EX-10.1











	




SECURITY
AGREEMENT 



     THIS
SECURITY AGREEMENT IS ENTERED INTO EFFECTIVE AS OF APRIL 18,
(“Security Agreement”), by Burst.com,
Inc., a Delaware corporation (“Grantor”), in
favor of GORDON ROCK and MERCER MANAGEMENT, INC. (collectively, the
“Secured Party”).  



RECITALS 



     
A. Secured Party has made and has agreed to make certain further advances of
money and to extend certain financial accommodations to Grantor pursuant to
various promissory notes entered into on or prior to the date hereof and to be
entered into by Grantor from time to time (collectively, the
“Loans”).  



     B.
Secured Party has agreed to make a loan on even date herewith and possibly
additional loans to Grantor, but only upon the condition, among others, that
Grantor shall have executed and delivered to Secured Party this Security
Agreement.  



AGREEMENT 



     NOW,
THEREFORE, in order to induce Secured Party to make a loan on even date
herewith, to extend the due dates on existing loans and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Grantor hereby represents,
warrants, covenants and agrees as follows:  



     1.  DEFINED
TERMS. When used in this Security Agreement the following terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural forms of the terms defined):  



     “Account”
means and includes any “account,” as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest and, in any event, shall include any account receivable, book
debt and other form of right to payment of monetary obligations now owned or
hereafter acquired or received by or belonging or owing to Grantor or in which
Grantor now holds or hereafter acquires or receives any right or interest
(including under any trade name, style or division thereof), whether or not
earned by performance, whether arising out of (a) property that has been or
is to be sold, leased, licensed, assigned or otherwise disposed of or services
rendered or to be rendered by Grantor, (b) any policy of insurance issued
or to be issued (including any health-care-insurance receivable, as such term is
defined in Revised Article 9 of the UCC), (c) contingent obligation or
other secondary obligation incurred or to be incurred, (d) energy provided
or to be provided, (e) the use or hire of a vessel under a charter or other
contract, (f) the use of a credit or charge card or information contained
in or for use with such card or (g) winnings in a lottery or other game of
chance operated, sponsored, licensed or authorized to be operated by any
governmental authority, and shall further include any of Grantor’s rights
or interests to or in any property represented by any of the foregoing
(including unpaid seller’s rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), and
all monies due or to become due to Grantor under or other proceeds of any
purchase order and contract for the sale, lease, license, assignment or other
disposition of property or the rendering of services or both by Grantor (whether
or not yet earned by performance on the part of Grantor or in connection with
any other transaction), and any collateral security or guaranty of any kind
given by any person with respect to any of the foregoing.  






1.  
















	





     “Account
Debtor” means a person obligated on an Account, Chattel
Paper or General Intangible, but does not include a person obligated to pay on
or under an Instrument, even if such Instrument constitutes a part of Chattel
Paper.  



     “Chattel
Paper” means and includes any “chattel
paper,” as such term is defined in Article 9 of the UCC, now owned
or hereafter acquired or received by Grantor or in which Grantor now holds or
hereafter acquires or receives any right or interest, and shall include, in any
event, any records of Grantor evidencing both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, a security interest in specific goods and license of
software used in the goods, a lease of specific goods or a lease of specific
goods and license of software used in the goods, and any such records consisting
of information stored in an electronic medium.  



     “Collateral”
shall have the meaning assigned to such term in Section 2 of this Security
Agreement.  



     “Commercial
Tort Claims” means any claim arising in tort now or
hereafter owned or acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest.  



     “Commodity
Account” means and includes any “commodity
account,” as such term is defined in Article 9 of the UCC, now
owned or hereafter acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest.  



     “Contracts”
means all contracts (including any customer, vendor, supplier, service or
maintenance contract), leases, licenses, undertakings, purchase orders, permits,
franchise agreements or other agreements (other than any right evidenced by
Chattel Paper, Documents or Instruments), whether in written or electronic form,
in or under which Grantor now holds or hereafter acquires any right, title or
interest, including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance thereof.  



     “Copyright
License” means any agreement, whether in written or
electronic form, in which Grantor now holds or hereafter acquires any interest,
granting any right in or to any Copyright or Copyright registration (whether
Grantor is the licensee or the licensor thereunder) including, without
limitation, licenses pursuant to which Grantor has obtained the exclusive right
to use a copyright owned by a third party.  



     “Copyrights”
means all of the following now owned or hereafter acquired or created (as a work
for hire for the benefit of Grantor) by Grantor or in which Grantor now holds or
hereafter acquires or receives any right or interest, in whole or in part: (a)
all copyrights, whether registered or unregistered, held pursuant to the laws of
the United States, any State thereof or any other country; (b) registrations,
applications, recordings and proceedings in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof or
any other country; (c) any continuations, renewals or extensions thereof; (d)
any registrations to be issued in any pending applications, and shall include
any right or interest in and to work protectable by any of the foregoing which
are presently or in the future owned, created or authorized (as a work for hire
for the benefit of Grantor) or acquired by Grantor, in whole or in part; (e)
prior versions of works covered by copyright and all works based upon, derived
from or incorporating such works; (f) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect to copyrights,
including, without limitation, damages, claims and recoveries for past, present
or future infringement; (g) rights to sue for past, present and future
infringements of any copyright; and (h) any other rights corresponding to any of
the foregoing rights throughout the world.  





2.  


















	





     “Deposit
Account” means and includes any “deposit account”
as such term is defined in Article 9 of the UCC, and shall include, in any
event, any demand, time, savings, passbook or similar account now or hereafter
maintained with a bank or other organization engaged in the business of banking,
including any savings bank, savings and loan association, credit union or trust
company in which Grantor now holds or hereafter acquires or receives any right
or interest, and any cash or other monies, funds or amounts therein, whether or
not restricted or designated for a particular purpose, but excluding all
Investment Property and Accounts evidenced by an Instrument.  



     “Documents”
means and includes any “documents,” as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any negotiable documents of
title, including any warehouse receipt, dock receipt or bill of lading issued by
any person with respect to any Inventory, whether in written or electronic form.  



     “Equipment”
means and includes any “equipment,” as such term is defined in
Article 9 of the UCC, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any machinery, equipment,
furnishing, truck or other vehicle, boat, tractor, trailer, railcar or other
rolling stock, aircraft, aircraft engine, avionic, tank, pump, filter,
generator, computer or other electronic data-processing equipment, terminal,
printer or related component or accessory, photocopier, telephonic, video or
other office equipment of any nature whatsoever, laboratory equipment, printing,
sorting, inserting, packaging, mailing or shipping, and other office,
production, and warehouse equipment of any nature or kind whatsoever, and any
and all additions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts, equipment
and accessions installed thereon or affixed thereto.  



     “Event
of Default” means (i) any failure by Grantor forthwith to
pay or perform any of the Secured Obligations, (ii) any report, information or
notice made to, obtained or received by Secured Party at any time after the date
hereof indicating that Secured Party’s security interest is not prior to
all other security interests or other interests reflected in such report,
information or notice, except Permitted Liens (iii) any breach by Grantor of any
warranty, representation, or covenant set forth herein, and (iv) any “Event
of Default” as defined in the Note.  






3.  

















	





     “Fixtures”
means and includes any “fixtures,” as such term is defined in
Article 9 of the UCC, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, regardless of where located,
any of the fixtures, systems, machinery, apparatus, equipment or fittings of any
kind or nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof, now or hereafter attached or affixed to
or constituting a part of, or located in or upon, real property wherever
located, including sign, escalator, elevator, any heating, electrical,
mechanical, lighting, lifting, plumbing, ventilating, air-conditioning or air
cooling, refrigerating, food preparation, incinerating or power, loading or
unloading, boilers, communication, switchboard, tank, pump, filter, sprinkler or
other fire prevention or extinguishing fixture, system, machinery, apparatus or
equipment, and any engine, motor, dynamo, machinery, pipe, pump, tank, conduit
or duct constituting a part of any of the foregoing, together with all
extensions, improvements, betterments, renewals, substitutes, and replacements
of, and all additions and appurtenances to any of the foregoing property, and
all conversions of the security constituted thereby, immediately upon any
acquisition or release thereof or any such conversion, as the case may be.  



     “General
Intangible” means and includes any “general
intangible,” as such term is defined in Article 9 of the UCC, now
owned or hereafter acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest, and shall include, in
any event, any Contract (including any License), Copyright, Trademark, Patent or
other Intellectual Property, payment intangible, interest in a partnership,
limited liability company, joint venture or other business association, books
and records, ledger card, file, correspondence, computer program, tape, disk and
related data processing software that at any time evidences or contains
information relating to any of the Collateral, permit, goodwill (including the
goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License), insurance policy or any claim in or under
any policy of insurance (including unearned premiums), chose in action,
judgment taken or any rights or claims included in the Collateral, cash and
other forms of money or currency, right to sue for past, present and future
infringement of any Copyright, Trademark, Patent, right to any tax refund of any
kind from any governmental authority, any right to receive the proceeds of any
indemnity, warranty (including any manufacturer’s warranty) or guaranty
(including any performance guaranty) in favor of Grantor, any claim of Grantor
arising out of any breach or default under any Contract (including any License)
or claim for damages arising out of such breach or default and right of Grantor
to terminate, amend, supplement, modify or exercise rights, options or remedies
under any Contract (including any License).  



     “Instrument”
means and includes any “instrument,” as such term is defined in
Article 9 of the UCC, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, whether in written or electronic form, and shall include, in
any event, any negotiable instrument or other writing that evidences a right to
the payment of a monetary obligation, is of a type that in the ordinary course
of business is transferred by delivery with any necessary endorsement or
assignment and which otherwise is not itself Investment Property, a security
agreement or lease comprising part of Chattel Paper, a letter of credit or a
writing evidencing a right to payment arising out of the use of a credit or
charge card or information contained on or for use with any such card.  





4.  

















	





     “Intellectual
Property” means any intellectual property, in any medium, of
any kind or nature whatsoever, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any Copyright, Trademark,
Patent, trade secret, customer list, internet domain name (including any right
related to the registration thereof), proprietary or confidential information,
mask work, source, object or other programming code, invention (whether or not
patented or patentable), technical information, procedure, design, knowledge,
know-how, software, data base, data, skill, expertise, recipe, experience,
process, model, drawing, material or record.  



     “Inventory”
means and includes any “inventory,” as such term is defined in
Article 9 of the UCC, wherever located, now or hereafter owned or acquired
or received by Grantor or in which Grantor now holds or hereafter acquires or
receives any right or interest, and shall include, in any event, any inventory,
good or other personal property which is held by or on behalf of Grantor for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Grantor’s business, or the
processing, packaging, promotion, delivery or shipping of the same, and all
finished goods whether or not such inventory is listed on any schedules,
assignments or reports furnished to Secured Party from time to time and whether
or not the same is in transit or in the constructive, actual or exclusive
occupancy or possession of Grantor or is held by Grantor or by others for
Grantor’s accounts, including all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers and all
inventory which may be located on premises of Grantor or of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents or other
persons.  



     “Investment
Property” means and includes any “investment
property,” as such term is defined in Article 9 of the UCC, now or
hereafter owned or acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest, and shall include, in
any event, any certificated security, uncertificated security, security
entitlement, Securities Account, commodity contract, Commodity Account or
financial asset, as each such term is defined in Article 9 of the UCC.  



     “Letter-of-Credit
Right” means any right now owned or hereafter acquired or
received by Grantor or in which Grantor now holds or hereafter acquires or
receives any right or interest, in each case to payment or performance under a
letter of credit (as such term is defined in Article 5 of the UCC), whether
or not the beneficiary has demanded or is at the time entitled to demand payment
or performance.  



     “License”
means any Copyright License, Patent License, Trademark License or other license
of rights or interests, whether in-bound or out-bound, whether in written or
electronic form, now or hereafter owned or acquired or received by Grantor or in
which Grantor now holds or hereafter acquires or receives any right or interest,
and shall include any renewals or extensions of any of the foregoing thereof.  



     “Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.  





5.  

















	





     “Patent
License” means any agreement, whether in written or
electronic form, in which Grantor now holds or hereafter acquires any interest,
granting any right with respect to any invention on which a Patent is in
existence (whether Grantor is the licensee or the licensor thereunder).  



     “Patents”
means all of the following in which Grantor now holds or hereafter acquires any
interest: (a) all letters patent of the United States or any other country, all
registrations and recordings thereof and all applications for letters patent of
the United States or any other country, including, without limitation,
registrations, recordings and applications 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; (b) all reissues, divisions, continuations,
renewals, continuations-in-part or extensions thereof; (c) all petty patents,
divisionals and patents of addition; (d) all patents to issue in any such
applications; (e) income, royalties, damages, claims and payments now and
hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.  



     “Payment
Intangibles” means and includes any “payment
intangible” as such term is defined in Article 9 of the UCC, now or
hereafter owned or acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest.  



     “Permitted
Lien” means: (a) any Liens existing on the date of this
Security Agreement and set forth on Schedule A attached hereto; (b) Liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Secured Party’s security interests;
(c) Liens (i) upon or in any Equipment acquired or held by Grantor to secure the
purchase price of such Equipment or indebtedness incurred solely for the purpose
of financing the acquisition of such Equipment or (ii) existing on such
Equipment at the time of its acquisition, provided that the Lien is confined
solely to the Equipment so acquired, improvements thereon and the Proceeds of
such Equipment; (d) leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Grantor’s business if such are otherwise
permitted under this Security Agreement and do not interfere in any material
respect with the business of Grantor; (e) any right, title or interest of a
licensor under a license provided that such license or sublicense does not
prohibit the grant of the security interest granted hereunder; (f) easements,
reservations, rights-of-way, restrictions, minor defects or irregularities in
title and other similar Liens affecting real property not interfering in any
material respect with the ordinary conduct of the business of Grantor; (g) Liens
in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (h) Liens
arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of setoff or similar rights and remedies as to
deposit accounts or other funds maintained with a creditor depository
institution; (i) Liens securing capital lease obligations on assets subject to
such capital leases and Liens on equipment leased by Grantor pursuant to an
operating lease in the ordinary course of Grantor’s business (including
proceeds thereof and accessions thereto), all incurred solely for the purpose of
financing the lease of such equipment (including Liens arising from UCC
financing statements regarding such leases); and (j) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (a) and (c) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.  





6.  

















	





     “Proceeds”
means and includes any “proceeds,” as such term is defined in
Article 9 of the UCC, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any and all
(a) Accounts, Chattel Paper, Instruments, Investment Property, cash or
other forms of money, currency or funds or other property of any nature, type or
land whatsoever payable to or renewable by Grantor from time to time in respect
of the Collateral, including upon the sale, lease, license, exchange or other
disposition of any Collateral, (b) proceeds of any insurance, indemnity,
warranty or guaranty payable to Grantor from time to time with respect to any of
the Collateral, including by reason of the loss, nonconformity or interference
with the use of, defects or infringement of rights in, or damage to, any of the
Collateral, (c) payments (in any form whatsoever) made or due and payable
to Grantor from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority), (d) claims of Grantor against third parties arising out of the
loss, nonconformity, interference with the use of, defects or infringements of
rights in, or damage to, any of the Collateral, including any claim (i) for
past, present or future infringement of any Patent or Patent License, Copyright
or Copyright License or (ii) for past, present or future infringement or
dilution of any Trademark or Trademark License or for injury to the goodwill
associated with any Trademark, Trademark registration or Trademark licensed
under any Trademark License, (e) certificates, dividends, cash, Instruments
or other forms of money, currency or funds and other Property received or
distributed in respect of or in exchange for any Investment Property,
(f) cash or other forms of money, currency or funds and other proceeds
received under and in respect of any letter of credit or other support
obligation, (g) rights arising out of any of the Collateral, and
(h) other property of any nature, type or kind whatsoever from time to time
paid or payable under or in connection with, collected on, or distributed on
account of, any of the Collateral.  



     “Promissory
Notes” means and includes any “promissory
notes” as such term is defined in Article 9 of the UCC, now or
hereafter owned or acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest.  



     “Revised
Article 9” has the meaning set forth in Section 3.  



     “Secured Obligations”
means (a) the obligation of Grantor to repay Secured Party all of the unpaid
principal amount of, and accrued interest on (including any interest that
accrues after the commencement of bankruptcy), the Loans and any and all
renewals, extensions, restructuring and refinancings thereof, (b) the obligation
of Grantor to pay any fees, costs and expenses of Secured Party under under
Section 7(d) hereof and (c) any and all other obligations, debt or other
monies now or hereafter owed by Grantor to Secured Party, including but not
limited to any monies owed or to be owed by Grantor to Secured Party under this
Security Agreement.  



     “Securities
Account” means and includes any “securities
account,” as such term is defined in Article 9 of the UCC, now or
hereafter owned or acquired or received by Grantor or in which Grantor now holds
or hereafter acquires or receives any right or interest.  






7.  

















	





     “Security
Agreement” means this Security Agreement and all Schedules
hereto, as the same may from time to time be amended, modified, supplemented or
restated.  



     “Supporting
Obligations” means and includes any “supporting
obligations” as such term is defined in Article 9 of the UCC, now
or hereafter owned or acquired or received by Grantor or in which Grantor now
holds or hereafter acquires or receives any right or interest.  



     “Trademark
License” means any agreement, whether in written or
electronic form, in which Grantor now holds or hereafter acquires any interest,
granting any right in and to any Trademark or Trademark registration (whether
Grantor is the licensee or the licensor thereunder).  



     “Trademarks”
means any of the following in which Grantor now holds or hereafter acquires any
interest: (a) any trademarks, tradenames, corporate names, company names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof and any
applications in connection therewith, including, without limitation,
registrations, recordings and applications 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 (collectively, the “Marks”); (b)
any reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to sue for past, present and
future infringements of the Marks.  



     “UCC”
means the Uniform Commercial Code as the same may from time to time be in effect
in the State of California (and each reference in this Security Agreement to an
Article thereof (denoted as a Division of the UCC as adopted and in effect
in the State of California) shall refer to that Article (or Division, as
applicable) as from time to time in effect, which in the case of Article 9
shall include and refer to Revised Article 9 from and after the date
Revised Article 9 shall become effective in the State of California);
provided, however, in the event that, by reason of mandatory provisions
of law, any or all of the attachment, perfection or priority of Secured
Party’s security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
California, the term “UCC” shall mean the Uniform Commercial
Code (including the Articles thereof) as in effect at such time in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.  



     All capitalized terms used herein and not otherwise defined herein shall
have the respective meanings given to them in the Loan Agreement.  



     2.  GRANT
OF SECURITY INTEREST. As collateral security for the full, prompt, complete
and final payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and in order to induce
Secured Party to extend or cause the Loans to be made as recited above, Grantor
hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to
Secured Party, and hereby grants to Secured Party, a security interest in all of
Grantor’s right, title and interest in, to and under the following, whether
now owned or hereafter acquired, (all of which being collectively referred to
herein as the “Collateral”):  





8.  

















	





     (a)
All Accounts of Grantor;   



     (b)
All Chattel Paper of Grantor;   



     (c)
All Commercial Tort Claims of Grantor;   



     (d)
All Contracts of Grantor;   



     (e)
All Deposit Accounts of Grantor;   



     (f)
All Documents of Grantor;   



     (g)
All Equipment of Grantor;   



     (h)
All Fixtures of Grantor;   




     (i)
All General Intangibles of Grantor, including, without limitation, Payment Intangibles,
all Copyrights, Patents, Trademarks, Licenses, designs, drawings, technical information,
marketing plans, customer lists, trade secrets, proprietary or confidential information,
inventions (whether or not patentable), procedures, know-how, models and data;   



     (j)
All Instruments of Grantor, including, without limitation, Promissory Notes;   



     (k)
All Inventory of Grantor;   



     (l)
All Investment Property of Grantor;   



     (m)
All Letter-of Credit Rights of Grantor;   



     (n)
All Supporting Obligations of Grantor;   




     (o)
All property of Grantor held by Secured Party, or any other party for whom Secured Party
is acting as agent hereunder, including, without limitation, all property of
every-description now or hereafter in the possession or custody of or in transit to
Secured Party or such other party for any purpose, including, without limitation,
safekeeping, collection or pledge, for the account of Grantor, or as to which Grantor may
have any right or power;   



     (p)
All other goods and personal property of Grantor, wherever located, whether tangible or
intangible, and whether now owned or hereafter acquired, existing, leased or consigned by
or to Grantor; and   



     (q) To
the extent not otherwise included, all Proceeds of each of the foregoing and all
accessions to, substitutions and replacements for and rents, profits and products of each
of the foregoing.   






9.  

















	





     This
Security Agreement does not include any obligation described above which is
secured by a consensual lien on real property.  



     Notwithstanding
the foregoing provisions of this Section 2, the grant, assignment and transfer
of a security interest as provided herein shall not extend to, and the term
“Collateral” shall not include:
(a) “intent-to-use” trademarks at all times prior to the first
use thereof, whether by the actual use thereof in commerce, the recording of a
statement of use with the United States Patent and Trademark Office or otherwise
or (b) any Contract, Instrument or Chattel Paper in which Grantor has any right,
title or interest if and to the extent such Contract, Instrument or Chattel
Paper includes a provision containing a restriction on assignment such that the
creation of a security interest in the right, title or interest of Grantor
therein would be prohibited and would, in and of itself, cause or result in a
default thereunder enabling another person party to such Contract, Instrument or
Chattel Paper to enforce any remedy with respect thereto; provided that
the foregoing exclusion shall not apply if (i) such prohibition has been waived
or such other person has otherwise consented to the creation hereunder of a
security interest in such Contract, Instrument or Chattel Paper or
(ii) such prohibition would be rendered ineffective pursuant to Section
9-318(4) of the Uniform Commercial Code or Sections 9-407(a) or 9-408(a) of
Revised Article 9 of the Uniform Commercial Code, as applicable and as then
in effect in any relevant jurisdiction, or any other applicable law (including
the Bankruptcy Code) or principles of equity; provided further that
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and Grantor shall be deemed to have
granted a security interest in, all its rights, title and interests in and to
such Contract, Instrument or Chattel Paper as if such provision had never been
in effect; and provided further that the foregoing exclusion shall in no
way be construed so as to limit, impair or otherwise affect Secured Party’s
unconditional continuing security interest in and to all rights, title and
interests of Grantor in or to any payment obligations or other rights to receive
monies due or to become due under any such Contract, Instrument or Chattel Paper
and in any such monies and other proceeds of such Contract, Instrument or
Chattel Paper.  



     3. Revised
Article 9. The parties acknowledge that revised Article 9 of the
Uniform Commercial Code in the form approved by the American Law Institute and
the National Conference of Commissioners on Uniform State Law and contained in
the 1999 official text of Revised Article 9 (“Revised
Article 9”) has been adopted in the State of California and
elsewhere and hereby agree to the following provisions of this Security
Agreement in anticipation of the possible application thereof, in one or more
jurisdictions, to the transactions contemplated hereby.  



     (a) In
applying the law of any jurisdiction in which Revised Article 9 is in
effect, the Collateral is all assets of Grantor described in Section 2,
whether or not within the scope of Revised Article 9.   




     (b)  Secured
Party may at any time and from time to time file financing statements, continuation
statements (including “in lieu”continuation statements) and amendments thereto
that describe the Collateral as all assets of Grantor or words of similar effect and
which contain any other information required by Part 5 of Revised Article 9 for
the sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including whether Grantor is an organization, the type of
organization and any organization identification number issued to Grantor. Grantor agrees
to furnish any such information to Secured Party promptly upon request. Any such
financing statements, continuation statements or amendments may be signed by Secured
Party on behalf of Grantor and may be filed at any time in any jurisdiction whether or
not Revised Article 9 is then in effect in that jurisdiction.   





10.  

















	






     (c)  Grantor
shall at any time and from time to time, whether or not Revised Article 9 is in effect in
any particular jurisdiction, take such steps as Secured Party may reasonably request for
Secured Party (i) to obtain an acknowledgment, in form and substance reasonably
satisfactory to Secured Party, of any bailee having possession of any of the Collateral
that the bailee holds such Collateral for Secured Party, (ii) to obtain “control”of
any investment property, deposit accounts, letter-of-credit rights or electronic chatter
paper (as such terms are defined in Revised Article 9 with corresponding provisions
in Rev. §§ 9-104, 9-105, 9-106 and 9-107 relating to what constitutes
“control”for such items of Collateral), with any agreements establishing
control to be in form and substance reasonably satisfactory to Secured Party, and (iii) otherwise
to insure the continued perfection and priority of Secured Party’s security interest
in any of the Collateral and of the preservation of its rights therein, whether in
anticipation of or following the effectiveness of Revised Article 9 in any
jurisdiction.   




     (d)  Nothing
contained in this Section 3 shall be construed to narrow the scope of Secured Party’s
security interest in any of the Collateral or the perfection or priority thereof or to
impair or otherwise limit any of the rights, powers, privileges or remedies of Secured
Party hereunder except as (and then only to the extent) mandated by Revised Article 9
to the extent then applicable.   



     4.  RIGHTS
OF SECURED PARTY; COLLECTION OF ACCOUNTS.  



     (a)  Notwithstanding
anything contained in this Security Agreement to the contrary, Grantor expressly
agrees that it shall remain liable under each of its Contracts and each of its
Licenses to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and that it shall perform all of its
duties and obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract or License. Secured Party shall not
have any obligation or liability under any Contract or License by reason of or
arising out of this Security Agreement or the granting to Secured Party of a
lien therein or the receipt by Secured Party of any payment relating to any
Contract or License pursuant hereto, nor shall Secured Party be required or
obligated in any manner to perform or fulfill any of the obligations of Grantor
under or pursuant to any Contract or License, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.   




     (b)  Secured
Party authorizes Grantor to collect its Accounts, provided that such collection is
performed in a prudent and businesslike manner, and Secured Party may, upon the
occurrence and during the continuation of any Event of Default and without notice, limit
or terminate said authority at any time. Upon the occurrence and during the continuance
of any Event of Default, at the request of Secured Party, Grantor shall deliver all
original and other documents evidencing and relating to the performance of labor or
service which created such Accounts, including, without limitation, all original orders,
invoices and shipping receipts.   





11.  

















	






     (c)  Secured
Party may at any time, upon the occurrence and during the continuance of any Event of
Default, without notifying Grantor of its intention to do so, notify Account Debtors of
Grantor, parties to the Contracts of Grantor, obligors in respect of Instruments of
Grantor and obligors in respect of Chattel Paper of Grantor that the Accounts and the
right, title and interest of Grantor in and under such Contracts, Instruments and Chattel
Paper have been assigned to Secured Party and that payments shall be made directly to
Secured Party. Upon the request of Secured Party, Grantor shall so notify such Account
Debtors, parties to such Contracts, obligors in respect of such Instruments and obligors
in respect of such Chattel Paper. Upon the occurrence and during the continuance of any
Event of Default, Secured Party may, in its name or in the name of others, communicate
with such Account Debtors, parties to such Contracts, obligors in respect of such
Instruments and obligors in respect of such Chattel Paper to verify with such parties, to
Secured Party’s satisfaction, the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.  



     5.  
REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and warrants to Secured Party
that:   



     (a)  Except
for the security interest granted to Secured Party under this Security
Agreement, Grantor is the sole legal and equitable owner or, has the power to
transfer or, as to Intellectual Property licensed from other persons, licensee
of each item of the Collateral in which it purports to grant a security interest
hereunder, having good and marketable title thereto or the power to transfer,
free and clear of any and all Liens, except for Permitted Liens.   




     (b)  No
effective security agreement, financing statement, equivalent security or lien instrument
or continuation statement covering all or any part of the Collateral exists, except such
as may have been filed by Grantor in favor of Secured Party pursuant to this Security
Agreement, except for Permitted Liens.   




     (c)  This
Security Agreement creates a legal and valid security interest on and in all of the
Collateral in which Grantor now has rights and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken.
Accordingly, Secured Party has a fully perfected first priority security interest in all
of the Collateral in which Grantor now has rights, subject only to Permitted Liens. This
Security Agreement will create a legal and valid and fully perfected first priority
security interest in the Collateral in which Grantor later acquires rights, when Grantor
acquires those rights, subject only to Permitted Liens and additional filings to be made
with the United States Copyright Office and/or Patent and Trademark Office as are
necessary to perfect Secured Party’s security interest in subsequent ownership
rights and interests of Grantor in Copyrights, Patents, Trademarks and Licenses.   




     (d)  Grantor’s
taxpayer identification number is, and chief executive office, principal place of
business, and the place where Grantor maintains its records concerning the Collateral are
presently located at the address set forth on the signature page hereof. If Grantor is a
corporation, limited liability company, limited partnership, corporate trust or other
registered organization, the State (or if not a state, the other jurisdiction) under
whose law such registered organization was organized is set forth on the signature page
hereof. The Collateral, other than Deposit Accounts, Securities Accounts, Commodity
Accounts and motor vehicles and other mobile goods of the type contemplated in Section
9103(3)(a) of the UCC, is presently located at such address. Grantor shall not change its
taxpayer identification number, jurisdiction of organization or such chief executive
office, principal place of business or remove or cause to be removed, the records
concerning the Collateral from those premises without prior written notice Secured Party
or as otherwise expressly permitted by the Loan Agreement.   





12.  
















	






     (e)  All
Collateral of Grantor existing as of the date hereof with respect to which a security
interest may be perfected by the Secured Party’s taking possession thereof,
including, without limitation, all Chattel Paper, Instruments or Investment Property
comprising certificated securities is set forth on Schedule B attached hereto. All action
necessary or desirable to protect and perfect such security interest in each item set
forth on Schedule B, including the delivery of all originals thereof, duly endorsed to
Secured Party, has been duly taken. The security interest of Secured Party in Grantor’s
Collateral listed on Schedule B is prior in right and interest to all other Liens (other
than Permitted Liens) and is enforceable as such against creditors of and purchasers from
Grantor.   




     (f)  Grantor
is the sole holder of record and the sole beneficial owner of all certificated securities
and uncertificated securities pledged to Secured Party by Grantor under Section 2 of
this Security Agreement, free and clear of any adverse claim, as defined in Section 8102(a)(1)
of the UCC, except for the Lien created in favor of Secured Party by this Security
Agreement.   




     (g)  None
of the Investment Property of Grantor has been transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which such
transfer may be subject.   




     (h)  All
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark
Licenses now owned, held or in which Grantor otherwise has any interest are listed on
Schedule C attached hereto. Grantor shall amend Schedule C from time to time within
twenty (20) business days after the filing of any application for a Patent, Trademark or
Copyright or the issuance of any Patent or registration of any Trademark or Copyright to
reflect any additions to or deletions from this list. Except as set forth on Schedule C,
none of the Patents, Trademarks or Copyrights has been licensed to any third party.   



     6.  COVENANTS.Grantor
covenants and agrees with Secured Party that from and after the date of this Security
Agreement and until the Secured Obligations have been performed and paid in full:  



     6.1  Disposition
of Collateral. Grantor shall not sell, lease, transfer or otherwise dispose
of any of the Collateral, or attempt or contract to do so, other than (a) the
sale of Inventory, (b) the granting of non-exclusive Licenses and (c) the
disposal of worn-out or obsolete Equipment, all in the ordinary course of
Grantor’s business.  



     6.2  Change
of Jurisdiction of Organization, Relocation of Business or Collateral. Grantor shall not
change its jurisdiction of organization, relocate its chief executive office, principal
place of business or its records, or allow the relocation of any Collateral (except as
allowed pursuant to Section 6.1 immediately above) from such address(es) provided to
Secured Party pursuant to Section 5(d) above without thirty (30) days prior written
notice to Secured Party.   





13.  

















	






     6.3  Limitation
on Liens on Collateral. Grantor shall not, directly or indirectly, create, permit or
suffer to exist, and shall defend the Collateral against and take such other action as is
necessary to remove, any Lien on the Collateral, except (a) Permitted Liens and (b) the
Lien granted to Secured Party under this Security Agreement. Grantor shall further defend
the right, title and interest of Bank in and to any of Grantor’s rights under the
Chattel Paper, Contracts, Documents, General Intangibles, Instruments and Investment
Property and to the Equipment and Inventory and in and to the Proceeds thereof against
the claims and demands of all persons whomsoever.   




     6.4  Limitations
on Modifications of Accounts, Etc. Upon the occurrence and during the continuance of any
Event of Default, Grantor shall not, without Secured Party’s prior written consent,
grant any extension of the time of payment of any of the Accounts, Chattel Paper,
Instruments or amounts due under any Contract or Document, compromise, compound or settle
the same for less than the full amount thereof, release, wholly or partly, any person
liable for the payment thereof, or allow any credit or discount whatsoever thereon other
than trade discounts and rebates granted in the ordinary course of Grantor’s
business.   




     6.5  Insurance.
Maintain insurance policies insuring the Collateral against loss or damage from such
risks and in such amounts and forms and with such companies as are customarily maintained
by businesses similar to Grantor.   




     6.6  Taxes,
Assessments, Etc. Grantor shall pay promptly when due all property and other taxes,
assessments and government charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment, Fixtures or Inventory,
except to the extent the validity thereof is being contested in good faith and adequate
reserves are being maintained in connection therewith.   




     6.7  Maintenance
of Records. Grantor shall keep and maintain at its own cost and expense satisfactory and
complete records of the Collateral. Grantor shall not create any Chattel Paper without
placing a legend on the Chattel Paper acceptable to Secured Party indicating that Secured
Party has a security interest in the Chattel Paper.   




     6.8  Registration
of Intellectual Property Rights. Grantor shall promptly register or cause to be
registered (to the extent not already registered) the most recent version of any
Copyright and any Copyright License and any Patent, Patent License, Trademark or
Trademark License, which, individually or in the aggregate, is material to the conduct of
Grantor’s business, with the United States Copyright Office or Patent and Trademark
Office, as applicable, including, without limitation, in all such cases the filing of
applications for renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings. Grantor shall register or cause
to be registered with the United States Copyright Office or Patent and Trademark Office,
as applicable, those additional rights and interests developed or acquired by Grantor
after the date of this Security Agreement, including, without limitation, any additions
to the rights and interests of Grantor listed on Schedule C hereto, prior to the
sale or licensing of any product containing such rights and interests.   





14.  

















	






     6.9  Notification
Regarding Changes in Intellectual Property. Grantor shall promptly advise Secured Party
of any subsequent ownership right or interest of the Grantor in or to any Copyright,
Patent, Trademark or License not specified on Schedule C hereto and shall permit Secured
Party to amend such Schedule, as necessary, to reflect any addition or deletion to such
ownership rights.   




     6.10  Defense
of Intellectual Property. Grantor shall (i) protect, defend and maintain the validity and
enforceability of the Copyrights, Patents and Trademarks, (ii) use its best efforts to
detect infringements of the Copyrights, Patents and Trademarks and promptly advise
Secured Party in writing of material infringements detected and (iii) not allow any
Copyrights, Patents or Trademarks to be abandoned, forfeited or dedicated to the public
without the written consent of Secured Party.   




     6.11  Further
Assurances; Pledge of Instruments. At any time and from time to time, upon the written
request of Secured Party, and at the sole expense of Grantor, Grantor shall promptly and
duly execute and deliver any and all such further instruments and documents and take such
further action as Secured Party may reasonably deem necessary or desirable to obtain the
full benefits of this Security Agreement, including, without limitation, (a) using
its best efforts to secure all consents and approvals necessary or appropriate for the
grant of a security interest to Secured Party in any Contract held by Grantor or in which
Grantor has any right or interest not heretofore assigned, (b) executing, delivering
and causing to be filed any financing or continuation statements (including “in lieu”continuation
statements) under the UCC with respect to the security interests granted hereby, (c)
filing or cooperating with Secured Party in filing any forms or other documents required
to be recorded with the United States Patent and Trademark Office, United States
Copyright Office, or any actions, filings, recordings or registrations in any foreign
jurisdiction or under any international treaty, required to secure or protect Secured
Party’s interest in Grantor’s Collateral, (d) transferring Grantor’s
Collateral to Secured Party’s possession (if a security interest in such Collateral
can be perfected by possession), (e) at Secured Party’s reasonable request,
placing the interest of Secured Party as lienholder on the certificate of title (or
similar evidence of ownership) of any vehicle, watercraft or other Equipment constituting
Collateral owned by Grantor which is covered by a certificate of title (or similar
evidence of ownership), (f) executing and delivering and causing the applicable
depository institution, securities intermediary, commodity intermediary or issuer or
nominated party under a letter of credit to execute and deliver a collateral control
agreement with respect to each new Deposit Account, Securities Account or Commodity
Account or Letter-of-Credit Right in or to which Grantor has any right or interest in
order to perfect the security interest created hereunder in favor of Secured Party
(including giving Secured Party “control”over such Collateral within the
meaning of the applicable provisions of Article 8 and Article 9 of the UCC),
(g) at Secured Party’s reasonable request, executing and delivering or causing to be
delivered written notice to insurers of Secured Party’s security interest in, or
claim in or under, any policy of insurance (including unearned premiums) and (g) at
Secured Party’s reasonable request, using its best efforts to obtain acknowledgments
from bailees having possession of any Collateral and waivers of liens from landlords and
mortgagees of any location where any of the Collateral may from time to time be stored or
located. Grantor also hereby authorizes Secured Party to file any such financing or
continuation statement (including “in lieu”continuation statements) without the
signature of Grantor. If any amount payable under or in connection with any of the
Collateral is or shall become evidenced by any Instrument, such Instrument, other than
checks and notes received in the ordinary course of business and any Instrument in the
outstanding or stated amount of less than $25,000, shall be duly endorsed in a manner
reasonably satisfactory to Secured Party and delivered to Secured Party promptly and in
any event within five (5) business days of Grantor’s receipt thereof.   





15.  


















	




7.  RIGHTS
AND REMEDIES UPON DEFAULT.  



     
(a) Beginning on the date which is five (5) days after any Event of
Default shall have occurred and while such Event of Default is continuing,
Secured Party may exercise in addition to all other rights and remedies granted
to it under this Security Agreement, the Note and under any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, Grantor expressly agrees that in any such event
Secured Party, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon Grantor or any other person (all and each of
which demands, advertisements and notices are hereby expressly waived to the
maximum extent permitted by the UCC and other applicable law), may (i) reclaim,
take possession, recover, store, maintain, finish, repair, prepare for sale or
lease, shop, advertise for sale or lease and sell or lease (in the manner
provided herein) the Collateral, and in connection with the liquidation of the
Collateral and collection of the accounts receivable pledged as Collateral, use
any Trademark, Copyright, or process used or owned by Grantor and (ii) forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, give an option or options to
purchase or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange or broker’s board or at any of
Secured Party’s offices or elsewhere at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. To the extent Grantor has the right to do so, Grantor authorizes Secured
Party, on the terms set forth in this Section 7 to enter the premises where
the Collateral is located, to take possession of the Collateral, or any part of
it, and to pay, purchase, contact, or compromise any encumbrance, charge, or
lien which, in the opinion of Secured Party, appears to be prior or superior to
its security interest. Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Grantor further agrees, at Secured Party’s request, to assemble
its Collateral and make it available to the Secured Party at places which
Secured Party shall reasonably select, whether at Grantor’s premises or
elsewhere. Secured Party shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale as provided in
Section 7(f), below, with Grantor remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by Secured Party of any other amount required by
any provision of law, need Secured Party account for the surplus, if any, to
Grantor. To the maximum extent permitted by applicable law, Grantor waives all
claims, damages, and demands against Secured Party arising out of the
repossession, retention or sale of the Collateral. Grantor agrees that Secured
Party need not give more than ten (10) days’ notice of the time and place
of any public sale or of the time after which a private sale may take place and
that such notice is reasonable notification of such matters. Grantor shall
remain liable for any deficiency if the proceeds of any sale or disposition of
its Collateral are insufficient to pay all amounts to which Secured Party is
entitled from Grantor, Grantor also being liable for the attorney costs of any
attorneys employed by Secured Party to collect such deficiency.  





16.  

















	





     (b) As to
any Collateral constituting certificated securities or uncertificated securities, if, at
any time when Secured Party shall determine to exercise its right to sell the whole or
any part of such Collateral hereunder, such Collateral or the part thereof to be sold
shall not, for any reason whatsoever, be effectively registered under Securities Act of
1933, as amended (as so amended the “Act”), Secured Party may, in its
discretion (subject only to applicable requirements of law), sell such Collateral or part
thereof by private sale in such manner and under such circumstances as Secured Party may
deem necessary or advisable, but subject to the other requirements of this Section 7(b),
and shall not be required to effect such registration or cause the same to be effected.
Without limiting the generality of the foregoing, in any such event Secured Party may, in
its sole discretion, (i) in accordance with applicable securities laws, proceed to
make such private sale notwithstanding that a registration statement for the purpose of
registering such Collateral or part thereof could be or shall have been filed under the
Act; (ii) approach and negotiate with a single possible purchaser to effect
such sale; and (iii) restrict such sale to a purchaser who will represent and
agree that such purchaser is purchasing for its own account, for investment, and not with
a view to the distribution or sale of such Collateral or part thereof. In addition
to a private sale as provided above in this Section 7(b), if any of such
Collateral shall not be freely distributable to the public without registration under the
Act at the time of any proposed sale hereunder, then Secured Party shall not be required
to effect such registration or cause the same to be effected but may, in its sole
discretion (subject only to applicable requirements of law), require that any sale
hereunder (including a sale at auction) be conducted subject to such restrictions as
Secured Party may, in its sole discretion, deem necessary or appropriate in order that
such sale (notwithstanding any failure so to register) may be effected in compliance with
the Bankruptcy Code and other laws affecting the enforcement of creditors’rights and
the Act and all applicable state securities laws.   




     (c)  Grantor
agrees that in any sale of any of such Collateral, whether at a foreclosure sale or
otherwise, Secured Party is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is necessary in
order to avoid any violation of applicable law (including compliance with such procedures
as may restrict the number of prospective bidders and purchasers, require that such
prospective bidders and purchasers have certain qualifications and restrict such
prospective bidders and purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a view to the distribution
or resale of such Collateral), or in order to obtain any required approval of the sale or
of the purchaser by any governmental authority, and Grantor further agrees that such
compliance shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall Secured Party be liable nor accountable to
Grantor for any discount allowed by the reason of the fact that such Collateral is sold
in compliance with any such limitation or restriction.   





17.  
















	






     (d)  Grantor
also agrees to pay all fees, costs and expenses of Secured Party, including, without
limitation, reasonable attorneys’ fees, incurred in connection with the enforcement
of any of its rights and remedies hereunder.   




     (e)  Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent permitted
by applicable law) of any kind in connection with this Security Agreement or any
Collateral.   




     (f)  The
Proceeds of any sale, disposition or other realization upon all or any part of the
Collateral shall be distributed by Secured Party in the following order of priorities:   



     FIRST,
to Secured Party in an amount sufficient to pay in full the reasonable costs of
Secured Party in connection with such sale, disposition or other realization,
including all fees, costs, expenses, liabilities and advances incurred or made
by Secured Party in connection therewith, including, without limitation,
reasonable attorneys’ fees;  



     SECOND,
to Secured Party in an amount equal to the then unpaid Secured Obligations; and   



     FINALLY,
upon payment in full of the Secured Obligations, to Grantor or its
representatives, in accordance with the UCC or as a court of competent
jurisdiction may direct.  




     8.  INDEMNITY.
Grantor agrees to defend, indemnify and hold harmless Secured Party and its officers,
employees, and agents against (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other party in connection with the transactions contemplated
by this Security Agreement and (b) all losses or expenses in any way suffered, incurred,
or paid by Secured Party as a result of or in any way arising out of, following or
consequential to transactions between Secured Party and Grantor, whether under this
Security Agreement or otherwise (including without limitation, reasonable attorneys fees
and expenses), except for losses arising from or out of Secured Party’s gross
negligence or willful misconduct.   



     9.  LIMITATION
ON SECURED PARTY’S DUTY IN RESPECT OF COLLATERAL. Secured Party shall
be deemed to have acted reasonably in the custody, preservation and disposition
of any of the Collateral if it takes such action as Grantor requests in writing,
but failure of Secured Party to comply with any such request shall not in itself
be deemed a failure to act reasonably, and no failure of Secured Party to do any
act not so requested shall be deemed a failure to act reasonably.  



     10.  REINSTATEMENT.
This Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against Grantor for liquidation or
reorganization, should Grantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Grantor’s property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.  





18.  

















	





     11.  MISCELLANEOUS.  



     11.1
No Waiver; Cumulative Remedies.   




     (a)  Secured
Party shall not by any act, delay, omission or otherwise be deemed to have waived any of
its respective rights or remedies hereunder, nor shall any single or partial exercise of
any right or remedy hereunder on any one occasion preclude the further exercise thereof
or the exercise of any other right or remedy.   



     (b)  The
rights and remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.   




     (c)  None
of the terms or provisions of this Security Agreement may be waived, altered, modified or
amended except by an instrument in writing, duly executed by Grantor and Secured Party.   




     11.2  Termination
of this Security Agreement. Subject to Section 10 hereof, this Security Agreement shall
terminate upon the payment and performance in full of the Secured Obligations.   




     11.3  Successor
and Assigns. This Security Agreement and all obligations of Grantor hereunder shall be
binding upon the successors and assigns of Grantor, and shall, together with the rights
and remedies of Secured Party hereunder, inure to the benefit of Secured Party, any
future holder of any of the indebtedness and their respective successors and assigns. No
sales of participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any portion
thereof or interest therein shall in any manner affect the lien granted to Secured Party
hereunder.   




     11.4  Governing
Law. In all respects, including all matters of construction, validity and performance,
this Security Agreement and the Secured Obligations arising hereunder shall be governed
by, and construed and enforced in accordance with, the laws of the State of California
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, except to the extent that the UCC provides
for the application of the law of Grantor’s State.   







19.  

















	








     IN
WITNESS WHEREOF, Grantor has caused this Security Agreement to be executed
and delivered by its duly authorized officer on the date first set forth above.  













	ADDRESS OF
GRANTOR

_____________________________________

_____________________________________


_____________________________________


TAXPAYER
IDENTIFICATION NUMBER OF GRANTOR

_____________________________________  	BURST.COM, INC.

By: _____________________________________


Printed Name: _____________________________

Title: ____________________________________


JURISDICTION OF ORGANIZATION OF GRANTOR



_____________________________________  











	


20.  

















	





SCHEDULE A 



LIENS
EXISTING ON THE DATE OF THIS SECURITY AGREEMENT 





















A-1.  

















	





SCHEDULE B 



LIST OF
COLLATERAL DELIVERED BY GRANTOR TO SECURED PARTY 





















B-1.   

















	








SCHEDULE C 



INTELLECTUAL
PROPERTY 

















C-1.