Document:

Placement Agent Agreement

    

      Exhibit
        10.3

       

      Seawright
        Holdings, Inc.

      PLACEMENT
        AGENT AGREEMENT

       

      Dated
        as
        of: September 12, 2005

       

      The
        undersigned, Seawright Holdings, Inc., a Delaware corporation (the “COMPANY”),
        hereby agrees with Jones, Byrd and Attkisson, Inc. (the “PLACEMENT AGENT”) as
        follows:

       

      
        	1.	
                OFFERING.
                  The Company hereby engages the Placement Agent to act as its exclusive
                  placement agent in connection with the Investment Agreement dated
                  September 12, 2005 (the “INVESTMENT AGREEMENT”) pursuant to which the
                  Company shall issue and sell to the Dutchess Private Equities Fund
                  II,
                  L.P., a Delaware Limited Partnership (the “INVESTOR”), from time to time,
                  and the Investor shall purchase from the Company (the “OFFERING”) up to
                  Five Million Dollars ($5,000,000) of the Company’s Common Stock (the
                  “COMMITMENT AMOUNT”), par value $0.001 per share (the “COMMON STOCK”), at
                  price per share equal to the Purchase Price, as that term is defined
                  in
                  the Investment Agreement. Pursuant to the terms hereof, the Placement
                  Agent shall render consulting services to the Company with respect
                  to the
                  Investment Agreement and shall be available for consultation in
                  connection
                  with the advances to be requested by the Company pursuant to the
                  Investment Agreement. All capitalized terms used herein and not
                  otherwise
                  defined herein shall have the same meaning ascribed to them as
                  in the
                  Investment Agreement. The Investor will be granted certain registration
                  rights with respect to the Common Stock as more fully set forth
                  in a
                  Registration Rights Agreement between the Company and the Investor
                  dated
                  September 12, 2005 (the “REGISTRATION RIGHTS AGREEMENT”). The documents to
                  be executed and delivered in connection with the Offering, including,
                  but
                  not limited to, this Agreement, the Investment Agreement, and the
                  Registration Rights Agreement, and any offering memorandum, prospectus
                  or
                  other disclosure document (including all amendments and supplements)
                  utilized in connection with the Offering are referred to sometimes
                  hereinafter collectively as the “OFFERING MATERIALS.” The Company’s Common
                  Stock is sometimes referred to hereinafter as the “SECURITIES.” The
                  Placement Agent shall not be obligated to sell any Securities and
                  the
                  Offering by the Placement Agent shall be solely on a “best efforts
                  basis.”

              

      

       

      
        	2.	
                REPRESENTATIONS,
                  WARRANTIES AND COVENANTS OF THE PLACEMENT
                  AGENT.

              

      

       

      
        	
              	A.	
                The
                  Placement Agent represents, warrants and covenants as
                  follows:

              

      

       

      (i) The
        Placement Agent has the necessary power to enter into this Agreement and
        to
        consummate the transactions contemplated hereby.

       

      (ii) The
        execution and delivery by the Placement Agent of this Agreement and the
        consummation of the transactions contemplated herein will not result in any
        violation of, or be in conflict with, or constitute a default under, any
        agreement or instrument to which the Placement Agent is a party or by which
        the
        Placement Agent or its properties are bound, or any judgment, decree, order
        or,
        to the Placement Agent’s knowledge, any statute, rule or regulation applicable
        to the Placement Agent. This Agreement when executed and delivered by the
        Placement Agent, will constitute the legal, valid and binding obligation
        of the
        Placement Agent, enforceable in accordance with its terms, except to the
        extent
        that (a) the enforceability hereof or thereof may be limited by bankruptcy,
        insolvency, reorganization, moratorium or similar laws from time to time
        in
        effect and affecting the rights of creditors generally, (b) the enforceability
        hereof or thereof is subject to general principles of equity, or (c) the
        indemnification provisions hereof or thereof may be held to be in violation
        of
        public policy.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          2

        

      

       

       

      (iii) Upon
        receipt and execution of this Agreement the Placement Agent will promptly
        forward copies of this Agreement to the Company or its counsel and the Investor
        or its counsel.

       

      (iv) The
        Placement Agent will not take any action that it reasonably believes would
        cause
        the Offering to violate the provisions of the Securities Act of 1933, as
        amended
        (the “1933 ACT”), the Securities Exchange Act of 1934 (the “1934 ACT”), the
        respective rules and regulations promulgated there under (the “RULES AND
        REGULATIONS”) or applicable “Blue Sky” laws of any state or
        jurisdiction.

       

      (v) The
        Placement Agent will use all reasonable efforts to determine (a) whether
        the
        Investor is an Accredited Investor and (b) that any information furnished
        by the
        Investor is true and accurate. The Placement Agent shall have no obligation
        to
        insure that (x) any check, note, draft or other means of payment for the
        Common
        Stock will be honored, paid or enforceable against the Investor in accordance
        with its terms, or (y) subject to the performance of the Placement Agent’s
        obligations and the accuracy of the Placement Agent’s representations and
        warranties hereunder, (1) the Offering is exempt from the registration
        requirements of the 1933 Act or any applicable state “Blue Sky” law or (2) the
        Investor is an Accredited Investor.

       

      (vi) The
        Placement Agent is a member of the National Association of Securities Dealers,
        Inc., and is a broker-dealer registered as such under the 1934 Act and under
        the
        securities laws of the states in which the Securities will be offered or
        sold by
        the Placement Agent unless an exemption for such state registration is available
        to the Placement Agent. The Placement Agent is in compliance with all material
        rules and regulations applicable to the Placement Agent generally and applicable
        to the Placement Agent’s participation in the Offering.

       

      
        	3.	
                REPRESENTATIONS
                  AND WARRANTIES OF THE COMPANY.

              

      

       

      
        	
              	A.	
                The
                  Company represents and warrants to the Placement Agent as follows:
                  

              

      

       

      (i) The
        execution, delivery and performance of each of this Agreement, the Investment
        Agreement and the Registration Rights Agreement has been or will be duly
        and
        validly authorized by the Company and is, and with respect to this Agreement,
        the Investment Agreement and the Registration Rights Agreement will each
        be, a
        valid and binding agreement of the Company, enforceable in accordance with
        its
        respective terms, except to the extent that (a) the enforceability hereof
        or
        thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
        or
        similar laws from time to time in effect and affecting the rights of creditors
        generally, (b) the enforceability hereof or thereof is subject to general
        principles of equity or (c) the indemnification provisions hereof or thereof
        may
        be held to be in violation of public policy. All corporate action required
        to be
        taken for the authorization, issuance and sale of the Securities has been
        duly
        and validly taken by the Company.

       

      (ii) The
        Company has a duly authorized, issued and outstanding capitalization as set
        forth herein. The Company is not a party to or bound by any instrument,
        agreement or other arrangement providing for it to issue any capital stock,
        rights, warrants, options or other securities, except for this Agreement,
        the
        agreements described herein and as described in the Investment Agreement,
        dated
        the date hereof and the agreements described therein. All issued and outstanding
        securities of the Company have been duly authorized and validly issued and
        are
        fully paid and non-assessable; the holders thereof have no rights of rescission
        or preemptive rights with respect thereto and are not subject to personal
        liability solely by reason of being security holders; and none of such
        securities were issued in violation of the preemptive rights of any holders
        of
        any security of the Company. As of June 30, 2005, the authorized capital
        stock
        of the Company consists of 19,900,000 shares of Common Stock, par value $0.001
        per share, of which 8,875,476 shares of Common Stock are issued and outstanding
        and 100,000 shares of preferred stock, of which no shares are issued
        and
        outstanding.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          3

        

      

       

       

      (iii) The
        Common Stock to be issued in accordance with this Agreement and the Investment
        Agreement has been duly authorized and when issued and paid for in accordance
        with this Agreement, the Investment Agreement and the certificates/instruments
        representing such Common Stock, will be validly issued, fully-paid and
        non-assessable.

       

      
        	4.	
                CERTAIN
                  COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants
                  and agrees
                  at its expense and without any expense to the Placement Agent as
                  follows:
                  

              

      

       

      
        	
              	A.	
                To
                  advise the Placement Agent of any material adverse change in the
                  Company’s
                  financial condition, prospects or business or of any development
                  materially affecting the Company or rendering untrue or misleading
                  any
                  material statement in the Offering Materials occurring at any time
                  as soon
                  as the Company is either informed or becomes aware
                  thereof.

              

      

       

      
        	
              	B.	
                To
                  use its commercially reasonable efforts to cause the Common Stock
                  issuable
                  in connection with the Investment Agreement to be qualified or
                  registered
                  for sale on terms consistent with those stated in the Registration
                  Rights
                  Agreement and under the securities laws of such jurisdictions as
                  the
                  Placement Agent shall reasonably request. Qualification, registration
                  and
                  exemption charges and fees shall be at the sole cost and expense
                  of the
                  Company.

              

      

       

      
        	
              	C.	
                Upon
                  written request, to provide and continue to provide the Placement
                  Agent
                  copies of all quarterly financial statements and audited annual
                  financial
                  statements prepared by or on behalf of the Company, other reports
                  prepared
                  by or on behalf of the Company for public disclosure and all documents
                  delivered to the Company’s
                  stockholders.

              

      

       

      
        	
              	D.	
                To
                  deliver, during the registration period of the Investment Agreement,
                  to
                  the Placement Agent upon the Placement Agent’s
                  request,

              

      

       

      (i) within
        sixty (60) days, a statement of its income for each such quarterly period,
        and
        its balance sheet and a statement of changes in stockholders’ equity as of the
        end of such quarterly period, all in reasonable detail, certified by its
        principal financial or accounting officer;

       

      (ii) within
        one hundred twenty (120) days after the close of each fiscal year, its balance
        sheet as of the close of such fiscal year, together with a statement of income,
        a statement of changes in stockholders’ equity and a statement of cash flow for
        such fiscal year, such balance sheet, statement of income, statement of changes
        in stockholders’ equity and statement of cash flow to be in reasonable detail
        and accompanied by a copy of the certificate or report thereon of independent
        auditors if audited financial statements are prepared; and

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          4

        

      

       

       

      (iii) a
        copy of
        all documents, reports and information furnished to its stockholders at the
        time
        that such documents, reports and information are furnished to its
        stockholders.

       

      (iv) a
        copy of
        all documents, reports and information furnished to the Investor at the time
        that such documents, reports and information are furnished to the
        Investor.

       

      
        	
              	E.	
                To
                  comply with the terms of the Offering
                  Materials.

              

      

       

      
        	
              	F.	
                To
                  ensure that any transactions between or among the Company, or any
                  of its
                  officers, directors and affiliates be on terms and conditions that
                  are no
                  less favorable to the Company, than the terms and conditions that
                  would be
                  available in an “arm’s length” transaction with an independent third
                  party.

              

      

       

      
        	5.	
                INDEMNIFICATION.

              

      

       

      
        
          	
                	A.	
                  The
                    Company hereby agrees that it will indemnify and hold the Placement
                    Agent
                    and each officer, director, shareholder, employee or representative
                    of the
                    Placement Agent and each person controlling, controlled by or
                    under common
                    control with the Placement Agent within the meaning of Section
                    15 of the
                    1933 Act or Section 20 of the 1934 Act or the SEC’s Rules and Regulations
                    promulgated there under (the “Rules and Regulations”), harmless from and
                    against any and all loss, claim, damage, liability, cost or expense
                    whatsoever (including, but not limited to, any and all reasonable
                    legal
                    fees and other expenses and disbursements incurred in connection
                    with
                    investigating, preparing to defend or defending any action, suit
                    or
                    proceeding, including any inquiry or investigation, commenced
                    or
                    threatened, or any claim whatsoever or in appearing or preparing
                    for
                    appearance as a witness in any action, suit or proceeding, including
                    any
                    inquiry, investigation or pretrial proceeding such as a deposition)
                    to
                    which the Placement Agent or such indemnified person of the Placement
                    Agent may become subject under the 1933 Act, the 1934 Act, the
                    Rules and
                    Regulations, or any other federal or state law or regulation,
                    common law
                    or otherwise, arising out of or based upon (i) any untrue statement
                    or
                    alleged untrue statement of a material fact contained in (a)
                    the Offering
                    Materials (except those written statements relating to the Placement
                    Agent
                    given by an indemnified person for inclusion therein) or (b)
                    any
                    application or other document or written communication executed
                    by the
                    Company or based upon written information furnished by the Company
                    filed
                    in any jurisdiction in order to qualify the Common Stock under
                    the
                    securities laws thereof, or any state securities commission or
                    agency;
                    (ii) the omission or alleged omission from documents described
                    in clauses
                    (a) or (b) above of a material fact required to be stated therein
                    or
                    necessary to make the statements therein not misleading; or (iii)
                    the
                    breach of any representation, warranty, covenant or agreement
                    made by the
                    Company in this Agreement. The Company further agrees that upon
                    demand by
                    an indemnified person, at any time or from time to time, it will
                    promptly
                    reimburse such indemnified person for any loss, claim, damage,
                    liability,
                    cost or expense actually and reasonably paid by the indemnified
                    person as
                    to which the Company has indemnified such person pursuant hereto.
                    Notwithstanding the foregoing provisions of this Section 5(A),
                    any such
                    payment or reimbursement by the Company of fees, expenses or
                    disbursements
                    incurred by an indemnified person in any proceeding in which
                    a final
                    judgment by a court of competent jurisdiction (after all appeals
                    or the
                    expiration of time to appeal) is entered against the Placement
                    Agent or
                    such indemnified person based upon specific finding of fact as
                    to the
                    Placement Agent or such indemnified person’s gross negligence, fraud or
                    willful misfeasance will be promptly repaid to the
                    Company.

                

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          5

        

         

         

      

      
        	
              	
                B.

              	
                The
                  Placement Agent hereby agrees that it will indemnify and hold the
                  Company
                  and each officer, director, shareholder, employee or representative
                  of the
                  Company, and each person controlling, controlled by or under common
                  control with the Company within the meaning of Section 15 of the
                  1933 Act
                  or Section 20 of the 1934 Act or the Rules and Regulations, harmless
                  from
                  and against any and all loss, claim, damage, liability, cost or
                  expense
                  whatsoever (including, but not limited to, any and all reasonable
                  legal
                  fees and other expenses and disbursements incurred in connection
                  with
                  investigating, preparing to defend or defending any action, suit
                  or
                  proceeding, including any inquiry or investigation, commenced or
                  threatened, or any claim whatsoever or in appearing or preparing
                  for
                  appearance as a witness in any action, suit or proceeding, including
                  any
                  inquiry, investigation or pretrial proceeding such as a deposition)
                  to
                  which the Company or such indemnified person of the Company may
                  become
                  subject under the 1933 Act, the 1934 Act, the Rules and Regulations,
                  or
                  any other federal or state law or regulation, common law or otherwise,
                  arising out of or based upon (i) the conduct of the Placement Agent
                  or its
                  officers, employees or representatives in willful violation of
                  any of such
                  laws and regulations while acting as Placement Agent for the Offering,
                  (ii) the material breach of any representation, warranty, covenant
                  or
                  agreement made by the Placement Agent in this Agreement or (iii)
                  any false
                  or misleading information provided to the Company by one of the
                  Placement
                  Agent’s indemnified persons.

              

      

       

      
        	
              	C.	
                Promptly
                  after receipt by an indemnified party of notice of commencement
                  of any
                  action covered by Section 5(A) or (B), the party to be indemnified
                  shall,
                  within five (5) business days, notify the indemnifying party of
                  the
                  commencement thereof; the omission by one (1) indemnified party
                  to so
                  notify the indemnifying party shall not relieve the indemnifying
                  party of
                  its obligation to indemnify any other indemnified party that has
                  given
                  such notice and shall not relieve the indemnifying party of any
                  liability
                  outside of this indemnification if not materially prejudiced thereby.
                  In
                  the event that any action is brought against the indemnified party,
                  the
                  indemnifying party will be entitled to participate therein and,
                  to the
                  extent it may desire, to assume and control the defense thereof
                  with
                  counsel chosen by it which is reasonably acceptable to the indemnified
                  party. After notice from the indemnifying party to such indemnified
                  party
                  of its election to so assume the defense thereof, the indemnifying
                  party
                  will not be liable to such indemnified party under such Section
                  5(A) or
                  (B) for any legal or other expenses subsequently incurred by such
                  indemnified party in connection with the defense thereof, but the
                  indemnified party may, at its own expense, participate in such
                  defense by
                  counsel chosen by it, without, however, impairing the indemnifying
                  party’s
                  control of the defense. Subject to the proviso of this sentence
                  and
                  notwithstanding any other statement to the contrary contained herein,
                  the
                  indemnified party or parties shall have the right to choose its
                  or their
                  own counsel and control the defense of any action, all at the expense
                  of
                  the indemnifying party if, (i) the employment of such counsel shall
                  have
                  been authorized in writing by the indemnifying party in connection
                  with
                  the defense of such action at the expense of the indemnifying party,
                  (ii)
                  the indemnifying party shall not have employed counsel reasonably
                  satisfactory to such indemnified party to have charge of the defense
                  of
                  such action within a reasonable time after notice of commencement
                  of the
                  action, or (iii) such indemnified party or parties shall have reasonably
                  concluded that there may be defenses available to it or them which
                  are
                  different from or additional to those available to one or all of
                  the
                  indemnifying parties (in which case the indemnifying parties shall
                  not
                  have the right to direct the defense of such action on behalf of
                  the
                  indemnified party or parties), in any of which events such fees
                  and
                  expenses of one additional counsel shall be borne by the indemnifying
                  party; provided, however, that the indemnifying party shall not,
                  in
                  connection with any one action or separate but substantially similar
                  or
                  related actions in the same jurisdiction arising out of the same
                  general
                  allegations or circumstance, be liable for the reasonable fees
                  and
                  expenses of more than one separate firm of attorneys at any time
                  for all
                  such indemnified parties. No settlement of any action or proceeding
                  against an indemnified party shall be made without the consent
                  of the
                  indemnifying party.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          6

        

         

         

      

      
        	
              	
                D.

              	
                In
                  order to provide for just and equitable contribution in circumstances
                  in
                  which the indemnification provided for in Section 5 is due in accordance
                  with its terms but is for any reason held by a court to be unavailable
                  on
                  grounds of policy or otherwise, the Company and the Placement Agent
                  shall
                  contribute to the aggregate losses, claims, damages and liabilities
                  (including legal or other expenses reasonably incurred in connection
                  with
                  the investigation or defense of same) which the other may incur
                  in such
                  proportion so that the Company and the Placement Agent shall be
                  responsible for such percent of the aggregate of such losses, claims,
                  damages and liabilities as shall equal the percentage of the gross
                  proceeds paid to each of them; provided, however, that no person
                  guilty of
                  fraudulent misrepresentation within the meaning of Section 11(f)
                  of the
                  1933 Act shall be entitled to contribution from any person who
                  was not
                  guilty of such fraudulent misrepresentation. For purposes of this
                  Section
                  5(D), any person controlling, controlled by or under common control
                  with
                  the Placement Agent, or any partner, director, officer, employee,
                  representative or any agent of any thereof, shall have the same
                  rights to
                  contribution as the Placement Agent and each person controlling,
                  controlled by or under common control with the Company within the
                  meaning
                  of Section 15 of the 1933 Act or Section 20 of the 1934 Act and
                  each
                  officer of the Company and each director of the Company shall have
                  the
                  same rights to contribution as the Company. Any party entitled
                  to
                  contribution will, promptly after receipt of notice of commencement
                  of any
                  action, suit or proceeding against such party in respect of which
                  a claim
                  for contribution may be made against the other party under this
                  Section
                  5(D), notify such party from whom contribution may be sought, but
                  the
                  omission to so notify such party shall not relieve the party from
                  whom
                  contribution may be sought from any obligation they may have hereunder
                  or
                  otherwise if the party from whom contribution may be sought is
                  not
                  materially prejudiced thereby. The indemnity and contribution agreements
                  contained in this Section 5 shall remain operative and in full
                  force and
                  effect regardless of any investigation made by or on behalf of
                  any
                  indemnified person or any termination of this
                  Agreement.

              

      

       

      
        	6.	
                FEES.
                  The Company hereby agrees to pay the Placement Agent 1% for the
                  gross
                  proceeds from each Put upon the execution of this
                  Agreement.

              

      

       

      
        	7.	
                PAYMENT
                  OF EXPENSES. The Company hereby agrees to bear all of the expenses
                  in
                  connection with the Offering, including, but not limited to the
                  following:
                  filing fees, printing and duplicating costs, advertisements, postage
                  and
                  mailing expenses with respect to the transmission of Offering Materials,
                  registrar and transfer agent fees, and expenses, fees of the Company’s
                  counsel and accountants, issue and transfer taxes, if any. The
                  Company
                  agrees to bear all the reasonable expenses of the Placement Agent
                  in
                  performing its services under this Agreement including but not
                  limited to
                  the fees and expenses of counsel.

              

      

       

      
        	8.	
                TERMINATION.
                  This Agreement shall be co-terminus with, and terminate upon the
                  same
                  terms and conditions as those set forth in, the Investment Agreement.
                  The
                  rights and obligations of the Placement Agent and the Company shall
                  survive the termination of this Agreement unabridged for a period
                  of
                  twenty-four (24) months after the Closing
                  Date.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          7

        

         

         

      

      
        	9.	
                MISCELLANEOUS.

              

      

       

      
        	
              	A.	
                This
                  Agreement may be executed in any number of counterparts, each of
                  which
                  shall be deemed to be an original, but all which shall be deemed
                  to be one
                  and the same instrument.

              

      

       

      
        	
              	B.	
                Any
                  notice required or permitted to be given hereunder shall be given
                  in
                  writing and shall be deemed effective when deposited in the United
                  States
                  mail, postage prepaid, or when received if personally delivered
                  or faxed
                  (upon confirmation of receipt received by the sending party), addressed
                  as
                  follows:

              

      

       

      If
        to
        Placement Agent, to:

       

      Jones,
        Byrd and Attkisson, Inc.

      2839
        Paces Ferry Road

      Suite
        320

      Atlanta,
        Georgia 30339

      Attention:
        Ronald Attkisson

       

      If
        to the
        Company, to:

       

      Seawright
        Holdings, Inc.

      600
        Cameron Street

      Alexandria,
        Virginia 22314

      Attention:
        Joel Sens

       

      or
        to
        such other address of which written notice is given to the others.

       

      
        	
              	C.	
                THIS
                  AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS UNDER
                  THE
                  LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ANY OTHERWISE
                  APPLICABLE CONFLICT OF LAWS RULES OR PRINCIPLES. ANY SUIT, ACTION,
                  PROCEEDING OR LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT
                  SHALL BE BROUGHT AND PROSECUTED IN SUCH FEDERAL OR STATE COURT
                  OR COURTS
                  LOCATED WITHIN THE COMMONWEALTH OF VIRGINIA AS PROVIDED BY LAW.
                  THE
                  PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENT TO THE JURISDICTION
                  OF EACH SUCH COURT OR COURTS LOCATED WITHIN THE COMMONWEALTH OF
                  VIRGINIA
                  AND TO SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN
                  RECEIPT
                  REQUESTED, OR BY ANY OTHER MANNER PROVIDED BY APPLICABLE LAW, AND
                  HEREBY
                  IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO CLAIM THAT ANY
                  SUIT,
                  ACTION, PROCEEDING OR LITIGATION SO COMMENCED HAS BEEN COMMENCED
                  IN AN
                  INCONVENIENT FORUM.

              

      

       

      
        	
              	D.	
                This
                  Agreement and the other agreements referenced herein contain the
                  entire
                  understanding between the parties hereto and may not be modified
                  or
                  amended except by a writing duly signed by the party against whom
                  enforcement of the modification or amendment is
                  sought.

              

      

       

      
        	
              	E.	
                If
                  any provision of this Agreement shall be held to be invalid or
                  unenforceable, such invalidity or unenforceability shall not affect
                  any
                  other provision of this Agreement.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          8

        

      

       

       

      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
        date
        first written above.

       

      COMPANY:

       

      SEAWRIGHT
        HOLDINGS, INC.

       

      By: /s/
        Joel Sens

      
        
          

        

      

      Name:
        Joel Sens

      Title:
        President and CEO 

       

       

      PLACEMENT
        AGENT: 

       

      JONES,
        BYRD AND ATTKISSON, INC.

       

      By:
        /s/
        Ronald L. Attkisson

      
        
          

        

      

      Name:
        Ronald L. Attkisson

      Title:
        Presidentexv10w25

 

Execution Copy

 

MASTER FINANCING AGREEMENT

among

ZAP, a California corporation

as Borrower,

the Lenders party hereto,

and

Surge Capital II, LLC,

as Administrative Agent

Dated as of

September 12, 2005

 

 

					
	 
	 	 
	 	Master Financing Agreement

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE 1.
	 	DEFINITIONS AND ACCOUNTING TERMS	 	 	1	 
	Section 1.1
	 	Defined Terms	 	 	1	 
	Section 1.2
	 	Accounting Terms and Calculations	 	 	15	 
	Section 1.3
	 	Other Definitional Provisions	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE 2.
	 	TERMS OF LENDING	 	 	15	 
	Section 2.1
	 	Letters of Credit	 	 	15	 
	Section 2.2
	 	Indemnification Relating to Loans and Letters of Credit	 	 	19	 
	Section 2.3
	 	Borrowing Procedures for Credits	 	 	20	 
	Section 2.4
	 	Vehicle Purchase Loans	 	 	21	 
	Section 2.5
	 	Ancillary Vehicle Loans	 	 	23	 
	Section 2.6
	 	Conversion of a Reimbursement Obligation and LC Interest to a Conversion Loan	 	 	24	 
	Section 2.7
	 	A/R Loans	 	 	25	 
	Section 2.8
	 	Interest and Repayment; Certain Mandatory Prepayments	 	 	26	 
	Section 2.9
	 	Net Payments	 	 	29	 
	Section 2.10
	 	Default Rate Generally	 	 	30	 
	Section 2.11
	 	Foreign Exchange Costs	 	 	30	 
	Section 2.12
	 	Termination of Commitments	 	 	31	 
	 
	 	 	 	 	 	 
	ARTICLE 3.
	 	CONDITIONS PRECEDENT	 	 	31	 
	Section 3.1
	 	Conditions of Initial Letter of Credit and Loans, etc.	 	 	31	 
	Section 3.2
	 	Conditions to Each Letter of Credit, Vehicle Purchase Loan and Ancillary Vehicle Loan	 	 	33	 
	Section 3.3
	 	Conditions to Issuance of Each Conversion Loan Issued Upon Conversion of an LC Loan	 	 	36	 
	Section 3.4
	 	Conditions to Each A/R Loan	 	 	37	 
	Section 3.5
	 	Withdrawal of Funds from Accounts	 	 	38	 
	Section 3.6
	 	Application of Accounts	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE 4.
	 	REPRESENTATIONS AND WARRANTIES	 	 	39	 
	Section 4.1
	 	Organization, Standing, etc.	 	 	39	 
	Section 4.2
	 	Authorization and Validity	 	 	39	 
	Section 4.3
	 	No Conflict, No Default	 	 	40	 
	Section 4.4
	 	Agreements with Affiliates	 	 	40	 
	Section 4.5
	 	Government Consent	 	 	40	 
	Section 4.6
	 	Litigation	 	 	40	 
	Section 4.7
	 	Financial Condition	 	 	41	 
	Section 4.8
	 	Compliance	 	 	41	 
	Section 4.9
	 	Ownership of Property; Leases; Liens	 	 	41	 
	Section 4.10
	 	Indebtedness	 	 	41	 
	Section 4.11
	 	Guaranty or Suretyship	 	 	41	 
	 
	 	 	 	 	 	 

					
	 
	 	 
	 	Master Financing Agreement

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 4.12
	 	Taxes	 	 	41	 
	Section 4.13
	 	Subsidiaries	 	 	42	 
	Section 4.14
	 	Partnerships and Joint Ventures	 	 	42	 
	Section 4.15
	 	Use of Proceeds	 	 	42	 
	Section 4.16
	 	Property Purchased From Vendors	 	 	42	 
	Section 4.17
	 	Insurance	 	 	42	 
	Section 4.18
	 	Contracts	 	 	42	 
	Section 4.19
	 	Accuracy of Information	 	 	43	 
	Section 4.20
	 	Ownership; Non-Operating Subsidiaries	 	 	43	 
	Section 4.21
	 	Foreign Assets Control Regulations and Anti-Money Laundering; Patriot Act	 	 	43	 
	Section 4.22
	 	Adverse Event	 	 	43	 
	Section 4.23
	 	Insolvency	 	 	44	 
	Section 4.24
	 	Survival of Representations	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE 5.
	 	AFFIRMATIVE COVENANTS	 	 	44	 
	Section 5.1
	 	Financial Statements and Reports	 	 	44	 
	Section 5.2
	 	Company Existence	 	 	46	 
	Section 5.3
	 	Insurance	 	 	46	 
	Section 5.4
	 	Payment of Taxes and Claims	 	 	47	 
	Section 5.5
	 	Inspection	 	 	47	 
	Section 5.6
	 	Maintenance of Properties	 	 	47	 
	Section 5.7
	 	Books and Records	 	 	47	 
	Section 5.8
	 	Bills of Sale	 	 	48	 
	Section 5.9
	 	Compliance	 	 	48	 
	Section 5.10
	 	Payment Upon Customer Delivery	 	 	48	 
	Section 5.11
	 	Further Assurances	 	 	48	 
	Section 5.12
	 	Encumbrance on Certain Real Property Interests	 	 	49	 
	 
	 	 	 	 	 	 
	ARTICLE 6.
	 	NEGATIVE COVENANTS	 	 	49	 
	Section 6.1
	 	Merger	 	 	49	 
	Section 6.2
	 	Sale of Assets	 	 	49	 
	Section 6.3
	 	Change in Nature of Business	 	 	50	 
	Section 6.4
	 	Subsidiaries, Partnerships and Joint Ventures	 	 	50	 
	Section 6.5
	 	Other Agreements	 	 	50	 
	Section 6.6
	 	Payment Terms	 	 	51	 
	Section 6.7
	 	Investments	 	 	51	 
	Section 6.8
	 	Indebtedness	 	 	51	 
	Section 6.9
	 	Liens	 	 	52	 
	Section 6.10
	 	Contingent Liabilities	 	 	52	 
	Section 6.11
	 	Unconditional Purchase Obligations	 	 	52	 
	Section 6.12
	 	Purchase Orders and Accounts	 	 	53	 
	Section 6.13
	 	Bank Accounts	 	 	53	 
	Section 6.14
	 	Modification of Organizational Documents	 	 	53	 
	Section 6.15
	 	Publicity	 	 	53	 
	Section 6.16
	 	Certain Matters Relating to Employment of Senior Executives	 	 	54	 
	 
	 	 	 	 	 	 

					
	 
	 	 
	 	Master Financing Agreement

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE 7.
	 	EVENTS OF DEFAULT AND REMEDIES	 	 	54	 
	Section 7.1
	 	Events of Default	 	 	54	 
	Section 7.2
	 	Remedies	 	 	57	 
	Section 7.3
	 	Offset	 	 	57	 
	Section 7.4
	 	Actions in Respect of the Letters of Credit upon Default	 	 	58	 
	 
	 	 	 	 	 	 
	ARTICLE 8.
	 	ADMINISTRATIVE AGENT; ASSIGNMENTS	 	 	58	 
	Section 8.1
	 	Appointment	 	 	58	 
	Section 8.2
	 	Nature of Duties	 	 	59	 
	Section 8.3
	 	Lack of Reliance on the Administrative Agent	 	 	59	 
	Section 8.4
	 	Certain Rights of the Administrative Agent	 	 	59	 
	Section 8.5
	 	Reliance	 	 	59	 
	Section 8.6
	 	Indemnification	 	 	60	 
	Section 8.7
	 	Holders	 	 	60	 
	Section 8.8
	 	Resignation by the Administrative Agent	 	 	60	 
	Section 8.9
	 	Release of Collateral	 	 	60	 
	Section 8.10
	 	Confirmation of Authority; Execution of Releases	 	 	61	 
	Section 8.11
	 	Absence of Duty	 	 	61	 
	Section 8.12
	 	Agency for Perfection	 	 	61	 
	Section 8.13
	 	Amendments, Consents and Waivers	 	 	62	 
	Section 8.14
	 	Assignments	 	 	62	 
	Section 8.15
	 	Recording of Assignments	 	 	62	 
	Section 8.16
	 	Acceptance of Assignment by Administrative Agent	 	 	63	 
	Section 8.17
	 	Security Interests in Obligations; Assignments to Affiliates	 	 	63	 
	Section 8.18
	 	Other Matters	 	 	63	 
	 
	 	 	 	 	 	 
	ARTICLE 9.
	 	MISCELLANEOUS	 	 	63	 
	Section 9.1
	 	Waiver and Amendment	 	 	63	 
	Section 9.2
	 	Expenses and Indemnities	 	 	64	 
	Section 9.3
	 	Notices	 	 	65	 
	Section 9.4
	 	Successors and Assignment	 	 	65	 
	Section 9.5
	 	Notes Not Securities	 	 	65	 
	Section 9.6
	 	Participations	 	 	65	 
	Section 9.7
	 	Severability	 	 	65	 
	Section 9.8
	 	Captions	 	 	66	 
	Section 9.9
	 	Entire Agreement	 	 	66	 
	Section 9.10
	 	Counterparts	 	 	66	 
	Section 9.11
	 	Governing Law	 	 	66	 
	Section 9.12
	 	Consent to Jurisdiction	 	 	66	 
	Section 9.13
	 	Waiver of Jury Trial	 	 	66	 
	 
	 	 	 	 	 	 

					
	 
	 	 
	 	Master Financing Agreement

iii

 

	 	 	 
	 

	 	EXHIBITS
	 
	 	 
	Exhibit A

	 	Form of Credit Note
	Exhibit B

	 	Form of Vehicle Purchase Note
	Exhibit C

	 	Form of Ancillary Vehicle Note
	Exhibit D

	 	Form of Conversion Note
	Exhibit E

	 	Form of A/R Note
	Exhibit F

	 	Form of Credit Request
	Exhibit G

	 	Form of Vehicle Purchase Request
	Exhibit H

	 	Form of Ancillary Vehicle Loan Request
	Exhibit I

	 	Form of Conversion Request
	Exhibit J

	 	Form of A/R Loan Request
	Exhibit K

	 	Requirements for Eligible Accounts
	Exhibit L

	 	Form of Bill of Sale
	 
	 	 
	 

	 	ANNEXES
	 
	 	 
	Annex A

	 	Creditors to be Paid
	Annex B

	 	UCC Termination Statements
	 

	 	SCHEDULES
	 
	 	 
	Schedule I

	 	Commitments of the Lenders
	Schedule 4.4(a)

	 	Affiliate Agreements
	Schedule 4.5(a)

	 	Government Consents and Filings
	Schedule 4.5(b)

	 	Outstanding Governmental Approvals Relating to the Vehicles
	Schedule 4.6

	 	Litigation
	Schedule 4.9

	 	Owned Real Property
	Schedule 4.13

	 	Subsidiaries
	Schedule 4.14

	 	Partnerships and Joint Ventures
	Schedule 4.17

	 	Insurance
	Schedule 4.18

	 	Material Agreements
	Schedule 4.20

	 	Capitalization
	Schedule 6.8(e)

	 	Indebtedness
	Schedule 6.9

	 	Liens
	 
	 	 

					
	 
	 	 
	 	Master Financing Agreement

 

 

MASTER FINANCING AGREEMENT

     This MASTER FINANCING AGREEMENT (the “Agreement”), dated as of September 12,
2005, is by and between ZAP, a California corporation (“Borrower”), Surge Capital II, LLC,
a Delaware limited liability company (“Surge Capital”) as the Initial Lender and such other
Lenders that are parties hereto from time to time, and Surge Capital, on behalf of itself and the
Lenders as administrative agent (in such capacity, the “Administrative Agent”).

RECITAL

     Borrower desires to finance (a) the purchase of Vehicles (as such term is defined in
Section 1.1) for further resale in the United States and (b) the costs and expenses of
importing such Vehicles to, and converting such Vehicles such that they will comply with all
applicable safety, environmental and other governmental standards of, the United States of America.

     Subject to and upon the terms and conditions set forth herein, the Lenders are willing to make
available certain credit facilities to the Borrower as more specifically provided for herein.

     NOW, THEREFORE, IT IS AGREED:

ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS

     Section 1.1 Defined Terms. In addition to terms defined elsewhere in this Agreement,
the following terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as the context may
require):

     “Administrative Agent”: Surge Capital II, LLC, a Delaware limited liability company,
or such other entity as may be designated by the Requisite Lenders, in writing, to be the Lenders’
agent with respect to this Loan facility and with respect to the Collateral, all as more fully
described in Article 8 hereof.

     “Account(s)”: As defined in Article 9 of the Uniform Commercial Code, as in
effect in applicable jurisdictions from time to time.

     “Account Debtor”: Any Person who is or who may become obligated to the Borrower
under, with respect to, or on account of an Account, General Intangible or other Collateral.

     “Act”: Securities Exchange Act of 1933, as amended, or any successor Federal statute.

     “Adverse Event”: The occurrence of any event that would have a material adverse
effect on the business, operations, property, assets or condition (financial or otherwise) of the
Borrower or any other Credit Party (or such other party to which the term applies in context) or on
the ability of the Borrower or any other Credit Party (or such other party) to perform its
obligations under any Loan Document to which it is a party.

Master Financing Agreement

 

 

     “Agreement”: This Master Financing Agreement, as originally executed and as it may be
amended, modified, supplemented, restated or replaced from time to time.

     “Aggregate Inventory Debt”: As defined in Section 3.2(h) hereof.

     “Americanizing”: The process of retrofitting and otherwise modifying a Vehicle such
that it conforms to and complies with all Laws (including all applicable safety and emissions
standards of the DOT and the EPA) pertaining to the sale and operation thereof in the United States
of America, and the term “Americanized” means that a Vehicle has been so retrofitted and
otherwise modified such that it conforms to and complies with all Laws (including all applicable
safety and emissions standards of the DOT and the EPA) pertaining to the lawful sale and operation
thereof in the United States of America. The term “Americanization” shall have a
correlative meaning, as the context may require.

     “Ancillary Vehicle Budget”: A detailed expense budget of the Vehicle Shipping &
Conversion Costs to be incurred in connection with the Eligible Inventory being purchased with the
proceeds of a Letter of Credit or Vehicle Purchase Loan, as applicable.

     “Ancillary Vehicle Loan”: As defined in Section 2.5(a) hereof.

     “Ancillary Vehicle Loan Interest”: As defined in Section 2.8(b) hereof.

     “Ancillary Vehicle Loan Request”: As defined in Section 2.5(c) hereof.

     “Ancillary Vehicle Note”: As defined in Section 2.5(b) hereof.

     “Approved Converter”: A reputable business enterprise that (i) is recognized as a
Registered Importer by DOT, (ii) is recognized as an Independent Commercial Importer by the EPA,
(iii) is capable of Americanizing a Vehicle and has entered into a Conversion Contract with
Borrower (or a subsidiary thereof that shall be a party to Vehicle Purchase Order with a Vendor),
and (iv) has been approved in writing by the Administrative Agent as an “Approved
Converter” and Administrative Agent shall not have revoked such approval by written notice to
the Borrower.

     “A/R Loan Interest”: As defined in Section 2.8(d) hereof.

     “A/R Loan”: As defined in Section 2.7(b) hereof.

     “A/R Loan Request”: As defined in Section 2.7(c) hereof.

     “A/R Note”: As defined in Section 2.7(b) hereof.

     “Assignment and Acceptance Agreement”: As defined in Section 8.14 hereof.

     “Available Borrowing Base”: Eighty-five percent (85%) of the aggregate amount of all
Eligible Accounts less the sum of (i) reserves established by the Administrative Agent in its
commercially reasonable discretion from time to time plus (ii) all then outstanding A/R Loans.

      

					
	 
	 	 
	 	Master Financing Agreement

2

 

     “Borrower”: As defined in the preamble hereto.

     “Business Day”: Any day other than (i) Saturday, (ii) Sunday and (iii) any other day
on which commercial banks in Chicago, Illinois are authorized by law to be closed; provided
that if the applicable Business Day relates to the issuance of any Letter of Credit to a Vendor in
Europe or the payment of the proceeds of a Vehicle Purchase Loan to such Vendor, the term
“Business Day” shall not include any day on which commercial banks in the jurisdiction of
such Vendor are authorized by law to be closed.

     “Cash Collateral Account”: That certain deposit account established in the name of,
and maintained by, Administrative Agent at Depository Bank, and bearing the account number assigned
to such account by the Depository Bank, which account shall be established and maintained by
Administrative Agent as soon as reasonably practicable following written request of Borrower or, if
no such request shall be made, upon the discretion of Administrative Agent for purposes of giving
effect to or facilitating the cash collateralization of the Obligations of Borrower as required or
contemplated pursuant to the provisions hereof or any other Loan Document as such provisions so
relate to the Cash Collateral Account.

     “Change in Control”: Means one or more of the following events:

     (a) if Borrower issues, or enters into a binding agreement to issue, any securities
(including, without limitation, any options, warrants, notes, bonds or other securities or
instruments convertible into, or exercisable or exchangeable for, any equity securities) of
the Borrower to any Person (including a Person as defined in Section 3(a)(9),
Section 13(d) or Section 14(d) of the Exchange Act) and such Person is or
becomes (or, upon the conversion, exercise or exchange of such security or other instrument,
would become) the owner or beneficial owner, directly or indirectly, of securities of the
Borrower representing fifty percent (50%) or more of the combined voting power of the
Borrower’s then outstanding securities (the term “beneficial owner” as used herein shall
include but not be limited to any person with the attributes or interests described in Rule
13d-3 (as now in effect or as amended) promulgated under the Exchange Act); or

     (b) (i) if the Board of Directors and the shareholders of the Borrower approve one or
more mergers, consolidations or combinations of the Borrower with any other corporations or
entities which, if consummated prior to the expiration of the Term, would result in the
voting securities of the Borrower outstanding the day following the date of this Agreement
representing less than fifty percent (50%) of the combined voting power of the voting
securities of the Borrower or such surviving entity immediately after consummation of any
such merger, consolidation or combination, or (ii) if the Board of Directors and the
shareholders of the Borrower approve a plan of liquidation of the Borrower or an agreement
for the sale, disposition or transfer by the Borrower of all or substantially all the assets
of the Borrower and its consolidated Subsidiaries.

     “Closing Date”: The date on which all of the conditions precedent set forth in
Section 3.1 hereof shall have been satisfied (or waived in writing by the Administrative
Agent).

      

					
	 
	 	 
	 	Master Financing Agreement

3

 

     “Code”: The Internal Revenue Code of 1986, as amended, and any Treasury Regulations
promulgated thereunder.

     “Collateral”: Any property in which the Administrative Agent has been granted a Lien
pursuant to any Loan Document.

     “Commitment”: With respect to any Lender, the aggregate amount of the commitment set
forth opposite such Lender’s name on Schedule I hereto under the heading “Commitment” or,
if such Lender has entered into one or more Assignment and Acceptance Agreements pursuant to
Section 8.14 hereof, set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 8.15 hereof as such Lender’s Commitment, in each
case as such Commitment may be reduced from time to time in accordance with the provisions of
Section 7.2 hereof.

     “Commitment Termination Date”: As defined in Section 2.12 hereof.

     “Commitment Termination Notice”: As defined in Section 2.12 hereof.

     “Control Agreements”: The Depository Account Control Agreement, the General Account
Control Agreement, the Cash Collateral Account Control Agreement, if any, and the Securities
Intermediary Control Agreement, collectively.

     “Conversion Contract”: A written agreement between Borrower and an Approved Converter
pursuant to which such Approved Converter shall have agreed (i) to act as Borrower’s Registered
Importer and Independent Commercial Importer with respect to the import of Vehicles and (ii) to
Americanize such Vehicles for Borrower (or one of its subsidiaries), with terms in form and
substance satisfactory to Administrative Agent in its absolute and sole discretion, and which
agreement shall have been approved in writing by Administrative Agent to Borrower.

     “Conversion Loan”: Any loan made to the Borrower pursuant to, and in accordance with
the provisions of, Section 2.6(a) hereof upon the conversion of any Credit Note and LC
Interest related thereto.

     “Conversion Loan Interest”: As defined in Section 2.8(c) hereof.

     “Conversion Note”: As defined in Section 2.6(b) hereof.

     “Conversion Request”: As defined in Section 2.6(c) hereof.

     “Credit Facility”: As of any date of determination, the aggregate amount of the
Commitments of all Lenders.

     “Credit Note”: As defined in Section 2.3(e) hereof.

     “Credit Party”: The Borrower and each Subsidiary thereof that is a party to any Loan
Document.

      

					
	 
	 	 
	 	Master Financing Agreement

4

 

     “Credit Request”: As defined in Section 2.3(a) hereof.

     “Customer”: A bona fide car dealership located in any State of the United States of
America or the District of Columbia provided the applicable Federal, State and local governmental
authorities having jurisdiction over such car dealership have approved the importation and sale of
Vehicles in such jurisdiction (to the extent such approval is required by applicable law) and have
not revoked or suspended such approvals.

     “Customer Purchase Order”: Any written purchaser order or other written agreement
between the Borrower or a wholly-owned Subsidiary thereof that is a party to a Subsidiary Security
Agreement and the Customer for the purchase of Eligible Inventory from the Borrower or such
Subsidiary, which purchase orders or other written agreements shall constitute a firm and
irrevocable agreement to purchase by the applicable Customer and in form and substance acceptable
to the Administrative Agent in its sole and absolute discretion and true, correct and complete
copies thereof shall have delivered to the Administrative Agent.

     “Customs Broker”: Any customs broker and freight forwarder acceptable to
Administrative Agent that has entered into such ‘customs broker and freight forwarder’ agreements
as Administrative Agent may require from time to time.

     “Customs Broker Agreement”: Those certain customs broker and freight forwarder
agreements entered into from time to time by Borrower, Administrative Agent and each Customs
Broker, in form and substance reasonably satisfactory to Administrative Agent.

     “Default”: Any event which, with the giving of notice to the Borrower or lapse of
time, or both, would constitute an Event of Default.

     “Depository Account”: The deposit account to be established and maintained by
Borrower and the Subsidiaries of Borrower parties to the Subsidiary Security Agreement at
Depository Bank and subject to the terms and conditions of the Depository Account Control
Agreement.

     “Depository Account Control Agreement”: That certain Lockbox and Deposit Account
Control Agreement, to be entered into by Borrower, the Subsidiaries of Borrower that are parties to
the Subsidiary Security Agreement(s), Depository Bank and the Administrative Agent, pursuant to
which Borrower and such Subsidiaries will grant a security interest with respect to their
respective interests (if any) in the Lockbox and the Depository Account, in form and substance
satisfactory to the Administrative Agent, as originally executed and as it may be amended,
modified, supplemented, restated or replaced from time to time.

     “Depository Bank”: North Coast Bank, a division of American River Bank, a California
corporation or such other banking institution from time to time approved by Administrative Agent in
writing as the Depository Bank.

     “DOT”: The United States Department of Transportation.

      

					
	 
	 	 
	 	Master Financing Agreement

5

 

     “Eligible Account”: An Account owing to the Borrower or any wholly-owned Subsidiary
thereof that is a party to this Agreement and a Subsidiary Security Agreement which meets the
requirements set forth on Exhibit K attached hereto.

     “Eligible Inventory”: Inventory consisting of Vehicles of the Borrower (i) which the
Borrower or any wholly-owned Subsidiary thereof that is a party to a Subsidiary Security Agreement
will purchase, with the proceeds of a Letter of Credit or a Vehicle Purchase Loan, as the case may
be, pursuant to purchase orders issued by Borrower or such Subsidiary to a Vendor that is not a
Related Party, which purchase orders are in all respects acceptable to Administrative Agent in its
sole and absolute discretion and complete copies of which have been provided to Administrative
Agent, and (ii) which Vehicles further satisfy the following requirements:

     (a) immediately upon the payment of the proceeds of the applicable Letter(s) of Credit
or Vehicle Purchase Loan to such Vendor, such Vehicle will be owned by the Borrower or such
Subsidiary and, except as the Administrative Agent may otherwise consent in writing, will
not be subject to any prior assignment, claim or Lien other than a first priority Lien in
favor of the Administrative Agent and any Liens in favor of any Approved Converter that are
contractually subordinated to the Lien in favor of the Administrative Agent pursuant to a
Subordination Agreement;

     (b) except as the Administrative Agent may otherwise consent in writing, such Vehicle
is either:

     (i) in the physical possession of a Customs Broker;

     (ii) in transit to an Approved Converter;

     (iii) in the physical possession of an Approved Converter; or

     (iv) in storage facilities approved by the Administrative Agent;

     (c) the Administrative Agent has determined, in its reasonable business judgment, that
such Vehicle is not unacceptable due to age, type, category, quality and/or quantity;

     (d) such Vehicle will not be held by the Borrower or such Subsidiary on “consignment”
and is not subject to any other repurchase or return agreement;

     (e) (i) such Vehicle is capable of being Americanized, (ii) an Approved Converter is
obligated under an applicable Conversion Contract to Americanize such Vehicle for Borrower
or such Subsidiary and (iii) following such Americanization, such Vehicle will comply with
all applicable safety, emissions and other standards imposed by any governmental agency
having regulatory authority over such Vehicles and/or their use, manufacture or sale; and

     (f) such Vehicle does not, in any way, violate or fail to meet any warranty,
representation or covenant contained in the Loan Documents relating directly or indirectly
to such Vehicle.

Vehicles of the Borrower or such Subsidiary which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall forthwith cease to be Eligible

 

					
	 
	 	 
	 	Master Financing Agreement

6

 

Inventory. The value of Eligible Inventory shall be the U.S. dollar amount thereof computed at the
lower of the cost, determined on a first in first out basis, or market value of such Vehicle,
including the cost of Americanizing and shipping such Vehicle to the applicable Customer, freight,
customs, duty and any other costs and expenses necessary to import such Vehicle, as determined by
the Administrative Agent after deduction of such reserves and allowances as the Administrative
Agent, in its reasonable business judgment, deems proper and necessary.

     “Event of Default”: Any event described in Section 7.1 which has not been
cured to the satisfaction of, or waived by, the Administrative Agent in accordance with Section
8.1.

     “Exchange Act”: Securities Exchange Act of 1934, as amended, or any successor Federal
statute.

     “Expiry Date”: As defined in Section 2.1(d) hereof.

     “Facility Commitment Amount”: As of any date of determination, the Credit Facility
less the sum of all outstanding Obligations as of such date.

     “Funding Date”: Any date on which any Letter of Credit is issued (or caused to be
issued) or any Loan (including any Conversion Loan upon the conversion of any LC Loan) is made
pursuant to this Agreement.

     “GAAP”: Generally accepted accounting principles as in effect from time to time
including, without limitation, applicable statements, bulletins and interpretations of the
Financial Accounting Standards Board and applicable bulletins, opinions and interpretations issued
by the American Institute of Certified Public Accountants or its committees.

     “General Account Control Agreement”: That certain Deposit Account Control Agreement,
to be entered into by Borrower, the Subsidiaries of Borrower that are parties to the Subsidiary
Security Agreement(s), Operating Bank and the Administrative Agent, pursuant to which (i) Borrower
will grant a security interest with respect to its interest in the Operating Account and certain
other deposit accounts of Borrower maintained at Operating Bank, and (ii) such Subsidiaries will
grant a security interest with respect to its interest in certain deposit accounts of such
Subsidiaries maintained at Operating Bank, in form and substance satisfactory to the Administrative
Agent, as originally executed and as it may be amended, modified, supplemented, restated or
replaced from time to time.

     “Governmental Authority”: As defined in Section 4.6 hereof.

     “Guarantor”: Any Subsidiary of the Borrower that has executed a Subsidiary Guaranty
in favor of the Administrative Agent and the Lenders.

     “Indebtedness”: Without duplication, all obligations, contingent or otherwise, which
in accordance with GAAP should be classified upon the obligor’s balance sheet as liabilities, but
in any event including the following (whether or not they should be classified as liabilities upon
such balance sheet): (a) obligations secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired subject thereto, whether or not
the obligation secured thereby shall have been assumed and whether or not the obligation

      

					
	 
	 	 
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secured is the obligation of the owner or another party; (b) any obligation on account of
deposits or advances; (c) any obligation for the deferred purchase price of any property or
services, except trade accounts payable; (d) any obligation as lessee under any capitalized lease;
(e) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of
others; and (f) undertakings or agreements to reimburse or indemnify issuers of letters of credit,
surety bonds on similar instruments. For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer unless such Indebtedness is non-recourse to such Person.

     “Independent Commercial Importer”: Any Person that is an independent commercial
importer of Vehicles under all applicable Laws (including the rules and regulations of the EPA) and
is approved in writing by the Administrative Agent.

     “Initial Lender”: Surge Capital II, LLC, a Delaware limited liability company.

     “Insolvent”: With respect to any Person on any date of determination, that on such
date,

     (a) the fair value of such Person’s tangible and intangible assets is not in excess of
the total amount of such Person’s liabilities, including, without limitation, contingent
obligations; or

     (b) such Person is not then able to pay its debts as they mature; or

     (c) such Person does not have capital sufficient to carry on its business.

     “Inventory”: As defined in Article 9 of the Uniform Commercial Code, as in
effect in applicable jurisdictions from time to time.

     “Investment”: The acquisition, purchase, making or holding of any stock or other
security, any loan, advance, contribution to capital, extension of credit (except for trade and
customer accounts receivable for Inventory sold or services rendered in the ordinary course of
business and payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other debt or equity
securities of, or any interest in, another Person or any integral part of any business or the
assets comprising such business or part thereof.

     “Law”: Any and all federal, state, local and foreign statutes, laws, judicial
decisions, regulations, guidances, guidelines, ordinances, rules, judgments, orders, decrees,
codes, plans, injunctions, permits, concessions, grants, franchises, governmental agreements and
governmental restrictions, whether now or hereafter in effect.

     “LC Interest”: As defined in Section 2.8 hereof.

     “LC Issuance Date”: With respect to any Letter of Credit, the date on which the LC
Issuer shall have issued such Letter of Credit.

      

					
	 
	 	 
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     “LC Issuer”: A bank, trust company or other financial institution acceptable to
Administrative Agent and Lenders, as issuer of one or more Letters of Credit outstanding at any
time.

     “LC Loan”: As defined in Section 2.3(e) hereof.

     “LC Payment Date”: With respect to any Letter of Credit, the date on which the LC
Issuer shall have paid to the beneficiary of such Letter of Credit the Stated Amount thereof.

     “LC Term”: With respect to any Letter of Credit, the period commencing on the LC
Issuance Date thereof and ending on the Expiry Date thereof.

     “Lenders”: The Initial Lender and its permitted assigns pursuant to Section
8.14 of this Agreement, and the successors thereof, and any other Person that shall become a
Lender hereunder in accordance with the terms hereof and the successors and permitted assigns
thereof.

     “Lender Affiliate”: With respect to any Lender (a) each Person that is directly or
indirectly controlling, controlled by, or under common control with such Lender; (b) each Person
that, directly or indirectly owns or holds fifty percent (50%) or more of any equity interest in
such Lender; or (c) fifty percent (50%) or more of whose voting stock or other equity interest is
directly or indirectly owned or held by such Lender. For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”) means the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting
securities or by contract or otherwise.

     “Lender Assumed LC Costs”: With respect to any Letter of Credit, (i) the letter of
credit application fee payable by the Lenders to the LC Issuer pursuant to the Support Agreement
relating to such Letter of Credit, (ii) the fee payable to the LC Issuer on the undrawn portion of
(or Stated Amount of) such Letter of Credit from the date of issuance thereof to the stated Expiry
Date thereof, as determined pursuant to the Support Agreement relating to such Letter of Credit,
and (iii) the fee payable to the LC Issuer pursuant to the Support Agreement relating to such
Letter of Credit in connection with the LC Issuer administering the draw under such Letter of
Credit and determining compliance by the beneficiary thereof with the documentary presentment and
similar requirements set forth under the terms of such Letter of Credit.

     “Letter of Credit”: A trade or documentary letter of credit issued pursuant to a
Support Agreement, following the request of Borrower for the issuance of a letter of credit
pursuant to and in accordance with Article 2 hereof, by an LC Issuer in connection with the
Borrower’s purchase of Eligible Inventory.

     “Letter of Credit Expenses”: With respect to any Letter of Credit, all fees
(including all commitment fees, draw-down fees and undrawn portion fees), costs and expenses
(including attorneys fees and expenses), indemnity payments and other amounts payable by the
Lenders to, or for the benefit of, the LC Issuer under, pursuant to or in connection with all
Support Agreements relating to such Letter of Credit.

      

					
	 
	 	 
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     “Liabilities”: With respect to any Person as at any date of determination, the
aggregate amount of liabilities appearing on such Person’s balance sheet at such date prepared in
accordance with GAAP.

     “Lien”: Any security interest, mortgage, pledge, lien, hypothecation, judgment lien
or similar legal process, charge, encumbrance, title retention agreement or analogous instrument or
device (including, without limitation, the interest of the lessors under capitalized leases and the
interest of any vendor or any other party under any conditional sale or other title retention
agreement).

     “Loan”: Any LC Loan, Vehicle Purchase Loan, Ancillary Vehicle Loan, Conversion Loan
or A/R Loan.

     “Loan Documents”: This Agreement, each Letter of Credit, any Note issued and
outstanding from time to time, the Security Agreement, the Pledge Agreement, each Control
Agreement, each Customs Broker Agreement, the Subordination Agreements, any Subsidiary Guaranty,
any Subsidiary Security Agreement and each other instrument, document, guaranty, security
agreement, mortgage, or other agreement executed and delivered at any time or from time to time by
the Borrower or any Affiliate of Borrower pursuant to which the Borrower or such Affiliate incurs
any liability to a Lender or to the Administrative Agent with respect to the Obligations, agrees to
perform any covenant or agreement with respect to the Obligations or grants any security interest
to secure, or guarantees, the Obligations.

     “Lockbox”: That certain P.O. Box maintained by the Depository Bank, all receipts
received into which are deposited into the Depository Account pursuant to the terms of the
Depository Account Control Agreement.

     “Mandatory Prepayment Date”: With respect to any Loan and any Eligible Inventory
purchased by the Borrower (or a wholly owned Subsidiary thereof that is a party to a Security
Agreement) with the proceeds of such Loan or whose Vehicle Shipping & Conversion Costs were
financed with the proceeds of such Loan, the date that is the earlier of (x) five (5) days
following the date on which such Eligible Inventory shall have been delivered to a Customer and (y)
the date on which a Customer shall have made payment to Borrower (or one of its wholly owned
Subsidiaries) for such Eligible Inventory, it being agreed that one or more Mandatory Prepayment
Dates may occur with respect to any such Loan as, when and to the extent that Eligible Vehicles are
delivered to a Customer prior to the regular maturity date of such Loan.

     “Maturity Date”: Any date designated in any Note as the final date on which principal
and accrued interest, if any, thereunder is due and payable to the holder thereof.

     “Mendocino Property:” As defined in Section 5.12 hereof.

     “Newly Formed Partially-Owned Subsidiary”: Any Subsidiary of the Borrower formed
pursuant to and in accordance with the provisions of clause (ii) of the proviso to Section
6.4 hereof.

      

					
	 
	 	 
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     “Newly Formed Wholly-Owned Subsidiary”: Any Subsidiary of the Borrower formed
pursuant to and in accordance with the provisions of clause (i) of the proviso to Section
6.4 hereof.

     “Non-Operating Subsidiaries”: ZAPWorld Stores, Inc., a California corporation, and
ZAPWorld Outlets, Inc., a California corporation.

     “Note”: Any promissory note of the Borrower (including, without limitation, any
Credit Note, any Vehicle Purchase Note, any Ancillary Vehicle Note, any Conversion Note or any A/R
Note), issued to a Lender (or subsequently re-issued by Borrower to an assignee of such Lender
pursuant to Section 8.14 hereof) and accepted by a Lender, as such promissory note may be
amended, modified or supplemented from time to time, and such term shall include any substitutions
for, or renewals of, such promissory note.

     “Obligations”: All Loans, Letters of Credit, LC Interest, Vehicle Purchase Loan
Interest, Ancillary Vehicle Loan Interest, Conversion Loan Interest, A/R Loan Interest, any
Prepayment Fee, Letter of Credit Expenses (other than Lender Assumed LC Costs), advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to a Lender of any kind or
nature, present or future, which arise under this Agreement or any other Loan Document or by
operation of law, whether or not evidenced by any note, guaranty or other instrument, whether or
not for the payment of money, whether arising by reason of an extension of credit, opening,
guarantying or confirming of a letter of credit, guaranty, indemnification or in any other manner,
whether joint, several, or joint and several, direct or indirect (including those acquired by
assignment or purchases), absolute or contingent, due or to become due, and however acquired. The
term includes, without limitation, all principal, interest, fees, charges, expenses, attorneys’
fees, and any other sum chargeable to the Borrower under this Agreement or any other Loan Document.
The Obligations shall include, without limitation, all obligations, liabilities and indebtedness
arising from or in connection with all Support Agreements (other than Lender Assumed LC Costs).

     “Operating Account”: The deposit account to be established and maintained by Borrower
at Operating Bank and subject to the terms and conditions of the General Account Control Agreement.

     “Operating Bank”: North Coast Bank, a division of American River Bank, a California
corporation, or such other banking institution from time to time approved by Administrative Agent
in writing as the Operating Bank.

     “Patriot Act”: The Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, P.L. 107-56, as amended.

     “Per Diem Base Rate”: The rate of interest equal to sixty-seven thousandths of one
percent (0.067%) per day, which interest shall be computed in arrears on a daily basis on the
amount as to which such interest shall accrue.

     “Per Diem Default Rate”: The rate of interest equal to one hundred thirty-four
thousandths of one percent (0.134%) per day, which interest shall be computed in arrears on a daily
basis on the amount as to which such interest shall accrue.

      

					
	 
	 	 
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     “Permitted Investments”: Each of (i) direct obligations of the United States of
America, and agencies thereof; (ii) obligations fully guaranteed by the United States of America;
(iii) certificates of deposit issued by, or bankers’ acceptance of, or time deposits with, any
bank, trust company or national banking association incorporated or doing business under the laws
of the United States of America or one of the states thereof having combined capital and surplus
and retained earnings of at least $500,000,000; (iv) commercial paper of companies having a rating
assigned to such commercial paper by Standard & Poor’s Corporation or Moody’s Investors Service,
Inc. (or, if neither such organization shall rate such commercial paper at any time, by any
nationally recognized rating organization in the United States of America) of A-1 or P-1,
respectively; or (v) bonds or other debt instruments of any company, if such bonds or other debt
instruments, at the time of their purchase, are rated AAA or Aaa, respectively, by Standard &
Poor’s Corporation or Moody’s Investors Service, Inc. (or, of neither such organization shall rate
such obligations at such time, by any nationally recognized rating organization in the United
States of America).

     “Permitted Liens”: The Liens permitted to be suffered, incurred or maintained
pursuant to Section 6.9 hereof.

     “Person”: Any natural person, corporation, partnership, joint venture, firm,
association, trust, unincorporated organization, government or governmental agency or political
subdivision, or any other entity, whether acting in an individual, fiduciary or other capacity.

     “Pledge Agreement”: That certain Pledge Agreement of even date herewith, between the
Borrower and the Administrative Agent, as originally executed and as it may be amended, modified,
supplemented, restated or replaced from time to time.

     “Prepayment Fee”: At any time during the period from the date hereof to and including
the first anniversary thereof, $12,750,000, thereafter, $0.

     “Pro Rata Share”: As to any amount (including, without limitation, any Loan or Letter
of Credit, amount of interest, fee or indemnity payment) means, with respect to any Lender as at
any date of determination, the product of (x) such amount and (y) a fraction,
expressed as a percentage, the numerator of which shall be the Commitment of such Lender (or, if
the Commitments shall have been terminated pursuant to Section 2.12 or 7.2 hereof,
such Lender’s Commitment as in effect immediately prior to such termination) and the denominator of
which shall be the Credit Facility at such date (or, if the Commitments shall have been terminated
pursuant to Section 2.12 or 7.2 hereof, such Lender’s Commitment as in effect
immediately prior to such termination).

     “Register”: As defined in Section 8.15 hereof.

     “Registered Importer”: Any Person that is a registered importer of Vehicles under all
applicable Laws (including the rules and regulations of the DOT) and is approved in writing by the
Administrative Agent.

     “Related Party”: Any Person: (a) which directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with, the Borrower or any
Guarantor; (b) which beneficially owns or holds 5% or more of the equity interest of the

      

					
	 
	 	 
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Borrower or any Guarantor; or (c) 5% or more of the equity interest of which is beneficially
owned or held by the Borrower. The term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or by contract.

     “Requisite Lenders”: At any one time any group of Lenders holding Obligations which
constitute a majority of the aggregate unpaid principal amount of all Obligations outstanding at
such time or, if no such Obligations shall be outstanding, holding a majority of the Commitments of
all Lenders at such time.

     “Santa Rosa Property:” As defined in Section 5.12 hereof.

     “Securities Intermediary:” North Coast Bank, a division of American River Bank, a
California Corporation, or such other financial institution from time to time approved by the
Administrative Agent in writing as the Securities Intermediary.

     “Securities Intermediary Control Agreement:” That certain Securities Account
Control Agreement to be entered into by Borrower, Voltage Vehicles, a Nevada corporation,
Securities Intermediary and the Administrative Agent, pursuant to which (i) Borrower and Voltage
Vehicles have granted a security interest with respect to their respective interests in the
securities accounts of Borrower and Voltage Vehicles identified therein, in form and substance
satisfactory to the Administrative Agent, as originally executed and as it may be amended,
modified, supplemented, restated or replaced from time to time.

     “Security Agreement”: That certain Borrower Security Agreement of even date herewith,
made by the Borrower in favor of the Administrative Agent, as originally executed and as it may be
amended, modified, supplemented, restated or replaced from time to time.

     “Stated Amount”: With respect to any Letter of Credit, the maximum dollar amount
available to be drawn under such Letter of Credit (subject to presentment of all required
documents) on the LC Issuance Date thereof (as such amount may be amended or modified);
provided that if such Letter of Credit is not issued in U.S. Dollars, then the “Stated
Amount” shall be equal to the U.S. Dollar equivalent of such Letter of Credit determined by
reference to the foreign exchange rate specified by the Administrative Agent as the foreign
exchange rate applicable to such Letter of Credit under the Support Agreement relating thereto (or
otherwise).

     “Subordination Agreements”: Those certain Subordination Agreements among the
Borrower, the Administrative Agent and an Approved Converter, each as a Subordinated Creditor, in
form and substance satisfactory to the Administrative Agent and Initial Lender in their sole and
absolute discretion, as originally executed and as they may be amended, modified, supplemented,
restated or replaced from time to time.

     “Subsidiary”: Any Person of which or in which the Borrower and its other
Subsidiaries, if any, own directly or indirectly 50% or more of: (a) the combined voting power of
all classes of stock having general voting power under ordinary circumstances to elect a majority
of the board of directors of such Person, if it is a corporation, (b) the capital interest or
profit interest of such Person, if it is a partnership, limited liability company, joint venture or
similar entity, having ordinary voting power to elect the manager or a majority of the managers
thereof or otherwise to

      

					
	 
	 	 
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have majority voting power over the general business and affairs of such partnership, limited
liability company, joint venture or other entity or (c) the beneficial interest of such Person, if
it is a trust, association or other unincorporated organization.

     “Subsidiary Guaranties”: Each Subsidiary Guaranty of even date herewith entered into
by a Subsidiary of the Borrower in favor of Administrative Agent, for the benefit of Administrative
Agent and the Lenders, guarantying the payment and performance of the Obligations, together with
each such additional Subsidiary Guaranty that shall be entered into after the date hereof by any
additional Subsidiary(ies) of the Borrower as required pursuant to Section 5.11 hereof, in
each case as originally executed and as it may be amended, modified, supplemented, restated or
replaced from time to time.

     “Subsidiary Security Agreements”: Each Subsidiary Security Agreement of even date
herewith entered into by a Subsidiary of the Borrower in favor of Administrative Agent, for the
benefit of Administrative Agent and the Lenders, securing the Obligations, together with each such
additional Subsidiary Security Agreement that shall be entered into after the date hereof by any
additional Subsidiary(ies) of the Borrower as required pursuant to Section 5.11 hereof, in
each case as originally executed and as it may be amended, modified, supplemented, restated or
replaced from time to time.

     “Support Agreement”: A guarantee issued by, a letter of credit facility entered into
by (which letter of credit facility may consist of a general credit facility entered into prior to,
on or after the date hereof providing for the issuance of letters of credit on behalf of a Lender
in connection with the operation of such Lender’s business) or a reimbursement agreement or other
instrument or agreement entered into by, one or more Lenders for the benefit of an LC Issuer for
purposes of inducing such LC Issuer to issue a Letter of Credit. Support Agreements shall include
any reimbursement agreement, letter of credit application or like document executed and delivered
by Administrative Agent or any Lender to an LC Issuer in connection with a Letter of Credit and
providing for, among other things, any agreement for the reimbursement of, or cash
collateralization of, any draws under a Letter of Credit.

     “Sweep Account”: The deposit account to be established and maintained by
Administrative Agent at Depository Bank.

     “Term”: The period of time commencing on the date hereof and ending on the last to
occur of (i) the Termination Date and (ii) the date each Note issued hereunder is paid in full
pursuant to its terms and all other obligations (other than contingent indemnification obligations
to the extent no claims giving rise thereto have been asserted) of the Borrower to the Lenders
hereunder and under the Notes and the other Loan Documents have been paid in full.

     “Termination Date”: September 8, 2006 or such later date as may be agreed to in
writing by the Administrative Agent and the Lenders (in their sole and absolute discretion) and the
Borrower.

     “Vehicle”: Any passenger car propelled by an engine or motor, meant for traveling on
streets or roads, that is of a make and model approved in writing by the Administrative Agent.

     “Vehicle Purchase Loan”: As defined in Section 2.4(a) hereof.

      

					
	 
	 	 
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     “Vehicle Purchase Loan Interest”: As defined in Section 2.8(b) hereof.

     “Vehicle Purchase Loan Request”: As defined in Section 2.4(c) hereof.

     “Vehicle Purchase Note”: As defined in Section 2.4(b) hereof.

     “Vehicle Shipping & Conversion Costs”: The costs and expenses of (i) shipping the
Eligible Vehicles purchased by the Borrower (or one of its wholly-owned Subsidiaries that is a
party to a Subsidiary Security Agreement) from the Vendor to the Customer (through the Approved
Converter), and (ii) Americanizing such Eligible Vehicles pursuant to a Conversion Contract,
together with such other costs and expenses incidental thereto that shall have been approved in
writing by the Administrative Agent.

     “Vendor”: Any dealer of Vehicles who shall be approved as such from time to time in
writing by the Administrative Agent in its sole and absolute discretion.

     Section 1.2 Accounting Terms and Calculations. Except as may be expressly provided to
the contrary herein, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP consistently applied for the
Borrower as used in the preparation of the Borrower’s financial statements.

     Section 1.3 Other Definitional Provisions. The words “hereof,” “herein,” and
“hereunder” and words of similar import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement. References to Sections,
Exhibits, Schedules and like references are to this Agreement unless otherwise expressly provided.

ARTICLE 2. TERMS OF LENDING

     Section 2.1 Letters of Credit.

          (a) Subject to the terms and conditions hereof and in reliance upon the representations and
warranties of the Borrower herein, Lenders shall, prior to the Termination Date, and upon request
made by Borrower in accordance with the terms hereof, severally (based on each Lender’s Pro Rata
Share) extend credit up to the Facility Commitment Amount then in effect to or for the benefit of
Borrower (by causing to be issued Letters of Credit pursuant to Support Agreements entered into by
Lenders from time to time (or a Support Agreement in effect on or prior to the date hereof). The
beneficiary of any Letter of Credit shall be a Vendor of Eligible Inventory. Each Letter of Credit
may be drawn only in one single amount equal to the Stated Amount upon the delivery for shipment of
the Eligible Inventory purchased in respect of which such Letter of Credit was issued to the
applicable Vendor and presentment of such Letter of Credit, together with delivery of such
documents and supporting materials as specified therein (including, without limitation, an
inspection certificate from a third party inspection company reasonably acceptable to
Administrative Agent, a commercial invoice from the applicable Vendor, a clean onboard ocean bill
of lading by the applicable freight carrier for delivery of the purchased Eligible Inventory to the
United States, a packing list and a Manufacturer’s Statement of Origin (or similar document under
the Law applicable to such Vendor)), all in strict compliance with the terms thereof. Each Letter
of Credit shall be issued

           

					
	 
	 	 
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for the account either of the Lenders or Borrower and the beneficiary thereunder shall be a
Vendor. Each Letter of Credit shall be issued for the purpose of ensuring payment with respect to
and inducing such Vendor to sell Eligible Inventory to Borrower (or one of its wholly-owned
Subsidiaries that is a party to a Subsidiary Security Agreement). Each Letter of Credit shall be
in form and substance satisfactory to Administrative Agent and the Lenders in their sole and
absolute discretion. No Letter of Credit shall contain any provision for payment thereunder at any
time earlier than 2:00 p.m. (Chicago time) on the first Business Day after the presentation of all
conforming drafts, demands for payment and all other documents, if any, required to be presented to
the LC Issuer pursuant to such Letter of Credit. Unless otherwise specified, all Letters of Credit
will be governed by the Uniform Customs and Practices for Documentary Credits of the International
Chamber of Commerce as in effect on the date of issuance of such Letter of Credit.

          (b) Letter of Credit Expenses; Unconditional Reimbursement Obligations; Etc. Borrower
shall, promptly but in no event later than two (2) Business Days following written demand,
reimburse the Administrative Agent, on behalf of itself and the Lenders, for all Letter of Credit
Expenses (other than the Lender Assumed LC Costs), paid, incurred, suffered or assumed from time to
time by the Lenders or the Administrative Agent (it being acknowledged and agreed that all Lender
Assumed LC Costs shall be borne by, and for the account of, the Lenders). In the event that the
Borrower shall fail to reimburse the Administrative Agent for the amount of such Letter of Credit
Expenses when due, the unpaid amount then due shall accrue interest on a daily basis at the Per
Diem Default Rate, and such interest shall be paid by Borrower to the Administrative Agent from
time to time upon demand. Borrower acknowledges and agrees that upon the issuance of any Letter of
Credit, the Lenders shall be deemed to have made an LC Loan to the Borrower in the Stated Amount of
such Letter of Credit, as provided in Section 2.3 hereof, and notwithstanding anything to the
contrary contained herein or in any other Loan Document, Borrower agrees that Borrower’s
obligations to pay or reimburse the Administrative Agent, for the benefit of the Lenders, for the
full amount of all Letter of Credit Expenses (other than the Lender Assumed LC Costs) and the
principal of, and interest on, any Credit Note (or Conversion Note issued upon the conversion of
any LC Loan), including, if applicable, any interest on such overdue Letter of Credit Expenses or
interest on any such overdue principal and interest, at the Per Diem Default Rate, when due, shall
be absolute, unconditional and irrevocable irrespective of whose account any such Letter of Credit
was issued, or the existence of any claim or circumstance, including without limitation any of the
following:

         (i) any lack of validity or enforceability of this Agreement or any of the other Loan
Documents (including any Support Agreement or Letter of Credit);

         (ii) the existence of any claim, setoff, defense or other right which Borrower may have
at any time against any beneficiary or any transferee of a Letter of Credit (or any Person
for whom any such transferee may be acting), the LC Issuer (including any claim for improper
payment), any Lender or any other Person, whether in connection with this Agreement, the
Support Agreement, the Letter of Credit, the transactions contemplated herein or therein or
any unrelated transactions (including any underlying transactions between Borrower and the
applicable Vendor);

          

					
	 
	 	 
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         (iii) any draft, demand certificate or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect or any particular conditions
stipulated in the documents presented under a Letter of Credit are superimposed thereon;

         (iv) the surrender or impairment of any security for the performance or observance of
any of the terms of any of the Loan Documents;

         (v) the occurrence of any Default or Event of Default;

         (vi) any affiliation between the LC Issuer, any Lender and/or Administrative Agent;

         (vii) the failure of any instrument to bear any reference or adequate reference to a
Letter of Credit, or the failure of any draft to be endorsed by the payee or to be
accompanied by documents at negotiation, or the failure of any negotiating bank to endorse
any draft or other instrument in connection with a Letter of Credit or the failure of any
person to note the amount of any draft on the reverse of a Letter of Credit or to surrender
or take up a Letter of Credit or to forward documents apart from drafts as required by the
terms of a Letter of Credit (each of which provisions, if contained in a Letter of Credit
itself, may be waived by LC Issuer and/or Lenders);

         (viii) any error, omission, interruption or delay in transmission or delivery of any
message or advice in connection with a Letter of Credit;

         (ix) payment by LC Issuer under any Letter of Credit or Support Agreement against
presentation of a demand, draft or certificate or other document that does not comply with
the terms of such Letter of Credit or Support Agreement;

         (x) any non-documentary conditions that may be stated in a Letter of Credit; and

         (xi) to the extent permitted under applicable law, any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.

The happening of any one or more of the foregoing contingencies shall not in any way affect,
impair, or prevent the obligation of Borrower to repay any LC Loan or reimburse the Administrative
Agent and the Lenders for any Letter of Credit Expenses required to be reimbursed by Borrower
hereunder. Borrower and Lenders hereby agree that payment of any Credit Note may be made in the
manner set forth in Section 2.6 hereof (by conversion thereof to a Conversion Loan) or
Section 2.8 hereof.

In furtherance and extension and not limitation of the specific provisions hereinabove set forth,
Borrower hereby agrees that any action, inaction or omission by Administrative Agent, any Lender,
an LC Issuer or any of its branches, affiliates or correspondents under or in connection with a
Letter of Credit, if taken in good faith, shall be binding on Borrower and shall not, except as set
forth below, put or create liability on Administrative Agent, any Lender or an LC Issuer or

 

					
	 
	 	 
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any of its branches, affiliates or correspondents. None of Administrative Agent, Lenders or any LC
Issuer shall, except as set forth below, be responsible for any act, error, neglect, default,
omission, insolvency or failure in the business of any of the affiliates or correspondents of such
Person or for any refusal by an LC Issuer to pay or honor drafts drawn under a Letter of Credit
because of any United States or foreign laws or regulations now or hereafter in force or for any
other matter beyond the control of such parties. Notwithstanding the foregoing, Borrower shall
have a claim against Administrative Agent, Lenders or an LC Issuer and any such Person may be
liable to Borrower, to the extent of any actual direct damages (and not indirect, special,
exemplary, incidental, punitive or consequential damages) suffered by Borrower which are caused by
such Person’s willful misconduct or gross negligence; provided, however, that, in the case of the
LC Issuer, Borrower shall have no right to pursue any such claims as against the LC Issuer except
solely to the extent, and in the manner, permitted by Section 2.2 hereof (it being agreed
that the Lenders’ obligations to pursue any such claim on behalf of the Borrower shall be subject
to the terms and conditions of Section 2.2 hereof).

          (c) Allocation of Risks. As between Administrative Agent, Lenders and the LC Issuers,
on the one hand, and Borrower, on the other, Borrower assumes all risks of the acts and omissions
of, or misuse of any Letter of Credit, by beneficiaries of any Letter of Credit. In furtherance
and not in limitation of the foregoing, to the fullest extent permitted by law, none of
Administrative Agent or the Lenders shall be responsible for, and the Borrower agrees that the LC
Issuer shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document issued by any party in connection with the application for and
issuance of any Letter of Credit or Support Agreement, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or
sufficiency of any instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part,
that may prove to be invalid or ineffective for any reason; (C) failure of the beneficiary of any
Letter of Credit to comply fully with conditions required in order to demand payment under any
Letter of Credit, provided that, in the case of any payment by LC Issuer under any Letter of Credit
or guaranty thereof, Borrower shall be entitled to assert that LC Issuer is liable to the extent
such payment was made solely as a result of its gross negligence or willful misconduct (as finally
determined by a court of competent jurisdiction) in determining that the demand for payment under
such Letter of Credit or guaranty thereof complies on its face with any applicable requirements for
a demand for payment under such Letter of Credit or Support Agreement, provided, however, such
assertion shall not affect Borrower’s Obligations hereunder; (D) errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they may be in cipher; (E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or otherwise of any document required in order to make a
payment under any Letter of Credit or Support Agreement or of the proceeds thereof, (G) the credit
of the proceeds of any drawing under any Letter of Credit or Support Agreement; and (H) any
consequences arising from causes beyond the control of Administrative Agent, the Lenders or the
applicable LC Issuer. None of the above shall affect, impair, or prevent the vesting of any of
Administrative Agent’s and Lenders’ rights or powers hereunder or under the other Loan Documents.
Nothing contained herein shall be deemed to limit or to expand any waivers, covenants or
indemnities made by Borrower in favor of Administrative Agent, Lenders or, if applicable, any LC
Issuer in any other Loan Document.

           

					
	 
	 	 
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          (d) Expiration of Letters of Credit. Each Letter of Credit shall be for a limited
term (such term not to exceed forty-five (45) days from the date of issuance) and shall have an
expiry date (the “Expiry Date”) that is specified by Borrower and agreed to by
Administrative Agent and the Lenders as the LC Term in the Credit Request. Each Letter of Credit
shall expire on the applicable Expiry Date thereof, which date shall, in no event, extend beyond
the Termination Date. If any Letter of Credit, whether or not then due and payable, shall for any
reason be outstanding on the Termination Date, Borrower shall either (A) provide cash collateral
therefor, (B) cause such Letter of Credit to be canceled and returned, or (C) deliver a stand-by
letter (or letters) of credit in guaranty of the Credit Note issued in respect thereof, which
stand-by letter (or letters) of credit shall be of like duration (plus thirty (30) additional days)
as, and in an amount equal to 105% of, the aggregate maximum amount then available to be drawn
under such Letter of Credit and shall be issued by a financial institution, and shall be subject to
such other terms and conditions, as are satisfactory to Administrative Agent and Lenders in their
sole discretion.

     Section 2.2 Indemnification Relating to Loans and Letters of Credit. In addition to
amounts payable as elsewhere provided in this Agreement, Borrower hereby agrees to pay and to
protect, indemnify, and save harmless Administrative Agent and each Lender from and against any and
all claims, demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys’ fees and allocated costs of internal counsel) that such Person may incur or
be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit,
Support Agreement (other than Lender Assumed LC Costs) or Loan or (B) the failure of Administrative
Agent, any Lender or of LC Issuer to honor (or, in the case of the Administrative Agent or the
Lenders, to cause to be honored) a demand for payment under any Letter of Credit or Support
Agreement, as a result of any act or omission, whether rightful or wrongful, including any act or
omission of any present or future de jure or de facto government or US Governmental Authority, in
each case other than to the extent solely as a result of the gross negligence or willful misconduct
of such Person (as finally determined by a court of competent jurisdiction); provided, however,
that if (i) LC Issuer shall have wrongfully dishonored any Letter of Credit after the presentation
to it by the beneficiary thereof of a draft or other demand for payment and other documentation
strictly complying with the terms and conditions of such Letter of Credit or (ii) LC Issuer shall
have made payment to the beneficiary of such Letter of Credit against presentation of documents
which do not substantially comply with the terms of such Letter of Credit, and in either event (x)
the Borrower shall have repaid to the Administrative Agent and the Lenders the unpaid principal of,
and accrued interest on, the Credit Note issued with respect to such Letter of Credit (or, if
applicable, the Conversion Note issued upon the conversion thereof), together with all Letter of
Credit Expenses required to be reimbursed to the Administrative Agent and the Lenders with respect
to such Letter of Credit pursuant to Section 2.1(b) hereof, (y) no Default or Event of
Default shall have occurred and be continuing and (z) the Administrative Agent and the Lenders
shall believe, in their sole and absolute discretion, that the actions taken by the LC Issuer in
clause (i) or (ii) above were undertaken by gross negligence or willful misconduct by the LC
Issuer, then the Administrative Agent and the Lenders, as the case may require, shall, at the cost
and expense of the Borrower, cooperate with the reasonable requests of the Borrower for the purpose
of exercising such rights and remedies as against the LC Issuer, for the benefit of the Borrower,
as shall be appropriate to enable the Lenders to recover, for the benefit of the Borrower, such
damages as the Borrower shall be entitled under the applicable Support Agreements or applicable law
as a result of the actions taken by the LC Issuer

      

					
	 
	 	 
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as described in clause (i) or (ii) above. Nothing contained in the immediately preceding
proviso shall limit the obligations of Borrower to Administrative Agent or the Lenders otherwise
set forth herein. It is understood that in making any payment under a Letter of Credit, the LC
Issuer will rely on documents presented to it under such Letter of Credit as to any and all matters
set forth therein without further investigation and regardless of any notice or information to the
contrary, and such reliance and payment against documents presented thereunder substantially
complying with the terms thereof shall not be deemed gross negligence or willful misconduct of such
LC Issuer in connection with such payment.

     Section 2.3 Borrowing Procedures for Credits.

          (a) Borrowing Procedures. The Borrower will make a request for the Lenders to cause
to be issued a Letter of Credit to the Administrative Agent in such manner as the Administrative
Agent may from time to time reasonably prescribe. In the absence of any such further direction and
subject to the provisions hereof, Borrower shall request the issuance of a Letter of Credit by
having a senior officer of Borrower, designated by Borrower in writing as having authority to make
such a request, submit to Administrative Agent a request for such Letter of Credit in the form of
Exhibit F attached hereto (each such request, a “Credit Request”), together with
such other information as Administrative Agent or the Lenders reasonably request in accordance with
the terms hereof, and must be given so as to be received by Administrative Agent not later than
12:30 p.m. (Chicago time) on the fourth (4th) Business Day prior to the requested date
of the issuance of such Letter of Credit. Each Credit Request shall (i) specify the proposed
issuance date (which shall be on a Business Day) and Expiry Date of the requested Letter of Credit,
(ii) specify the name and address of the beneficiary Vendor, (iii) specify the proposed Stated
Amount of such Letter of Credit, (iv) set forth a description of the Eligible Inventory being
purchased in connection with such Letter of Credit, (v) have attached thereto a true, correct and
complete copy of the commercial invoice from such Vendor in respect of such Eligible Inventory,
(vi) set forth the name and address of the applicable Customer(s) under the Customer Purchase
Orders relating to such Eligible Inventory and have attached thereto a true, correct and complete
copy of such Customer Purchase Orders, (vii) set forth a detailed expense budget of the Vehicle
Shipping & Conversion Costs to be incurred in connection with the Eligible Inventory being
purchased with the proceeds of such Letter of Credit (an “Ancillary Vehicle Budget”), and
(viii) set forth such other information as the Administrative Agent or the Lenders may from time to
time reasonably request, in each case in form and substance acceptable to the Administrative Agent
and the Lenders. In addition, each Credit Request shall contain a description of the requested
terms, conditions and presentments required for any draw under the proposed Letter of Credit. Each
request for a Letter of Credit shall be deemed a representation and warranty by the Borrower that
(i) all conditions precedent specified in Section 3.2 to the issuance of such Letter of
Credit are satisfied on the Funding Date of such Letter of Credit and (ii) no breach or default
under, and no Event of Default defined or described in, this Agreement or any of the other Loan
Documents will exist.

          (b) The Borrower acknowledges that the Administrative Agent or the Lenders may issue Support
Agreements under the Loan Documents or any other basis deemed appropriate by the Administrative
Agent and the Lenders from time to time, or may have entered into Support Agreements prior to the
date hereof. The Borrower shall not request Letter of Credits for any purpose other than in
connection with the purchase of Eligible Inventory.

           

					
	 
	 	 
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          (c) The Administrative Agent may maintain from time to time, at its discretion, liability
records as to any and all LC Loans made or repaid and interest accrued or paid under this Agreement
and any Letter of Credit Expenses reimbursable to the Administrative Agent or Lenders hereunder.
All entries made on any such record shall be presumed correct until the Borrower establishes the
contrary. On demand by Administrative Agent, the Borrower will admit and certify in writing the
exact principal balance which Borrower then asserts to be outstanding to Lenders under any Credit
Note.

          (d) The Administrative Agent shall endeavor to respond to each Credit Request within four (4)
Business Days of its receipt thereof. The failure of Administrative Agent to respond in writing to
a Credit Request within four (4) Business Days of its receipt, either declining or approving such
request or requesting additional information shall be deemed a rejection by Administrative Agent
and the Lenders of such Credit Request. If Administrative Agent or any Lender reasonably
determines that it requires more information than contained in the Credit Request in order to
evaluate the Letter of Credit that is the subject of such request, the Administrative Agent shall
present a request for more information to Borrower.

          (e) Upon the issuance of any Letter of Credit, the Lenders shall be deemed to have made to the
Borrower, and the Borrower shall be deemed to have borrowed from the Lenders, a loan (each, an
“LC Loan”) in the principal amount equal to the Stated Amount of such Letter of Credit, and
such LC Loan shall be evidenced by, and subject to the terms and conditions of, one or more
promissory notes, substantially in the form of Exhibit A attached hereto, evidencing such
LC Loan made in connection with such Letter of Credit (each such note, a “Credit Note”),
and such LC Loan shall accrue interest in accordance with Section 2.8 hereof.

          (f) Each LC Loan shall not exceed the Facility Commitment Amount then in effect (and, as to
any Lender, such Lender’s Pro Rata Share thereof), and if there shall be more than one Lender
hereunder, each LC Loan shall consist of LC Loans made simultaneously by the Lenders ratably
according to their Pro Rata Share thereof.

          (g) Copy of Invoice for Certain Expenses. In the event that the Lenders, the
Administrative Agent, the Borrower and the LC Issuer shall agree to amend any Letter of Credit
following the issuance thereof, the Administrative Agent shall, as soon as reasonably practicable
following the written request of the Borrower, deliver to the Borrower a copy of an invoice (or
other document) evidencing the costs and expenses required to be paid to the LC Issuer in
connection with such amendment (which costs and expenses are acknowledged by the Borrower to be
reimbursable to the Lenders as Letter of Credit Expenses pursuant to Section 2.1(b)
hereof). Nothing contained in this clause (g) shall be intended to impose any obligation or duty
upon the Administrative Agent or the Lenders to amend any such Letter of Credit following the
issuance thereof, it being understood and agreed that the Administrative Agent and the Lenders
shall have the right to withhold their consent to any such amendment in their sole and absolute
discretion.

     Section 2.4 Vehicle Purchase Loans.

          (a) Vehicle Purchase Loans. On the terms and subject to the conditions set forth
herein (including, without limitation, the conditions set forth in Section 3.2 hereof),

           

					
	 
	 	 
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Lenders severally agree to make vehicle purchase loans (each, a “Vehicle Purchase
Loan”) to Borrower from time to time as set forth herein, up to the Facility Commitment Amount
then in effect (and, as to any Lender, such Lender’s Pro Rata Share thereof). If there shall be
more than one Lender hereunder, each proposed Vehicle Purchase Loan shall consist of Vehicle
Purchase Loans made simultaneously by the Lenders ratably according to their Pro Rata Share
thereof. The Borrower shall not request Vehicle Purchase Loans for any purpose other than the
purchase of Eligible Inventory.

          (b) Vehicle Purchase Notes. Each Vehicle Purchase Loan shall be evidenced by, and be
subject to the terms and conditions of, one or more promissory notes payable by Borrower to each
Lender (or its assignee), in the form of Exhibit B attached hereto (a “Vehicle Purchase
Note”).

          (c) Borrowing Procedures. The Borrower will make a request for a Vehicle Purchase
Loan to the Administrative Agent in such manner as the Administrative Agent may from time to time
prescribe. In the absence of any such further direction and subject to the provisions hereof,
Borrower shall request a Vehicle Purchase Loan by having a senior officer of Borrower, designated
by Borrower in writing as having authority to make such request, submit a request for such Vehicle
Purchase Loan in the form of Exhibit G attached hereto (each such request, a “Vehicle
Purchase Loan Request”), together with such other information as Administrative Agent or the
Lenders reasonably request in accordance with the terms hereof, and must be given so as to be
received by Administrative Agent not later than 12:30 p.m. (Chicago time) on the fourth
(4th) Business Day prior to the requested Funding Date of such proposed Vehicle Purchase
Loan. Each Vehicle Purchase Loan Request shall (i) specify the proposed Funding Date (which shall
be on a Business Day) of the requested Vehicle Purchase Loan, (ii) specify the name and address of
the Vendor(s) of the Eligible Inventory being purchased with the proceeds of such Vehicle Purchase
Loan, (iii) state the proposed principal amount of such Vehicle Purchase Loan, (iv) set forth a
description of the Eligible Inventory being purchased with the proceeds of such Vehicle Purchase
Loan, (v) have attached thereto a true, correct and complete copy of the commercial invoice from
the Vendor(s) in respect of such Eligible Inventory, (vi) set forth the name and address of the
applicable Customer(s) under the Customer Purchase Orders relating to such Eligible Inventory and
have attached thereto a true, correct and complete copy of such Customer Purchase Orders, (vii) set
forth the Ancillary Vehicle Budget with respect to the Eligible Inventory being purchased with the
proceeds of Vehicle Purchase Loan, and (viii) set forth such other information as the
Administrative Agent or the Lenders may from time to time reasonably request, in each case in form
and substance acceptable to the Administrative Agent and the Lenders. Each request for a Vehicle
Purchase Loan shall be deemed a representation and warranty by the Borrower that (i) all conditions
precedent specified in Section 3.2 to such Vehicle Purchase Loan are satisfied on the
Funding Date of such Vehicle Purchase Loan and (ii) no breach or default under, and no Event of
Default defined or described in, this Agreement or any of the other Loan Documents will exist. The
Administrative Agent shall endeavor to respond to each Vehicle Purchase Loan Request within four
(4) Business Days of its receipt thereof. The failure of Administrative Agent to respond in
writing to a Vehicle Purchase Loan Request within four (4) Business Days of its receipt, either
declining or approving such request or requesting additional information shall be deemed a
rejection by Administrative Agent and the Lenders of such Vehicle Purchase Loan Request. If
Administrative Agent or any Lender reasonably determines that it requires more information

           

					
	 
	 	 
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than contained in the Vehicle Purchase Loan Request in order to evaluate the proposed Vehicle
Purchase Loan subject of such request, the Administrative Agent shall present a request for more
information to Borrower.

          (d) Record of Vehicle Purchase Loans. The Administrative Agent may maintain from time
to time, at its discretion, liability records as to any and all Vehicle Purchase Loans made or
repaid and interest accrued or paid under this Agreement. All entries made on any such record
shall be presumed correct until the Borrower establishes the contrary. On demand by Administrative
Agent, the Borrower will admit and certify in writing the exact principal balance which Borrower
then asserts to be outstanding to Lenders for Vehicle Purchase Loans under this Agreement.

     Section 2.5 Ancillary Vehicle Loans.

          (a) Ancillary Vehicle Loans. On the terms and subject to the conditions set forth
herein (including, without limitation, the conditions set forth in Section 3.2 hereof),
Lenders severally agree to make ancillary vehicle loans (each, an “Ancillary Vehicle Loan”)
to Borrower from time to time as set forth herein, up to the Facility Commitment Amount then in
effect (and, as to any Lender, such Lender’s Pro Rata Share thereof). If there shall be more than
one Lender hereunder, each proposed Ancillary Vehicle Loan shall consist of Ancillary Vehicle Loans
made simultaneously by the Lenders ratably according to their Pro Rata Share thereof. The Borrower
shall not request Ancillary Vehicle Loans for any purpose other than in connection with the
financing of the actual Vehicle Shipping & Conversion Costs attributable to Vehicles financed
pursuant to a Letter of Credit or Vehicle Purchase Loan hereunder.

          (b) Ancillary Vehicle Notes. Each Ancillary Vehicle Loan shall be evidenced by, and
be subject to the terms and conditions of, one or more promissory notes payable by Borrower to the
each Lender (or its assignee), in the form of Exhibit C attached hereto (an “Ancillary
Vehicle Note”), and shall accrue interest in accordance with Section 2.8 hereof.

          (c) Borrowing Procedures. The Borrower will make a request for an Ancillary Vehicle
Loan to the Administrative Agent in such manner as the Administrative Agent may from time to time
prescribe. In the absence of any such further direction and subject to the provisions hereof,
Borrower shall request an Ancillary Vehicle Loan by having a senior officer of Borrower, designated
by Borrower in writing as having authority to make such a request, submit a request for an
Ancillary Vehicle Loan in the form of Exhibit H attached hereto (each such request, an
“Ancillary Vehicle Loan Request”) to Administrative Agent, together with such other
information as Administrative Agent or the Lenders reasonably request in accordance with the terms
hereof, and must be given so as to be received by Administrative Agent not later than 12:30 p.m.
(Chicago time) on the fourth (4th) Business Day prior to the requested Funding Date of
such proposed Ancillary Vehicle Loan. Each Ancillary Vehicle Loan Request shall (i) specify the
proposed Funding Date (which shall be on a Business Day) of the requested Ancillary Vehicle Loan,
(ii) set forth the name and address of the shipping company, Approved Converter or other party
being paid with the proceeds of such Ancillary Vehicle Loan, (iii) specify the proposed principal
amount of such Ancillary Vehicle Loan, (iv) set forth a description of the services provided by the
recipient of the proceeds of such Ancillary Vehicle Loan, (v) set forth the Eligible Inventory as
to which such requested Ancillary Vehicle Loan shall relate and the

           

					
	 
	 	 
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Ancillary Vehicle Budget relating thereto, (vi) have attached thereto a true, correct and
complete copy of one or more commercial invoices from the recipients of the proceeds of such
Ancillary Vehicle Loan, (vii) set forth a written direction from the Borrower to pay such proceeds
directly to such recipients and (viii) set forth such other information as the Administrative Agent
or the Lenders may from time to time reasonably request, in each case in form and substance
acceptable to the Administrative Agent and the Lenders. Each Ancillary Vehicle Loan Request shall
be deemed a representation and warranty by the Borrower that (i) all conditions precedent specified
in Section 3.2 to such Ancillary Vehicle Loan are satisfied on the Funding Date of such
Ancillary Vehicle Loan and (ii) no breach or default under, and no Event of Default defined or
described in, this Agreement or any of the other Loan Documents will exist. The Administrative
Agent shall endeavor to respond to each Ancillary Vehicle Loan Request within four (4) Business
Days of its receipt thereof. The failure of Administrative Agent to respond in writing to an
Ancillary Vehicle Loan Request within four (4) Business Days of its receipt, either declining or
approving such request or requesting additional information shall be deemed a rejection by
Administrative Agent and the Lenders of such Ancillary Vehicle Loan Request. If the Administrative
Agent or any Lender reasonably determines that it requires more information than contained in the
Ancillary Vehicle Loan Request in order to evaluate the proposed Ancillary Vehicle Loan subject of
such request, the Administrative Agent shall present a request for more information to Borrower.

          (d) Record of Ancillary Vehicle Loans. The Administrative Agent may maintain from
time to time, at its discretion, liability records as to any and all Ancillary Vehicle Loans made
or repaid and interest accrued or paid under this Agreement. All entries made on any such record
shall be presumed correct until the Borrower establishes the contrary. On demand by Administrative
Agent, the Borrower will admit and certify in writing the exact principal balance which Borrower
then asserts to be outstanding to Lenders for Ancillary Vehicle Loans under this Agreement.

     Section 2.6 Conversion of a Reimbursement Obligation and LC Interest to a Conversion
Loan.

          (a) At the request of the Borrower following the payment of the Stated Amount of a Letter of
Credit to a Vendor by an LC Issuer and provided the conditions set forth in Section 3.3
hereof have been satisfied not later than two (2) Business Days following the LC Payment Date of
such Letter of Credit, the then outstanding principal amount of the LC Loan, together with all
unpaid LC Interest accrued thereon, related to such Letter of Credit shall be converted into the
original principal amount of a Conversion Loan. The Administrative Agent shall, to the extent
reasonably practicable, endeavor to give advance notice (which may be telephonic) of the expected
LC Payment Date of a Letter of Credit and, if such advance written notice shall not have been
given, the Administrative Agent shall give notice (which may be telephonic) of the LC Payment Date
promptly following the occurrence thereof.

          (b) Each Conversion Loan shall be evidenced by, and be subject to the terms and conditions of,
one or more notes payable by Borrower to each Lender (or its assignee), in the form of Exhibit
D attached hereto (a “Conversion Note”), and shall accrue interest in accordance with
Section 2.8 hereof.

           

					
	 
	 	 
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          (c) The Borrower will make a request to convert an LC Loan (together with all unpaid LC
Interest accrued thereon) to a Conversion Loan to the Administrative Agent in such manner as the
Administrative Agent may from time to time prescribe. In the absence of any such further direction
and subject to the provisions hereof, Borrower may request the conversion of an LC Loan (together
with such accrued and unpaid LC Interest) to a Conversion Loan by having a senior officer of
Borrower, designated by Borrower in writing as having authority to make such request, submit a
request for such Conversion Loan in the form of Exhibit I attached hereto (each such
request, a “Conversion Request”) to Administrative Agent, together with such other
information as Administrative Agent or the Lenders reasonably request in accordance with the terms
hereof, and must be given so as to be received by Administrative Agent not earlier than the LC
Payment Date of the Letter of Credit as to which such LC Loan relates but not later than 4:00 p.m.
(Chicago time) on the next succeeding Business Day. Each Conversion Request shall specify, as
applicable, the aggregate outstanding amount of the LC Loan, together with all unpaid interest
accrued thereon, being converted to a Conversion Loan, and such other information as the
Administrative Agent or the Lenders may from time to time reasonably request, in each case in form
and substance acceptable to the Administrative Agent and the Lenders. Each Conversion Request
shall be deemed a representation and warranty by the Borrower that (i) all conditions precedent
specified in Section 3.3 in respect of such Conversion Loan are satisfied on the Funding
Date thereof and (ii) no breach or default under, and no Event of Default defined or described in,
this Agreement or any of the other Loan Documents will exist.

          (d) Record of Conversion Loans. The Administrative Agent may maintain from time to
time, at its discretion, liability records as to any and all Conversion Loans made or repaid and
interest accrued or paid under this Agreement. All entries made on any such record shall be
presumed correct until the Borrower establishes the contrary. On demand by Administrative Agent,
the Borrower will admit and certify in writing the exact principal balance which Borrower then
asserts to be outstanding to Lenders for Conversion Loans under this Agreement.

     Section 2.7 A/R Loans. (a) On the terms and subject to the conditions set forth
herein (including, without limitation, the conditions set forth in Section 3.4 hereof) and
in consideration of Borrower’s obligation to pay A/R Loan Interest pursuant to Section 2.8
hereof, Lenders severally agree to make A/R loans (each, an “A/R Loan”) to Borrower from
time to time as set forth herein up to the Facility Commitment Amount then in effect (and, as to
any Lender, such Lender’s Pro Rata Share thereof) provided that after giving effect to any such A/R
Loan, the aggregate amount of all then outstanding and unpaid A/R Loans and Conversion Loans shall
not exceed the amount of the Available Borrowing Base.

          (b) Each A/R Loan shall be evidenced by, and be subject to the terms and conditions of, one or
more promissory notes payable by Borrower to each Lender (or its assignee), in the form of
Exhibit E attached hereto (an “A/R Note”), and shall accrue interest in accordance
with Section 2.8 hereof.

          (c) The Borrower will make a request for an A/R Loan to the Administrative Agent in such
manner as the Administrative Agent may from time to time prescribe. In the absence of any such
further direction and subject to the provisions hereof, Borrower shall request

           

					
	 
	 	 
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an A/R Loan by having a senior officer of Borrower, designated by Borrower in writing as
having authority to make such request, submit a request for an A/R Loan in the form of Exhibit
J attached hereto (each such request, an “A/R Loan Request”) to Administrative Agent,
together with such other information as the Administrative Agent or the Lenders reasonably request
in accordance with the terms hereof, and must be given so as to be received by Administrative Agent
not later than 12:30 p.m. (Chicago time) on the Business Day prior to the requested Funding Date of
such proposed A/R Loan. Each A/R Loan Request shall specify such information as the Administrative
Agent may reasonably request, in each case in form and substance acceptable to the Administrative
Agent, and shall be accompanied by: (i) a borrowing base report demonstrating (x) the calculation
of Eligible Accounts and (y) the calculation of Available Borrowing Base at the time of such A/R
Loan Request, (ii) original evidence of the issuance of either a prepaid credit insurance policy or
letter of credit with respect the applicable Customer’s obligations under the applicable Customer
Purchase Order in favor of Administrative Agent, in form and substance satisfactory to
Administrative Agent in its sole discretion, and (iv) Borrower’s invoices to its Customers in
respect of the Eligible Accounts, which invoice shall have terms and shall be in form and substance
satisfactory to Administrative Agent in its sole and absolute discretion. Each A/R Loan Request
shall be deemed a representation and warranty by the Borrower that (i) all conditions precedent
specified in Section 3.4 to such A/R Loan are satisfied on the Funding Date of such A/R
Loan and (ii) no breach or default under, and no Event of Default defined or described in, this
Agreement or any of the other Loan Documents will exist. The failure of Administrative Agent to
respond in writing to an A/R Loan Request within one (1) Business Day of its receipt, either
declining or approving such request or requesting additional information shall be deemed a
rejection by Administrative Agent and the Lenders of such A/R Loan Request. If the Administrative
Agent or any Lender reasonably determines that it requires more information than contained in the
A/R Loan Request in order to evaluate the proposed A/R Loan subject of such request, the
Administrative Agent shall present a request for more information to Borrower.

          (d) Record of A/R Loans. The Administrative Agent may maintain from time to time, at
its discretion, liability records as to any and all A/R Loans made or repaid and interest accrued
or paid under this Agreement. All entries made on any such record shall be presumed correct until
the Borrower establishes the contrary. On demand by Administrative Agent, the Borrower will admit
and certify in writing the exact principal balance which Borrower then asserts to be outstanding to
Lenders for A/R Loans under this Agreement.

     Section 2.8 Interest and Repayment; Certain Mandatory Prepayments.

          (a) LC Interest; Repayment. Each LC Loan shall accrue interest in an amount equal to
two percent (2.0%) of the original principal amount thereof, for the first thirty (30) day period
following the making of such LC Loan (regardless of whether all or any portion of such LC Loan
shall be repaid (or converted to a Conversion Loan) prior to the expiration of such 30-day period,
in which case interest in an amount equal to the full two percent (2%) of the original principal
amount of such LC Loan shall fully accrue), and following the expiration of such thirty (30) day
period, interest on the unpaid principal amount of such LC Loan shall accrue on a daily basis at
the Per Diem Base Rate; provided, however, that from and after an Event of Default and during the
continuance thereof, the unpaid principal amount of such LC Loan, together with all unpaid interest
accrued thereon, shall accrue interest on a daily basis at the Per Diem Default

           

					
	 
	 	 
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Rate (all such interest payable on such LC Loan, the “LC Interest”). The LC Interest
shall be due and payable in accordance with the terms and conditions of this Agreement and the
applicable Credit Note. Notwithstanding the foregoing, in the event that two percent (2%) of the
original principal amount of any such LC Loan shall be equal to less than $50,000, then the
Borrower shall pay a minimum amount of LC Interest during the initial thirty (30) day period of
such LC Loan in an amount equal to $50,000. Upon the conversion (if at all) of an LC Loan to a
Conversion Loan in accordance with Section 2.6 hereof, such LC Loan shall cease to accrue
LC Interest; provided, however, that if such LC Loan is not converted to a Conversion Loan in
accordance with Section 2.6 hereof, such LC Loan shall continue to accrue LC Interest at
the rates specified herein until the aggregate unpaid amount of such LC Loan and all accrued and
unpaid LC Interest thereon shall have been paid in full. To the extent an LC Loan shall not be
converted to a Conversion Loan in accordance with Section 2.6 hereof, the aggregate unpaid
principal amount of such LC Loan, together with all unpaid LC Interest accrued thereon, shall be
due and payable in full no later than the third (3rd) Business Day following the LC Payment Date of
the Letter of Credit as to which such LC Loan relates. Failure to make timely payment of any LC
Loan or LC Interest, when due, shall constitute an immediate Event of Default under this Agreement
and shall entitle Administrative Agent and the Lenders to exercise any of the remedies available to
them hereunder, in equity or at law.

          (b) Vehicle Purchase Loan Interest and Ancillary Vehicle Loan Interest; Repayment;
Mandatory Prepayment. Each Vehicle Purchase Loan and Ancillary Vehicle Loan shall accrue
interest in an amount equal to two percent (2.0%) of the original principal amount thereof for the
first thirty (30) day period following the making of such Vehicle Purchase Loan or Ancillary
Vehicle Loan, as the case may be (regardless of whether such Vehicle Purchase Loan or Ancillary
Vehicle Loan, as the case may be, shall be repaid prior to the expiration of such 30-day period, in
which case interest in an amount equal to the full two percent (2.0%) of such original principal
amount shall fully accrue), and following the expiration of such thirty (30) day period interest on
the unpaid principal amount of such Vehicle Purchase Loan or Ancillary Vehicle Loan shall accrue on
a daily basis at the Per Diem Base Rate; provided, however, that from and after an Event of Default
and during the continuance thereof, the unpaid principal amount of each Vehicle Purchase Loan and
Ancillary Vehicle Loan, together with all unpaid interest accrued thereon, shall accrue interest on
a daily basis at the Per Diem Default Rate (all such interest payable on any such Vehicle Purchase
Loan, the “Vehicle Purchase Loan Interest”, and all such interest payable on any such
Ancillary Vehicle Loan, the “Ancillary Vehicle Loan Interest”). Such interest shall be due
and payable in accordance with the terms and conditions of this Agreement and the applicable
Vehicle Purchase Note or Ancillary Vehicle Note, as the case may be. Interest on each Vehicle
Purchase Loan and Ancillary Vehicle Loan shall accrue, at the rates specified herein, until the
aggregate unpaid principal amount of such Loan, together with all unpaid Vehicle Purchase Loan
Interest or Ancillary Vehicle Loan Interest, as the case may be, accrued thereon, shall have been
paid in full. Each Vehicle Purchase Loan and Ancillary Vehicle Loan, together with all unpaid
interest accrued thereon, shall be due and payable as follows:

     (i) In the case of any Vehicle Purchase Loan, the aggregate unpaid principal
amount thereof, and all unpaid interest accrued thereon, shall become due and
payable no later than the date that is one hundred twenty (120) days following the
Funding Date of such Vehicle Purchase Loan; provided, however,

      

					
	 
	 	 
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that if prior to the expiration of such 120-day period any Eligible Inventory
the purchase of which by the Borrower (or a wholly owned Subsidiary thereof) was
financed with all or a portion of the proceeds of such Vehicle Purchase Loan shall
have been delivered to a Customer, then, on the Mandatory Prepayment Date pertaining
thereto, the Borrower shall prepay the unpaid interest accrued on, and any unpaid
principal of, such Vehicle Purchase Loan by delivering to the Administrative Agent
an amount equal to the amount paid (or required to be paid) by such Customer for
such Eligible Inventory under the Customer Purchase Order(s) to which such Customer
is a party; and

     (ii) In the case of any Ancillary Vehicle Loan, the aggregate unpaid principal
amount thereof, and all unpaid interest accrued thereon, shall become due and
payable no later than the date that is one hundred twenty (120) days following the
Funding Date of such Ancillary Vehicle Loan; provided, however, that if prior to the
expiration of such 120-day period any Eligible Inventory, the Vehicle Shipping &
Conversion Costs of which were financed with all or a portion of such Ancillary
Vehicle Loan, shall have been delivered to a Customer by the Borrower (or a wholly
owned Subsidiary thereof), then, on the Mandatory Prepayment Date pertaining
thereto, the Borrower shall prepay the unpaid interest accrued on, and any unpaid
principal of, such Ancillary Vehicle Loan by delivering to the Administrative Agent
an amount equal to the amount paid (or required to be paid) by such Customer for
such Eligible Inventory under the Customer Purchase Order(s) to which such Customer
is a party.

Failure to make timely payment of any Vehicle Purchase Loan or Ancillary Purchase Loan or interest
thereon, when due, shall constitute an immediate Event of Default under this Agreement and shall
entitle Administrative Agent and the Lenders to exercise any of the remedies available to them
hereunder, in equity or at law.

          (c) Conversion Loan Interest; Repayment; Mandatory Prepayment. Each Conversion Loan
shall bear interest on a daily basis on the unpaid principal amount thereof at the Per Diem Base
Rate; provided, however, that from and after an Event of Default and during the continuance
thereof, the unpaid principal amount of each Conversion Loan, together with all unpaid interest
accrued thereon, shall accrue interest on a daily basis at the Per Diem Default Rate (all such
interest payable on any such Conversion Loan, the “Conversion Loan Interest”). Such
interest shall be due and payable in accordance with the terms and conditions of this Agreement and
the applicable Conversion Note; provided, however, if such Conversion Loan has been made within the
first thirty (30) day period following the issuance of the LC Loan which has converted into such
Conversion Loan, then such Conversion Loan shall not accrue interest at the Per Diem Base Rate from
the period commencing on the Funding Date of such Conversion Loan and ending on the date that is
thirty (30) days following the date of the making of such LC Loan (such period, the “Interest
Overlap Period”), it being understood that if an Event of Default shall occur and be continuing
during such Interest Overlap Period, interest on such Conversion Loan (and all unpaid interest
accrued thereon) shall accrue on a daily basis at the Per Diem Default Rate from the date of such
Event of Default. Interest on each Conversion Loan shall accrue, at the rates specified herein,
until the aggregate unpaid principal amount of such Conversion Loan, together with all unpaid
Conversion Loan Interest accrued thereon, shall have

           

					
	 
	 	 
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been paid in full. Each Conversion Loan, together with all unpaid interest accrued thereon,
shall be due and payable on the date that is one hundred twenty (120) days following the Funding
Date of the LC Loan that has converted into such Conversion Loan except that such Conversion Loan
shall be required to be prepaid in the event that, prior to the expiration of such 120-day period,
the Borrower (or a wholly owned Subsidiary thereof) shall have delivered to a Customer any Eligible
Inventory the acquisition of which by the Borrower (or such wholly owned Subsidiary) was financed
with all or a portion of the proceeds of LC Loan into which such Conversion Loan has converted, in
which case on the applicable Mandatory Prepayment Date relating to such Conversion Loan, the
aggregate amount of all payments made by such Customer with respect to such Eligible Inventory
shall be paid to the Administrative Agent to prepay the unpaid principal of, and all unpaid
interest accrued on, such Conversion Loan. Failure to make timely payment of any Conversion Loan
or interest thereon, when due, shall constitute an immediate Event of Default under this Agreement
and shall entitle Administrative Agent and the Lenders to exercise any of the remedies available to
them hereunder, in equity or at law.

          (d) A/R Loan Interest; Repayment. Each A/R Loan shall bear interest on a daily basis
on the unpaid principal amount thereof at the Per Diem Base Rate; provided, however, that from and
after an Event of Default and during the continuance thereof, the unpaid principal amount of each
Conversion Loan, together with all unpaid interest accrued thereon, shall accrue interest on a
daily basis at the Per Diem Default Rate (all such interest payable on any such A/R Loan, the
“A/R Loan Interest”). Such interest shall be due and payable in accordance with the terms
and conditions of this Agreement and the applicable A/R Note. Interest on each A/R Loan shall
accrue, at the rates specified herein, until the aggregate unpaid principal amount of such A/R
Loan, together with all unpaid A/R Loan Interest accrued thereon, shall have been paid in full.
Each A/R Loan, together with all unpaid interest accrued thereon, shall be due and payable on the
date that is thirty (30) days following the Funding Date thereof. Failure to make timely payment
of any A/R Loan or interest thereon, when due, shall constitute an immediate Event of Default under
this Agreement and shall entitle Administrative Agent and the Lenders to exercise any of the
remedies available to them hereunder, in equity or at law.

          (e) Applicable Law. No provision of this Agreement or any Note shall require the
payment of interest in excess of the rate permitted by applicable law. All interest and amounts
payable hereunder shall be paid by Borrower in accordance with this Agreement and the applicable
Note and otherwise immediately upon demand during the existence of an Event of Default.

          (f) Interest Compounding. All interest payable on the principal amount of any Loan
shall not compound except that (i) compound interest shall be payable on any Conversion Loan to the
extent that the principal amount thereof shall be comprised of accrued and unpaid interest on the
LC Loan that has converted into such Conversion Loan, (ii) compound interest shall be payable on
all unpaid interest due and owing on any Loan from and after, and during the continuance of, any
Event of Default, as and to the extent provided herein or in any Note, and (iii) compound interest
shall be payable on any other Obligation to the extent expressly provided by any provision of any
Loan Document.

     Section 2.9 Net Payments. All payments made by the Borrower hereunder, whether
relating to a Vehicle Purchase Loan, Vehicle Purchase Loan Interest, Ancillary Vehicle Loan,

      

					
	 
	 	 
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Ancillary Vehicle Loan Interest, Letter of Credit, LC Loan, LC Interest, A/R Loan, A/R Loan
Interest, Prepayment Fee or otherwise, will be made without setoff, counterclaim, deduction or
other defense. All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments (but excluding any
tax imposed on or measured by the net income of net profits of a Lender pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the principal office or
applicable lending office of such Lender is located or any subdivision thereof or therein), and all
interest, penalties or similar liabilities with respect to such taxes, levies, imposts, duties,
fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees,
assessments or other charges being referred to collectively as “Taxes”). If any Taxes are
so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this Agreement or under
any Note, after withholding or deduction for or on account of any Taxes, will not be less than the
amount provided for herein or in such Note.

     Section 2.10 Default Rate Generally. In the event that any unpaid principal of, or
unpaid interest accrued on, any Loan shall not be paid when due, or any Prepayment Fee shall not be
paid when due, or any other amount required to be paid to the Administrative Agent or the Lenders
pursuant to this Agreement or any other Loan Document shall not be paid when due (in each case
whether due on the stated maturity date or due date thereof, by acceleration or otherwise), then,
in lieu of the accrual of interest at the Per Diem Base Rate, interest on such overdue amount shall
accrue thereon on a daily basis, from the date such payment shall have become due until the date
such amount shall have been paid in full, at the Per Diem Default Rate (it being understood that
Per Diem Default Rate interest shall be without duplication of any other Per Diem Default Rate
interest payable pursuant to any other provision contained herein or in any other Loan Document).
All such interest accruing at the Per Diem Default Rate shall become due and payable immediately
upon demand therefor.

     Section 2.11 Foreign Exchange Costs. The Borrower acknowledges that, in connection
with the transactions contemplated by this Agreement, including the issuance of any Letter of
Credit as contemplated hereby, the Lenders may incur (i) certain costs and expenses in connection
with the exchange of currency of the United States into currency of any foreign jurisdiction or
(ii) suffer certain losses in connection with the exchange of currency of any foreign jurisdiction
into currency of the United States (in each case, a “Foreign Exchange Loss”). Without
limiting the generality of the foregoing, the Borrower further acknowledges that the Lenders may be
required to collateralize any Support Agreement entered into with any LC Issuer by depositing funds
with such LC Issuer that will be exchanged for currency of the jurisdiction of such LC Issuer and,
in the event that the Letter of Credit relating thereto shall expire without being drawn, such
foreign currency will be returned to the Lenders in currency of the United States based on the then
applicable foreign exchange rate, in which case the Lenders may suffer a Foreign Exchange Loss.
The Borrower shall indemnify the Lenders from and against, and pay and reimburse the Lenders for,
promptly upon written demand, any and all Foreign Exchange Losses suffered or incurred by the
Lenders from time to time. In the event that the Borrower shall fail to indemnify, pay or
reimburse the Lenders for any such Foreign Exchange Loss upon demand therefor, the amount then due
shall bear interest on a daily basis, and the Borrower shall

      

					
	 
	 	 
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pay interest thereon, at the Per Diem Default Rate until such amount shall have been paid in
full. The Lenders agree that if, in connection with the issuance of any Letter of Credit
(including the return to the Lenders of funds deposited or paid by them under Support Agreements
for the purpose of causing to be issued such Letter of Credit), they shall receive a foreign
exchange gain arising out of the exchange of any foreign currency into the currency of the United
States, the Lenders shall, as soon as reasonably practicable following the receipt of such gain,
deliver to the Borrower the full amount of such gain (net of expenses).

     Section 2.12 Termination of Commitments. The Borrower shall have the right, at its
option, to terminate all (but not less than all) of the Commitments of the Lenders by giving
irrevocable written notice (the “Commitment Termination Notice”) to the Administrative
Agent not less than ten (10) Business Days’ prior to the desired termination date of such
Commitments, in which case the Commitments of all Lenders shall so terminate on such date (the
“Commitment Termination Date”). On the Commitment Termination Date, the Borrower shall pay
to the Administrative Agent, for the benefit of the Lenders, the aggregate amount of all
Obligations then outstanding, together with the Prepayment Fee (if any), which, in the case of the
portion of the Obligations consisting of Letters of Credit then outstanding, shall, for the
avoidance of doubt, be equal to 105% of the aggregate maximum amount then available to be drawn
under such Letters of Credit. For the avoidance of doubt, the Borrower shall not be obligated to
pay a Prepayment Fee solely on account of the suspension, reduction or termination of the
Commitments by the Lenders following an Event of Default (unless, in any such case, the Borrower
shall have delivered a Commitment Termination Notice).

ARTICLE 3. CONDITIONS PRECEDENT

     Section 3.1 Conditions of Initial Letter of Credit and Loans, etc. The effectiveness
of the Commitments and the obligation of the Lenders to cause to be issued the initial Letter of
Credit pursuant hereto, or to enter into Support Agreements relating thereto or to make an initial
Loan to Borrower hereunder shall be subject to the satisfaction of the conditions precedent, in
addition to the applicable condition precedent set forth in Section 3.2 below, that the
Administrative Agent shall have received all of the following, in form and substance satisfactory
to the Administrative Agent, each duly executed and certified or dated the Closing Date or such
other date as is satisfactory to the Administrative Agent:

          (a) The initial Note(s) evidencing the LC Loans, the Vehicle Purchase Loans and Ancillary
Vehicle Loans, as the case may be, to be made on the Closing Date appropriately completed and duly
executed by the Borrower;

          (b) The other Loan Documents, appropriately completed and duly executed by the Borrower and
the other parties thereto;

          (c) One or more UCC-1 Financing Statements in a form acceptable to the Administrative Agent
appropriately completed in favor of the Administrative Agent and pre-filed in such filing offices
as Administrative Agent shall require, describing the Collateral and having the effect of
perfecting the security interest of the Administrative Agent, on behalf of the Lenders, in the
Collateral;

           

					
	 
	 	 
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          (d) Recent UCC searches from the filing offices in all states required by the Administrative
Agent which reflect that no Person other than the Administrative Agent, on behalf of the Lenders,
holds a Lien on the Borrower’s and each other Credit Party’s assets, other than, (i) in the case of
the Borrower, the Santa Rosa Property and the Mendocino Property, and (ii) the Liens set forth on
Schedule 6.9 hereof;

          (e) A certificate of the Secretary of each Credit Party having attached (i) a copy of the
resolution of such Credit Party authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, certified by the Secretary or an Assistant Secretary of such
Credit Party; (ii) an incumbency certificate showing the names and titles, and bearing the
signatures of, the officers of such Credit Party authorized to execute the Loan Documents to which
it is a party; and (iii) a copy of such Credit Party’s certificate/articles of incorporation and
by-laws with all amendments thereto;

          (f) A copy of the certificate/articles of incorporation of each Credit Party with all
amendments thereto, certified by the appropriate governmental official of the jurisdiction of its
organization as of a date acceptable to the Administrative Agent;

          (g) Certificates of good standing for each Credit Party in the jurisdiction of its
incorporation and such other states as such Credit Party is required to qualify to do business,
certified by the appropriate governmental officials as of a date acceptable to the Administrative
Agent;

          (h) An opinion of counsel to the Borrower and each other Credit Party, addressed to the
Administrative Agent and the Lenders, in form and substance satisfactory to the Administrative
Agent (which opinion will expressly permit any Person who shall become a Lender hereunder to rely
on such opinion);

          (i) Evidence of insurance for all insurance required by the Loan Documents;

          (j) Pay-off letters from each of the creditors listed on Annex A hereto and any other
Person having a Lien on the Collateral not permitted hereunder;

          (k) Uniform Commercial Code termination statements evidencing the termination of the Liens
identified on Annex B hereto and any other Lien on the Collateral not permitted hereunder;

          (l) certified copies of each Conversion Contract in effect on the date hereof; and

          (m) Such other approvals, opinions, documents or certificates as the Administrative Agent may
reasonably request;

provided, however, that Initial Lender may, in its sole and absolute discretion, elect to enter
into a Support Agreement, issue a Letter of Credit or make a Vehicle Purchase Loan or an Ancillary
Vehicle Loan prior to satisfaction of all conditions in this Section 3.1 and the act of
doing so shall not be deemed a waiver of any theretofore unsatisfied condition unless
Administrative Agent expressly waives such condition in writing.

 

					
	 
	 	 
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     Section 3.2 Conditions to Each Letter of Credit, Vehicle Purchase Loan and Ancillary
Vehicle Loan. The obligation of the Lenders to cause to be issued each Letter of Credit and to
make each Vehicle Purchase Loan and Ancillary Vehicle Loan on the Funding Date with respect
thereto, as the case may be, shall be subject to Borrower’s satisfaction of all the following
conditions precedent:

          (a) The Administrative Agent shall have received a Credit Request, Vehicle Purchase Loan
Request or Ancillary Vehicle Loan Request, as the case may be, in the form of, respectively,
Exhibit F, Exhibit G or Exhibit H attached hereto, duly executed and
completed by Borrower, in form and substance satisfactory to the Administrative Agent;

          (b) The Administrative Agent shall have received a Credit Note, Vehicle Purchase Note or
Ancillary Vehicle Note, as the case may be, for each Lender, duly executed by Borrower, in form and
substance satisfactory to the Administrative Agent;

          (c) The Borrower’s representations and warranties contained in Article 4 shall be true
and correct, as though made on such Funding Date;

          (d) Before and after giving effect to such Letter of Credit, Vehicle Purchase Loan and/or
Ancillary Vehicle Loan, no Default or Event of Default shall have occurred and be continuing;

          (e) Such Letter of Credit, Vehicle Purchase Loan or Ancillary Vehicle Loan shall be issued for
the sole purpose of (i) in the case of a Letter of Credit or Vehicle Purchase Loan, purchasing
Eligible Inventory, and (ii) in the case of an Ancillary Vehicle Loan, financing Vehicle Shipping &
Conversion Costs;

          (f) The Administrative Agent, in its sole discretion, shall be satisfied with the
creditworthiness of the Vendor to whom the proceeds of such Letter of Credit or Vehicle Purchase
Loan are to be paid;

          (g) In the case of a Letter of Credit or Vehicle Purchase Loan, the Administrative Agent, in
its sole and absolute discretion, shall be satisfied with the creditworthiness of the Customer(s)
(or the floor plan lender of such Customer(s)) to which the Eligible Inventory purchased with the
proceeds of such Letter of Credit or Vehicle Purchase Loan is to be sold and, to the extent the
Administrative Agent shall not be so satisfied with the creditworthiness of any such Customer (or
any such Customer’s floor plan lender), the Borrower shall have delivered or cause to be delivered
a prepaid credit insurance policy or letter of credit, from an insurance company or other financial
institution acceptable to the Administrative Agent in its sole and absolute discretion, securing
the performance obligations of such Customer under the Customer Purchase Order(s) to which such
Customer is a party, which insurance policy or letter of credit shall be in form and substance
acceptable to the Administrative Agent in its sole and absolute discretion; with respect to any
floor plan lender and if requested by the Administrative Agent, the Borrower shall have delivered
or cause to be delivered to the Administrative Agent an instrument in writing (which shall be
addressed to the Administrative Agent, for the benefit of the Lenders, and shall be in form and
substance acceptable to the Administrative Agent in its sole and absolute discretion) pursuant to
which such floor plan lender

           

					
	 
	 	 
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shall have irrevocably, unconditionally and absolutely agreed to pay directly to the
Administrative Agent, for the benefit of the Lenders, the full purchase price payable pursuant to
such Customer Purchase Order(s) upon delivery to such Customer of the Eligible Inventory that are
the subject of such Customer Purchase Order(s);

          (h) With respect to any Customer Purchase Order and immediately after giving effect to the
issuance of such Letter of Credit or the making of such Vehicle Purchase Loan or Ancillary Vehicle
Loan, as the case may be, the sum of (i) the aggregate Stated Amount of all Letters of Credit at
any time caused to be issued by the Lenders and the aggregate principal amount of all Vehicle
Purchase Loans at any time made by the Lenders, in each case for the purpose of financing the
purchase of the Eligible Inventory to be sold by Borrower (or its Subsidiary) under such Customer
Purchase Order, plus (ii) the aggregate principal amount of all Ancillary Vehicle Loans at anytime
made by the Lenders to finance the Ancillary Vehicle Budget of such Eligible Inventory (such sum,
the “Aggregate Inventory Debt”), shall not exceed eighty-five percent (85%) of the
aggregate purchase price (after deducting freight charges, rebates or discounts, taxes and other
miscellaneous charges) of such Eligible Inventory under such Customer Purchase Order, unless the
Borrower has deposited into the Cash Collateral Account funds in an amount equal to the excess of
the Aggregate Inventory Debt over eighty-five percent (85%) of such aggregate purchase price under
such Customer Purchase Order;

          (i) Borrower shall have provided evidence satisfactory to Administrative Agent that it has
instructed its Customers (or shall have caused the applicable Subsidiary of Borrower to instruct
their Customers) in writing (and such Customers shall have agreed in writing, for the benefit of
the Lenders) to make all payments on amounts owing from such Customer to Borrower (or its
wholly-owned Subsidiary a party to a Subsidiary Security Agreement) by wire transfer directly to
the Depository Account or by mail to the Lockbox;

          (j) Upon request of Administrative Agent, Borrower (or its wholly-owned Subsidiary a party to
a Subsidiary Security Agreement) shall file, in favor of the Borrower (or such Subsidiary) or the
Administrative Agent, a precautionary UCC Financing Statement against the Vendors (or similar
statement under the laws applicable to such Vendors) of the Eligible Inventory purchased by
Borrower (or such Subsidiary) with the proceeds of such Letter of Credit or Vehicle Purchase Loan;
provided, however, that Borrower’s (or such Subsidiary’s) obligation to make such
filing is conditioned upon obtaining the consent of such Vendors with respect to such filing, which
Borrower shall use commercially reasonable efforts to obtain and which Borrower acknowledges will,
if commercially reasonable, be obtained with respect to any Vendor upon such Vendor’s execution of
the Bill of Sale in the form attached hereto as Exhibit L. Such financing statement shall
describe the Eligible Inventory purchased by Borrower (or such Subsidiary) and note that the
relationship between Borrower (or such Subsidiary) or Administrative Agent and Vendors is that of
Bailee/Bailor or Seller/Buyer, as appropriate;

          (k) Borrower shall have provided Administrative Agent with prepaid property, marine and
cancellation insurance policies in favor of Administrative Agent, in amounts and otherwise in form
and substance satisfactory to Administrative Agent, insuring the Vehicles financed pursuant to such
Letter of Credit, Vehicle Purchase Loan and/or Ancillary Vehicle Loan, and such insurance policies
shall name the Administrative Agent as an additional insured and loss payee, in form and substance
acceptable to the Administrative Agent;

           

					
	 
	 	 
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          (l) Borrower shall have provided Administrative Agent with a copy of a performance bond in
favor of Administrative Agent, in form and substance satisfactory to Administrative Agent, insuring
the performance of the Approved Converter’s obligations under the applicable Conversion Contracts
to Americanize the Eligible Inventory purchased with the proceeds of such Letter of Credit or
Vehicle Purchase Loan or the Eligible Inventory relating to such Ancillary Vehicle Loan, which
performance bond shall be in an amount equal to not less than one hundred and ten percent (110%) of
the Aggregate Inventory Debt relating to such Eligible Inventory as outstanding immediately after
giving effect to the issuance of such Letter of Credit or the making of such Vehicle Purchase Loan
or Ancillary Vehicle Loan, as the case may be;

          (m) Borrower shall have provided, or shall have caused the applicable Approved Converter to
provide, Administrative Agent with evidence of a performance bond in favor of the EPA, satisfying
all requirements of Law applicable thereto and otherwise in form and substance satisfactory to
Administrative Agent, insuring the applicable Approved Converter’s Americanization of the Eligible
Inventory purchased with the proceeds of such Letter of Credit or Vehicle Purchase Loan or
Americanization of the Eligible Inventory relating to such Ancillary Vehicle Loan, which
performance bond shall be in an amount equal to not less than [one hundred and ten percent (110%)
of the Aggregate Inventory Debt] relating to such Eligible Inventory as outstanding immediately
after giving effect to the issuance of such Letter of Credit or the making of such Vehicle Purchase
Loan or Ancillary Vehicle Loan, as the case may be;

          (n) In the case of any Vehicle Purchase Loan, the Administrative Agent (or a third party
acting on its behalf pursuant to a written agreement satisfactory to the Administrative Agent)
shall have received, or shall be satisfied with arrangements established to ensure that the
Administrative Agent (or such third party acting pursuant to such written agreement) shall receive,
contemporaneously with or prior to the funding of such Vehicle Purchase Loan, the Manufacturer’s
Statement of Origin (or similar document under the law applicable to the Vendor(s) named in the
applicable Vehicle Purchase Loan Request) of the Eligible Inventory being purchased with the
proceeds of such Vehicle Purchase Loan, in form and substance acceptable to the Administrative
Agent in its sole and absolute discretion;

          (o) In the case of any Letter of Credit, the Administrative Agent shall be satisfied, in its
sole and absolute discretion, with the form and terms of such Letter of Credit and that the other
conditions or provisions applicable to, or governing, the issuance of such Letter of Credit as set
forth in Section 2.1(a) hereof shall have been satisfied;

          (p) Without limiting any other condition set forth in this Section 3.2, (i) the
Administrative Agent and the Lenders shall be satisfied, in their sole and absolute discretion,
that all documents, instruments and certificates, and all actions, shall have been taken by the
Borrower and such other Persons (including Customs Brokers, independent inspection Persons, or
otherwise) as shall be necessary or advisable, as determined by the Administrative Agent, to
perfect, and maintain the perfection of (from the time Borrower shall acquire title to the
applicable Eligible Inventory and including during the period when the Eligible Inventory shall be
shipped from the Vendor to the Approved Converter, shall be in the possession of the Approved
Converter or shall be in transit to the applicable Customer), the Administrative

           

					
	 
	 	 
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Agent’s first priority lien on and security interest in the Eligible Inventory being financed
(or the Eligible Inventory as to which the Vehicle Shipping & Conversion Costs are being financed)
with the proceeds of such Letter of Credit, Vehicle Purchase Loan or Ancillary Vehicle Loan,
including the execution and delivery by the applicable Customs Broker of an agreement pursuant to
which it agrees to be in possession and control of the Manufacturer’s Statement of Origin (or
similar title document) in respect of such Eligible Inventory for the benefit, and at the direction
of, the Administrative Agent, and (ii) at the request of the Administrative Agent, the Borrower
shall have caused to be delivered an opinion of counsel to the Borrower and each other Credit
Party, addressed to the Administrative Agent and the Lenders, in form and substance satisfactory to
the Administrative Agent (which opinion will expressly permit any person who shall become a Lender
hereunder to rely on such opinion), which opinion shall address, among other things, the validity
and perfection of such security interest; and

          (q) If the Administrative Agent shall so request, it shall have received a certificate of the
Borrower in a form acceptable to the Administrative Agent stating that such Credit Note, Vehicle
Purchase Note or Ancillary Vehicle Note has been duly issued.

     Section 3.3 Conditions to Issuance of Each Conversion Loan Issued Upon Conversion of an LC
Loan. The obligation of the Lenders to make a Conversion Loan upon the conversion of an LC
Loan in accordance with Section 2.6 shall be subject to Borrower’s satisfaction of all the
following conditions precedent not later than two (2) Business Days following the LC Payment Date
of the Letter of Credit as to which such LC Loan relates:

          (a) The Administrative Agent shall have received a Conversion Request, in the form of
Exhibit I attached hereto, duly executed by Borrower, in form and substance reasonably
satisfactory to the Lenders and accompanied by the documents and other attachments, if any,
required pursuant to Section 2.6 hereof;

          (b) The Administrative Agent shall have received a Conversion Note, for each Lender, duly
executed by Borrower, in form and substance reasonably satisfactory to the Administrative Agent;

          (c) The Borrower’s representations and warranties contained in Article 4 shall be true
and correct, as though made on the applicable Funding Date;

          (d) Before and after giving effect to such Conversion Loan, no Default or Event of Default
shall have occurred and be continuing; and

          (e) Borrower shall have provided evidence satisfactory to Administrative Agent that it has
instructed (or shall have caused its Subsidiaries to instruct) in writing the Customers of the
Eligible Inventory purchased with the proceeds of the LC Loan that shall convert into the proposed
Conversion Loan (and such Customers shall have agreed in writing, for the benefit of the Lenders)
to make all payments on amounts owing from such Customers to Borrower (or any Subsidiary thereof)
with respect to such Eligible Inventory by wire transfer directly to the Depository Account or by
mail to the Lockbox.

           

					
	 
	 	 
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     Section 3.4 Conditions to Each A/R Loan. The obligation of the Lenders to make an A/R
Loan pursuant to Section 2.7 hereof shall be subject to Borrower’s satisfaction on or prior
to the Funding Date thereof of all the following conditions precedent:

          (a) The Administrative Agent shall have received an A/R Loan Request, in the form of
Exhibit J attached hereto, duly executed by Borrower, in form and substance reasonably
satisfactory to the Administrative Agent and accompanied by: (i) the documents and other
attachments required pursuant to Section 2.7 hereof and (ii) original evidence of the
shipment to and acceptance by Borrower’s Customers of the purchased Eligible Inventory underlying
the Eligible Accounts;

          (b) The Administrative Agent shall have received an A/R Note, for each Lender, duly executed
by Borrower, in form and substance reasonably satisfactory to such Lender;

          (c) The Borrower’s representations and warranties contained in Article 4 shall be true
and correct, as though made on such Funding Date;

          (d) Before and after giving effect to such A/R Loan, no Default or Event of Default shall have
occurred and be continuing;

          (e) The Administrative Agent, in its sole and absolute discretion, shall be satisfied with the
creditworthiness of the Customer(s) (or the floor plan lender of such Customer(s)) in respect of
the Eligible Accounts and, to the extent the Administrative Agent shall not be so satisfied with
the creditworthiness of any such Customer (or any such Customer’s floor plan lender), the Borrower
shall have delivered or cause to be delivered a prepaid credit insurance policy or letter of
credit, from an insurance company or other financial institution acceptable to the Administrative
Agent in its sole and absolute discretion, securing or guarantying the payment of the Eligible
Accounts of such Customer, which insurance policy or letter of credit shall be in form and
substance acceptable to the Administrative Agent in its sole and absolute discretion; with respect
to any floor plan lender and if requested by the Administrative Agent, the Borrower shall have
delivered or cause to be delivered to the Administrative Agent an instrument in writing (which
shall be addressed to the Administrative Agent, for the benefit of the Lenders, and shall be in
form and substance acceptable to the Administrative Agent in its sole and absolute discretion)
pursuant to which such floor plan lender shall have irrevocably, unconditionally and absolutely
agreed to pay directly to the Administrative Agent, for the benefit of the Lenders, the full amount
of the Eligible Accounts of such Customer not later than a date specified by the Administrative
Agent;

          (f) Immediately after giving effect to such A/R Loan, the aggregate principal amount of all
Conversion Loans and A/R Loans then outstanding shall not exceed the Available Borrowing Base; and

          (g) Borrower shall have provided evidence satisfactory to Administrative Agent that it has
instructed (or shall have caused its Subsidiaries to instruct) in writing the Customers as to which
the Eligible Accounts financed with the proceeds of such A/R Loan relate (and such Customers shall
have agreed in writing, for the benefit of the Lenders) to make all

           

					
	 
	 	 
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payments on amounts owing from such Customers to Borrower (or any Subsidiary thereof) with
respect to such Eligible Accounts by wire transfer directly to the Depository Account or by mail to
the Lockbox.

     Section 3.5 Withdrawal of Funds from Accounts. Pursuant to the terms of the
Depository Account Control Agreement, the Borrower shall have no right (and shall have caused each
Subsidiary thereof to agree that it shall have no right) to withdraw funds from the Depository
Account or the Lockbox. Pursuant to the terms of the General Account Control Agreement and the
Securities Intermediary Control Agreement, the Borrower shall have no right (and shall have caused
each Subsidiary thereof to agree that it shall have no right) to withdraw funds from the deposit
accounts identified in the General Account Control Agreement and the securities accounts identified
in the Securities Intermediary Control Agreement in the absence of the prior written consent of the
Administrative Agent, except that, in the absence of an Event of Default, the Borrower and the
applicable Subsidiaries thereof shall have the right to withdraw funds from such account to the
extent provided therein. The Borrower acknowledges and agrees that the Sweep Account and the Cash
Collateral Account, if any, will be established in the name of the Administrative Agent and neither
the Borrower nor any Subsidiary thereof shall have any right to withdraw funds from or direct the
disposition of funds from, or otherwise have control over, such Sweep Account or Cash Collateral
Account, if any. The Borrower further acknowledges and agrees (and shall have caused each
Subsidiary thereof to acknowledge and agree) that any and all deposits received in the Lockbox
and/or Depository Account shall be swept into the Sweep Account daily without further action on the
part of Borrower or such Subsidiary. Borrower acknowledges and agrees, for and on behalf of itself
and its Subsidiaries, that the Administrative Agent, without seeking the consent of the Borrower
(or any Subsidiary thereof), will withdraw funds from the Sweep Account (and the Cash Collateral
Account if the funds on deposit in the Sweep Account are insufficient) from time to time, and
without the consent of Borrower, in order to make payments due and payable on the Obligations.

     Section 3.6 Application of Accounts. So long as no Event of Default shall have
occurred and be continuing, the Lenders shall apply funds received in the Sweep Account to the
Obligations as follows:

          (a) To the extent such funds consist of payments received from any Customer, such funds shall
be applied to the Loans (such as the Vehicle Purchase Loan and Ancillary Vehicle Loan) the proceeds
of which were used to finance Borrower’s (or its wholly owned Subsidiary’s) purchase of, or Vehicle
Shipping & Conversion Costs relating to, the Eligible Inventory that was sold to such Customer, in
the inverse order of maturity as to such Loans, as follows: (i) first, to any due but unpaid
interest accrued on such Loan at the Per Diem Default Rate, (ii) second, to any due but unpaid
interest accrued on such Loan at the Per Diem Base Rate, (iii) third, to any due but unpaid fees or
expenses payable hereunder and allocated to such Loan (which allocation the Administrative Agent
shall be entitled to make in such manner or order as it shall deem appropriate), (iv) fourth, to
any then outstanding principal of such Loan, and (vi) except as set forth in clause (b) of this
Section 3.6, fifth, to any and all other Obligations in such order as the Administrative
Agent shall deem appropriate.

          (b) To the extent such funds consist of any other payments received from any Customer, such
funds shall be applied to the A/R Loans (in such order of maturity as the

           

					
	 
	 	 
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Administrative Agent shall deem appropriate), as follows: (i) first, to any due but unpaid
interest accrued on such A/R Loan at the Per Diem Default Rate, (ii) second, to any due but unpaid
interest accrued on such A/R Loan at the Per Diem Base Rate, (iii) third, to any due but unpaid
fees or expenses payable hereunder and allocated to such A/R Loan (which allocation the
Administrative Agent shall be entitled to make in such manner or order as it shall deem
appropriate), and (iv) fourth, to any then outstanding principal of such A/R Loan.

          (c) Any payments received into the Sweep Account, to the extent not applied in accordance with
clauses (a) and (b) hereof, in excess of the amount of the then outstanding Obligations (including,
without limitation, all then outstanding A/R Loans, A/R Loan Interest, Conversion Loans, Conversion
Loan Interest, Ancillary Vehicle Loans, Ancillary Vehicle Loan Interest, Vehicle Purchase Loans,
Vehicle Purchase Loan Interest, LC Loan, LC Interest and any Prepayment Fee) shall be transferred
to the Borrower’s Operating Account promptly upon Borrower’s written request, and at Borrower’s
sole cost and expense.

     Notwithstanding the foregoing or any other provision to the contrary contained herein, upon
the occurrence and during the continuance of an Event of Default, the Lenders shall have the right
to apply any monies, payments or set-off amounts received by the Lenders, including any funds
received by the Lenders from the Sweep Account, the Lockbox, the Depository Account, the Cash
Collateral Account (if any), the Operating Account, any account identified in the General Account
Control Agreement, any account identified in the Securities Intermediary Control Agreement, or
otherwise), to any and all of the Obligations in such order as the Administrative Agent shall deem
appropriate.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES

     To induce any Lender to cause to be issued any Letter of Credit and make any Loan and to
purchase the Notes, the Borrower represents and warrants to the Administrative Agent and to each
Lender as follows:

     Section 4.1 Organization, Standing, etc. Each of the Borrower and each Subsidiary
thereof (other than Non-Operating Subsidiaries) is a corporation duly organized and validly
existing and in good standing under the laws of the State of its incorporation and has all
requisite power and authority to carry on its business as now conducted, to enter into the Loan
Documents to which it is a party and to perform its obligations under such Loan Documents. Each of
the Borrower and each Subsidiary thereof (other than Non-Operating Subsidiaries) is duly qualified
and in good standing as a foreign corporation in each jurisdiction in which the character of the
properties owned, leased or operated by it or the business conducted by it makes such qualification
necessary and where the failure to qualify could constitute an Adverse Event.

     Section 4.2 Authorization and Validity. The execution, delivery and performance by
each of the Borrower and each Subsidiary thereof of the Loan Documents to which it is a party have
been duly authorized by all necessary corporation action. The Loan Documents to which each of the
Borrower and each Subsidiary thereof is a party constitute the legal, valid and binding obligations
of the Borrower and such Subsidiary, as the case may be, enforceable against the Borrower and such
Subsidiary, as the case may be, in accordance with their respective terms, subject to limitations
as to enforceability which might result from bankruptcy, insolvency,

      

					
	 
	 	 
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moratorium and other similar laws affecting creditors’ rights generally and subject to
limitations on the availability of equitable remedies.

     Section 4.3 No Conflict, No Default. The execution, delivery and performance by each
of the Borrower and each Subsidiary thereof of the Loan Documents to which it is a party will not:
(a) violate any provision of any law, statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to the Borrower or such Subsidiary; (b) violate or
contravene any provisions of the Borrower’s or such Subsidiary’s certificate/articles of
incorporation or by-laws; or (c) result in a breach of or constitute a default under any indenture,
loan or credit agreement or any other agreement, lease or instrument to which the Borrower or such
Subsidiary is a party or by which it or any of its properties may be bound or result in the
creation of any Lien on any asset of the Borrower or such Subsidiary except for Liens created by
the Loan Documents. None of the Borrower or any Subsidiary thereof is in default under or in
violation of any such law, statute, rule or regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, loan or Loan Document or other agreement, lease or
instrument in any case in which the consequences of such default or violation constitute an Adverse
Event. No Default or Event of Default has occurred and is continuing.

     Section 4.4 Agreements with Affiliates. Except as set forth on Schedule 4.4
to this Agreement, the Borrower is not a party to any agreements with Guarantors or any entities
controlled by Guarantors that have not been disclosed in writing to Administrative Agent prior to
the date hereof, other than any thereof that has been entered into in good faith and on terms and
conditions that are no less favorable to the Borrower than would be obtained had such agreement
been entered into with a unrelated third party based on arms’ length negotiations.

     Section 4.5 Government Consent. (a) Except as set forth on Schedule 4.5(a) to
this Agreement, no order, consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by, any federal, state or local governmental or public
body or authority is required on the part of the Borrower or any Subsidiary thereof to authorize,
or is required in connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents to which it is a party; and (b)
except as set forth on Schedule 4.5(b) to this Agreement, all federal and state government
approvals to import Vehicles into the United States, Americanizing Vehicles and selling Vehicles
have been taken.

     Section 4.6 Litigation. Except as specifically disclosed in Schedule 4.6 to
this Agreement, there are no actions, suits, claims, investigations, inquiries, voluntary requests
for information or proceedings pending or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower or any Subsidiary thereof, or the Borrower’s or any of its
Subsidiaries’ properties, before any court or arbitrator, any nation or state (or political
subdivision thereof), or any governmental department, board, agency or other instrumentality, or
other entity owned or controlled, through stock or capital ownership or otherwise, by any of the
foregoing (the foregoing are individually and collectively hereinafter referred to as a
“Governmental Authority”). No injunction, writ, temporary restraining order or any order
of any nature has been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance by the Borrower of this Agreement or the other

      

					
	 
	 	 
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Loan Documents to which it is a party or by any Subsidiary thereof of any other Loan Document
to which such Subsidiary is a party, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.

     Section 4.7 Financial Condition. The annual and quarterly consolidated financial
statements of the Borrower (including the Borrower’s Form 10-K and Forms 10-Q) for the fiscal year
ended December 31, 2004 and for the fiscal quarters ended March 31, 2005 and June 30, 2005 (the
“Financial Statements”), copies of which have been furnished to the Lenders, were prepared
in accordance with GAAP (except, in the case of the quarterly financial statements, subject to
normal year-end adjustments and the absence of footnotes) and are complete and correct and fairly
and accurately present in all material respects the financial condition of the Borrower and its
Subsidiaries (taken as a whole) as of their dates and the results of their operations for the
periods then ended. Since June 30, 2005, there has no material adverse change in the financial
condition of the Borrower and its consolidated subsidiaries (taken as a whole) or the results of
their operations. Neither the Borrower nor any Subsidiary thereof has any contingent obligations
other than, in the case of the Subsidiaries, their respective obligations under the Subsidiary
Guaranties and, in the case of the Borrower and its Subsidiaries, such contingent obligations as
are reflected in the Financial Statements or footnotes thereto.

     Section 4.8 Compliance. Each of the Borrower and each Subsidiary thereof is in
compliance with all statutes and governmental rules and regulations applicable to it, the
noncompliance of which could constitute an Adverse Event.

     Section 4.9 Ownership of Property; Leases; Liens. Neither the Borrower nor any
Subsidiary thereof owns real estate except as set forth on Schedule 4.9 to this Agreement,
and each of the Borrower and each Subsidiary thereof has good and marketable title to, or a good
and valid license to, all of its personal property. The Borrower has provided to Administrative
Agent true and accurate copies of any and all written real property or personal property leases to
which it and each Subsidiary thereof is party, and has accurately described in writing to
Administrative Agent any and all unwritten real property or personal property leases to which it is
subject, including any leases with Related Parties. None of the properties, revenues or assets of
the Borrower or any Subsidiary thereof is subject to a Lien except for Liens granted to the
Administrative Agent as required by the Loan Documents or Liens that are subordinated to the
Administrative Agent’s Lien under a Subordination Agreement or Permitted Liens.

     Section 4.10 Indebtedness. Neither the Borrower nor any of its Subsidiaries has any
Indebtedness except for Indebtedness to Lenders pursuant to Notes and the Indebtedness permitted
under Section 6.8 hereof.

     Section 4.11 Guaranty or Suretyship. Neither the Borrower nor any of its Subsidiaries
is a party to any contract of guaranty or suretyship, and none of its assets is subject to such a
contract, except, in the case of the Subsidiaries of the Borrower, the Subsidiary Guaranties.

     Section 4.12 Taxes. The Borrower and each Subsidiary thereof has filed all federal,
state and local tax returns required to be filed and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any assessments made against

      

					
	 
	 	 
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it or any of its property and all other taxes, fees and other charges imposed on it or any of
its property by any governmental authority. No tax Liens have been filed and no claims are being
asserted with respect to any such taxes, fees or charges against Borrower or its Subsidiaries. The
sum of the charges, accruals and reserves on the books of the Borrower or any Subsidiary thereof in
respect of taxes and other governmental charges are adequate to pay and discharge all such taxes of
the Borrower or such Subsidiary.

     Section 4.13 Subsidiaries. Schedule 4.13 to this Agreement sets forth all of
the Subsidiaries of the Borrower.

     Section 4.14 Partnerships and Joint Ventures. Except as set forth on Schedule
4.14 to this Agreement, neither the Borrower nor any Subsidiary thereof is a partner (limited
or general) or joint venturer in any partnerships or joint ventures.

     Section 4.15 Use of Proceeds. The Letters of Credit and Vehicle Purchase Loans shall
be used solely to acquire merchandise from Vendors approved by the Administrative Agent that are
not Related Parties of the Borrower or any Guarantor, which merchandise when purchased shall have
been contracted for sale by Borrower (or a wholly owned Subsidiary thereof that is a party to a
Subsidiary Security Agreement) to Customers approved in advance by the Administrative Agent. The
Ancillary Vehicle Loans shall be used solely to pay Vehicle Shipping & Conversion Costs. The A/R
Loans shall be used solely to finance Eligible Accounts.

     Section 4.16 Property Purchased From Vendors. All Eligible Inventory purchased by
Borrower (or a wholly owned Subsidiary thereof that is a party to a Subsidiary Security Agreement)
with the proceeds of a Letter of Credit or a Ancillary Vehicle Loan shall be purchased from Vendors
who are not Related Parties and whose interest therein is not subject to any Lien or encumbrance
superior to Borrower’s interest therein.

     Section 4.17 Insurance. Schedule 4.17 to this Agreement describes the
property and casualty insurance and credit insurance carried by the Borrower and its Subsidiaries
on the date hereof. All such policies of insurance are in full force and effect on the date
hereof, and all premiums, assessments and other charges required thereunder have been paid.

     Section 4.18 Contracts. Neither the Borrower nor any Subsidiary thereof is a party to
any contract or agreement, or subject to any charge, corporate restriction, judgment, decree or
order, the performance of which could constitute an Adverse Event. Schedule 4.18 hereto
sets forth all material agreements currently in effect to which Borrower and each of its
Subsidiaries is a party, including, without limitation, each Conversion Contract and each agreement
in place for purchase of Vehicles from Vendors. Each such agreement set forth on Schedule
4.18 hereof is in full force and effect, is the legal, valid and binding obligation of Borrower
(or such Subsidiary) a party thereto and, to the knowledge of Borrower, each other party thereto,
and the Borrower or its Subsidiary a party thereto is not, and to the knowledge of the Borrower the
other parties thereto are not, in default in their respective obligations thereunder other than
such defaults that would not, individually or in the aggregate, have or result in an Adverse Event
as against the Borrower or any Subsidiary thereof. The Borrower has good and valid title to, or a
good, valid and enforceable license in, all technology, know-how and other rights (including
intellectual property rights) as shall be necessary to effect the Americanization of the Vehicles
to be

      

					
	 
	 	 
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purchased by it (or a wholly owned Subsidiary thereof a party to a Subsidiary Security
Agreement) with the proceeds of a Letter of Credit or Vehicle Purchase Loan.

     Section 4.19 Accuracy of Information. All factual information heretofore or herewith
furnished by, or on behalf of, the Borrower to the Administrative Agent for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and all other such
factual information hereafter furnished by, or on behalf of, the Borrower to the Administrative
Agent will be, true and accurate in every material respect on the date as of which such information
is dated or certified and no such information contains any material misstatement of fact or omits
to state any fact necessary to make the statements contained therein not misleading.

     Section 4.20 Ownership; Non-Operating Subsidiaries. Schedule 4.20 to this
Agreement sets forth the authorized capital stock of the Borrower and each Subsidiary thereof as of
the Closing Date, together with (x) the aggregate issued and outstanding shares of capital stock of
the Borrower and each Subsidiary thereof and (y) in the case of each such Subsidiary, the names of
the holders of record of all issued and outstanding shares of capital stock of such Subsidiary and
the number of shares to held by such holder. All of the issued and outstanding shares of capital
stock (or other equity interests) are duly authorized, validly issued, fully paid and
nonassessable. With respect to each Non-Operating Subsidiary, such Non-Operating Subsidiary (i) is
not engaged in any material business activities as of the date hereof, and (ii) has no material
assets, property or other interests, and has no material liabilities of any nature (whether accrued
or contingent, matured or unmatured), as of the date hereof.

     Section 4.21 Foreign Assets Control Regulations and Anti-Money Laundering; Patriot
Act.

          (a) Neither Borrower nor any Subsidiary of Borrower (i) is a person whose property or interest
in property is blocked or subject to blocking pursuant to Section 1 of Executive Order
13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings
or transactions prohibited by Section 2 of such executive order, or is otherwise associated
with any such person in any manner violative of Section 2, or (iii) is a person on the list
of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions
under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or
executive order.

          (b) Borrower and each of its Subsidiaries are in compliance, in all material respects, with
the Patriot Act. No part of the proceeds of the Loans or any Letter of Credit will be used,
directly or indirectly, for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

     Section 4.22 Adverse Event. To the Borrower’s knowledge, no Adverse Event has
occurred and no circumstance exists that would prohibit or delay the import of Vehicles or the
Americanizing of Vehicles.

      

					
	 
	 	 
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     Section 4.23 Insolvency. The aggregate value of all of the assets of the Borrower and
its Subsidiaries on a consolidated basis, at a fair valuation, exceeds the total Liabilities of the
Borrower and its Subsidiaries on a consolidated basis (including contingent, subordinated,
unmatured and unliquidated Liabilities). The Borrower and its Subsidiaries have the ability to pay
their respective debts as they mature and do not have unreasonably small capital with which to
conduct their respective businesses. For purposes of this Section 4.23, the “fair
valuation” of such assets is the price at which the assets would change hands between a willing
buyer and a willing seller, both being adequately informed of the relevant facts, and neither being
under any compulsion to buy or to sell.

     Section 4.24 Survival of Representations. All representations and warranties
contained in this Article 4 shall survive the issuance of any Letter of Credit, the
delivery of a Note, and the making of any Loan evidenced thereby, and any investigation at any time
made by or on behalf of a Lender shall not diminish the Lenders’ rights to rely thereon.

ARTICLE 5. AFFIRMATIVE COVENANTS

     During the Term, unless the Administrative Agent shall otherwise expressly consent in writing,
the Borrower will do (and, to the extent applicable to any Subsidiary thereof, cause such
Subsidiary to do) all of the following:

     Section 5.1 Financial Statements and Reports. Furnish to the Administrative Agent:

          (a) As soon as available and in any event within ninety (90) days after the end of each fiscal
year, a copy of the audited, consolidated and consolidating financial statements of the Borrower
and its consolidated Subsidiaries prepared in conformity with GAAP consisting of an audited,
consolidated balance sheet as of the close of such fiscal year and related consolidated and
consolidating statements of operations and retained earnings and cash flow for such fiscal year,
reviewed by an independent accounting firm reasonably acceptable to Administrative Agent, together
with (i) a certificate of such independent accounting firm stating that in the regular audit of the
business of the Borrower and such Subsidiaries, which audit was conducted by such accounting firm
in accordance with generally accepted auditing standards, such accounting firm has obtained no
knowledge that a Default or an Event of Default has occurred and is continuing or, if in the
opinion of such accounting firm, a Default or an Event of Default has occurred and is continuing, a
statement as to the nature thereof, and (ii) a certificate of the chief financial officer (or
person performing similar functions) of the Borrower stating that no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action that the Borrower has taken or
proposes to be taken with respect thereto.

          (b) As soon as available and in any event within forty-five (45) days after the end of each of
the first three fiscal quarters of each fiscal year, a copy of the unaudited, consolidated and
consolidating financial statements of the Borrower and its consolidated Subsidiaries prepared in
conformity with GAAP (except for the omission of footnotes and variations from GAAP which in the
aggregate are not material) consisting of a consolidated and consolidating balance sheet as of the
close of such fiscal quarter and related consolidated and consolidating statements of operations
and retained earnings and cash flow for such fiscal quarter

           

					
	 
	 	 
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and from the beginning of such fiscal year to the end of such fiscal quarter, in form and
substance satisfactory to Administrative Agent and accompanied by a certificate of the chief
financial officer (or person performing similar functions) of the Borrower stating that such
financial statements present fairly in all material respects the financial condition and results of
operations of the Borrower and its consolidated subsidiaries for the periods as to which such
financial statements relate;

          (c) (x) As soon as available and in any event within fifteen (15) days after the end of each
month of each fiscal year a copy of the unaudited consolidated financial statements of Voltage
Vehicles, prepared in conformity with GAAP (except for the omission of footnotes and prior period
comparative data required by GAAP and for variations from GAAP which in the aggregate are not
material) consisting of a consolidated balance sheet as of the close of such month and related
consolidated statements of operations and retained earnings and cash flow for such month and from
the beginning of such fiscal year to the end of such month, and (y) as soon as available and in any
event within forty-five (45) days after the end of each month of each fiscal year: (i) a copy of
the unaudited consolidated financial statements of the Borrower, prepared in conformity with GAAP
(except for the omission of footnotes and prior period comparative data required by GAAP and for
variations from GAAP which in the aggregate are not material and except that all expenses relating
to the issuance of warrants [and options] by Borrower shall be accounted for based on the expenses
therefor set forth in the Borrower’s most recent Form 10-K or Form 10-Q) consisting of a
consolidated balance sheet as of the close of such month and related consolidated statements of
operations and retained earnings and cash flow for such month and from the beginning of such fiscal
year to the end of such month together with the other monthly reports required by the
Administrative Agent, (ii) an accounts receivable aging report, (iii) an accounts payable aging
report, and (iv) an inventory report; the financial statements described in each of the foregoing
clauses shall be in form and substance satisfactory to Administrative Agent and accompanied by a
certificate of the chief financial officer (or person performing similar functions) of the Borrower
stating that such financial statements present fairly in all material respects the financial
condition, results of operations, aging report or inventory report, as the case may be, of the
Borrower and/or its Subsidiaries, as applicable, for the periods as to which such financial
statements or reports relate.

          (d) By no later than two (2) Business Days after becoming aware of any Default or Event of
Default, a notice describing the nature thereof and what action the Borrower proposes to take with
respect thereto;

          (e) By no later than two (2) Business Days after becoming aware of the occurrence thereof,
notice of the institution of any litigation, arbitration or governmental proceeding against the
Borrower or any of its Subsidiaries or any of their respective property which, if determined
adversely to the Borrower or such Subsidiary would constitute an Adverse Event, or the rendering of
a judgment or decision in such litigation or proceeding which constitutes an Adverse Event, and the
steps being taken by the defendant with respect thereto;

          (f) As soon as available and in any event within thirty (30) days after the end of each month
of each fiscal year, a copy of the bank account records relating to the Operating Account as
regularly furnished by the Operating Bank;

           

					
	 
	 	 
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          (g) If any Customer of Borrower (or a Subsidiary thereof) shall at any time make payments to
any account of the Borrower other than the Depository Account (although such payments are required
hereunder to be made to the Depository Account directly), such payment shall be promptly
transferred to the Depository Account, and, as soon as available and in any event within thirty
(30) days after the end of each month of each fiscal year, a copy of the account records relating
to such account for as many months as Administrative Agent may request in its sole discretion;

          (h) As soon as available but in any event not later than 60 days after the end of each of the
Borrower’s fiscal years, a copy of the Borrower’s business plan;

          (i) Promptly after the sending or filing thereof, copies of all proxy statements, financial
statements and reports that the Borrower or any of its Subsidiaries sends to its stockholders, and
copies of all periodic and special reports, and all registration statements, that the Borrower of
any of its Subsidiaries files with the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or with any national securities exchange; and

          (j) From time to time, such other information regarding the business, operation and financial
condition of the Borrower as the Administrative Agent may reasonably request.

     Section 5.2 Company Existence. The Borrower shall maintain its and each of its
Subsidiaries’ corporate existence and good standing under the laws of its jurisdiction of
incorporation and its qualification to transact business in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business conducted by it makes
such qualification necessary and where the failure to so qualify could constitute an Adverse Event.

     Section 5.3 Insurance. The Borrower shall, with respect to itself and its
Subsidiaries, maintain with financially sound and reputable insurance companies such insurance as
may be required by any Loan Document or by law and such other insurance in such amounts and against
such hazards as is customary in the case of reputable corporations or companies engaged in the same
or similar business and similarly situated. Borrower shall cause Administrative Agent to be named
as an additional insured and loss payee on each insurance policy required to be maintained by
Borrower hereunder pursuant to endorsements in form and substance reasonably satisfactory to
Administrative Agent. Prior to the Closing Date, Borrower will deliver to Administrative Agent a
certificate from Borrower’s insurance broker dated as of such date showing the amount of coverage
as of such date, and which certificate shall provide that if any or all of any such policies are
cancelled, terminated or expires, the insurer will forthwith give notice thereof to each additional
insured and no cancellation, reduction in amount or material change in coverage thereof shall be
effective until at least thirty (30) days (or, with respect to any insurance policy the premiums in
respect of which shall be paid in installments, at least ten (10) days) after receipt by each
additional insured of written notice thereof. In addition, upon the request of Lender, Borrower
may purchase credit insurance with respect to certain account debtors for Accounts of the Borrower
and assign the benefits payable thereunder to the Administrative Agent, for the benefit of the
Lenders, in a form acceptable to Lenders; provided, however, (i) Lenders may only request that
Borrower purchase such credit insurance in connection with its

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response to a Credit Request, a Vehicle Purchase Loan Request, an Ancillary Vehicle Loan
Request, a Conversion Request or an A/R Loan Request, and (ii) although Borrower shall not be
obligated to purchase any such credit insurance, failure to do so may result in Lenders declining
such Credit Request, Vehicle Purchase Loan Request, Ancillary Vehicle Loan Request, Conversion
Request or A/R Loan Request.

     Section 5.4 Payment of Taxes and Claims. File all tax returns and reports which are
required by law to be filed by it and its Subsidiaries and pay before they become delinquent all
taxes, assessments and governmental charges and levies imposed upon it and its Subsidiaries or its
or their property and all claims or demands of any kind (including, without limitation, those of
suppliers, mechanics, carriers, warehouses, landlords and other like Persons) which, if unpaid,
might result in the creation of a Lien upon its or their property (other than taxes, fees or
charges the amount or validity of which are being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been provided on the
books of the Borrower or such Subsidiary, as the case may be). Borrower shall provide proof of
such filings upon the request of Administrative Agent within ten (10) days of receipt of such
request.

     Section 5.5 Inspection. Permit any Person designated by the Administrative Agent to,
upon at least one (1) Business Days’ advance notice) visit and inspect any of the Borrower’s or its
Subsidiaries’ properties, company books and financial records, or, on behalf of the Borrower with
its permission deemed granted by execution hereof, any warehouse or location where Inventory is
stored at any time (during regular business hours), and to make copies of Borrower’s or such
Subsidiary’s books of accounts and other financial records, and to discuss the affairs, finances
and accounts of the Borrower or such Subsidiary with, and to be advised as to the same by, its
officers at such reasonable times and intervals as the Administrative Agent may designate.
Administrative Agent specifically acknowledges that other entities may share properties with the
Borrower or its Subsidiaries, and any inspections shall be specifically limited to properties,
company books and financial records of, or directly relating to, the Borrower or such Subsidiary,
or their respective business or operations.

     Section 5.6 Maintenance of Properties. Provide copies or descriptions of all real
property or material personal property leases (and, at the request of the Administrative Agent,
such other personal property leases) of the Borrower or any Subsidiary thereof entered into during
the Term within thirty (30) days of commencement of such lease. Each of Borrower and each
Subsidiary thereof shall maintain its properties used or useful in the conduct of its business in
good condition, repair and working order, and supplied with all necessary equipment, and make all
necessary repairs, renewals, replacements, betterments, and improvements thereto, all as may be
necessary so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.

     Section 5.7 Books and Records. Keep adequate and proper records and books of account
in which full and correct entries will be made of the Borrower’s and its Subsidiaries’ Accounts,
dealings, business and affairs. Notwithstanding the foregoing, the Borrower agrees that the
Administrative Agent has the right to maintain a parallel set of books and records relating to the
Borrower’s and its Subsidiaries’ Accounts for the purpose of tracking and confirming Borrower’s
Accounts and Available Borrowing Base, and administering the Loans and other Obligations arising
hereunder; provided, that ADMINISTRATIVE AGENT AND

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THE LENDERS SHALL HAVE NO OBLIGATION OR LIABILITY TO BORROWER OR ANY OTHER PERSON TO MAINTAIN
SUCH PARALLEL SET OF BOOKS AND RECORDS NOR SHALL ADMINISTRATIVE AGENT OR THE LENDERS HAVE ANY
OBLIGATION OR LIABILITY TO OTHERWISE MONITOR, COLLECT OR ENFORCE THE BORROWER’S AND ITS
SUBSIDIARIES’ ACCOUNTS.

     Section 5.8 Bills of Sale. If the Administrative Agent shall so request, deliver to
the Administrative Agent an executed Bill of Sale from each Vendor with respect to the Inventory
purchased by the Borrower in the form set forth in Exhibit K not later than three (3)
Business Days following issuance of the Letter of Credit or the making of the Ancillary Vehicle
Loan related to financing such purchase.

     Section 5.9 Compliance. Comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which the Borrower or any
Subsidiary may be subject, including, without limitation, all customs, trademark and environmental
laws, rules or regulations.

     Section 5.10 Payment Upon Customer Delivery. Unless the Accounts arising from the
sale of Vehicles financed pursuant to an LC Loan (or Conversion Loan) and/or Vehicle Purchase Loan
hereunder are further financed pursuant to an A/R Loan hereunder, Borrower shall cause each of its
Customers to deposit the full amount of the purchase price paid by such Customer in respect of
Vehicles financed hereunder into either the Lockbox or Depository Account within five (5) days of
such Customer’s receipt of such Vehicles.

     Section 5.11 Further Assurances. At its own cost and expense, cause (or cause any of
its Subsidiaries) to be promptly and duly taken, executed, acknowledged and delivered all such
further acts, documents and assurances as may from time to time be necessary or as Administrative
Agent or any Lender may from time to time reasonably request in order to carry out the intent and
purposes of the Loan Documents and the transactions contemplated thereby, including, without
limitation, all such actions (i) to establish, preserve, protect and perfect a first-priority Lien
in favor of Administrative Agent for the benefit of the Administrative Agent and the Lenders on the
Collateral (including Collateral acquired after the date hereof), including on any and all assets
of the Borrower and its Subsidiaries (other than (A) a Newly Formed Partially-Owned Subsidiary and
(B) subject to the last sentence of this Section 5.11, any Non-Operating Subsidiary),
whether now owned or hereafter acquired, and (ii) to cause each Subsidiary of the Borrower (other
than (A) a Newly Formed Partially-Owned Subsidiary and (B) subject to the last sentence of this
Section 5.11, any Non-Operating Subsidiary), whether now or hereafter existing, to become
bound by and a party to any existing Subsidiary Guaranty, and any existing Subsidiary Security
Agreement or to execute and deliver a separate Subsidiary Guaranty and a separate Subsidiary
Security Agreement. With respect to each Non-Operating Subsidiary, in the event that any such
Non-Operating Subsidiary shall, after the date hereof, (i) engage in any material business
activities or (ii) acquire or possess any material assets, property or other interests, the
Borrower shall give written notice thereof to the Administrative Agent as soon as practicable (but
in any event not later than 15 days following) following the occurrence thereof and shall, at any
time following the request of the Administrative Agent, cause such Non-Operating Subsidiary to
become bound by and a party to any existing Subsidiary Guaranty and

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any existing Subsidiary Security Agreement or to execute and deliver a separate Subsidiary
Guaranty and a separate Subsidiary Security Agreement.

     Section 5.12 Encumbrance on Certain Real Property Interests. The Borrower
acknowledges that, as of the Closing Date, the Borrower is prohibited from granting to the
Administrative Agent, for the benefit of the Lenders, a lien on and security interest in (i) the
real property and improvements thereon owned by Borrower and located at 501 Fourth Street, Santa
Rosa, California 95401 (the “Santa Rosa Property”) pursuant to the restrictive covenants
contained in that certain Deed of Trust with Assignment of Rents and Security Agreement, dated
March 11, 2003, between ZAP and Chicago Title Company, as Trustee, for the benefit of Atocha Land,
LLC, a Virginia limited liability company, a true and complete copy of which has been delivered to
the Administrative Agent, and (ii) the real property and improvements thereon owned by Borrower and
located at 44720 Main Street, Mendocino, California 95460 (the “Mendocino Property”)
pursuant to the restrictive covenants contained in that certain Purchase Price True-Up Agreement,
dated April 21, 2005, between ZAP and Jinsei LLC, a California limited liability company, a true
and complete copy of which has been delivered to the Administrative Agent. If at anytime during
the Term the Borrower shall no longer be bound by the restrictive covenant contained in either of
the agreements referred to in clause (i) or (ii) of the immediately preceding sentence, the
Borrower shall give prompt written notice thereof to the Administrative Agent. At anytime
following receipt by the Administrative Agent of such notice with respect to either the Santa Rosa
Property or the Mendocino Property (or both of them), promptly following the written request of the
Administrative Agent, the Borrower shall execute and deliver to the Administrative Agent such
mortgages or other collateral security documents as shall be necessary or appropriate to grant to
the Administrative Agent, for the benefit of itself and the Lenders, a first priority lien on and
security interest the Santa Rosa Property or the Mendocino Property (or both of them), as the case
may be.

ARTICLE 6. NEGATIVE COVENANTS

     During the Term, unless the Administrative Agent shall otherwise expressly consent in writing,
the Borrower will not do (and will not permit any of its Subsidiaries to do) any of
the following:

     Section 6.1 Merger. Neither the Borrower nor any Subsidiary thereof will merge or
consolidate or enter into any analogous reorganization or transaction with any Person.

     Section 6.2 Sale of Assets. Neither the Borrower nor any Subsidiary thereof will
sell, transfer, lease, or otherwise convey all or any part of its assets except for sales of
Inventory in the ordinary course of business and for the fair market value thereof; provided,
however, that the Borrower and its Subsidiaries may sell other assets so long as (i) any such sale
of other assets by the Borrower or any Subsidiary thereof is in the best interests of the Borrower
or such Subsidiary (as determined in good faith by the Board of Directors of the Borrower) and is
pursuant to a bona fide, arms’ length transaction with a Person that is not a Related Party, (ii)
the fair market value of the assets being sold by the Borrower or such Subsidiary in such sale, or
series of related sales, does not exceed $2,000,000, (iii) the aggregate fair value of the assets
sold by the Borrower and its Subsidiaries, taken as a whole, pursuant to this proviso during any
calendar year does not exceed, in the aggregate, $6,000,000 (or a ratable portion thereof, based on
a 365

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day year and number of days elapsed) in the event that this Agreement shall be in effect
during any calendar year for less than a full calendar year), (iv) the aggregate proceeds (net of
expenses) received by the Borrower or its Subsidiary, as the case may be, from the sale of such
assets shall, contemporaneously with the closing of such sale, be used by the Borrower to repay (or
prepay), and the Borrower shall so repay (or prepay), the Obligations then outstanding hereunder
(if any), and (v) immediately after giving effect to the closing of such sale, no Default or Event
of Default shall have occurred and be continuing.

     Section 6.3 Change in Nature of Business. Neither the Borrower nor any Subsidiary
thereof will make any material change in the nature of its business as carried on at the date
hereof.

     Section 6.4  Subsidiaries, Partnerships and Joint Ventures. Neither the Borrower nor
any Subsidiary thereof will either: (a) form or acquire any corporation or company which would
thereby become a Subsidiary; or (b) form or enter into any partnership as a limited or general
partner or form or enter into any joint venture; provided, however, that (i) the Borrower and any
direct or indirect wholly-owned Subsidiary thereof may form other direct or indirect wholly-owned
Subsidiaries thereof so long as (A) prior to the formation thereof the Borrower shall have given
the Administrative Agent at least five (5) Business Days’ advance written notice of its intention
to form such Subsidiary, (B) such newly formed Subsidiary shall have executed and delivered, in
favor of the Administrative Agent, a Subsidiary Guaranty and a Subsidiary Security Agreement
contemporaneously with the formation thereof, (C) such newly formed Subsidiary shall be in the same
line of business as the Borrower or any Subsidiary of the Borrower, and (D) after forming such
Subsidiary, no Default or Event of Default shall have occurred and be continuing, and (ii) the
Borrower and any direct or indirect wholly-owned Subsidiary thereof may form other Subsidiaries
that are not wholly-owned Subsidiaries so long as (A) prior to the formation thereof the Borrower
shall have given the Administrative Agent at least ten (10) Business Days’ advance written notice
of its intention to form such Subsidiary, along with the names of the other owners thereof, (B)
such Subsidiary shall not be a general partnership (or other similar entity as to which the equity
holders shall have general liability for the debt and obligations of such entity), (C) the Borrower
shall, directly or indirectly, hold more than fifty percent (50%) of the issued and outstanding
voting equity interests (or of the capital or profits) of such Subsidiary having ordinary voting
power to elect a majority of the board of directors, managers or other persons having authority
over the general business and affairs of such Subsidiary, (D) the Borrower shall have pledged, or
caused to be pledged, in favor of the Administrative Agent pursuant to a pledge agreement in form
and substance acceptable to it, all of the equity and other interests held by the Borrower, either
directly or indirectly, in such Subsidiary, (E) such newly formed Subsidiary shall be in the same
line of business as the Borrower or any Subsidiary of the Borrower as of the date of its formation;
and (F) after forming such Subsidiary, no Default or Event of Default shall have occurred and be
continuing. In addition and for the avoidance of doubt, the Borrower and each direct or indirect
Subsidiary thereof may enter into such joint venture transactions or partnerships, or form such
Subsidiaries, not otherwise expressly permitted by this Section 6.4 to the extent approved
in writing from time to time by the Administrative Agent in its sole and absolute discretion.

     Section 6.5 Other Agreements. Neither the Borrower nor any Subsidiary thereof shall
enter into any agreement, bond, note or other instrument with or for the benefit of any

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Person other than the Administrative Agent or the Lenders which would: (a) prohibit the
Borrower or such Subsidiary from granting, or otherwise limit the ability of the Borrower or such
Subsidiary to grant to the Administrative Agent, or any other Person designated by Administrative
Agent, any Lien on any assets or properties of the Borrower or such Subsidiary; or (b) be violated
or breached by the Borrower’s or such Subsidiary’s performance of its obligations under the Loan
Documents to which it is a party.

     Section 6.6 Payment Terms. Neither the Borrower nor any Subsidiary thereof shall
materially change its selling terms of payment on any Eligible Accounts as in effect on the date of
this Agreement.

     Section 6.7 Investments. Neither the Borrower nor any Subsidiary thereof shall
acquire for value, make, have or hold any Investments, except (a) deposits in the Depository
Account and the Operating Account, and deposits in such other bank accounts of the Borrower or any
Subsidiary thereof in or as to which the Administrative Agent shall have a first priority and
perfected security interest, (b) Investments of the Borrower in any Subsidiary of the Borrower as
of the date of this Agreement, (c) any Investment in any direct or indirect wholly-owned Subsidiary
of the Borrower, including any direct or indirect Newly Formed Wholly-Owned Subsidiary of the
Borrower, (d) any Investment in any direct or indirect Newly Formed Partially-Owned Subsidiary of
the Borrower (other than PORTEGY, a Nevada corporation (“PORTEGY”)); provided that, during
the Term, (i) the aggregate amount of all Investments in any Newly Formed Partially-Owned
Subsidiary shall not exceed $2,000,000 and (ii) the aggregate amount of all Investments in all
Newly Formed Partially-Owned Subsidiaries shall not exceed $6,000,000, (e) Permitted Investments,
provided the Administrative Agent shall have been granted, and shall maintain, a first priority and
perfected security interest in such Permitted Investments (or in the account in which such
Permitted Investments are held or maintained), (f) any Investment in PORTEGY, provided that the
Administrative Agent shall have a first priority and perfected security interest in all capital
stock of PORTEGY held directly or indirectly by the Borrower or any of its Subsidiaries, or (g)
such other Investments authorized by Administrative Agent in writing.

     Section 6.8 Indebtedness. Neither the Borrower nor any Subsidiary thereof shall
incur, create, issue, assume or suffer to exist any Indebtedness except:

          (a) Indebtedness to a Lender;

          (b) Current liabilities, other than for borrowed money, incurred in the ordinary course of
business;

          (c) Indebtedness consisting of endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary course of business; and

          (d) letters of credit issued for the account of the Borrower and its Subsidiaries provided (i)
that no assets of the Borrower or its Subsidiaries are used to collateralize the reimbursement
obligations with respect thereto other than cash from operations of the Borrower and its
Subsidiaries, (ii) the aggregate available amount to be drawn under all such letters of

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          credit at any time outstanding shall not exceed $500,000 and (iii) the letter of credits shall
be used for the purpose of purchasing scooters included within the product lines (or future product
lines) of the Borrower or any Subsidiary thereof or such other inventory as the Administrative
Agent shall approve from time to time in writing; and

          (e) the Indebtedness set forth on Schedule 6.8(e) hereof .

     Section 6.9 Liens. Neither the Borrower nor any Subsidiary thereof shall create,
incur, assume or suffer to exist any Lien with respect to any property, revenues or assets now
owned or hereafter arising or acquired, except:

          (a) Liens granted for the benefit of the Lenders;

          (b) Deposits or pledges to secure payment of workers’ compensation, unemployment insurance,
old age pensions or other social security obligations, in the ordinary course of business of the
Borrower;

          (c) Liens for taxes, fees, assessments and governmental charges not delinquent;

          (d) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens arising
in the ordinary course of business, for sums not due;

          (e) Deposits to secure the performance of bids, trade contracts, leases, statutory obligations
and other obligations of a like nature incurred in the ordinary course of business;

          (f) Liens on the Santa Rosa Property and the Mendocino Property to the extent existing on the
date hereof;

          (g) Liens of the type, and securing Indebtedness in the amount, set forth in Section
6.8(d) hereof; and

          (h) Liens on the property of the Borrower or its Subsidiaries on the date of this Agreement
and set forth on Schedule 6.9 hereof, which Liens secure the Indebtedness outstanding on
the date hereof and permitted by Section 6.8(e), including replacement Liens on the
property currently subject to such Liens securing such Indebtedness.

     Section 6.10 Contingent Liabilities. Neither the Borrower nor any Subsidiary thereof
shall either: (a) endorse, guarantee, contingently agree to purchase or to provide funds for the
payment of, or otherwise become contingently liable upon, any obligation of any other Person,
except by the endorsement of negotiable instruments for deposit or collection (or similar
transactions) in the ordinary course of business and except as otherwise provided by (Section
6.8(d) hereof; or (b) agree to maintain the net worth or working capital of, or provide funds
to satisfy any other financial test applicable to, any other Person.

     Section 6.11 Unconditional Purchase Obligations. Neither the Borrower nor any
Subsidiary thereof shall enter into or be a party to any contract for the purchase or lease of

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materials, supplies or other property or services if such contract requires that payment be
made by it regardless of whether or not delivery is ever made of such materials, supplies or other
property or services.

     Section 6.12 Purchase Orders and Accounts. Cancel or modify any Customer Purchase
Order if: (i) such Customer Purchase Order is the basis of any Credit issued hereunder or the
effect of the cancellation of modification of such Customer Purchase Order would cause the then
existing Available Borrowing Base to be less than the aggregate amount of all A/R Loans then
outstanding without: (x) Agent’s prior written consent or (y) depositing an amount equal to the
amount of the Reimbursement Obligations attributable to such Credit or the difference in amount the
A/R Loans then outstanding and the then existing Available Borrowing Base (after taking into
account the cancellation or modification of such Customer Purchase Order), as applicable, in the
Cash Collateral Account. Notwithstanding the foregoing, Borrower may make, and may permit a
Customer to make, minor adjustments and modifications to Customer Purchase Orders in the ordinary
course of business; provided, that if such minor adjustment or modification is in respect of a
Customer Purchase Order that underlies any Credit issued hereunder, Borrower shall give
Administrative Agent immediate notice of such adjustment or modification.

     Section 6.13 Bank Accounts. Neither the Borrower nor any Subsidiary thereof shall
directly or indirectly, establish any new bank account without prior written notice to
Administrative Agent and unless Administrative Agent, Borrower or such Subsidiary and the bank at
which the account is to be opened enter into a control agreement regarding such bank account
pursuant to which such bank acknowledges the security interest of the Administrative Agent in such
bank account, agrees to comply with instructions originated by Administrative Agent directing
disposition of the funds in the bank account without further consent from Borrower or such
Subsidiary, as the case may be, and agrees to subordinate and limit any security interest the bank
may have in the bank account on terms reasonably satisfactory to Administrative Agent.

     Section 6.14 Modification of Organizational Documents. Neither the Borrower nor any
Subsidiary thereof shall directly or indirectly amend or otherwise modify its certificate/articles
of incorporation, certificate of formation, by-laws, limited liability company agreement or other
similar constituent documents of such Person, except for such amendments or other modifications
required by law and fully disclosed to Administrative Agent or such other amendments or
modifications that would not adversely affect (i) the rights, remedies or interests of the
Administrative Agent or the Lenders under any Loan Document or (ii) the validity, enforceability or
binding nature of any Loan Document as against any Credit Party.

     Section 6.15 Publicity. The Borrower shall not, directly or indirectly, issue or make
or cause to be issued or made any press release, filing or other public announcement with respect
to the transactions contemplated hereby unless it shall have (i) given the Administrative Agent a
reasonable period of time to review such press release, filing or other public announcement and
(ii) obtained the prior written approval thereof by the Administrative Agent, which approval shall
not be unreasonably withheld or delayed; provided, however, that such approval shall not be
required if the Borrower reasonably believes, upon the advice of qualified legal counsel, that the
Borrower is required by applicable law to issue or make such press release, filing or other public

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announcement, in which case the Borrower shall take all reasonable efforts to (A)
consult with the Administrative Agent in advance of the issuance or making of such press release,
filing or other public announcement, (B) to the extent not in contravention of applicable
law, not disclose such information with respect to the Administrative Agent and the Lenders and the
transactions contemplated hereby as shall be reasonably requested by the Administrative Agent or,
as to a Lender, such Lender, and (C) deliver to the Administrative Agent all drafts of such
press releases, filings or other public announcements prior to the issuance or making thereof, to
the greatest extent practicable. Notwithstanding anything to the contrary contained in this
Section 6.15, the Borrower shall be permitted to disclose publicly, without the prior
consent or approval of the Lenders, the general fact that the Borrower has obtained the credit
facility contemplated hereunder, the aggregate Commitments hereunder, the purpose hereof and the
Term (and such other general information as the Borrower shall deem necessary or appropriate) so
long as the Borrower shall not disclose any information with respect to the Lenders or the
Administrative Agent other than their names as set forth on the signature pages hereto or such
other information as the Administrative Agent or the Lenders shall permit to be disclosed by
written notice to the Borrower.

     Section 6.16 Certain Matters Relating to Employment of Senior Executives. Without the
prior written consent of the Administrative Agent, the Borrower shall not amend, modify or waive in
any material respect any term of provision of the employment agreements of each of Gary Starr and
Steve Schneider as in effect on the date hereof. Without limiting the generality of the foregoing,
the Borrower shall not, without the prior written consent of the Administrative Agent, permit Gary
Starr or Steve Schneider to serve as an officer or employee of, or consultant to, any corporation,
limited liability company, partnership, company or other business enterprise other than (i) the
Borrower and any Subsidiary thereof and (ii) in the case of Steve Schneider, Rotoblock Corp., in
which case Steve Schneider shall be permitted to serve solely as the interim chief executive
thereof until the date on which he is required to resign therefrom as provided by Section
7.1(r) hereof.

ARTICLE 7. EVENTS OF DEFAULT AND REMEDIES

     Section 7.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default upon the expiration of the cure period, if any,
described in the relevant event:

          (a) The Borrower shall fail to make when due, whether by acceleration or otherwise, (i) any
payment of principal of, or interest on, any Note or other Obligation hereunder, (ii) payment of
any Prepayment Fee required to be made to a Lender or to the Administrative Agent pursuant to this
Agreement, or (iii) payment of any other amount required to be made to a Lender or to the
Administrative Agent pursuant to this Agreement or any other Loan Document and such failure
pursuant to this clause (iii) shall continue for a period of three (3) Business Days after
notification of such failure; or

          (b) Any representation or warranty made or deemed to have been made by or on behalf of the
Borrower or any other Credit Party in any of the Loan Documents by or on behalf of the Borrower or
such other Credit Parties in any certificate, statement, report or other writing furnished by or on
behalf of the Borrower to the Administrative Agent or any Lender

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pursuant to the Loan Documents shall prove to have been false or misleading in any material
respect on the date as of which the facts set forth are stated or certified or deemed to have been
stated or certified; or

          (c) The Borrower shall fail to comply with any term, covenant or agreement contained in
Article 6 hereof or Sections 3.5, 5.2, 5.3 or 5.10 hereof;

          (d) The Borrower shall fail to comply with Section 5.1(d) or Section 5.1(e)
hereof and such failure shall continue for a period of three (3) Business Days after notification
of such failure; or

          (e) The Borrower shall fail to comply with any agreement, covenant, condition, provision or
term contained in the Loan Documents on its part to be performed (and such failure shall not
constitute an Event of Default under any of the other provisions of this Section 7.1) and
such failure to comply shall continue for ten (10) calendar days after notice thereof to the
Borrower by the Administrative Agent or any Lender (or, if sooner, such failure to comply shall
continue unremedied for thirty (30) days after an executive officer of the Borrower becomes aware
of such failure); or

          (f) The Borrower or any other Credit Party shall become Insolvent or shall generally not pay
its or his debts as they mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of the Borrower or any such Credit Party, or for a
substantial part of the property of any one of them or, in the absence of such application, consent
or acquiescence, a custodian, trustee or receiver shall be appointed for the Borrower or any such
Credit Party, or for a substantial part of the property of any one of them and shall not be
discharged within thirty (30) days; or

          (g) Any bankruptcy, reorganization, debt arrangement or other proceedings under any bankruptcy
or insolvency law shall be instituted by or against the Borrower or any other Credit Party, or such
debtor shall take any corporate action to approve institution of, or shall have acquiesced in, such
a proceeding; or

          (h) Any Credit Party that is a party to any Subsidiary Guaranty shall fail to make any payment
required to be made by it, when due; or

          (i) The Administrative Agent shall cease to have a valid and first priority and perfected
security interest in any of the Collateral pledged, or purported to be pledged, to the
Administrative Agent under any Loan Document; or

          (j) Any Credit Party (other than the Borrower) shall fail to comply with any agreement,
covenant, condition, provision or term binding on such Credit Party and contained in any Loan
Document to which it is a party (and such failure shall not constitute an Event of Default under
any of the other provisions of this Section 7.1) and such failure to comply shall continue
unremedied for ten (10) calendar days after notice thereof to the Borrower by the Administrative
Agent or any Lender (or, if sooner, if such failure to comply shall continue unremedied for thirty
(30) days after an executive officer of the Borrower or such Credit Party becomes aware of such
failure); or

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          (k) Any non-monetary judgment or order shall be rendered against any Credit Party that would
reasonably be likely to constitute an Adverse Event as to the Borrower or any other Credit Party,
and there shall be any period of thirty (30) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

          (l) A Change of Control shall occur; or

          (m) Any dissolution or liquidation proceeding shall be instituted by or against the Borrower
or any other Credit Party, or the Borrower or such Credit Party shall take any corporate or
individual action to approve institution of, or acquiescence in, such a proceeding; or

          (n) A judgment or judgments for the payment of money in excess of the sum of $50,000 in the
aggregate shall be rendered against the Borrower or any other Credit Party and the Borrower or any
such Credit Party shall not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, prior to any execution on such judgments by such
judgment creditor, within thirty (30) days from the date of entry thereof, and within said period
of thirty (30) days, or such longer period during which execution of such judgment shall be stayed,
appeal therefrom and cause the execution thereof to be stayed during such appeal; or

          (o) The maturity of any Indebtedness of the Borrower or any other Credit Party (other than
Indebtedness under this Agreement or the other Loan Documents) shall be accelerated, or the
Borrower or any such Credit Party shall fail to pay any such Indebtedness when due and any
applicable grace period shall have expired or, in the case of such Indebtedness payable on demand,
when demanded, or any event shall occur or condition shall exist and shall continue for more than
the period of grace, if any, applicable thereto and shall have the effect of causing, or permitting
(any required notice having been given and grace period having expired) the holder of any such
Indebtedness or any trustee or other Person acting on behalf of such holder to cause such
Indebtedness to become due prior to its stated maturity or to realize upon any collateral given as
security therefor; or

          (p) Gary Starr shall (i) die, (ii) become mentally incapacitated or otherwise become unable to
fulfill, in the good faith judgment of the Administrative Agent, his duties as the Chairman of the
Board of the Borrower, or (iii) resign, or be removed, from his position as Chairman of the Board
of the Borrower unless, in the case of any of the events described in clause (i), (ii) or (iii)
hereof (other than his resignation), the Borrower shall have elected a successor Chairman of the
Board within thirty (30) days of the occurrence of such event who shall be acceptable to the
Administrative Agent; or

          (q) Steven Schneider shall (i) die, (ii) become mentally incapacitated or otherwise become
unable to fulfill, in the good faith judgment of the Administrative Agent, his duties as the Chief
Executive Officer of the Borrower, or (iii) resign, or be removed, from his position as Chief
Executive Officer of the Borrower unless, in the case of any of the events described in clause (i),
(ii) or (iii) hereof (other than his resignation), the Borrower shall have elected a successor
Chief Executive Officer within thirty (30) days of the occurrence of such event who shall be
acceptable to the Administrative Agent; or

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          (r) If Steven Schneider shall have failed to resign from any officer or director position held
by him in Rotoblock Corp. as of October 1, 2005;

          (s) If the validity or enforceability of any of the Loan Documents shall be challenged by the
Borrower or any other party thereto (other than the Lenders), or shall fail to remain in full force
and effect; or

          (t) The Administrative Agent shall have determined in good faith the interest of the
Administrative Agent or any Lender in any material Collateral has been materially adversely
affected or impaired, or the value thereof to the Lenders has been diminished to a material extent,
and the condition giving rise to such determination does not constitute an Event of Default under
any of the other subsections of this Section 7.1.

     Section 7.2 Remedies. If: (a) any Event of Default described in Sections
7.1(f), (g) or (m) shall occur, the outstanding unpaid principal balance of the
Notes, the accrued interest thereon and all other Obligations under the Loan Documents (including
any Ancillary Vehicle Loan, Ancillary Vehicle Loan Interest, LC Loan, LC Interest, Conversion Loan,
Conversion Loan Interest, Vehicle Purchase Loan, Vehicle Purchase Loan Interest, A/R Loan and A/R
Loan Interest) shall automatically become immediately due and payable, in which case the
obligations of the Lenders hereunder to issue (or cause to be issued) any Letter of Credit or make
any Loan shall automatically terminate; or (b) any other Event of Default shall occur and be
continuing, then the Administrative Agent may take any or all of the following actions: (i) declare
that the outstanding unpaid principal balance of any or all Notes, the accrued and unpaid interest
thereon and all other Obligations (including any Reimbursement Obligations, LC Interest, Ancillary
Vehicle Loans, Ancillary Vehicle Loan Interest, Conversion Loan, Conversion Loan Interest, Vehicle
Purchase Loan, Vehicle Purchase Loan Interest, A/R Loans and A/R Loan Interest) under the Loan
Documents to be forthwith due and payable, whereupon the Notes, all accrued and unpaid interest
thereon and all such Obligations shall immediately become due and payable, in each case without
demand or notice of any kind, all of which are hereby expressly waived, anything in this Agreement
or in any Note (or other Loan Documents) to the contrary notwithstanding; (ii) impose interest at
the Per Diem Default Rate on all Obligations then outstanding; (iii) exercise all rights and
remedies under any other instrument, document or agreement between the Borrower or any other Credit
Party and Administrative Agent and/or any Lender; (iv) suspend, reduce the amount of or terminate
the Commitment of the Lenders to issue (or cause to be issued) any Letter of Credit or make any
Loan pursuant to the provisions of this Agreement; and (v) enforce all rights and remedies under
any applicable law.

     Section 7.3 Offset. In addition to the remedies set forth in Section 7.2,
upon the occurrence of any Event of Default or at any time thereafter while such Event of Default
continues, the Administrative Agent, any Lender or any other holder of any Note may offset any and
all balances, credits, deposits (general or special, time or demand, provisional or final),
accounts or monies of the Borrower then or thereafter with such Lender or such other holder, or any
obligations of such Lender or such other holder of such Note, against the Indebtedness then owed by
the Borrower to such Lender. The Borrower hereby grants to the Lenders and each other Note holder
a security interest in all such balances, credits, deposits, accounts or monies.

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     Section 7.4 Actions in Respect of the Letters of Credit upon Default. If any Event of
Default shall have occurred and be continuing, the Administrative Agent may, or shall at the
request of the Requisite Lenders, irrespective of whether it is taking any of the actions described
in Section 7.1 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the Lenders in same day
funds at the Administrative Agent’s office designated in such demand, for deposit into an account
specified by the Administrative Agent, an amount equal to one hundred five percent (105%) of the
aggregate amount then available to be drawn under all Letters of Credit then outstanding. If at
any time the Administrative Agent determines that any funds held in such account are subject to any
right or claim of any Person other than the Administrative Agent and the Lenders or that the total
amount of such funds is less than one hundred five percent (105%) of the aggregate amount available
to be drawn under all Letters of Credit then outstanding, the Borrower will, forthwith upon demand
by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited
and held in such account, an amount equal to the excess of (a) one hundred five percent (105%) of
the aggregate amount then available to be drawn under all Letters of Credit then outstanding over
(b) the total amount of funds, if any, then held in such account that the Administrative Agent
determines to be free and clear of any such right and claim. Upon the drawing of any Letter of
Credit for which funds are on deposit in such account, such funds shall be applied to reimburse the
relevant LC Issuer or Lenders, as applicable, to the extent permitted by applicable law. If (i)(A)
all Letters of Credit for which funds are on deposit in such account have expired or been
terminated and (B) no Default or Event of Default shall then be continuing or (ii)(A) if the
commitments of each Lender and the obligation of each Lender to issue (or cause to be issued) any
Letter of Credit and make any Loan shall have been terminated and (B) all other Obligations shall
have been satisfied in full in cash, then the Administrative Agent shall, within fourteen (14)
days, return to the Borrower all such monies then remaining in such account.

ARTICLE 8. ADMINISTRATIVE AGENT; ASSIGNMENTS

     Section 8.1 Appointment. The Lenders hereby designate and appoint Surge Capital II,
LLC, a Delaware limited liability company as Administrative Agent and as their Administrative Agent
(for purposes of this Article 8, the term “Administrative Agent” also shall include
Surge Capital II, LLC in its capacity as Secured Party under the Security Agreement and the Deposit
Account Control Agreements) on their collective behalf to act as specified herein and in the other
Loan Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent to take
such action on its behalf under the provisions of this Agreement, the other Loan Documents and any
other instruments and agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or required of the
Administrative Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto, including, without limitation, to execute and deliver any Subsidiary Guaranty,
any Subsidiary Security Agreement, the Security Agreement, the Pledge Agreement, the Deposit
Account Control Agreements and any other Loan Document necessary or useful in connection with the
Obligations and any collateral or guaranty entered into or provided by any Person collateralizing
or guarantying such Obligations. The Administrative Agent may perform any of its duties hereunder
by or through its officers, directors, agents, employees or affiliates.

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     Section 8.2 Nature of Duties. The Administrative Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and in the other Loan
Documents. Neither the Administrative Agent nor any of its officers, directors, agents, employees
or affiliates shall be liable for any action taken or omitted by any of them hereunder or under any
other Loan Document or in connection herewith or therewith, unless caused by its or their gross
negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and
non-appealable decision). The duties of the Administrative Agent shall be mechanical and
administrative in nature; the Administrative Agent shall not have by reason of this Agreement or
any other Loan Document a fiduciary relationship in respect of any Lender or the holder of any
Note; and nothing in this Agreement or in any other Loan Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Administrative Agent any obligations in
respect of this Agreement or any other Loan Document except as expressly set forth herein or
therein.

     Section 8.3 Lack of Reliance on the Administrative Agent. Independently and without
reliance upon the Administrative Agent, each Lender and the holder of each Note, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Borrower and each other Credit Party in connection with the
making and the continuance of the Loans and the taking or not taking of any action in connection
herewith and (ii) its own appraisal of the creditworthiness of the Borrower and each other Credit
Party and, except as expressly provided in this Agreement, the Administrative Agent shall not have
any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the
holder of any Note with any credit or other information with respect thereto, whether coming into
its possession before the making of the Loans or at any time or times thereafter. The
Administrative Agent shall not be responsible to any Lender or the holder of any Note for any
recitals, statements, information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Loan Document or the financial condition of the Borrower or any other Credit
Party or be required to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement or any other Loan Document, or the financial
condition of the Borrower or any other Credit Party or the existence or possible existence of any
Default or Event of Default.

     Section 8.4 Certain Rights of the Administrative Agent. If the Administrative Agent
requests instructions from the Lenders with respect to any act or action (including failure to act)
in connection with this Agreement or any other Loan Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the Administrative Agent
shall have received instructions from the Lenders; and the Administrative Agent shall not incur
liability to any Lender by reason of so refraining. Without limiting the foregoing, neither any
Lender nor the holder of any Note shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions of the Lenders.

     Section 8.5 Reliance. The Administrative Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate,
telex,

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teletype or telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by any Person that the Administrative Agent believed to be the proper
Person, and, with respect to all legal matters pertaining to this Agreement and any other Loan
Document and its duties hereunder and thereunder, upon advice of counsel selected by the
Administrative Agent.

     Section 8.6 Indemnification. To the extent the Administrative Agent (or any affiliate
thereof) is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify the Administrative Agent (and any affiliate thereof) in proportion to their respective
percentage of principal amount of Notes held by them for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by
the Administrative Agent (or any affiliate thereof) in performing its duties hereunder or under any
other Loan Document or in any way relating to or arising out of this Agreement or any other Loan
Document; provided, that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent’s (or such affiliate’s) gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a final and
non-appealable decision).

     Section 8.7 Holders. The Administrative Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the
Administrative Agent. Any request, authority or consent of any Person who, at the time of making
such request or giving such authority or consent, is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor. Notwithstanding anything in this
Section, no Note or interest in any Note may be transferred unless such transfer complies with
Section 8.14 of this Agreement.

     Section 8.8 Resignation by the Administrative Agent.

          (a) The Administrative Agent may resign from the performance of all its functions and duties
hereunder and/or under the other Loan Documents at any time by giving fifteen (15) Business Days’
prior written notice to the Lenders. Such resignation shall take effect upon the appointment of a
successor Administrative Agent pursuant to clause (b) below or as otherwise provided below.

          (b) Upon any such notice of resignation by the Administrative Agent, the Lenders shall appoint
a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust
company reasonably acceptable to the Borrower, which acceptance shall not be unreasonably withheld
or delayed (provided that the Borrower’s approval shall not be required if a Default or an Event of
Default then exists).

     Section 8.9 Release of Collateral. The Lenders hereby irrevocably authorize
Administrative Agent to, and the Administrative Agent shall, release any Lien granted to or held by
it upon any Collateral (i) upon payment and satisfaction of all Obligations (other than

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contingent indemnification obligations to the extent no claims giving rise thereto have been
asserted) and execute and file any and all documents and instruments, including, without
limitation, UCC termination statements, necessary or appropriate to evidence the release of such
Liens; (ii) constituting property being sold or disposed of if Borrower certifies to Administrative
Agent that the sale or disposition is made in compliance with the provisions of this Agreement and
the other applicable Loan Documents (and Administrative Agent may rely in good faith conclusively
on any such certificate, without further inquiry);

     Section 8.10 Confirmation of Authority; Execution of Releases. Without in any manner
limiting Administrative Agent’s authority to act without any specific or further authorization or
consent by Lenders, each Lender agrees to confirm in writing, upon request by Administrative Agent,
the authority to release any Collateral conferred upon Administrative Agent hereunder. Upon
receipt by Administrative Agent of any required confirmation from the Requisite Lenders of its
authority to release any particular item or types of Collateral, Administrative Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the liens granted to Administrative Agent upon such Collateral; provided, however,
that (i) Administrative Agent shall not be required to execute any such document on terms which, in
Administrative Agent’s opinion, would expose Administrative Agent to liability or create any
obligation or entail any consequence other than the release of such liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or impair the
indebtedness evidenced by the Notes or any Liens upon (or obligations of Borrower, in respect of),
all interests retained by Borrower, including (without limitation) the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.

     Section 8.11 Absence of Duty. Administrative Agent shall have no obligation
whatsoever to any Lender or any other Person to assure that the property covered by the Security
Agreement, the Subsidiary Security Agreements or the Pledge Agreement exists or is owned by
Borrower or any other Credit Party or is cared for, protected or insured or has been encumbered or
that the Liens granted to Administrative Agent have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or
to continue exercising, any of the rights, authorities and powers granted or available to such
Agent in any of the Loan Documents, it being understood and agreed that in respect of the property
covered by the Security Agreement, the Subsidiary Security Agreements, the Pledge Agreement, the
Deposit Account Control Agreements or any act, omission or event related thereto, Administrative
Agent may act in any manner it may deem appropriate, in its discretion and provided that
Administrative Agent shall exercise the same care which it would in dealing with loans for its own
account.

     Section 8.12 Agency for Perfection. Each Lender hereby appoints Administrative Agent
as agent for the purpose of perfecting such Lender’s security interest in that portion of the
Collateral which, in accordance with the Uniform Commercial Code in any applicable jurisdiction,
can be perfected by possession or control. Each Lender agrees that it will not have any right
individually to enforce or seek to enforce the Security Agreement, the Subsidiary Security
Agreements, the Pledge Agreement, the Deposit Account Control Agreements or to realize upon any
Collateral for the Notes unless consented to by Administrative Agent, it being

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understood and agreed that such rights and remedies may be exercised only by Administrative
Agent. Nothing herein is intended or shall be construed to limit any Lender’s rights under its
Notes, including the right to enforce, accelerate, amend, compromise or otherwise administer such
Notes.

     Section 8.13 Amendments, Consents and Waivers.

          (a) Except as otherwise provided herein and except as to matters set forth in other
subsections hereof or in any other Loan Document as requiring only Administrative Agent’s consent,
the consent of Requisite Lenders will be required to amend, modify, terminate, or waive any
provision of this Agreement or any of the other Loan Documents; provided, however, that if such
amendment, modification, termination or waiver applies only to a certain Loan or Loans, only the
consent of the Lender or Lenders with respect to such Loans shall be required.

          (b) In the event Administrative Agent requests the consent of a Lender and does not receive a
written consent or denial thereof within ten (10) Business Days after such Lender’s receipt of such
request, then such Lender will be deemed to have given such consent.

     Section 8.14 Assignments.

          (a) Each Lender may from time to time assign, subject to the terms of an assignment and
acceptance agreement, in form and substance satisfactory to the Administrative Agent (the
“Assignment and Acceptance Agreement”) and this Section 8.14 hereof, a Loan to
another Person (other than to any business enterprise that is engaged in the importation and sale
of vehicles similar to the vehicles being financed with the Loans extended (or proposed to be
extended) to Borrower hereunder; provided, however, that the restrictions contained in this
parenthetical shall not apply during the occurrence and continuance of any Event of Default);
provided, however, that no Lender will offer, sell or otherwise dispose of all or any part of a
Note except under circumstances which will not result in a violation of the Act or applicable state
securities laws. In the case of an assignment authorized hereunder, the assignee shall have, as to
the Loan assigned, the same rights, benefits and obligations as it would if it were a Lender
hereunder and the assigning Lender shall be relieved of its obligations hereunder with respect to
such Loan or the assigned portion thereof.

          (b) Borrower hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered to be a Lender
hereunder.

     Section 8.15 Recording of Assignments. Administrative Agent shall maintain at its
office a copy of each Assignment and Acceptance Agreement delivered to it and a register for the
recordation of the names and addresses of Lenders, and the commitments of, and principal amount of
the Obligations and Loans owing to each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be presumptive evidence of the amounts due
and owing to Lenders in the absence of manifest error. Borrower, Administrative Agent and each
Lender may treat each Person whose name is recorded in the Register pursuant to the terms hereof as
a Lender hereunder for all purposes of this Agreement. The Register shall

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be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable
prior notice.

     Section 8.16 Acceptance of Assignment by Administrative Agent. Upon its receipt of a
duly completed Assignment and Acceptance Agreement executed by an assigning Lender and its assignee
(together with the Note(s) subject to such assignment), evidence satisfactory to the Administrative
Agent that such assignment complies with Section 8.14, Administrative Agent shall (a)
accept such Assignment and Acceptance Agreement and (b) record the information contained therein in
the Register. If requested by Administrative Agent, Borrower shall promptly execute and deliver to
Administrative Agent new Note(s) evidencing the Obligations owed by Borrower to the assignee and,
if applicable, the assigning Lender, after giving effect to the assignment. Administrative Agent
shall cancel the Notes delivered to it by the assigning Lender and deliver the new Notes to the
assignee and, unless the assigning Lender has assigned all of its interests under this Agreement,
the assigning Lender.

     Section 8.17 Security Interests in Obligations; Assignments to Affiliates. Any Lender
may at any time, following written notice to Administrative Agent, (a) pledge the Obligations held
by it or create a security interest in all or any portion of its rights under this Agreement or the
other Loan Documents in favor of any Person (other than to any business enterprise that is engaged
in the importation and sale of vehicles similar to the vehicles being financed with the Loans
extended (or proposed to be extended) to Borrower hereunder); provided, however, that (i) no such
pledge or grant of security interest to any Person shall release such Lender from its obligations
hereunder or under any other Loan Document and (ii) the acquisition of title to such Lender’s
Obligations pursuant to any foreclosure or other exercise of remedies by such Person shall be
subject to the provisions of this Agreement and the other Loan Documents in all respects; and (b)
assign all or any portion of its funded Loans to a Lender Affiliate of such Lender, to one or more
other Lenders or to a Lender Affiliate of such other Lender.

     Section 8.18 Other Matters. Except as otherwise provided herein, no Lender shall, as
between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment, transfer or negotiation of, or granting of a participation in, all or any
part of the Loans, the Notes or other Obligations owed to such Lender. Each Lender may furnish any
information concerning Borrower or any other Credit Party in possession of that Lender from time to
time to Borrower, approved assignees and participants and to any Lender Affiliate of such Lender or
its parent company.

ARTICLE 9. MISCELLANEOUS

     Section 9.1 Waiver and Amendment. No failure on the part of the Administrative Agent,
any Lender or the holder of any Note or other Obligations to exercise and no delay in exercising
any power or right hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right. The remedies herein and in any other
instrument, document or agreement delivered or to be delivered to the Administrative Agent, or any
Lender hereunder or in connection herewith are cumulative and not exclusive of any remedies
provided by law. No notice to or demand on the Borrower not

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required hereunder or under any Note or any other Loan Document shall in any event entitle the
Borrower to any other or further notice or demand in similar or other circumstances or constitute a
waiver of the right of the Administrative Agent, the Administrative Agent, any Lender or the holder
of any Note to any other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of any provision of this Agreement or any Note or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be in writing and
signed by the Administrative Agent, on behalf of all Lenders, the Lenders and the Borrower and then
such amendment, modification, waiver or consent shall be effective only in the specific instances
and for the specific purpose for which given; provided, however, that in no event
shall any amendment, modification or waiver of the provisions of Article 8 hereof require
the consent of, or execution by, the Borrower unless such amendment, modification or waiver shall
impose greater duties on the Borrower than those in existence prior to such amendment, modification
or waiver.

     Section 9.2 Expenses and Indemnities.

          (a) Loan Documents. The Borrower agrees to pay and reimburse the Administrative Agent
upon demand for all expenses paid or incurred by the Administrative Agent and the Lenders
(including fees and expenses of outside legal counsel) in connection with the evaluation,
preparation, negotiation, execution, administration, amendment, collection and enforcement of the
Loan Documents (including, without limitation, any Subsidiary Guaranty, any Subsidiary Security
Agreement, the Security Agreement, the Pledge Agreement and the Deposit Account Control
Agreements), except that the Borrower shall have no obligation to reimburse the Lenders for any
Lender Assumed LC Cost. The Borrower agrees to pay, and save the Administrative Agent and all
Lenders harmless from all liability for, any stamp or other taxes which may be payable with respect
to the execution or delivery of the Loan Documents. The Borrower agrees to indemnify and hold
harmless the Administrative Agent and all Lenders from any loss or expense which may arise or be
created by the acceptance of telephonic or other instructions for issuing any Letter of Credit or
for making any Loan or disbursing (or causing the disbursement of) the proceeds of any thereof.

          (b) General Indemnity. In addition to the payment of expenses pursuant to Section
9.2(a), whether or not the transactions contemplated hereby shall be consummated, the Borrower
hereby indemnifies, and agrees to pay and reimburse and hold harmless and defend, the
Administrative Agent, the Lenders, their affiliates and any holder of any Note, and their
respective officers, directors, employees, agents, successors and assigns (collectively called the
“Indemnitees”) from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of
counsel for any of such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not any of such Indemnitees shall be
designated a party thereto, and for enforcing the provisions of this Section 9.2), that may
be imposed on, incurred by, or asserted against the Indemnitees (or any of them), in any manner
relating to or arising out of the Loan Documents, the statements contained in any letters delivered
by the Administrative Agent or any Lender, the Americanizing and shipping of the Vehicles or the
use or intended use of the proceeds of any of the Loans (the “Indemnified Liabilities”);
provided, however, that the Borrower shall have no obligation to an Indemnitee

Master Financing Agreement

64

 

hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnitee or for any Lender Assumed LC Cost. To the extent that the
undertaking to indemnify, defend, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower shall contribute
the maximum portion that it is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them.

          (c) Survival. The obligations of the Borrower under this Section 9.2 shall
survive any termination of this Agreement.

     Section 9.3 Notices. Except when telephonic notice is expressly authorized by this
Agreement, any notice or other communication to any party in connection with this Agreement shall
be in writing and shall be sent by manual delivery, telegram, telex, facsimile transmission,
overnight courier or United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party shall have specified
to the other party hereto in writing. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if sent by telegram, telex
or facsimile transmission, from the first Business Day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed; provided, however, that
any notice to the Administrative Agent under Sections 2.3, 2.4, 2.5, 2.6 and 2.7 hereof
shall be deemed to have been given only when received by the Administrative Agent. The Borrower
hereby authorizes the Administrative Agent and any Lender to rely upon the telephone or written
instructions of any person identifying himself or herself as an authorized officer of the Borrower
and upon any signature which the Administrative Agent or such Lender believes to be genuine, and
the Borrower shall be bound thereby in the same manner as if the Borrower were authorized or such
signature were genuine.

     Section 9.4 Successors and Assignment. This Agreement shall be binding upon the
Borrower, the Administrative Agent, the Lenders and their respective successors and assigns, and
shall inure to the benefit of the Borrower, the Administrative Agent, the Lenders and the
successors and permitted assigns of the Borrower, the Administrative Agent and the Lenders. The
Borrower shall not assign its rights or duties hereunder without the consent in writing of the
Administrative Agent, on behalf of the Lenders.

     Section 9.5 Notes Not Securities. The Borrower, Administrative Agent, and each Lender
agree that the Notes do not constitute “securities” under the Act or applicable state securities
laws.

     Section 9.6 Participations. Any Lender may sell participation interests in any or all
of the Loans and in all or any portion of the Notes other than to any business enterprise that is
engaged in the importation and sale of vehicles similar to the vehicles being financed with the
Loans extended (or proposed to be extended) to Borrower hereunder.

     Section 9.7 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such

Master Financing Agreement

65

 

prohibition or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.

     Section 9.8 Captions. The captions or headings herein and any table of contents
hereto are for convenience only and in no way define, limit or describe the scope or intent of any
provision of this Agreement.

     Section 9.9 Entire Agreement. This Agreement, the Notes and the other Loan Documents
embody the entire agreement and understanding between the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof and thereof supersede all prior agreements
and understandings relating to the subject matter hereof.

     Section 9.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument, and either
of the parties hereto may execute this Agreement by signing any such counterpart.

     Section 9.11 Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A PARTY SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF.

     Section 9.12 Consent to Jurisdiction. AT THE OPTION OF THE ADMINISTRATIVE AGENT, THIS
AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A PARTY MAY BE ENFORCED
IN ANY FEDERAL COURT OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH
FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE ADMINISTRATIVE AGENT AND THE LENDERS AT THEIR OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.

     Section 9.13 Waiver of Jury Trial. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
LENDERS WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b) ARISING FROM ANY LENDING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

[Remainder of Page Intentionally Left Blank; Signature Page Follows ]

Master Financing Agreement

66

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of
the date first above.

	 	 	 	 	 
	 	 	“BORROWER”:
	 
	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider
	 

	 	Name:
	 	Steven Schneider
	 

	 	Its:
	 	CEO
	 
	 	 	 	 
	 	 	“ADMINISTRATIVE AGENT”:
	 
	 	 	 	 
	 	 	SURGE CAPITAL II, LLC, a Delaware limited
	 	 	liability company, as Administrative Agent
	 
	 	 	 	 
	 

	 	By:
	 	/s/ John Maselli
	 

	 	Name:
	 	John Maselli
	 

	 	Its:
	 	Vice President

Master Financing Agreement

67

 

	 	 	 	 	 
	 	 	“INITIAL LENDER”:
	 
	 	 	 	 
	 	 	SURGE CAPITAL II, LLC, a Delaware limited
	 	 	liability company, as Initial Lender
	 
	 	 	 	 
	 

	 	By:
	 	/s/ John Maselli
	 

	 	Name:
	 	John Maselli
	 

	 	Its:
	 	Vice President

Master Financing Agreement

68

 

Exhibit A

FORM OF CREDIT NOTE

			
	$___
	 	Chicago, Illinois
	 
	 	[Date]

     FOR VALUE RECEIVED, ZAP, a California corporation (the “Borrower”), hereby promises to
pay to Surge Capital II, LLC, a Delaware limited liability company, or its assigns (the
“Lender”), to the account set forth below, the principal sum of                                         
AND 00/100 DOLLARS (the “Principal”) on the Maturity Date (as defined below).

     This Credit Note is one of the Credit Notes referred to in that certain Master Financing
Agreement dated as of September 12, 2005 (as amended, restated, supplemented or otherwise modified
from time to time, herein called the “Financing Agreement”) among the Borrower, the Lenders
party thereto from time to time, and Surge Capital II, LLC, a Delaware limited liability company,
as Administrative Agent and the Initial Lender, to which Financing Agreement and all agreements
supplemental thereto reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Borrower and the Lender and of the terms upon
which this Credit Note is delivered. This Credit Note is subject to the terms of the Financing
Agreement, and to the extent there is a conflict between the terms of the Financing Agreement and
this Credit Note, the terms of the Financing Agreement shall govern. Capitalized terms used herein
and not otherwise defined herein shall have the meaning ascribed to them in the Financing
Agreement.

     The unpaid Principal, and all unpaid interest accrued hereon, may be converted into a
Conversion Loan subject to the satisfaction of the terms and conditions of the Financing Agreement,
in which case all such unpaid Principal and interest accrued hereon shall be so converted into such
Conversion Loan. If the unpaid Principal, together with all unpaid interest accrued hereon, shall
not be so converted into a Conversion Loan, then the unpaid Principal, and all unpaid interest
accrued hereon, shall be due and payable on the Maturity Date.

     The “Maturity Date” shall mean the earlier of (x) the third (3rd) Business Day
following the LC Payment Date of the Letter of Credit issued in connection with this Credit Note
and (y) if such Letter of Credit shall expire without having been paid by the applicable LC Issuer,
the Expiry Date of such Letter of Credit.

     This Credit Note is secured by and the Lender hereof is entitled to the benefits provided
under the Loan Documents. This Credit Note is subject to voluntary prepayment prior to the
Maturity Date, in whole or in part, at any time, without premium or penalty.

     The Borrower promises to pay interest from the date hereof on the unpaid Principal and, from
and after (and during the continuance of) an Event of Default, on the unpaid interest accrued
hereon at the rates, and in the manner, set forth in Section 2.8 of the Financing

A-1

 

Agreement until the aggregate unpaid Principal, and all interest accrued hereon, shall have
been paid in full. In the event that the due date of any of the Obligations evidenced hereby is
not a Business Day, the amounts otherwise payable on such date will be paid on the next succeeding
Business Day with the same force and effect as if made on such due date.

     If an Event of Default shall occur and be continuing, the unpaid principal balance of and
accrued interest on this Credit Note may become or be declared to be due and payable in the manner
and with the effect provided in the Financing Agreement.

     The Borrower hereby waives presentment, demand, protest or notice of any kind in connection
with this Credit Note.

     This Credit Note may be transferred only in accordance with the Financing Agreement,
including, without limitation, Section 8.14 of the Financing Agreement. The transfer of
this Credit Note is registrable in the register maintained by the Administrative Agent, upon
surrender of this Credit Note for registration of transfer in accordance with Article 8 of
the Financing Agreement. Prior to due presentment of this Credit Note for registration of
transfer, the Borrower and Administrative Agent may treat the Person in whose name this Credit Note
is registered in such register as the owner hereof for all purposes, whether or not this Credit
Note be overdue, and neither the Borrower nor the Administrative Agent shall be affected by notice
to the contrary. This Credit Note is a registered instrument. A manually signed copy of this
Credit Note shall be evidence of the Lender’s rights and is not a bearer instrument.

     THIS CREDIT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS. THE VENUE, JURISDICTION AND JURY TRIAL WAIVER PROVISIONS SET FORTH IN THE FINANCING
AGREEMENT ARE APPLICABLE TO THE CREDIT NOTE AS IF FULLY SET FORTH HEREIN.

     Payment of the Principal and all interest accrued on this Credit Note will be made in such
coin or currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Payment of the Principal and all interest accrued on this
Credit Note due on the Maturity Date will be made in immediately available funds on the Maturity
Date (whether or not this Credit Note has been presented), with such funds transferred by wire to
the following account:

 

 

 

 

 

; or such other account or place as the Administrative Agent shall direct the Borrower in writing.

[ Remainder of this Page Intentionally Left Blank; Signature Page Follows ]

Master Financing Agreement

A-2

 

     IN WITNESS WHEREOF, the Borrower has caused this instrument to be duly executed.

	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

Master Financing Agreement

A-3

 

Exhibit B

FORM OF VEHICLE PURCHASE NOTE

			
	$___
	 	Chicago, Illinois
	 
	 	[Date]

     FOR VALUE RECEIVED, ZAP, a California corporation (the “Borrower”), hereby promises to
pay to Surge Capital II, LLC, a Delaware limited liability company, or its assigns (the
“Lender”), to the account set forth below, the principal sum of                                         
AND 00/100 DOLLARS (the “Principal”) on the Maturity Date (as defined below).

     This Vehicle Purchase Note is one of the Vehicle Purchase Notes referred to in that certain
Master Financing Agreement dated as of September 12, 2005 (as amended, restated, supplemented or
otherwise modified from time to time, herein called the “Financing Agreement”) among the
Borrower, the Lenders party thereto from time to time, and Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Initial Lender, to which Financing
Agreement and all agreements supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of the Borrower and the
Lender and of the terms upon which this Vehicle Purchase Note is delivered. This Vehicle Purchase
Note is subject to the terms of the Financing Agreement, and to the extent there is a conflict
between the terms of the Financing Agreement and this Vehicle Purchase Note, the terms of the
Financing Agreement shall govern. Capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to them in the Financing Agreement.

     The unpaid Principal, and all interest accrued hereon, shall be due and payable on
                    [insert the date that is one hundred twenty (120) days following the Funding Date
of such Vehicle Purchase Loan] (the “Maturity Date”), except that this Vehicle Purchase
Note shall be subject to mandatory prepayment to the extent provided in the Financing Agreement.

     This Vehicle Purchase Note is secured by and the Lender hereof is entitled to the benefits
provided under the Loan Documents. This Vehicle Purchase Note is subject to voluntary prepayment
prior to the Maturity Date, in whole or in part, at any time, without premium or penalty.

     The Borrower promises to pay interest from the date hereof on the unpaid Principal and, from
and after (and during the continuance of) an Event of Default, on the unpaid interest accrued
hereon at the rates, and in the manner, set forth in Section 2.8 of the Financing Agreement until
the aggregate unpaid Principal, and all interest accrued hereon, shall have been paid in full. In
the event that the due date of any of the Obligations evidenced hereby is not a Business Day, the
amounts otherwise payable on such date will be paid on the next succeeding Business Day with the
same force and effect as if made on such due date.

B-1

 

     If an Event of Default shall occur and be continuing, the unpaid principal balance of and
accrued interest on this Vehicle Purchase Note may become or be declared to be due and payable in
the manner and with the effect provided in the Financing Agreement.

     The Borrower hereby waives presentment, demand, protest or notice of any kind in connection
with this Vehicle Purchase Note.

     This Vehicle Purchase Note may be transferred only in accordance with the Financing Agreement,
including, without limitation, Section 8.14 of the Financing Agreement. The transfer of
this Vehicle Purchase Note is registrable in the register maintained by the Administrative Agent,
upon surrender of this Vehicle Purchase Note for registration of transfer in accordance with
Article 8 of the Financing Agreement. Prior to due presentment of this Vehicle Purchase
Note for registration of transfer, the Borrower and Administrative Agent may treat the Person in
whose name this Vehicle Purchase Note is registered in such register as the owner hereof for all
purposes, whether or not this Vehicle Purchase Note be overdue, and neither the Borrower nor the
Administrative Agent shall be affected by notice to the contrary. This Vehicle Purchase Note is a
registered instrument. A manually signed copy of this Vehicle Purchase Note shall be evidence of
the Lender’s rights and is not a bearer instrument.

     THIS VEHICLE PURCHASE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS. THE VENUE, JURISDICTION AND JURY TRIAL WAIVER PROVISIONS SET FORTH IN THE
FINANCING AGREEMENT ARE APPLICABLE TO THE VEHICLE PURCHASE NOTE AS IF FULLY SET FORTH HEREIN.

     Payment of the Principal and all interest accrued on this Vehicle Purchase Note will be made
in such coin or currency of the United States of America as at the time of payment is legal tender
for payment of public and private debts. Payment of the Principal and all interest accrued on this
Vehicle Purchase Note due on the Maturity Date will be made in immediately available funds on the
Maturity Date (whether or not this Vehicle Purchase Note has been presented), with such funds
transferred by wire to the following account:

Master Financing Agreement

B-2

 

 

 

 

 

 

; or such other account or place as the Administrative Agent shall direct the Borrower in writing.

[ Remainder of this Page Intentionally Left Blank; Signature Page Follows ]

Master Financing Agreement

B-3

 

     IN WITNESS WHEREOF, the Borrower has caused this instrument to be duly executed.

	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

Master Financing Agreement

B-4

 

Exhibit C

FORM OF ANCILLARY VEHICLE NOTE

			
	$___
	 	Chicago, Illinois

[Date]

     FOR VALUE RECEIVED, ZAP, a California corporation (the “Borrower”), hereby promises to
pay to Surge Capital II, LLC, a Delaware limited liability company, or its assigns (the
“Lender”), to the account set forth below, the principal sum of                                         
AND 00/100 DOLLARS (the “Principal”) on the Maturity Date (as defined below).

     This Ancillary Vehicle Note is one of the Ancillary Vehicle Notes referred to in that certain
Master Financing Agreement dated as of September 12, 2005 (as amended, restated, supplemented or
otherwise modified from time to time, herein called the “Financing Agreement”) among the
Borrower, the Lenders party thereto from time to time, and Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Initial Lender, to which Financing
Agreement and all agreements supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of the Borrower and the
Lender and of the terms upon which this Ancillary Vehicle Note is delivered. This Ancillary
Vehicle Note is subject to the terms of the Financing Agreement, and to the extent there is a
conflict between the terms of the Financing Agreement and this Ancillary Vehicle Note, the terms of
the Financing Agreement shall govern. Capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to them in the Financing Agreement.

     The unpaid Principal, and all unpaid interest accrued hereon, shall be due and payable on
                    ,___[insert the date that is 120 days following the Funding Date of the Ancillary
Vehicle Loan relating to this Ancillary Vehicle Note] (the “Maturity Date”), except that
this Ancillary Vehicle Note shall be subject to mandatory prepayment to the extent provided in the
Financing Agreement.

     This Ancillary Vehicle Note is secured by and the Lender hereof is entitled to the benefits
provided under the Loan Documents. This Ancillary Vehicle Note is subject to prepayment prior to
the Maturity Date, in whole or in part, at any time, without premium or penalty.

     The Borrower promises to pay interest from the date hereof on the unpaid Principal and, from
and after (and during the continuance of) an Event of Default, on the unpaid interest accrued
hereon at the rates, and in the manner, set forth in Section 2.8 of the Financing Agreement until
the aggregate unpaid Principal, and all interest accrued hereon, shall have been paid in full. In
the event that the due date of any of the Obligations evidenced hereby is not a Business Day, the
amounts otherwise payable on such date will be paid on the next succeeding Business Day with the
same force and effect as if made on such due date.

Master Financing Agreement

C-1

 

     If an Event of Default shall occur and be continuing, the unpaid principal balance of and
accrued interest on this Ancillary Vehicle Note may become or be declared to be due and payable in
the manner and with the effect provided in the Financing Agreement.

     The Borrower hereby waives presentment, demand, protest or notice of any kind in connection
with this Ancillary Vehicle Note.

     This Ancillary Vehicle Note may be transferred only in accordance with the Financing
Agreement, including, without limitation, Section 8.14 of the Financing Agreement. The
transfer of this Ancillary Vehicle Note is registrable in the register maintained by the
Administrative Agent, upon surrender of this Ancillary Vehicle Note for registration of transfer in
accordance with Article 8 of the Financing Agreement. Prior to due presentment of this
Ancillary Vehicle Note for registration of transfer, the Borrower and Administrative Agent may
treat the Person in whose name this Ancillary Vehicle Note is registered in such register as the
owner hereof for all purposes, whether or not this Ancillary Vehicle Note be overdue, and neither
the Borrower nor the Administrative Agent shall be affected by notice to the contrary. This
Ancillary Vehicle Note is a registered instrument. A manually signed copy of this Ancillary
Vehicle Note shall be evidence of the Lender’s rights and is not a bearer instrument.

     THIS ANCILLARY VEHICLE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS. THE VENUE, JURISDICTION AND JURY TRIAL WAIVER PROVISIONS SET FORTH IN THE
FINANCING AGREEMENT ARE APPLICABLE TO THE ANCILLARY VEHICLE NOTE AS IF FULLY SET FORTH HEREIN.

     Payment of the Principal and all interest accrued on this Ancillary Vehicle Note will be made
in such coin or currency of the United States of America as at the time of payment is legal tender
for payment of public and private debts. Payment of the Principal and all interest accrued on this
Ancillary Vehicle Note due on the Maturity Date will be made in immediately available funds on the
Maturity Date (whether or not this Ancillary Vehicle Note has been presented), with such funds
transferred by wire to the following account:

 

 

 

 

 

; or such other account or place as the Administrative Agent shall direct the Borrower in writing.

[ Remainder of this Page Intentionally Left Blank; Signature Page Follows ]

Master Financing Agreement

C-2

 

     IN WITNESS WHEREOF, the Borrower has caused this instrument to be duly executed.

	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

Master Financing Agreement

C-3

 

Exhibit D

FORM OF CONVERSION NOTE

			
	$___
	 	Chicago, Illinois
	 
	 	[Date]

     FOR VALUE RECEIVED, ZAP, a California corporation (the “Borrower”), hereby promises to
pay to Surge Capital II, LLC, a Delaware limited liability company, or its assigns (the
“Lender”), to the account set forth below, the principal sum of                                         
AND 00/100 DOLLARS (the “Principal”) on the Maturity Date (as defined below).

     This Conversion Note is one of the Conversion Notes referred to in that certain Master
Financing Agreement dated as of September 12, 2005 (as amended, restated, supplemented or otherwise
modified from time to time, herein called the “Financing Agreement”) among the Borrower,
the Lenders party thereto from time to time, and Surge Capital II, LLC, a Delaware limited
liability company, as Administrative Agent and the Initial Lender, to which Financing Agreement and
all agreements supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Borrower and the Lender and
of the terms upon which this Conversion Note is delivered. This Conversion Note is subject to the
terms of the Financing Agreement, and to the extent there is a conflict between the terms of the
Financing Agreement and this Conversion Note, the terms of the Financing Agreement shall govern.
Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to
them in the Financing Agreement.

     The unpaid Principal, and all unpaid interest accrued hereon, shall be due and payable on
                    ,___[insert the date that is 120 days following the Funding Date of the LC Loan
that is being converted into this Conversion Note] (the “Maturity Date”), except that this
Conversion Note shall be subject to mandatory prepayment to the extent provided in the Financing
Agreement.

     This Conversion Note is secured by and the Lender hereof is entitled to the benefits provided
under the Loan Documents. This Conversion Note is subject to voluntary prepayment prior to the
Maturity Date, in whole or in part, at any time, without premium or penalty.

     The Borrower promises to pay interest from the date hereof on the unpaid Principal and, from
and after (and during the continuance of) an Event of Default, on the unpaid interest accrued
hereon at the rates, and in the manner, set forth in Section 2.8 of the Financing Agreement until
the aggregate unpaid Principal, and all interest accrued hereon, shall have been paid in full. In
the event that the due date of any of the Obligations evidenced hereby is not a Business Day, the
amounts otherwise payable on such date will be paid on the next succeeding Business Day with the
same force and effect as if made on such due date.

     If an Event of Default shall occur and be continuing, the unpaid principal balance of and
accrued interest on this Conversion Note may become or be declared to be due and payable in the
manner and with the effect provided in the Financing Agreement.

D-1

 

     The Borrower hereby waives presentment, demand, protest or notice of any kind in connection
with this Conversion Note.

     This Conversion Note may be transferred only in accordance with the Financing Agreement,
including, without limitation, Section 8.14 of the Financing Agreement. The transfer of
this Conversion Note is registrable in the register maintained by the Administrative Agent, upon
surrender of this Conversion Note for registration of transfer in accordance with Article 8
of the Financing Agreement. Prior to due presentment of this Conversion Note for registration of
transfer, the Borrower and Administrative Agent may treat the Person in whose name this Conversion
Note is registered in such register as the owner hereof for all purposes, whether or not this
Conversion Note be overdue, and neither the Borrower nor the Administrative Agent shall be affected
by notice to the contrary. This Conversion Note is a registered instrument. A manually signed
copy of this Conversion Note shall be evidence of the Lender’s rights and is not a bearer
instrument.

     THIS CONVERSION NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS. THE VENUE, JURISDICTION AND JURY TRIAL WAIVER PROVISIONS SET FORTH IN THE
FINANCING AGREEMENT ARE APPLICABLE TO THE CONVERSION NOTE AS IF FULLY SET FORTH HEREIN.

     Payment of the Principal and all accrued interest on this Conversion Note will be made in such
coin or currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Payment of the Principal and all accrued interest on this
Conversion Note due on the Maturity Date will be made in immediately available funds on the
Maturity Date (whether or not this Conversion Note has been presented), with such funds transferred
by wire to the following account:

 

 

 

 

 

; or such other account or place as the Administrative Agent shall direct the Borrower in writing.

[ Remainder of this Page Intentionally Left Blank; Signature Page Follows ]

D-2

 

     IN WITNESS WHEREOF, the Borrower has caused this instrument to be duly executed.

	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

D-3

 

Exhibit E

FORM OF A/R NOTE

			
	$___
	 	Chicago, Illinois
	 
	 	[Date]

     FOR VALUE RECEIVED, ZAP, a California corporation (the “Borrower”), hereby promises to
pay to Surge Capital II, LLC, a Delaware limited liability company, or its assigns (the
“Lender”), to the account set forth below, the principal sum of                                         
AND 00/100 DOLLARS (the “Principal”) on                     ,200___[insert the date that is
30 days from the execution of this Note] (the “Maturity Date”).

     This A/R Note is one of the A/R Notes referred to in that certain Master Financing Agreement
dated as of September 12, 2005 (herein called the “Financing Agreement”) among the
Borrower, the Lenders party thereto from time to time, and Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Initial Lender, to which Financing
Agreement and all agreements supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of the Borrower and the
Lender and of the terms upon which this A/R Note is delivered. This A/R Note is subject to the
terms of the Financing Agreement, and to the extent there is a conflict between the terms of the
Financing Agreement and this A/R Note, the terms of the Financing Agreement shall govern.
Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Financing Agreement.

     The unpaid Principal, and all unpaid interest accrued hereon, shall be due and payable on the
Maturity Date.

     This A/R Note is secured by and the Lender hereof is entitled to the benefits provided under
the Loan Documents. This A/R Note is subject to voluntary prepayment prior to the Maturity Date,
in whole or in part, at any time, without premium or penalty.

     The Borrower promises to pay interest from the date hereof on the unpaid Principal and, from
and after (and during the continuance of) an Event of Default, on the unpaid interest accrued
hereon at the rates, and in the manner, set forth in Section 2.8 of the Financing Agreement until
the aggregate unpaid Principal, and all interest accrued hereon, shall have been paid in full. In
the event that the due date of any of the Obligations evidenced hereby is not a Business Day, the
amounts otherwise payable on such date will be paid on the next succeeding Business Day with the
same force and effect as if made on such due date.

     If an Event of Default shall occur and be continuing, the unpaid principal balance of and
accrued interest on this A/R Note may become or be declared to be due and payable in the manner and
with the effect provided in the Financing Agreement.

E-1

 

     The Borrower hereby waives presentment, demand, protest or notice of any kind in connection
with this A/R Note.

     This A/R Note may be transferred only in accordance with the Financing Agreement, including,
without limitation, Section 8.14 of the Financing Agreement. The transfer of this A/R Note
is registrable in the register maintained by the Administrative Agent, upon surrender of this A/R
Note for registration of transfer in accordance with Article 8 of the Financing Agreement.
Prior to due presentment of this A/R Note for registration of transfer, the Borrower and
Administrative Agent may treat the Person in whose name this A/R Note is registered in such
register as the owner hereof for all purposes, whether or not this A/R Note be overdue, and neither
the Borrower nor the Administrative Agent shall be affected by notice to the contrary. This A/R
Note is a registered instrument. A manually signed copy of this A/R Note shall be evidence of the
Lender’s rights and is not a bearer instrument.

     THIS A/R NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. THE VENUE, JURISDICTION AND JURY TRIAL WAIVER PROVISIONS SET FORTH IN THE FINANCING
AGREEMENT ARE APPLICABLE TO THE A/R NOTE AS IF FULLY SET FORTH HEREIN.

     Payment of the Principal and all interest accrued on this A/R Note will be made in such coin
or currency of the United States of America as at the time of payment is legal tender for payment
of public and private debts. Payment of the Principal and all interest accrued on this A/R Note
due on the Maturity Date will be made in immediately available funds on the Maturity Date (whether
or not this A/R Note has been presented), with such funds transferred by wire to the following
account:

 

 

 

 

 

; or such other account or place as the Administrative Agent shall direct the Borrower in writing.

[ Remainder of this Page Intentionally Left Blank; Signature Page Follows ]

E-2

 

     IN WITNESS WHEREOF, the Borrower has caused this instrument to be duly executed.

	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

E-3

 

Exhibit F

Form of Credit Request

[DATE]

Surge Capital II, LLC, as Administrative Agent

1033 Skokie, Boulevard, Suite 620

Northbrook, Illinois, 60062

     The undersigned is the Borrower under that certain Master Financing Agreement, dated as of
September 12, 2005 (as the same may be amended, modified or supplemented from time to time, herein
called the “Agreement;” capitalized terms not otherwise defined herein being used as
therein defined), among ZAP, a California corporation (the “Borrower”), the Lenders that
are parties thereto from time to time, and Surge Capital II, LLC, a Delaware limited liability
company, as Administrative Agent.

     The Borrower hereby requests the issuance of a Letter of Credit in the original Stated Amount
of $                                        which Letter of Credit shall have an Expiry Date of ___
days1 following the date of issuance of the Letter of Credit. Such Letter of
Credit shall contain the following:

[specify and provide particulars].

     The Borrower hereby reaffirms all representations and warranties made by the Borrower in the
Agreement and certifies as follows:

	 	(1)	 	That such representations and warranties are true and correct on and as of the
date hereof and will be true and correct on and as of the proposed Funding Date with
respect to such Letter of Credit, both before and after giving effect to the issuance
of such Letter of Credit.
	 
	 	(2)	 	That no Default or Event of Default has occurred and is continuing, nor would
any Default or Event of Default result from the issuance of such Letter of Credit or
the application of the proceeds therefrom.
	 
	 	(3)	 	That the proceeds of the Letter of Credit shall be used for the sole purpose of
making payment to the Vendor identified in Exhibit 2 for Eligible Inventory
identified in the purchase order in Exhibit 2 and that such Eligible Inventory
identified in the purchase order in Exhibit 2 is being acquired for Borrower’s
(or one of Borrower’s Subsidiaries that is a party to a Subsidiary Security Agreement)
inventory and for resale to the Customer(s) identified in Paragraph 5 below.
	 
	 	(4)	 	The proposed Funding Date of the Letter of Credit is                     .

 

	
	1 The date to be inserted may not exceed forty-five (45)
days beyond the issuance date of the Letter of Credit.

F-1

 

	 	(5)	 	Attached as Exhibit 1 is a complete copy (including all attachments and
schedules) of the Customer Purchase Order(s) of the following Customer(s) in the
aggregate amount of
$                                        ,
which Customer Purchase Order(s) provide for the
purchase by such Customer(s) from the Borrower (or such Subsidiary) of the Eligible
Inventory being acquired by Borrower (or such Subsidiary) with the proceeds of such
Letter of Credit.
	 
	 	 	 	[Customer Name]
	 
	 	 	 	[Address ]
	 
	 	 	 	[Telephone Number]
	 
	 	 	 	[Contact Person]
	 
	 	 	 	; and Borrower hereby acknowledges and agrees that Borrower has granted a security
interest in such Customer Purchase Order(s) and the accounts receivable, if any,
arising thereunder to Administrative Agent, on behalf of the Lenders, to secure
Borrower’s performance of the Obligations.
	 
	 	(6)	 	Attached as Exhibit 2 is a complete copy (including all attachments and
schedules) of the purchase order(s) between the Borrower (or a Subsidiary thereof that
is a party to a Subsidiary Security Agreement) and the Vendor whose name is set forth
below in this paragraph (6), in the aggregate amount of $___, which
Exhibit 2 further sets forth in sufficient detail a description of all Eligible
Inventory being purchased by Borrower (or such Subsidiary) from such Vendor with the
proceeds of such Letter of Credit:
	 
	 	 	 	[Vendor Name]
	 
	 	 	 	[Address]
	 
	 	 	 	[Telephone Number]
	 
	 	 	 	[Contact Person]
	 
	 	 	 	; such purchase order(s) will be paid, directly or indirectly, with the proceeds of
such Letter of Credit, and Borrower hereby acknowledges and agrees that Borrower (or
such Subsidiary) has granted a security interest in such purchase order(s) and the
Eligible Inventory purchased thereunder to Administrative Agent, on behalf of the
Lenders, to secure Borrower’s performance of the Obligations.
	 
	 	(7)	 	Attached as Exhibit 3 is the Ancillary Vehicle Budget relating to the
Eligible Inventory being purchased with the proceeds of such Letter of Credit.
	 
	 	(8)	 	Attached as Exhibit 4 is a worksheet listing the following information
with respect to the Eligible Inventory as to which this Credit Request relates:

	 	(a)	 	Price per unit of purchased Eligible Inventory;
	 
	 	(b)	 	Delivery date and other delivery information of purchased
Eligible Inventory from Vendor to Borrower (or such Subsidiary) and from
Borrower (or such Subsidiary) to Customer(s);

F-2

 

	 	(c)	 	Inspection Certificate (from third party inspection company
acceptable to the Administrative Agent);
	 
	 	(d)	 	Clean onboard ocean bill of lading by the applicable freight
carrier for delivery of the purchased Eligible Inventory to the United States;
	 
	 	(e)	 	Packing List:

	 
	 	(f)	 	Manufacturer’s Statement of Origin; and
	 
	 	(g)	 	Terms of liability for shipping cost, insurance, risk of loss,
etc...

	 	(9)	 	The Borrower reaffirms that neither the Vendor nor Customer named herein is a
Related Party of the Borrower or any Subsidiary thereof.
	 
	 	(10)	 	The Borrower confirms that the Aggregate Inventory Debt in respect of the
Eligible Inventory being financed with the proceeds of such Letter of Credit does not
exceed eighty-five percent (85%) of the amount of the Customer Purchase Order in
respect of such Eligible Inventory, unless the Borrower has deposited into the Cash
Collateral Account funds in an amount equal to the excess of the Aggregate Inventory
Debt over eight-five percent (85%) of the amount of such Customer Purchase Order.
	 
	 	(11)	 	The Inventory being purchased constitutes Eligible Inventory.

     Delivery of an executed counterpart of this Credit Request by telecopier or email shall be
effective as delivery of an original executed counterpart of this Credit Request.

Sincerely,

	 	 	 	 	 
	ZAP, a California corporation	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

F-3

 

Exhibit G

Form of Vehicle Purchase Loan Request

[DATE]

Surge Capital II, LLC, a Delaware limited liability company

1033 Skokie, Boulevard, Suite 620

Northbrook, Illinois, 60062

     The undersigned is the Borrower under that certain Master Financing Agreement, dated as of
September 12, 2005 (as the same may be amended, modified or supplemented from time to time, herein
called the “Agreement” capitalized terms not otherwise defined herein being used as therein
defined) among ZAP, a California corporation (the “Borrower”), the Lenders party thereto
from time to time, and Surge Capital II, LLC, a Delaware limited liability company, as
Administrative Agent.

     The Borrower hereby requests a Vehicle Purchase Loan in the original principal amount of
$                                        .

     The Borrower hereby reaffirms all representations and warranties in the Agreement and
certifies as follows:

	 	(1)	 	That such representations and warranties are true and correct on and as of the
date hereof and will be true and correct on and as of the proposed Funding Date with
respect to such Vehicle Purchase Loan, both before and after giving effect to such
Vehicle Purchase Loan.
	 
	 	(2)	 	That no Default or Event of Default has occurred and is continuing, nor would
any Default or Event of Default result from the borrowing of such Vehicle Purchase Loan
or the application of the proceeds therefrom.
	 
	 	(3)	 	That the proceeds of the Vehicle Purchase Loan shall be used for the sole
purpose of making payment to the Vendor identified in Exhibit 2 for Eligible
Inventory identified in the purchase order in Exhibit 2 and that such Eligible
Inventory is acquired for Borrower’s (or one of Borrower’s Subsidiaries that is a party
to a Subsidiary Security Agreement) inventory and for resale to the Customer(s)
identified in paragraph 5 below.
	 
	 	(4)	 	The proposed Funding Date of the Vehicle Purchase Loan is ________.
	 
	 	(5)	 	Attached as Exhibit 1 is a complete copy (including all attachments and
schedules) of the Customer Purchase Order(s) of the following Customer(s) in the
aggregate amount of $___which Customer Purchase Order(s) provide for the
purchase by such Customer(s) from the Borrower (or such

G-1

 

	 	 	 	Subsidiary) of the Eligible Inventory being acquired by Borrower (or such
Subsidiary) with the proceeds of such Vehicle Purchase Loan:
	 
	 	 	 	[Customer Name]
	 
	 	 	 	[Address]
	 
	 	 	 	[Telephone Number]
	 
	 	 	 	[Contact Person]
	 
	 	 	 	; and Borrower hereby acknowledges and agrees that Borrower (or such Subsidiary) has
granted a security interest in such Customer Purchase Order(s) and the accounts
receivable, if any, arising thereunder to Administrative Agent, on behalf of the
Lenders, to secure Borrower’s performance of the Obligations.
	 
	 	(6)	 	Attached as Exhibit 2 is a complete copy (including all attachments and
schedules) of the purchase order(s) between the Borrower (or such Subsidiary) and the
Vendor whose name is set forth below in this paragraph (6), in the aggregate amount of
$___, which Exhibit 2 further sets forth in sufficient detail a description
of all Eligible Inventory being purchased by Borrower (or such Subsidiary) from such
Vendor with the proceeds of such Vehicle Purchase Loan:
	 
	 	 	 	[Vendor Name]
	 
	 	 	 	[Address]
	 
	 	 	 	[Telephone Number]
	 
	 	 	 	[Contact Person]
	 
	 	 	 	; such purchase order(s) will be paid, directly or indirectly, with the proceeds of such
Vehicle Purchase Loan, and Borrower hereby acknowledges and agrees that Borrower (or such
Subsidiary) has granted a security interest in such purchase order(s) and the Eligible Inventory
purchased thereunder to Administrative Agent, on behalf of the Lenders, to secure Borrower’s
performance of the Obligations.
	 
	 	(7)	 	Attached as Exhibit 3 is the Ancillary Vehicle Budget relating to the
Eligible Inventory being purchased with the proceeds of such Vehicle Purchase Loan.
	 
	 	(8)	 	Attached as Exhibit 4 is a worksheet listing the following information
with respect to the Eligible Inventory as to which this Vehicle Purchase Loan Request
relates:

	 	(a)	 	Price per unit of purchased Eligible Inventory;
	 
	 	(b)	 	Delivery date and other delivery information of purchased
Eligible Inventory from Vendor to Borrower (or such Subsidiary) and from
Borrower (or such Subsidiary) to Customer(s);
	 
	 	(c)	 	Inspection Certificate (from third party inspection company
acceptable to the Administrative Agent);
	 
	 	(d)	 	Clean onboard ocean bill of lading by the applicable freight
carrier for delivery of the purchased Eligible Inventory to the United States;

G-2

 

	 	(e)	 	Packing list;

	 
	 	(f)	 	Manufacturer’s Statement of Origin; and
	 
	 	(g)	 	Terms of liability for shipping cost, insurance, risk of loss,
etc...

	 	(9)	 	The Borrower reaffirms that neither the Vendor nor the Customer(s) named herein
is a Related Party of the Borrower or any Subsidiary thereof.
	 
	 	(10)	 	The Borrower confirms that the Aggregate Inventory Debt in respect of the
Eligible Inventory being financed with the proceeds of such Vehicle Purchase Loan does
not exceed eighty-five percent (85%) of the amount of the Customer Purchase Order(s) in
respect of such Eligible Inventory, unless the Borrower has deposited into the Cash
Collateral Account funds in an amount equal to the excess of the Aggregate Inventory
Debt over eighty-five percent (85%) of the amount of such Customer Purchase Order(s).
	 
	 	(11)	 	The Inventory being purchased constitutes Eligible Inventory.

     Delivery of an executed counterpart of this Vehicle Purchase Loan Request by telecopier or
email shall be effective as delivery of an original executed counterpart of this Vehicle Purchase
Loan Request.

Sincerely,

	 	 	 	 	 
	ZAP, a California corporation	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

G-3

 

Exhibit H

Form of Ancillary Vehicle Loan Request

[DATE]

Surge Capital II, LLC, a Delaware limited liability company

1033 Skokie, Boulevard, Suite 620

Northbrook, Illinois, 60062

     The undersigned is the Borrower under that certain Master Financing Agreement, dated as of
September 12, 2005 (as the same may be amended, modified or supplemented from time to time, herein
called the “Agreement”; capitalized terms not otherwise defined herein being used as
therein defined) among ZAP, a California corporation (the “Borrower”), the Lenders that are
parties thereto from time to time, and Surge Capital II, LLC, a Delaware limited liability company,
as Administrative Agent.

     The Borrower hereby requests an Ancillary Vehicle Loan in the original principal amount of
$                                        .

     The Borrower hereby reaffirms all representations and warranties in the Agreement and
certifies as follows:

	 	(1)	 	That such representations and warranties are true and correct on and as of the
date hereof and will be true and correct on and as of the proposed Funding Date with
respect to such Ancillary Vehicle Loan, both before and after giving effect to such
Ancillary Vehicle Loan.
	 
	 	(2)	 	That no Default or Event of Default has occurred and is continuing, nor would
any Default or Event of Default result form the borrowing of such Ancillary Vehicle
Loan or the application of the proceeds therefrom.
	 
	 	(3)	 	That the Ancillary Vehicle Loan shall be for the sole purpose of making payment
on an invoice for services provided by the recipient of the proceeds of the Ancillary
Vehicle Loan. The Vehicle Shipping & Conversion Costs set forth on such invoice are
attributable to Vehicles financed pursuant to a Letter of Credit issued, or Vehicle
Purchase Loan made, pursuant to the Agreement.
	 
	 	(4)	 	The proposed Funding Date of the Ancillary Vehicle Loan is ________.
	 
	 	(5)	 	Attached as Exhibit 1 is a complete copy (including all attachments and
schedules) of the Commercial Invoice of the following [shipping company] [Approved
Converter] [other party being paid with proceeds of the Ancillary Vehicle Loan] in the
aggregate amount of $___:

H-1

 

	 	 	 	[Name]
	 
	 	 	 	[Address]
	 
	 	 	 	[Telephone Number]
	 
	 	 	 	[Contact Person]
	 
	 	 	 	[Description of the services provided by the recipient of the proceeds of the
Ancillary Vehicle Loan]
	 
	 	(6)	 	Attached as Exhibit 2 is the Ancillary Vehicle Budget relating to the
Eligible Inventory as to which the services paid (or to be paid) with the proceeds of
such Ancillary Vehicle Loan have been (or shall be) performed.
	 
	 	(7)	 	Attached as Exhibit 3 is a written direction from the Borrower to pay
directly to the service provider of such services the proceeds of the Ancillary Vehicle
Loan.
	 
	 	(8)	 	The Borrower reaffirms that the recipient of the proceeds of the Ancillary
Vehicle Loan is not a Related Party of the Borrower or any Subsidiary thereof;

     Delivery of an executed counterpart of this Ancillary Vehicle Loan Request by telecopier or
email shall be effective as delivery of an original executed counterpart of this Ancillary Vehicle
Loan Request.

Sincerely,

	 	 	 	 	 
	ZAP, a California corporation	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

H-2

 

Exhibit I

Form of Conversion Request

[DATE]

Surge Capital II, LLC, a Delaware limited liability company

1033 Skokie, Boulevard, Suite 620

Northbrook, Illinois, 60062

     The undersigned is the Borrower under that certain Master Financing Agreement, dated as of
September 12, 2005 (as the same may be amended, modified or supplemented from time to time, herein
called the “Agreement” capitalized terms not otherwise defined herein being used as therein
defined) among ZAP, a California corporation (the “Borrower”), the Lenders that are parties
thereto from time to time, and Surge Capital II, LLC, a Delaware limited liability company, as
Administrative Agent.

     The Borrower hereby requests a Conversion Loan in the original principal amount of
$                                        for the purpose of converting the LC Loan with respect to the Letter of Credit
identified below and LC Interest accrued thereon to the principal amount of the Conversion Loan
hereby requested.

[Identify in sufficient detail the applicable Letter of Credit]

     The Borrower hereby reaffirms all representations and warranties in the Agreement and
certifies as follows:

	 	(1)	 	That such representations and warranties are true and correct on and as of the
date hereof and will be true and correct on and as of the proposed Funding Date with
respect to such Conversion Loan, both before and after giving effect to such Conversion
Loan.
	 
	 	(2)	 	That no Default or Event of Default has occurred and is continuing, nor would
any Default or Event of Default result from the borrowing of such Conversion Loan or
the application of the proceeds therefrom.
	 
	 	(3)	 	The proposed Funding Date of the Conversion Loan is                     .
	 
	 	(4)	 	Attached as Exhibit 1 is:

[Administrative Agent to specify documents to attach, if any]

     Delivery of an executed counterpart of this Conversion Loan Request by telecopier or email
shall be effective as delivery of an original executed counterpart of this Conversion Loan Request.

Sincerely,

I-1

 

	 	 	 	 	 
	ZAP, a California corporation	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

I-2

 

Exhibit J

Form of A/R Loan Request

[DATE]

Surge Capital II, LLC, a Delaware limited liability company

1033 Skokie, Boulevard, Suite 620

Northbrook, Illinois, 60062

     The undersigned is the Borrower under that certain Master Financing Agreement, dated September
12, 2005 (as the same may be amended, modified or supplemented from time to time, herein called the
“Agreement” capitalized terms not otherwise defined herein being used as therein defined)
among ZAP, a California corporation (the “Borrower”), the Lenders that are parties thereto
from time to time, and Surge Capital II, LLC, a Delaware limited liability company, as
Administrative Agent.

     Borrower hereby requests an A/R Loan in the original principal amount of $                                        .

     The Borrower hereby reaffirms all representations and warranties in the Agreement and
certifies as follows:

	 	(1)	 	That such representations and warranties are true and correct on and as of the
date hereof and will be true and correct on and as of the proposed Funding Date, both
before and after giving effect to such A/R Loan.
	 
	 	(2)	 	That no Default or Event of Default has occurred and is continuing, nor would
any Default or Event of Default result form the borrowing of such A/R Loan or the
application of the proceeds therefrom.
	 
	 	(3)	 	The proceeds of the A/R Loan are being used solely to finance the Eligible
Accounts.
	 
	 	(4)	 	The proposed Funding Date of the A/R Loan is ________.
	 
	 	(5)	 	Attached as Exhibit 1 is a complete copy including all attachments and
schedules) of the Customer Purchase Order(s) of the following customer in the aggregate
amount of $___, which Customer Purchase Order(s) (together with the Borrower’s
commercial invoice) evidences the account receivable being financed with the proceeds
of the requested A/R Loan.
	 
	 	(6)	 	Attached as Exhibit 1 is a true and correct copy of the borrowing base
report demonstrating (x) the calculation of Eligible Accounts and (y) the calculation
of Available Borrowing Base as of the date of this A/R Loan Request.
	 
	 	(7)	 	Attached hereto as Exhibit 2 are (i) the original Manufacturers
Statements of Origin or other similar documentation evidencing shipment of the Eligible

J-1

 

	 	 	 	Inventory underlying the Eligible Accounts from Borrower (or one of its Subsidiaries
a party to a Subsidiary Security Agreement) to the Customers and evidence of such
Customers’ acceptance of the purchased Eligible Inventory; (ii) original evidence of
the issuance of a prepaid credit insurance policy / letter of credit / unconditional
obligation from the Customer’s floor plan lender that is approved in writing by the
Administrative Agent, with respect the applicable Customer’s obligations under the
applicable Customer Purchase Order(s) in favor of Administrative Agent.
	 
	 	(8)	 	Attached hereto as Exhibit 3 are copies of Borrower’s (or such
Subsidiary’s) commercial invoice to its Customer(s) in respect of the Eligible Accounts
financed hereunder.
	 
	 	(9)	 	The accounts to be financed with the proceeds of the requested A/R Loan are
Eligible Accounts.

     Delivery of an executed counterpart of this A/R Loan Request by telecopier or email shall be
effective as delivery of an original executed counterpart of this A/R Loan Request.

Sincerely,

	 	 	 	 	 
	ZAP, a California corporation	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

J-2

 

Exhibit K

Requirements for Eligible Accounts

     An Eligible Account is an Account owing to the Borrower (or a wholly-owned Subsidiary thereof
that is a party to a Subsidiary Security Agreement) which meets the following requirements:

     (a) it is genuine and in all respects what it purports to be;

     (b) it arises from the sale of Eligible Inventory by the Borrower (or such Subsidiary) and (i)
such Eligible Inventory complies with such Account Debtor’s specifications (if any) and have been
shipped to, or delivered to and accepted by, such Account Debtor, (ii) the Borrower has possession
of, or has delivered to the Administrative Agent, at its request, shipping and delivery receipts
evidencing such shipment, delivery and acceptance, and (iii) such Eligible Inventory have not been
returned to the Borrower (or such Subsidiary);

     (c) it is evidenced by an invoice rendered to the Account Debtor with respect thereto which
(i) is dated not earlier than the date of shipment or performance, (ii) has payment terms
reasonably acceptable to the Administrative Agent, and (iii) requires Account Debtor to make
payment either by wire transfer directly to the Depository Account or by mail to the Lockbox;

     (d) (i) it must not be unpaid on the date that is thirty (30) days after the date of the
invoice evidencing such Account; or (ii) it must not be an Account owed by any Account Debtor which
has not paid twenty-five percent (25%) or more of its Accounts within the time period specified in
subclause (i) above;

     (e) it is not subject to any assignment, claim or Lien other than a first priority Lien in
favor of the Administrative Agent, for the benefit of the Lenders and any Liens in favor of any
Approved Converter that are contractually subordinated to the Lien in favor of the Administrative
Agent;

     (f) the Administrative Agent has approved the Account Debtor in advance;

     (g) Administrative Agent has received written notice of the terms of such Account from Account
Debtor not less than three (3) Business day’s prior to the date of Account Debtor’s acceptance of
its purchase order giving rise to such Account and does not object to the transaction by written
notice to Borrower within two (2) Business Days of receipt of such notice;

     (h) it is a valid, legally enforceable and unconditional obligation of the Account Debtor with
respect thereto and is not subject to setoff, counterclaim, credit or allowance (except any credit
or allowance which has been deducted in computing the net amount of the applicable invoice as shown
in the original schedule furnished to the Administrative Agent identifying or including such
Account) or adjustment by the Account Debtor with respect thereto, or to any claim by such Account
Debtor denying liability thereunder in whole or in part, does not reflect a

K-1

 

reasonable reserve for warranty claims or returns, and such Account Debtor has not refused to
accept any of the Eligible Inventory which are the subject of such Account or offered or attempted
to return any of such Eligible Inventory;

     (i) there are no proceedings or actions which are then threatened or pending against the
Account Debtor with respect thereto or to which such Account Debtor is a party which might result
in any material adverse change in such Account Debtor’s financial condition or in its ability to
pay any Account in full when due;

     (j) it does not arise out of a contract or order which, by its terms, forbids, restricts or
makes void or unenforceable the assignment by the Borrower (or such Subsidiary) to the
Administrative Agent of such Account;

     (k) it does not arise from a “sale on approval,” “sale or return” or “consignment,” nor is it
subject to any other repurchase or return agreement;

     (l) it is not an Account with respect to which possession and/or control of the Eligible
Inventory giving rise thereto is held, maintained or retained by the Borrower, any Subsidiary or
any Related Party (or by any Administrative Agent or custodian of the Borrower, any Subsidiary or
Related Party) for the account of or subject to further and/or future direction from the Account
Debtor with respect thereto;

     (m) it does not, in any way, violate or fail to meet any warranty, representation or covenant
contained in the Loan Documents relating directly or indirectly to the Borrower’s (or such
Subsidiary’s) Accounts;

     (n) it arises in the ordinary course of the Borrower’s (or such Subsidiary’s) business;

     (o) such Account is eligible for credit insurance coverage by an insurer reasonably acceptable
to Administrative Agent and on terms and conditions reasonably acceptable to Administrative Agent;

     (p) if the Administrative Agent, in its reasonable business judgment, has established a credit
limit for the Account Debtor with respect thereto, the aggregate dollar amount of Accounts due from
such Account Debtor, including such Account, does not exceed such credit limit;

     (q) if it is evidenced by chattel paper or instruments, (i) the Administrative Agent shall
have specifically agreed to include such Account as an Eligible Account, (ii) only payments then
due and payable under such chattel paper or instrument shall be included as an Eligible Account and
(iii) the originals of such chattel paper or instruments have been assigned and delivered to the
Administrative Agent in a manner satisfactory to the Administrative Agent;

     (r) the Account Debtor does not have its principal place of business or executive office
outside the United States;

K-2

 

     (s) the Account Debtor is not any unit of government, whether foreign or domestic (provided,
however, that there shall be included in Eligible Accounts that portion of Accounts owed by such
units of government for which the Borrower has provided evidence satisfactory to the Administrative
Agent that (i) the Administrative Agent, for the benefit of the Lenders, has a first priority Lien
and (ii) such Accounts may be enforced by the Administrative Agent directly against such unit of
government under all applicable laws);

     (t) the Account Debtor is not a Subsidiary, Affiliate, shareholder, director, officer or
employee of the Borrower, either directly or indirectly;

     (u) such Account has not been restructured, extended, amended or modified; and

     (v) such Account does not constitute advertising, finance charges, service charges or sales or
excise taxes.

An Account which is at any time an Eligible Account but which subsequently fails to meet any of the
foregoing requirements shall forthwith cease to be an Eligible Account. Further, with respect to
any Account, if the Administrative Agent at any time or times hereafter determines, in its
reasonable business judgment, that the prospect of payment or performance by the Account Debtor
with respect thereto is or will be impaired for any reason whatsoever, notwithstanding anything to
the contrary contained above, such Account shall forthwith cease to be an Eligible Account. The
amount of Eligible Accounts shall be the net United States dollar amount (as determined by the
Administrative Agent after deduction of such reserves and allowances as the Administrative Agent,
in its commercially reasonable credit judgment, deems proper and necessary).

K-3

 

Exhibit L

Form of Bill of Sale

     This BILL OF SALE is made as of [DATE OF LOAN] by [NAME AND ADDRESS OF MERCHANDISE VENDOR]
(“Seller”).

     For $                                          [TOTAL PURCHASE PRICE FOR GOODS, MATCHING PRICE ON BORROWER PURCHASE
ORDER], the receipt of which is hereby acknowledged, Seller does hereby sell, transfer, convey,
assign and deliver to ZAP, a California corporation (“Buyer”), its successors and assigns,
forever, free and clear of all mortgages, pledges, liens and security interests of any kind or
nature (whether or not of record), good and merchantable right, title and interest of Seller in and
to the following goods (the “Goods”):

[DESCRIPTION OF GOODS FROM PURCHASE ORDER]

                                                            

                                                            

                                                            

     Seller acknowledges that Buyer has granted a security interest in the Goods to Surge Capital
II, LLC, a Delaware limited liability company and in its capacity as Administrative Agent for
certain lenders (“Secured Party”), and acknowledges that it holds possession of the goods
for the benefit of Buyer and Secured Party pending shipment. Seller authorizes Buyer or Secured
Party as bailor to file a precautionary financing statement describing the Goods if either so
elects, and Seller will take all reasonable and necessary actions to cause Secured Party to have a
security interest that is prior to any other existing or future security interest that may arise
through Seller in the Goods or other goods previously sold to Buyer.

[ Remainder of Page Intentionally Left Blank; Signature Page Follows ]

L-1

 

     IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed by its duly
authorized officer or representative.

[VENDOR]

By:                                                             

Its:                                                             

L-2

 

ANNEX A to Master Financing Agreement

Pay-Off Letters and Unauthorized Indebtedness

None

 

 

ANNEX B to Master Financing Agreement

UCC Termination Statements

 

 

SCHEDULE I to Master Financing Agreement

Commitments of the Lenders

	 	 	 	 	 	 	 	 	 
	Name of Lender	 	Commitment	 	Pro Rata Share
	Surge Capital II, LLC
	 	$	425,000,000	 	 	 	100	%
	Total
	 	$	425,000,000	 	 	 	100	%

 

 

SCHEDULE 4.4(a) to Master Financing Agreement

Affiliate Agreements

None

 

 

SCHEDULE 4.5(a) to Master Financing Agreement

Government Consents

     1. With respect to the Borrower and the Subsidiaries that are a party to the Subsidiary Security
Agreement, the UCC-1 Financing Statements required to be filed to perfect the security interests
granted pursuant to, in the case of the Borrower, the Security Agreement, and in the case of such
Subsidiaries, the Subsidiary Security Agreement.

 

 

SCHEDULE 4.5(b) to Master Financing Agreement

Government Approvals

2005 EPA Approval

CARB (California Air Resources Board)

2006 DOT and EPA Approvals

 

 

SCHEDULE 4.6 to Master Financing Agreement

Litigation

A dormant complaint filed in 2002 against R.A.P. Group, Inc. and Steve Schneider (CEO of ZAP)
individually was reactivated by the plaintiff, Jim Arnold Trucking. The Complaint alleges Breach
of Contract, Promissory Estoppel and Fraud and seeks contract damages in the amount $71,000 plus
monthly storage fees and punitive damages of $750,000. The Company has cross-claimed against
Plaintiffs seeking compensatory damages, attorneys’ fees and equitable relief for breach of oral
contract, common count for goods sold and delivered, conversion, liability of surety, violation of
statute, and violation of Unfair Practices Act. On February 17, 2005, the court referred the
matter to non-binding arbitration. The non-binding arbitration hearing was held on July 27, 2005,
and the arbitrator found in favor of the Plaintiff. ZAP did not accept the results of the
non-binding arbitration. ZAP intends to assert its defenses vigorously and to litigate its
cross-complaint aggressively. Management believes that the ultimate resolution of this claim will
not have a material adverse effect on our financial position or on results of operations.

On May 20, 2003, R.A.P. Group, Inc. was named as a defendant in a lawsuit filed in the Superior
Court of California by Fireside Thrift Co. The plaintiff was seeking damages in the amount of
$546,108 plus interest. This action was resolved without a material affect to the Company.

The Company, during the first quarter of 2002, became aware that the California Department of Motor
Vehicles (DMV)-Investigations Division was conducting an inquiry into the activities of certain
employees of the R.A.P. Group. If any adverse findings did result, the Auto Dealer’s License for
R.A.P. Group, Inc. could be jeopardized, since R.A.P. Group, Inc., was then on probation with the
California Department of Motor Vehicles for a period of two years ending June 12, 2004. The
probationary action was primarily due to the R.A.P. Group Inc.’s untimely transfers of pink slips
for sales of vehicles and lack of compliance with Motor Vehicle Pollution Control guidelines on
certain automobile sales. As part of ZAP’s original business plan, management is considering
converting, depending upon the sales volume, the dealership into a wholesale distributor for its
electric cars. R.A.P. Group, Inc. has had no additional inquiries from the DMV since 2002. In
2004 R.A.P. Group, Inc.’s license was issued on a probationary basis, but in 2005 such license was
issued on a non-probationary basis.

Pursuant to a default judgment taken by Air Resources Board without the knowledge of ZAP, R.A.P.
Group, Inc., or any of its principals an injunction issued against Bug Motors, R.A.P. Group, Inc.,
Kenneth Scheiler and Steve Schneider, restraining them against directly or indirectly importing,
delivering, purchasing or acquiring and/or receiving new motor vehicles or motor vehicle engines
that have not been certified by the Air Resources Board for use, registration or resale in CA.
Defendants were further required: (a) to transfer any remaining uncertified vehicles to recipients
located outside of the US and to provide written disclosure to buyer containing language
substantially similar to the following: “this vehicle may never be registered or resold for use in
US”; and (b) to provide Air Resources Board with documentation of transfer of all uncertified
vehicles outside the US within 90 days of the court order. R.A.P. Group, Inc. and Steven Schneider
paid the sum of $37,500 to settle the action as evidenced by a Satisfaction

 

 

of Judgment. A judgment lien was filed with the Secretary of State of the State of California,
Sonoma County and Lake County prior to the payment. The liens have been released in each
circumstance.

Leandra Dominguez v. R.A.P. Group, Inc. dba the Repo Outlet et. al., Case No. SCV-235641, complaint
filed October 14, 2004, first amended complaint filed December 15, 2004. Plaintiff has sued The
Repo Outlet for negligent misrepresentation, for a violation of the Business and Professions Code
Section 17200, for breach of the implied warranty of merchantability under the Magnusson-Moss Act,
and for violation of the federal Truth in Lending Act. On January 13, 2005, R.A.P. Group, Inc.
agreed to defend and indemnify Credit West Corporation. At a hearing before the Sonoma County
Superior Court on February 23, 2005, the court granted The Repo Outlet’s motion to compel
arbitration. The matter was originally set for a case management conference on February 8, 2005,
but that conference has now been continued to October 14, 2005, pending resolution of the motion to
compel arbitration. The R.A.P. Group, Inc. filed a demand for arbitration with the American
Arbitration Association (the “Association”) on April 7, 2005, and the parties have been working
with the Association to move this matter forward.

Joanne Roberts v. States Recovery System, Inc., R.A.P. Group, Inc. dba The Repo Outlet et al., Case
No. MCV-180575, cross-complaint filed December 17, 2004. After being sued by States Recovery
System, Inc., Roberts filed a cross-complaint against The Repo Outlet for negligent
misrepresentation, violation of the Business and Professions Code Section 17200, and violation of
Civil Code Section 2981.9. Plaintiff also asserted other causes of actions against the other
cross-defendants. An answer to the cross-complaint was filed on February 9, 2005. The matter is
set for trial on March 23, 2006.

First Class Imports is a vehicle dealer that executed a licensing and distributorship agreement
with Voltage Vehicles on May 22, 2004. Pursuant to the agreement, First Class Imports is allowed
to use Voltage Vehicles’ trademarks and to distribute SMART-branded automobiles that it receives
from Voltage Vehicles. Voltage Vehicles agreed to use its best efforts to provide First Class
Imports with SMART-branded vehicles. First Class Imports has alleged that Voltage Vehicles
breached the agreement by not delivering new SMART-branded vehicles to First Class Imports. First
Class Imports has demanded a return of $100,000 licensing fees paid to the Voltage Vehicles under
the agreement, plus interest. Voltage Vehicles has responded with a letter stating that no breach
of contract has occurred and has initiated an arbitration proceeding in Northern California to
obtain a declaration to that effect.

 

 

SCHEDULE 4.9 to Master Financing Agreement

Owned Real Property

	 	 	 
	501 4th Street, Santa Rosa, CA 95401

	 	(building and land)
	44720 Main Street, Mendocino, CA 95460

	 	(building and land)

 

 

SCHEDULE 4.13 to Master Financing Agreement

Subsidiaries

R.A.P. Group, Inc., a California corporation

Voltage Vehicles, a Nevada corporation

ZAP Manufacturing, Inc., a Nevada corporation

ZAP Rental Outlet, a California corporation

ZAPWorld Stores, Inc., a California corporation

ZAPWorld Outlets, Inc., a California corporation

 

 

SCHEDULE 4.14 to Master Financing Agreement

Partnerships and Joint Ventures

Joint Venture Formation Agreement by and between ZAP, Ding Feng Enterprises Co. Ltd., a Jangxi,
China Corporation, and Kent Hsin, an individual who is a principal of Ding Feng and a Resident of
California, dated December 5, 2004, with respect to the formation of a to-be-formed entity to be
known as ZAP (China) Co. Ltd. (“ZAP (China)”).

 

 

SCHEDULE 4.17 to Master Financing Agreement

Insurance

Insurance Policy Number 73GHN321765 from Pacific Gateway Insurance Company and ISU Insurance
Services in re “Voltage Vehicles, Inc. – 3362 Fulton Road, Fulton, CA 95439” to provide Voltage
Vehicles with Garage Liability ($1,000,000), Dealers Physical Damage Insurance ($700,000), and CSL
$2,000,000 Aggregate. The annual premium is $25,473 and covers the property located at 3362 Fulton
Road, Fulton, CA 95439. National Liability & Fire Insurance Company Agreement in re Insurance
Policy Number 73GHN321765 for Voltage Vehicles, Inc. at 3362 Fulton Road, Fulton, CA to provide for
Each Accident — Garage Operations $1,000,000 limit of insurance for Auto Only and $1,000,000 limit
of insurance for Other than Auto Only and $2,000,000 Aggregate — Garage Operations for Other than
Auto Only for the period from February 28, 2005 to February 28, 2006 for the premium of $25,473.

Amendment of Limits of Liability Agreement, amending an insurance agreement, between Zap Inc., ZAP
Manufacturing, ZAPWorld Store, ZAPWorld Outlets, Inc. and ZAP Rental Outlet (the “Insureds”) and
Evanston Insurance Company (“Insurer”) effective December 16, 2004 to provide greater liability
amount coverage for 1) Bodily Injury and Property Damage Liability (a) Each Occurrence — $2,000,000
and (b) Damage to Premises – any one premise $100,000 and 2) Personal Injury and Advertising Injury
Liability (a) Each Person or Organization — $2,000,000 and 3) Policy Aggregate — $2,000,000.
Certificate of Insurance from ISU Insurance Services dated May, 28, 2005. The Insurer is Evanston
Insurance Company providing general liability insurance for the Insured, Zap Inc. at 6784 and 6786
Sebastopol Avenue and 6793 C McKinley Street, Sebastopol, CA. Deduction amount is $5,500. The
coverage is as follows: $2,000,000 for each occurrence; $100,000 for damage to rented premises
(each occurrence); $2,000,000 for personal and adv injury; and $2,000,000 general aggregate.
Sebastopol Co-Op, LLC & Pine Creek Properties are named as additional insured as landlord.

 

 

SCHEDULE 4.18 to Master Financing Agreement

Material Agreements

Distribution and Strategic Relationship Agreement between Smart Automobile, LLC (SA) and ZAP (the
“Parties”) dated April 19, 2004, as amended, by the Conversion Agreement between the Parties, dated
October 25, 2004.

Promissory Note in the Amount of $1,000,000 made by Smart Automobile, a California limited
liability company, in favor of ZAP, dated January 6, 2005.

Promissory Note in the Amount of $2,000,000 made by ZAP in favor of Atocha Land LLC, a Virginia
limited liability company, dated March 7, 2003.

Purchase Price True-Up Agreement between ZAP and Jinsei LLC, dated April 21, 2005 relating to ZAP’s
purchase of 44720 Main Street, Mendocino, California.

Master Distribution Agreement between Apollo Energy Systems, Inc. (“Manufacturer”) and Voltage
Vehicles (“Distributor”) dated August 6, 2004.

Letter Agreement between ZAP to Anuvu Inc. dated December 13, 2004. Agreement whereby ZAP agrees to
buy 1 Fuel Cell System Conversion for the Smart Car with delivery on July 4, 2005 at $100,000; 100
3KW Fuel Cell System Engines with delivery on December 30, 2005 at $1,500,000; and 100 3KW Fuel
Cell System Engines with delivery on December 30, 2006 at $9,000,000.

Purchase Agreement between ZAP and Lazarus Investment Partners LLP, dated February 16, 2005.

Purchase Agreement between ZAP and Platinum Partners Value Arbitrage Fund LP, dated December 20,
2004.

Form of Distribution Agreement between Zibo and ZAP dated October 5, 2004 wherby Zibo appoints ZAP
as the exclusive distributor for the sale and distribution of portable energy products manufactured
or assembled by Zibo or by others under arrangements with Zibo in North America.

 

 

SCHEDULE 4.20 to Master Financing Agreement

Capitalization

ZAP, a California Corporation

	 	•	 	Authorized to issue 100,000,000 shares of common stock and 50,000,000 shares of
preferred stock.

	 
	 	•	 	31,850,871 shares of common stock issued and outstanding; 7,500 shares of preferred
stock issued and outstanding; 6,400,517 
	 	options issued and outstanding to purchase 6,400,517
shares of common stock; and 53,385,083 warrants issued and outstanding to purchase 53,385,083
shares of common stock.

R.A.P. Group, Inc., a California corporation

	 	•	 	Authorized to issue 25,000 shares of common stock.
	 
	 	•	 	25,000 shares of common stock issued and outstanding.
	 
	 	•	 	The Borrower owns 100% of all outstanding shares of the common stock.

Voltage Vehicles, a Nevada corporation

	 	•	 	Authorized to issue 25,000 shares of common stock.
	 
	 	•	 	25,000 shares of common stock issued and outstanding.
	 
	 	•	 	The Borrower owns 100% of all outstanding shares of the common stock.

ZAP Manufacturing, Inc., a Nevada corporation

	 	•	 	Authorized to issue 75,000 shares of common stock.
	 
	 	•	 	75,000 shares of common stock issued and outstanding.
	 
	 	•	 	The Borrower owns 100% of all outstanding shares of the common stock.

ZAP Rental Outlet, a California corporation

	 	•	 	Authorized to issue 100,000 shares of common stock.
	 
	 	•	 	100,000 shares of common stock issued and outstanding.
	 
	 	•	 	The Borrower owns 100% of all outstanding shares of the common stock.

ZAPWorld Stores, Inc., a California corporation [Charter and Bylaw Documents not provided to
Lenders]

	 	•	 	Authorized to issue
                     shares of common stock.
	 
	 	•	 	                     shares of common stock issued and outstanding.
	 
	 	•	 	The Borrower owns 100% of all outstanding shares of the common stock.

ZAPWorld Outlets, Inc., a California corporation [Charter and Bylaw Documents not provided to
Lenders]

	•	 	Authorized to issue
                     shares of common stock.
	 
	•	 	                     shares of common stock issued and outstanding.
	 
	•	 	The Borrower owns 100% of all outstanding shares of the common stock.

 

 

SCHEDULE 6.8(e) to Master Financing Agreement

Indebtedness

Promissory Note in the Amount of $2,000,000 between ZAP (“Maker”) and Atocha Land LLC (“Payee”)
dated March 7, 2003.

Letter Agreement between R.A.P. Group, Inc. and Fidelity Capital (“Fidelity”), dated July 14, 2003,
where Fidelity agrees to provide a 60 month capitalized lease for the capitalized cost of $35,500
for an ASM Generation II and InGround Turnkey. (Sterling has a purchase money security interest in
ASM Generation II Systems W/Cooling Fan S/N 40270315837.)

Purchase Price True-Up Agreement between ZAP and Jinsei LLC dated April 21, 2005. The Agreement
relates to ZAP’s purchase of 44720 Main Street, Mendocino, California from Seller. As Security for
ZAP’s obligations under the Agreement, ZAP pledges and assigns to Jinsei, and grants to Jinsei a
security interest in and lien on, all right, title and interest of ZAP in and to the Property.
Such security interest will be recorded by a first priority deed of trust on the Property. ZAP
will not sell, transfer or dispose of the Property or use the Property as collateral for any
indebtedness or otherwise encumber the Property until Jinsei has received cash in the amount of the
full Purchase Price of $1,045,000.

 

 

SCHEDULE 6.9 to Master Financing Agreement

Liens

	 	 	 	 	 	 	 	 	 
	Jurisdiction	 	Secured Party	 	Filing Number	 	Filing Date
	CA

	 	Atocha Land, LLC2
	 	 	03-09360051	 	 	04/01/2003
	 
	 	 	 	 	 	 	 	 
	Mendocino County

	 	Jinsei LLC3	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	CA

	 	Production Finance

International, LLC4
	 	03-16460600	 	 	06/12/2003
	 
	 	 	 	 	 	 	 	 
	CA

	 	Sterling National

Bank5
	 	03-22060234	 	 	08//04/2003
	 
	 	 	 	 	 	 	 	 
	CA

	 	Manheim Automotive
Financial Services,
Inc.6
	 	0007461078	 	 	03/10/2000
	 
	 	 	 	 	 	 	 	 
	CA Secretary of
State, Sonoma
County, and Lake
County

	 	California
Secretary of
State7in re case
number BC236187
	 	2005035955 — Sonoma County

2005009384 — Lake County 

04-1005611605 — CA Sec. of State	 	3/18/2005 — Sonoma County

04/04/2005 — Lake County
	 
	 	 	 	 	 	 	 	 
	CA Secretary of
State and Sonoma
County

	 	Internal Revenue

Service8
	 	Sonoma
County — Federal Tax

Lien No. 2004180517
	 	Sonoma County — 11/22/2004
	 
	 	 	 	 	 	 	 	 
	California

	 	Sonoma County

Treasurer9
	 	2005091656 — Tax Lien
	 	06/28/2005

 

			
	2 	 	Lien on property that ZAP purchased from Atocha.
	 
	3 	 	Lien on property that ZAP purchased from Jinsei.
	 
	4 	 	Security interest in all inventory, accounts, accounts
receivable, chattel paper, documents, instruments, contract rights, insurance
proceeds, trademarks, tradenames and other general intangibles , and all
proceeds thereof, now owned and hereafter acquired relating to all debts owed
by ZAP to PFI. Katten filing UCC-3 on behalf of PFI. Awaiting release of
lien.
	 
	5 	 	Purchase money security interest in ASM Generations II
Systems with cooling fan S/N 40270315837 relating to Letter Agreement between
R.A.P. Group, Inc. (“R.A.P.”) and Fidelity Capital
(“Fidelity”) dated July 14, 2003.
	 
	6 	 	Lien on all vehicle inventory, equipment, fixtures,
accounts, cash reserves, holdback reserves, manufacturer rebates and incentive
payments, general intangibles and proceeds of the foregoing now owned or
hereafter acquired. UCC-3 termination statement filed. Awaiting release of
lien.
	 
	7 	 	Lien against Bug Motors, RAP Group, Kenneth Scheiler and
Steve Schneider. Restraint against defendants directly or indirectly
importing, delivering, purchasing or acquiring and/or receiving new motor
vehicles or motor vehicle engines that have not been certified by the Air
Resources Board for use, registration or resale in CA. Payment of $37,500 made.
Satisfaction of judgment filed with CA Secretary of State, Sonoma County and
Lake County. Awaiting release of lien.
	 
	8 	 	Lien against R.A.P. Group/Redwood Auto Plaza for
approximately $15,581.00 for tax period ending 12/31/99 and 9/30/02. Received
evidence of payment of $19,356.00. Waiting for release of liens.
	 
	9 	 	Property lien for delinquency of 2004-2005 taxes of
$1,688.31. Evidence stamped by Sonoma County of payment of $1,964.53 to Sonoma
County. Awaiting evidence of release of lien which may take 6 to 8 weeks.

 

 

Execution Copy

BORROWER SECURITY AGREEMENT

          THIS BORROWER SECURITY AGREEMENT (this “Security Agreement”), dated and effective as
of this September 12, 2005, is made by ZAP, a California corporation, with its chief executive
office located at 501 Fourth Street, Santa Rosa, California (hereinafter called the
“Debtor”), in favor of Surge Capital II, LLC, a Delaware limited liability company, as
Administrative Agent, with an office at 1033 Skokie, Boulevard, Suite 620, Northbrook, Illinois,
60062 (“Secured Party”), for the benefit of the Lenders (as hereinafter defined).

WITNESSETH:

          WHEREAS, the Debtor has entered into that certain Master Financing Agreement of even date
herewith (the same, as it may be amended, restated, supplemented or otherwise modified and in
effect from time to time, being herein referred to as the “Financing Agreement”) among the
Debtor, Secured Party and the Lenders from time to time parties thereto, providing for the Lenders
to make available certain Loans and Credits to the Debtor on the terms and conditions set forth
therein;

          WHEREAS, it is a condition precedent to the effectiveness of the Financing Agreement and the
obligations of the Lenders to make their respective Loans and Credits under the Financing Agreement
that the Debtor shall have executed and delivered this Security Agreement to the Administrative
Agent for the ratable benefit of the Lenders.

          NOW THEREFORE, in consideration of these premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

	 	1.	 	Definitions.

          As used herein, the following terms shall have the meanings set forth in this Section. Other
terms defined herein shall have the meanings ascribed to them herein. All capitalized terms used
herein not specifically defined herein shall have the meaning ascribed to them in the Financing
Agreement, and the following terms which are defined in the Uniform Commercial Code from time to
time in effect in the State of Illinois (the “UCC”) are used herein as so defined:
Accessions, Accounts, As-Extracted Collateral, Chattel Paper, Commercial Tort Claims, Consumer
Goods, Control, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products,
Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit
Rights, Manufactured Homes, Payment Intangibles, Proceeds, Products, Securities Intermediary,
Software, Standing Timber, Supporting Obligations and Tangible Chattel Paper.

          “Bankruptcy Code”: means the Bankruptcy Code in Title 11 of the United States Code, as
amended, modified, succeeded or replaced from time to time.

 

 

          “Copyright Licenses”: means any agreement, whether written or oral, providing for the
grant by or to a Person of any right under any Copyright.

          “Copyrights”: means all copyrights (other than copyrights of de minimus value) of the
Borrower and its Subsidiaries in all works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in connection therewith, whether in the
United States Copyright Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof.

          “Debtor”: shall have the meaning ascribed to such term in the recitals hereto.

          “Default”: means any event which if it continued uncured would, with notice or lapse
of time or both, constitute an Event of Default.

          “Event of Default”: shall have the meaning ascribed to such term in the Financing
Agreement.

          “Financing Agreement”: shall have the meaning set forth in the Recitals
hereto.

          “Material Adverse Effect”: means a material adverse effect on (a) the business,
operations, property, condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole, (b) the ability of Debtor or any Guarantor to perform its
obligations, when such obligations are required to be performed, under this Agreement or any of the
Notes or any other Loan Document or (c) the validity or enforceability of this Agreement, any of
the Notes or any of the other Loan Documents or the rights or remedies of the Administrative Agent
or the Lenders hereunder or thereunder or the perfection or priority of any Lien in favor of the
Administrative Agent.

          “Material Contract”: means (a) any partnership or joint venture agreement to which
Debtor or any of its Subsidiaries is a party, (b) any contract, agreement, permit or license,
written or oral, of any Credit Party or any of its Subsidiaries involving monetary liability of or
to any such Person in an amount in excess of $50,000 per annum and (c) any other contract,
agreement, permit or license, written or oral, of any Credit Party or any of its Subsidiaries as to
which the breach, nonperformance, cancellation or failure to renew by any party thereto could
reasonably be expected to have a Material Adverse Effect.

          “Patent Licenses”: means all agreements, whether written or oral, providing for the
grant by or to a Person of any right to manufacture, use or sell any invention covered by a Patent.

          “Patents”: means (i) all letters of patent of the United States or any other country,
now existing or hereafter arising, and all improvement patents, reissues, reexaminations, patents
of additions, renewals and extensions, and (ii) all applications for letters patent of the United
States or any other country, now existing or hereafter arising, and all provisionals, divisions,
continuations and continuations-in-part and substitutes thereof.

2

 

	 	 	“Permitted Liens”: means all Liens permitted under Section 6.9 of the
Financing Agreement.
	 
	 	 	“Secured Obligations”: means “Obligations” as defined in the Financing Agreement.
	 
	 	 	“Trademark License”: means any agreement, whether written or oral, providing for the
grant by or to a Person of any right to use any Trademark.
	 
	 	 	“Trademarks”: means (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, service marks, elements of package or trade dress of
goods or services, logos and other source or business identifiers (other than such items that are
of de minimus value), together with the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any similar office or
agency of the United states, any state thereof or any other country or any political subdivision
thereof and (ii) all renewals thereof.

	 	2.	 	Grant of Security Interest in the Collateral.

          To secure the prompt payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations, the Debtor hereby
grants to the Administrative Agent, for the benefit of the Lenders, a continuing first priority
security interest in and lien on, and a right to set off against, any and all right, title and
interest of the Debtor in and to the following, whether now owned or existing or owned, acquired,
or arising hereafter (collectively, the “Collateral”):

	 	(i)	 	all Accounts;
	 
	 	(ii)	 	all cash;
	 
	 	(iii)	 	all Chattel Paper;
	 
	 	(iv)	 	Commercial Tort Claims set forth on
Schedule VII (as such Schedule may be updated from time to time
by the Debtor);
	 
	 	(v)	 	all Copyright Licenses;
	 
	 	(vi)	 	all Copyrights;
	 
	 	(vii)	 	all Deposit Accounts set forth on Schedule
VI (as such Schedule may be updated from time to time by the
Debtor);
	 
	 	(viii)	 	all Documents;
	 
	 	(ix)	 	all Equipment;
	 
	 	(x)	 	all Fixtures;

3

 

	 	(xi)	 	all General Intangibles;
	 
	 	(xii)	 	all Goods;
	 
	 	(xiii)	 	all Instruments;
	 
	 	(xiv)	 	all Inventory;
	 
	 	(xv)	 	all Investment Property;
	 
	 	(xvi)	 	all Letter-of-Credit Rights;
	 
	 	(xvii)	 	all Material Contracts and all such other agreements, contracts,
leases, licenses, tax sharing agreements or hedging arrangements now or
hereafter entered into by the Debtor, as such agreements may be amended
or otherwise modified from time to time (collectively, the “Assigned
Agreements”), including without limitation, (i) all rights of the
Debtor to receive moneys due and to become due under or pursuant to the
Assigned Agreements, (ii) all rights of the Debtor to receive proceeds
of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) claims of the Debtor for damages arising out
of or for breach of or default under the Assigned Agreements and (iv)
the right of the Debtor to terminate the Assigned Agreements, to
perform thereunder and to compel performance and otherwise exercise all
remedies thereunder;
	 
	 	(xviii)	 	all Patent Licenses;
	 
	 	(xix)	 	all Patents;
	 
	 	(xx)	 	all Payment Intangibles;
	 
	 	(xxi)	 	all Trademark Licenses;
	 
	 	(xxii)	 	all Trademarks;
	 
	 	(xxiii)	 	all Software;
	 
	 	(xxiv)	 	all Supporting Obligations;
	 
	 	(xxv)	 	all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and related data
processing software (owned by the Debtor or in which it has an
interest) that at any time evidence or contain information relating to
any Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon;

4

 

	 	(xxvi)	 	all other personal property of any kind or type whatsoever owned by
the Debtor; and
	 
	 	(xxvii)	 	to the extent not otherwise included, all Accessions, Proceeds and
Products of any and all of the foregoing.

The Debtor and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and agree
that the security interest created hereby in the Collateral constitutes a continuing collateral
security interest for all of the Secured Obligations, whether now existing or hereafter arising.

	 	3.	 	Provisions Relating to Accounts, Contracts and Agreements.

     (a) Anything herein to the contrary notwithstanding, the Debtor shall remain liable
under each of its Accounts, contracts and agreements to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Account or the terms of such
contract or agreement. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise thereto), contract
or agreement by reason of or arising out of this Security Agreement or the receipt by the
Administrative Agent or any Lender of any payment relating to such Account, contract or
agreement pursuant hereto, nor shall the Administrative Agent or any Lender be obligated in
any manner to perform any of the obligations of the Debtor under or pursuant to any Account
(or any agreement giving rise thereto), contract or agreement, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement giving rise
thereto), contract or agreement, to present or file any claim, to take any action to enforce
any performance or to collect the payment of any amounts which may have been assigned to it
or to which it may be entitled at any time or times.

     (b) At any time and from time to time, the Administrative Agent shall have the right,
but not the obligation, to make test verifications of the Accounts in any manner and through
any medium that it reasonably considers advisable, and the Debtor shall furnish all such
assistance and information as the Administrative Agent may reasonably require in connection
with such test verifications. Upon the Administrative Agent’s request and at the expense of
the Debtor, the Debtor shall cause independent public accountants or others satisfactory to
the Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the Accounts. The
Administrative Agent in its own name or in the name of others may communicate with account
debtors on the Accounts to verify with them to the Administrative Agent’s satisfaction the
existence, amount and terms of any Accounts.

	 	4.	 	Representations and Warranties.

          The Debtor hereby represents and warrants to the Administrative Agent, for the benefit of the
Lenders, that so long as any of the Secured Obligations remain outstanding (other

5

 

than contingent indemnity obligations) or any Loan Document is in effect, and until all of the
Commitments shall have been terminated:

     (a) Chief Executive Office; Books & Records; Legal Name; State of
Incorporation. As of the Closing Date, the Debtor’s chief executive office and chief
place of business are (and for the prior four months has been) located at the locations set
forth on Schedule I (as updated from time to time), and the Debtor keeps its books
and records at such locations. The Debtor’s exact legal name is as shown in this Security
Agreement and its state of incorporation is (and for the prior four months has been) the
location set forth on Schedule I. The Debtor has not in the past four months
changed its name, been party to a merger, consolidation or other change in structure or used
any tradename not disclosed on Schedule II hereto (as updated from time to time).

     (b) Location of Tangible Collateral. The location of all tangible Collateral
owned by the Debtor is as shown on Schedule I (as updated from time to time).

     (c) Ownership. The Debtor is the legal and beneficial owner of its Collateral
and has the right to pledge, sell, assign or transfer the same.

     (d) Security Interest/Priority. This Security Agreement creates a valid
security interest in favor of the Administrative Agent, for the benefit of the Lenders, in
the Collateral of the Debtor and, when properly perfected by filing or otherwise, shall
constitute a valid first priority, perfected security interest in such Collateral, to the
extent such security interest can be perfected by filing or otherwise under the UCC or by
filing an appropriate notice with the United States Patent and Trademark Office or the
United States Copyright Office, free and clear of all Liens except for Permitted Liens.

     (e) Consents. Except for (i) the filing or recording of UCC financing
statements, (ii) the filing of appropriate notices with the United States Patent and
Trademark Office and the United States Copyright Office or (iii) obtaining Control to
perfect the Liens created by this Security Agreement, no consent or authorization of, filing
with, or other act by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any shareholder, member or
creditor of the Debtor), is required (i) for the grant by the Debtor of the security
interest in the Collateral granted hereby or for the execution, delivery or performance of
this Security Agreement by the Debtor or (ii) for the perfection of such security interest
or the exercise by the Administrative Agent of the rights and remedies provided for in this
Security Agreement.

     (f) Types of Collateral. None of the Collateral consists of, or is the
Proceeds of, As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes or
Standing Timber.

     (g) Accounts. With respect to the Accounts of the Debtor: (i) the goods sold
and/or services furnished giving rise to each Account are not subject to any security
interest or Lien except the first priority, perfected security interest granted to the
Administrative Agent herein and Permitted Liens; (ii) each Account and the papers and

6

 

documents of the Debtor relating thereto are genuine and in all material respects what
they purport to be; (iii) each Account arises out of a bona fide transaction for goods sold
and delivered (or in the process of being delivered) by the Debtor or for services actually
rendered by the Debtor, which transaction was conducted in the ordinary course of the
Debtor’s business and was completed in accordance with the terms of any documents pertaining
thereto; (iv) no Account of the Debtor is evidenced by any Instrument or Chattel Paper
unless such Instrument or Chattel Paper has been theretofore endorsed over and delivered to,
or submitted to the Control of, the Administrative Agent; (v) the amount of each Account as
shown on the Debtor’s books and records, and on all invoices and statements which may be
delivered to the Administrative Agent with respect thereto, is due and payable to the Debtor
and is not in any way contingent; (vi) no Account is evidenced by judgment, there are no
set-offs, counterclaims or disputes existing or asserted with respect to any Account and the
Debtor has not made any agreement with any account debtor for any deduction from any Account
except for deductions made in the ordinary course of its business; (vii) there are no facts,
events or occurrences which in any material respect impair the validity or enforcement of
any Account or tend to materially reduce the amount payable thereunder as shown on the
Debtor’s books and records and all invoices and statements delivered to the Administrative
Agent with respect thereto; (viii) the right to receive payment under each Account is
assignable except, where the account debtor with respect to such Account is the United
States government or any State government or any agency, department or instrumentality
thereof, to the extent the assignment of any such right to payment is prohibited or limited
by applicable law, regulations, administrative guidelines or contract; and (ix) the goods
sold and/or services furnished giving rise to each Account are not subject to any security
interest or Lien except the security interest granted the Administrative Agent herein and
except for Permitted Liens.

     (h) Inventory. No Inventory of the Debtor is held by a third party pursuant to
consignment, sale or return, sale on approval or similar arrangement.

     (i) Intellectual Property.

	 	(i)	 	Schedules III, IV and V includes all
material registered and unregistered Copyrights, Patents and Trademarks
owned by or licensed (pursuant to a written license) by or to the
Debtor as of the date hereof.1
	 
	 	(ii)	 	Except as provided in Schedules III, IV and
V, all material Intellectual Property of the Debtor is valid,
subsisting, unexpired, enforceable and has not been abandoned, and the
Debtor is legally entitled to use each of its
tradenames.2

 

			
	1	 	The scope and extent of the Intellectual Property to be included under this section is under discussion.
	 
	2	 	The scope and extent of the Intellectual Property to be included under this section is under discussion.

7

 

	 	(iii)	 	Except as set forth in Schedules III, IV
and V, none of the Intellectual Property of the Debtor is the
subject of any licensing or franchise agreement.
	 
	 	(iv)	 	No holding, decision or judgment has been
rendered by any Governmental Authority which would limit, cancel or
question the validity of any Intellectual Property of the Debtor.
	 
	 	(v)	 	No action or proceeding is pending seeking to
limit, cancel or question the validity of any Intellectual Property of
the Debtor, or which, if adversely determined, would have a material
adverse effect on the value of any such Intellectual Property.
	 
	 	(vi)	 	All applications pertaining to the material
Intellectual Property of the Debtor have been duly and properly filed,
and all registrations or letters pertaining to such Intellectual
Property have been duly and properly filed and issued, and all of such
Intellectual Property is valid and enforceable.3
	 
	 	(vii)	 	The Debtor has not made any assignment or
agreement in conflict with the security interest of the Administrative
Agent in the Intellectual Property of the Debtor hereunder.

     (j) Documents, Instruments and Chattel Paper. All Documents, Instruments and
Chattel Paper describing, evidencing or constituting Collateral are, to the Debtor’s
knowledge, complete, valid, and genuine.

     (k) Equipment. With respect to the Debtor’s Equipment: (i) the Debtor has
good and marketable title thereto; (ii) all such Equipment is in normal operating condition
and repair, ordinary wear and tear alone excepted, and is suitable for the uses to which it
is customarily put in the conduct of the Debtor’s business; and (iii) no Equipment used in
the conduct of the Debtor’s business is leased, except for non-material items.

     (l) Restrictions on Security Interest. The Debtor is not a party to any
material license or any material lease that contains legally enforceable restrictions on the
granting of a security interest therein.

	 	5.	 	Covenants.

          The Debtor covenants that, so long as any of the Secured Obligations remain outstanding (other
than contingent indemnity obligations) or any Loan Document is in effect, and until all of the
Commitments shall have been terminated, the Debtor shall:

 

			
	3	 	The scope and extent of the Intellectual Property to be included under this section is under discussion.

8

 

     (a) Other Liens. Defend the Collateral against the claims and demands of all
other parties claiming an interest therein and keep the Collateral free from all Liens,
except for Permitted Liens. Neither the Administrative Agent nor any Lender authorizes the
Debtor to, and the Debtor shall not, sell, exchange, transfer, assign, lease or otherwise
dispose of the Collateral or any interest therein, except as permitted under the Financing
Agreement.

     (b) Preservation of Collateral. Keep the Collateral in good order, condition
and repair in all material respects, ordinary wear and tear excepted; not use the Collateral
in violation of the provisions of this Security Agreement or any other agreement relating to
the Collateral or any policy insuring the Collateral or any applicable requirement of law;
not permit any Collateral to be or become a fixture to real property or an accession to
other personal property unless the Administrative Agent has a valid, perfected and first
priority security interest for the benefit of the Lenders in such real or personal property;
and not, without the prior written consent of the Administrative Agent, alter or remove any
identifying symbol or number on its Equipment.

     (c) Possession or Control of Certain Collateral. If (i) any amount payable
under or in connection with any of the Collateral shall be or become evidenced by any
Instrument, Tangible Chattel Paper or Supporting Obligation or (ii) if any Collateral shall
be stored or shipped subject to a Document or (iii) if any Collateral shall consist of
Investment Property in the form of certificated securities, immediately notify the
Administrative Agent of the existence of such Collateral and, at the request of the
Administrative Agent, deliver such Instrument, Chattel Paper, Supporting Obligation,
Document or Investment Property to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Security
Agreement. If any Collateral shall consist of Deposit Accounts, Electronic Chattel Paper,
Letter-of-Credit Rights or uncertificated Investment Property, execute and deliver (and,
with respect to any Collateral consisting of uncertificated Investment Property, cause the
Securities Intermediary with respect to such Investment Property to execute and deliver) to
the Administrative Agent, upon the Administrative Agent’s request, all control agreements,
assignments, instruments or other documents as reasonably requested by the Administrative
Agent for the purposes of obtaining and maintaining Control of such Collateral.

     (d) Changes in Corporate Structure or Location. Not, without providing 30 days
prior written notice to the Administrative Agent and without filing (or confirming that the
Administrative Agent has filed) such amendments to any previously filed financing statements
as the Administrative Agent may require, (i) alter its corporate existence or, in one
transaction or a series of transactions, merge into or consolidate with any other entity, or
sell all or substantially all of its assets, (ii) change its state of incorporation or
formation or (iii) change its registered corporate name, in each case after obtaining the
consent of the Administrative Agent to the extent required by the Financing Agreement.

     (e) Inspection. Allow the Administrative Agent or its representatives to visit
and inspect the Collateral as set forth in Section 5.5 of the Financing Agreement.

9

 

     (f) Perfection of Security Interest. Mark its books and records to reflect the
security interest of the Administrative Agent in the Collateral. The Debtor hereby
authorizes the Administrative Agent to prepare and file such financing statements (including
renewal statements) or amendments thereof or supplements thereto or other instruments as the
Administrative Agent may from time to time deem necessary or appropriate in order to perfect
and maintain the security interests granted hereunder in accordance with the UCC. The
Debtor shall also execute and deliver to the Administrative Agent such agreements,
assignments or instruments (including affidavits, notices, reaffirmations and amendments and
restatements of existing documents, as the Administrative Agent may reasonably request) and
do all such other things requested by the Administrative Agent as the Administrative Agent
may reasonably deem necessary or appropriate (i) to assure to the Administrative Agent that
its security interests hereunder are perfected, including (A) such financing statements
(including renewal statements) or amendments thereof or supplements thereto or other
instruments as the Administrative Agent may from time to time reasonably request in order to
perfect and maintain the security interests granted hereunder in accordance with the UCC and
any other personal property security legislation in the appropriate state(s) or province(s),
(B) with regard to Copyrights registered with the United States Copyright Office, a Notice
of Grant of Security Interest in Copyrights for filing with the United States Copyright
Office in the form of Schedule IX attached hereto, (C) with regard to Patents
registered with the United States Patent and Trademark Office, a Notice of Grant of Security
Interest in Patents for filing with the United States Patent and Trademark Office in the
form of Schedule X attached hereto and (D) with regard to Trademarks registered with
the United States Patent and Trademark Office, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark Office in the form of
Schedule XI attached hereto, (ii) to consummate the transactions contemplated hereby
and (iii) to otherwise protect and assure the Administrative Agent of its rights and
interests hereunder. To that end, the Debtor hereby irrevocably makes, constitutes and
appoints the Administrative Agent, its nominee or any other person whom the Administrative
Agent may designate, as the Debtor’s attorney-in-fact with full power and for the limited
purpose to sign in the name of the Debtor any such financing statements, or amendments and
supplements to financing statements, renewal financing statements, notices or any similar
documents which in the Administrative Agent’s reasonable discretion would be necessary,
appropriate or convenient in order to perfect and maintain perfection of the security
interests granted hereunder, such power, being coupled with an interest, being and remaining
irrevocable so long as any of the Secured Obligations remain outstanding (other than any
such obligations which by the terms thereof are stated to survive termination of the Loan
Documents) or any Loan Document (to the extent the obligations of the Debtor thereunder
constitute Secured Obligations) is in effect, and until all of the Commitments shall have
terminated. The Debtor hereby agrees that a carbon, photographic or other reproduction of
this Security Agreement or any such financing statement is sufficient for filing as a
financing statement by the Administrative Agent without notice thereof to the Debtor
wherever the Administrative Agent may in its sole discretion desire to file the same. In
the event for any reason the law of any jurisdiction other than Illinois becomes or is
applicable to the Collateral of the Debtor or any part thereof, or to any of the Secured
Obligations, the Debtor agrees to execute and deliver all

10

 

such instruments and to do all such other things requested by the Administrative Agent
as the Administrative Agent in its sole discretion reasonably deems necessary or appropriate
to preserve, protect and enforce the security interests of the Administrative Agent under
the law of such other jurisdiction (and, if the Debtor shall fail to do so promptly upon the
request of the Administrative Agent, then the Administrative Agent may execute any and all
such requested documents on behalf of the Debtor pursuant to the power of attorney granted
hereinabove).

     (g) Collateral Held by Warehouseman, Bailee, etc. If any Collateral is at any
time in the possession or control of a warehouseman, bailee or any agent or processor of the
Debtor, (i) notify the Administrative Agent of such possession, (ii) notify such Person of
the Administrative Agent’s security interest for the benefit of the Lenders in such
Collateral, (iii) instruct such Person to hold all such Collateral for the Administrative
Agent’s account subject to the Administrative Agent’s instructions and (iv) obtain an
acknowledgment from such Person that it is holding such Collateral for the benefit of the
Administrative Agent.

     (h) Treatment of Accounts. (i) Not grant or extend the time for payment of any
Account, or compromise or settle any Account for less than the full amount thereof, or
release any person or property, in whole or in part, from payment thereof, or allow any
credit or discount thereon, other than as normal and customary in the ordinary course of the
Debtor’s business and (ii) maintain at its principal place of business a record of Accounts
consistent with customary business practices.

     (i) Covenants Relating to Inventory.

	 	(i)	 	Maintain, keep and preserve its Inventory in
good salable condition at its own cost and expense.
	 
	 	(ii)	 	Comply with all reporting requirements set
forth in the Financing Agreement with respect to Inventory.
	 
	 	(iii)	 	If any of the Inventory is at any time
evidenced by a document of title, immediately upon request by the
Administrative Agent, deliver such document of title to the
Administrative Agent.

     (j) Covenants Relating to Copyrights.

	 	(i)	 	Employ the Copyright for each material Work
with such notice of copyright as may be required by law to secure
copyright protection.
	 
	 	(ii)	 	Not do any act or knowingly omit to do any act
whereby any Copyright may become invalidated and (A) not do any act, or
knowingly omit to do any act, whereby any material Copyright may become
injected into the public domain; (B) notify the Administrative Agent
immediately if it knows, or has reason to

11

 

	 	 	 	know, that any Copyright may become injected into the public domain
or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in any court or tribunal in the United
States or any other country) regarding the Debtor’s ownership of any
such Copyright or its validity; (C) take all necessary steps as it
shall deem appropriate under the circumstances, to maintain and
pursue each application (and to obtain the relevant registration) and
to maintain each registration of each Copyright owned by the Debtor,
which the Debtor reasonably determines are necessary or material to
the conduct of its business, including, without limitation, filing of
applications for renewal where necessary; and (D) promptly notify the
Administrative Agent of any material infringement of any Copyright of
the Debtor of which it becomes aware (with respect to Copyrights that
the Debtor reasonably determines are necessary or desirable for the
conduct of its business) and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such Copyright,
including, where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all damages
for such infringement.
	 
	 	(iii)	 	Not make any assignment or agreement in
conflict with the security interest in the Copyrights of the Debtor
hereunder.

     (k) Covenants Relating to Patents and Trademarks.

	 	(i)	 	(A) Continue to use each Trademark, which the
Debtor reasonably determines is necessary or desirable for the conduct
of its business, in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, (B) maintain as in the past
the quality of products and services offered under such Trademark, (C)
employ such Trademark with the appropriate notice of registration, (D)
not adopt or use any mark which is confusingly similar or a colorable
imitation of such registered Trademark unless the Administrative Agent,
for the ratable benefit of the Lenders, shall obtain a perfected
security interest in such mark pursuant to this Security Agreement, and
(E) not (and not permit any licensee or sublicensee thereof to) do any
act or knowingly omit to do any act whereby any such Trademark may
become invalidated.
	 
	 	(ii)	 	Not do any act, or omit to do any act, whereby
any Patent, which the Debtor reasonably determines is necessary or
desirable for the conduct of its business, may become abandoned or
dedicated.
	 
	 	(iii)	 	Promptly notify the Administrative Agent if it
knows, or has reason to know, that any application or registration
relating to any

12

 

	 	 	 	Patent or Trademark may become abandoned or dedicated, or of any
adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any
court or tribunal in any country) regarding the Debtor’s ownership of
any such Patent or Trademark or its right to register the same or to
keep, maintain and use the same.
	 	 	 	 
	 
	 	(iv)	 	Whenever the Debtor, either by itself or
through an agent, employee, licensee or designee, shall file an
application for the registration of any Patent or Trademark with the
United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, the
Debtor shall promptly report such filing to the Administrative Agent.
Upon request of the Administrative Agent, the Debtor shall execute and
deliver any and all agreements, instruments, documents and papers as
the Administrative Agent may request to evidence the Administrative
Agent’s and the Lenders’ security interest in any Patent or Trademark
and the goodwill and General Intangibles of the Debtor relating thereto
or represented thereby.
	 
	 	(v)	 	Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United
States Patent and Trademark Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain and
pursue each application, to obtain the relevant registration and to
maintain each registration of the Patents and Trademarks, which the
Debtor reasonably determines is necessary or material to the conduct of
its business, including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.
	 
	 	(vi)	 	Promptly notify the Administrative Agent and
the Lenders after it learns that any Patent or Trademark included in
the Collateral is infringed, misappropriated or diluted by a third
party and, if such Patent or Trademark is necessary or desirable for
the conduct of the Debtor’s business, then promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions
as it shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
	 
	 	(vii)	 	Not make any assignment or agreement in
conflict with the security interest in the Patents or Trademarks of the
Debtor hereunder.

13

 

     (l) New Patents, Copyrights and Trademarks. Promptly provide the
Administrative Agent with (i) a listing of all applications, if any, for new Copyrights,
Patents or Trademarks (together with a listing of the issuance of registrations or letters
on present applications), which new applications and issued registrations or letters shall
be subject to the terms and conditions hereunder, and (ii) (A) with respect to Copyrights, a
duly executed Notice of Grant of Security Interest in Copyrights, (B) with respect to
Patents, a duly executed Notice of Grant of Security Interest in Patents, (C) with respect
to Trademarks, a duly executed Notice of Grant of Security Interest in Trademarks or (D)
such other duly executed documents as the Administrative Agent may request in a form
acceptable to counsel for the Administrative Agent and suitable for recording to evidence
the security interest in the Copyright, Patent or Trademark which is the subject of such new
application.

     (m) Commercial Tort Claims; Notice of Litigation. (i) Promptly forward to the
Administrative Agent written notification of any and all Commercial Tort Claims, including,
but not limited to, any and all actions, suits, and proceedings before any court or
Governmental Authority by or affecting the Debtor or any of its Subsidiaries and (ii)
execute and deliver such statements, documents and notices and do and cause to be done all
such things as may be required by the Administrative Agent, or required by law, including
all things which may from time to time be necessary under the UCC to fully create, preserve,
perfect and protect the priority of the Administrative Agent’s security interest in any
Commercial Tort Claims.

     (n) Fixtures. At all times maintain the Collateral as personal property and
not affix any of the Collateral to any real property in a manner which would change its
nature from personal property to real property or a Fixture.

     (o) Insurance. Insure, repair and replace the Collateral of the Debtor as set
forth in the Financing Agreement. All insurance proceeds shall be subject to the security
interest of the Administrative Agent hereunder.

     (p) Covenants Relating to the Assigned Agreements.

	 	(i)	 	Upon the request of the Administrative Agent,
the Debtor shall, at its expense, (A) furnish to the Administrative
Agent copies of all notices, requests and other documents received by
the Debtor under or pursuant to the Assigned Agreements, and such other
information and reports regarding the Assigned Agreements and (B) make
to any other party to any Assigned Agreement such demands and requests
for information and reports or for action as the Debtor is entitled to
make thereunder.
	 
	 	(ii)	 	Unless the Debtor believes it is necessary or
desirable in the prudent conduct of its business, the Debtor shall not
(A) cancel or terminate any Assigned Agreement of the Debtor or consent
to or accept any cancellation or termination thereof; (B) amend or
otherwise modify any Assigned Agreement of the Debtor or give any
consent, waiver

14

 

or approval thereunder; (C) waive any default under or breach of any
Assigned Agreement of the Debtor; or (D) take any other action in
connection with any Assigned Agreement of the Debtor which would
impair the value of the interest or rights of the Debtor thereunder
or which would impair the interests or rights of the Administrative
Agent.

     (q) New Material Contracts. Whenever the Debtor shall enter into a Material
Contract, the Debtor shall provide the Administrative Agent with a true and complete copy of
such Material Contract and such other related documents as the Administrative Agent may
request in a form acceptable to the Administrative Agent and, if requested by the
Administrative Agent, execute and deliver (or cause to be executed and delivered) to the
Administrative Agent a collateral assignment of such Material Contract and a consent to such
collateral assignment, in each case in a form acceptable to the Administrative Agent. Upon
the request of the Administrative Agent, the Debtor will do any act, or execute any
additional documents required by the Administrative Agent to ensure to the Administrative
Agent the effectiveness and first priority of its security interest in such Material
Contract.

	 	6.	 	Special Provisions Regarding Inventory.

          Notwithstanding anything to the contrary contained in this Security Agreement, the Debtor may,
unless and until an Event of Default occurs and is continuing and the Administrative Agent
instructs the Debtor otherwise, without further consent or approval of the Administrative Agent,
use, consume, sell, lease and exchange its Inventory in the ordinary course of its business as
presently conducted, whereupon, in the case of such a sale or exchange, the security interest
created hereby in the Inventory so sold or exchanged (but not in any Proceeds arising from such
sale or exchange) shall cease immediately without any further action on the part of the
Administrative Agent.

	 	7.	 	Performance of Obligations; Advances by Administrative Agent.

          On failure of the Debtor to perform any of the covenants and agreements contained herein, the
Administrative Agent may, at its sole option and in its sole discretion, perform or cause to be
performed the same and in so doing may expend such sums as the Administrative Agent may reasonably
deem advisable in the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential
Lien, expenditures made in defending against any adverse claim and all other expenditures which the
Administrative Agent may make for the protection of the security interest hereof or may be
compelled to make by operation of law. All such sums and amounts so expended shall be repayable by
the Debtor promptly upon timely notice thereof and demand therefor, shall constitute additional
Secured Obligations and shall bear interest daily from the date said amounts are expended until
repaid at the Default Rate. No such performance of any covenant or agreement by the Administrative
Agent on behalf of the Debtor, and no such advance or expenditure therefor, shall relieve the
Debtor of any default under the terms of this Security Agreement or the other Loan Documents. The
Administrative Agent may make any payment hereby authorized in accordance with any bill, statement
or

15

 

estimate procured from the appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate or into the validity of any
tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is
being contested in good faith by the Debtor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.

	 	8.	 	[Intentionally omitted]
	 
	 	9.	 	Remedies.

     (a) General Remedies. Upon the occurrence of an Event of Default and during
the continuation thereof, the Administrative Agent and the Lenders shall have, in addition
to the rights and remedies provided herein, in the Loan Documents or by law (including, but
not limited to, levy of attachment, garnishment and the rights and remedies set forth in the
Uniform Commercial Code of the jurisdiction applicable to the affected Collateral), the
rights and remedies of a secured party under the UCC (regardless of whether the UCC is the
law of the jurisdiction where the rights and remedies are asserted and regardless of whether
the UCC applies to the affected Collateral), and further, the Administrative Agent may, with
or without judicial process or the aid and assistance of others, (i) enter on any premises
on which any of the Collateral may be located and, without resistance or interference by the
Debtor, take possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Debtor to assemble and make available to the Administrative
Agent at the expense of the Debtor any Collateral at any place and time designated by the
Administrative Agent which is reasonably convenient to both parties, (iv) remove any
Collateral from any such premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice, hearing or process of
law, all of which the Debtor hereby waives to the fullest extent permitted by law, at any
place and time or times, sell and deliver any or all Collateral held by or for it at public
or private sale, by one or more contracts, in one or more parcels, for cash, upon credit or
otherwise, at such prices and upon such terms as the Administrative Agent deems advisable,
in its sole discretion (subject to any and all mandatory legal requirements). Neither the
Administrative Agent’s compliance with any applicable state or federal law in the conduct of
such sale, nor its disclaimer of any warranties relating to the Collateral, shall be
considered to adversely affect the commercial reasonableness of such sale. In addition to
all other sums due the Administrative Agent and the Lenders with respect to the Secured
Obligations, the Debtor shall pay the Administrative Agent and each of the Lenders all
reasonable documented costs and expenses incurred by the Administrative Agent or any such
Lender, including, but not limited to, reasonable attorneys’ fees and court costs, in
obtaining or liquidating the Collateral, in enforcing payment of the Secured Obligations, or
in the prosecution or defense of any action or proceeding by or against the Administrative
Agent or the Lenders or the Debtor concerning any matter arising out of or connected with
this Security Agreement, any Collateral or the Secured Obligations, including, without
limitation, any of the foregoing arising in, arising under or related to a case under the
Bankruptcy Code. To the extent the rights of notice cannot be legally waived hereunder, the
Debtor agrees that any requirement of reasonable notice shall be

16

 

met if such notice is personally served on or mailed, postage prepaid, to the Debtor in
accordance with the notice provisions of Section 9.3 of the Financing Agreement at least 10
days before the time of sale or other event giving rise to the requirement of such notice.
The Administrative Agent and the Lenders shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given. To the extent
permitted by law, any Lender may be a purchaser at any such sale. To the extent permitted
by applicable law, the Debtor hereby waives all of its rights of redemption with respect to
any such sale. Subject to the provisions of applicable law, the Administrative Agent and
the Lenders may postpone or cause the postponement of the sale of all or any portion of the
Collateral by announcement at the time and place of such sale, and such sale may, without
further notice, to the extent permitted by law, be made at the time and place to which the
sale was postponed, or the Administrative Agent and the Lenders may further postpone such
sale by announcement made at such time and place.

     (b) Remedies Relating to Accounts. Upon the occurrence of an Event of Default
and during the continuation thereof, whether or not the Administrative Agent has exercised
any or all of its rights and remedies hereunder, the Administrative Agent shall have the
right, subject to applicable law, to enforce the Debtor’s rights against any account debtor
and obligors on the Debtor’s Accounts. The Debtor acknowledges and agrees that the Proceeds
of its Accounts remitted to or on behalf of the Administrative Agent in accordance with the
provisions hereof shall be solely for the Administrative Agent’s own convenience and that
the Debtor shall not have any right, title or interest in such Proceeds or in any such other
amounts except as expressly provided herein. To the extent required by the Administrative
Agent, the Debtor agrees to execute any document or instrument, and to take any action,
necessary under applicable law in order for the Administrative Agent to exercise its rights
and remedies (or to be able to exercise its rights and remedies at some future date) with
respect to any Accounts of the Debtor where the account debtor is a Governmental Authority.
The Administrative Agent and the Lenders shall have no liability or responsibility to the
Debtor for acceptance of a check, draft or other order for payment of money bearing the
legend “payment in full” or words of similar import or any other restrictive legend or
endorsement or be responsible for determining the correctness of any remittance. The Debtor
hereby agrees to indemnify the Administrative Agent and the Lenders from and against all
liabilities, damages, losses, actions, claims, judgments, costs, expenses, charges and
reasonable attorneys’ fees suffered or incurred by the Administrative Agent or the Lenders
(each, an “Indemnified Party”) because of the maintenance of the foregoing
arrangements except as relating to or arising out of the gross negligence or willful
misconduct of an Indemnified Party or its officers, employees or agents. In the case of any
investigation, litigation or other proceeding, the foregoing indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by the Debtor, its
directors, shareholders or creditors or an Indemnified Party or any other Person or any
other Indemnified Party is otherwise a party thereto.

     (c) Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the Debtor shall
provide the Administrative Agent with access to the Collateral, without cost or charge to

17

 

the Administrative Agent, and the reasonable use of the same, together with materials,
supplies, books and records of the Debtor for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise (except to the extent such activities are specifically
restricted by the terms of any lease; provided, if the foregoing activities are
specifically restricted by the terms of any lease, the Debtor shall promptly take all
reasonable steps to move the Collateral at such lease location to a new location
satisfactory to the Administrative Agent). In addition, the Administrative Agent may remove
Collateral, or any part thereof, from such premises and/or any records with respect thereto,
in order to effectively collect or liquidate such Collateral. If the Administrative Agent
exercises its right to take possession of the Collateral, the Debtor shall also at its
expense perform any and all other steps reasonably requested by the Administrative Agent to
preserve and protect the security interest hereby granted in the Collateral, such as placing
and maintaining signs indicating the security interest of the Administrative Agent,
appointing overseers for the Collateral and maintaining inventory records.

     (d) Nonexclusive Nature of Remedies. Failure by the Administrative Agent or
the Lenders to exercise any right, remedy or option under this Security Agreement, any other
Loan Document or as provided by law, or any delay by the Administrative Agent or the Lenders
in exercising the same, shall not operate as a waiver of any such right, remedy or option.
No waiver hereunder shall be effective unless it is in writing, signed by the party against
whom such waiver is sought to be enforced and then only to the extent specifically stated,
which in the case of the Administrative Agent or the Lenders shall only be granted as
provided herein. To the extent permitted by law, neither the Administrative Agent, the
Lenders, nor any party acting as attorney for the Administrative Agent or the Lenders, shall
be liable hereunder for any acts or omissions or for any error of judgment or mistake of
fact or law other than their gross negligence or willful misconduct hereunder. The rights
and remedies of the Administrative Agent and the Lenders under this Security Agreement shall
be cumulative and not exclusive of any other right or remedy which the Administrative Agent
or the Lenders may have.

     (e) Retention of Collateral. The Administrative Agent may, after providing the
notices required by Sections 9-620 and 9-621 (or similar provision) of the UCC (or any
successor sections of the UCC) or otherwise complying with the requirements of applicable
law of the relevant jurisdiction, accept or retain the Collateral in satisfaction of the
Secured Obligations. Unless and until the Administrative Agent shall have provided such
notices, however, the Administrative Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.

     (f) Deficiency. In the event that the proceeds of any sale, collection or
realization are insufficient to pay all amounts to which the Administrative Agent or the
Lenders are legally entitled, the Debtor shall be jointly and severally liable for the
deficiency, together with daily interest thereon at the Default Rate, together with the
costs of collection and the reasonable fees of any attorneys employed by the Administrative
Agent to collect such deficiency. Any surplus remaining after the full payment and

18

 

satisfaction of the Secured Obligations shall be returned to the Debtor or to
whomsoever a court of competent jurisdiction shall determine to be entitled thereto.

     (g) Other Security. To the extent that any of the Secured Obligations are now
or hereafter secured by property other than the Collateral (including, without limitation,
real property and securities owned by the Debtor), or by a guarantee, endorsement or
property of any other Person, then the Administrative Agent and the Lenders shall have the
right to proceed against such other property, guarantee or endorsement upon the occurrence
of any Event of Default, and the Administrative Agent and the Lenders have the right, in
their sole discretion, to determine which rights, security, liens, security interests or
remedies the Administrative Agent and the Lenders shall at any time pursue, relinquish,
subordinate, modify or take with respect thereto, without in any way modifying or affecting
any of them or any of the Administrative Agent’s and the Lenders’ rights or the Secured
Obligations under this Security Agreement or under any other of the Loan Documents (to the
extent the obligations of the Debtor thereunder constitute Secured Obligations).

	 	10.	 	Rights of the Administrative Agent.

     (a) Power of Attorney. In addition to other powers of attorney contained
herein, the Debtor hereby designates and appoints the Administrative Agent, on behalf of the
Lenders, and each of its designees or agents, as attorney-in-fact of the Debtor, irrevocably
and with power of substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuation of an Event of Default:

	 	(i)	 	to demand, collect, settle, compromise, adjust,
give discharges and releases, all as the Administrative Agent may
reasonably determine;
	 
	 	(ii)	 	to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and enforcing any
other right in respect thereof;
	 
	 	(iii)	 	to defend, settle, adjust or compromise any
action, suit or proceeding brought and, in connection therewith, give
such discharge or release as the Administrative Agent may deem
reasonably appropriate;
	 
	 	(iv)	 	to receive, open and dispose of mail addressed
to the Debtor and endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other instruments or
documents evidencing payment, shipment or storage of the goods giving
rise to the Collateral of the Debtor, or securing or relating to such
Collateral, on behalf of and in the name of the Debtor;

19

 

	 	(v)	 	to sell, assign, transfer, make any agreement
in respect of, or otherwise deal with or exercise rights in respect of,
any Collateral or the goods or services which have given rise thereto,
as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes;
	 
	 	(vi)	 	to adjust and settle claims under any insurance
policy relating thereto;
	 
	 	(vii)	 	to execute and deliver all assignments,
conveyances, statements, financing statements, renewal financing
statements, security agreements, affidavits, notices and other
agreements, instruments and documents that the Administrative Agent may
determine necessary in order to perfect and maintain the security
interests and liens granted in this Security Agreement and in order to
fully consummate all of the transactions contemplated herein;
	 
	 	(viii)	 	to institute any foreclosure proceedings that the Administrative
Agent may deem appropriate;
	 
	 	(ix)	 	to do and perform all such other acts and
things as the Administrative Agent may reasonably deem to be necessary,
proper or convenient in connection with the Collateral; and
	 
	 	(x)	 	to execute any document or instrument, and to
take any action, necessary under applicable law in order for the
Administrative Agent to exercise its rights and remedies (or to be able
to exercise its rights and remedies at some future date) with respect
to any Account of the Debtor where the account debtor is a Governmental
Authority.

This power of attorney is a power coupled with an interest and shall be irrevocable for so long as
any of the Secured Obligations remain outstanding (other than contingent indemnity obligations) or
any Loan Document is in effect, and until all of the Commitments shall have been terminated. The
Administrative Agent shall be under no duty to exercise or withhold the exercise of any of the
rights, powers, privileges and options expressly or implicitly granted to the Administrative Agent
in this Security Agreement, and shall not be liable for any failure to do so or any delay in doing
so. The Administrative Agent shall not be liable for any act or omission or for any error of
judgment or any mistake of fact or law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative Agent solely to protect,
preserve and realize upon its security interest in the Collateral.

     (b) Assignment by the Administrative Agent. The Administrative Agent may from
time to time assign the Secured Obligations and any portion thereof and/or the Collateral
and any portion thereof, and the assignee shall be entitled to all of the rights

20

 

and remedies of the Administrative Agent under this Security Agreement in relation
thereto.

     (c) The Administrative Agent’s Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being held by the
Administrative Agent hereunder, the Administrative Agent shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that the Debtor shall be
responsible for preservation of all rights in the Collateral, and the Administrative Agent
shall be relieved of all responsibility for the Collateral upon surrendering it or tendering
the surrender of it to the Debtor. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that which the
Administrative Agent accords its own property, which shall be no less than the treatment
employed by a reasonable and prudent agent in the industry, it being understood that the
Administrative Agent shall not have responsibility for taking any necessary steps to
preserve rights against any parties with respect to any of the Collateral. In the event of
a public or private sale of Collateral pursuant to Section 9 hereof, the
Administrative Agent shall have no obligation to clean-up, repair or otherwise prepare the
Collateral for sale.

	 	11.	 	Application of Proceeds.

          Upon the occurrence and during the continuation of an Event of Default, any payments in
respect of the Secured Obligations and any proceeds of the Collateral, when received by the
Administrative Agent or any of the Lenders in cash or its equivalent, will be applied in reduction
of the Secured Obligations in the order set forth in Section 3.6 of the Financing
Agreement, and the Debtor irrevocably waives the right to direct the application of such payments
and proceeds and acknowledges and agrees that the Administrative Agent shall have the continuing
and exclusive right to apply and reapply any and all such payments and proceeds in the
Administrative Agent’s sole discretion, notwithstanding any entry to the contrary upon any of its
books and records.

	 	12.	 	Costs of Counsel.

          If at any time hereafter, whether upon the occurrence of an Event of Default or not, the
Administrative Agent employs counsel to prepare or consider amendments, waivers or consents with
respect to this Security Agreement, or to take action or make a response in or with respect to any
legal or arbitral proceeding relating to this Security Agreement or relating to the Collateral, or
to protect the Collateral or exercise any rights or remedies under this Security Agreement or with
respect to the Collateral, then the Debtor agrees to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Administrative Agent, all of which costs and
expenses shall constitute Secured Obligations hereunder.

	 	13.	 	Continuing Agreement.

     (a) This Security Agreement shall be a continuing agreement in every respect and shall
remain in full force and effect so long as any of the Secured Obligations remain outstanding
(other than contingent indemnity obligations) or any Loan Document is in

21

 

effect, and until all of the Commitments shall have been terminated. Upon such payment
and termination, this Security Agreement shall be automatically terminated and the
Administrative Agent and the Lenders shall, upon the request and at the expense of the
Debtor, forthwith release all of their liens and security interests hereunder and shall
execute and deliver all UCC termination statements and/or other documents reasonably
requested by the Debtor evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination of this Security
Agreement.

     (b) This Security Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in part, of any of the
Secured Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender as a preference, fraudulent conveyance or otherwise under
any bankruptcy, insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Secured Obligations is
rescinded or must be restored or returned, all reasonable costs and expenses (including
without limitation any reasonable legal fees and disbursements) incurred by the
Administrative Agent or any Lender in defending and enforcing such reinstatement shall be
deemed to be included as a part of the Secured Obligations.

	 	14.	 	Amendments; Waivers; Modifications.

          This Security Agreement and the provisions hereof may not be amended, waived, modified,
changed, discharged or terminated except as set forth in Section 9.1 of the Financing
Agreement.

	 	15.	 	Successors in Interest.

          This Security Agreement shall create a continuing security interest in the Collateral and
shall be binding upon the Debtor, its successors and assigns and shall inure, together with the
rights and remedies of the Administrative Agent and the Lenders hereunder, to the benefit of the
Administrative Agent and the Lenders and their successors and permitted assigns; provided,
however, that the Debtor may not assign its rights or delegate its duties hereunder without
the prior written consent of each Lender or the Required Lenders, as required by the Financing
Agreement. To the fullest extent permitted by law, the Debtor hereby releases the Administrative
Agent and each Lender, each of their respective officers, employees and agents and each of their
respective successors and assigns, from any liability for any act or omission relating to this
Security Agreement or the Collateral, except for any liability arising from the gross negligence or
willful misconduct of the Administrative Agent or such Lender or their respective officers,
employees and agents.

	 	16.	 	Notices.

          All notices required or permitted to be given under this Security Agreement shall be in
conformance with Section 9.3 of the Financing Agreement.

	 	17.	 	Counterparts.

22

 

          This Security Agreement may be executed in any number of counterparts, each of which where so
executed and delivered shall be an original, but all of which shall constitute one and the same
instrument. It shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.

	 	18.	 	Headings.

          The headings of the sections and subsections hereof are provided for convenience only and
shall not in any way affect the meaning, construction or interpretation of any provision of this
Security Agreement.

	 	19.	 	Governing Law; Submission to Jurisdiction and Service of Process; Waiver of
Jury Trial.

          THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
The terms of Sections 9.12 and 9.13 of the Financing Agreement are incorporated
herein by reference, mutatis mutandis, and the parties hereto agree to such terms.

	 	20.	 	Severability.

          If any provision of any of the Security Agreement is determined to be illegal, invalid or
unenforceable, such provision shall be fully severable and the remaining provisions shall remain in
full force and effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.

	 	21.	 	Entirety.

          This Security Agreement and the other Loan Documents represent the entire agreement of the
parties hereto and thereto with respect to the subject matter hereof and thereof, and supersede all
prior agreements and understandings, oral or written, if any, including any commitment letters,
term sheets or correspondence relating to the transactions contemplated herein and therein.

	 	22.	 	Survival.

          All representations and warranties of the Debtor hereunder shall survive the execution and
delivery of this Security Agreement and the other Loan Documents, the delivery of the Notes and the
making of the Loans and the issuance of the Credits under the Financing Agreement.

(Signatures appear on following page)

23

 

          IN WITNESS WHEREOF, the undersigned has executed this Security Agreement as of the date and
year first above written.

	 	 	 
	 

	 	DEBTOR:
	 
	 	 
	 

	 	ZAP, a California corporation
	 
	 	 
	 

	 	By: /s/ Steven Schneider
	 

	 	Name: Steven Schneider
	 

	 	Its: CEO
	 
	 	 
	 

	 	SECURED PARTY:
	 
	 	 
	 

	 	SURGE CAPITAL II, LLC, a Delaware limited
	 

	 	liability company, as Administrative Agent
	 
	 	 
	 

	 	By: /s/ John Maselli
	 

	 	Name: John Maselli
	 

	 	Its: Vice President

 

 

SCHEDULE I

TO

SECURITY AGREEMENT

UCC Financing Statements; Location of Equipment, Inventory, Goods and Books and Records; Goods
in Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtor’s Legal Name;
State of Incorporation; Organizational Identification Number; Chief Executive Office. 

	I.	 	DEBTOR: ZAP

	 	 	 	 	 
	1.

	 	Legal Name of Debtor:
	 	ZAP
	 
	 	 	 	 
	2.

	 	State of Incorporation:
	 	CA
	 
	 	 	 	 
	3.

	 	Organizational Identification
	 	C1913349
	 

	 	Number:
	 	EIN 94-3210624
	 
	 	 	 	 
	4.

	 	Chief Executive Office:
	 	501 4th Street, Santa Rosa, CA 95401
	 
	 	 	 	 
	5.

	 	Location of Books and Records:
	 	501 4th Street, Santa Rosa, CA 95401
	 
	 	 	 	 
	6.

	 	Locations of Equipment,
Inventory and Goods:
	 	6784 Sebastopol Avenue, Sebastopol, CA, 95472
	 
	 	 	 	 
	 

	 	 	 	3405 Fulton Road, Santa Rosa, CA 95439
	 
	 	 	 	 
	 

	 	 	 	3362 Fulton Road, Santa Rosa, CA 95439
	 
	 	 	 	 
	 

	 	 	 	44720 Main Street, Mendocino, CA
	 
	 	 	 	 
	 

	 	 	 	1815 E. Sahara, Las Vegas, NV
	 
	 	 	 	 
	7.

	 	Locations of Goods in
	 	 2530 S. Birch Street, Santa Ana, CA 92707
	 

	 	Possession of Consignees, Bailees,	 	 
	 

	 	Warehousemen, Agents and	 	 
	 

	 	Processors (including names of	 	 
	 

	 	such consignees, bailees, etc.):	 	 
	 
	 	 	 	 
	8.

	 	Jurisdictions For UNIFORM
	 	California
	 

	 	COMMERCIAL CODE Filings:	 	 

 

 

SCHEDULE II

TO

SECURITY AGREEMENT

Tradenames and Fictitious Names

(Present and Past Five Years)

	1.	 	ZAPWORLD.COM
	 
	2.	 	Mendo Wheels

 

 

SCHEDULE III

TO

SECURITY AGREEMENT

U.S. Copyright Registrations; Foreign Copyright Registrations; U.S. Copyright

Applications; Foreign Copyright Applications; Copyright Licenses

U.S. Copyright Registrations

None

Foreign Copyright Registrations

None

U.S. Copyright Applications

None

Foreign Copyright Applications

None

Copyright Licenses

None

 

 

SCHEDULE IV

TO

SECURITY AGREEMENT

U.S. Patent Registrations; Foreign Patent Registrations; U.S. Patent Applications;

Foreign Patent Applications; Patent Licenses

U.S. Patent Registrations

	 	 	 	 	 	 	 
	 	 	 	 	REGISTRATION	 	REGISTRATION
	HOLDER	 	PATENT	 	NUMBER	 	DATE
	ZAP	 	Electric Propulsion system for bicycle
	 	5,491,390	 	02/13/1996*
	ZAP	 	Electric Propulsion system for bicycle
	 	5,671,821	 	09/30/1997*
	ZAP	 	Portable Collapsible Scooter
	 	5,848,660	 	12/15/1998*
	ZAP	 	Powered Skateboard
	 	6,050,357	 	04/18/2000*
	ZAP	 	Powered Roller Skates
	 	6,059,062	 	05/09/2000*
	ZAP	 	Personal Submersible Marine Vehicle
	 	5,634,423	 	06/03/1997*
	ZAP	 	Submersible Marine Vehicle
	 	5,423,278	 	06/13/1995*
	ZAP	 	Submersible Marine Vessel
	 	5,303,666	 	04/19/1994*
	ZAP	 	Electric Vehicle Drive System
	 	6,588,528	 	07/08/2003
	ZAP	 	Electric Drive Assembly for Bicycles
	 	5,842,535	 	12/01/1998
	ZAP	 	Dual-Pole Personal Towing Vehicle
	 	5,735,361	 	04/07/1998*
	ZAP	 	Dual-Pole, Dual-Wheel Personal Towing Vehicle
	 	5,913,373	 	06/22/1999*
	ZAP	 	Portable Collapsible Scooter
	 	433,718	 	11/14/2000*
	ZAP	 	Scuba Scooter
	 	347,418	 	05/31/1994*
	ZAP	 	Scuba Scooter
	 	359,022	 	06/06/1995*
	ZAP	 	Submersible Marine Vehicle
	 	US D453,726S	 	02/19/2002
	ZAP	 	Seascooter
	 	6,748,892	 	06/15/2004

 

 

Foreign Patent Registrations

None

U.S. Patent Applications

None

Foreign Patent Applications

None

Patent Licenses

None

 

 

SCHEDULE V

TO

SECURITY AGREEMENT

U.S. Trademark Registrations; Foreign Trademark Registrations; U.S. Trademark

Applications; Foreign Trademark Applications; Trademark Licenses

U.S. Trademark Registrations

	 	 	 	 	 	 	 
	 	 	 	 	REGISTRATION	 	REGISTRATION
	HOLDER	 	MARK	 	NUMBER	 	DATE
	ZAP	 	ZAP
	 	1,794,866	 	09/28/1993*
	ZAP	 	Electricruizer
	 	2,240,270	 	04/20/1999*
	ZAP	 	Powerbike
	 	2,248,753	 	06/01/1999*
	ZAP	 	Zero Air Pollution
	 	2,320,346	 	02/22/2000*
	ZAP	 	ZAPPY
	 	2,330,894	 	03/21/2000*
	ZAP	 	ZAP Electric Vehicle Outlet
	 	2,335,090	 	03/28/2000*
	ZAP	 	Zapworld.com
	 	2,371,240	 	07/25/2000*
	ZAP	 	Swimmy
	 	2,689,203	 	02/18/2003*
	ZAP	 	ZAP Seascooter
	 	2,885,816	 	09/21/2004*
	ZAP	 	ZAP Car
	 	2,912,329	 	12/21/2004*
	ZAP	 	etc and Design
	 	2,271,018	 	08/17/1999
	ZAP	 	The future is Electric
	 	2,329,466	 	03/14/2000
	ZAP	 	ETC Express
	 	2,534,197	 	01/29/2002
	ZAP	 	Capin Billy’s Whiz Bang and Design
	 	2,759,913	 	09/02/2003

Foreign Trademark Registrations

None

U.S. Trademark Applications

None

Foreign Trademark Applications

None

Trademark Licenses

None

 

 

SCHEDULE VI

TO

SECURITY AGREEMENT

Depository Accounts and Other Accounts

	 	 	 	 	 	 	 
	Name of Account	 	 	 	Type of Account (with	 	Account
	Holder	 	Bank	 	general description)	 	Number
	ZAP	 	Wells Fargo
	 	Operating	 	
	ZAP	 	Wells Fargo
	 	Money Market	 	
	ZAP	 	Wells Fargo
	 	Sweep	 	
	ZAP	 	Wells Fargo
	 	Deposit Acct	 	
	ZAP	 	Wells Fargo
	 	Payroll	 	
	ZAP	 	Wells Fargo
	 	Purchasing	 	
	ZAP	 	Wells Fargo
	 	Money Market	 	

 

 

SCHEDULE VII

TO

SECURITY AGREEMENT

Commercial Tort Claims

None

 

 

SCHEDULE VIII

TO

SECURITY AGREEMENT

[Reserved]

 

 

SCHEDULE IX

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (as
the same may be amended, modified, extended or restated from time to time, the “Security
Agreement”) made by ZAP, a California corporation (the “Debtor”) in favor of Surge
Capital II, LLC, a Delaware limited liability company, as Administrative Agent (the
“Administrative Agent”) for the lenders referenced therein (the “Lenders”), the
Debtor has granted a continuing security interest in and continuing lien upon, the copyrights and
copyright applications shown below to the Administrative Agent for the ratable benefit of the
Lenders:

COPYRIGHTS

None

COPYRIGHT APPLICATIONS

None

 

 

     The Debtor and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing copyrights and copyright applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any copyright or copyright application.

	 	 	 	 	 	 	 
	 	 	Very truly yours,  
	 
	 	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Acknowledged and Accepted:

Surge Capital II, LLC, as Administrative Agent

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

 

 

SCHEDULE X

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (the
“Security Agreement”) made by ZAP, a California corporation (the “Debtor”) and in
favor of Surge Capital II, LLC, a Delaware limited liability company, as Administrative Agent (the
“Administrative Agent”) for the lenders referenced therein (the “Lenders”), the
undersigned Debtor has granted a continuing security interest in and
continuing lien upon, to the
extent Debtor is able to grant such interest and lien, the patents and patent applications shown
below to the Administrative Agent for the ratable benefit of the Lenders:

PATENTS

	 	 	 	 	 
	PATENT NUMBER	 	DESCRIPTION OF PATENT	 	DATE OF PATENT
	5,491,390	 	Electric Propulsion system for bicycle
	 	02/13/1996*
	5,671,821	 	Electric Propulsion system for bicycle
	 	09/30/1997*
	5,848,660	 	Portable Collapsible Scooter
	 	12/15/1998*
	6,050,357	 	Powered Skateboard
	 	04/18/2000*
	6,059,062	 	Powered Roller Skates
	 	05/09/2000*
	5,634,423	 	Personal Submersible Marine Vehicle
	 	06/03/1997*
	5,423,278	 	Submersible Marine Vehicle
	 	06/13/1995*
	5,303,666	 	Submersible Marine Vessel
	 	04/19/1994*
	6,588,528	 	Electric Vehicle Drive System
	 	07/08/2003
	5,842,535	 	Electric Drive Assembly for Bicycles
	 	12/01/1998
	5,735,361	 	DualPole Personal Towing Vehicle
	 	04/07/1998*
	5,913,373	 	DualPole, DualWheel Personal Towing Vehicle
	 	06/22/1999*
	433,718	 	Portable Collapsible Scooter
	 	11/14/2000*
	347,418	 	Scuba Scooter
	 	05/31/1994*
	359,022	 	Scuba Scooter
	 	06/06/1995*
	US D453,726S	 	Submersible Marine Vehicle
	 	02/19/2002
	6,748,892	 	Seascooter
	 	06/15/2004

 

 

PATENT APPLICATIONS

None

2

 

     The Debtor and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing patents and patent applications (i) may only be
terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed
as an assignment of any patent or patent application.

	 	 	 	 	 	 	 
	 	 	Very truly yours,  
	 
	 	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Acknowledged and Accepted:

SURGE CAPITAL II, LLC, as Administrative Agent

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

3

 

SCHEDULE XI

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (the
“Security Agreement”) made by ZAP, a California corporation (the “Debtor”) and in
favor of Surge Capital II, LLC, a Delaware limited liability company as Administrative Agent (the
“Administrative Agent”) for the lenders referenced therein (the “Lenders”), the
undersigned Debtor has granted a continuing security interest in and
continuing lien upon, to the
extent Debtor is able to grant such interest and lien, the trademarks and trademark applications
shown below to the Administrative Agent for the ratable benefit of the Lenders:

TRADEMARKS

	 	 	 	 	 
	TRADEMARK	 	 	 	 
	NO.	 	DESCRIPTION OF TRADEMARK	 	DATE OF TRADEMARK
	1,794,866	 	ZAP
	 	09/28/1993*
	2,240,270	 	Electricruizer
	 	04/20/1999*
	2,248,753	 	Powerbike
	 	06/01/1999*
	2,320,346	 	Zero Air Pollution
	 	02/22/2000*
	2,330,894	 	ZAPPY
	 	03/21/2000*
	2,335,090	 	ZAP Electric Vehicle Outlet
	 	03/28/2000*
	2,371,240	 	Zapworld.com
	 	07/25/2000*
	2,689,203	 	Swimmy
	 	02/18/2003*
	2,885,816	 	ZAP Seascooter
	 	09/21/2004*
	2,912,329	 	ZAP Car
	 	12/21/2004*
	2,271,018	 	etc and Design
	 	08/17/1999
	2,329,466	 	The future is Electric
	 	03/14/2000
	2,534,197	 	ETC Express
	 	01/29/2002
	2,759,913	 	Capin Billy’s Whiz Bang and Design
	 	09/02/2003

4

 

TRADEMARK APPLICATIONS

None

5

 

     The Debtor and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any trademark or trademark application.

	 	 	 	 	 	 	 
	 	 	Very truly yours,  
	 
	 	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

Acknowledged and Accepted:

SURGE CAPITAL II, LLC, as Administrative Agent

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

6

 

Execution Copy

SUBSIDIARY SECURITY AGREEMENT

     THIS SUBSIDIARY SECURITY AGREEMENT (this “Security Agreement”), dated and effective as
of this September 12, 2005 is made by the Subsidiaries party hereto (the “Subsidiaries”)
and each other Person who becomes a party to this Agreement by execution of a joinder in the form
of Exhibit A attached hereto (together with the Subsidiaries, individually a
“Debtor” and, collectively, the “Debtors”), in favor of Surge Capital II, LLC, a
Delaware limited liability company, as Administrative Agent, with an office at 1033 Skokie,
Boulevard, Suite 620, Northbrook, Illinois, 60062 (“Secured Party”), for the benefit of the
Lenders (as hereinafter defined).

WITNESSETH:

     WHEREAS, ZAP, a California corporation (the “Borrower”) has entered into that certain
Master Financing Agreement of even date herewith (the same, as it may be amended, restated,
supplemented or otherwise modified and in effect from time to time, being herein referred to as the
“Financing Agreement”), among the Borrower, Secured Party and the Lenders from time to time
parties thereto, providing for the Lenders to make available certain Loans and Credits to the
Borrower on the terms and subject to the conditions set forth therein;

     WHEREAS, it is a condition precedent to the effectiveness of the Financing Agreement and the
obligations of the Lenders to make their respective Loans and Credits under the Financing Agreement
that the Debtors shall have executed and delivered that certain Subsidiary Guaranty dated the date
hereof to the Administrative Agent for the ratable benefit of the Lenders (the “Guaranty”);

     WHEREAS, it is a further condition precedent to the effectiveness of the Financing Agreement
and the obligations of the Lenders to make their respective Loans and Credits under the Financing
Agreement that the Debtors shall have executed and delivered this Security Agreement to the
Administrative Agent for the ratable benefit of the Lenders to secure the payment and performance
of the Debtors’ obligations under the Guaranty; and

     WHEREAS, the Debtors will receive a substantial benefit from the Loans and Credits.

     NOW, THEREFORE, in consideration of these premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

     1. Definitions.

          As used herein, the following terms shall have the meanings set froth in this Section. Other
terms defined herein shall have the meanings ascribed to them herein. All capitalized terms used
herein not specifically defined herein shall have the meaning ascribed to them in the Financing
Agreement, and the following terms which are defined in the Uniform Commercial Code from time to
time in effect in the State of Illinois (the “UCC”) are used herein as so defined:
Accessions, Accounts, As-Extracted Collateral, Chattel Paper, Commercial Tort

 

 

Claims, Consumer Goods, Control, Deposit Accounts, Documents, Electronic Chattel Paper,
Equipment, Farm Products, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment
Property, Letter-of-Credit Rights, Manufactured Homes, Payment Intangibles, Proceeds, Products,
Securities Intermediary, Software, Standing Timber, Supporting Obligations and Tangible Chattel
Paper.

          “Bankruptcy Code”: means the Bankruptcy Code in Title 11 of the United States Code, as
amended, modified, succeeded or replaced from time to time.

          “Copyright Licenses”: means any agreement, whether written or oral, providing for the
grant by or to a Person of any right under any Copyright.

          “Copyrights”: means all copyrights (other than copyrights of de minimus value) of the
Debtors in all works, now existing or hereafter created or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the United States
Copyright Office or in any similar office or agency of the United States, any state thereof or any
other country or any political subdivision thereof.

          “Debtor”: shall have the meaning ascribed to such term in the recitals hereto.

          “Default”: means any event which if it continued uncured would, with notice or lapse
of time or both, constitute an Event of Default.

          “Event of Default”: shall have the meaning ascribed to such term in the Financing
Agreement.

          “Financing Agreement”: shall have the meaning set forth in the Recitals hereto.

          “Material Adverse Effect”: means a material adverse effect on (a) the business,
operations, property, condition (financial or otherwise) or prospects of the Debtors, (b) the
ability of any Debtor to perform its obligations, when such obligations are required to be
performed, under this Agreement or any of the Notes or any other Loan Document to which such Debtor
is a party or (c) the validity or enforceability of this Agreement, any of the Notes or any of the
other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder or the perfection or priority of any Lien in favor of the Administrative Agent.

          “Material Contract”: means (a) any partnership or joint venture agreement to which any
Debtor is a party, (b) any contract, agreement, permit or license, written or oral, of any Debtor
involving monetary liability of or to any such Person in an amount in excess of $50,000 per annum
and (c) any other contract, agreement, permit or license, written or oral, of any Debtor as to
which the breach, nonperformance, cancellation or failure to renew by any party thereto could
reasonably be expected to have a Material Adverse Effect.

          “Patent Licenses”: means all agreements, whether written or oral, providing for the
grant by or to a Person of any right to manufacture, use or sell any invention covered by a Patent.

          “Patents”: means (i) all letters of patent of the United States or any other country,
now existing or hereafter arising, and all improvement patents, reissues, reexaminations, patents
of additions, renewals and extensions, and (ii) all applications for letters patent of the United
States or any other country, now existing or hereafter arising, and all provisionals, divisions,
continuations and continuations-in-part and substitutes.

2

 

          “Permitted Liens”: means all Liens permitted under Section 6.9 of the Financing
Agreement.

          “Secured Obligations”: means “Obligations” as defined in the Financing Agreement.

          “Trademark License”: means any agreement, whether written or oral, providing for the
grant by or to a Person of any right to use any Trademark.

          “Trademarks”: means (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, service marks, elements of package or trade dress of
goods or services, logos and other source or business identifiers (other than such items that are
of de minimus value), together with the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any similar office or
agency of the United states, any state thereof or any other country or any political subdivision
thereof and (ii) all renewals thereof.

     2. Grant of Security Interest in the Collateral.

          (a) To secure the prompt payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations, each Debtor hereby
grants to the Administrative Agent, for the benefit of the Lenders, a continuing first priority
security interest in and lien on, and a right to set off against, any and all right, title and
interest of such Debtor in and to the following, whether now owned or existing or owned, acquired,
or arising hereafter (collectively, the “Collateral”):

     (i) all Accounts;

     (ii) all cash;

     (iii) all Chattel Paper;

     (iv) Commercial Tort Claims set forth on Schedule VII (as such Schedule
may be updated from time to time by the Debtors);

     (v) all Copyright Licenses;

     (vi) all Copyrights;

     (vii) all Deposit Accounts set forth on Schedule VI (as such Schedule may be
updated from time to time by the Debtors);

     (viii) all Documents;

     (ix) all Equipment;

     (x) all Fixtures;

     (xi) all General Intangibles;

3

 

     (xii) all Goods;

     (xiii) all Instruments;

     (xiv) all Inventory;

     (xv) all Investment Property;

     (xvi) all Letter-of-Credit Rights;

     (xvii) all Material Contracts and all such other agreements, contracts, leases,
licenses, tax sharing agreements or hedging arrangements now or hereafter entered
into by a Debtor, as such agreements may be amended or otherwise modified from time
to time (collectively, the “Assigned Agreements”), including without
limitation, (i) all rights of a Debtor to receive moneys due and to become due under
or pursuant to the Assigned Agreements, (ii) all rights of a Debtor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) claims of a Debtor for damages arising out of or for
breach of or default under the Assigned Agreements and (iv) the right of a Debtor to
terminate the Assigned Agreements, to perform thereunder and to compel performance
and otherwise exercise all remedies thereunder;

     (xviii) all Patent Licenses;

     (xix) all Patents;

     (xx) all Payment Intangibles;

     (xxi) all Trademark Licenses;

     (xxii) all Trademarks;

     (xxiii) all Software;

     (xxiv) all Supporting Obligations;

     (xxv) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks, and related data processing software (owned by such Debtor
or in which it has an interest) that at any time evidence or contain information
relating to any Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon;

     (xxvi) all other personal property of any kind or type whatsoever owned by such
Debtor; and

     (xxvii) to the extent not otherwise included, all Accessions, Proceeds and
Products of any and all of the foregoing.

4

 

          (b) The Debtors and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest created hereby in the Collateral constitutes a continuing
collateral security interest for all of the Secured Obligations, whether now existing or hereafter
arising.

     3. Provisions Relating to Accounts, Contracts and Agreements.

          (a) Anything herein to the contrary notwithstanding, each of the Debtors shall remain liable
under each of its Accounts, contracts and agreements to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account or the terms of such contract or agreement. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under any Account (or
any agreement giving rise thereto), contract or agreement by reason of or arising out of this
Security Agreement or the receipt by the Administrative Agent or any Lender of any payment relating
to such Account, contract or agreement pursuant hereto, nor shall the Administrative Agent or any
Lender be obligated in any manner to perform any of the obligations of a Debtor under or pursuant
to any Account (or any agreement giving rise thereto), contract or agreement, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement giving rise
thereto), contract or agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.

          (b) At any time and from time to time, the Administrative Agent shall have the right, but not
the obligation, to make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and the Debtors shall furnish all such assistance and
information as the Administrative Agent may reasonably require in connection with such test
verifications. Upon the Administrative Agent’s request and at the expense of the Debtors, the
Debtors shall cause independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts. The Administrative Agent in its own name
or in the name of others may communicate with account debtors on the Accounts to verify with them
to the Administrative Agent’s satisfaction the existence, amount and terms of any Accounts.

     4. Representations and Warranties. Each Debtor hereby represents and warrants to the
Administrative Agent, for the benefit of the Lenders, that so long as any of the Secured
Obligations remain outstanding (other than contingent indemnity obligations) or any Loan Document
is in effect, and until all of the Commitments shall have been terminated:

          (a) Chief Executive Office; Books & Records; Legal Name; State of Incorporation. As
of the Closing Date, each Debtor’s chief executive office and chief place of business are (and for
the prior four months has been) located at the locations set forth on Schedule I (as
updated from time to time) under such Debtor’s name, and each Debtor keeps its books and records at
such locations. Each Debtor’s exact legal name is as shown in this Security Agreement and its
state of formation or incorporation is (and for the prior four months has been) the location set
forth on Schedule I. No Debtor has in the past four months changed its name,

5

 

been party to a merger, consolidation or other change in structure or used any tradename not
disclosed on Schedule I attached hereto (as updated from time to time).

          (b) Location of Tangible Collateral. The location of all tangible Collateral owned by
each Debtor is as shown on Schedule I (as updated from time to time) under such Debtor’s
name.

          (c) Ownership. Each Debtor is the legal and beneficial owner of its Collateral and
has the right to pledge, sell, assign or transfer the same.

          (d) Security Interest/Priority. This Security Agreement creates a valid security
interest in favor of the Administrative Agent, for the benefit of the Lenders, in the Collateral of
such Debtor and, when properly perfected by filing or otherwise, shall constitute a valid first
priority, perfected security interest in such Collateral, to the extent such security interest can
be perfected by filing or otherwise under the UCC or by filing an appropriate notice with the
United States Patent and Trademark Office or the United States Copyright Office, free and clear of
all Liens except for Permitted Liens.

          (e) Consents. Except for (i) the filing or recording of UCC financing statements,
(ii) the filing of appropriate notices with the United States Patent and Trademark Office and the
United States Copyright Office or (iii) obtaining Control to perfect the Liens created by this
Security Agreement, no consent or authorization of, filing with, or other act by or in respect of,
any arbitrator or Governmental Authority and no consent of any other Person (including, without
limitation, any shareholder, member or creditor of such Debtor), is required (i) for the grant by
such Debtor of the security interest in the Collateral granted hereby or for the execution,
delivery or performance of this Security Agreement by such Debtor or (ii) for the perfection of
such security interest or the exercise by the Administrative Agent of the rights and remedies
provided for in this Security Agreement.

          (f) Types of Collateral. None of the Collateral consists of, or is the Proceeds of,
As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes or Standing Timber.

          (g) Accounts. With respect to the Accounts of the Debtors: (i) the goods sold and/or
services furnished giving rise to each Account are not subject to any security interest or Lien
except the first priority, perfected security interest granted to the Administrative Agent herein
and Permitted Liens; (ii) each Account and the papers and documents of the applicable Debtor
relating thereto are genuine and in all material respects what they purport to be; (iii) each
Account arises out of a bona fide transaction for goods sold and delivered (or in the process of
being delivered) by a Debtor or for services actually rendered by a Debtor, which transaction was
conducted in the ordinary course of the Debtor’s business and was completed in accordance with the
terms of any documents pertaining thereto; (iv) no Account of a Debtor is evidenced by any
Instrument or Chattel Paper unless such Instrument or Chattel Paper has been theretofore endorsed
over and delivered to, or submitted to the Control of, the Administrative Agent; (v) the amount of
each Account as shown on the applicable Debtor’s books and records, and on all invoices and
statements which may be delivered to the Administrative Agent with respect thereto, is due and
payable to the applicable Debtor and is not in any way contingent; (vi) no

6

 

Account is evidenced by judgment, there are no set-offs, counterclaims or disputes existing or
asserted with respect to any Account that in the aggregate could reasonably be expected to have a
Material Adverse Effect, and no Debtor has made any agreement with any account debtor for any
deduction from any Account except for deductions made in the ordinary course of its business; (vii)
there are no facts, events or occurrences which in any material respect impair the validity or
enforcement of any Account or tend to materially reduce the amount payable thereunder as shown on
the applicable Debtor’s books and records and all invoices and statements delivered to the
Administrative Agent with respect thereto; (viii) the right to receive payment under each Account
is assignable except, where the account debtor with respect to such Account is the United States
government or any State government or any agency, department or instrumentality thereof, to the
extent the assignment of any such right to payment is prohibited or limited by applicable law,
regulations, administrative guidelines or contract; and (ix) the goods sold and/or services
furnished giving rise to each Account are not subject to any security interest or Lien except the
security interest granted the Administrative Agent herein and except for Permitted Liens.

          (h) Inventory. No Inventory of a Debtor is held by a third party pursuant to
consignment, sale or return, sale on approval or similar arrangement.

          (i) Intellectual Property.

     (i) Schedules III, IV and V includes all material registered and
unregistered Copyrights, Patents and Trademarks owned by or licensed (pursuant to a
written license) by or to the Debtors as of the date hereof.1

     (ii) Except as set forth on Schedules III, IV and V, all material
Intellectual Property of each Debtor is valid, subsisting, unexpired, enforceable
and has not been abandoned, and each Debtor is legally entitled to use each of its
tradenames.2

     (iii) Except as set forth in Schedules III, IV and V, none of the
Intellectual Property of the Debtors is the subject of any licensing or franchise
agreement.

     (iv) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of any Intellectual
Property of the Debtors.

     (v) No action or proceeding is pending seeking to limit, cancel or question the
validity of any Intellectual Property of the Debtors, or which, if adversely
determined, would have a material adverse effect on the value of any such
Intellectual Property.

 

			
	1	 	The scope and extent of the
Intellectual Property to be included under this section is under discussion.
	 
	2	 	The scope and extent of the
Intellectual Property to be included under this section is under discussion.

7

 

     (vi) All applications pertaining to the material Intellectual Property of each
Debtor have been duly and properly filed, and all registrations or letters
pertaining to such Intellectual Property have been duly and properly filed and
issued, and all of such Intellectual Property is valid and
enforceable.3

     (vii) No Debtor has made any assignment or agreement in conflict with the
security interest of the Administrative Agent in the Intellectual Property of each
Debtor hereunder.

          (j) Documents, Instruments and Chattel Paper. All Documents, Instruments and Chattel
Paper describing, evidencing or constituting Collateral are, to the Debtors’ knowledge, complete,
valid, and genuine.

          (k) Equipment. With respect to each Debtor’s Equipment: (i) such Debtor has good and
marketable title thereto; (ii) all such Equipment is in normal operating condition and repair,
ordinary wear and tear alone excepted, and is suitable for the uses to which it is customarily put
in the conduct of such Debtor’s business; and (iii) no Equipment used in the conduct of such
Debtor’s business is leased, except for non-material items.

          (l) Restrictions on Security Interest. None of the Debtors is party to any material
license or any material lease that contains legally enforceable restrictions on the granting of a
security interest therein.

     5. Covenants. Each Debtor covenants that, so long as any of the Secured Obligations
remain outstanding (other than contingent indemnity obligations) or any Loan Document is in effect,
and until all of the Commitments shall have been terminated, such Debtor shall:

          (a) Other Liens. Defend the Collateral against the claims and demands of all other
parties claiming an interest therein and keep the Collateral free from all Liens, except for
Permitted Liens. Neither the Administrative Agent nor any Lender authorizes any Debtor to, and no
Debtor shall, sell, exchange, transfer, assign, lease or otherwise dispose of the Collateral or any
interest therein, except as permitted under the Financing Agreement.

          (b) Preservation of Collateral. Keep the Collateral in good order, condition and
repair in all material respects, ordinary wear and tear excepted; not use the Collateral in
violation of the provisions of this Security Agreement or any other agreement relating to the
Collateral or any policy insuring the Collateral or any applicable requirement of law; not permit
any Collateral to be or become a fixture to real property or an accession to other personal
property unless the Administrative Agent has a valid, perfected and first priority security
interest for the benefit of the Lenders in such real or personal property; and not, without the
prior written consent of the Administrative Agent, alter or remove any identifying symbol or number
on its Equipment.

 

			
	3	 	The scope and extent of the
Intellectual Property to be included under this section is under discussion.

8

 

          (c) Possession or Control of Certain Collateral. If (i) any amount payable under or
in connection with any of the Collateral shall be or become evidenced by any Instrument, Tangible
Chattel Paper or Supporting Obligation or (ii) if any Collateral shall be stored or shipped subject
to a Document or (iii) if any Collateral shall consist of Investment Property in the form of
certificated securities, immediately notify the Administrative Agent of the existence of such
Collateral and, at the request of the Administrative Agent, deliver such Instrument, Chattel Paper,
Supporting Obligation, Document or Investment Property to the Administrative Agent, duly endorsed
in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this
Security Agreement. If any Collateral shall consist of Deposit Accounts, Electronic Chattel Paper,
Letter-of-Credit Rights or uncertificated Investment Property, execute and deliver (and, with
respect to any Collateral consisting of uncertificated Investment Property, cause the Securities
Intermediary with respect to such Investment Property to execute and deliver) to the Administrative
Agent, upon the Administrative Agent’s request, all control agreements, assignments, instruments or
other documents as reasonably requested by the Administrative Agent for the purposes of obtaining
and maintaining Control of such Collateral.

          (d) Changes in Corporate Structure or Location. Not, without providing 30 days prior
written notice to the Administrative Agent and without filing (or confirming that the
Administrative Agent has filed) such amendments to any previously filed financing statements as the
Administrative Agent may require, (i) alter its corporate existence or, in one transaction or a
series of transactions, merge into or consolidate with any other entity, or sell all or
substantially all of its assets, (ii) change its state of incorporation or formation or (iii)
change its registered corporate name, in each case after obtaining the consent of the
Administrative Agent to the extent required by the Financing Agreement.

          (e) Inspection. Allow the Administrative Agent or its representatives to visit and
inspect the Collateral as set forth in Section 5.5 of the Financing Agreement.

          (f) Perfection of Security Interest. Mark its books and records to reflect the
security interest of the Administrative Agent in the Collateral. Each Debtor hereby authorizes the
Administrative Agent to prepare and file such financing statements (including renewal statements)
or amendments thereof or supplements thereto or other instruments as the Administrative Agent may
from time to time deem necessary or appropriate in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC. Each Debtor shall also execute and deliver
to the Administrative Agent such agreements, assignments or instruments (including affidavits,
notices, reaffirmations and amendments and restatements of existing documents, as the
Administrative Agent may reasonably request) and do all such other things requested by the
Administrative Agent as the Administrative Agent may reasonably deem necessary or appropriate (i)
to assure to the Administrative Agent that its security interests hereunder are perfected,
including (A) such financing statements (including renewal statements) or amendments thereof or
supplements thereto or other instruments as the Administrative Agent may from time to time
reasonably request in order to perfect and maintain the security interests granted hereunder in
accordance with the UCC and any other personal property security legislation in the appropriate
state(s) or province(s), (B) with regard to Copyrights registered with the United States Copyright
Office, a Notice of Grant of Security Interest in Copyrights for filing with the United States
Copyright Office in the form of Schedule IX attached hereto, (C) with regard to Patents
registered with the United States Patent and Trademark Office, a Notice of

9

 

Grant of Security Interest in Patents for filing with the United States Patent and Trademark
Office in the form of Schedule X attached hereto and (D) with regard to Trademarks
registered with the United States Patent and Trademark Office, a Notice of Grant of Security
Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of
Schedule XI attached hereto, (ii) to consummate the transactions contemplated hereby and
(iii) to otherwise protect and assure the Administrative Agent of its rights and interests
hereunder. To that end, each Debtor hereby irrevocably makes, constitutes and appoints the
Administrative Agent, its nominee or any other person whom the Administrative Agent may designate,
as such Debtor’s attorney-in-fact with full power and for the limited purpose to sign in the name
of such Debtor any such financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar documents which in the
Administrative Agent’s reasonable discretion would be necessary, appropriate or convenient in order
to perfect and maintain perfection of the security interests granted hereunder, such power, being
coupled with an interest, being and remaining irrevocable so long as any of the Secured Obligations
remain outstanding (other than any such obligations which by the terms thereof are stated to
survive termination of the Loan Documents) or any Loan Document (to the extent the obligations of
such Debtor thereunder constitute Secured Obligations) is in effect, and until all of the
Commitments shall have terminated. Each Debtor hereby agrees that a carbon, photographic or other
reproduction of this Security Agreement or any such financing statement is sufficient for filing as
a financing statement by the Administrative Agent without notice thereof to such Debtor wherever
the Administrative Agent may in its sole discretion desire to file the same. In the event for any
reason the law of any jurisdiction other than Illinois becomes or is applicable to the Collateral
of any Debtor or any part thereof, or to any of the Secured Obligations, such Debtor agrees to
execute and deliver all such instruments and to do all such other things requested by the
Administrative Agent as the Administrative Agent in its sole discretion reasonably deems necessary
or appropriate to preserve, protect and enforce the security interests of the Administrative Agent
under the law of such other jurisdiction (and, if a Debtor shall fail to do so promptly upon the
request of the Administrative Agent, then the Administrative Agent may execute any and all such
requested documents on behalf of such Debtor pursuant to the power of attorney granted
hereinabove).

          (g) Collateral Held by Warehouseman, Bailee, etc. If any Collateral is at any time in
the possession or control of a warehouseman, bailee or any agent or processor of such Debtor, (i)
notify the Administrative Agent of such possession, (ii) notify such Person of the Administrative
Agent’s security interest for the benefit of the Lenders in such Collateral, (iii) instruct such
Person to hold all such Collateral for the Administrative Agent’s account subject to the
Administrative Agent’s instructions and (iv) obtain an acknowledgment from such Person that it is
holding such Collateral for the benefit of the Administrative Agent.

          (h) Treatment of Accounts. (i) Not grant or extend the time for payment of any
Account, or compromise or settle any Account for less than the full amount thereof, or release any
person or property, in whole or in part, from payment thereof, or allow any credit or discount
thereon, other than as normal and customary in the ordinary course of a Debtor’s business and (ii)
maintain at its principal place of business a record of Accounts consistent with customary business
practices.

10

 

(i) Covenants Relating to Inventory.

     (i) Maintain, keep and preserve its Inventory in good salable condition at its
own cost and expense.

     (ii) Comply with all reporting requirements set forth in the Financing
Agreement with respect to Inventory.

     (iii) If any of the Inventory is at any time evidenced by a document of title,
immediately upon request by the Administrative Agent, deliver such document of title
to the Administrative Agent.

(j) Covenants Relating to Copyrights.

     (i) Employ the Copyright for each material Work with such notice of copyright
as may be required by law to secure copyright protection.

     (ii) Not do any act or knowingly omit to do any act whereby any Copyright may
become invalidated and (A) not do any act, or knowingly omit to do any act, whereby
any material Copyright may become injected into the public domain; (B) notify the
Administrative Agent immediately if it knows, or has reason to know, that any
Copyright may become injected into the public domain or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in any court or tribunal in the
United States or any other country) regarding a Debtor’s ownership of any such
Copyright or its validity; (C) take all necessary steps as it shall deem appropriate
under the circumstances, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of each Copyright owned by
a Debtor, which any Debtor reasonably determines are necessary or material to the
conduct of its business, including, without limitation, filing of applications for
renewal where necessary; and (D) promptly notify the Administrative Agent of any
material infringement of any Copyright of a Debtor of which it becomes aware (with
respect to Copyrights that a Debtor reasonably determines are necessary or material
to the conduct of its business) and take such actions as it shall reasonably deem
appropriate under the circumstances to protect such Copyright, including, where
appropriate, the bringing of suit for infringement, seeking injunctive relief and
seeking to recover any and all damages for such infringement.

     (iii) Not make any assignment or agreement in conflict with the security
interest in the Copyrights of each Debtor hereunder.

(k) Covenants Relating to Patents and Trademarks.

     (i) (A) Continue to use each Trademark, which any Debtor reasonably determines
is necessary or desirable for the conduct of its business, in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (B) maintain
as in the past the quality of products and services offered

11

 

under such Trademark, (C) employ such registered Trademark with the appropriate
notice of registration, (D) not adopt or use any mark which is confusingly similar
or a colorable imitation of such Trademark unless the Administrative Agent, for the
ratable benefit of the Lenders, shall obtain a perfected security interest in such
mark pursuant to this Security Agreement, and (E) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do any act whereby any
such Trademark may become invalidated.

     (ii) Not do any act, or omit to do any act, whereby any Patent, which any
Debtor reasonably determines is necessary or desirable for the conduct of its
business, may become abandoned or dedicated.

     (iii) Promptly notify the Administrative Agent if it knows, or has reason to
know, that any application or registration relating to any Patent or Trademark may
become abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office or
any court or tribunal in any country) regarding a Debtor’s ownership of any such
Patent or Trademark or its right to register the same or to keep, maintain and use
the same.

     (iv) Whenever a Debtor, either by itself or through an agent, employee,
licensee or designee, shall file an application for the registration of any Patent
or Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof, such
Debtor shall promptly report such filing to the Administrative Agent. Upon request
of the Administrative Agent, a Debtor shall execute and deliver any and all
agreements, instruments, documents and papers as the Administrative Agent may
request to evidence the Administrative Agent’s and the Lenders’ security interest in
any Patent or Trademark and the goodwill and General Intangibles of such Debtor
relating thereto or represented thereby.

     (v) Take all reasonable and necessary steps, including, without limitation, in
any proceeding before the United States Patent and Trademark Office, or any similar
office or agency in any other country or any political subdivision thereof, to
maintain and pursue each application, to obtain the relevant registration and to
maintain each registration of the Patents and Trademarks, which any Debtor
reasonably determines is necessary or material to the conduct of its business,
including, without limitation, filing of applications for renewal, affidavits of use
and affidavits of incontestability.

     (vi) Promptly notify the Administrative Agent and the Lenders after it learns
that any Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and, if such Patent or Trademark is
necessary or desirable for the conduct of any Debtor’s business, then promptly sue
for infringement, misappropriation or dilution, to seek injunctive relief where

12

 

appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as it shall reasonably deem
appropriate under the circumstances to protect such Patent or Trademark.

     (vii) Not make any assignment or agreement in conflict with the security
interest in the Patents or Trademarks of any Debtor hereunder.

          (l) New Patents, Copyrights and Trademarks. Promptly provide the Administrative Agent
with (i) a listing of all applications, if any, for new Copyrights, Patents or Trademarks (together
with a listing of the issuance of registrations or letters on present applications), which new
applications and issued registrations or letters shall be subject to the terms and conditions
hereunder, and (ii) (A) with respect to Copyrights, a duly executed Notice of Grant of Security
Interest in Copyrights, (B) with respect to Patents, a duly executed Notice of Grant of Security
Interest in Patents, (C) with respect to Trademarks, a duly executed Notice of Grant of Security
Interest in Trademarks or (D) such other duly executed documents as the Administrative Agent may
request in a form acceptable to counsel for the Administrative Agent and suitable for recording to
evidence the security interest in the Copyright, Patent or Trademark which is the subject of such
new application.

          (m) Commercial Tort Claims; Notice of Litigation. (i) Promptly forward to the
Administrative Agent written notification of any and all Commercial Tort Claims, including, but not
limited to, any and all actions, suits, and proceedings before any court or Governmental Authority
by or affecting such Debtor or any of its Subsidiaries and (ii) execute and deliver such
statements, documents and notices and do and cause to be done all such things as may be required by
the Administrative Agent, or required by law, including all things which may from time to time be
necessary under the UCC to fully create, preserve, perfect and protect the priority of the
Administrative Agent’s security interest in any Commercial Tort Claims.

          (n) Fixtures. At all times maintain the Collateral as personal property and not affix
any of the Collateral to any real property in a manner which would change its nature from personal
property to real property or a Fixture.

          (o) Insurance. Insure, repair and replace the Collateral of such Debtor as set forth
in the Financing Agreement. All insurance proceeds shall be subject to the security interest of
the Administrative Agent hereunder.

          (p) Covenants Relating to the Assigned Agreements.

     (i) Upon the request of the Administrative Agent, each Debtor shall, at its
expense, (A) furnish to the Administrative Agent copies of all notices, requests and
other documents received by such Debtor under or pursuant to the Assigned
Agreements, and such other information and reports regarding the Assigned Agreements
and (B) make to any other party to any Assigned Agreement such demands and requests
for information and reports or for action as a Debtor is entitled to make
thereunder.

     (ii) Unless the applicable Debtor believes it is necessary or desirable in the
prudent conduct of its business, no Debtor shall (A) cancel or terminate any

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Assigned Agreement of such Debtor or consent to or accept any cancellation or
termination thereof; (B) amend or otherwise modify any Assigned Agreement of such
Debtor or give any consent, waiver or approval thereunder; (C) waive any default
under or breach of any Assigned Agreement of such Debtor; or (D) take any other
action in connection with any Assigned Agreement of such Debtor which would impair
the value of the interest or rights of such Debtor thereunder or which would impair
the interests or rights of the Administrative Agent.

          (q) New Material Contracts. Whenever a Debtor shall enter into a Material Contract,
such Debtor shall provide the Administrative Agent with a true and complete copy of such Material
Contract and such other related documents as the Administrative Agent may request in a form
acceptable to the Administrative Agent and, if requested by the Administrative Agent, execute and
deliver (or cause to be executed and delivered) to the Administrative Agent a collateral assignment
of such Material Contract and a consent to such collateral assignment, in each case in a form
acceptable to the Administrative Agent. Upon the request of the Administrative Agent, a Debtor
will do any act, or execute any additional documents required by the Administrative Agent to ensure
to the Administrative Agent the effectiveness and first priority of its security interest in such
Material Contract.

     6. Special Provisions Regarding Inventory. Notwithstanding anything to the contrary
contained in this Security Agreement, each Debtor may, unless and until an Event of Default occurs
and is continuing and the Administrative Agent instructs such Debtor otherwise, without further
consent or approval of the Administrative Agent, use, consume, sell, lease and exchange its
Inventory in the ordinary course of its business as presently conducted, whereupon, in the case of
such a sale or exchange, the security interest created hereby in the Inventory so sold or exchanged
(but not in any Proceeds arising from such sale or exchange) shall cease immediately without any
further action on the part of the Administrative Agent.

     7. Performance of Obligations; Advances by Administrative Agent. On failure of any
Debtor to perform any of the covenants and agreements contained herein, the Administrative Agent
may, at its sole option and in its sole discretion, perform or cause to be performed the same and
in so doing may expend such sums as the Administrative Agent may reasonably deem advisable in the
performance thereof, including, without limitation, the payment of any insurance premiums, the
payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made
in defending against any adverse claim and all other expenditures which the Administrative Agent
may make for the protection of the security interest hereof or may be compelled to make by
operation of law. All such sums and amounts so expended shall be repayable by the Debtors on a
joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear daily interest from the date said amounts are
expended until repaid at the Default Rate. No such performance of any covenant or agreement by the
Administrative Agent on behalf of any Debtor, and no such advance or expenditure therefor, shall
relieve the Debtors of any default under the terms of this Security Agreement, the other Loan
Documents or any Hedging Agreement. The Administrative Agent may make any payment hereby
authorized in accordance with any bill, statement or estimate procured from the appropriate public
office or holder of the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title
or claim except to the extent such payment is being

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contested in good faith by a Debtor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.

     8. [Intentionally omitted]

     9. Remedies.

          (a) General Remedies. Upon the occurrence of an Event of Default and during the
continuation thereof, the Administrative Agent and the Lenders shall have, in addition to the
rights and remedies provided herein, in the Loan Documents or by law (including, but not limited
to, levy of attachment, garnishment and the rights and remedies set forth in the Uniform Commercial
Code of the jurisdiction applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the
rights and remedies are asserted and regardless of whether the UCC applies to the affected
Collateral), and further, the Administrative Agent may, with or without judicial process or the aid
and assistance of others, (i) enter on any premises on which any of the Collateral may be located
and, without resistance or interference by the Debtors, take possession of the Collateral, (ii)
dispose of any Collateral on any such premises, (iii) require the Debtors to assemble and make
available to the Administrative Agent at the expense of the Debtors any Collateral at any place and
time designated by the Administrative Agent which is reasonably convenient to both parties, (iv)
remove any Collateral from any such premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law,
all of which each of the Debtors hereby waives to the fullest extent permitted by law, at any place
and time or times, sell and deliver any or all Collateral held by or for it at public or private
sale, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Administrative Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). Neither the Administrative Agent’s
compliance with any applicable state or federal law in the conduct of such sale, nor its disclaimer
of any warranties relating to the Collateral, shall be considered to adversely affect the
commercial reasonableness of such sale. In addition to all other sums due the Administrative Agent
and the Lenders with respect to the Secured Obligations, the Debtors shall pay the Administrative
Agent and each of the Lenders all reasonable documented costs and expenses incurred by the
Administrative Agent or any such Lender, including, but not limited to, reasonable attorneys’ fees
and court costs, in obtaining or liquidating the Collateral, in enforcing payment of the Secured
Obligations, or in the prosecution or defense of any action or proceeding by or against the
Administrative Agent or the Lenders or the Debtors concerning any matter arising out of or
connected with this Security Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or related to a case under the
Bankruptcy Code. To the extent the rights of notice cannot be legally waived hereunder, each
Debtor agrees that any requirement of reasonable notice shall be met if such notice is personally
served on or mailed, postage prepaid, to the Borrower in accordance with the notice provisions of
Section 9.3 of the Financing Agreement at least 10 days before the time of sale or other event
giving rise to the requirement of such notice. The Administrative Agent and the Lenders shall not
be obligated to make any sale or other disposition of the Collateral regardless of notice having
been given. To the extent permitted by law, any Lender may be a purchaser at any such sale. To
the extent permitted by applicable law, each of the Debtors hereby waives all of its rights of
redemption with respect to any such sale. Subject to

15

 

the provisions of applicable law, the Administrative Agent and the Lenders may postpone or
cause the postponement of the sale of all or any portion of the Collateral by announcement at the
time and place of such sale, and such sale may, without further notice, to the extent permitted by
law, be made at the time and place to which the sale was postponed, or the Administrative Agent and
the Lenders may further postpone such sale by announcement made at such time and place.

          (b) Remedies Relating to Accounts. Upon the occurrence of an Event of Default and
during the continuation thereof, whether or not the Administrative Agent has exercised any or all
of its rights and remedies hereunder, the Administrative Agent shall have the right, subject to
applicable law, to enforce any Debtor’s rights against any account debtors and obligors on such
Debtor’s Accounts. Each Debtor acknowledges and agrees that the Proceeds of its Accounts remitted
to or on behalf of the Administrative Agent in accordance with the provisions hereof shall be
solely for the Administrative Agent’s own convenience and that such Debtor shall not have any
right, title or interest in such Proceeds or in any such other amounts except as expressly provided
herein. To the extent required by the Administrative Agent, each Debtor agrees to execute any
document or instrument, and to take any action, necessary under applicable law (including the
Federal Assignment of Claims Act) in order for the Administrative Agent to exercise its rights and
remedies (or to be able to exercise its rights and remedies at some future date) with respect to
any Accounts of such Debtor where the account debtor is a Governmental Authority. The
Administrative Agent and the Lenders shall have no liability or responsibility to any Debtor for
acceptance of a check, draft or other order for payment of money bearing the legend “payment in
full” or words of similar import or any other restrictive legend or endorsement or be responsible
for determining the correctness of any remittance. Each Debtor hereby agrees to indemnify the
Administrative Agent and the Lenders from and against all liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and reasonable attorneys’ fees suffered or incurred by
the Administrative Agent or the Lenders (each, an “Indemnified Party”) because of the
maintenance of the foregoing arrangements except as relating to or arising out of the gross
negligence or willful misconduct of an Indemnified Party or its officers, employees or agents. In
the case of any investigation, litigation or other proceeding, the foregoing indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought by a Debtor, its
directors, shareholders or creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.

          (c) Access. In addition to the rights and remedies hereunder, upon the occurrence of
an Event of Default and during the continuation thereof, the Debtors shall provide the
Administrative Agent with access to the Collateral, without cost or charge to the Administrative
Agent, and the reasonable use of the same, together with materials, supplies, books and records of
the Debtors for the purpose of collecting and liquidating the Collateral, or for preparing for sale
and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise (except to
the extent such activities are specifically restricted by the terms of any lease; provided,
if the foregoing activities are specifically restricted by the terms of any lease, the Debtors
shall promptly take all reasonable steps to move the Collateral at such lease location to a new
location satisfactory to the Administrative Agent). In addition, the Administrative Agent may
remove Collateral, or any part thereof, from such premises and/or any records with respect thereto,
in order to effectively collect or liquidate such Collateral. If the Administrative Agent
exercises its right to take possession of the Collateral, each Debtor shall also at its expense
perform any and all other steps reasonably requested by the Administrative Agent to preserve

16

 

and protect the security interest hereby granted in the Collateral, such as placing and
maintaining signs indicating the security interest of the Administrative Agent, appointing
overseers for the Collateral and maintaining inventory records.

          (d) Nonexclusive Nature of Remedies. Failure by the Administrative Agent or the
Lenders to exercise any right, remedy or option under this Security Agreement, any other Loan
Document, or as provided by law, or any delay by the Administrative Agent or the Lenders in
exercising the same, shall not operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the party against whom such waiver
is sought to be enforced and then only to the extent specifically stated, which in the case of the
Administrative Agent or the Lenders shall only be granted as provided herein. To the extent
permitted by law, neither the Administrative Agent, the Lenders, nor any party acting as attorney
for the Administrative Agent or the Lenders, shall be liable hereunder for any acts or omissions or
for any error of judgment or mistake of fact or law other than their gross negligence or willful
misconduct hereunder. The rights and remedies of the Administrative Agent and the Lenders under
this Security Agreement shall be cumulative and not exclusive of any other right or remedy which
the Administrative Agent or the Lenders may have.

          (e) Retention of Collateral. The Administrative Agent may, after providing the
notices required by Sections 9-620 and 9-621 (or similar provision) of the UCC (or any successor
sections of the UCC) or otherwise complying with the requirements of applicable law of the relevant
jurisdiction, accept or retain the Collateral in satisfaction of the Secured Obligations. Unless
and until the Administrative Agent shall have provided such notices, however, the Administrative
Agent shall not be deemed to have retained any Collateral in satisfaction of any Secured
Obligations for any reason.

          (f) Deficiency. In the event that the proceeds of any sale, collection or realization
are insufficient to pay all amounts to which the Administrative Agent or the Lenders are legally
entitled, the Debtors shall be jointly and severally liable for the deficiency, together with daily
interest thereon at the Default Rate, together with the costs of collection and the reasonable fees
of any attorneys employed by the Administrative Agent to collect such deficiency. Any surplus
remaining after the full payment and satisfaction of the Secured Obligations shall be returned to
the Debtors or to whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.

          (g) Other Security. To the extent that any of the Secured Obligations are now or
hereafter secured by property other than the Collateral (including, without limitation, real
property and securities owned by a Debtor), or by a guarantee, endorsement or property of any other
Person, then the Administrative Agent and the Lenders shall have the right to proceed against such
other property, guarantee or endorsement upon the occurrence of any Event of Default, and the
Administrative Agent and the Lenders have the right, in their sole discretion, to determine which
rights, security, liens, security interests or remedies the Administrative Agent and the Lenders
shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in
any way modifying or affecting any of them or any of the Administrative Agent’s and the Lenders’
rights or the Secured Obligations under this Security Agreement, or under any other of the Loan
Documents (to the extent the obligations of such Debtor thereunder constitute Secured Obligations).

17

 

     10. Rights of the Administrative Agent.

          (a) Power of Attorney. In addition to other powers of attorney contained herein, each
Debtor hereby designates and appoints the Administrative Agent, on behalf of the Lenders, and each
of its designees or agents, as attorney-in-fact of such Debtor, irrevocably and with power of
substitution, with authority to take any or all of the following actions upon the occurrence and
during the continuation of an Event of Default:

     (i) to demand, collect, settle, compromise, adjust, give discharges and
releases, all as the Administrative Agent may reasonably determine;

     (ii) to commence and prosecute any actions at any court for the purposes of
collecting any Collateral and enforcing any other right in respect thereof;

     (iii) to defend, settle, adjust or compromise any action, suit or proceeding
brought and, in connection therewith, give such discharge or release as the
Administrative Agent may deem reasonably appropriate;

     (iv) to receive, open and dispose of mail addressed to a Debtor and endorse
checks, notes, drafts, acceptances, money orders, bills of lading, warehouse
receipts or other instruments or documents evidencing payment, shipment or storage
of the goods giving rise to the Collateral of such Debtor, or securing or relating
to such Collateral, on behalf of and in the name of such Debtor;

     (v) to sell, assign, transfer, make any agreement in respect of, or otherwise
deal with or exercise rights in respect of, any Collateral or the goods or services
which have given rise thereto, as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes;

     (vi) to adjust and settle claims under any insurance policy relating thereto;

     (vii) to execute and deliver all assignments, conveyances, statements,
financing statements, renewal financing statements, security agreements, affidavits,
notices and other agreements, instruments and documents that the Administrative
Agent may determine necessary in order to perfect and maintain the security
interests and liens granted in this Security Agreement and in order to fully
consummate all of the transactions contemplated herein;

     (viii) to institute any foreclosure proceedings that the Administrative Agent
may deem appropriate;

     (ix) to do and perform all such other acts and things as the Administrative
Agent may reasonably deem to be necessary, proper or convenient in connection with
the Collateral; and

18

 

     (x) to execute any document or instrument, and to take any action, necessary
under applicable law in order for the Administrative Agent to exercise its rights
and remedies (or to be able to exercise its rights and remedies at some future date)
with respect to any Account of a Debtor where the account debtor is a Governmental
Authority.

This power of attorney is a power coupled with an interest and shall be irrevocable for so long as
any of the Secured Obligations remain outstanding (other than contingent indemnity obligations) or
any Loan Document is in effect, and until all of the Commitments shall have been terminated. The
Administrative Agent shall be under no duty to exercise or withhold the exercise of any of the
rights, powers, privileges and options expressly or implicitly granted to the Administrative Agent
in this Security Agreement, and shall not be liable for any failure to do so or any delay in doing
so. The Administrative Agent shall not be liable for any act or omission or for any error of
judgment or any mistake of fact or law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative Agent solely to protect,
preserve and realize upon its security interest in the Collateral.

          (b) Assignment by the Administrative Agent. The Administrative Agent may from time to
time assign the Secured Obligations and any portion thereof and/or the Collateral and any portion
thereof, and the assignee shall be entitled to all of the rights and remedies of the Administrative
Agent under this Security Agreement in relation thereto.

          (c) The Administrative Agent’s Duty of Care. Other than the exercise of reasonable
care to assure the safe custody of the Collateral while being held by the Administrative Agent
hereunder, the Administrative Agent shall have no duty or liability to preserve rights pertaining
thereto, it being understood and agreed that the Debtors shall be responsible for preservation of
all rights in the Collateral, and the Administrative Agent shall be relieved of all responsibility
for the Collateral upon surrendering it or tendering the surrender of it to the Debtors. The
Administrative Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own property, which shall be
no less than the treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Administrative Agent shall not have responsibility for taking any necessary
steps to preserve rights against any parties with respect to any of the Collateral. In the event
of a public or private sale of Collateral pursuant to Section 9 hereof, the Administrative Agent
shall have no obligation to clean-up, repair or otherwise prepare the Collateral for sale.

     11. Application of Proceeds. Upon the occurrence and during the continuation of an
Event of Default, any payments in respect of the Secured Obligations and any proceeds of the
Collateral, when received by the Administrative Agent or any of the Lenders in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order set forth in
Section 3.6 of the Financing Agreement, and each Debtor irrevocably waives the right to
direct the application of such payments and proceeds and acknowledges and agrees that the
Administrative Agent shall have the continuing and exclusive right to apply and reapply any and

19

 

all such payments and proceeds in the Administrative Agent’s sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.

     12. Costs of Counsel. If at any time hereafter, whether upon the occurrence of an
Event of Default or not, the Administrative Agent employs counsel to prepare or consider
amendments, waivers or consents with respect to this Security Agreement, or to take action or make
a response in or with respect to any legal or arbitral proceeding relating to this Security
Agreement or relating to the Collateral, or to protect the Collateral or exercise any rights or
remedies under this Security Agreement or with respect to the Collateral, then the Debtors agree to
promptly pay upon demand any and all such reasonable documented costs and expenses of the
Administrative Agent, all of which costs and expenses shall constitute Secured Obligations
hereunder.

     13. Continuing Agreement.

          (a) This Security Agreement shall be a continuing agreement in every respect and shall remain
in full force and effect so long as any of the Secured Obligations remain outstanding (other than
contingent indemnity obligations) or any Loan Document is in effect, and until all of the
Commitments shall have been terminated. Upon such payment and termination, this Security Agreement
shall be automatically terminated and the Administrative Agent and the Lenders shall, upon the
request and at the expense of the Debtors, forthwith release all of their liens and security
interests hereunder and shall execute and deliver all UCC termination statements and/or other
documents reasonably requested by the Debtors evidencing such termination. Notwithstanding the
foregoing all releases and indemnities provided hereunder shall survive termination of this
Security Agreement.

          (b) This Security Agreement shall continue to be effective or be automatically reinstated, as
the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all
as though such payment had not been made; provided that in the event payment of all or any
part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including without limitation any reasonable legal fees and disbursements) incurred by
the Administrative Agent or any Lender in defending and enforcing such reinstatement shall be
deemed to be included as a part of the Secured Obligations.

     14. Amendments; Waivers; Modifications. This Security Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth
in Section 9.1 of the Financing Agreement.

     15. Successors in Interest. This Security Agreement shall create a continuing
security interest in the Collateral and shall be binding upon each Debtor, its successors and
assigns and shall inure, together with the rights and remedies of the Administrative Agent and the
Lenders hereunder, to the benefit of the Administrative Agent and the Lenders and their successors
and permitted assigns; provided, however, that none of the Debtors may assign its
rights or delegate its duties hereunder without the prior written consent of each Lender or the
Required Lenders, as required by the Financing Agreement. To the fullest extent permitted by law,
each Debtor

20

 

hereby releases the Administrative Agent and each Lender, each of their respective officers,
employees and agents and each of their respective successors and assigns, from any liability for
any act or omission relating to this Security Agreement or the Collateral, except for any liability
arising from the gross negligence or willful misconduct of the Administrative Agent or such Lender
or their respective officers, employees and agents.

     16. Notices. All notices required or permitted to be given under this Security
Agreement shall be effected in the manner provided for in Section 9.3 of the Financing
Agreement, and if to any Debtor, at its address set forth opposite such Debtor’s signature block on
the signature pages of this Security Agreement (or such other address as such Debtor shall specify
to the Secured Party).

     17. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in making proof of this
Security Agreement to produce or account for more than one such counterpart.

     18. Headings. The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning, construction or interpretation of any
provision of this Security Agreement.

     19. Governing Law; Submission to Jurisdiction and Service of Process; Waiver of Jury
Trial.

          (a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

          (b) AT THE OPTION OF THE ADMINISTRATIVE AGENT, THIS SECURITY AGREEMENT, THE NOTES AND THE
OTHER LOAN DOCUMENTS TO WHICH ANY DEBTOR IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT OR
ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS; AND SUCH DEBTOR CONSENTS TO THE JURISDICTION AND
VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN
THE EVENT ANY DEBTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR
CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE
ADMINISTRATIVE AGENT AND THE LENDERS AT THEIR OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED
TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED
UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

          (c) THE DEBTORS, THE ADMINISTRATIVE AGENT AND THE LENDERS WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS SECURITY

21

 

AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b) ARISING FROM ANY LENDING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS SECURITY AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

     20. Severability. If any provision of any of the Security Agreement is determined to
be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining
provisions shall remain in full force and effect and shall be construed without giving effect to
the illegal, invalid or unenforceable provisions.

     21. Entirety. This Security Agreement and the other Loan Documents represent the
entire agreement of the parties hereto and thereto with respect to the subject matter hereof and
thereof, and supersede all prior agreements and understandings, oral or written, if any, including
any commitment letters, term sheets or correspondence relating to the transactions contemplated
herein and therein.

     22. Survival. All representations and warranties of the Debtors hereunder shall
survive the execution and delivery of this Security Agreement, the other Loan Documents, the
delivery of the Notes and the making of the Loans and the issuance of the Credits under the
Financing Agreement.

     23. Joint and Several Obligations of Debtors.

          (a) Each of the Debtors is accepting joint and several liability hereunder in consideration of
the financial accommodation to be provided by the Lenders under the Financing Agreement, for the
mutual benefit, directly and indirectly, of each of the Debtors and in consideration of the
undertakings of each of the Debtors to accept joint and several liability for the obligations of
each of them.

          (b) Each of the Debtors jointly and severally hereby irrevocably and unconditionally accepts,
not merely as a surety but also as a co-debtor, joint and several liability with the other Debtors
with respect to the payment and performance of all of the Secured Obligations arising under this
Security Agreement, the other Loan Documents (to the extent the obligations of such Debtor
thereunder constitute Secured Obligations), it being the intention of the parties hereto that all
the Secured Obligations shall be the joint and several obligations of each of the Debtors without
preferences or distinction among them.

          (c) Notwithstanding any provision to the contrary contained herein or in any other of the Loan
Documents, to the extent the obligations of a Debtor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the obligations of such Debtor
hereunder shall be limited to the maximum amount that is permissible under applicable law (whether
federal or state and including, without limitation, the Bankruptcy Code).

[remainder of page intentionally left blank]

22

 

     IN WITNESS WHEREOF, the undersigned has executed this Security Agreement as of the date first
above written.

	 	 	 	 	 
	 	 	DEBTORS:
	 
	 	 	 	 
	Address:	 	VOLTAGE VEHICLES, a Nevada company
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider
	 

	 	 	 	Name: Steven Schneider
	 

	 	 	 	Title: Vice President
	 
	 	 	 	 
	Address:	 	R. A. P. GROUP, INC., a California company
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Dennis Vickery
	 

	 	 	 	Name: Dennis Vickery
	 

	 	 	 	Title: President
	 
	 	 	 	 
	Address:	 	ZAP RENTAL OUTLET, a California company
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider
	 

	 	 	 	Name: Steven Schneider
	 

	 	 	 	Title: Vice President
	 
	 	 	 	 
	Address:	 	ZAP MANUFACTURING, INC., a Nevada company
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider
	 

	 	 	 	Name: Steven Schneider
	 

	 	 	 	Title: Vice President

 

 

	 	 	 	 	 
	 	 	SECURED PARTY:
	 	 	SURGE CAPITAL II, LLC, a Delaware limited liability company, as

Administrative Agent
	 
	 	 	 	 
	 

	 	By:
	 	/s/ John Maselli
	 

	 	 	 	Name: John Maselli
	 

	 	 	 	Title: Vice President

 

 

EXHIBIT A

FORM OF JOINDER

JOINDER TO SUBSIDIARY SECURITY AGREEMENT

     The undersigned,                                         , hereby joins in the execution of that certain
Subsidiary Security Agreement dated as of                     , 2005 (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the “Security Agreement”)
by each Debtor party thereto, each other Person that has become a Debtor thereunder prior to the
date hereof pursuant to the terms thereof, and Surge Capital II, LLC, a Delaware limited liability
company, as Administrative Agent for the benefit of Lenders. By executing this Joinder, the
undersigned hereby agrees that it is a Debtor thereunder and agrees to be bound by all of the terms
and provisions of the Security Agreement.

     The undersigned represents and warrants to Secured Party that:

     (a) all of the Equipment, Inventory and Goods owned by such Debtor is located at the places as
specified on Schedule I attached hereto;

     (b) except as disclosed on Schedule I, none of such Collateral is in the possession of
any bailee, warehousemen, processor or consignee;

     (c) the chief place of business, chief executive office and the office where such Debtor keeps
its books and records are located at the place specified on Schedule I;

     (d) such Debtor (including any Person acquired by such Debtor) does not do business or has not
done business during the past five years under any tradename or fictitious business name, except as
disclosed on Schedule II; and

     (e) all Copyrights, Patents and Trademarks owned by the undersigned are listed in
Schedules III, IV and V, respectively.

[Signature page follows]

 

 

SCHEDULE I

TO

SUBSIDIARY SECURITY AGREEMENT

UCC Financing Statements; Location of Equipment, Inventory, Goods and Books and Records; Goods in
Possession of Consignees, Bailees, Warehousemen, Agents and Processors; Debtors’ Legal Name; State
of Incorporation; Organizational Identification Number; Chief Executive Office.

A. With respect to R.A.P. Group, Inc.

	 	 	 	 	 	 	 	 	 
	I.	 	 	DEBTOR:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	1.	 	 	Legal Name of Debtor:
	 	R.A.P. Group, Inc
	 
	 	 	 	 	 	 	 	 
	 

	 	 	2.	 	 	State of Incorporation:
	 	CA
	 
	 	 	 	 	 	 	 	 
	 

	 	 	3.	 	 	Organizational Identification Number:
	 	C1968885
	 

	 	 	 	 	 	 	 	EIN 94-3259783
	 
	 	 	 	 	 	 	 	 
	 

	 	 	4.	 	 	Chief Executive Office:
	 	3362 Fulton Road, Santa Rosa, CA
	 
	 	 	 	 	 	 	 	 
	 

	 	 	5.	 	 	Location of Books and Records:
	 	3362 Fulton Road, Santa Rosa, CA
	 
	 	 	 	 	 	 	 	 
	 

	 	 	6.	 	 	Locations of Equipment, Inventory
and Goods:
	 	3362 Fulton Road, Santa Rosa, CA
	 

	 	 	 	 	 	 	 	3405 Fulton Road, Santa Rosa, CA
	 
	 	 	 	 	 	 	 	 
	 

	 	 	7.	 	 	Locations of Goods in Possession of
Consignees, Bailees, Warehousemen,
Agents and Processors (including
names of such consignees, bailees,
etc.):	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	8.	 	 	Jurisdictions For UNIFORM COMMERCIAL

CODE Filings:
	 	CA

 

 

B. With respect to Voltage Vehicles

	 	 	 	 	 	 	 	 	 
	I.	 	 	DEBTOR:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	1.	 	 	Legal Name of Debtor:
	 	Voltage Vehicles
	 
	 	 	 	 	 	 	 	 
	 

	 	 	2.	 	 	State of Incorporation:
	 	NV
	 
	 	 	 	 	 	 	 	 
	 

	 	 	3.	 	 	Organizational Identification Number:
	 	C2539358
	 

	 	 	 	 	 	 	 	EIN 68-5629843
	 
	 	 	 	 	 	 	 	 
	 

	 	 	4.	 	 	Chief Executive Office:
	 	501 4th Street, Santa Rosa, CA 95401
	 
	 	 	 	 	 	 	 	 
	 

	 	 	5.	 	 	Location of Books and Records:
	 	501 4th Street, Santa Rosa, CA 95401
	 
	 	 	 	 	 	 	 	 
	 

	 	 	6.	 	 	Locations of Equipment, Inventory
	 	6784 Sebastopol Avenue, Sebastopol, CA 95472
	 

	 	 	 	 	 	and Goods:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	7.	 	 	Locations of Goods in Possession of
Consignees, Bailees, Warehousemen,
Agents and Processors (including
names of such consignees, bailees,
etc.):
	 	2530 S. Birch Street, Santa Ana, CA 92707
	 
	 	 	 	 	 	 	 	 
	 

	 	 	8.	 	 	Jurisdictions For UNIFORM COMMERCIAL

CODE Filings:
	 	NV

 

 

C. With respect to ZAP Manufacturing, Inc.

	 	 	 	 	 	 	 	 	 
	I.	 	 	DEBTOR:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	1.	 	 	Legal Name of Debtor:
	 	ZAP Manufacturing, Inc.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	2.	 	 	State of Incorporation:
	 	NV
	 
	 	 	 	 	 	 	 	 
	 

	 	 	3.	 	 	Organizational Identification Number:
	 	C 3218-03
	 

	 	 	 	 	 	 	 	EIN 92-0181089
	 
	 	 	 	 	 	 	 	 
	 

	 	 	4.	 	 	Chief Executive Office:
	 	2533 North Carson Street, Carson
City, NV 89706
	 
	 	 	 	 	 	 	 	 
	 

	 	 	5.	 	 	Location of Books and Records:
	 	2533 North Carson Street, Carson
City, NV 89706
	 
	 	 	 	 	 	 	 	 
	 

	 	 	6.	 	 	Locations of Equipment, Inventory
and Goods:
	 	None
	 
	 	 	 	 	 	 	 	 
	 

	 	 	7.	 	 	Locations of Goods in Possession of
Consignees, Bailees, Warehousemen,
Agents and Processors (including
names of such consignees, bailees,
etc.):
	 	None
	 
	 	 	 	 	 	 	 	 
	 

	 	 	8.	 	 	Jurisdictions For UNIFORM COMMERCIAL

CODE Filings:
	 	NV

 

 

D. With respect to ZAP Rental Outlet

	 	 	 	 	 	 	 	 	 
	I.	 	 	DEBTOR:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	1.	 	 	Legal Name of Debtor:
	 	ZAP Rental Outlet
	 
	 	 	 	 	 	 	 	 
	 

	 	 	2.	 	 	State of Incorporation:
	 	CA
	 
	 	 	 	 	 	 	 	 
	 

	 	 	3.	 	 	Organizational Identification Number:
	 	C 2469319
	 

	 	 	 	 	 	 	 	EIN 94-0258376
	 
	 	 	 	 	 	 	 	 
	 

	 	 	4.	 	 	Chief Executive Office:
	 	501 4th Street, Santa Rosa, CA 95401
	 
	 	 	 	 	 	 	 	 
	 

	 	 	5.	 	 	Location of Books and Records:
	 	501 4th Street, Santa Rosa, CA 95401
	 
	 	 	 	 	 	 	 	 
	 

	 	 	6.	 	 	Locations of Equipment, Inventory
and Goods:
	 	6784 Sebastopol Avenue, Sebastopol, CA
	 

	 	 	 	 	 	 	 	1815 E. Sahara, Las Vegas, NV
	 
	 	 	 	 	 	 	 	 
	 

	 	 	7.	 	 	Locations of Goods in Possession of
Consignees, Bailees, Warehousemen,
Agents and Processors (including
names of such consignees, bailees,
etc.):	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	8.	 	 	Jurisdictions For UNIFORM COMMERCIAL

CODE Filings:
	 	CA

 

 

SCHEDULE II

TO

SUBSIDIARY SECURITY AGREEMENT

Tradenames and Fictitious Names

(Present and Past Five Years)

A. With respect to R. A. P. Group, Inc.

Bug World

Smog Store

Credit Union Rep

Repo Outlet

Voltage Vehicles

B. With respect to Voltage Vehicles

None

C. With respect to ZAP Manufacturing, Inc.

None

D. With respect to ZAP Rental Outlet

None

 

 

SCHEDULE III

TO

SUBSIDIARY SECURITY AGREEMENT

U.S. Copyright Registrations; Foreign Copyright Registrations; U.S. Copyright

Applications; Foreign Copyright Applications; Copyright Licenses

A. With respect to R.A.P. Group, Inc.

U.S.
Copyright Registrations

None

Foreign Copyright Registrations

None

U.S. Copyright Applications

None

Foreign Copyright Applications

None

Copyright Licenses

None

 

 

B. With respect to Voltage Vehicles

U.S. Copyright Registrations

None

Foreign Copyright Registrations

None

U.S. Copyright Applications

None

Foreign Copyright Applications

None

Copyright Licenses

None

2

 

C. With respect to ZAP Manufacturing, Inc.

U.S. Copyright Registrations

None

Foreign Copyright Registrations

None

U.S. Copyright Applications

None

Foreign Copyright Applications

None

Copyright Licenses

None

3

 

D. With respect to ZAP Rental Outlet

U.S. Copyright Registrations

None

Foreign Copyright Registrations

None

U.S. Copyright Applications

None

Foreign Copyright Applications

None

Copyright Licenses

None

4

 

SCHEDULE IV

TO

SUBSIDIARY SECURITY AGREEMENT

U.S. Patent Registrations; Foreign Patent Registrations; U.S. Patent

Applications; Foreign Patent Applications; Patent Licenses

A. With respect to R.A.P. Group, Inc.

U.S. Patent Registrations

None

Foreign Patent Registrations

None

U.S. Patent Applications

None

Foreign Patent Applications

None

Patent Licenses

None

 

 

B. With respect to Voltage Vehicles

U.S. Patent Registrations

None

Foreign Patent Registrations

None

U.S. Patent Applications

None

Foreign Patent Applications

None

Patent Licenses

None

2

 

C. With respect to ZAP Manufacturing, Inc.

U.S. Patent Registrations

None

Foreign Patent Registrations

None

U.S. Patent Applications

None

Foreign Patent Applications

None

Patent Licenses

None

3

 

D. With respect to ZAP Rental Outlet

U.S. Patent Registrations

None

Foreign Patent Registrations

None

U.S. Patent Applications

None

Foreign Patent Applications

None

Patent Licenses

None

4

 

SCHEDULE V

TO

SUBSIDIARY SECURITY AGREEMENT

U.S. Trademark Registrations; Foreign Trademark Registrations; U.S. Trademark

Applications; Foreign Trademark Applications; Trademark Licenses

A. With respect to R.A.P. Group, Inc.

U.S. Trademark Registrations

None

Foreign Trademark Registrations

None

U.S. Trademark Applications

None

Foreign Trademark Applications

None

Trademark Licenses

None

 

 

B. With respect to Voltage Vehicles

U.S. Trademark Registrations

None4

Foreign Trademark Registrations

None

U.S. Trademark Applications

None

Foreign Trademark Applications

None

Trademark Licenses

None

 

		
	4	Voltage Vehicles is a trademark by first use, although it has never been filed.

2

 

C. With respect to ZAP Manufacturing, Inc.

U.S. Trademark Registrations

None

Foreign Trademark Registrations

None

U.S. Trademark Applications

None

Foreign Trademark Applications

None

Trademark Licenses

None

3

 

D. With respect to ZAP Rental Outlet

U.S. Trademark Registrations

None

Foreign Trademark Registrations

None

U.S. Trademark Applications

None

Foreign Trademark Applications

None

Trademark Licenses

None

4

 

SCHEDULE VI

TO

SUBSIDIARY SECURITY AGREEMENT

Depository Accounts and Other Accounts

A. With respect to R. A. P. Group, Inc.

	 	 	 	 	 	 	 
	 	 	 	 	Type of Account (with	 	 
	Name of Account Holder	 	Bank	 	general description)	 	Account Number
	R. A. P. Group, LLC-dba
	 	 	 	 	 	 
	Bug World
	 	Wells Fargo	 	Operating	 	
	 
	 	 	 	 	 	 
	R. A. P. Group, LLC-dba
	 	 	 	 	 	 
	Bug World
	 	Wells Fargo	 	Savings	 	
	 
	 	 	 	 	 	 
	R. A. P. Group, LLC-dba
	 	 	 	 	 	 
	Smog Store
	 	Wells Fargo	 	Operating	 	
	 
	 	 	 	 	 	 
	R. A. P. Group, LLC-dba
	 	 	 	 	 	 
	Bug World
	 	Wells Fargo	 	Payroll Acct	 	

B. With respect to Voltage Vehicles

	 	 	 	 	 	 	 
	 	 	 	 	Type of Account (with	 	 
	Name of Account Holder	 	Bank	 	general description)	 	Account Number
	Voltage Vehicles
	 	Wells Fargo	 	Operating	 	
	 
	 	 	 	 	 	 
	Voltage Vehicles
	 	Wells Fargo	 	Money Market	 	

C. With respect to ZAP Manufacturing, Inc.

None

D. With respect to ZAP Rental Outlet

None

 

 

SCHEDULE VII

TO

SUBSIDIARY SECURITY AGREEMENT

Commercial Tort Claims

A. With respect to R.A.P. Group, Inc.

None

B. With respect to Voltage Vehicles

None

C. With respect to ZAP Manufacturing, Inc.

None

D. With respect to ZAP Rental Outlet

None

 

 

SCHEDULE VIII

TO

SUBSIDIARY SECURITY AGREEMENT

[Reserved]

 

 

SCHEDULE IX

TO

SUBSIDIARY SECURITY AGREEMENT

A. With respect to R.A.P. Group, Inc.

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (as
the same may be amended, modified, extended or restated from time to time, the “Security
Agreement”) made by each of the undersigned in favor of Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent (the “Administrative Agent”) for the
lenders referenced therein (the “Lenders”), each of the undersigned has granted a
continuing security interest in and continuing lien upon, the copyrights and copyright applications
shown below to the Administrative Agent for the ratable benefit of the Lenders:

COPYRIGHTS

None

COPYRIGHT APPLICATIONS

None

 

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing copyrights and copyright applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any copyright or copyright application.

Very truly yours,

	 	 	 	 	 
	Address:	 	VOLTAGE VEHICLES
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	Address:	 	R.A.P. GROUP, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	Address:	 	ZAP RENTAL OUTLET
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	Address:	 	ZAP MANUFACTURING, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

2

 

	 	 	 	 	 
	 

	 	 	 	 
	Acknowledged and Accepted:	 	 
	 
	 	 	 	 
	Surge Capital II, LLC as Administrative Agent	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

3

 

B. With respect to Voltage Vehicles

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (as the same may be
amended, modified, extended or restated from time to time, the “Security Agreement”) made by each of the undersigned in
favor of Surge Capital II, LLC, a Delaware limited liability company, as Administrative Agent (the “Administrative Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has granted a continuing security
interest in and continuing lien upon, the copyrights and copyright applications shown below to the Administrative Agent
for the ratable benefit of the Lenders:

COPYRIGHTS

None

COPYRIGHT APPLICATIONS

None

4

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and agree that the
security interest in the foregoing copyrights and copyright applications (i) may only be terminated in accordance with
the terms of the Security Agreement and (ii) is not to be construed as an assignment of any copyright or copyright
application.

Very truly yours,

	 	 	 	 	 
	Address:	 	VOLTAGE VEHICLES
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	Address:	 	R. A. P. GROUP, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	Address:	 	ZAP RENTAL OUTLET
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	Address:	 	ZAP MANUFACTURING, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

5

 

	 	 	 	 	 
	 

	 	 	 	 
	Acknowledged and Accepted:	 	 
	 
	 	 	 	 
	Surge Capital II, LLC as Administrative Agent	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

6

 

C. With respect to ZAP Manufacturing, Inc.

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (as
the same may be amended, modified, extended or restated from time to time, the “Security
Agreement”) made by each of the undersigned in favor of Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent (the “Administrative Agent”) for the
lenders referenced therein (the “Lenders”), each of the undersigned has granted a
continuing security interest in and continuing lien upon, the copyrights and copyright applications
shown below to the Administrative Agent for the ratable benefit of the Lenders:

COPYRIGHTS

None

COPYRIGHT APPLICATIONS

None

7

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing copyrights and copyright applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any copyright or copyright application.

	 	 	 	 	 
	 	Very truly yours,

 	 
	Address: 	VOLTAGE VEHICLES

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	Address: 	R. A. P. GROUP, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP RENTAL OUTLET

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP MANUFACTURING, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

8

 

	 	 	 	 	 

Acknowledged and Accepted:

Surge Capital II, LLC as Administrative Agent

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 

9

 

D. With respect to ZAP Rental Outlet

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

United States Copyright Office

Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of September 12, 2005 (as
the same may be amended, modified, extended or restated from time to time, the “Security
Agreement”) made by each of the undersigned in favor of Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent (the “Administrative Agent”) for the
lenders referenced therein (the “Lenders”), each of the undersigned has granted a
continuing security interest in and continuing lien upon, the copyrights and copyright applications
shown below to the Administrative Agent for the ratable benefit of the Lenders:

COPYRIGHTS

None

COPYRIGHT APPLICATIONS

None

10

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing copyrights and copyright applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any copyright or copyright application.

Very truly yours,

	 	 	 	 	 
	Address: 	VOLTAGE VEHICLES

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	R. A. P. GROUP, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP RENTAL OUTLET

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP MANUFACTURING, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

11

 

	 	 	 	 	 

Acknowledged and Accepted:

Surge Capital II, LLC as Administrative Agent

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 

12

 

SCHEDULE X

TO

SUBSIDIARY SECURITY AGREEMENT

A. With respect to R.A.P. Group, Inc.

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

     United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the patents and patent
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

PATENTS

None

PATENT APPLICATIONS

None

 

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing patents and patent applications (i) may only be
terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed
as an assignment of any patent or patent application.

Very truly yours,

	 	 	 	 	 
	Address: 	VOLTAGE VEHICLES

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	R. A. P. GROUP, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	Address: 	ZAP RENTAL OUTLET

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP MANUFACTURING, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

2

 

Acknowledged and Accepted:

Surge Capital II, LLC, as Administrative Agent

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 

3

 

B. With respect to Voltage Vehicles

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the patents and patent
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

PATENTS

None

PATENT APPLICATIONS

None

4

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing patents and patent applications (i) may only be
terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed
as an assignment of any patent or patent application.

Very truly yours,

	 	 	 	 	 
	Address: 	VOLTAGE VEHICLES

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	R. A. P. GROUP, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP RENTAL OUTLET

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP MANUFACTURING, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

5

 

	 	 	 	 	 

Acknowledged and Accepted:

Surge Capital II, LLC, as Administrative Agent

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Name:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 

6

 

C. With respect to ZAP Manufacturing, Inc.

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

     Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the patents and patent
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

PATENTS

None

PATENT APPLICATIONS

None

7

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing patents and patent applications (i) may only be
terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed
as an assignment of any patent or patent application.

Very truly yours,

	 	 	 	 	 
	Address: 	VOLTAGE VEHICLES

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	R. A. P. GROUP, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP RENTAL OUTLET

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	Address: 	ZAP MANUFACTURING, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

8

 

	 	 	 	 	 

Acknowledged and Accepted:

Surge Capital II, LLC, as Administrative Agent

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 

9

 

D. With respect to ZAP Rental Outlet

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the patents and patent
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

PATENTS

None

PATENT APPLICATIONS

None

10

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing patents and patent applications (i) may only be
terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed
as an assignment of any patent or patent application.

	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	VOLTAGE VEHICLES	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	R. A. P. GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP RENTAL OUTLET	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP MANUFACTURING, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 

11

 

	 	 	 	 	 
	Acknowledged and Accepted:	 	 
	 
	 	 	 	 
	Surge Capital II, LLC, as Administrative Agent	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

12

 

SCHEDULE XI

TO

SUBSIDIARY SECURITY AGREEMENT

A. With respect to R.A.P. Group, Inc.

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the trademarks and trademark
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

TRADEMARKS

None

TRADEMARK APPLICATIONS

None

 

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any trademark or trademark application.

	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	VOLTAGE VEHICLES	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	R. A. P. GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP RENTAL OUTLET	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP MANUFACTURING, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 

2

 

	 	 	 	 	 
	Acknowledged and Accepted:	 	 
	 
	 	 	 	 
	Surge Capital II, LLC, as Administrative Agent	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

3

 

ACKNOWLEDGMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of that certain Master Financing Agreement
of even date herewith among ZAP, a California corporation, Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Lenders from time to time party thereto
(as same, as it may be amended, restated, supplemented or otherwise modified and in effect from
time to time, being herein referred to as the “Financing Agreement”). Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement. The undersigned agrees for the benefit of the Administrative Agent and the
Lenders that it will be bound by the terms of the Financing Agreement and will comply with the
terms of Articles 5 and 6 thereof insofar as such terms are applicable to the undersigned.

	 	 	 	 	 	 	 
	 	 	R. A. P. Group Inc., a California corporation  
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

4

 

B. With respect to Voltage Vehicles

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the trademarks and trademark
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

TRADEMARKS

None

TRADEMARK APPLICATIONS

None

5

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any trademark or trademark application.

	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	VOLTAGE VEHICLES	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	R. A. P. GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP RENTAL OUTLET	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP MANUFACTURING, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 

6

 

	 	 	 	 	 
	Acknowledged and Accepted:	 	 
	 
	 	 	 	 
	Surge Capital II, LLC, as Administrative Agent
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

7

 

ACKNOWLEDGMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of that certain Master Financing Agreement
of even date herewith among ZAP, a California corporation, Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Lenders from time to time party thereto
(as same, as it may be amended, restated, supplemented or otherwise modified and in effect from
time to time, being herein referred to as the “Financing Agreement”). Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement. The undersigned agrees for the benefit of the Administrative Agent and the
Lenders that it will be bound by the terms of the Financing Agreement and will comply with the
terms of Articles 5 and 6 thereof insofar as such terms are applicable to the undersigned.

	 	 	 	 	 	 	 
	 	 	Voltage Vehicles a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

8

 

C. With respect to ZAP Manufacturing, Inc.

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the trademarks and trademark
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

TRADEMARKS

None

TRADEMARK APPLICATIONS

None

9

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any trademark or trademark application.

	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	VOLTAGE VEHICLES	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	R. A. P. GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP RENTAL OUTLET	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	ZAP MANUFACTURING, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 

10

 

	 	 	 	 	 
	Acknowledged and Accepted:	 	 
	 
	 	 	 	 
	Surge Capital II, LLC, as Administrative Agent	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 

11

 

ACKNOWLEDGMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of that certain Master Financing Agreement
of even date herewith among ZAP, a California corporation, Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Lenders from time to time party thereto
(as same, as it may be amended, restated, supplemented or otherwise modified and in effect from
time to time, being herein referred to as the “Financing Agreement”). Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement. The undersigned agrees for the benefit of the Administrative Agent and the
Lenders that it will be bound by the terms of the Financing Agreement and will comply with the
terms of Articles 5 and 6 thereof insofar as such terms are applicable to the undersigned.

	 	 	 	 	 	 	 
	 	 	ZAP Manufacturing, Inc. a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

12

 

D. With respect to ZAP Rental Outlet

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

United States Patent and Trademark Office

Gentlemen:

     Please be advised that pursuant to the Subsidiary Security Agreement dated as of September 12,
2005 (the “Security Agreement”) made by each of the undersigned in favor of Surge Capital
II, LLC, a Delaware limited liability company as Administrative Agent (the “Administrative
Agent”) for the lenders referenced therein (the “Lenders”), each of the undersigned has
granted a continuing security interest in and continuing lien upon, the trademarks and trademark
applications shown below to the Administrative Agent for the ratable benefit of the Lenders:

TRADEMARKS

None

TRADEMARK APPLICATIONS

None

13

 

     The undersigned and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be
construed as an assignment of any trademark or trademark application.

	 	 	 
	 

	 	Very truly yours,

	 	 	 	 	 
	Address:	 	VOLTAGE VEHICLES
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

	 	 	 	 	 
	Address:	 	R. A. P. GROUP, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

	 	 	 	 	 
	Address:	 	ZAP RENTAL OUTLET
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

	 	 	 	 	 
	Address:	 	ZAP MANUFACTURING, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

14

 

Acknowledged and Accepted:

Surge Capital II, LLC, as Administrative Agent

	 	 	 	 	 
	By:

	 	 	 	 
	 	 	 	 	 
	Name:
	 	 	 	 
	 	 	 	 	 
	Title:
	 	 	 	 
	 	 	 	 	 

15

 

ACKNOWLEDGMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of that certain Master Financing Agreement
of even date herewith among ZAP, a California corporation, Surge Capital II, LLC, a Delaware
limited liability company, as Administrative Agent and the Lenders from time to time party thereto
(as same, as it may be amended, restated, supplemented or otherwise modified and in effect from
time to time, being herein referred to as the “Financing Agreement”). Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement. The undersigned agrees for the benefit of the Administrative Agent and the
Lenders that it will be bound by the terms of the Financing Agreement and will comply with the
terms of Articles 5 and 6 thereof insofar as such terms are applicable to the undersigned.

	 	 	 	 	 
	 	 	ZAP Rental Outlet, a California corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 	 	 	 	 
	 

	 	Name:	 	 
	 	 	 	 	 
	 

	 	Title:	 	 
	 	 	 	 	 

16

 

Execution Copy

SUBSIDIARY GUARANTY

September 12, 2005

     FOR VALUABLE CONSIDERATION, and to induce the Lenders, as defined in that certain Master
Financing Agreement, dated as of even date herewith, among ZAP, a California corporation (the
“Borrower”), the Lenders from time to time parties thereto and Surge Capital II, LLC, a
Delaware limited liability company, as Administrative Agent (the “Administrative Agent”)
(as amended, restated, supplemented or otherwise modified and in effect from time to time, the
“Financing Agreement”), to make loans or extend other accommodations to or for the account
of the Borrower, each Person listed on the signature pages hereof under the heading “Subsidiary
Guarantors” (each, a “Guarantor” and, collectively, the “Guarantors” and, together
with the Borrower, each a “Credit Party” and, collectively, the “Credit Parties”)
gives this Subsidiary Guaranty (this “Guaranty”) and absolutely, irrevocably and
unconditionally guarantees to the Administrative Agent and the Lenders the full and prompt payment,
when due, whether at the scheduled date or maturity or upon any acceleration or otherwise, of all
obligations of the Borrower to the Lenders relating to or arising out of the Financing Agreement,
including all Loans and Notes made under the Financing Agreement, the aggregate unpaid principal of
and interest on, and all other amounts owing in respect of, such Loans, and any further amendments,
extensions, renewals, replacements, increases and refinancings of any Loans or Notes (all such
obligations, including every promissory note and any other agreement given by the Borrower
evidencing an obligation to the Lenders thereunder, collectively referred to as the
“Obligations”). Capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Financing Agreement.

     The liability of each Guarantor under this Guaranty shall include accrued interest and all
attorneys’ fees, collection costs and enforcement expenses incurred by the Administrative Agent and
the Lenders in collecting on and enforcing their rights under the Obligations, and all such costs
and expenses incurred by the Administrative Agent and the Lenders in connection with the
protection, defense, or enforcement of this Guaranty in any litigation, bankruptcy or other
insolvency proceedings. The Administrative Agent and the Lenders may apply any sums received by or
available to the Lenders on account of the Obligations from Borrower or any other Person, or from
the Borrower’s or other such Persons’ properties or any collateral security or other source of
payment, and such application of proceeds or receipts shall not reduce or impair the liability of
the Guarantors under this Guaranty.

     The liability of the Guarantors under this Guaranty shall be joint and several and shall not
be limited notwithstanding that the amount of the Obligations may increase from time to time for
any reason, and the Obligations may be created and continued in any amount without reducing or
impairing the liability of the Guarantors under this Guaranty. Any payment made by any Guarantor
under this Guaranty shall be effective to reduce or discharge such Guarantor’s liability only if
accompanied by a written transmittal document, received by the Administrative Agent and advising it
that such payment is made under this Guaranty for such purpose.

 

 

     Each Guarantor, and by its acceptance of this Guaranty, the Administrative Agent and each
Lender, hereby confirms that it is the intention of all such Persons that this Guaranty and the
Obligations of each Guarantor hereunder will not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent
applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the
foregoing intention, the Administrative Agent and the Lenders and the Guarantors hereby irrevocably
agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to
the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not
constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law”
means any proceeding of the type referred to in Section 7.1(f) or 7.1(g) of the Financing Agreement
or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.
Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be
required to be made to the Administrative Agent or any Lender under this Guaranty, such Guarantor
will contribute, subject to the immediately proceeding sentences of this paragraph and to the
maximum extent permitted by law, such amounts to each other Guarantor so as to maximize the
aggregate amount paid to the Administrative Agent and the Lenders under or in respect of the Loan
Documents.

     Each Guarantor hereby acknowledges and agrees that is shall receive substantial direct and
indirect benefits from the financing arrangements contemplated by, and Loans made pursuant to, the
Financing Agreement and that all waivers made by such Guarantor under this Guaranty have been made
knowingly and in contemplation of such direct and indirect benefits.

     The Guarantors further acknowledge and agree (jointly and severally) with the Administrative
Agent and the Lenders that:

     1. No act or event need occur to establish the liability of the Guarantors under this
Guaranty, and no act or event, except full payment and discharge of all Obligations, shall
exonerate and discharge the liability of the Guarantors under this Guaranty.

     2. If any Guarantor becomes insolvent (however defined) then the Administrative Agent may
declare immediately due and payable the obligations of the Guarantors under this Guaranty, and the
Guarantors shall immediately pay to the Administrative Agent for the benefit of the Lenders the
full amount of all Obligations, whether due and payable or unmatured. If any Guarantor voluntarily
commences or there is commenced involuntarily against such Guarantor a case or proceeding under the
United States Bankruptcy Code, or pursuant to any other law governing the liquidation,
reorganization, dissolution or distribution of the assets of insolvent estates, including, but not
limited to assignments for the benefit of creditors and receiverships, the obligations of the
Guarantors under this Guaranty shall immediately be due and payable without the necessity of demand
or notice.

     3. The Administrative Agent and Lenders may in their discretion enter into transactions
resulting in the creation of additional Obligations or continuance of Obligations, without notice
to or the consent or approval of the Guarantors, regardless of whether or not any existing
relationship between the Borrower and the Guarantors (or any of them) have been revoked. Each
Guarantor hereby unconditionally and irrevocably waives any right to revoke this

2

 

Guaranty and acknowledges that this is a continuing guaranty and applies to all Obligations
now or hereafter existing.

     4. The liability of the Guarantors hereunder shall not be reduced or impaired by any of the
following acts or events (which the Administrative Agent and the Lenders are expressly authorized
to do, omit or suffer from time to time, both before and after revocation of this Guaranty, without
notice to or the consent or approval of the Guarantor): (i) any acceptance of collateral security,
guarantors, accommodation parties or sureties for any or all of the Obligations; (ii) any one or
more extensions or renewals of Obligations (whether or not for a period longer than the original
period) or any modification of the interest rate, maturity or other contractual terms applicable to
all or part of the Obligations; (iii) any waiver or indulgence granted to the Borrower, any
Guarantor or any other Person, any delay or lack of diligence in the enforcement of the
Obligations, or any failure to institute proceedings, file a claim, give any required notices or
otherwise protect any of the Obligations; (iv) any full or partial release of, settlement with, or
agreement not to sue Borrower, any Guarantor, or any other guarantor or other Person liable with
respect to, or whose assets shall secure or collateralize, any of the Obligations; (v) any
discharge of any evidence of Obligations or the acceptance of any instrument renewing or
refinancing the Obligations; (vi) any failure to obtain collateral security (including rights of
setoff) for the Obligations, or to assure its proper or sufficient creation, perfection, or
priority, or to protect, insure, or enforce any collateral security; or any modification,
substitution, discharge, impairment, or loss of such collateral security; (vii) any foreclosure or
enforcement of any collateral security by the Administrative Agent and the Lenders or any other
creditor of the Borrower with a security interest in the collateral security; (viii) any assignment
or transfer, in accordance with the Loan Documents, of any Obligations or documentation evidencing
the Obligations; (ix) any failure of the Administrative Agent or any Lender to disclose to any
Guarantor any information relating to the business, condition (financing or otherwise), operations,
performance, properties or prospects of any other Credit Party now or hereafter known to the
Administrative Agent or a Lender; and (x) any order of application of any payments or credits upon
the Obligations from the Borrower, the Guarantor, or any other Person; (xi) any election by the
Administrative Agent or the Lenders under §1111(b)(2) of the United States Bankruptcy Code; and
(xi) any other action, omission, event or circumstance (including any statute of limitations or
other circumstance that might constitute a defense available to, or a discharge of, a guarantor or
surety), other than the indefeasible payment of the Obligations in full in cash.

     5. Each Guarantor waives any and all defenses, claims and discharges of Borrower, or any other
obligor, pertaining to the Obligations, except the defense of discharge by payment in full.
Without limiting the generality of the preceding sentence, such Guarantor will not assert, plead or
enforce against the Administrative Agent or the Lenders any defense of waiver, release, discharge
in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute,
misrepresentation or fraud, incapacity, minority, usury, illegality or unenforceability which may
be available to Borrower or any other party liable for payment of any of the Obligations, or any
setoff available against the Lenders to Borrower or any such other Person, whether or not on
account of a related transaction. Each Guarantor shall be liable for any deficiency remaining after
foreclosure (or acceptance of deed in lieu of foreclosure) of any mortgage, deed of trust or
security interest securing the Obligations, whether or not the liability

3

 

of the Borrower or any other obligor for such deficiency is discharged pursuant to statute or
judicial decision.

     6. In furtherance of this Guaranty and not in limitation of any other right that the
Administrative Agent and the Lenders have at law or in equity against each Guarantor by virtue
hereof, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the
Lenders as designated thereby in cash the amount of any Obligations when and as the same shall
become due, whether at maturity, by acceleration, after notice of prepayment or otherwise. Each
Guarantor permanently waives and disclaims any right of subrogation, contribution, reimbursement,
or indemnity from or against the Borrower that such Guarantor may now possess or hereafter acquire,
whether by operation of law or contract, as a result of any payment or obligation under this
Guaranty. In addition, any obligations or liabilities of the Borrower, or claims against the
Borrower, now or hereafter held by any Guarantor is hereby subordinated in right of payment to the
prior payment in full of the Obligations, and each Guarantor hereby agrees that, unless the
Administrative Agent consents in writing, such Guarantor shall not demand, accept or take any
action to collect from the Borrower any payment on account of any debt, obligation, liability or
claim owing by the Borrower to such Guarantor. If any amount shall erroneously be paid to the
Guarantor on account of (a) such subrogation, contribution, reimbursement, indemnity or similar
right or (b) any such indebtedness of the Borrower, such amount shall be held in trust for the
benefit of the Lenders and the Administrative Agent and shall forthwith be paid to the Lenders and
the Administrative Agent to be credited against the payment of the Obligations, whether matured or
unmatured, in accordance with the terms thereof. After the occurrence and during the continuance of
any Event of Default (including the commencement and continuance of any bankruptcy or insolvency
(or similar) proceeding relating to any Credit Party), the Administrative Agent is authorized and
empowered (but without any obligation to do so), in its discretion, (i) in the name of each
Guarantor, to collect and enforce and to submit claims in respect of, any of the Obligations,
liabilities and claims subordinated hereunder and to apply any amounts received thereon to the
Obligations (including any post-petition interest), and (ii) to require each Guarantor (A) to
collect and enforce, and submit claims in respect of, such subordinated obligations, liabilities
and claims to the Administrative Agent for the benefit of the Lenders for application to the
Obligations (including post-petition interest).

     7. Each Guarantor assumes all responsibility for being and keeping itself informed of the
Borrower’s and each other Credit Party’s financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and
extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that the
Administrative Agent and the Lenders will not have any duty to advise such Guarantor of information
known to it regarding such circumstances or risks.

     8. The Administrative Agent and the Lenders may in their absolute discretion demand that such
Guarantor discharge its obligations under this Guaranty at any time, whether at the time of the
scheduled or accelerated maturity of the Obligations or at any earlier or later time. Neither the
Administrative Agent nor the Lenders shall be required to first resort for payment of the
Obligations to the Borrower or to any other Person or their properties, or to first enforce,
realize upon, or exhaust any collateral security given to secure the Obligations before enforcing
this Guaranty. Each Guarantor waives presentment, demand for payment or performance, notice

4

 

of dishonor or nonpayment, and protest of any instrument evidencing part or all of the
Obligations and further waives notice of acceptance of this Guaranty.

     9. Each Guarantor agrees that its guarantee hereunder constitutes a guarantee of payment
when due and not of collection, and waives any right to require that any resort be had by
the Administrative Agent and the Lenders to (i) any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of the Lenders in favor
of the Borrower or any other Person and (ii) any other collateral or guaranty pledged or issued by
any other Person in respect of the Obligations.

     10. If any payment applied by the Administrative Agent or the Lenders to the Obligations is
later set aside, recovered, rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of the Borrower or any other obligor), the
Obligations to which such payment was applied shall for the purposes of this Guaranty be deemed to
have continued in existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such Obligations as fully as if such application had never been made.

     11. No failure or delay of the Administrative Agent or the Lenders in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other right or power. The
liability of the Guarantors under this Guaranty is in addition to and cumulative with all other
liabilities of the Guarantors to the Administrative Agent and the Lenders as a guarantor or
otherwise, without limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary. No waiver of any provision of
this Guaranty or consent to any departure by any Guarantor therefrom shall in any event be
effective except pursuant to a written agreement entered into among such Guarantor with respect to
which such waiver, amendment or modification relates and the Administrative Agent and the Lenders,
and then such waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice or demand on such Guarantor in any case shall entitle such
Guarantor to any other or further notice or demand in similar or other circumstances.

     12. This Guaranty shall be enforceable regardless of the failure of other Persons to sign
other guaranties of the Obligations. The execution and delivery of any instrument adding an
additional guarantor as a party to this Guaranty shall not require the consent of the Guarantors or
any other guarantor hereunder. The rights and obligations of the Guarantors hereunder shall remain
in full force and effect notwithstanding the addition of any new guarantor as a party to this
Guaranty. This Guaranty shall be effective upon delivery to the Administrative Agent, on behalf of
the Lenders, without further act, condition or acceptance by the Administrative Agent or the
Lenders, shall be binding upon the Guarantor and the heirs, representatives and permitted assigns
of the Guarantors for the benefit of the Administrative Agent, the Lenders and their participants,
successors and assigns. Any invalidity or unenforceability of any provision or application shall
not affect other lawful provisions and applications of this Guaranty, which is severable. This
Guaranty may not be waived, modified, amended, terminated, released or otherwise changed except by
a writing signed by the Guarantors, the Administrative Agent and the Lenders.

5

 

     13. All covenants, agreements, representations and warranties made by the Guarantors herein
and in the certificates and other instruments prepared or delivered in connection with or pursuant
to this Guaranty shall be considered to have been relied upon by the Administrative Agent and the
Lenders and shall survive the incurrence of all Obligations and shall continue in full force and
effect as long as the principal of or any accrued interest on any Obligations or any other fee or
amount payable under this Guaranty is outstanding and unpaid.

     14. All communications and notices hereunder shall be in writing and given as provided in the
Financing Agreement. All communications and notices hereunder to the Guarantors will be given to
them at the address set forth opposite the respective names of the Guarantors on the signature
pages hereof.

     15. EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ANY SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
GUARANTY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY, AND ACKNOWLEDGES THAT SUCH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER HAVE BEEN
INDUCED TO ENTER INTO AND ACCEPT THIS GUARANTY AND THE FINANCING AGREEMENT, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.

     16. If an Event of Default (as defined in the Financing Agreement) shall have occurred and be
continuing, the Administrative Agent and each Lender are hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other obligations
at any time owing by such Lender to or for the credit or the account of any Guarantor against any
or all the obligations of such Guarantor now or hereafter existing under this Guaranty,
irrespective of whether or not the Administrative Agent or any Lender, including such Lender, shall
have made any demand under this Guaranty and although such obligations may be unmatured. The
rights of the Lenders under this section are in addition to other rights and remedies (including
other rights of setoff) which the Lenders may have.

     17. THIS GUARANTY AND THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH APPLICABLE FEDERAL LAW AND THE SUBSTANTIVE AND PROCEDURAL INTERNAL
LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO THE LAWS OF CONFLICT OF ANY JURISDICTION) AS TO
ALL MATTERS INCLUDING WITHOUT LIMITATION, MATTERS OF VALIDITY, INTERPRETATION, CONSTRUCTION,
ENFORCEABILITY, PERFORMANCE, EFFECT AND REMEDIES.

     18. IN THE EVENT THAT ANY CLAIM, DISPUTE OR CONTROVERSY ARISING BETWEEN THE PARTIES HERETO IS
NOT SUBMITTED TO BINDING ARBITRATION, THIS GUARANTY MAY, AT THE OPTION OF THE LENDERS AND

6

 

THE ADMINISTRATIVE AGENT, BE ENFORCED IN ANY FEDERAL COURT OR ILLINOIS STATE COURT SITTING IN
CHICAGO, ILLINOIS; AND EACH GUARANTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT A GUARANTOR
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS GUARANTY, THE ADMINISTRATIVE AGENT OR
ANY LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS
AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO
HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

[ Remainder of Page Intentionally Left Blank; Signature Page Follows ]

7

 

     IN WITNESS WHEREOF, this Guaranty has been duly executed on the above date by the
Guarantors.

	 	 	 	 	 
	 	SUBSIDIARY GUARANTORS:

VOLTAGE VEHICLES

 	 
	 	By:  	/s/ Steven Schneider
 	 
	 	 	Name:  	Steven Schneider 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	R. A. P. GROUP, INC.

 	 
	 	By:  	/s/ Dennis Vickery
 	 
	 	 	Name:  	Dennis Vickery 	 
	 	 	Title:  	President 	 
	 

	 	 	 	 	 
	 	ZAP RENTAL OUTLET

 	 
	 	By:  	/s/ Steven Schneider
 	 
	 	 	Name:  	Steven Schneider 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	ZAP MANUFACTURING, INC.

 	 
	 	By:  	/s/ Steven Schneider
 	 
	 	 	Name:  	Steven Schneider 	 
	 	 	Title:  	Vice President 	 
	 

 

 

Execution Copy

PLEDGE AGREEMENT

     THIS PLEDGE AGREEMENT (this “Agreement”), dated as of September 12, 2005, is by and
between ZAP, a California corporation (“Pledgor”), and Surge Capital II, LLC, a Delaware
limited liability company, acting in its capacity as administrative agent (the “Pledgee”)
for the benefit of the “Lenders” (as such term is defined in the Master Financing Agreement
referred to herein below).

W I T N E S S E T H:

     WHEREAS, Pledgor legally and beneficially owns all of the issued and outstanding capital stock
of each of the entities described on Exhibit A hereto; and

     WHEREAS, Pledgor, as borrower, has entered into that certain Financing Agreement of even date
herewith (as amended, restated, supplemented or otherwise modified and in effect from time to time,
being herein referred to as the “Financing Agreement”) by and among Pledgor, Pledgee and
the Lenders (as such term is defined therein, the “Lenders”) from time to time party
thereto, providing for the Pledgee and the Lenders to make available to Pledgor certain loans and
other financial accommodations (collectively, the “Loans”) on the terms and conditions set
forth therein (the Loans, together with all other “Obligations” as defined in the Financing
Agreement, are collectively referred to herein as the “Obligations”); and

     WHEREAS, to induce the Pledgee and the Lenders to enter into the Financing Agreement and make
the Loans thereunder, in order to secure the payment and performance of the Liabilities (as
hereinafter defined) Pledgor has agreed to pledge to Pledgee, for the benefit of the Pledgee and
the Lenders, all of the shares of each of the Issuers (as hereinafter defined) described on
Exhibit A hereto now or hereafter owned or acquired by Pledgor as security for the
Liabilities (as hereinafter defined);

     NOW, THEREFORE, in consideration of the premises and in order to induce the Pledgee and the
Lenders enter into the Financing Agreement and make the Loans and other financial accommodations to
Pledgor under the Financing Agreement, Pledgor hereby agrees with Pledgee, for benefit of Pledgee
and the Lenders, as follows:

     Section 1. Defined Terms. Unless otherwise defined herein, all capitalized terms used
herein shall have the respective meanings ascribed thereto in the Financing Agreement. Terms
defined in the Uniform Commercial Code, as in effect in the State of Illinois from time to time
(the “UCC”), which are not otherwise defined in this Agreement or in the Financing
Agreement are used in this Agreement as defined in the UCC as in effect on the date hereof.

     Section 2. Pledge. Pledgor hereby pledges, assigns, hypothecates, transfers, delivers
and grants to Pledgee, for the benefit of the Pledgee and the Lenders, a first lien on and first

 

 

security interest in (i) all of the capital stock, limited liability company membership
interests or units or other equity interests of the each of the entities described on Exhibit
A (the “Issuers”) hereto now owned or hereafter acquired by Pledgor (collectively, the
“Pledged Interests”), (ii) all other property hereafter delivered to, or in the possession
or in the custody of, Pledgee in substitution for or in addition to the Pledged Interests, (iii)
any other property of Pledgor, as described in Section 4 below or otherwise, now or hereafter
delivered to, or in the possession or custody of Pledgor, and (iv) all proceeds of the collateral
described in the preceding clauses (i), (ii) and (iii) (the collateral described in clauses (i)
through (iv) of this Section 2 being collectively referred to as the “Pledged Collateral”),
as collateral security for:

     (a) the prompt and complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of all the Obligations; and

     (b) the due and punctual payment and performance by Pledgor of its obligations and
liabilities under, arising out of or in connection with this Agreement;

(all of the foregoing being referred to hereinafter collectively as the “Liabilities”).
All of the Pledged Interests now owned by Pledgor which are presently represented by certificates
are listed on Exhibit A hereto, which certificates, with undated assignments separate from
certificate duly executed in blank by Pledgor, are being delivered to Pledgee, for the benefit of
Pledgee and the Lenders, simultaneously herewith. Pledgee, on behalf of the Lenders, shall
maintain possession and custody of the certificates representing the Pledged Interests, such
assignments, and any additional Pledged Collateral.

     Section 3. Section 3. Representations and Warranties of Pledgor. Pledgor represents
and warrants to Pledgee, and covenants with Pledgee, that:

     (a) Pledgor is the record and beneficial owner of, and has legal title to, the Pledged
Interests listed on Exhibit A, and such interests are and will remain and all other
interests constituting Pledged Collateral will be, free and clear of all pledges, liens,
security interests and other encumbrances and restrictions whatsoever, except the liens and
security interests created by this Agreement;

     (b) Pledgor has full power, authority and legal right to execute the pledge provided
for herein and to pledge the Pledged Interests and any additional Pledged Collateral to
Pledgee, for the benefit of the Pledgee and the Lenders;

     (c) this Agreement has been duly authorized, executed and delivered by Pledgor and
constitutes a legal, valid and binding obligation of Pledgor enforceable in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy,
moratorium, reorganization and other similar laws affecting the enforcement of creditors’
rights generally;

     (d) there are no outstanding options, warrants or other agreements with respect to the
Pledged Interests;

     (e) the Pledged Interests have been, and all additional Pledged Collateral constituting
membership interests or other similar equity interests will be, duly and

2

 

validly authorized and issued, and are or will be fully paid and non-assessable. The
Pledged Interests listed on Exhibit A constitute all of the membership interests or
other equity interests of the Issuers described therein;

     (f) no consent, approval or authorization of or designation or filing with any
governmental authority on the part of Pledgor is required in connection with the pledge and
security interest granted under this Agreement, or the exercise by Pledgee of the voting and
other rights provided for in this Agreement;

     (g) the execution, delivery and performance of this Agreement by Pledgor will not
violate any provision of any applicable law or regulation or of any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or foreign, or
of the charter or by-laws of Pledgor or any Issuer or of any securities issued by any Issuer
or of any mortgage, indenture, lease, contract, or other agreement, instrument or
undertaking to which Pledgor or any Issuer is a party or which purports to be binding upon
Pledgor or any Issuer or upon any of their respective assets, and will not result in the
creation or imposition of any lien, charge or encumbrance on or security interest in any of
the assets of Pledgor or any Issuer except as contemplated by this Agreement;

     (h) the pledge, assignment and delivery to Pledgee of the Pledged Interests pursuant to
this Agreement creates a valid first lien on and a first perfected security interest in the
Pledged Interests and the proceeds thereof in favor of Pledgee, for the benefit of Pledgee
and the Lenders, subject to no prior pledge, lien, mortgage, hypothecation, security
interest, charge, option or encumbrance or to any agreement purporting to grant to any third
party a security interest in the property or assets of Pledgor which would include the
Pledged Interests. Pledgor covenants and agrees that it will defend Pledgee’s right, title
and security interest in and to the Pledged Interests and the proceeds thereof against the
claims and demands of all persons whomsoever; and

     (i) the Pledged Interests and all additional Pledged Collateral constituting membership
interests are and will remain certificated.

     Section 4. Stock Dividends, Distributions, etc. If, while this Agreement is in
effect, Pledgor shall become entitled to receive or shall receive any stock certificate or other
membership interest certificate evidencing an equity interest in an Issuer (including, without
limitation, any certificate representing a dividend or a distribution in connection with any
reclassification, increase or reduction of capital, or issued in connection with any
reorganization, merger or consolidation), or any options or rights, whether as an addition to, in
substitution for, or in exchange for any of the Pledged Interests, Pledgor agrees to accept the
same as Pledgee’s agent and to hold the same in trust for Pledgee, and to deliver the same
forthwith to Pledgee in the exact form received, with the endorsement of Pledgor when necessary
and/or appropriate undated assignments separate from certificate duly executed in blank, to be held
by Pledgee, for the benefit of Pledgee and the Lenders, subject to the terms hereof, as additional
Pledged Collateral. In case any distribution of capital shall be made on or in respect of the
Pledged Interests or any property shall be distributed upon or with respect to the Pledged
Interests pursuant to the recapitalization or reclassification of the capital of the issuer thereof
or pursuant

3

 

to the reorganization thereof, the property so distributed shall be delivered to Pledgee to be
held by it as additional Pledged Collateral. Except as provided in subsection 5(a)(ii) below, all
sums of money and property so paid or distributed in respect of the Pledged Interests which are
received by Pledgor shall, until paid or delivered to Pledgee, be held by Pledgor in trust as
additional Pledged Collateral.

     Section 5. Administration of Security. The following provisions shall govern the
administration of the Pledged Interests:

     (a) So long as no Event of Default has occurred and is continuing, Pledgor shall be
entitled (subject to the other provisions hereof, including, without limitation, Section 8
below):

     (i) to vote or consent with respect to the Pledged Interests in any manner not
inconsistent with this Agreement, the Financing Agreement and the other “Loan
Documents” referred to therein; and

     (ii) to receive cash dividends or other distributions in the ordinary course
made in respect of the Pledged Interests, to the extent permitted to be paid
pursuant to the Financing Agreement.

Pledgor hereby grants to Pledgee or its nominee, on behalf of Pledgee and Lenders, an
irrevocable proxy to exercise all voting and corporate and/or company rights relating to the
Pledged Interests in any instance, including, without limitation, to approve any merger
involving any Subsidiary as a constituent company, which proxy shall only be exercisable
immediately upon the occurrence and during the continuance of an “Event of Default” as
defined in the Financing Agreement (any such being hereinafter referred to as an “Event of
Default”). After the occurrence and during the continuance of an Event of Default and upon
the request of Pledgee, Pledgor agrees to deliver to Pledgee, on behalf of Pledgee and
Lenders, such further evidence of such irrevocable proxy or such further irrevocable proxies
to vote the Pledged Interests as Pledgee may request.

     (b) Upon the occurrence and during the continuance of an Event of Default, in the event
that Pledgor, as record and beneficial owner of the Pledged Interests, shall have received
or shall have become entitled to receive, any cash dividends or other distributions in the
ordinary course, Pledgor shall deliver to Pledgee, for the benefit of Pledgee and the
Lenders, and Pledgee, for its own benefit and the benefit of the Lenders, shall be entitled
to receive and retain, all such cash or other distributions as additional Pledged
Collateral.

     (c) Subject to any sale or other disposition by Pledgee, on behalf of the Pledgee and
Lenders, of the Pledged Interests or other property pursuant to this Agreement, the Pledged
Interests and any other Pledged Collateral shall be delivered to Pledgor upon full payment
in cash, satisfaction and termination of all of the Liabilities and the termination of the
lien and security interest pursuant to Section 14 hereof.

     Section 6. Rights of Pledgee. Neither Pledgee nor any of the Lenders shall be liable
for failure to collect or realize upon the Obligations or any collateral security or guaranty

4

 

therefor, or any part thereof, or for any delay in so doing, nor shall Pledgee or any of the
Lenders be under any obligation to take any action whatsoever with regard thereto. Any or all of
the Pledged Interests held by Pledgee hereunder may, if an Event of Default has occurred and is
continuing, be registered in the name of Pledgee or its nominee and Pledgee or its nominee may
thereafter without notice exercise all voting and corporate and/or company rights at any meeting
with respect to each Issuer and exercise any and all rights of conversion, exchange, subscription
or any other rights, privileges or options pertaining to any of the Pledged Interests as if it were
the absolute owner thereof, including, without limitation, the right to vote in favor of, and to
exchange at its discretion any and all of the Pledged Interests upon, the merger, consolidation,
reorganization, recapitalization or other readjustment with respect to each Issuer or upon the
exercise by Pledgor or Pledgee of any right, privilege or option pertaining to any of the Pledged
Interests, and in connection therewith, to deposit and deliver any and all of the Pledged Interests
with any committee, depository, transfer agent, registrar or other designated agency upon such
terms and conditions as Pledgee may determine, all without liability except to account for property
actually received by Pledgee, but Pledgee shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any failure to do so or delay in so
doing.

     Section 7. Remedies. Upon the occurrence and during the continuance of an Event of
Default, Pledgee, 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
Pledgor or any other person (all and each of which demands, advertisements and/or notices are
hereby expressly waived), may forthwith collect, receive, appropriate and realize upon the Pledged
Collateral, or any part thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell or otherwise dispose of (including the disposition by merger) and
deliver said Pledged Collateral, or any part thereof, in one or more portions at public or private
sale or sales or transactions, at any exchange, broker’s board or at any of Pledgee’s offices or
elsewhere upon such terms and conditions as Pledgee may deem advisable and at such prices as it may
deem best, for any combination of cash and/or securities or other property or on credit or for
future delivery without assumption of any credit risk, with the right to Pledgee upon any such sale
or sales, public or private, to purchase the whole or any part of said Pledged Collateral so sold,
free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly
waived or released. Pledgee, for its own benefit and the benefit of the Lenders, shall apply the
net proceeds of any such collection, recovery, receipt, appropriation, realization, sale or
disposition, after deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the safekeeping of any and all of the Pledged Collateral or in any way relating to
the rights of Pledgee or any of the Lenders hereunder, including reasonable attorneys’ fees and
legal expenses, to the payment, in whole or in part, of the Liabilities in accordance with the
Financing Agreement. Only after so paying over such net proceeds and after the payment by Pledgee
of any other amount required by any provision of law, including, without limitation, Section 9-608
of the UCC, need Pledgee, on behalf of the Lenders, account for the surplus, if any, to Pledgor.
Pledgor shall remain liable for any deficiency remaining unpaid after such application. Pledgor
agrees that if any notice of a proposed sale or other disposition of Collateral shall be required
by law of Pledgee, such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition. No notification need be given to Pledgor if Pledgor has
signed after the occurrence and during the continuance of an Event of Default a statement
renouncing or modifying any right to notification of sale or other intended disposition.

5

 

In addition to the rights and remedies granted to Pledgee for the benefit of the Lenders in
this Agreement and in any other instrument or agreement securing, evidencing or relating to any of
the Liabilities, Pledgee and the Lenders shall have all the rights and remedies of a secured party
under the UCC and under any other applicable law.

     Section 8. No Disposition, etc. Without the prior written consent of Pledgee, Pledgor
agrees that Pledgor will not sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Pledged Interests or any other Pledged Collateral, nor will Pledgor
create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the Pledged Interests, any other
Pledged Collateral or any interest therein, or any proceeds thereof, except for the lien and
security interest provided for by this Agreement. Without the prior written consent of Pledgee
(which consent shall not be unreasonably withheld so long as no Event of Default has occurred and
is continuing or would result therefrom), Pledgor agrees that it will not vote to enable, and will
not otherwise permit, any Issuer to (a) issue any membership interests or other securities of any
nature in addition to or in exchange or substitution for the Pledged Interests or (b) dissolve,
liquidate, retire any of its capital, reduce its capital or merge or consolidate with any other
Person.

     Section 9. Sale of Pledged Interests.

     (a) Pledgor recognizes that Pledgee, for its own benefit and on behalf of Lenders, may
be unable to effect a public sale or disposition (including, without limitation, any
disposition in connection with a merger of any Issuer) of any or all the Pledged Collateral
by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the
“Act”), and applicable state securities laws, but may be compelled to resort to one
or more private sales or dispositions thereof to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Pledgor
acknowledges and agrees that any such private sale or disposition may result in prices and
other terms (including the terms of any securities or other property received in connection
therewith) less favorable to the seller than if such sale or disposition were a public sale
or disposition and, notwithstanding such circumstances, agrees that any such private sale or
disposition shall be deemed to be reasonable and affected in a commercially reasonable
manner. Pledgee shall be under no obligation to delay a sale or disposition of any of the
Pledged Collateral in order to permit Pledgor or any Issuer to register such securities for
public sale under the Act, or under applicable state securities laws, even if Pledgor or any
Issuer would agree to do so.

     (b) Pledgor further agrees to do or cause to be done all such other acts and things as
may be necessary to make such sale or sales or dispositions of any portion or all of the
Pledged Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales or dispositions, all at Pledgor’s expense. Pledgor further agrees
that a breach of any of the covenants contained in Sections 2, 4, 5(b), 8, 9 or 10 hereof
will cause irreparable injury to Pledgee and the Lenders, that Pledgee and the

6

 

Lenders have no adequate remedy at law in respect of such breach and, as a consequence,
agrees, without limiting the right of Pledgee to seek and obtain specific performance of
other obligations of Pledgor contained in this Agreement, that each and every covenant
referenced above shall be specifically enforceable against Pledgor, and Pledgor hereby
waives and agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred and is continuing.

     (c) Pledgor further agrees to indemnify and hold harmless Pledgee and the Lenders, each
of their respective successors and assigns, officers, directors, employees, agents and
attorneys, and any Person in control of any thereof, from and against any loss, liability,
claim, damage and expense, including, without limitation, reasonable counsel fees
(collectively called the “Indemnified Liabilities”), under federal and state
securities laws or otherwise insofar as such loss, liability, claim, damage or expense:

     (i) arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement, prospectus or
offering memorandum or in any preliminary prospectus or preliminary offering
memorandum or in any amendment or supplement to any of the foregoing or in any other
writing prepared in connection with the offer, sale or resale of all or any portion
of the Pledged Collateral unless such untrue statement of material fact was provided
by Pledgee specifically for inclusion therein; or

     (ii) arises out of or is based upon any omission or alleged omission to state
therein a material fact required to be stated or necessary to make the statements
therein not misleading;

such indemnification to remain operative regardless of any investigation made by or on behalf of
Pledgee or any successor thereof, or any Person in control of any thereof. In connection with a
public sale or other distribution, Pledgor will provide customary indemnification to any
underwriters, their respective successors and assigns, their respective officers and directors and
each Person who controls any such underwriter (within the meaning of the Act). If and to the
extent that the foregoing undertakings in this Section 9(c) may be unenforceable for any reason,
Pledgor agrees to make maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. The obligations of Pledgor
under this Section 9(c) shall survive any termination of this Agreement.

     Section 10. Further Assurances. Pledgor agrees that at any time and from time to
time, upon the written request of Pledgee, Pledgor will execute and deliver all assignments
separate from certificate, financing statements and such further documents and do such further acts
and things as Pledgee may reasonably request consistent with the provisions hereof in order to
effect the purposes of this Agreement.

     Section 11. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

7

 

     Section 12. No Waiver; Cumulative Remedies. Neither Pledgee nor any of the Lenders
shall not by any act, delay, omission or otherwise be deemed to have waived any of its remedies
hereunder, and no waiver by Pledgee or any Lender shall be valid unless in writing and signed by
Pledgee or such Lender and then only to the extent therein set forth. A waiver by Pledgee, or any
Lender, of any right or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Pledgee, or such Lender, would otherwise have on any further occasion. No
course of dealing between Pledgor and Pledgee or any Lender and no failure to exercise, nor any
delay in exercising on the part of Pledgee or any Lender of any right, power or privilege hereunder
or under the Loan Documents shall impair such right or remedy or operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights or remedies provided by law.

     Section 13. Successors. This Agreement and all obligations of Pledgor hereunder shall
be binding upon the successors and assigns of Pledgor, and shall, together with the rights and
remedies of Pledgee and the Lenders hereunder, inure to the benefit of Pledgee and the Lenders and
their successors and assigns, except that Pledgor shall not have any right to assign its
obligations under this Agreement or any interest herein without the prior written consent of
Pledgee.

     Section 14. Termination. This Agreement and the liens and security interests granted
hereunder shall terminate upon the full and complete performance and satisfaction of the
Liabilities (other than contingent indemnification obligations), and promptly upon such full and
complete performance and satisfaction, Pledgee shall surrender and deliver the certificates
evidencing the Pledged Interests and all assignments separate from certificate in respect of the
Pledged Interests to Pledgor.

     Section 15. Possession of Pledged Collateral. Beyond the exercise of reasonable care
to assure the safe custody of the Pledged Collateral in the physical possession of Pledgee pursuant
hereto, neither Pledgee nor any nominee of Pledgee shall have any duty or liability to collect any
sums due in respect thereof or to protect, preserve or exercise any rights pertaining thereto, and
shall be relieved of all responsibility for the Pledged Collateral upon surrendering them to
Pledgor.

     Section 16. Survival of Representations. All representations and warranties of
Pledgor contained in this Agreement shall survive the execution and delivery of this Agreement.

     Section 17. Taxes and Expenses. Pledgor will upon demand pay to Pledgee all
reasonable expenses, including the reasonable fees and expenses of counsel for Pledgee and of any
experts and agents that Pledgee may incur in connection with:

     (a) the administration of this Agreement;

     (b) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral;

8

 

     (c) the exercise or enforcement of any of the rights of Pledgee hereunder; or

     (d) the failure of Pledgor to perform or observe any of the provisions hereof.

     Section 18. Pledgee Appointed Attorney-In-Fact. Pledgor hereby irrevocably appoints
Pledgee as Pledgor’s attorney-in-fact, effective upon the occurrence and during the continuance of
an Event of Default, with full authority in the place and stead of Pledgor and in the name of
Pledgor or otherwise, from time to time in Pledgee’s discretion, to take any action and to execute
any instrument that Pledgee deems reasonably necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive, endorse and collect all instruments made
payable to Pledgor representing any dividend, interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to give full discharge for the same, when and to the
extent permitted by this Agreement.

     Section 19. Notices. All notices, approvals, requests, demands and other
communications hereunder shall be effected in the manner provided for in Section 9.3 of the
Financing Agreement.

     Section 20. GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PRINCIPLES THEREOF.

     Section 21. CONSENT TO JURISDICTION. AT THE OPTION OF THE PLEDGEE, THIS AGREEMENT MAY
BE ENFORCED IN ANY FEDERAL COURT OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS; AND PLEDGOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH
FORUMS IS NOT CONVENIENT. IN THE EVENT ANY CREDIT PARTY COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT, THE PLEDGEE AT ITS OPTION SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT
BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

     Section 22. WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT, OR (b)
ARISING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.

     Section 23. Changes in Writing. No amendment, modification, termination or waiver of
any provision of this Agreement or consent to any departure by Pledgor thereof from, shall in

9

 

any event be effective without the written agreement of Pledgee and Pledgor, and then only to
the extent specifically set forth in such writing.

     Section 24. Headings. Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this Agreement for any
other purpose or be given any substantive effect.

     Section 25. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart. Any such counterpart
which is delivered to Administrative Agent by email, facsimile or other similar electronic
transmission shall be deemed the equivalent of an originally executed counterpart and shall be
fully admissible in any enforcement proceedings regarding this Agreement.

     Section 26. Entire Agreement. This Agreement embodies the entire agreement and
understanding between Pledgor and Pledgee with respect to the subject matter hereof and supersedes
all prior oral and written agreements and understandings between Pledgor and Pledgee relating to
the subject matter hereof.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

10

 

     IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed
and delivered as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	PLEDGOR:
	 
	 	 	 	 	 	 
	 	 	ZAP, a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider	 	 
	 

	 	Name:
	 	Steven Schneider	 	 
	 

	 	Its:
	 	CEO	 	 
	 
	 	 	 	 	 	 
	 	 	PLEDGEE:
	 
	 	 	 	 	 	 
	 	 	SURGE CAPITAL II, LLC, a Delaware limited liability company,
as Administrative Agent
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John Maselli	 	 
	 

	 	Name:
	 	John Maselli	 	 
	 

	 	Its:
	 	Vice President	 	 

 

 

ACKNOWLEDGMENT

     The undersigned hereby (a) acknowledges receipt of a copy of the foregoing Pledge Agreement,
(b) waives any rights or requirement at any time hereafter to receive a copy of such Pledge
Agreement in connection with the registration of any Pledged Interests or any other Pledged
Collateral (as such terms are defined therein) in the name of Pledgee or its nominee or the
exercise of voting or other consensual rights by Pledgee, and (c) agrees promptly to note on its
books and records the transfer of the security interest in the membership interests of the
undersigned as provided in such Pledge Agreement, including the following legend:

	 	 	 	PURSUANT TO THAT CERTAIN PLEDGE AGREEMENT DATED AS OF SEPTEMBER 12, 2005 (AS FROM TIME TO
TIME AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED AND IN EFFECT FROM TIME TO TIME),
ZAP, A CALIFORNIA CORPORATION, HAS UNDER THE CIRCUMSTANCES SPECIFIED IN SUCH PLEDGE
AGREEMENT EMPOWERED SURGE CAPITAL II, LLC, A DELAWARE LIMITED LIABILITY COMPANY, AS
ADMINISTRATIVE AGENT FOR CERTAIN LENDERS, TO VOTE THE INTERESTS REPRESENTED BY THIS
CERTIFICATE PURSUANT TO SUCH PLEDGE AGREEMENT.

Dated: September 12, 2005

	 	 	 	 	 	 	 
	 	 	VOLTAGE VEHICLES
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider	 	 
	 

	 	Name:
	 	Steven Schneider	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	R. A. P. GROUP, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dennis Vickery	 	 
	 

	 	Name:
	 	Dennis Vickery	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	ZAP RENTAL OUTLET
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider	 	 
	 

	 	Name:
	 	Steven Schneider	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	ZAP MANUFACTURING, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven Schneider	 	 
	 

	 	Name:
	 	Steven Schneider	 	 
	 

	 	Title:
	 	Vice President	 	 

 

 

Exhibit A

to

Pledge Agreement

Description of Stock

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Certificate	 	Date	 	Number of	 	Percentage of
	Issued and Outstanding	 	No.	 	Issued	 	Class Interests	 	Issuer
	VOLTAGE VEHICLES

	 	 	1	 	 	9/1/2005
	 	25,000 common stock
	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	R.
A. P. GROUP, INC.

	 	 	1	 	 	9/1/2005
	 	25,000 common stock
	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ZAP RENTAL OUTLET

	 	 	1	 	 	9/1/2005
	 	100,000 common stock
	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ZAP MANUFACTURING, INC.

	 	 	1	 	 	9/1/2005
	 	75,000 common stock
	 	 	100	%

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