Exhibit 10.4

 

SECURITY AND PLEDGE AGREEMENT

 

This SECURITY AND PLEDGE AGREEMENT (the “Agreement”) is made and entered into on
February 25, 2020 by and between Franchise Holdings International, Inc.
(“FNHI”), a Nevada corporation, and Worksport, Ltd. (“Worksport”), an Ontario
corporation, (collectively “the “Debtor”) and Leonite Capital LLC, a Delaware
limited liability company, and its permitted endorsees, transferees and assigns
(collectively, the “Secured Party”).

 

RECITALS

 

A. Concurrently herewith, Debtor and the Secured Party have entered into a
Securities Purchase Agreement (the “Securities Purchase Agreement”) and certain
other agreements, pursuant to which the Debtor issued that certain senior
secured convertible promissory note in the principal amount of up to $544,425.09
(the “Note”) to the Secured Party.

 

B. The Debtor now enters into this Agreement with the Secured Party as security
for Debtor’s Obligations (as defined below).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of their respective promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:

 

1. Definitions. Terms used but not otherwise defined in this Agreement that are
defined in Division 9 of the Uniform Commercial Code as adopted in the state of
Nevada (the “UCC”) (such as “account,” “adverse claim,” “chattel paper,”
“deposit account,” “document,” “equipment,” “fixtures,” “general intangibles,”
“goods,” “instruments,” “inventory,” “investment property,” “proceeds,” and
“supporting obligations”) shall have the respective meanings given such terms in
Division 9 of the UCC. Capitalized terms used in this Agreement and not defined
elsewhere herein or in the Securities Purchase Agreement shall have the meanings
set forth below:

 

“Collateral” means all of the collateral identified on Exhibit A hereto, as well
as all of Debtor’s tangible and intangible personal property assets, including,
but not limited to, all of the following: (i) all accounts,
health-care-insurance receivables, cash and currency, chattel paper, deposit
accounts, documents, equipment, fixtures, general intangibles, instruments,
intellectual property, inventory, investment property, Negotiable Collateral,
loans receivable, motor vehicles, Pledged Equity, goods, supporting obligations,
Debtor’s Books, and such other assets of Debtor as may hereafter arise or Debtor
may hereafter acquire or in which the Secured Party may from time-to-time obtain
a security interest, and (ii) the proceeds of any of the foregoing, including,
but not limited to, proceeds of insurance covering the foregoing or any portion
thereof; provided, however, that notwithstanding anything to the contrary
contained in this Agreement, the Collateral does not include any “hazardous
waste” as that term is defined under 42 U.S.C. section 6903(5), as such section
may be from time to time amended, or under any regulations thereunder.

 

“Debtor’s Books” means and includes all of Debtor’s books and records in any
medium or form, including, but not limited to, all records, ledgers and computer
programs, disk or tape files, thumb drives, material stored in the “cloud”,
printouts and other information indicating, summarizing or evidencing the
Collateral.

 

   

 

 

“Equity Interests” means, with respect to any person, all of the shares of
capital stock of (or other ownership or profit interests in) such person, all of
the warrants, options or other rights for the purchase or acquisition from such
person of shares of capital stock of (or other ownership or profit interests in)
such person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such person or
warrants, rights or options for the purchase or acquisition from such person of
such shares (or such other interests), and all of the other ownership or profit
interests in such person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

 

“Event of Default” has the meaning specified in Section 6 of this Agreement.

 

“Negotiable Collateral” means and includes all of Debtor’s presently existing
and hereafter acquired or arising letters of credit, advices of credit,
promissory notes, drafts, instruments, documents, Equity Interests in any
entity, leases of personal property and chattel paper, as well as Debtor’s Books
relating to any of the foregoing.

 

“Obligations” means and includes any and all present or future indebtedness or
obligations of Debtor owing to the Secured Party under the Note and the other
Subscription Documents, including, without limitation, (i) any amendments to any
of the foregoing and (ii) all interest and other payments required thereunder
that are not paid when due, and (iii) all of the Secured Party Expenses which
Debtor is required to pay or reimburse by this Agreement, by law, or otherwise.

 

“Permitted Liens” means (i) statutory liens of landlords and liens of carriers,
warehousemen, bailees, mechanics, materialmen and other like liens imposed by
law, created in the ordinary course of business and securing amounts not yet due
(or which are being contested in good faith, by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such
liens), and with respect to which adequate reserves or other appropriate
provisions are being maintained by Debtor in accordance with generally accepted
accounting principles (“GAAP”) , (ii) deposits made (and the liens thereon) in
the ordinary course of business of Debtor (including, without limitation,
security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts, (iii) liens
for taxes not yet due and payable or which are being contested in good faith and
with respect to which adequate reserves are being maintained by Debtor in
accordance with GAAP, (iv) purchase money liens relating to the acquisition of
equipment, machinery or other goods of Debtor approved in writing by the Secured
Party (which approval shall not be unreasonably withheld, conditioned or
delayed) and (v) liens in favor of the Secured Party under the Subscription
Documents.

 

“Pledged Equity” means, with respect to Debtor, 100% of the issued and
outstanding Equity Interests of any subsidiary that is directly owned, or will
be owned, by Debtor, in each case together with the certificates (or other
agreements or instruments), if any, representing such shares, and all options
and other rights, contractual or otherwise, with respect thereto, including, but
not limited to, the following:

 

(1) all Equity Interests representing a dividend thereon, or representing a
distribution or return of capital upon or in respect thereof, or resulting from
a stock split, revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to the holder thereof, or
otherwise in respect thereof; and

 

(2) in the event of any consolidation or merger involving the issuer thereof and
in which such issuer is not the surviving person, all shares of each class of
the Equity Interests of the successor person formed by or resulting from such
consolidation or merger, to the extent that such successor person is a direct
subsidiary of an Debtor.

 

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The term “Pledged Equity” specifically includes, but is not limited to, all
rights of Debtor embodied in or arising out of the Debtor’s status as a
shareholder or member, consisting of: (a) all economic rights, including without
limitation, all rights to share in the profits and losses and all rights to
receive distributions of the assets; and (b) all governance rights, including
without limitation, all rights to vote, consent to action and otherwise
participate in the management.

 

“Secured Party Expenses” means and includes (i) all costs or expenses required
to be paid by Debtor under this Agreement that are instead paid or advanced by
the Secured Party, including without limitation, all taxes, insurance,
satisfaction of liens, securities interests, encumbrances or other claims at any
time levied or placed on the Collateral, (ii) all reasonable costs and expenses
incurred to correct any default or enforce any provision of this Agreement, or
in gaining possession of, maintaining, disabling, handling, preserving, storing,
shipping, selling, preparing for sale or advertising to sell all or any part of
the Collateral, irrespective of whether a sale is consummated, and (iii) all
reasonable costs and expenses (including reasonable attorney’s fees) incurred by
the Secured Party in enforcing or defending this Agreement, irrespective of
whether suit is brought.

 

2. Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and vice versa, to the
part include the whole, “including” is not limiting, and “or” has the inclusive
meaning represented by the phrase “and/or.” The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section references are to this Agreement, unless otherwise specified.

 

3. Creation of Security Interest. In order to secure Debtor’s timely payment of
the Obligations and timely performance of each and all of its covenants and
obligations under this Agreement and any other document, instrument or agreement
executed by Debtor or delivered by Debtor to the Secured Party in connection
with the Obligations, Debtor hereby unconditionally and irrevocably grant,
pledge and hypothecate to the Secured Party a continuing security interest in
and to, a lien upon, assignment of, and right of set-off against, all presently
existing and hereafter acquired or arising Collateral. Such security interest
shall be a first priority security interest. Such security interest shall attach
to all Collateral without further act on the part of the Secured Party or
Debtor.

 

4. Filings; Further Assurances.

 

(a) General. The Secured Party is authorized to file a UCC-1 Financing Statement
(or its equivalent) with the Secretary of State of the State of Nevada and in
any other jurisdictions where the Secured Party chooses to file, with respect to
the Debtor. Debtor also authorize the filing by the Secured Party of such other
UCC financing statements, continuation financing statements, fixture filings,
filing appropriate notices in federal registries including the United States
Patent and Trademark Office, security agreements, mortgages, deeds of trust,
chattel mortgages, assignments, assignments of rents, motor vehicle lien
acknowledgments and other documents as the Secured Party may reasonably require
in order to perfect, maintain, protect or enforce its security interest in the
Collateral or any portion thereof and in order to fully consummate all of the
transactions contemplated under this Agreement. Subject to the foregoing, if so
requested by the Secured Party at any time hereafter, Debtor shall promptly
execute and deliver to the Secured Party such fixture filings, agreements,
security agreements, mortgages, deeds of trust, chattel mortgages, assignments,
motor vehicle lien acknowledgments and other documents as the Secured Party may
reasonably require from such Debtor in order to perfect, maintain, protect or
enforce its rights under this Agreement. Debtor shall promptly deliver to the
Secured Party all certificates and instruments constituting the Pledged Equity
in suitable form for transfer by delivery and accompanied by duly executed
instruments of transfer or assignment in blank. Debtor hereby irrevocably makes,
constitutes and appoints the Secured Party as such Debtor’s true and lawful
attorney with power, upon Debtor’s failure or refusal to promptly comply with
its obligations in this Section 4(a), to sign the name of Debtor on any of the
above-described documents or on any other similar documents which need to be
executed, recorded or filed in order to perfect, maintain, protect or enforce
the Secured Party’s security interest in the Collateral. Debtor further agrees
to enter into such control agreements with the Secured Party and such third
parties as may be necessary to obtain a first priority security interest in the
Collateral, including deposit accounts and Pledged Equity, and agrees to use
best efforts to obtain the assent of the third parties to said agreements.

 

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(b) Mortgage. Debtor hereby authorizes Secured Party to obtain a mortgage on any
and all of its real estate. Debtor covenants and agrees that it will execute any
documents, provide any information and take such other action as is requested by
Secured Party to effectuate such mortgage.

 

(c) Additional Matters. Without limiting the generality of Section 4(a), Debtor
will at the reasonable written request of the Secured Party, appear in and
defend any action or proceeding which is reasonably expected to have a material
and adverse effect with respect to such Debtor’s title to, or the security
interest of the Secured Party in, the Collateral.

 

5. Representations, Warranties and Agreements. Debtor represents, warrants and
agrees as follows:

 

(a) No Other Encumbrances. Debtor has good and marketable title to its
Collateral, free and clear of any liens, claims, encumbrances and rights of any
kind, except the Liens scheduled pursuant to the Securities Purchase Agreement
or as otherwise approved in writing by the Secured Party, and has the right to
pledge, sell, assign or transfer the same. There exists no adverse claim with
respect to the Pledged Equity.

 

(b) Authorization of Pledged Equity. All Pledged Equity is duly authorized and
validly issued, is fully paid and, to the extent applicable, nonassessable and
is not subject to the preemptive rights of any person.

 

(c) Security Interest/Priority. This Agreement creates a valid security interest
in favor of the Secured party in the Collateral of Debtor and, when properly
perfected by filing shall constitute a valid and perfected first priority
security interest in such Collateral (including all uncertificated Pledged
Equity consisting of partnership or limited liability company interests that do
not constitute securities), to the extent such security interest can be
perfected by filing under the UCC, free and clear of all liens except for liens
permitted by the Securities Purchase Agreement. The taking possession by the
Secured Party of the certificated securities (if any) evidencing the Pledged
Equity and all other Instruments constituting Collateral will perfect and
establish the first priority of the Secured Party’s security interest in all the
Pledged Equity evidenced by such certificated securities and such instruments.
With respect to any Collateral consisting of a deposit account, investment
property, securities entitlement or held in a securities account, upon execution
and delivery by the Debtor, the applicable depository bank or securities
intermediary and the Secured Party of an agreement granting control to the
Secured Party over such Collateral, the Secured Party shall have a valid and
perfected first priority security interest in such Collateral.

 

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(d) Consents; Etc. There are no restrictions in any organizational document
governing any Pledged Equity or any other document related thereto which would
limit or restrict (i) the grant of a security interest pursuant to this
Agreement on such Pledged Equity, (ii) the perfection of such security interest
or (iii) the exercise of remedies in respect of such perfected security interest
in the Pledged Equity as contemplated by this Agreement. 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, the United States
Copyright Office, other applicable federal registries and local registries
regarding assignments of rents and fixture filings, (iii) obtaining control to
perfect the security interests created by this Agreement (to the extent required
under Section 4 hereof), (iv) such actions as may be required by laws affecting
the offering and sale of securities, and (v) consents, authorizations, filings
or other actions which have been obtained or made, 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 stockholder, member or creditor of Debtor), is required for (A)
the grant by Debtor of the security interest in the Collateral granted hereby or
for the execution, delivery or performance of this Agreement by Debtor, (B) the
perfection of such security interest (to the extent such security interest can
be perfected by filing under the UCC, the granting of control (to the extent
required by Section 4(a) hereof) or by filing an appropriate notice with the
United States Patent and Trademark Office, the United States Copyright Office or
other applicable registry) or (C) the exercise by the Secured party of the
rights and remedies provided for in this Agreement.

 

(e) Right to Inspect the Collateral. The Secured Party shall have the right,
during usual business hours of the applicable Debtor and upon reasonable advance
notice, to inspect and examine the Collateral. Debtor agrees that any reasonable
expenses incurred by the Secured Party in connection with this Section 5(e)
during the continuance of an Event of Default shall constitute Secured Party
Expenses.

 

(f) Negative Covenants. Except for sale of inventory in the ordinary course of
business, Debtor shall not (i) sell, lease or otherwise dispose of, relocate or
transfer, any of the Collateral, except dispositions of Collateral that is worn
out, obsolete or no longer necessary in the business of Debtor, (ii) allow any
liens on or grant security interests in the Collateral except the Permitted
Liens or (iii) change any of their names or add any new fictitious name without
the written consent of the Secured Party.

 

(g) Relocation of Principal Place of Business. The principal place of business
of Debtor, and the addresses at which the Collateral is located at 3120
Rutherford Road, Suite 414, Vaughan, Ontario, Canada L4K 0B2, and such other
address as indicated on Schedule 5(e) hereto. Debtor shall not, without at least
thirty (30) days prior written notice to the Secured Party, relocate such
principal place of business or the Collateral, with no relocation being
permitted outside the United States in any event.

 

(h) Further Information. Debtor shall promptly supply the Secured Party with
such information concerning Debtor’s business as the Secured Party may
reasonably request from time-to-time hereafter, and shall within five (5)
business days of obtaining knowledge thereof, notify the Secured Party of any
event which constitutes an Event of Default.

 

(i) Solvency. Debtor is now and shall be at all times hereafter able to pay its
debts (including trade debts) as they mature.

 

(j) Secured Party Expenses. Debtor shall, within fifteen (15) business days of
written demand from the Secured Party accompanied by adequate documentation of
such expenses, reimburse the Secured Party for all sums expended by it which
constitute Secured Party Expenses and, in the event that Debtor does not pay any
Secured Party Expenses payable to a third party within fifteen (15) business
days after notice thereof, then the Secured Party may immediately and without
further notice pay such Secured Party Expenses on Debtor’s behalf. All such
expenses shall become a part of the Obligations and, at the Secured Party’s
option, will (i) be payable on demand or (ii) be added to the balance of the
Note and be payable proportionately with any installment payments that become
due during the remaining term of the Note or, (iii) at Secured Party’s option,
may be treated as a balloon payment which will be due and payable at the
maturity of the Note. This Agreement shall also secure payment of those amounts.

 

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(k) Commercial Tort Claims. Debtor have no pending commercial tort claim (as a
plaintiff) against any individual or entity (a “Commercial Claim”). Debtor shall
promptly deliver to the Secured Party notice of any Commercial Claim that a
Debtor may bring against any individual or entity, together with such
information with respect thereto as the Secured Party may reasonably request.
Within ten (10) days after a written request by the Secured Party, Debtor shall
grant the Secured Party a security interest in any pending Commercial Claim to
the extent such security interest is permitted by applicable law.

 

(l) Reliance by the Secured Party; Representations Cumulative. Each
representation, warranty and agreement contained in this Agreement shall be
conclusively presumed to have been relied on by the Secured Party regardless of
any investigation made or information possessed by the Secured Party. The
representations, warranties and agreements set forth herein shall be cumulative
and in addition to any and all other representations, warranties and agreements
set forth in the Subscription Documents or any other documents created after the
Closing Date and signed by Debtor.

 

6. Events of Default. The occurrence of any Event of Default under the Note,
after the expiration of any applicable grace or cure period, shall constitute an
“Event of Default” by Debtor under this Agreement.

 

7. Rights and Remedies.

 

(a) Rights and Remedies of the Secured Party.

 

(i) Upon the occurrence and during the continuance of an Event of Default,
without notice of election and without demand, the Secured Party may cause any
one or more of the following to occur, all of which are authorized by Debtor:

 

(A) The Secured Party may make such payments and do such acts as it reasonably
considers necessary to protect its security interest in the Collateral. Debtor
agree to promptly assemble and make available the Collateral if the Secured
Party so requires. Debtor authorize the Secured Party to enter the premises
where the Collateral is located, take and maintain possession of the Collateral,
or any part thereof, and pay, purchase, contest or compromise any encumbrance,
claim, right or lien which, in the reasonable opinion of the Secured Party,
appears to be prior or superior to its security interest in violation of this
Agreement, and to pay all reasonable expenses incurred in connection therewith.

 

(B) The Secured Party shall be automatically deemed to be granted a license or
other appropriate right to use, without charge or representation or warranty,
Debtor’s labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks and advertising matter, and any other property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral.

 

(C) The Secured Party may ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell (in the manner provided
for herein) the Collateral.

 

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(D) The Secured Party may sell the Collateral at either a public or private
sale, or both (which in the case of a private sale of Pledged Equity, shall be
to a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own accounts, for investment and
not with a view to the distribution or resale thereof), by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Debtor’s premises) as is commercially reasonable (it not being
necessary that the Collateral be present at any such sale). In the case of a
sale of Pledged Equity, the Secured party shall have no obligation to delay sale
of any such securities for the period of time necessary to permit the issuer of
such securities to register such securities for public sale under the Securities
Act of 1933. Debtor further acknowledges and agrees that any offer to sell any
Pledged Equity which has been (i) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial community
of New York, New York (to the extent that such offer may be advertised without
prior registration under the Securities Act of 1933), or (ii) made privately in
the manner described above shall be deemed to involve a “public sale” under the
UCC, notwithstanding that such sale may not constitute a “public offering” under
the Securities Act of 1933, and the Secured Party may, in such event, bid for
the purchase of such securities

 

(E) The Secured Party shall be entitled to give notice of the disposition of the
Collateral as follows: (1) the Secured Party shall give Debtor a notice in
writing of the time and place of public sale, or, if the sale is a private sale
or some other disposition other than a public sale is to be made of the
Collateral, the time on or after which the private sale or other disposition is
to be made, (2) the notice shall be personally delivered or mailed, postage
prepaid, to Debtor at least ten (10) days before the date fixed for the sale, or
at least ten (10) days before the date on or after which the private sale or
other disposition is to be made, unless the Collateral is perishable or
threatens to decline speedily in value in which case the Secured Party shall use
commercially reasonable efforts to provide such notice to Debtor as far in
advance of such disposition as is practicable.

 

(F) The Secured Party may purchase all or any portion of the Collateral at any
public sale by credit bid or other appropriate payment therefor.

 

(G) To the extent permitted by applicable law, the Secured Party shall have the
following rights and remedies regarding the appointment of a receiver: (1) the
Secured Party may have a receiver appointed as a matter of right, (2) the
receiver may be an employee of the Secured Party and may serve without bond, and
(3) all fees of the receiver and his or her attorney shall be Secured Party
Expenses and become part of the Obligations and shall be payable on demand, with
interest at the Rate specified in the Note from the date of expenditure until
repaid.

 

(H) To the extent permitted by applicable law, the Secured Party, either itself
or through a receiver, may collect the payments, rents, income, and revenues
from the Collateral. The Secured Party may at any time, in its reasonable
discretion, transfer any Collateral into its own name or that of its nominee(s)
and receive the payments, rents, income, and revenues therefrom and hold the
same as security for the Obligations or apply it to payment of the Obligations
in such order of preference as the Secured Party may determine. Insofar as the
Collateral consists of accounts, general intangibles, loans receivable,
insurance policies, instruments, chattel paper, choses in action, or similar
property, the Secured Party may demand, collect, issue receipts for, settle,
compromise, adjust, sue for, foreclose, or otherwise realize on the Collateral
as the Secured Party may determine (in its reasonable discretion), whether or
not the Obligations are then due. For these purposes, the Secured Party may, on
behalf of and in the name of Debtor, (1) receive, open and dispose of mail
addressed to Debtor, (2) change any address to which mail and payments are to be
sent, and (3) endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to the payment, shipment, or storage of any
Collateral. To facilitate collection, the Secured Party may notify account
debtors and Debtor on any Collateral to make payments directly to the Secured
Party.

 

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(ii) The Secured Party may deduct from the proceeds of any sale of the
Collateral all Secured Party Expenses incurred in connection with the
enforcement and exercise of any of the rights and remedies of the Secured Party
provided for herein, irrespective of whether suit is commenced. If such
deduction does not occur (in the Secured Party’s reasonable discretion), upon
demand, Debtor shall pay all of such Secured Party Expenses. Any deficiency
which exists after disposition of the Collateral as provided herein will be paid
immediately by Debtor, and any excess that exists will be returned, without
interest and subject to the rights of third parties, to Debtor by the Secured
Party; provided, however, that if any excess exists at a time when any of the
Obligations remain outstanding, such excess shall instead remain as part of the
Collateral and continue to be subject to the security interest in Section 3(a)
above until such time as all of the Obligations have been fully satisfied or
otherwise terminated.

 

(iii) Voting and payment Rights in Respect of the Pledged Equity.

 

(A) So long as no Event of Default shall exist, Debtor may (1) exercise any and
all voting and other consensual rights pertaining to the Pledged Equity of such
Debtor or any part thereof for any purpose not inconsistent with the terms of
this Agreement or the Securities Purchase Agreement and (2) receive and retain
any and all dividends (other than stock dividends and other dividends
constituting Collateral which are addressed hereinabove), principal or interest
paid in respect of the Pledged Equity to the extent they are allowed under the
Securities Purchase Agreement; and

 

(B) During the continuance of an Event of Default, (1) all rights of an Debtor
to exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to clause (A)(1) above shall cease and all such
rights shall thereupon become vested in the Secured Party which shall then have
the sole right to exercise such voting and other consensual rights, (2) all
rights of an Debtor to receive the dividends, principal and interest payments
which it would otherwise be authorized to receive and retain pursuant to clause
(A)(2) above shall cease and all such rights shall thereupon be vested in the
Secured Party which shall then have the sole right to receive and hold as
Collateral such dividends, principal and interest payments, and (3) all
dividends, principal and interest payments which are received by a Debtor
contrary to the provisions of clause (B)(2) above shall be received in trust for
the benefit of the Secured Party, shall be segregated from other property or
funds of such Debtor, and shall be forthwith paid over to the Secured Party as
Collateral in the exact form received, to be held by the Secured Party as
Collateral and as further collateral security for the Secured Obligations.

 

(b) Rights and Remedies Cumulative. The rights and remedies of the Secured Party
under this Agreement and any other agreements and documents delivered or
executed in connection with the Obligations shall be cumulative. The Secured
Party shall also have all other rights and remedies not inconsistent herewith as
are provided under applicable law, or in equity. No exercise by the Secured
Party of any one right or remedy shall be deemed an election.

 

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8. Additional Waivers. The Secured Party shall not in any way or manner be
liable or responsible for (i) the safekeeping of the Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency or other person whomsoever,
except to the extent that such loss, damage, liability, cost or expense has
resulted from the gross negligence or willful misconduct of the Secured Party or
its affiliates. If the Secured Party at any time has possession of any
Collateral, whether before or after an Event of Default, the Secured Party shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral if the Secured Party takes such action for that purpose as Debtor
shall request or as the Secured Party, in its reasonable discretion, shall deem
appropriate under the circumstances, but failure to honor any request by Debtor
shall not of itself be deemed to be a failure to exercise reasonable care. The
Secured Party shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve, or
maintain any security interest given to secure the Obligations.

 

9. Notices. All notices or demands by any party relating to this Agreement shall
be made in writing as provided in the Note, such notices shall be delivered to
the addresses indicated herein. Each party shall provide written notice to the
other party of any change in address.

 

10. Choice of Law. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined under, governed by, and construed
in accordance with the laws of the state of New York as applied to contracts
made and to be fully performed in such state, without regard to the conflicts of
laws provisions thereof, except to the extent that the validity, perfection or
enforcement of a security interest hereunder in respect of any Collateral is
governed by the laws of the state of New York or some other state, in which case
such laws shall govern.

 

11. Waiver of Jury Trial. THE DEBTOR WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.

 

12. General Provisions.

 

(a) Effectiveness. This Agreement shall be binding and deemed effective against
Debtor when executed by Debtor and the Secured Party.

 

(b) Successors and Assigns. This Agreement shall bind and inure to the benefit
of the successors and permitted endorsees, transferees and assigns of the
Secured Party. Debtor shall not assign this Agreement or any rights or
obligations hereunder, and any such assignment shall be absolutely void.

 

(c) Section Headings. Section headings are for convenience only.

 

(d) Interpretation. No uncertainty or ambiguity herein shall be construed or
resolved against the Secured Party or Debtor, whether under any rule of
construction or otherwise. This Agreement shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of the parties.

 

(e) Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

 

(f) Entire Agreement; Amendments. This Agreement and the agreements and
documents referenced herein contain the entire understanding of the parties with
respect to the subject matter covered herein and supersede all prior agreements,
negotiations and understandings, written or oral, with respect to such subject
matter. No provision of this Agreement shall be waived or amended other than by
an instrument in writing signed by Debtor and the Secured Party.

 

 9 

 

 

(g) Good Faith. The parties intend and agree that their respective rights,
duties, powers, liabilities and obligations shall be performed, carried out,
discharged and exercised reasonably and in good faith.

 

(h) Waiver and Consent. No delay or omission on the part of the Secured Party in
exercising any right shall operate as a waiver of such right or any other right.
A waiver by the Secured Party of a provision of this Agreement or any other
agreement between or among the parties shall not prejudice or constitute a
waiver of the Secured Party’s right otherwise to demand strict compliance with
that provision or any other provision of this Agreement. No prior waiver by the
Secured Party, nor any course of dealing between the Secured Party and Debtor,
shall constitute a waiver of any of the Secured Party’s rights or of any of
Debtor’s obligations as to any future transactions. Whenever the consent of the
Secured Party is required under this Agreement, the granting of such consent by
the Secured Party in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the reasonable discretion of the Secured
Party.

 

(i) Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
agreement.

 

(j) Termination. Upon full satisfaction or other termination of the Obligations
(i) the Secured Party shall release and return to Debtor all of the Collateral
and any and all certificates and other documentation representing or relating to
the Collateral and (ii) the security interests provided for under this Agreement
shall be terminated and of no further force and effect. At Debtor’s expense, the
Secured Party shall take all actions reasonably requested by Debtor in
connection with the foregoing.

 

(k) Consent of Debtor as Issuers of Pledged Equity. Debtor/issuer of Pledged
Equity party to this Agreement hereby acknowledges, consents and agrees to the
grant of the security interests in such Pledged Equity pursuant to this
Agreement, together with all rights accompanying such security interest as
provided by this Agreement and applicable law, notwithstanding any
anti-assignment provisions in any operating agreement, limited partnership
agreement or similar organizational or governance documents of such issuer.

 

[remainder of page intentionally left blank]

 

 10 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized persons on the date first written above.

 

  The Debtor:         Franchise Holdings International, Inc.         By: /s/
Steven Rossi   Name: Steven Rossi   Title: CEO         Worksport, Ltd.        
By: /s/ Steven Rossi   Name: Steven Rossi   Title: CEO         The Secured
Party:         Leonite Capital LLC         By: /s/ Avi Geller   Name: Avi Geller
  Title: Chief Investment Officer

 

 11 

 

 

Schedule 5(e)

 

Locations of Collateral/Addresses of Debtor

 

   

 

 

EXHIBIT A

 

COLLATERAL

 

1. All accounts, chattel paper, contracts, contract rights, accounts receivable,
tax refunds, tax credits, Notes receivable, Pledged Equity, documents, choses in
action and general intangibles, including, but not limited to, proceeds of
inventory and returned goods and proceeds from the sale of goods and services,
and all rights, liens, securities, guaranties, remedies and privileges related
thereto, including the right of stoppage in transit and rights and property of
any kind forming the subject matter of any of the foregoing;

 

2. All certificates of deposit and all time, savings, demand, or other deposit
accounts in the name of Debtor or in which Debtor has any right, title or
interest, including but not limited to all sums now or at any time hereafter on
deposit, and any renewals, extensions or replacements of and all other property
which may from time to time be acquired directly or indirectly using the
proceeds of any of the foregoing;

 

3. All inventory and equipment of every type or description wherever located,
including, but not limited to all raw materials, parts, containers, work in
process, finished goods, goods in transit, wares, merchandise, furniture,
fixtures, hardware, machinery, tools, parts, supplies, automobiles, trucks,
other intangible property of whatever kind and wherever located associated with
the Debtor’s business, tools and goods returned for credit, repossessed,
reclaimed or otherwise reacquired by Debtor;

 

4. All documents of title and other property from time to time received,
receivable or otherwise distributed in respect of, exchange or substitution for
or addition to any of the foregoing including, but not limited to, any documents
of title;

 

5. All know-how, information, labels, permits, patents, copyrights, goodwill,
trademarks, trade names, licenses and approvals held by Debtor, including all
other intangible property of Debtor;

 

6. All assets of any type or description that may at any time be assigned or
delivered to or come into possession of Debtor for any purpose for the account
of Debtor or as to which Debtor may have any right, title, interest or power,
and property in the possession or custody of or in transit to anyone for the
account of Debtor, as well as all proceeds and products thereof and accessions
and annexations thereto; and

 

7. Debtor’s tangible and intangible personal property assets, including, but not
limited to, all of the following: (i) all accounts, health-care-insurance
receivables, cash and currency, chattel paper, deposit accounts, documents,
equipment, fixtures, general intangibles, instruments, intellectual property,
inventory, investment property, Negotiable Collateral, loans receivable, motor
vehicles, Pledged Equity, goods, supporting obligations, Debtor’s Books, and
such other assets of Debtor as may hereafter arise or Debtor may hereafter
acquire or in which the Secured Party may from time-to-time obtain a security
interest, and (ii) the proceeds of any of the foregoing, including, but not
limited to, proceeds of insurance covering the foregoing or any portion thereof;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the Collateral does not include any “hazardous waste” as that
term is defined under 42 U.S.C. section 6903(5), as such section may be from
time to time amended, or under any regulations thereunder.

 

8. All proceeds (including but not limited to insurance proceeds) and products
of and accessions and annexations to any of the foregoing.