Exhibit 10.4
 
SECURITY AGREEMENT
 
This SECURITY AGREEMENT, dated as of November 21, 2011 (this “Agreement”), is
among NXT Nutritionals Holdings, Inc., a Delaware corporation (the “Company”),
all of the Subsidiaries of the Company (such subsidiaries, the “Guarantors” and
together with the Company, the “Debtors”) and NXT Investment Partners, LLC, a
Delaware limited liability company, as the holder (the “Holder”) of the
Company’s 13% Senior Secured Note due November 21, 2015 (the “Note”) and
together, the Holder with its endorsees, transferees and assigns (the “Secured
Party”).
 
W I T N E S S E T H:
 
WHEREAS, pursuant to the Purchase Agreement (as defined in the Note), the
Secured Party has agreed to extend the loan to the Company evidenced by the
Note;
 
WHEREAS, pursuant to a certain Subsidiary Guarantee, dated as of the date hereof
(the “Guarantee”), the Guarantors have jointly and severally agreed to guarantee
and act as surety for payment of such Note; and
 
WHEREAS, in order to induce the Secured Party to extend the loan evidenced by
the Note, each Debtor has agreed to execute and deliver to the Secured Party
this Agreement and to grant the Secured Party, a security interest in all of the
property of such Debtor to secure the prompt payment, performance and discharge
in full of all of the Company’s obligations under the Note and the Guarantors’
obligations under the Guarantee.
 
NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
 
1. Certain Definitions.  As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1.  Terms used but not otherwise
defined in this Agreement that are defined in Article 9 of the UCC (such as
“account,” “chattel paper,” “commercial tort claim,” “deposit account,”
“document,” “equipment,” “fixtures,” “general intangibles,” “goods,”
“instruments,” “inventory,” “investment property,” “letter-of-credit rights,”
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.
 
(a) “Collateral” means the collateral in which the Secured Party is granted a
valid, continuing lien and security interest by this Agreement and which shall
include all of the personal property of the Debtors, whether presently owned or
existing or hereafter acquired or coming into existence, wherever situated, and
all additions and accessions thereto and all substitutions and replacements
thereof, and all proceeds, products and accounts thereof (including, without
limitation, all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection therewith, and
all dividends, interest, cash, notes, securities, equity interest or other
property at any time and from time to time acquired, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the Pledged
Securities (as defined below)), including, without limitation, all of the
following: 
 
 
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(i) All goods, including, without limitation: (A) all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control devices and other
equipment of every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all additions and
accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with any Debtor’s businesses and all improvements thereto; (B) all
raw materials; and (C) all inventory;
 
(ii) All contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock or other
securities,  licenses, distribution and other agreements, computer software
(whether “off-the-shelf”, licensed from any third party or developed by any
Debtor), computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, trademarks,
service marks, trade styles, trade names, patents, patent applications,
copyrights, and income tax refunds, including, without limitation, any rights,
title and interest to the natural sweetener, SUSTA®;
 
(iii) All accounts (including all accounts receivable), together with all
instruments, all documents of title representing any of the foregoing, and all
right, title, security and guaranties with respect to each account, including
any right of stoppage in transit;
 
(iv) All documents, letter-of-credit rights, instruments and chattel paper;
 
(v) All commercial tort claims;
 
(vi) All deposit accounts and all cash (whether or not deposited in such deposit
accounts);
 
(vii) All investment property;
 
(viii) All supporting obligations; and
 
(ix) All files, records, books of account, business papers, and computer
programs; and
 
(x) The products and proceeds of all of the foregoing Collateral set forth in
clauses (i)-(ix) above.
 
 
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Without limiting the generality of the foregoing, the “Collateral” shall include
all investment property and general intangibles respecting ownership and/or
other equity interests in each Guarantor, including, without limitation, the
shares of capital stock and the other equity interests listed on Schedule H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests of
any other direct or indirect subsidiary of any Debtor obtained in the future,
and, in each case, all certificates representing such shares and/or equity
interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash.
 
Notwithstanding the foregoing, none of the following items will be included in
the Collateral: (a) any asset of a foreign Subsidiary or any shares of capital
stock or other equity interests of a foreign Subsidiary (other than 65% of the
common voting capital stock or other equity interests and 100% of any non-voting
capital stock or other equity interests of any first-tier foreign Subsidiary,
each of which shall constitute Collateral); (b) assets if the granting of a
security interest in such asset would (I) be prohibited by applicable law (but
proceeds and receivables thereof, the assignment of which is expressly deemed
effective under the UCC, shall not be deemed excluded from the Collateral
regardless such prohibition), or (II) be prohibited by contract (except to the
extent such prohibition is overridden by UCC Section 9-408) (but proceeds and
receivables thereof shall not be deemed excluded from the Collateral regardless
of such prohibition); (c) any property and assets, the pledge of which would
require approval, license or authorization of any governmental body, unless and
until such consent, approval, license or authorization shall have been obtained
or waived; (d) assets in circumstances where Secured Party reasonably determines
that the cost, burden or consequences (including adverse tax consequences) of
obtaining or perfecting a security interest in such assets is excessive in
relation to the practical benefit afforded thereby; provided, however, that to
the extent permitted by applicable law, this Agreement shall create a valid
security interest in such asset and, to the extent permitted by applicable law,
this Agreement shall create a valid security interest in the proceeds of such
asset.
 
(b) “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation: (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office; (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof; (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto; (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof;
(v) all rights to obtain any reissues, renewals or extensions of the foregoing;
(vi) all licenses for any of the foregoing; and (vii) all causes of action for
infringement of the foregoing. 
 
 
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(c) “Necessary Endorsement” means undated stock powers endorsed in blank or
other proper instruments of assignment duly executed and such other instruments
or documents as the Secured Party (as that term is defined below) may reasonably
request.
 
(d) “Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing to, of any
Debtor to the Secured Party, including, without limitation, all obligations
under this Agreement, the Note, the Guarantee and any other instruments,
agreements or other documents executed and/or delivered in connection herewith
or therewith, in each case, whether now or hereafter existing, voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owned with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly by the Secured Party as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented, converted, extended
or modified from time to time.  Without limiting the generality of the
foregoing, the term “Obligations” shall include, without limitation: (i)
principal of, and interest on the Note and the loan extended pursuant thereto;
(ii) any and all other fees, indemnities, costs, obligations and liabilities of
the Debtors from time to time under or in connection with this Agreement, the
Note, the Guarantee and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith; and (iii) all
amounts (including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Debtor.
 
(e) “Organizational Documents” means with respect to any Debtor, the documents
by which such Debtor was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred stock or other
forms of preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).
 
(f) “Pledged Interests” shall have the meaning ascribed to such term in Section
4(j).
 
(g) “Pledged Securities” shall have the meaning ascribed to such term in Section
4(i). 
 
(h) “UCC” means the Uniform Commercial Code of the State of New York and or any
other applicable law of any state or states which has jurisdiction with respect
to all, or any portion of, the Collateral or this Agreement, from time to
time.  It is the intent of the parties that defined terms in the UCC should be
construed in their broadest sense so that the term “Collateral” will be
construed in its broadest sense.
 
 
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(i) “Business Day” means any day other than a Saturday, Sunday or a day on which
banks are closed in the State of New York.
 
2. Grant of First Priority Security Interest in Collateral.  As an inducement
for the Secured Party to extend the loan as evidenced by the Note and to secure
the complete and timely payment, performance and discharge in full, as the case
may be, of all of the Obligations, each Debtor hereby unconditionally and
irrevocably pledges, grants and hypothecates to the Secured Party a first
priority security interest in and to, a first lien upon and a right of set-off
against all of its respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (a “Security Interest” and, collectively, the
“Security Interests”); provided, however, that the Secured Party shall
subordinate from time to time upon the Company’s request its Security Interests
granted in such Collateral as constitutes raw materials, inventory and accounts
receivable to any security interest(s) granted by the Company and each
applicable Debtor to unaffiliated third parties (each a “Third Party Security
Interest” and collectively, the “Third Party Security Interests”); and provided,
further, that the Company and each applicable Debtor delivers a prior written
notice of each such Third Party Security Interest not less than three (3)
Business Days prior to the grant of such Third Party Security Interest.
 
3. Delivery of Certain Collateral.  Contemporaneously with or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Secured Party: (a) any and all certificates and other instruments
representing or evidencing the Pledged Securities; and (b) any and all
certificates and other instruments or documents representing any of the other
Collateral, in each case, together with all Necessary Endorsements.  The Debtors
are, contemporaneously with the execution hereof, delivering to the Secured
Party, or have previously delivered to Secured Party, a true and correct copy of
each Organizational Document governing any of the Pledged Securities.
 
4. Representations, Warranties, Covenants and Agreements of the Debtors. Except
as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Party concurrently herewith (the “Disclosure
Schedules”), which Disclosure Schedules shall be deemed a part hereof, each
Debtor represents and warrants to, and covenants and agrees with, the Secured
Party as follows:
 
(a) Each Debtor has the requisite corporate, partnership, limited liability
company or other power and authority to enter into this Agreement and otherwise
to perform its obligations hereunder. The execution, delivery and performance by
each Debtor of this Agreement and the filings contemplated therein have been
duly authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor.  This Agreement has been duly
executed by each Debtor.  This Agreement constitutes the legal, valid and
binding obligation of each Debtor, enforceable against each Debtor in accordance
with its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws of general application
relating to or affecting the rights and remedies of creditors and by general
principles of equity.
 
 
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(b) The Debtors have no place of business or offices where their respective
books of account and records are kept (other than temporarily at the offices of
its attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached hereto.  Except as specifically set
forth on Schedule A, each Debtor is the record owner of the real property where
such Collateral is located, and there exist no mortgages or other liens on any
such real property except for Permitted Liens (as defined in the Note).  Except
as disclosed on Schedule A, none of such Collateral is in the possession of any
consignee, bailee, warehouseman Secured Party or processor.
 
(c) Except for Permitted Liens (as defined in the Note) and except as set forth
on Schedule B attached hereto, the Debtors are the sole owner of the Collateral
(except for non-exclusive licenses granted by any Debtor in the ordinary course
of business), free and clear of any liens, security interests, encumbrances,
rights or claims, and are fully authorized to grant the Security
Interests.  Except as set forth on Schedule C attached hereto, there is not on
file in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of
the Secured Party pursuant to this Agreement) covering or affecting any of the
Collateral.  Except as set forth on Schedule C attached hereto and except
pursuant to this Agreement, as long as this Agreement shall be in effect, the
Debtors shall not execute and shall not knowingly permit to be filed in any such
office or agency any other financing statement or other document or instrument
(except to the extent filed or recorded in favor of the Secured Party pursuant
to the terms of this Agreement).
 
(d) No written claim has been received that any Collateral or any Debtor's use
of any Collateral violates the rights of any third party. To Debtors’ knowledge,
has been no adverse decision to any Debtor's claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to any Debtor's
right to keep and maintain such Collateral in full force and effect, and there
is no proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
 
(e) Each Debtor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and its Collateral
at the locations set forth on Schedule A attached hereto and may not relocate
such books of account and records or tangible Collateral unless it delivers to
the Secured Party at least 30 days prior to such relocation: (i) written notice
of such relocation and the new location thereof (which must be within the United
States); and (ii) evidence that appropriate financing statements under the UCC
and other necessary documents have been filed and recorded and other steps have
been taken to perfect the Security Interests to create in favor of the Secured
Party a valid, perfected and continuing perfected first priority lien in the
Collateral, except as otherwise provided in Section 2 hereof.
 
 
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(f) This Agreement creates in favor of the Secured Party a valid, continuing
security interest in the Collateral, subject only to Permitted Liens (as defined
in the Notes) securing the payment and performance of the Obligations and except
as otherwise provided in Section 2 hereof.  Upon making the filings described in
the immediately following paragraph together with the payment of all necessary
filing fees with the applicable office of the Secretary of State, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly perfected.  
Without limiting the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property Security
Agreement, and the execution and delivery of said deposit account control
agreements, no consent of any third parties and no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for: (i) the execution, delivery and performance of
this Agreement; (ii) the creation or perfection of the Security Interests
created hereunder in the Collateral; or (iii) the enforcement of the rights of
the Secured Party hereunder.
 
(g) Each Debtor hereby authorizes the Secured Party to file one or more
financing statements under the UCC, with respect to the Security Interests, with
the proper filing and recording agencies in any jurisdiction deemed proper by
it.
 
(h) The execution, delivery and performance of this Agreement by the Debtors
does not: (i) violate any of the provisions of any Organizational Documents of
any Debtor or any judgment, decree, order or award of any court, governmental
body or arbitrator or any applicable law, rule or regulation applicable to any
Debtor; or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing any Debtor's debt or otherwise) or other
understanding to which any Debtor is a party or by which any property or asset
of any Debtor is bound or affected. If any, all required consents (including,
without limitation, from stockholders or creditors of any Debtor) necessary for
any Debtor to enter into and perform its obligations hereunder have been
obtained.
 
(i) The capital stock and other equity interests listed on Schedule H hereto
(the “Pledged Securities”) represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company.  All of the Pledged
Securities are validly issued, fully paid and nonassessable, and the Company is
the legal and beneficial owner of the Pledged Securities, free and clear of any
lien, security interest or other encumbrance except for the security interests
created by this Agreement and other Permitted Liens (as defined in the Note).
 
(j) The ownership and other equity interests in partnerships and limited
liability companies (if any) included in the Collateral (the “Pledged
Interests”) by their express terms do not provide that they are securities
governed by Article 8 of the UCC and are not held in a securities account or by
any financial intermediary.
 
 
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(k) Except for Permitted Liens (as defined in the Note), each Debtor shall at
all times maintain the liens and Security Interests provided for hereunder as
valid and perfected first priority liens and security interests in the
Collateral in favor of the Secured Party until this Agreement and the Security
Interest hereunder shall be terminated pursuant to Section 14 hereof.  Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Secured Party.  At the request of the Secured Party, each
Debtor will sign and deliver to the Secured Party at any time or from time to
time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Secured Party and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the Secured Party to be,
necessary or desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, each Debtor shall pay all
fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interests hereunder, and each Debtor shall obtain and furnish to the
Secured Party from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the
priority of the Security Interests hereunder.
 
(l) No Debtor will transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (except for (i) Permitted Liens and
(ii) non-exclusive licenses granted by a Debtor in its ordinary course of
business and sales of inventory by a Debtor in its ordinary course of business)
without the prior written consent of the Secured Party.
 
(m) Each Debtor shall keep and preserve its equipment, inventory and other
tangible Collateral in good condition, repair and order and shall not operate or
locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
 
(n) Each Debtor shall maintain with financially sound and reputable insurers,
insurance with respect to the Collateral, including Collateral hereafter
acquired, against loss or damage of the kinds and in the amounts customarily
insured against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent for entities
engaged in similar businesses but in any event sufficient to cover the full
replacement cost thereof.  Each Debtor shall cause each insurance policy issued
in connection herewith to provide, and the insurer issuing such policy to
certify to the Secured Party, that: (a) the Secured Party will be named as
lender loss payee and additional insured under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Secured Party and such
cancellation or change shall not be effective as to the Secured Party for at
least thirty (30) days after receipt by the Secured Party of such notice, unless
the effect of such change is to extend or increase coverage under the policy;
and (c) the Secured Party will have the right (but no obligation) at its
election to remedy any default in the payment of premiums within thirty (30)
days of notice from the insurer of such default.  If no Event of Default (as
defined in the Note) exists and if the proceeds arising out of any claim or
series of related claims do not exceed $100,000, loss payments in each instance
will be applied by the applicable Debtor to the repair and/or replacement of
property with respect to which the loss was incurred to the extent reasonably
feasible, and any loss payments or the balance thereof remaining, to the extent
not so applied, shall be payable to the applicable Debtor; provided, however,
that payments received by any Debtor after an Event of Default occurs and is
continuing or in excess of $100,000 for any occurrence or series of related
occurrences shall be paid to the Secured Party and, if received by such Debtor,
shall be held in trust for the Secured Party and immediately paid over to the
Secured Party unless otherwise directed in writing by the Secured
Party.   Copies of such policies or the related certificates, in each case,
naming the Secured Party as lender loss payee and additional insured shall be
delivered to the Secured Party at least annually and at the time any new policy
of insurance is issued.
 
 
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(o) Each Debtor shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Party promptly, in sufficient detail, of any material adverse
change in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured Party
security interest therein.
 
(p) Each Debtor shall promptly execute and deliver to the Secured Party such
further deeds, mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and take such
further action as the Secured Party may from time to time request and may in its
sole discretion deem necessary to perfect, protect or enforce the Secured
Party’s security interest in the Collateral including, without limitation, if
applicable, the execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property (“Intellectual Property Security
Agreement”) in which the Secured Party has been granted a security interest
hereunder, substantially in a form reasonably acceptable to the Secured Party,
which Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof.
 
(q) Each Debtor shall permit the Secured Party and its representatives to
inspect the Collateral once person calendar year absence continuance of an Event
of Default, during normal business hours and upon reasonable prior notice, and
to make copies of records pertaining to the Collateral as may be reasonably
requested by the Secured Party from time to time.
 
(r) Each Debtor shall take all steps reasonably necessary to diligently pursue
and seek to preserve, enforce and collect any rights, claims, causes of action
and accounts receivable in respect of the Collateral.
 
(s) Each Debtor shall promptly notify the Secured Party in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other legal
process levied against any Collateral and of any other information received by
such Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Party hereunder. 
 
(t) All information heretofore, herein or hereafter supplied to the Secured
Party by or on behalf of any Debtor with respect to the Collateral is accurate
and complete in all material respects as of the date furnished.
 
 
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(u) The Debtors shall at all times preserve and keep in full force and effect
their respective valid existence and good standing and any rights and franchises
material to its business.
 
(v) No Debtor will change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or
corporate structure, or identity, or add any new fictitious name unless it
provides at least 30 days prior written notice to the Secured Party of such
change and, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this Agreement.
 
(w) Except in the ordinary course of business, no Debtor may consign any of its
inventory or sell any of its inventory on bill and hold, sale or return, sale on
approval, or other conditional terms of sale without the consent of the Secured
Party which shall not be unreasonably withheld.
 
(x) Each Debtor was organized and remains organized solely under the laws of the
state set forth next to such Debtor’s name in Schedule D attached hereto, which
Schedule D sets forth each Debtor’s organizational identification number or, if
any Debtor does not have one, states that one does not exist.
 
(y) (i) The actual name of each Debtor is the name set forth in Schedule D
attached hereto; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than that
stated in the preamble hereto or as set forth on Schedule E for the preceding
five years; and (iv) no entity has merged into any Debtor or been acquired by
any Debtor within the past five years except as set forth on Schedule E.
 
(z) At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the Secured Party to perfect the security interest created hereby,
the applicable Debtor shall deliver such Collateral to the Secured Party. 
 
(aa) Each Debtor, in its capacity as issuer, hereby agrees to comply with any
and all orders and instructions of the Secured Party regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC.  Further, each Debtor agrees that it shall not enter into a
similar agreement (or one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.
 
(bb) Each Debtor shall cause all tangible chattel paper constituting Collateral
to be delivered to the Secured Party, or, if such delivery is not possible, then
to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement.  To the extent that
any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).
 
 
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(cc) If there is any investment property or deposit account included as
Collateral that can be perfected by “control” through an account control
agreement, the applicable Debtor shall cause such an account control agreement,
in form and substance in each case satisfactory to the Secured Party, to be
entered into and delivered to the Secured Party.
 
(dd) To the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to
consent to an assignment of the proceeds thereof to the Secured Party.
 
(ee) To the extent that any Collateral is in the possession of any third party,
the applicable Debtor shall join with the Secured Party in notifying such third
party of the Secured Party’s security interest in such Collateral and shall use
its best efforts to obtain an acknowledgement and agreement from such third
party with respect to the Collateral, in form and substance reasonably
satisfactory to the Secured Party.
 
(ff) If any Debtor shall at any time hold or acquire a commercial tort claim,
such Debtor shall promptly notify the Secured Party in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Party in such writing
a security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Secured Party.
 
(gg) Each Debtor shall cause each subsidiary of such Debtor to promptly become a
party hereto (an “Additional Debtor”), by executing and delivering an Additional
Debtor Joinder in substantially the form of Annex A attached hereto and comply
with the provisions hereof applicable to the Debtors.  Concurrent therewith, the
Additional Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect.  The Additional Debtor shall also deliver such
opinions of counsel, authorizing resolutions, good standing certificates,
incumbency certificates, organizational documents, financing statements and
other information and documentation as the Secured Party may reasonably
request.  Upon delivery of the foregoing to the Secured Party, the Additional
Debtor shall be and become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to the same
extent as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as of the
date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.
 
(hh) The Company agrees that, in its capacity of the holder of the Pledged
Securities, it shall not vote or give consents with respect to the Pledged
Securities for any purpose inconsistent with the provisions of this Agreement
and the Note.
 
 
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(ii) Except with respect to certificated securities delivered to the Secured
Party, the applicable Debtor shall deliver to Secured Party an acknowledgement
of pledge (which, where appropriate, shall comply with the requirements of the
relevant UCC with respect to perfection by registration) signed by the issuer of
the applicable Pledged Securities, which acknowledgement shall confirm that: (a)
it has registered the pledge on its books and records; and (b) at any time
directed by Secured Party during the continuation of an Event of Default, such
issuer will transfer the record ownership of such Pledged Securities into the
name of any designee of Secured Party, will take such steps as may be necessary
to effect the transfer, and will comply with all other instructions of Secured
Party regarding such Pledged Securities without the further consent of the
applicable Debtor.
 
(jj) Without limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly give the Secured Party notice whenever it
acquires (whether absolutely or by license) or creates any additional material
Intellectual Property.
 
(kk) Each Debtor will from time to time, at the joint and several expense of the
Debtors, promptly execute and deliver all such further instruments and
documents, and take all such further action as may be necessary, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Secured Party to exercise and enforce its rights and
remedies hereunder and with respect to any Collateral or to otherwise carry out
the purposes of this Agreement.
 
(ll) Schedule F attached hereto lists all of the patents, patent applications,
trademarks, trademark applications, registered copyrights, and domain names
owned by any of the Debtors as of the date hereof.  Schedule F lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material patents and
trademarks of the Debtors have been duly recorded at the United States Patent
and Trademark Office and all material copyrights of the Debtors have been duly
recorded at the United States Copyright Office.  Schedule F lists all e-mail
addresses, business, personal and otherwise, of all “Named Executive Officers”
as such term is used in the Securities Exchange Act of 1934, as amended.
 
(mm) Except as set forth on Schedule G attached hereto, none of the account
debtors or other persons or entities obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or any
similar federal, state or local statute or rule in respect of such Collateral.
 
5. Defaults.  The following events shall be “Events of Default”:
 
(a) The occurrence of an Event of Default (as defined in the Note) under the
Note;
 
 
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(b) Any representation or warranty of any Debtor in this Agreement shall prove
to have been untrue or incorrect in any material respect as of the date when
made or deemed made;
 
(c) The failure by any Debtor to observe or perform any of its obligations
hereunder for ten (10) days after delivery to such Debtor of notice of such
failure by or on behalf of a Secured Party unless such default is capable of
cure but cannot be cured within such time frame and such Debtor is using best
efforts to cure same in a timely fashion; or
 
(d) If any provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by
any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any liability or obligation purported to be created under
this Agreement.
 
6. Duty To Hold In Trust.
 
(a) Upon the occurrence of any Event of Default and at any time thereafter, each
Debtor shall, upon receipt of any revenue, income, dividend, interest or other
sums subject to the Security Interests, whether payable pursuant to the Note or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Party and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Party, in an amount equal to the currently
outstanding Principal Amount of the Note for application to the satisfaction of
the Obligations.
 
(b) If any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to: (i) hold the same in trust on behalf of and
for the benefit of the Secured Party; and (ii) to deliver any and all
certificates or instruments evidencing the same to Secured Party on or before
the close of business on the fifth (5th) Business Day following the receipt
thereof by such Debtor, in the exact form received together with the Necessary
Endorsements, to be held by Secured Party subject to the terms of this Agreement
as Collateral.
 
 
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7. Rights and Remedies Upon Default. 
 
(a) Upon the occurrence of any Event of Default and at any time thereafter, the
Secured Party shall have the right to exercise all of the remedies conferred
hereunder and under the Note, and the Secured Party shall have all the rights
and remedies of a secured party under the UCC.  Without limitation, the Secured
Party shall have the following rights and powers:
 
(i) The Secured Party shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is or may be placed and
remove the same, and each Debtor shall assemble the Collateral and make it
available to the Secured Party at places which the Secured Party shall
reasonably select, whether at such Debtor's premises or elsewhere, and make
available to the Secured Party, without rent, all of such Debtor’s respective
premises and facilities for the purpose of the Secured Party taking possession
of, removing or putting the Collateral in saleable or disposable form.
 
(ii) Upon notice to the Debtors by the Secured Party, all rights of each Debtor
to exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease.  Upon such notice, Secured Party shall have the right to receive any
interest, cash dividends or other payments on the Collateral and, at the option
of the Secured Party, to exercise in such Secured Party’s discretion all voting
rights pertaining thereto.  
 
(iii) The Secured Party shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon such terms and
conditions as the Secured Party may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to any Debtor or right of redemption of a
Debtor, which are hereby expressly waived.  Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Party may, unless
prohibited by applicable law which cannot be waived, purchase all or any part of
the Collateral being sold, free from and discharged of all trusts, claims, right
of redemption and equities of any Debtor, which are hereby waived and released. 
 
(iv) The Secured Party shall have the right (but not the obligation) to notify
any account debtors and any obligors under instruments or accounts to make
payments directly to the Secured Party and to enforce the Debtors’ rights
against such account debtors and obligors.
 
(v) The Secured Party may (but is not obligated to) direct any financial
intermediary or any other person or entity holding any investment property to
transfer the same to the Secured Party or its designee.
 
 
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(vi) The Secured Party may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the name of the Secured
Party or any designee or any purchaser of any Collateral.
 
(b) The Secured Party shall comply with any applicable law in connection with a
disposition of Collateral.  The Secured Party may sell the Collateral without
giving any warranties and may specifically disclaim such warranties.  In
addition, each Debtor waives any and all rights that it may have to a judicial
hearing in advance of the enforcement of any of the Secured Party’s rights and
remedies hereunder, including, without limitation, its right following an Event
of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.
 
(c) For the purpose of enabling the Secured Party to further exercise rights and
remedies under this Section 8 or elsewhere provided by agreement or applicable
law, each Debtor hereby grants to the Secured Party and the Secured Party, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to such Debtor) to use, license or sublicense following an
Event of Default, any Intellectual Property now owned or hereafter acquired by
such Debtor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.
 
8. Applications of Proceeds.  The proceeds of any such sale, lease or other
disposition of the Collateral hereunder or from payments made on account of any
insurance policy insuring any portion of the Collateral shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys’ fees and expenses incurred by the Secured Party in
enforcing the Secured Party’ rights hereunder and in connection with collecting,
storing and disposing of the Collateral, and then to satisfaction of the
Obligations of the Secured Party (based on then-outstanding Principal Amount of
the Note at the time of any such determination), and to the payment of any other
amounts required by applicable law, after which the Secured Party shall pay to
the applicable Debtor any surplus proceeds.
 
9. Securities Law Provision.  Each Debtor recognizes that Secured Party may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“Securities Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof.  Each Debtor agrees that sales so made may
be at prices and on terms less favorable than if the Pledged Securities were
sold to the public, and that Secured Party has no obligation to delay the sale
of any Pledged Securities for the period of time necessary to register the
Pledged Securities for sale to the public under the Securities Laws.  
 
 
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10. Costs and Expenses.  Each Debtor agrees to pay all reasonable and documented
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Party.  The Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Secured Party is
reasonably likely to prejudice, imperil or otherwise affect the Collateral or
the Security Interests therein.  The Debtors will also, upon demand, pay to the
Secured Party the amount of any and all reasonable and documented expenses,
including the reasonable fees and expenses of its counsel and of any experts
which the Secured Party may incur in connection with the creation, perfection,
protection, satisfaction, foreclosure, collection or enforcement of the Security
Interest and the preparation, administration, continuance, amendment or
enforcement of this Agreement and pay to the Secured Party the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and Secured Party, which the Secured Party, for the
benefit of the Secured Party, and the Secured Party may incur in connection
with: (i) the enforcement of this Agreement; (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Collateral; or (iii) the exercise or enforcement of any of the rights of the
Secured Party under the Note.  Until so paid, any fees payable hereunder shall
be added to the Principal Amount of the Note and shall bear interest at the
Default Rate.
 
11. Responsibility for Collateral.  The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason.  The
Secured Party agrees to treat the Collateral with the same standard of care with
which it would accord its own collateral.  Without limiting the generality of
the foregoing: (a) the Secured Party does not have: (i) any duty (either before
or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral; or (ii) any
obligation to clean-up or otherwise prepare the Collateral for sale; and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder.  The Secured Party shall not have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement or
the receipt by the Secured Party of any payment relating to any of the
Collateral, nor shall the Secured Party be obligated in any manner to perform
any of the obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times.
 
 
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12. Security Interests Absolute.  All rights of the Secured Party and all
obligations of the Debtors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Note or any agreement entered into in connection with the foregoing, or any
portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Note or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guarantee, or any other security, for all or any of the
Obligations; (d) any action by the Secured Party to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral; or (e) any other circumstance which might
otherwise constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interests granted hereby.  Until
the Obligations shall have been paid and performed in full, the rights of the
Secured Party shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or
bankruptcy.  Each Debtor expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Collateral or any payment received by the
Secured Party hereunder shall be deemed by final, nonappealable order of a court
of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Party,
then, in any such event, each Debtor’s obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof.  Each Debtor waives all right to require the Secured Party to
proceed against any other person or entity or to apply any Collateral which the
Secured Party may hold at any time, or to marshal assets, or to pursue any other
remedy. Each Debtor waives any defense arising by reason of the application of
the statute of limitations to any obligation secured hereby.
 
13. Term of Agreement.  This Agreement and the Security Interests shall
terminate on the date on which all payments under the Note have been paid in
full and all other Obligations have been paid or discharged; provided, however,
that all indemnities of the Debtors contained in this Agreement shall survive
and remain operative and in full force and effect regardless of the termination
of this Agreement.
 
 
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14. Power of Attorney; Further Assurances.
 
(a) Each Debtor authorizes the Secured Party, and does hereby make, constitute
and appoint the Secured Party and its officers, Secured Party’s, successors or
assigns with full power of substitution, as such Debtor’s true and lawful
attorney-in-fact, with power, in the name of the Secured Party or such Debtor,
to, after the occurrence and during the continuance of an Event of Default: (i)
endorse any note, checks, drafts, money orders or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party;
(ii) to sign and endorse any financing statement pursuant to the UCC or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and sue for monies due in respect of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the
Secured Party, and at the expense of the Debtors, at any time, or from time to
time, to execute and deliver any and all documents and instruments and to do all
acts and things which the Secured Party deems necessary to protect, preserve and
realize upon the Collateral and the Security Interests granted therein in order
to effect the intent of this Agreement and the Note all as fully and effectually
as the Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.  This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.  The designation set forth herein shall be deemed to amend and
supersede any inconsistent provision in the Organizational Documents or other
documents or agreements to which any Debtor is subject or to which any Debtor is
a party.  Without limiting the generality of the foregoing, after the occurrence
and during the continuance of an Event of Default, each Secured Party is
specifically authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and the
United States Copyright Office.
 
(b) Each Debtor hereby irrevocably appoints the Secured Party as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Secured Party’s
discretion, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral as “all
assets” or “all personal property” or words of like import, and ratifies all
such actions taken by the Secured Party.  This power of attorney is coupled with
an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.
 
15. Notices.  All notices, requests, demands and other communications hereunder
shall be subject to the notice provision of the Purchase Agreement (as such term
is defined in the Note).
 
16. Other Security.  To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party’s rights and
remedies hereunder.
 
 
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17. Miscellaneous.
 
(a) No course of dealing between the Debtors and the Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right, power or privilege hereunder or under the Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. 
 
(b) All of the rights and remedies of the Secured Party with respect to the
Collateral, whether established hereby or by the Note or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.
 
(c) This Agreement, together with the exhibits and schedules hereto, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
this Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtors and the Secured
Party, or, in the case of a waiver, by the party against whom enforcement of any
such waived provision is sought.
 
(d) If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
 
(e) No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.
 
(f) This Agreement shall be binding upon and inure to the benefit of the parties
and their successors and permitted assigns.  The Company and the Guarantors may
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Secured Party (other than by merger).  The Secured
Party may assign any or all of its rights under this Agreement to any Person (as
defined in the Purchase Agreement) to whom such Secured Party assigns or
transfers any Obligations, provided such transferee agrees in writing to be
bound, with respect to the transferred Obligations, by the provisions of this
Agreement that apply to the “Secured Party.”
 
(g) Each party shall take such further action and execute and deliver such
further documents as may be necessary in order to carry out the provisions and
purposes of this Agreement. 
 
 
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(h) Except to the extent mandatorily governed by the jurisdiction or situs where
the Collateral is located, all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof.  Except to
the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and the Note (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or Secured Party) shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan.  Except to
the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper.  Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby.
 
(i) This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
 
(j) All Debtors shall jointly and severally be liable for the obligations of
each Debtor to the Secured Party hereunder. 
 
(k) Each Debtor shall indemnify, reimburse and hold harmless the Secured Party
and their respective partners, members, shareholders, officers, directors,
employees and the Secured Party (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from and against any and
all losses, claims, liabilities, damages, penalties, suits, costs and expenses,
of any kind or nature, (including reasonable and documented fees relating to the
cost of investigating and defending any of the foregoing) imposed on, incurred
by or asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent jurisdiction.  This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the Notes, the Purchase Agreement (as such term is
defined in the Note) or any other agreement, instrument or other document
executed or delivered in connection herewith or therewith.
 
 
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(l) Nothing in this Agreement shall be construed to subject the Secured Party to
liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, nor shall
the Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any of its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto.
 
(m) To the extent that the grant of the security interest in the Collateral and
the enforcement of the terms hereof require the consent, approval or action of
any partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents.
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.
 

NXT NUTRITIONALS HOLDINGS, INC.
 
By:    /s/ Francis
McCarthy                                                      
      Name: Francis McCarthy
      Title:   President and CEO
 
 
NXT NUTRITIONALS, INC.
 
 
By:    /s/ Francis McCarthy                                                     
      Name: Francis McCarthy
      Title:   President and CEO
 

 
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[SIGNATURE PAGE OF SECURED PARTY]

Name of Investing Entity: NXT INVESTMENT PARTNERS, LLC
 
Signature of Authorized Signatory of Investing Entity:    /s/ Richard J.
Golden                                                                                                                                
 
Name of Authorized Signatory: Richard J. Golden
 
Title of Authorized Signatory:
Manager of NIP-GGS Management, LLC
  Manager of Investing Entity

                 
 
 
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ANNEX A
to
SECURITY
AGREEMENT
 
FORM OF ADDITIONAL DEBTOR JOINDER
 

 
Security Agreement dated as of November 21, 2011 made by
NXT Nutritionals Holdings, Inc.
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Party identified therein (the “Security Agreement”)

 
           Reference is made to the Security Agreement as defined above;
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Security Agreement.
 
           The undersigned hereby agrees that upon delivery of this Additional
Debtor Joinder to the Secured Party referred to above, the undersigned shall:
(a) be an Additional Debtor under the Security Agreement: (b) have all the
rights and obligations of the Debtors under the Security Agreement as fully and
to the same extent as if the undersigned was an original signatory thereto; and
(c) be deemed to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor
Joinder.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED
SPECIFICALLY GRANTS TO THE SECURED PARTY A SECURITY INTEREST IN THE COLLATERAL
AS SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER
OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
 
           Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
 
           An executed copy of this Joinder shall be delivered to the Secured
Party, and the Secured Party may rely on the matters set forth herein on or
after the date hereof.  This Joinder shall not be modified, amended or
terminated without the prior written consent of the Secured Party.
 
 
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Disclosure Schedules
 
A           -           Collateral
 
B           -           Permitted Liens
 
C           -           Financing Statements, Security Agreements, Licensed and
Transfer Notices
 
D           -           Debtors
 
E           -           Trade Names
 
F           -           Material Licenses; Email Addresses of Named Executive
Officers
 
G           -           Account Debtors Covered by Federal Assignment of Claims
Act
 
H           -           Capital Stock and Other Equity Interests
 

 
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