Exhibit 10.4

 

PLEDGE AND SECURITY AGREEMENT

 

PLEDGE AND SECURITY AGREEMENT, dated as of January ___, 2014 (this “Agreement”),
made by Fuse Science, Inc., a Nevada corporation (the “Company”), and each of
its existing “Subsidiaries” (as defined in the Securities Purchase Agreement
defined below) as named on the signature pages hereto (collectively, the
“Existing Subsidiaries”) and each other Subsidiary of the Company hereafter
becoming party hereto (together with the Company and the Existing Subsidiaries,
each a “Grantor” and, collectively, the “Grantors”), in favor of Hudson Bay
Master Fund Ltd., in its capacity as collateral agent (in such capacity, the
“Collateral Agent”) for the Buyers (as defined below) party to the Securities
Purchase Agreement, dated as of even date herewith (as amended, restated or
otherwise modified from time to time, the “Securities Purchase Agreement”).

 

WITNESSETH:

 

WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of
Buyers (as such schedule may be amended, restated or otherwise modified from
time to time) attached thereto, each a “Buyer”, and collectively, the “Buyers”)
are parties to the Securities Purchase Agreement, pursuant to which the Company
shall be required to sell, and the Buyers shall purchase or have the right to
purchase, the “Notes” (as defined in the Securities Purchase Agreement);

 

WHEREAS, the Buyers and the Collateral Agent have required that the Existing
Subsidiaries execute a Guaranty and this Agreement;

 

WHEREAS, it is a condition precedent to the Buyers consummating the transactions
contemplated by the Securities Purchase Agreement that the Company shall have
executed and delivered to the Collateral Agent this Agreement providing for the
grant to the Collateral Agent for the benefit of the Buyers of a security
interest in all personal property of the Company to secure all of the Company’s
obligations under the Securities Purchase Agreement and the “Notes” (as defined
therein) issued pursuant thereto (as such Notes may be amended, restated,
replaced or otherwise modified from time to time in accordance with the terms
thereof, collectively, the “Notes”) and the other Transaction Documents (as
defined in the Securities Purchase Agreement);

 

WHEREAS, each of the Existing Subsidiaries will derive substantial benefits from
the execution of the Securities Purchase Agreement;

 

WHEREAS, each of the Existing Subsidiaries, the Company and each other Grantor
(i) are or will be mutually dependent on each other in the conduct of their
respective businesses as an integrated operation, with the credit needed from
time to time by one often being provided through financing obtained by the other
and the ability to obtain such financing being dependent on the successful
operations of each of the Existing Subsidiaries, the Company and each other
Grantor and (ii) will receive a mutual benefit from the proceeds received by the
Company in respect of the issuance of the Notes;

 

 

 

  

WHEREAS, it is a condition precedent to the Buyers consummating the transaction
contemplated by the Securities Purchase Agreement that each of the Existing
Subsidiaries shall have granted to the Collateral Agent for the benefit of the
Buyers a security interest in all personal property of each of the Existing
Subsidiaries to secure the Company’s obligations under the Securities Purchase
Agreement and the Notes, and that each future Subsidiary of the Company becomes
a party to this Agreement; and

 

WHEREAS, each of the Existing Subsidiaries and each other Grantor has determined
that the execution, delivery and performance of this Agreement directly
benefits, and are in the best interest of such applicable Grantor; and

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Buyers to perform under the Securities Purchase
Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the
Buyers, as follows:

 

Section 1.          Definitions.

 

(a)          Reference is hereby made to the Securities Purchase Agreement and
the Notes for a statement of the terms thereof. All terms used in this Agreement
and the recitals hereto which are defined in the Securities Purchase Agreement,
the Notes or in Articles 8 or 9 of the Uniform Commercial Code (the “Code”) as
in effect from time to time in the State of New York, and which are not
otherwise defined herein, shall have the same meanings herein as set forth
therein; provided, that terms used herein which are defined in the Code as in
effect in the State of New York on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as the Collateral Agent may otherwise determine.

 

(b)          The following terms shall have the respective meanings provided for
in the Code: “Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort
Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”,
“Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”,
“Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”,
“Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”,
“Security”, “Record”, “Security Account”, “Software”, and “Supporting
Obligations”.

 

(c)          As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

 

“Collateral” shall have the meaning set forth in Section 2 hereof.

 

“Copyright Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to use or sell any works covered by any copyright
(including, without limitation, all Copyright Licenses set forth in Schedule II
hereto).

 

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“Copyrights” means all domestic and foreign copyrights, whether registered or
not, including, without limitation, all copyright rights throughout the universe
(whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

 

“Event of Default” means (i) any defined event of default under any one or more
of the Transaction Documents, in each instance, after giving effect to any
notice, grace, or cure periods provided for in the applicable Transaction
Document, (ii) the failure by the Company to pay any amounts when due under the
Notes or any other Transaction Document, or (iii) the breach of any
representation, warranty or covenant by any Grantor under this Agreement.

 

“Existing Issuer” has the meaning specified therefor in the definition of the
term “Pledged Shares”.

 

“Guaranty” means the Guaranty, dated as of the date hereof, by the Existing
Subsidiaries in favor of the Buyers and the Collateral Agent.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United
States Code) or under any other bankruptcy or insolvency law, assignments for
the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

 

“Intellectual Property” means the Copyrights, Trademarks and Patents.

 

“Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.

 

“Lien” means any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential
arrangement of any nature, including, without limitation, any conditional sale
or title retention arrangement, any capitalized lease and any assignment,
deposit arrangement or financing lease intended as, or having the effect of,
security.

 

“Obligations” shall have the meaning set forth in Section 3 hereof.

 

“Patent Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule
II hereto).

 

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“Patents” means all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, of
any Grantor, now existing or hereafter acquired (including, without limitation,
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how and
formulae described in Schedule II hereto), all applications, registrations and
recordings thereof (including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office, or in any
similar office or agency of the United States or any other country or any
political subdivision thereof), and all reissues, divisions, continuations,
continuations in part and extensions or renewals thereof.

 

“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any Lien created by
operation of law, such as materialmen’s liens, mechanics’ liens and other
similar liens, arising in the ordinary course of business with respect to a
liability that is not yet due or delinquent or that are being contested in good
faith by appropriate proceedings, (iii) Liens granted hereunder securing the
Obligations and (iv) leases or subleases and licenses and sublicenses granted to
others in the ordinary course of the Grantors’ business, not interfering in any
material respect with the business of a Grantor.

 

“Pledged Debt” means the indebtedness described in Schedule VII hereto and all
indebtedness from time to time owned or acquired by a Grantor, the promissory
notes and other Instruments evidencing any or all of such indebtedness, and all
interest, cash, Instruments, Investment Property, financial assets, securities,
capital stock, other equity interests, stock options and commodity contracts,
notes, debentures, bonds, promissory notes or other evidences of indebtedness
and all other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness.

 

“Pledged Interests” means, collectively, (a) the Pledged Debt, (b) the Pledged
Shares and (c) all security entitlements in any and all of the foregoing.

 

“Pledged Issuer” has the meaning specified therefor in the definition of the
term “Pledged Shares”.

 

“Pledged Shares” means (a) the shares of capital stock or other equity interests
described in Schedule VIII hereto, whether or not evidenced or represented by
any stock certificate, certificated security or other Instrument, issued by the
Persons described in such Schedule VIII (the “Existing Issuers”), (b) the shares
of capital stock or other equity interests at any time and from time to time
acquired by a Grantor of any and all Persons now or hereafter existing (such
Persons, together with the Existing Issuers, being hereinafter referred to
collectively as the “Pledged Issuers” and each individually as a “Pledged
Issuer”), whether or not evidenced or represented by any stock certificate,
certificated security or other Instrument, and (c) the certificates representing
such shares of capital stock, all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
Instruments, Investment Property, financial assets, securities, capital stock,
other equity interests, stock options and commodity contracts, notes,
debentures, bonds, promissory notes or other evidences of indebtedness and all
other property (including, without limitation, any stock dividend and any
distribution in connection with a stock split) from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such capital stock.

 

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“Trademark Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by any Grantor and now or hereafter covered
by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).

 

“Trademarks” means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a’s,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a’s, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.

 

Section 2.          Grant of Security Interest. As collateral security for all
of the Obligations, each Grantor hereby pledges and assigns to the Collateral
Agent for the benefit of the Buyers, and grants to the Collateral Agent for the
benefit of the Buyers a continuing security interest in, all personal property
of such Grantor, wherever located and whether now or hereafter existing and
whether now owned or hereafter acquired, of every kind and description, tangible
or intangible (collectively, the “Collateral”), including, without limitation,
the following:

 

(a)          all Accounts;

 

(b)          all Chattel Paper (whether tangible or electronic);

 

(c)          the Commercial Tort Claims specified on Schedule VI hereto;

 

(d)          all Deposit Accounts (including, without limitation, all cash, and
all other property from time to time deposited therein and the monies and
property in the possession or under the control of the Collateral Agent or a
Buyer or any affiliate, representative, agent or correspondent of the Collateral
Agent or a Buyer);

 

(e)          all Documents;

 

(f)          all Equipment;

 

(g)          all Fixtures;

 

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(h)          all General Intangibles (including, without limitation, all Payment
Intangibles);

 

(i)          all Goods;

 

(j)          all Instruments (including, without limitation, Promissory Notes
and each certificated Security);

 

(k)          all Inventory;

 

(l)          all Investment Property;

 

(m)          all Copyrights, Patents and Trademarks, and all Licenses;

 

(n)          all Letter-of-Credit Rights;

 

(o)          all Supporting Obligations;

 

(p)          all Pledged Interests;

 

(q)          all other tangible and intangible personal property of such Grantor
(whether or not subject to the Code), including, without limitation, all bank
and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of such Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by such Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of such Grantor or any other Person from time to
time acting for such Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and

 

(r)          all Proceeds, including all Cash Proceeds and Noncash Proceeds, and
products of any and all of the foregoing Collateral;

 

in each case, howsoever such Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

 

Section 3.          Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred
(collectively, the “Obligations”):

 

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(a)          the prompt payment by each Grantor, as and when due and payable (by
scheduled maturity, required prepayment, acceleration, demand or otherwise), of
all amounts from time to time owing by it in respect of the Securities Purchase
Agreement, the Notes, the Guaranty and the other Transaction Documents,
including, without limitation, (A) all principal of and interest on the Notes
(including, without limitation, all interest that accrues after the commencement
of any Insolvency Proceeding of any Grantor, whether or not the payment of such
interest is unenforceable or is not allowable due to the existence of such
Insolvency Proceeding), (B) all amounts from time to time owing by such Grantor
under the Guaranty, and (C) all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any of the
Transaction Documents; and

 

(b)          the due performance and observance by each Grantor of all of its
other obligations from time to time existing in respect of any of the
Transaction Documents for so long as the Notes are outstanding.

 

Section 4.          Representations and Warranties.  Each Grantor represents and
warrants as follows:

 

(a)          Schedule I hereto sets forth (i) the exact legal name of such
Grantor, (ii) the organizational identification number of such Grantor or states
that no such organizational identification number exists and (iii) the state or
jurisdiction of organization of such Grantor.

 

(b)          There is no pending or written notice threatening any action, suit,
proceeding or claim affecting such Grantor before any governmental authority or
any arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that may adversely affect the grant by such Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or
remedies hereunder.

 

(c)          All Federal, state and local tax returns and other reports required
by applicable law to be filed by such Grantor have been filed, or extensions
have been obtained, and all taxes, assessments and other governmental charges
imposed upon such Grantor or any property of such Grantor (including, without
limitation, all federal income and social security taxes on employees’ wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with United States generally accepted accounting
principles consistently applied (“GAAP”).

 

(d)          All Equipment, Fixtures, Goods and Inventory of such Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of such Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Schedule III hereto, except that such Grantor will give the
Collateral Agent not less than 30 days’ prior written notice of any change of
the location of any such Collateral, other than to locations set forth on
Schedule III and with respect to which the Collateral Agent has filed financing
statements and otherwise fully perfected its Liens thereon. Such Grantor’s chief
place of business and chief executive office, the place where such Grantor keeps
its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of (i) each Promissory Note, Security and other Instrument owned by
each Grantor and (ii) each Deposit Account, Securities Account and Commodities
Account of each Grantor, together with the name and address of each institution
at which each such Account is maintained, the account number for each such
Account and a description of the purpose of each such Account. Set forth in
Schedule II hereto is a complete and correct list of each trade name used by
each Grantor and the name of, and each trade name used by, each person from
which such Grantor has acquired any substantial part of the Collateral.

 

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(e)          Such Grantor has delivered or made available to the Collateral
Agent complete and correct copies of each License described in Schedule II
hereto, including all schedules and exhibits thereto, which represents all of
the Licenses existing on the date of this Agreement. Each such License sets
forth the entire agreement and understanding of the parties thereto relating to
the subject matter thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby or the
rights of such Grantor or any of its affiliates in respect thereof. Each
material License now existing is, and any material License entered into in the
future will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, suretyship or other similar laws and equitable principles
(regardless of whether enforcement is sought in equity or in law). No default
under any material License by any such party has occurred, nor does any defense,
offset, deduction or counterclaim exist thereunder in favor of any such party.

 

(f)          Such Grantor owns and controls, or otherwise possesses adequate
rights to use, all Trademarks, Patents and Copyrights, which are the only
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity necessary to
conduct its business in substantially the same manner as conducted as of the
date hereof. Schedule II hereto sets forth a true and complete list of all
registered copyrights, issued patents, Trademarks (including, without
limitation, any Internet domain names and the registrar of each such Internet
domain name), and Licenses annually owned or used by such Grantor as of the date
hereof. To the best knowledge of each Grantor, all such Intellectual Property of
such Grantor is subsisting and in full force and effect, has not been adjudged
invalid or unenforceable, is valid and enforceable and has not been abandoned in
whole or in part. Except as set forth in Schedule II, no such Intellectual
Property is the subject of any licensing or franchising agreement. Such Grantor
has no knowledge of any conflict with the rights of others to any Intellectual
Property and, to the best knowledge of such Grantor, such Grantor is not now
infringing or in conflict with any such rights of others in any material
respect, and to the best knowledge of such Grantor, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by such Grantor. Such Grantor has not received
any notice that it is violating or has violated the trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity or other intellectual property rights of
any third party.

 

(g)          Such Grantor is and will be at all times the sole and exclusive
owner of, or otherwise has and will have adequate rights in, the Collateral free
and clear of any Liens, except for Permitted Liens on any Collateral. No
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording or filing office
except (A) such as may have been filed in favor of the Collateral Agent relating
to this Agreement, and (B) such as may have been filed to perfect any Permitted
Liens.

 

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(h)          The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene any law or any contractual restriction
binding on or otherwise affecting such Grantor or any of its properties and will
not result in or require the creation of any Lien, upon or with respect to any
of its properties.

 

(i)          No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body, or any
other Person, is required for (i) the grant by such Grantor, or the perfection,
of the security interest purported to be created hereby in the Collateral, or
(ii) the exercise by the Collateral Agent of any of its rights and remedies
hereunder, except (A) for the filing under the Uniform Commercial Code as in
effect in the applicable jurisdiction of the financing statements, all of which
financing statements have been duly filed and are in full force and effect,
(B) with respect to the perfection of the security interest created hereby in
the Intellectual Property, for the recording of the appropriate Assignment for
Security, substantially in the form of Exhibit A hereto, as applicable, in the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, and (C) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to the Intellectual Property and Licenses.

 

(j)          This Agreement creates in favor of the Collateral Agent a legal,
valid and enforceable security interest in the Collateral as security for the
Obligations. The Collateral Agent’s having possession of all Instruments and
cash constituting Collateral from time to time, the recording of the appropriate
Assignment for Security executed pursuant hereto in the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, and the
filing of the financing statements and the other filings and recordings, as
applicable, described in Schedule V hereto and, with respect to the Intellectual
Property hereafter existing and not covered by an appropriate Assignment for
Security, the recording in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, of appropriate instruments of
assignment, result in the perfection of such security interests. Such security
interests are, or in the case of Collateral in which such Grantor obtains rights
after the date hereof, will be, perfected, first priority security interests,
subject only to Permitted Liens and the recording of such instruments of
assignment. Such recordings and filings and all other actions necessary or
desirable to perfect and protect such security interest have been duly taken,
except for the Collateral Agent’s having possession of Instruments and cash
constituting Collateral after the date hereof and the other filings and
recordations described in Section 4(f) hereof.

 

(k)          As of the date hereof, such Grantor does not hold any Commercial
Tort Claims nor is aware of any such pending claims, except for such claims
described in Schedule VI.

 

(l)          The Existing Subsidiaries are the only Subsidiaries of the Company
as of the date hereof.

 

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Section 5.          Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:

 

(a)          Further Assurances. Each Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may reasonably
request in order to: (i) perfect and protect the security interest purported to
be created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise
effect the purposes of this Agreement, including, without limitation:
(A) marking conspicuously all Chattel Paper and each License and, at the request
of the Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B)  delivering and pledging to the Collateral Agent
hereunder each Promissory Note, Security, Chattel Paper or other Instrument, now
or hereafter owned by such Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent, (C) executing and filing (to the extent, if any, that such
Grantor’s signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or desirable or that the Collateral Agent may request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral in each case as the Collateral Agent may reasonably request,
all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent’s security interest
created hereby and obtaining a written acknowledgment from such Person that such
Person holds possession of the Collateral for the benefit of the Collateral
Agent, which such written acknowledgement shall be in form and substance
satisfactory to the Collateral Agent, (F) if at any time after the date hereof,
such Grantor acquires or holds any Commercial Tort Claim, promptly notifying the
Collateral Agent in a writing signed by such Grantor setting forth a brief
description of such Commercial Tort Claim and granting to the Collateral Agent a
security interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by such Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with the
Securities Purchase Agreement; and (H) taking all actions required by any
earlier versions of the Uniform Commercial Code or by other law, as applicable,
in any relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in any foreign jurisdiction.

 

(b)          Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory at the locations specified therefor in Section 4(g)
hereof or, upon not less than thirty (30) days’ prior written notice to the
Collateral Agent accompanied by a new Schedule III hereto indicating each new
location of the Equipment and Inventory, at such other locations in the United
States.

 

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(c)          Condition of Equipment. Each Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment of
such Grantor within a commercially reasonable time after the occurrence thereof,
make or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may reasonably request to such end. Such
Grantor will promptly furnish to the Collateral Agent a statement describing in
reasonable detail any such loss or damage in excess of $25,000 to any Equipment.

 

(d)          Taxes, Etc. Each Grantor agrees to pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside
for the payment thereof.

 

(e)          Insurance.

 

(i)          Each Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any governmental authority having jurisdiction
with respect thereto or as is carried by such Grantor as of the date hereof and
in any event, in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent. Each such policy for liability insurance shall provide for all
losses to be paid on behalf of the Collateral Agent and such Grantor as their
respective interests may appear, and each policy for property damage insurance
shall provide for all losses to be adjusted with, and paid directly to, the
Collateral Agent. Each such policy shall in addition (A) name the Collateral
Agent as an additional insured party thereunder (without any representation or
warranty by or obligation upon the Collateral Agent) as their interests may
appear, (B) contain an agreement by the insurer that any loss thereunder shall
be payable to the Collateral Agent on its own account notwithstanding any
action, inaction or breach of representation or warranty by such Grantor, (C)
provide that there shall be no recourse against the Collateral Agent for payment
of premiums or other amounts with respect thereto, and (D) provide that at least
30 days’ prior written notice of cancellation, lapse, expiration or other
adverse change shall be given to the Collateral Agent by the insurer. Such
Grantor will, if so requested by the Collateral Agent, deliver to the Collateral
Agent original or duplicate policies of such insurance and, as often as the
Collateral Agent may reasonably request, a report of a reputable insurance
broker with respect to such insurance. Such Grantor will also, at the request of
the Collateral Agent, execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to acknowledge notice of
such assignment.

 

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(ii)         Reimbursement under any liability insurance maintained by a Grantor
pursuant to this Section 5(e) may be paid directly to the Person who shall have
incurred liability covered by such insurance. In the case of any loss involving
damage to Equipment or Inventory, any proceeds of insurance maintained by a
Grantor pursuant to this Section 5(e) shall be paid to the Collateral Agent
(except as to which paragraph (iii) of this Section 5(e) is not applicable),
such Grantor will make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by such Grantor pursuant to this Section 5(e) shall be paid by the
Collateral Agent to such Grantor as reimbursement for the costs of such repairs
or replacements.

 

(iii)        All insurance payments in respect of such Equipment or Inventory
shall be paid to the Collateral Agent and applied as specified in Section 7(b)
hereof.

 

(f)          Provisions Concerning the Accounts and the Licenses.

 

(i)          Each Grantor will (A) give the Collateral Agent at least 30 days’
prior written notice of any change in such Grantor’s name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation as set
forth in Section 4(a) hereto, (C) immediately notify the Collateral Agent upon
obtaining an organizational identification number, if on the date hereof such
Grantor did not have such identification number, and (D) keep adequate records
concerning the Accounts and Chattel Paper and permit representatives of the
Collateral Agent during normal business hours on reasonable notice to such
Grantor, to inspect and make abstracts from such Records and Chattel Paper.

 

(ii)         Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, such Grantor
may (and, at the Collateral Agent’s direction, will) take such action as such
Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection or performance of the Accounts; provided, however, that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to the Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to such Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at the
expense of such Grantor and to the extent permitted by law, to enforce
collection of any such Accounts and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as such Grantor
might have done. After receipt by a Grantor of a notice from the Collateral
Agent that the Collateral Agent has notified, intends to notify, or has enforced
or intends to enforce a Grantor’s rights against the account debtors or obligors
under any Accounts as referred to in the proviso to the immediately preceding
sentence, (A) all amounts and proceeds (including Instruments) received by such
Grantor in respect of the Accounts shall be received in trust for the benefit of
the Collateral Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and applied as specified in Section 7(b) hereof, and (B) such Grantor
will not adjust, settle or compromise the amount or payment of any Account or
release wholly or partly any account debtor or obligor thereof or allow any
credit or discount thereon. In addition, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent may (in its sole and
absolute discretion) direct any or all of the banks and financial institutions
with which such Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Accounts to send immediately to the Collateral
Agent by wire transfer (to such account as the Collateral Agent shall specify,
or in such other manner as the Collateral Agent shall direct) all or a portion
of such securities, cash, investments and other items held by such institution.
Any such securities, cash, investments and other items so received by the
Collateral Agent shall (in the sole and absolute discretion of the Collateral
Agent) be held as additional Collateral for the Obligations or distributed in
accordance with Section 7 hereof.

 

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(iii)        Upon the occurrence and during the continuance of any breach or
default under any material License referred to in Schedule II hereto by any
party thereto other than a Grantor, the Grantor party thereto will, promptly
after obtaining knowledge thereof, give the Collateral Agent written notice of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto and thereafter will take reasonable
steps to protect and preserve its rights and remedies in respect of such breach
or default, or will obtain or acquire an appropriate substitute License.

 

(iv)        Each Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor thereto.

 

(v)         Each Grantor will exercise promptly and diligently each and every
right which it may have under each material License (other than any right of
termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Collateral Agent, cancel, terminate,
amend or otherwise modify in any respect, or waive any provision of, any
material License referred to in Schedule II hereto.

 

(g)          Transfers and Other Liens.

 

(i)          No Grantor will sell, assign (by operation of law or otherwise),
lease, license, exchange or otherwise transfer or dispose of any of the
Collateral, except (A) Inventory in the ordinary course of business and (B)
worn-out or obsolete assets not necessary to the business.

 

(ii)         No Grantor will create, suffer to exist or grant any Lien upon or
with respect to any Collateral other than a Permitted Lien.

 

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(h)          Intellectual Property.

 

(i)          If applicable, each Grantor shall, upon the Collateral Agent’s
written request, duly execute and deliver the applicable Assignment for Security
in the form attached hereto as Exhibit A. Each Grantor (either itself or through
licensees) will, and will cause each licensee thereof to, take all action
necessary to maintain all of the Intellectual Property in full force and effect,
including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to
so maintain the Trademarks in full force and free from any claim of abandonment
for non-use, and such Grantor will not (nor permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Intellectual Property may
become invalidated; provided, however, that so long as no Event of Default has
occurred and is continuing, such Grantor shall not have an obligation to use or
to maintain any Intellectual Property (A) that relates solely to any product or
work that has been, or is in the process of being, discontinued, abandoned or
terminated, (B) that is being replaced with Intellectual Property substantially
similar to the Intellectual Property that may be abandoned or otherwise become
invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such replacement Intellectual Property is
subject to the Lien created by this Agreement or (C) that is substantially the
same as another Intellectual Property that is in full force, so long the failure
to use or maintain such Intellectual Property does not materially adversely
affect the validity of such replacement Intellectual Property and so long as
such other Intellectual Property is subject to the Lien and security interest
created by this Agreement. Each Grantor will cause to be taken all necessary
steps in any proceeding before the United States Patent and Trademark Office and
the United States Copyright Office or any similar office or agency in any other
country or political subdivision thereof to maintain each registration of the
Intellectual Property (other than the Intellectual Property described in the
proviso to the immediately preceding sentence), including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and payment of maintenance
fees, filing fees, taxes or other governmental fees in the ordinary course of
business. If any Intellectual Property (other than Intellectual Property
described in the proviso to the first sentence of subsection (i) of this clause
(h)) is infringed, misappropriated, diluted or otherwise violated in any
material respect by a third party, such Grantor shall (x) upon learning of such
infringement, misappropriation, dilution or other violation, promptly notify the
Collateral Agent and (y) to the extent such Grantor shall deem appropriate under
the circumstances, promptly sue for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as such Grantor shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Collateral Agent from time to time upon its request
statements and schedules further identifying and describing the Intellectual
Property and Licenses and such other reports in connection with the Intellectual
Property and Licenses as the Collateral Agent may reasonably request, all in
reasonable detail and promptly upon request of the Collateral Agent, following
receipt by the Collateral Agent of any such statements, schedules or reports,
such Grantor shall modify this Agreement by amending Schedule II hereto, as the
case may be, to include any Intellectual Property and License, as the case may
be, which becomes part of the Collateral under this Agreement and shall execute
and authenticate such documents and do such acts as shall be necessary or, in
the judgment of the Collateral Agent, desirable to subject such Intellectual
Property and Licenses to the Lien and security interest created by this
Agreement. Notwithstanding anything herein to the contrary, upon the occurrence
and during the continuance of an Event of Default, such Grantor may not abandon
or otherwise permit any Intellectual Property to become invalid without the
prior written consent of the Collateral Agent, and if any Intellectual Property
is infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, such Grantor will take such action as the Collateral
Agent shall deem appropriate under the circumstances to protect such
Intellectual Property.

 

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(ii)         In no event shall a Grantor, either itself or through any agent,
employee, licensee or designee, file an application for the registration of any
Trademark or Copyright or the issuance of any Patent with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Collateral
Agent prior written notice thereof. Upon request of the Collateral Agent, each
Grantor shall execute, authenticate and deliver any and all assignments,
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s security interest
hereunder in such Intellectual Property and the General Intangibles of such
Grantor relating thereto or represented thereby, and such Grantor hereby
appoints the Collateral Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the complete conversion of all of
the Company’s obligations under the Notes to equity securities of the Company
and/or indefeasible payment in full in cash of all obligations under the Notes
(together with any matured indemnification obligations as of the date of such
conversion and/or payment, but excluding any inchoate or unmatured contingent
indemnification obligations).

 

(iii)        Upon the Collateral Agent’s request, each Grantor shall cause each
domain registrar where any of such Grantor’s Internet domain names are
registered, whether as of the date of this Agreement or at any time hereafter,
to execute and deliver to the Collateral Agent a domain name control agreement,
in form and substance reasonably satisfactory to the Collateral Agent, duly
executed by such Grantor and such domain registrar, or enter into other
arrangements in form and substance satisfactory to the Collateral Agent,
pursuant to which such domain registrar shall irrevocably agree, inter alia,
that (i) it will comply at any time with the instructions originated by the
Collateral Agent to such domain registrar directing substitution of the
Collateral Agent or its designee as the registered owner of such Internet domain
names, without further consent of such Grantor, which instructions the
Collateral Agent will not give to such domain registrar in the absence of a
continuing Event of Default.

 

(i)          Deposit, Commodities and Securities Accounts. Upon the Collateral
Agent’s request, each Grantor shall cause each bank and other financial
institution with an account referred to in Schedule IV hereto to execute and
deliver to the Collateral Agent a control agreement, in form and substance
reasonably satisfactory to the Collateral Agent, duly executed by such Grantor
and such bank or financial institution, or enter into other arrangements in form
and substance satisfactory to the Collateral Agent, pursuant to which such
institution shall irrevocably agree, inter alia, that (i) it will comply at any
time with the instructions originated by the Collateral Agent to such bank or
financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of such Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in
the absence of a continuing Event of Default, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of such Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Collateral Agent, (iii) any right of set off,
banker’s Lien or other similar Lien, security interest or encumbrance shall be
fully waived as against the Collateral Agent, and (iv) upon receipt of written
notice from the Collateral Agent during the continuance of an Event of Default,
such bank or financial institution shall immediately send to the Collateral
Agent by wire transfer (to such account as the Collateral Agent shall specify,
or in such other manner as the Collateral Agent shall direct) all such cash, the
value of any Commodity Contracts, securities, Investment Property and other
items held by it. Without the prior written consent of the Collateral Agent,
such Grantor shall not make or maintain any Deposit Account, Commodity Account
or Securities Account except for the accounts set forth in Schedule IV hereto.
The provisions of this paragraph 5(i) shall not apply to (i) Deposit Accounts
for which the Collateral Agent is the depositary and (ii) Deposit Accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of a Grantor’s salaried
employees.

 

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(j)          Motor Vehicles.

 

(i)          Upon the Collateral Agent’s written request, each Grantor shall
deliver to the Collateral Agent originals of the certificates of title or
ownership for all motor vehicles owned by it with the Collateral Agent listed as
lienholder, for the benefit of the Buyers.

 

(ii)         Each Grantor hereby appoints the Collateral Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of this Agreement, for the purpose of (A) executing on behalf of such Grantor
title or ownership applications for filing with appropriate state agencies to
enable motor vehicles now owned or hereafter acquired by such Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such
applications with such state agencies, and (C) executing such other documents
and instruments on behalf of, and taking such other action in the name of, such
Grantor as the Collateral Agent may deem necessary or advisable to accomplish
the purposes hereof (including, without limitation, for the purpose of creating
in favor of the Collateral Agent a perfected Lien on the motor vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until the complete conversion of all of the Company’s obligations under the
Notes to equity securities of the Company and/or indefeasible payment in full in
cash of all obligations under the Notes (together with any matured
indemnification obligations as of the date of such conversion and/or payment,
but excluding any inchoate or unmatured contingent indemnification obligations).

 

(iii)        Any certificates of title or ownership delivered pursuant to the
terms hereof shall be accompanied by odometer statements for each motor vehicle
covered thereby.

 

(iv)        So long as no Event of Default shall have occurred and be
continuing, upon the request of such Grantor, the Collateral Agent shall execute
and deliver to such Grantor such instruments as such Grantor shall reasonably
request to remove the notation of the Collateral Agent as lienholder on any
certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by
the Collateral Agent of a certificate from such Grantor stating that such motor
vehicle is to be sold or has suffered a casualty loss (with title thereto
passing to the casualty insurance company therefor in settlement of the claim
for such loss) and the amount that such Grantor will receive as sale proceeds or
insurance proceeds. Any proceeds of such sale or casualty loss shall be paid to
the Collateral Agent hereunder immediately upon receipt, to be applied to the
Obligations then outstanding.

 

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(k)          Control. Each Grantor hereby agrees to take any or all action that
may be necessary or desirable or that the Collateral Agent may request in order
for the Collateral Agent to obtain control in accordance with Sections 9-105 –
9-107 of the Code with respect to the following Collateral: (i) Electronic
Chattel Paper, (ii) Investment Property, (iii) Pledged Interests and (iv)
Letter-of-Credit Rights.

 

(l)          Inspection and Reporting. Each Grantor shall permit the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, not more than once a year in the
absence of an Event of Default, (i) to examine and make copies of and abstracts
from such Grantor’s records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory
and other assets of such Grantor from time to time and (iv) to conduct audits,
physical counts, appraisals and/or valuations, examinations at the locations of
such Grantor. Each Grantor shall also permit the Collateral Agent or any agent
or representatives thereof or such professionals or other Persons as the
Collateral Agent may designate to discuss such Grantor’s affairs, finances and
accounts with any of its officers subject to the execution by the Collateral
Agent or its designee(s) of a mutually agreeable confidentiality agreement.

 

(m)          Future Subsidiaries. If any Grantor shall hereafter create or
acquire any Subsidiary, simultaneously with the creation of acquisition of such
Subsidiary, such Grantor shall cause such Subsidiary to become a party to this
Agreement as an additional “Grantor” hereunder, and to duly execute and/or
deliver such opinions of counsel and other documents, in form and substance
acceptable to the Collateral Agent, as the Collateral Agent shall reasonably
request with respect thereto.

 

Section 6.          Additional Provisions Concerning the Collateral.

 

(a)          Each Grantor hereby (i) authorizes the Collateral Agent to file one
or more Uniform Commercial Code financing or continuation statements, and
amendments thereto, relating to the Collateral (including, without limitation,
financing statements describing the Collateral as “all assets” or “all personal
property” or words of similar effect) and (ii) ratifies such authorization to
the extent that the Collateral Agent has filed any such financing or
continuation statements, or amendments thereto, prior to the date hereof. A
photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.

 

(b)          Each Grantor hereby irrevocably appoints the Collateral Agent as
its attorney-in-fact and proxy, with full authority in the place and stead of
such Grantor and in the name of such Grantor or otherwise, from time to time in
the Collateral Agent’s discretion, so long as an Event of Default shall have
occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of such Grantor under Section
5 hereof), including, without limitation, (i) to obtain and adjust insurance
required to be paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the collection of
any Collateral or otherwise to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral. This power is coupled with an
interest and is irrevocable until the complete conversion of all of the
Company’s obligations under the Notes to equity securities of the Company and/or
indefeasible payment in full in cash of all obligations under the Notes
(together with any matured indemnification obligations as of the date of such
conversion and/or payment, but excluding any inchoate or unmatured contingent
indemnification obligations).

 

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(c)          For the purpose of enabling the Collateral Agent to exercise rights
and remedies hereunder, at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies upon and during an Event of
Default, and for no other purpose, each Grantor hereby grants to the Collateral
Agent, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Grantor)
to use, assign, license or sublicense any Intellectual Property now owned or
hereafter acquired by such Grantor, wherever the same may be located, including
in such license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for the
compilation or printout thereof. Notwithstanding anything contained herein to
the contrary, but subject to the provisions of the Securities Purchase Agreement
that limit the right of such Grantor to dispose of its property and Section 5(h)
hereof, so long as no Event of Default shall have occurred and be continuing,
such Grantor may exploit, use, enjoy, protect, license, sublicense, assign,
sell, dispose of or take other actions with respect to the Intellectual Property
in the ordinary course of its business. In furtherance of the foregoing, unless
an Event of Default shall have occurred and be continuing, the Collateral Agent
shall from time to time, upon the request of a Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor’s judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the complete conversion of all of the Company’s obligations under
the Notes to equity securities of the Company and/or indefeasible payment in
full in cash of all obligations under the Notes (together with any matured
indemnification obligations as of the date of such conversion and/or payment,
but excluding any inchoate or unmatured contingent indemnification obligations),
the Collateral Agent (subject to Section 10(e) hereof) shall release and
reassign to such Grantor all of the Collateral Agent’s right, title and interest
in and to the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever. The exercise of rights and remedies
hereunder by the Collateral Agent shall not terminate the rights of the holders
of any licenses or sublicenses theretofore granted by such Grantor in accordance
with the second sentence of this clause (c). Each Grantor hereby releases the
Collateral Agent from any claims, causes of action and demands at any time
arising out of or with respect to any actions taken or omitted to be taken by
the Collateral Agent under the powers of attorney granted herein other than
actions taken or omitted to be taken through the Collateral Agent’s gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.

 

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(d)          If a Grantor fails to perform any agreement contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or
obligation, in the name of such Grantor or the Collateral Agent, and the
expenses of the Collateral Agent incurred in connection therewith shall be
payable by such Grantor pursuant to Section 8 hereof and shall be secured by the
Collateral.

 

(e)          The powers conferred on the Collateral Agent hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Collateral Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.

 

(f)          Anything herein to the contrary notwithstanding, (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed,
(ii) the exercise by the Collateral Agent of any of its rights hereunder shall
not release such Grantor from any of its obligations under the Licenses or
otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not
have any obligation or liability by reason of this Agreement under the Licenses
or with respect to any of the other Collateral, nor shall the Collateral Agent
be obligated to perform any of the obligations or duties of such Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

 

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Section 7.          Remedies Upon Event of Default. If any Event of Default
shall have occurred and be continuing:

 

(a)          The Collateral Agent may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Collateral Agent, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of its respective Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place or places to be
designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned
or leased by such Grantor where the Collateral or any part thereof is located or
assembled for a reasonable period in order to effectuate the Collateral Agent’s
rights and remedies hereunder or under law, without obligation to such Grantor
in respect of such occupation, and (iii) without notice except as specified
below and without any obligation to prepare or process the Collateral for sale,
(A) sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent’s offices or elsewhere, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may deem commercially reasonable and/or
(B) lease, license or dispose of the Collateral or any part thereof upon such
terms as the Collateral Agent may deem commercially reasonable. Each Grantor
agrees that, to the extent notice of sale or any other disposition of its
respective Collateral shall be required by law, at least ten (10) days’ notice
to such Grantor of the time and place of any public sale or the time after which
any private sale or other disposition of its respective Collateral is to be made
shall constitute reasonable notification. The Collateral Agent shall not be
obligated to make any sale or other disposition of any Collateral regardless of
notice of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor hereby waives any claims
against the Collateral Agent and the Buyers arising by reason of the fact that
the price at which its respective Collateral may have been sold at a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Obligations, even if the Collateral
Agent accepts the first offer received and does not offer such Collateral to
more than one offeree, and waives all rights that such Grantor may have to
require that all or any part of such Collateral be marshalled upon any sale
(public or private) thereof. Each Grantor hereby acknowledges that (i) any such
sale of its respective Collateral by the Collateral Agent shall be made without
warranty, (ii) the Collateral Agent may specifically disclaim any warranties of
title, possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely effect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing,
(A) upon written notice to any Grantor from the Collateral Agent, such Grantor
shall cease any use of the Intellectual Property or any trademark, patent or
copyright similar thereto for any purpose described in such notice; (B) the
Collateral Agent may, at any time and from time to time, upon 10 days’ prior
notice to such Grantor, license, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any of the Intellectual
Property, throughout the universe for such term or terms, on such conditions,
and in such manner, as the Collateral Agent shall in its sole discretion
determine to the extent consistent with any restrictions or conditions imposed
upon such Grantor with respect to such Intellectual Property by license or other
contractual arrangement; and (C) the Collateral Agent may, at any time, pursuant
to the authority granted in Section 6 hereof (such authority being effective
upon the occurrence and during the continuance of an Event of Default), execute
and deliver on behalf of such Grantor, one or more instruments of assignment of
the Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.

 

(b)          Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in
whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with
the provisions of the Securities Purchase Agreement. Any surplus of such cash or
Cash Proceeds held by the Collateral Agent and remaining after the complete
conversion of all of the Company’s obligations under the Notes to equity
securities of the Company and/or indefeasible payment in full in cash of all
obligations under the Notes (together with any matured indemnification
obligations as of the date of such conversion and/or payment, but excluding any
inchoate or unmatured contingent indemnification obligations) shall be paid over
to whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.

 

-20-

 

 

(c)          In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Buyers are legally entitled, each shall be liable for the deficiency,
together with interest thereon at the highest rate specified in any of the
applicable Transaction Documents for interest on overdue principal thereof or
such other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees, costs, expenses and other client charges of
any attorneys employed by the Collateral Agent to collect such deficiency.

 

(d)          Each Grantor hereby acknowledges that if the Collateral Agent
complies with any applicable state, provincial, or federal law requirements in
connection with a disposition of the Collateral, such compliance will not
adversely affect the commercial reasonableness of any sale or other disposition
of the Collateral.

 

(e)          The Collateral Agent shall not be required to marshal any present
or future collateral security (including, but not limited to, this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or to
resort to such collateral security or other assurances of payment in any
particular order, and all of the Collateral Agent’s rights hereunder and in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that each Grantor lawfully may, such Grantor hereby agrees that it
will not invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent’s rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, such Grantor hereby irrevocably waives the
benefits of all such laws.

 

Section 8.          Indemnity and Expenses.

 

(a)          Each Grantor agrees, jointly and severally, to defend, protect,
indemnify and hold the Collateral Agent and each of the Buyers, jointly and
severally, harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, reasonable legal fees, costs, expenses, and disbursements of
such Person’s counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and directly
from such Person’s gross negligence or willful misconduct, as determined by a
final judgment of a court of competent jurisdiction.

 

(b)          Each Grantor agrees, jointly and severally, to upon demand pay to
the Collateral Agent the amount of any and all costs and expenses, including the
reasonable fees, costs, expenses and disbursements of counsel for the Collateral
Agent and of any experts and agents (including, without limitation, any
collateral trustee which may act as agent of the Collateral Agent), which the
Collateral Agent may incur in connection with (i) the preparation, negotiation,
execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or
observe any of the provisions hereof.

 

-21-

 

  

Section 9.          Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered, if to a
Grantor at its address specified below and if to the Collateral Agent to it, at
its address specified below; or as to any such Person, at such other address as
shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (a) if sent by certified mail, return
receipt requested, when received or five days after deposited in the mails,
whichever occurs first, (b) if telecopied, when transmitted (during normal
business hours) and confirmation is received, otherwise, the day after the
notice was transmitted if confirmation is received, or (c) if delivered, upon
delivery.

 

Section 10.         Miscellaneous.

 

(a)          No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by each Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
a Grantor therefrom, shall be effective unless it is in writing and signed by
the Collateral Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

 

(b)          No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any of the other Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Agent or
any Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Collateral Agent or any Buyer under any of the other
Transaction Documents against any party thereto are not conditional or
contingent on any attempt by such Person to exercise any of its rights under any
of the other Transaction Documents against such party or against any other
Person, including, but not limited to, any Grantor.

 

(c)          To the extent permitted by applicable law, each Grantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and this Agreement and any requirement that
the Collateral Agent exhaust any right or take any action against any other
Person or any Collateral. Each Grantor acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated herein and
that the waiver set forth in this Section 10(c) is knowingly made in
contemplation of such benefits. The Grantors hereby waive any right to revoke
this Agreement, and acknowledge that this Agreement is continuing in nature and
applies to all Obligations, whether existing now or in the future.

 

(d)          No Grantor may exercise any rights that it may now or hereafter
acquire against any other Grantor that arise from the existence, payment,
performance or enforcement of any Grantor’s obligations under this Agreement,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Collateral Agent against any Grantor or any Collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from any Grantor, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security solely on account of such
claim, remedy or right, unless and until the complete conversion of all of the
Company’s obligations under the Notes to equity securities of the Company and/or
indefeasible payment in full in cash of all obligations under the Notes
(together with any matured indemnification obligations as of the date of such
conversion and/or payment, but excluding any inchoate or unmatured contingent
indemnification obligations). If any amount shall be paid to a Grantor in
violation of the immediately preceding sentence at any time prior to the
complete conversion of all of the Company’s obligations under the Notes to
equity securities of the Company and/or indefeasible payment in full in cash of
all obligations under the Notes (together with any matured indemnification
obligations as of the date of such conversion and/or payment, but excluding any
inchoate or unmatured contingent indemnification obligations), such amount shall
be held in trust for the benefit of the Collateral Agent and shall forthwith be
paid to the Collateral Agent to be credited and applied to the Obligations and
all other amounts payable under the Transaction Documents, whether matured or
unmatured, in accordance with the terms of the Transaction Documents, or to be
held as Collateral for any Obligations or other amounts payable under the
Transaction Documents thereafter arising.

 

-22-

 

 

(e)          Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
portions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction.

 

(f)          This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the complete
conversion of all of the Company’s obligations under the Notes to equity
securities of the Company and/or indefeasible payment in full in cash of all
obligations under the Notes (together with any matured indemnification
obligations as of the date of such conversion and/or payment, but excluding any
inchoate or unmatured contingent indemnification obligations), and (ii) be
binding on each Grantor and all other Persons who become bound as debtor to this
Agreement in accordance with Section 9-203(d) of the Code and shall inure,
together with all rights and remedies of the Collateral Agent and the Buyers
hereunder, to the benefit of the Collateral Agent and the Buyers and their
respective permitted successors, transferees and assigns. Without limiting the
generality of clause (ii) of the immediately preceding sentence, without notice
to any Grantor, the Collateral Agent and the Buyers may assign or otherwise
transfer their rights and obligations under this Agreement and any of the other
Transaction Documents, to any other Person and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the
Collateral Agent and the Buyers herein or otherwise. Upon any such assignment or
transfer, all references in this Agreement to the Collateral Agent or any such
Buyer shall mean the assignee of the Collateral Agent or such Buyer. None of the
rights or obligations of any Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Collateral Agent, and any
such assignment or transfer without the consent of the Collateral Agent shall be
null and void.

 

(g)          Upon the complete conversion of all of the Company’s obligations
under the Notes to equity securities of the Company and/or indefeasible payment
in full in cash of all obligations under the Notes (together with any matured
indemnification obligations as of the date of such conversion and/or payment,
but excluding any inchoate or unmatured contingent indemnification obligations),
(i) this Agreement and the security interests created hereby shall terminate and
all rights to the Collateral shall revert to the respective Grantor that granted
such security interests hereunder, and (ii) the Collateral Agent will, upon such
Grantor’s request and at such Grantor’s expense, (A) return to such Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever.

 

-23-

 

 

(h)          THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.

 

(i)          ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.

 

(j)          EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT) THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.

 

(k)          Nothing contained herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against any Grantor or any property of such
Grantor in any other jurisdiction.

 

-24-

 

  

(l)          Each Grantor irrevocably and unconditionally waives any right it
may have to claim or recover in any legal action, suit or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.

 

(m)          Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.

 

(n)          This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

-25-

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

 

  COMPANY:       FUSE SCIENCE, INC., a Nevada corporation         By:     Name:
Brian Tuffin   Title: Chief Executive Officer         EXISTING SUBSIDIARIES:    
  FS Consumer Products Group, Inc., a Florida corporation         By:     Name:
    Title:           FSR&D, Inc., a Delaware corporation         By:     Name:  
  Title:  

 

[Signature Page to Pledge and Security Agreement]

 

 

ACCEPTED BY:

 

COLLATERAL AGENT:       Hudson Bay Master Fund Ltd.         By:   Hudson Bay
Capital Management LP, as its     Investment Manager         By:     Name: Yoav
Roth   Title: Authorized Signatory  

  

[Signature Page to Pledge and Security Agreement]

 

  

SCHEDULE I

 

LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR JURISDICTION OF
ORGANIZATION

 

Name   Identification Number   State of Organization           Fuse Science,
Inc.   C7596-1988   Nevada           FS Consumer Products Group, Inc.  
P11000098169   Florida           FSR&D, Inc.   4948807   Delaware

 

Sched. I-1

 

 

SCHEDULE II

 

INTELLECTUAL PROPERTY AND LICENSES; TRADE NAMES

 

the Company

 

A. COPYRIGHTS

 

  1. Registered Copyrights NONE.   2. Copyright Applications NONE.   3.
Copyright Licenses NONE.

 

B. PATENTS

 

For each of the items below, please see the attached Summary of Patent Matters
for Fuse Science, Inc., dated 11/6/2013, from the Company’s IP counsel.

 

  1. Registered Patents   2. Patents Applications   3. Patents Licenses

 

Exclusive Patent and Technology License Agreement, with a thirty year term,
dated November 2, 2011, by and among Fuse Science, Inc. (as Licensee), and Cure
IP Holdings LLC, Robert S. Davidson, Edward Maliski, Edward Maliski PhD., Eric
Allen, and Platform Delivery Technologies, Inc. (as Licensors).

 

C. TRADEMARKS

 

For each of the items below, please see the attached Summary of Trademark
Matters, dated 11/6/2013, from the Company’s IP Counsel.

 

  1. Registered Trademarks   2. Trademark Applications   3. Trademark Licenses

 

D. OTHER INTELLECTUAL PROPERTY NONE.       E. TRADE NAMES NONE.       F. NAME
OF, AND EACH TRADE NAME USED BY, EACH PERSON FROM WHICH A GRANTOR HAS ACQUIRED
ANY SUBSTANTIAL PART OF THE COLLATERAL WITHIN THE PRECEDING FIVE YEARS       N/A
 

 

Sched. II-1

 

 

EXISTING SUBSIDIARIES

  

A. COPYRIGHTS

 

  1. Registered Copyrights NONE.   2. Copyright Applications NONE.   3.
Copyright Licenses NONE.

 

B. PATENTS

 

  1. Registered Patents NONE.   2. Patents Applications NONE.   3. Patents
Licenses NONE.

 

C. TRADEMARKS

 

  1. Registered Trademarks NONE.   2. Trademark Applications NONE.   3.
Trademark Licenses NONE.

 

D. OTHER INTELLECTUAL PROPERTY NONE.       E. TRADE NAMES NONE.       F. NAME
OF, AND EACH TRADE NAME USED BY, EACH PERSON FROM WHICH A GRANTOR HAS ACQUIRED
ANY SUBSTANTIAL PART OF THE COLLATERAL WITHIN THE PRECEDING FIVE YEARS       N/A
 

 

Sched. II-2

 

 

SCHEDULE III

 

LOCATIONS OF the Company

 

LOCATION

Description of Location (State if Location

(i) contains Rolling Stock, other Equipment, Fixtures, Goods or Inventory,

  (ii) is chief place of business and chief executive office, or   (iii)
contains Records concerning Accounts   and originals of Chattel Paper)

 

The principal place of business for the Company is 6135 NW 167th Street, Suite
E-21, Miami Lakes, FL 33015.

 

The Company has goods and inventory at the following locations:

 

Location   Goods and Inventory at Location Unicep Packaging, Inc.   242,000
units finished goods inventory 1702 Industrial Drive     Sandpoint, ID 83864    
      Cure Pharmaceutical Corp.   Equipment and raw material Corporate HQ    
Receiving, & Manufacturing     1620 Beacon Place     Oxnard, CA 93033          
Smart Warehousing, LLC   Finished goods inventory 1869 N. Topping Ave.    
Kansas City, MO 64120    

 

Sched. III-1

 

 

LOCATIONS OF EXISTING SUBSIDIARIES

 

LOCATION Description of Location (State if Location   (i) contains Rolling
Stock, other Equipment, Fixtures, Goods or Inventory,   (ii) is chief place of
business and chief executive office, or   (iii) contains Records concerning
Accounts and originals of Chattel Paper)

 

The principal place of business for each of the Company’s subsidiaries is 6135
NW 167th Street, Suite E-21, Miami Lakes, FL 33015.

 

Sched. III-2

 

 

SCHEDULE IV

 

PROMISSORY NOTES, SECURITIES, DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND
COMMODITIES ACCOUNTS

 

the Company

 

Promissory Notes:

 

Purchase Order Financing Notes (The Company will use a portion of the proceeds
to pay off a portion of the Purchase Order Financing Notes):

 

Principal & Interest outstanding:  $202,086.27 

 

Bridge Financing (This Indebtedness will no longer be outstanding upon the
execution of this Agreement):

 

Principal & Interest outstanding:  $775,000.00 

 

Securities and Other Instruments:

 

NONE.

 

Name and Address             of Institution             Maintaining Account  
Acct. Number   Type of Account   Purpose of Account               Bank United  
      15201 NW 67th Ave         Miami Lakes, FL  33014                      
Same as above   9852626142   Checking   Main Operating Acct. Same as above  
9852626142   Checking   Payroll Account Same as above   9852798245   Checking  
CC receipt account Same as above   9852807023   Debit   Company debit card Same
as above   9852866917   Checking   Investment Account

 

Sched. IV-1

 

 

EXISTING SUBSIDIARIES

 

Promissory Notes

 

NONE.

 

Securities and Other Instruments

 

NONE.

 

Name and Address             of Institution             Maintaining Account  
Account Number    Type of Account   Purpose of Account

 

NONE.

 

Sched. IV-2

 

 

SCHEDULE V

 

UCC-1 FINANCING STATEMENTS

 

UCC Financing Statements have been filed in the jurisdictions below against the
Grantors:

 

Debtor (Grantor) Secured Party Document No.       Fuse Science, Inc. Jonathan
Manela 2013027782-6   Brian Tuffin         Fuse Science, Inc. MusclePharm Corp.
2013029592-5

 

The foregoing UCC Financing Statements will be terminated on, or before, the
Initial Closing Date.

 

Sched. V-1

 

 

SCHEDULE VI

 

COMMERCIAL TORT CLAIMS

 

the Company

 

COMMERCIAL TORT CLAIMS

 

NONE.

 

Sched. VI-1

 

 

EXISTING SUBSIDIARIES

 

COMMERCIAL TORT CLAIMS

 

NONE.

 

 

 

 

SCHEDULE VII

 

PLEDGED DEBT

 

            Principal Amount Grantor   Name of Maker   Description   Outstanding
as of

 

NONE.

Sched. VII-2

 

 

SCHEDULE VIII

 

PLEDGED SHARES

 

Grantor  Name of Pledged
Issuer  Number of
Shares   Percentage of
Outstanding
Shares   Class   Certificate
Number  Fuse Science, Inc.  FS Consumer Products Group, Inc.   1,000    100% 
     001                           Fuse Science, Inc.  FSR&D, Inc.   11,000  
 100%        001 

 

For each of the foregoing, see attached Stock Certificate and corresponding
Stock Power.

 

Sched. VIII-1

 

 

EXHIBIT A

 

ASSIGNMENT FOR SECURITY

 

[TRADEMARKS] [PATENTS] [COPYRIGHTS]

 

WHEREAS, ______________________________ (the “Assignor”) [has adopted, used and
is using, and holds all right, title and interest in and to, the trademarks and
service marks listed on the annexed Schedule 1A, which trademarks and service
marks are registered or applied for in the United States Patent and Trademark
Office (the “Trademarks”)] [holds all right, title and interest in the letter
patents, design patents and utility patents listed on the annexed Schedule 1A,
which patents are issued or applied for in the United States Patent and
Trademark Office (the “Patents”)] [holds all right, title and interest in the
copyrights listed on the annexed Schedule 1A, which copyrights are registered in
the United States Copyright Office (the “Copyrights”)];

 

WHEREAS, the Assignor has entered into a Pledge and Security Agreement, dated as
of December [__], 2013 (as amended, restated or otherwise modified from time to
time the “Security Agreement”), in favor of Hudson Bay Master Fund Ltd., as
collateral agent for certain buyers (the “Assignee”);

 

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the
Assignee and granted to the Assignee for the benefit of the Buyers (as defined
in the Security Agreement) a continuing security interest in all right, title
and interest of the Assignor in, to and under the [Trademarks, together with,
among other things, the good-will of the business symbolized by the Trademarks]
[Patents] [Copyrights] and the applications and registrations thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof and any and all damages
arising from past, present and future violations thereof (the “Collateral”), to
secure the payment, performance and observance of the “Obligations” (as defined
in the Security Agreement);

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee for
the benefit of the Buyers a continuing security interest in the Collateral to
secure the prompt payment, performance and for the benefit of the Buyers
observance of the Obligations.

 

The Assignor does hereby further acknowledge and affirm that the rights and
remedies of the Assignee with respect to the Collateral are more fully set forth
in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.

 

Exh. A-1

 

 

IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized as of _____________, 20__

 

  [GRANTOR]       By:       Name:     Title:

 

Exh. A-2

 

 

STATE OF ____________

ss.:

 

COUNTY OF __________

 

On this ____ day of _______________, 20__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.

 

Exh. A-3

 

 

SCHEDULE 1A TO ASSIGNMENT FOR SECURITY

 

[Trademarks and Trademark Applications]

[Patent and Patent Applications]

[Copyright and Copyright Applications]

Owned by ______________________________

  

Exh. A-4