the Obligations shall be outstanding.



     16. Notices. All notices, requests, demands and other communications hereunder shall be
subject to the notice provision of the Purchase Agreement (as such term is defined in the
Debentures).



     17. Other Security. To the extent that the Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity, then the Agent shall have



 









 







the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any of the Secured Parties’
rights and remedies hereunder.



     18. Appointment of Agent. The Secured Parties hereby appoint [                     to act as their agent
(“[___” or “Agent”) for purposes of exercising any and all rights and remedies of
the Secured Parties hereunder. Such appointment shall continue until revoked in writing by a
Majority in Interest, at which time a Majority in Interest shall appoint a new Agent, provided that
[                     may not be removed as Agent unless [                     shall then hold less than $                     in principal
amount of Debentures; provided, further, that such removal may occur only if each
of the other Secured Parties shall then hold not less than an aggregate of $                     in principal
amount of Debentures. The Agent shall have the rights, responsibilities and immunities set forth
in Annex B hereto.



     19. Miscellaneous.




     (a) No course of dealing between the Debtors and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties, any right,
power or privilege hereunder or under the Debentures shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.




     (b) All of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Debentures or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised singly or
concurrently.




     (c) This Agreement and the Transaction Documents, together with the exhibits and
schedules hereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been merged into
this Agreement, the Transaction Documents and the exhibits and schedules hereto. No
provision of this Agreement may be waived, modified, supplemented or amended except in a
written instrument signed, in the case of an amendment, by the Debtors and the Secured
Parties holding 51% or more of the principal amount of Debentures then outstanding, or, in
the case of a waiver, by the party against whom enforcement of any such waived provision is
sought.




     (d) If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable efforts to find and employ
an alternative means to



 









 







achieve the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.




     (e) No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.




     (f) This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company and the Guarantors may not assign
this Agreement or any rights or obligations hereunder without the prior written consent
of each Secured Party (other than by merger). Any Secured Party may assign any or all of
its rights under this Agreement to any Person (as defined in the Purchase Agreement) to
whom such Secured Party assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred Obligations, by the
provisions of this Agreement that apply to the “Secured Parties.”




     (g) Each party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the provisions and
purposes of this Agreement.




     (h) Except to the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, all questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Except to the extent mandatorily governed by the
jurisdiction or situs where the Collateral is located, each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debentures (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York, Borough of Manhattan. Except to the extent mandatorily governed
by the jurisdiction or situs where the Collateral is located, each Debtor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such proceeding is
improper. Each party hereto hereby irrevocably waives personal service of process and
consents to



 









 







process being served in any such proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby.




     (i) This Agreement may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.




     (j) All Debtors shall jointly and severally be liable for the obligations of each
Debtor to the Secured Parties hereunder.




     (k) Each Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers, directors,
employees and agents (and any other persons with other titles that have similar functions)
(collectively, “Indemnitees”) from and against any and all losses, claims,
liabilities, damages, penalties, suits, costs and expenses, of any kind or nature,
(including fees relating to the cost of investigating and defending any of the foregoing)
imposed on, incurred by or asserted against such Indemnitee in any way related to or
arising from or alleged to arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction. This indemnification
provision is in addition to, and not in limitation of, any other indemnification provision
in the Debentures, the Purchase Agreement (as such term is defined in the Debentures) or
any other agreement, instrument or other document executed or delivered in connection
herewith or therewith.




     (l) Nothing in this Agreement shall be construed to subject Agent or any Secured Party
to liability as a partner in any Debtor or any if its direct or indirect subsidiaries that
is a partnership or as a member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured Party be deemed to have
assumed any obligations under any partnership agreement or limited liability company
agreement, as applicable, of any such Debtor or any of its direct or indirect subsidiaries
or otherwise, unless



 









 







and until any such Secured Party exercises its right to be substituted for such Debtor
as a partner or member, as applicable, pursuant hereto.




     (m) To the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any partner or
member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents, the Debtors hereby
grant such consent and approval and waive any such noncompliance with the terms of said
documents.



[SIGNATURE PAGES FOLLOW]




 









 








     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
on the day and year first above written.



	 	 	 	 	 
	T3 MOTION, INC.

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 
	T3 MOTION, LTD.

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 



[SIGNATURE PAGE OF HOLDERS FOLLOWS]




 









 








[SIGNATURE PAGE OF HOLDERS TO T3 SA]






     Name of Investing Entity:                                                             




     Signature of Authorized Signatory of Investing entity:                                                             




     Name of Authorized Signatory:                                                             




     Title of Authorized Signatory:                                                             



[SIGNATURE PAGE OF HOLDERS FOLLOWS]




 









 








ANNEX A

to

SECURITY

AGREEMENT




FORM OF ADDITIONAL DEBTOR JOINDER




Security Agreement dated as of December 30, 2008 made by

T3 Motion. Inc.

and its subsidiaries party thereto from time to time, as Debtors

to and in favor of

the Secured Parties identified therein (the “Security Agreement”)




     Reference is made to the Security Agreement as defined above; capitalized terms used herein
and not otherwise defined herein shall have the meanings given to such terms in, or by reference
in, the Security Agreement.



     The undersigned hereby agrees that upon delivery of this Additional Debtor Joinder to the
Secured Parties referred to above, the undersigned shall (a) be an Additional Debtor under the
Security Agreement, (b) have all the rights and obligations of the Debtors under the Security
Agreement as fully and to the same extent as if the undersigned was an original signatory thereto
and (c) be deemed to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN
THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.



     Attached hereto are supplemental and/or replacement Schedules to the Security Agreement, as
applicable.



     An executed copy of this Joinder shall be delivered to the Secured Parties, and the Secured
Parties may rely on the matters set forth herein on or after the date hereof. This Joinder shall
not be modified, amended or terminated without the prior written consent of the Secured Parties.



 









 





     IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the name and on
behalf of the undersigned.





	 	 	 	 	 
	 	[Name of Additional Debtor] 	 
	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	
 	 
	 
	 	 	Address: 	
 	 



Dated:




 









 





ANNEX B

to

SECURITY

AGREEMENT




THE AGENT




          1. Appointment. The Secured Parties (all capitalized terms used herein and not otherwise
defined shall have the respective meanings provided in the Security Agreement to which this Annex B
is attached (the “Agreement”)), by their acceptance of the benefits of the Agreement,
hereby designate [                     (“[                    ” or “Agent”) as the Agent to act as specified
herein and in the Agreement. Each Secured Party shall be deemed irrevocably to authorize the Agent
to take such action on its behalf under the provisions of the Agreement and any other Transaction
Document (as such term is defined in the Purchase Agreement) and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto.
The Agent may perform any of its duties hereunder by or through its agents or employees.




          2. Nature of Duties. The Agent shall have no duties or responsibilities except those
expressly set forth in the Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or answerable for any loss,
unless caused solely by its or their gross negligence or willful misconduct as determined by a
final judgment (not subject to further appeal) of a court of competent jurisdiction. The duties of
the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any obligations in
respect of the Agreement or any other Transaction Document except as expressly set forth herein and
therein.




          3. Lack of Reliance on the Agent. Independently and without reliance upon the Agent, each
Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of the Collateral from time
to time, and the Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other information with respect
thereto, whether coming into its possession before any Obligations are incurred or



 









 






at any time or times thereafter. The Agent shall not be responsible to the Debtors or any Secured
Party for any recitals, statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith, or for the execution,
effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of the Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or conditions of the Agreement
or any other Transaction Document, or the financial condition of the Debtors, or the value of any
of the Collateral, or the existence or possible existence of any default or Event of Default under
the Agreement, the Debentures or any of the other Transaction Documents.




          4. Certain Rights of the Agent. The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured Parties. To the extent practical, the
Agent shall request instructions from the Secured Parties with respect to any material act or
action (including failure to act) in connection with the Agreement or any other Transaction
Document, and shall be entitled to act or refrain from acting in accordance with the instructions
of a Majority in Interest; if such instructions are not provided despite the Agent’s request
therefor, the Agent shall be entitled to refrain from such act or taking such action, and if such
action is taken, shall be entitled to appropriate indemnification from the Secured Parties in
respect of actions to be taken by the Agent; and the Agent shall not incur liability to any person
or entity by reason of so refraining. Without limiting the foregoing, (a) no Secured Party shall
have any right of action whatsoever against the Agent as a result of the Agent acting or refraining
from acting hereunder in accordance with the terms of the Agreement or any other Transaction
Document, and the Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent shall not be required
to take any action which the Agent believes (i) could reasonably be expected to expose it to
personal liability or (ii) is contrary to this Agreement, the Transaction Documents or applicable
law.




          5. Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message signed, sent or made by
the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and
the other Transaction Documents and its duties thereunder, upon advice of counsel selected by it
and upon all other matters pertaining to this Agreement and the other Transaction Documents and its
duties thereunder, upon advice of other experts selected by it. Anything to the contrary
notwithstanding, the Agent shall have no obligation whatsoever to any Secured Party to assure that
the Collateral exists or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently or lawfully created,
perfected, or enforced or are entitled to any particular priority.




 









 








          6. Indemnification. To the extent that the Agent is not reimbursed and indemnified by the
Debtors, the Secured Parties will jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective principal amounts of Debentures, from and
against any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder or under the Agreement
or any other Transaction Document, or in any way relating to or arising out of the Agreement or any
other Transaction Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the Agent’s own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent, the Agent may
require each Secured Party to deposit with it sufficient sums as it determines in good faith is
necessary to protect the Agent for costs and expenses associated with taking such action.




          7. Resignation by the Agent.






     (a) The Agent may resign from the performance of all its functions and duties under
the Agreement and the other Transaction Documents at any time by giving 30 days’ prior
written notice (as provided in the Agreement) to the Debtors and the Secured Parties. Such
resignation shall take effect upon the appointment of a successor Agent pursuant to clauses
(b) and (c) below.




     (b) Upon any such notice of resignation, the Secured Parties, acting by a Majority in
Interest, shall appoint a successor Agent hereunder.




     (c) If a successor Agent shall not have been so appointed within said 30-day period,
the Agent shall then appoint a successor Agent who shall serve as Agent until such time, if
any, as the Secured Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent may petition any court of
competent jurisdiction or may interplead the Debtors and the Secured Parties in a
proceeding for the appointment of a successor Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.



          8. Rights with respect to Collateral. Each Secured Party agrees with all other Secured
Parties and the Agent (i) that it shall not, and shall not attempt to, exercise any rights with
respect to its security interest in the Collateral, whether pursuant to any other agreement or
otherwise (other than pursuant to this Agreement), or take or institute any action against the
Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii) that such Secured
Party has no other rights with respect to the Collateral other than as set forth in this Agreement
and the other Transaction Documents. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the
rights,



 









 






powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from
its duties and obligations under the Agreement. After any retiring Agent’s resignation or removal
hereunder as Agent, the provisions of the Agreement including this Annex B shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.