Document:

exv10w2

 

Exhibit 10.2

PLEDGE AND SECURITY AGREEMENT

     THIS PLEDGE AND SECURITY AGREEMENT is entered into as of July 27,2006 by and between
           
            
            
             
            (the “Debtor”), and JPMORGAN CHASE
BANK, N.A., a national banking association, as Lender under the Credit Agreement referred to below
(the “Lender”).

PRELIMINARY STATEMENT

     MOBILITY ELECTRONICS, INC., a Delaware corporation (the “Borrower”) and Lender have entered
into a Credit Agreement dated as of July 24, 2006 (as it may be amended or modified from time to
time, the “Credit Agreement”). The Debtor is entering into this Pledge and Security Agreement (as
it may be amended or modified from time to time, the “Security Agreement”) in order to induce the
Lender to continue to extend credit to the Borrower under the Credit Agreement.

     ACCORDINGLY, the Debtor and the Lender, hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Terms Defined in Credit Agreement. All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.

     1.2 Terms Defined in Arizona Uniform Commercial Code. Terms defined in the Arizona
UCC which are not otherwise defined in this Security Agreement are used herein as defined in the
Arizona UCC.

     1.3 Definitions of Certain Terms Used Herein. As used in this Security Agreement, in
addition to the terms defined in the Preliminary Statement, the following terms shall have the
following meanings:

     “Accounts” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Arizona UCC” means the Arizona Uniform Commercial Code as in effect from time to time.

     “Article” means a numbered article of this Security Agreement, unless another document is
specifically referenced.

     “Chattel Paper” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Collateral” means all Accounts, Chattel Paper, Documents, Equipment, Farm Products, Fixtures,
General Intangibles, Instruments, Inventory, Investment Property, Pledged Deposits, and Other
Collateral, wherever located, in which the Debtor now has or hereafter acquires any

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right or interest, and the proceeds (including Stock Rights), insurance proceeds and products
thereof, together with all books and records, customer lists, credit files, computer files,
programs, printouts and other computer materials and records related thereto.

     “Control” shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104,
9-105, 9-106 or 9-107 of Article 9 of the Arizona UCC.

     “Default” means an event described in Section 5.1.

     “Deposit Accounts” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Documents” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Equipment” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Exhibit” refers to a specific exhibit to this Security Agreement, unless another document is
specifically referenced.

     “Farm Products” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Fixtures” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “General Intangibles” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Instruments” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Inventory” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Investment Property” shall have the meaning set forth in Article 9 of the Arizona UCC.

     “Obligations” means any and all existing and future indebtedness, obligation and liability of
every kind, nature and character, direct or indirect, absolute or contingent (including all
renewals, extensions and modifications thereof and all fees, costs and expenses incurred by the
Lender in connection with the preparation, administration, collection or enforcement thereof), of
the Borrower to the Lender or any branch, subsidiary or affiliate thereof, arising under or
pursuant to this Security Agreement, the Credit Agreement and any promissory note or notes now or
hereafter issued under the Credit Agreement.

     “Other Collateral” means any property of the Debtor, other than real estate, not included
within the defined terms Accounts, Chattel Paper, Documents, Equipment, Farm Products, Fixtures,
General Intangibles, Instruments, Inventory, Investment Property, and Pledged Deposits, including,
without limitation, all cash on hand, letter-of-credit rights, letters of credit, Stock Rights and
Deposit Accounts or other deposits (general or special, time or demand, provisional or final) with
any bank or other financial institution, it being intended that the Collateral include all property
of the Debtor other than real estate.

     “Pledged Deposits” means all time deposits of money (other than Deposit Accounts and
Instruments), whether or not evidenced by certificates, which the Debtor may from time to time

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designate as pledged to the Lender as security for any Obligation, and all rights to receive
interest on said deposits.

     “Rate Management Transaction” means any transaction (including an agreement with respect
thereto) now existing or hereafter entered into between the Debtor and the Lender or Affiliate
thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.

     “Rate Management Obligations” means any and all obligations of the Borrower, whether absolute
or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all
Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions.

     “Receivables” means the Accounts, Chattel Paper, Documents, Investment Property, Instruments
or Pledged Deposits, and any other rights or claims to receive money which are General Intangibles
or which are otherwise included as Collateral.

     “Required Secured Parties” means the Lender.

     “Section” means a numbered section of this Security Agreement, unless another document is
specifically referenced.

     “Secured Obligations” means the Obligations and Rate Management Obligations entered into with
one or more of the Lender or their Affiliates.

     “Security” has the meaning set forth in Article 8 of the Arizona UCC.

     “Stock Rights” means any securities, dividends or other distributions and any other right or
property which the Debtor shall receive or shall become entitled to receive for any reason
whatsoever with respect to, in substitution for or in exchange for any securities or other
ownership interests in a corporation, partnership, joint venture or limited liability company
constituting Collateral and any securities, any right to receive securities and any right to
receive earnings, in which the Debtor now has or hereafter acquires any right, issued by an issuer
of such securities.

     “Unmatured Default” means an event which but for the lapse of time or the giving of notice, or
both, would constitute a Default.

     The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.

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ARTICLE II

GRANT OF SECURITY INTEREST

     The Debtor hereby pledges, assigns and grants to the Lender and (to the extent specifically
provided herein) its Affiliates, a security interest in all of the Debtor’s right, title and
interest in and to the Collateral to secure the prompt and complete payment and performance of the
Secured Obligations.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     The Debtor represents and warrants to the Lender that:

     3.1 Title, Authorization, Validity and Enforceability. The Debtor has good and valid
rights in or the power to transfer the Collateral and title to the Collateral with respect to which
it has purported to grant a security interest hereunder, free and clear of all Liens except for
Liens permitted under Section 4.1.6, and has full power and authority to grant to the Lender the
security interest in such Collateral pursuant hereto. The execution and delivery by the Debtor of
this Security Agreement has been duly authorized by proper corporate proceedings, and this Security
Agreement constitutes a legal, valid and binding obligation of the Debtor and creates a security
interest which is enforceable against the Debtor in all now owned and hereafter acquired
Collateral.

     3.2 Conflicting Laws and Contracts. Neither the execution and delivery by the Debtor
of this Security Agreement, the creation and perfection of the security interest in the Collateral
granted hereunder, nor compliance with the terms and provisions hereof will violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on the Debtor or the
Debtor’s articles or certificate of formation or operating agreement the provisions of any
indenture, instrument or agreement to which the Debtor is a party or is subject, or by which it, or
its property, is bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien pursuant to the terms of any such indenture, instrument or
agreement (other than any Lien of the Lender).

     3.3 Type and Jurisdiction of Organization. The Debtor is a corporation organized
under the laws of the State of                                         .

     3.4 Principal Location. The Debtor’s mailing address and the location of its place of
business (if it has only one) or its chief executive office (if it has more than one place of
business), are disclosed in Exhibit “A”; the Debtor has no other places of business except those
set forth in Exhibit “A”.

     3.5 Property Locations. The Inventory, Equipment and Fixtures are located solely at
the locations described in Exhibit “A”. All of said locations are owned by the Debtor except for
locations (i) which are leased by the Debtor as lessee and designated in Part B of Exhibit “A” and
(ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on
consignment as designated in Part C of Exhibit “A”, with respect to which Inventory the Debtor

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has delivered bailment agreements, warehouse receipts, financing statements or other documents
satisfactory to the Lender to protect the Lender’s security interest in such Inventory.

     3.6 No Other Names. The Debtor does not conduct business under any name except the
name in which it has executed this Security Agreement, which is the exact name as it appears in the
Debtor’s organizational documents, as amended, as filed with the Debtor’s jurisdiction of
organization.

     3.7 No Default. No Default or Unmatured Default exists.

     3.8 Accounts and Chattel Paper. The names of the obligors, amounts owing, due dates
and other information with respect to the Accounts and Chattel Paper are and will be correctly
stated in all records of the Debtor relating thereto and in all invoices and reports with respect
thereto furnished to the Lender by the Debtor from time to time. As of the time when each Account
or each item of Chattel Paper arises, the Debtor shall be deemed to have represented and warranted
that such Account or Chattel Paper, as the case may be, and all records relating thereto, are
genuine and in all respects what they purport to be.

     3.9 [Intentionally left blank.]

     3.10 No Financing Statements. No financing statement describing all or any portion of
the Collateral which has not lapsed or been terminated naming the Debtor as debtor has been filed
in any jurisdiction except financing statements naming the Lender as the secured party.

     3.11 Federal Employer Identification Number. The Debtor’s Federal employer
identification number is                                         .

     3.12 State Organization Number. The Debtor’s State organization number is
                    .

ARTICLE IV

COVENANTS

     From the date of this Security Agreement, and thereafter until this Security Agreement is
terminated:

     4.1 General.

          4.1.1 Inspection. The Debtor will permit the Lender, by its representatives and
Lenders (i) to inspect the Collateral, (ii) to examine and make copies of the records of the Debtor
relating to the Collateral and (iii) to discuss the Collateral and the related records of the
Debtor with, and to be advised as to the same by, the Debtor’s officers and employees (and, in the
case of any Receivable, with any person or entity which is or may be obligated thereon), all at
such reasonable times and intervals as the Lender may determine, and all at the Debtor’s expense.

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          4.1.2 Taxes. The Debtor will pay when due all taxes, assessments and governmental
charges and levies upon the Collateral, except those which are being contested in good faith by
appropriate proceedings and with respect to which no Lien exists.

          4.1.3 Records and Reports; Notification of Default. The Debtor will maintain complete
and accurate books and records with respect to the Collateral, and furnish to the Lender, such
reports relating to the Collateral as the Lender shall from time to time request. The Debtor will
give prompt notice in writing to the Lender of the occurrence of any Default or Unmatured Default
and of any other development, financial or otherwise, which might materially and adversely affect
the Collateral.

          4.1.4 Financing Statements and Other Actions; Defense of Title. The Debtor hereby
authorizes the Lender to file, and if requested will execute and deliver to the Lender, all
financing statements and other documents and take such other actions as may from time to time be
requested by the Lender in order to maintain a first perfected security interest in and, if
applicable, Control of, the Collateral. The Debtor will take any and all actions necessary to
defend title to the Collateral against all persons and to defend the security interest of the
Lender in the Collateral and the priority thereof against any Lien not expressly permitted
hereunder.

          4.1.5 Disposition of Collateral. The Debtor will not sell, lease or otherwise dispose
of the Collateral except (i) prior to the occurrence of a Default or Unmatured Default,
dispositions specifically permitted pursuant to the Credit Agreement, (ii) until such time
following the occurrence of a Default as the Debtor receives a notice from the Lender instructing
the Debtor to cease such transactions, sales or leases of Inventory in the ordinary course of
business, and (iii) until such time as the Debtor receives a notice from the Lender pursuant to
Article VII, proceeds of Inventory and Accounts collected in the ordinary course of business.

          4.1.6 Liens. The Debtor will not create, incur, or suffer to exist any Lien on the
Collateral except (i) the security interest created by this Security Agreement, (ii) existing Liens
described in the Credit Agreement, and (iii) other Liens permitted pursuant to the Credit
Agreement.

          4.1.7 Change in Legal Existence, Type or Jurisdiction of Organization, Location, Name.
The Debtor will:

     (a) preserve its existence as a                      and not, in one transaction or
a series of related transactions, merge into or consolidate with any other entity,
or sell all or substantially all of its assets;

     (b) not change its state of organization;

     (c) not maintain its place of business (if it has only one) or its chief
executive office (if it has more than one place of business) at a location other
than a location specified on Exhibit “A;” and

     (d) not (i) have any Inventory, Equipment or Fixtures or proceeds or products
thereof (other than Inventory and proceeds thereof located outside the
United States or disposed of as permitted by Section 4.1.5) at a location other than

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a location specified in Exhibit “A”, (ii) change its name or taxpayer
identification number or (iii) change its mailing address,

unless the Debtor shall have given the Lender not less than 30 days’ prior written
notice of such event or occurrence and the Lender shall have either (x) determined
that such event or occurrence will not adversely affect the validity, perfection or
priority of the Lender’s security interest in the Collateral, or (y) taken such
steps (with the cooperation of the Debtor to the extent necessary or advisable) as
are necessary or advisable to properly maintain the validity, perfection and
priority of the Lender’s security interest in the Collateral.

          4.1.8 Other Financing Statements. The Debtor will not sign or authorize the signing
on its behalf or the filing of any financing statement naming it as debtor covering all or any
portion of the Collateral, except as permitted by Section 4.1.6.

     4.2 Receivables.

          4.2.1 Certain Agreements on Receivables. The Debtor will not make or agree to make
any discount, credit, rebate or other reduction in the original amount owing on a Receivable or
accept in satisfaction of a Receivable less than the original amount thereof, except that, prior to
the occurrence of a Default, the Debtor may reduce the amount of Accounts arising from the sale of
Inventory in accordance with its present policies and in the ordinary course of business.

          4.2.2 Collection of Receivables. Except as otherwise provided in this Security
Agreement, the Debtor will collect and enforce, at the Debtor’s sole expense, all amounts due or
hereafter due to the Debtor under the Receivables.

          4.2.3 Delivery of Invoices. The Debtor will deliver to the Lender immediately upon
its request after the occurrence of a Default duplicate invoices with respect to each Account
bearing such language of assignment as the Lender shall specify.

          4.2.4 Disclosure of Counterclaims on Receivables. If (i) any discount, credit or
agreement to make a rebate or to otherwise reduce the amount owing on a Receivable exists or (ii)
if, to the knowledge of the Debtor, any dispute, setoff, claim, counterclaim or defense exists or
has been asserted or threatened with respect to a Receivable, the Debtor will disclose such fact to
the Lender in writing in connection with the inspection by the Lender of any record of the Debtor
relating to such Receivable and in connection with any invoice or report furnished by the Debtor to
the Lender relating to such Receivable.

     4.3 Inventory and Equipment.

          4.3.1 Maintenance of Goods. The Debtor will do all things necessary to maintain,
preserve, protect and keep the Inventory and the Equipment in good repair and working and saleable
condition.

          4.3.2 Insurance. The Debtor will (i) maintain fire and extended coverage insurance on
the Inventory and Equipment containing a lender’s loss payable clause in favor of

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the Lender, and providing that said insurance will not be terminated except after at least 30
days’ written notice from the insurance company to the Lender, (ii) maintain such other insurance
on the Collateral for the benefit of the Lender as the Agent shall from time to time request, (iii)
furnish to the Lender upon the request of the Lender from time to time the originals of all
policies of insurance on the Collateral and certificates with respect to such insurance and (iv)
maintain general liability insurance naming the Lender, as an additional insured.

          4.3.3 Titled Vehicles. If requested in writing by the Lender, the Debtor will give
the Lender notice of its acquisition of any vehicle covered by a certificate of title and deliver
to the Lender, upon request, the original of any vehicle title certificate and do all things
necessary to have the Lien of the Lender noted on any such certificate.

     4.4 Instruments, Securities, Chattel Paper, Documents and Pledged Deposits. The
Debtor will (i) deliver to the Lender immediately upon execution of this Security Agreement the
originals of all Chattel Paper, Securities and Instruments constituting Collateral (if any then
exist), (ii) hold in trust for the Lender upon receipt and immediately thereafter deliver to the
Lender any Chattel Paper, Securities and Instruments constituting Collateral, (iii) upon the
designation of any Pledged Deposits (as set forth in the definition thereof), deliver to the Lender
such Pledged Deposits which are evidenced by certificates included in the Collateral endorsed in
blank, marked with such legends and assigned as the Lender shall specify, and (iv) upon the
Lender’s request, after the occurrence and during the continuance of a Default, deliver to the
Lender (and thereafter hold in trust for the Lender upon receipt and immediately deliver to the
Lender) any Document evidencing or constituting Collateral.

     4.5 Uncertificated Securities and Certain Other Investment Property. The Debtor will
permit the Lender from time to time to cause the appropriate issuers (and, if held with a
securities intermediary, such securities intermediary) of uncertificated securities or other types
of Investment Property not represented by certificates which are Collateral to mark their books and
records with the numbers and face amounts of all such uncertificated securities or other types of
Investment Property not represented by certificates and all rollovers and replacements therefor to
reflect the Lien of the Lender granted pursuant to this Security Agreement. The Debtor will take
any actions necessary to cause (i) the issuers of uncertificated securities which are Collateral
and which are Securities and (ii) any financial intermediary which is the holder of any Investment
Property, to cause the Lender to have and retain Control over such Securities or other Investment
Property. Without limiting the foregoing, the Debtor will, with respect to Investment Property
held with a financial intermediary, cause such financial intermediary to enter into a control
agreement with the Lender in form and substance satisfactory to the Lender.

     4.6 Stock and Other Ownership Interests.

          4.6.1 Changes in Capital Structure of Issuers. The Debtor will not (i) permit or
suffer any issuer of privately held company securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company constituting Collateral to
dissolve, liquidate, retire any of its capital stock or other Instruments or Securities evidencing
ownership, reduce its capital or merge or consolidate with any other entity, or (ii) vote any of
the Instruments, Securities or other Investment Property in favor of any of the foregoing.

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          4.6.2 Issuance of Additional Securities. The Debtor will not permit or suffer the
issuer of privately held company securities or other ownership interests in a corporation,
partnership, joint venture or limited liability company constituting Collateral to issue any such
securities or other ownership interests, any right to receive the same or any right to receive
earnings, except to the Debtor.

          4.6.3 Registration of Pledged Securities and other Investment Property. The Debtor
will permit any registrable Collateral to be registered in the name of the Lender or its nominee at
any time at the option of the Required Secured Parties.

          4.6.4 Exercise of Rights in Pledged Securities and other Investment Property. The
Debtor will permit the Lender or its nominee at any time after the occurrence of a Default, without
notice, to exercise all voting and company rights relating to the Collateral, including, without
limitation, exchange, subscription or any other rights, privileges, or options pertaining to any
company securities or other ownership interests or Investment Property in or of a corporation,
partnership, joint venture or limited liability company constituting Collateral and the Stock
Rights as if it were the absolute owner thereof.

     4.7 Pledged Deposits. The Debtor will not withdraw all or any portion of any Pledged
Deposit or fail to rollover said Pledged Deposit without the prior written consent of the Lender.

     4.8 Deposit Accounts. The Debtor will (i) upon the Lender’s request, cause each bank
or other financial institution in which it maintains (a) a Deposit Account to enter into a control
agreement with the Lender, in form and substance satisfactory to the Lender in order to give the
Lender Control of the Deposit Account or (b) other deposits (general or special, time or demand,
provisional or final) to be notified of the security interest granted to the Lender hereunder and
cause each such bank or other financial institution to acknowledge such notification in writing and
(ii) upon the Lender’s request after the occurrence and during the continuance of a Default,
deliver to each such bank or other financial institution a letter, in form and substance acceptable
to the Lender, transferring ownership of the Deposit Account to the Lender or transferring dominion
and control over each such other deposit to the Lender until such time as no Default exists. In
the case of deposits maintained with the Lender, the terms of such letter shall be subject to the
provisions of the Credit Agreement regarding setoffs.

     4.9 Letter-of-Credit Rights. The Debtor will upon the Lender’s request, cause each
issuer of a letter of credit, to consent to the assignment of proceeds of the letter of credit in
order to give the Lender Control of the letter-of-credit rights to such letter of credit.

     4.10 Federal, State or Municipal Claims. The Debtor will notify the Lender of any
Collateral which constitutes a claim against the United States government or any state or local
government or any instrumentality or agency thereof, the assignment of which claim is restricted by
federal, state or municipal law.

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ARTICLE V

DEFAULT

     5.1 The occurrence of any one or more of the following events shall constitute a Default:

     5.1.1 Any representation or warranty made by or on behalf of the Debtor under
or in connection with this Security Agreement shall be materially false as of the
date on which made.

     5.1.2 The breach by the Debtor of any of the terms or provisions of Article IV
or Article VII.

     5.1.3 The breach by the Debtor (other than a breach which constitutes a Default
under Section 5.1.1 or 5.1.2) of any of the terms or provisions of this Security
Agreement which is not remedied within thirty (30) days after the giving of written
notice to the Debtor by the Lender.

     5.1.4 Any material portion of the Collateral shall be transferred or otherwise
disposed of, either voluntarily or involuntarily, in any manner not permitted by
Section 4.1.5 or 8.7 or shall be lost, stolen, damaged or destroyed.

     5.1.5 The occurrence of any “Default” under, and as defined in, the Credit
Agreement.

     5.2 Acceleration and Remedies. Upon the acceleration of the obligations under the
Credit Agreement pursuant to Section 8.1 thereof, the Obligations and, to the extent provided for
under the Rate Management Transactions evidencing the same, the Rate Management Obligations, shall
immediately become due and payable without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived, and the Lender may, with the concurrence or at the direction
of the Required Secured Parties, exercise any or all of the following rights and remedies:

     5.2.1 Those rights and remedies provided in this Security Agreement, the Credit
Agreement, or any other Credit Document, provided that this Section 5.2.1
shall not be understood to limit any rights or remedies available to the Lender
prior to a Default.

     5.2.2 Those rights and remedies available to a secured party under the Arizona
UCC (whether or not the Arizona UCC applies to the affected Collateral) or under any
other applicable law (including, without limitation, any law governing the exercise
of a bank’s right of setoff or bankers’ lien) when a debtor is in default under a
security agreement.

     5.2.3 Without notice except as specifically provided in Section 8.1 or
elsewhere herein, sell, lease, assign, grant an option or options to purchase or
otherwise dispose of the Collateral or any part thereof in one or more parcels at

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public or private sale, for cash, on credit or for future delivery, and upon
such other terms as the Lender may deem commercially reasonable.

     The Lender may comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and compliance will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral.

     If, after the Credit Agreement has terminated by its terms and all of the Obligations have
been paid in full, there remain Rate Management Obligations outstanding, the Required Secured
Parties may exercise the remedies provided in this Section 5.2 upon the occurrence of any event
which would allow or require the termination or acceleration of any Rate Management Obligations
pursuant to the terms of the agreement governing any Rate Management Transaction.

     5.3 Debtor’s Obligations Upon Default. Upon the request of the Lender after the
occurrence of a Default, the Debtor will:

     5.3.1 Assembly of Collateral. Assemble and make available to the
Lender the Collateral and all records relating thereto at any place or places
specified by the Lender.

     5.3.2 Secured Party Access. Permit the Lender, by the Lender’s
representatives and Lenders, to enter any premises where all or any part of the
Collateral, or the books and records relating thereto, or both, are located, to take
possession of all or any part of the Collateral and to remove all or any part of the
Collateral.

     5.4 License. The Lender is hereby granted a license or other right to use, following
the occurrence and during the continuance of a Default, without charge, the Debtor’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service
marks, customer lists and advertising matter, or any property of a similar nature, as it pertains
to the Collateral, in completing production of, advertising for sale, and selling any Collateral,
and, following the occurrence and during the continuance of a Default, the Debtor’s rights under
all licenses and all franchise agreements shall inure to the Lender’s benefit. In addition, the
Debtor hereby irrevocably agrees that the Lender may, following the occurrence and during the
continuance of a Default, sell any of the Debtor’s Inventory directly to any person, including
without limitation persons who have previously purchased the Debtor’s Inventory from the Debtor and
in connection with any such sale or other enforcement of the Lender’s rights under this Agreement,
may sell Inventory which bears any trademark owned by or licensed to the Debtor and any Inventory
that is covered by any copyright owned by or licensed to the Debtor and the Lender may finish any
work in process and affix any trademark owned by or licensed to the Debtor and sell such Inventory
as provided herein.

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ARTICLE VI

WAIVERS, AMENDMENTS AND REMEDIES

     No delay or omission of the Lender to exercise any right or remedy granted under this Security
Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an
acquiescence therein, and any single or partial exercise of any such right or remedy shall not
preclude any other or further exercise thereof or the exercise of any other right or remedy. No
waiver, amendment or other variation of the terms, conditions or provisions of this Security
Agreement whatsoever shall be valid unless in writing signed by the Lender. All rights and
remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall
be available to the Lender until the Secured Obligations have been paid in full.

ARTICLE VII

PROCEEDS; COLLECTION OF RECEIVABLES

     7.1 Lockboxes. Upon request of the Lender after the occurrence of a Default or
Unmatured Default, the Debtor shall execute and deliver to the Lender irrevocable lockbox
agreements in the form provided by or otherwise acceptable to the Lender, which agreements shall be
accompanied by an acknowledgment by the bank where the lockbox is located of the Lien of the Lender
granted hereunder and of irrevocable instructions to wire all amounts collected therein to a
special collateral account at the Lender.

     7.2 Collection of Receivables. The Lender may at any time after the occurrence of a
Default, by giving the Debtor written notice, elect to require that the Receivables be paid
directly to the Lender. In such event, the Debtor shall, and shall permit the Lender to, promptly
notify the account debtors or obligors under the Receivables of the Lender’ interest therein and
direct such account debtors or obligors to make payment of all amounts then or thereafter due under
the Receivables directly to the Lender. Upon receipt of any such notice from the Lender, the
Debtor shall thereafter hold in trust for the Lender, all amounts and proceeds received by it with
respect to the Receivables and Other Collateral and immediately and at all times thereafter deliver
to the Lender all such amounts and proceeds in the same form as so received, whether by cash,
check, draft or otherwise, with any necessary endorsements. The Lender shall hold and apply funds
so received as provided by the terms of Sections 7.3 and 7.4.

     7.3 Special Collateral Account. After the occurrence of a Default, the Lender may
require all cash proceeds of the Collateral to be deposited in a special non-interest bearing cash
collateral account with the Lender and held there as security for the Secured Obligations. The
Debtor shall have no control whatsoever over said cash collateral account. If no Default has
occurred or is continuing, the Lender shall from time to time deposit the collected balances in
said cash collateral account into the Debtor’s general operating account with the Lender. If any
Default has occurred and is continuing, the Lender may, from time to time, apply the collected
balances in said cash collateral account to the payment of the Secured Obligations whether or not
the Secured Obligations shall then be due.

12

 

     7.4 Application of Proceeds. The proceeds of the Collateral shall be applied by the
Lender to payment of the Secured Obligations in the following order unless a court of competent
jurisdiction shall otherwise direct:

     (a) FIRST, to payment of all costs and expenses of the Lender incurred in
connection with the collection and enforcement of the Secured Obligations or of the
security interest granted to the Lender pursuant to this Security Agreement;

     (b) SECOND, to payment of that portion of the Secured Obligations constituting
accrued and unpaid interest and fees;

     (c) THIRD, to payment of the principal of the Secured Obligations and the net
early termination payments and any other Rate Management Obligations then due and
unpaid from the Debtor to the Lender;

     (d) FOURTH, to payment of any Secured Obligations (other than those listed
above); and

     (e) FIFTH, the balance, if any, after all of the Secured Obligations have been
satisfied, shall be deposited by the Lender into the Debtor’s general operating
account with the Lender.

ARTICLE VIII

GENERAL PROVISIONS

     8.1 Notice of Disposition of Collateral; Condition of Collateral. The Debtor hereby
waives notice of the time and place of any public sale or the time after which any private sale or
other disposition of all or any part of the Collateral may be made. To the extent such notice may
not be waived under applicable law, any notice made shall be deemed reasonable if sent to the
Debtor, addressed as set forth in Article IX, at least ten days prior to (i) the date of any such
public sale or (ii) the time after which any such private sale or other disposition may be made.
Lender shall have no obligation to clean-up or otherwise prepare the Collateral for sale.

     8.2 Compromises and Collection of Collateral. The Debtor and the Lender recognize
that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to
certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole
or in part and that the expense and probability of success in litigating a disputed Receivable may
exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In
view of the foregoing, the Debtor agrees that the Lender may at any time and from time to time, if
a Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in
full payment of any Receivable such amount as the Lender in its sole discretion shall determine or
abandon any Receivable, and any such action by the Lender shall be commercially reasonable so long
as the Lender acts in good faith based on information known to it at the time it takes any such
action.

13

 

     8.3 Secured Party Performance of Debtor Obligations. Without having any obligation to
do so, the Lender may perform or pay any obligation which the Debtor has agreed to perform or pay
in this Security Agreement and the Debtor shall reimburse the Lender for any amounts paid by the
Lender pursuant to this Section 8.3. The Debtor’s obligation to reimburse the Lender pursuant to
the preceding sentence shall be a Secured Obligation payable on demand.

     8.4 Authorization for Secured Party to Take Certain Action. The Debtor irrevocably
authorizes the Lender at any time and from time to time in the sole discretion of the Lender and
appoints the Lender as its attorney in fact (i) to execute on behalf of the Debtor as debtor and to
file financing statements necessary or desirable in the Lender’s sole discretion to perfect and to
maintain the perfection and priority of the Lender’s security interest in the Collateral, (ii) to
indorse and collect any cash proceeds of the Collateral, (iii) to file a carbon, photographic or
other reproduction of this Security Agreement or any financing statement with respect to the
Collateral as a financing statement and to file any other financing statement or amendment of a
financing statement (which does not add new collateral or add a debtor) in such offices as the
Lender in its sole discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the Lender’s security interest in the Collateral, (iv) to contact and
enter into one or more agreements with the issuers of uncertificated securities which are
Collateral and which are Securities or with financial intermediaries holding other Investment
Property as may be necessary or advisable to give the Lender Control over such Securities or other
Investment Property, (v) subject to the terms of Section 4.1.5, to enforce payment of the
Receivables in the name of the Lender or the Debtor, (vi) to apply the proceeds of any Collateral
received by the Lender to the Secured Obligations as provided in Article VII, and (vii) to
discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such
Liens as are specifically permitted hereunder), and the Debtor agrees to reimburse the Lender on
demand for any payment made or any expense incurred by the Lender in connection therewith,
provided that this authorization shall not relieve the Debtor of any of its obligations
under this Security Agreement or under the Credit Agreement.

     8.5 Specific Performance of Certain Covenants. The Debtor acknowledges and agrees
that a breach of any of the covenants contained in Sections 4.1.5, 4.1.6, 4.4, 5.3, or 8.7 or in
Article VII will cause irreparable injury to the Lender, that the Lender has no adequate remedy at
law in respect of such breaches and therefore agrees, without limiting the right of the Lender or
the Lender to seek and obtain specific performance of other obligations of the Debtor contained in
this Security Agreement, that the covenants of the Debtor contained in the Sections referred to in
this Section 8.5 shall be specifically enforceable against the Debtor.

     8.6 Use and Possession of Certain Premises. Upon the occurrence of a Default, the
Lender shall be entitled to occupy and use any premises owned or leased by the Debtor where any of
the Collateral or any records relating to the Collateral are located until the Secured Obligations
are paid or the Collateral is removed therefrom, whichever first occurs, without any obligation to
pay the Debtor for such use and occupancy.

     8.7 Dispositions Not Authorized. The Debtor is not authorized to sell or otherwise
dispose of the Collateral except as set forth in Section 4.1.5 and notwithstanding any course of
dealing between the Debtor and the Lender or other conduct of the Lender, no authorization to

14

 

sell or otherwise dispose of the Collateral (except as set forth in Section 4.1.5) shall be
binding upon the Lender unless such authorization is in writing signed by the Lender.

     8.8 Benefit of Agreement. The terms and provisions of this Security Agreement shall
be binding upon and inure to the benefit of the Debtor and the Lender and their respective
successors and assigns (including all persons who become bound as a debtor to this Security
Agreement), except that the Debtor shall not have the right to assign its rights or delegate its
obligations under this Security Agreement or any interest herein, without the prior written consent
of the Lender.

     8.9 Survival of Representations. All representations and warranties of the Debtor
contained in this Security Agreement shall survive the execution and delivery of this Security
Agreement.

     8.10 Taxes and Expenses. Any taxes (including income taxes) payable or ruled payable
by Federal or State authority in respect of this Security Agreement shall be paid by the Debtor,
together with interest and penalties, if any. The Debtor shall reimburse the Lender for any and
all out-of-pocket expenses and internal charges (including reasonable attorneys’, auditors’ and
accountants’ fees and reasonable time charges of attorneys, paralegals, auditors and accountants
who may be employees of the Lender) paid or incurred by the Lender in connection with the
preparation, execution, delivery, administration, collection and enforcement of this Security
Agreement and in the audit, analysis, administration, collection, preservation or sale of the
Collateral (including the expenses and charges associated with any periodic or special audit of the
Collateral). Any and all costs and expenses incurred by the Debtor in the performance of actions
required pursuant to the terms hereof shall be borne solely by the Debtor.

     8.11 Headings. The title of and section headings in this Security Agreement are for
convenience of reference only, and shall not govern the interpretation of any of the terms and
provisions of this Security Agreement.

     8.12 Termination. This Security Agreement shall continue in effect (notwithstanding
the fact that from time to time there may be no Secured Obligations outstanding) until (i) the
Credit Agreement has terminated pursuant to its express terms and (ii) all of the Secured
Obligations have been indefeasibly paid and performed in full and no commitments of the Lender
which would give rise to any Secured Obligations are outstanding.

     8.13 Entire Agreement. This Security Agreement embodies the entire agreement and
understanding between the Debtor and the Lender relating to the Collateral and supersedes all prior
agreements and understandings between the Debtor and the Lender relating to the Collateral.

     8.14 CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ARIZONA, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

15

 

     8.15 Non-Borrower Provisions.

     (a) All advances of principal under the Note shall be made to Borrower subject
to and in accordance with the terms thereof. It is not necessary for the Agent or
the Lenders to inquire into the powers of Borrower or the officers, directors,
partners or agents acting or purporting to act on its behalf. Debtor is and shall
continue to be fully informed as to all aspects of the business affairs of Borrower
that it deems relevant to the risks it is assuming and hereby waives and fully
discharges the Agent and the Lenders from any and all obligations to communicate to
Debtor any facts of any nature whatsoever regarding Borrower and Borrower’s business
affairs.

     (b) Debtor authorizes Lender, without notice or demand, without affecting the
obligations of Debtor hereunder or the personal liability of any person for payment
or performance of the Secured Obligations and without affecting the lien or the
priority of the security interest, from time to time, at the request of any person
primarily obligated therefor, to renew, compromise, extend, accelerate or otherwise
change the time for payment or performance of, or otherwise change the terms of, all
or any part of the Secured Obligations, including increase or decrease any rate of
interest thereon. Debtor waives and agrees not to assert: (i) any right to require
the Agent and the Lenders to proceed against Borrower; (ii) the benefits of any
statutory provision limiting the liability of a surety, including without limitation
the benefit of Section 12-1641, et seq., of the Arizona Revised
Statutes; and (iii) any defense arising by reason of any disability or other defense
of Borrower or by reason of the cessation from any cause whatsoever of the liability
of Borrower. Debtor shall have no right of subrogation and hereby waives any right
to enforce any remedy which the Agent and the Lenders now have, or may hereafter
have, against Borrower.

ARTICLE IX

NOTICES

     9.1 Sending Notices. Any notice required or permitted to be given under this Security
Agreement shall be sent (and deemed received) in the manner and to the addresses set forth in the
Credit Agreement.

     9.2 Change in Address for Notices. Each of the Debtor and the Lender may change the
address for service of notice upon it by a notice in writing to the other parties.

16

 

     IN WITNESS WHEREOF, the Debtor and the Lender have executed this Security Agreement as of the
date first above written.

	 	 	 	 	 	 	 
	 	 	                                                            ,	 	 
	 	 	                                        	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	JPMORGAN CHASE BANK, N.A., a national
 banking association
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

17exv10w3

 

Exhibit 10.3

CONTINUING GUARANTEE

TO: JPMORGAN CHASE BANK, N.A., a national banking association

     1. For valuable consideration, the undersigned (hereinafter called “Guarantor”), whose address
is set forth after Guarantor’s signature below, jointly and severally, and unconditionally,
guarantees and promises to pay to JPMORGAN CHASE BANK, N.A., a national banking association
(hereinafter called “Lender”), or order, on demand, in lawful money of the United States, any and
all indebtedness of MOBILITY ELECTRONICS, INC., a Delaware corporation (hereinafter called
“Borrower”) to Lender. If this Guarantee is executed by more than one Guarantor, the word
“Guarantor” shall mean all and any one or more of them, severally and collectively. The word
“indebtedness” is used in its most comprehensive sense and includes any and all advances, debts,
obligations and liabilities of Borrower heretofore, now or hereafter made, incurred or created,
with or without notice to Guarantor, whether voluntary or involuntary and however arising, whether
due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and
whether Borrower is liable individually or jointly with others, or whether recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations, or whether such
indebtedness may be or hereafter become otherwise unenforceable, exclusive, however, of any
indebtedness of Borrower to Lender presently covered by existing guaranties executed by Guarantor,
but without derogation to such existing guaranties, if any, which are hereby ratified and
reaffirmed.

     2. The liability of Guarantor hereunder shall include principal, plus all interest thereon and
all attorneys’ fees and other costs and expenses incurred by Lender in collecting, compromising or
enforcing the indebtedness or in protecting or preserving any security for the indebtedness. Any
payment by Guarantor shall not reduce Guarantor’s obligation hereunder, unless written notice to
that effect is actually received by Lender at or prior to the time of such payment.

     3. This is a continuing guarantee that shall remain in full force and effect and includes all
indebtedness arising under future transactions or under successive transactions which either
continue then existing indebtedness or from time to time renew it after it has been satisfied, but
shall not apply to any indebtedness created after actual receipt by Lender of written notice of the
revocation of this Guarantee as to future transactions. Any such revocation of this Guarantee at
any time by any Guarantor as to future transactions shall not affect the liability of any other
guarantor for indebtedness of Borrower and shall not affect the liability of that Guarantor or any
other guarantor for indebtedness incurred or credit committed by Lender to Borrower prior to the
effective time of that revocation; this Guarantee shall remain in full force and effect as to all
such indebtedness. The death of any Guarantor shall not operate as a revocation of liability
hereunder of the estate of that Guarantor for indebtedness created or incurred or credit committed
by Lender to Borrower subsequent to such death until actual receipt by Lender of written notice of
the death of that Guarantor. Guarantor waives notice of revocation given by any other guarantor.

     4. Guarantor is providing this Guarantee at the instance and request of Borrower to induce
Lender to extend or continue financial accommodations to Borrower. Guarantor hereby

1

 

represents and warrants that Guarantor is and will continue to be fully informed about all
aspects of the financial condition and business affairs of Borrower that Guarantor deems relevant
to the obligations of Guarantor hereunder and hereby waives and fully discharges Lender from any
and all obligations to communicate to Guarantor any information whatsoever regarding Borrower or
Borrower’s financial condition or business affairs.

     5. Guarantor authorizes Lender, without notice or demand and without affecting Guarantor’s
liability hereunder, from time to time, to: (a) renew, modify, compromise, extend, accelerate or
otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any
part thereof, including increasing or decreasing the rate of interest thereon; (b) release,
substitute or add any one or more endorsers, Guarantor or other guarantors; (c) take and hold
security for the payment of this Guarantee or the indebtedness, and enforce, exchange, substitute,
subordinate, waive or release any such security; (d) proceed against such security and direct the
order or manner of sale of such security as Lender in its discretion may determine; and (e) apply
any and all payments from Borrower, Guarantor or any other guarantor, or recoveries from such
security, in such order or manner as Lender in its discretion may determine.

     6. Guarantor waives and agrees not to assert: (a) any right to require Lender to proceed
against Borrower or any other guarantor, to proceed against or exhaust any security for the
indebtedness, to pursue any other remedy available to Lender, or to pursue any remedy in any
particular order or manner; (b) the benefit of any statute of limitations affecting Guarantor’s
liability hereunder or the enforcement thereof; (c) demand, diligence, presentment for payment,
protest and demand, and notice of extension, dishonor, protest, demand, nonpayment and acceptance
of this Guarantee; (d) notice of the existence, creation or incurring of new or additional
indebtedness of Borrower to Lender; (e) the benefits of any statutory provision limiting the
liability of a surety, including without limitation the provisions of A.R.S. Sections 12-1641,
et seq.; (f) any defense arising by reason of any disability or other defense of
Borrower or by reason of the cessation from any cause whatsoever (other than payment in full) of
the liability of Borrower for the indebtedness; and (g) the benefits of any statutory provision
limiting the right of Lender to recover a deficiency judgment, or to otherwise proceed against any
person or entity obligated for payment of the indebtedness, after any foreclosure or trustee’s sale
of any security for the indebtedness, including without limitation the benefits, if any, to
Guarantor of A.R.S. Section 33-814. Guarantor shall have no right of subrogation and hereby waives
any right to enforce any remedy which Lender now has, or may hereafter have, against Borrower, and
waives any benefit of, and any right to participate in, any security now or hereafter held by
Lender.

     7. All existing and future indebtedness of Borrower to Guarantor is hereby subordinated to the
indebtedness of Borrower to Lender and such indebtedness of Borrower to Guarantor, if Lender so
requests, shall be collected, enforced and received by Guarantor as trustee for Lender and shall be
paid over to Lender on account of the indebtedness of Borrower to Lender, but without reducing or
affecting in any manner the liability of Guarantor under the other provisions of this Guarantee.

     8. In addition to all liens upon, and rights of setoff against, the monies, securities or
other property of Guarantor given to Lender by law, Lender shall have a lien and a right of setoff
against, and Guarantor hereby grants to Lender a security interest in, all monies, securities and

2

 

other property of Guarantor now and hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, or for safekeeping or otherwise; every
such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien
or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender,
by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so
doing.

     9. It is not necessary for Lender to inquire into the powers of Borrower or the officers,
directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made
or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.

     10. Guarantor agrees to pay all attorneys’ fees and all other costs and expenses which may be
incurred by Lender in enforcing this Guarantee.

     11. The obligations of Guarantor hereunder are joint and several if Guarantor is more than one
person or entity, are separate and independent of the obligations of Borrower and of any other
guarantor, and a separate action or actions may be brought and prosecuted against Guarantor whether
action is brought against Borrower or any other guarantor or whether Borrower or any other
guarantor is joined in any action or actions. The obligations of Guarantor hereunder shall survive
and continue in full force and effect until payment in full of the indebtedness is actually
received by Lender, notwithstanding any release or termination of Borrower’s liability by express
or implied agreement with Lender or by operation of law and notwithstanding that the indebtedness
or any part thereof is deemed to have been paid or discharged by operation of law or by some act or
agreement of Lender. For purposes of this Guarantee, the indebtedness shall be deemed to be paid
only to the extent that Lender actually receives immediately available funds and to the extent of
any credit bid by Lender at any foreclosure or trustee’s sale of any security for the indebtedness.

     12. This Guarantee sets forth the entire agreement of Guarantor and Lender with respect to the
subject matter hereof and supersedes all prior oral and written agreements and representations by
Lender to Guarantor. No modification or waiver of any provision of this Guarantee or any right of
Lender hereunder and no release of Guarantor from any obligation hereunder shall be effective
unless in a writing executed by an authorized officer of Lender.

     13. This Guarantee shall inure to the benefit of Lender and its successors and assigns and
shall be binding upon Guarantor and its heirs, personal representatives, successors and assigns.
Lender may assign this Guarantee in whole or in part without notice.

     14. This Guarantee shall be governed by and construed according to the laws of the State of
Arizona.

3

 

     IN WITNESS WHEREOF these presents are executed as of the 27th day of July, 2006.

	 	 	 	 	 	 	 
	 	 	GUARANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	      
              
             
              
      ,
                  	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 

1

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