SECURITY AGREEMENT


 


This SECURITY AGREEMENT,
dated as of August 31, 2013 and effective as of October 10, 2013 (as amended, restated or modified from time to time, the “Security
Agreement”), is executed by and between HDI PLASTICS, INC., a corporation incorporated under the laws of the
State of Texas with an address at 10501 Wayzata Blvd South, Suite 102, Minnetonka, MN 55305 (the “Grantor”),
and TCA GLOBAL CREDIT MASTER FUND, LP, a limited partnership organized and existing under the laws of the Cayman Islands
(the “Secured Party”).


 


RECITALS:


 


WHEREAS, the Grantor
has entered into a senior secured revolving credit facility agreement, dated as of the date hereof (as amended, restated or modified
from time to time, the “Credit Agreement”), by and among Hypertension Diagnostics, Inc., as borrower
(the “Borrower”), the Grantor , as guarantor, and the Secured Party, as lender, pursuant to which the
Secured Party shall advance an aggregate principal amount of up to Three Million and No/100 United States Dollars (US$3,000,000)
(the “Loan”), which Loan is further evidenced by a revolving convertible promissory note to be given
by the Borrower in favor of the Secured Party (as may be amended, restated or modified from time to time, the “Note”);


 


WHEREAS, in order to
induce the Secured Party to make the Loan, and with full knowledge that the Secured Party would not make the Loan without this
Security Agreement, the Grantor has agreed to execute and deliver this Security Agreement to the Secured Party, for the benefit
of the Secured Party; and


 


NOW,
THEREFORE, in consideration of the credit extended now and in the future by Secured Party to the Borrower and for other good and
valuable consideration, the receipt and adequacy of which are hereby acknowledged, Grantor and Secured Party hereby agree as follows:


 


AGREEMENTS:


 


Section
1          DEFINITIONS.


 


1.1           Defined
Terms. Capitalized terms used but not otherwise defined in this Security Agreement shall have the meanings ascribed to them
in the Credit Agreement. For the purposes of this Security Agreement, the following capitalized words and phrases shall have the
meanings set forth below.


 


“Capital
Securities” shall mean, with respect to any Person, all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the
date hereof, including common shares, preferred shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership interest.


 


“Collateral”
shall have the meaning set forth in Section 2.1 hereof.


 


“Obligor”
shall mean Grantor, or any other party liable with respect to the Obligations.


 






    	 



    	 



    

 


“Taxes”
shall mean any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings, and
any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing.


 


“Unmatured
Event of Default” shall mean any event which, with the giving of notice, the passage of time or both, would constitute
an Event of Default.


 


1.2           Other
Terms Defined in UCC. All other capitalized words and phrases used herein and not otherwise specifically defined herein or
in the Credit Agreement shall have the respective meanings assigned to such terms in the UCC, to the extent the same are used or
defined therein.


 


1.3           Other
Interpretive Provisions.


 


(a)          The
meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa, and in
particular the word “Grantor” shall be so construed.


 


(b)          Section
and Schedule references are to this Security Agreement unless otherwise specified. The words “hereof”, “herein”
and “hereunder” and words of similar import when used in this Security Agreement shall refer to this Security Agreement
as a whole and not to any particular provision of this Security Agreement.


 


(c)          The
term “including” is not limiting, and means “including, without limitation”.


 


(d)          In
the computation of periods of time from a specified date to a later specified date, the word “from” means “from
and including”; the words “to” and “until” each mean “to but excluding”, and the word
“through” means “to and including”.


 


(e)          Unless
otherwise expressly provided herein, (i) references to agreements (including this Security Agreement and the other Loan Documents)
and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications
thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms
of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory
provisions amending, replacing, supplementing or interpreting such statute or regulation.


 


(f)          To
the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Security Agreement, the provisions
of this Security Agreement shall govern.


 


(g)          This
Security Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with
its terms.


 






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Section
2          SECURITY FOR THE OBLIGATIONS.


 


2.1           Security
for Obligations. As security for the payment and performance of the Obligations now existing or
in the future, Grantor does hereby pledge, assign, transfer, deliver and grant to Secured Party a continuing and unconditional
first priority security interest in and to any and all property of Grantor, of any kind or description, tangible or intangible,
wheresoever located and whether now existing or hereafter arising or acquired, including the following (all of which property for
Grantor, along with the products and proceeds therefrom, are individually and collectively referred to as the “Collateral”):


 


(a)          all
property of, or for the account of, Grantor now or hereafter coming into the possession, control or custody of, or in transit to,
Secured Party or any agent or bailee for Secured Party or any parent, affiliate or subsidiary of Secured Party or any participant
with Secured Party in the Obligations (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise),
including all cash, earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom,
including the proceeds of insurance thereon; and


 


(b)          the
additional property of Grantor, whether now existing or hereafter arising or acquired, and wherever now or hereafter located, together
with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds therefrom,
and all of Grantor's books and records and recorded data relating thereto (regardless of the medium of recording or storage), together
with all of Grantor's right, title and interest in and to all computer software required to utilize, create, maintain and process
any such records or data on electronic media, identified and set forth as follows:


 


(i)          All
Accounts and all goods whose sale, lease or other disposition by Grantor has given rise to Accounts and have been returned to,
or repossessed or stopped in transit by, Grantor, or rejected or refused by any person who is or who may become obligated under,
with respect to, or on an Account (“Account Grantor”);


 


(ii)         All
Inventory, including raw materials, work-in-process and finished goods;


 


(iii)        All
goods (other than Inventory), including embedded software, Equipment, vehicles, furniture and Fixtures;


 


(iv)         All
Software and computer programs;


 


(v)          All
Securities, Investment Property, Financial Assets and Deposit Accounts;


 


(vi)         All
Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance
Receivables, Supporting Obligations, notes secured by real estate, Commercial Tort Claims and General Intangibles, including Payment
Intangibles;


 






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(vii)        All
real estate property owned by Grantor and the interest of Grantor in fixtures related to such real property; and


 


(viii)      All
Proceeds (whether Cash Proceeds or Non-cash Proceeds) of the foregoing property, including all insurance policies and proceeds
of insurance payable by reason of loss or damage to the foregoing property, including unearned premiums, and of eminent domain
or condemnation awards.


 


2.2           Possession
and Transfer of Collateral. Until an Event of Default has occurred and is continuing, Grantor shall be entitled to possession
and use of the Collateral (other than Instruments or Documents (including Tangible Chattel Paper and Investment Property consisting
of certificated securities) and other Collateral required to be delivered to Secured Party pursuant to this Section 2).
The cancellation or surrender of any promissory note evidencing an Obligation, upon payment or otherwise, shall not affect the
right of Secured Party to retain the Collateral for any other of the Obligations except upon payment in full of the Obligations.
Grantor shall not sell, assign (by operation of law or otherwise), license, lease or otherwise dispose of, or grant any option
with respect to any of the Collateral, except as permitted pursuant to the Credit Agreement.


 


2.3           Financing
Statements. Grantor authorizes Secured Party to prepare and file such financing statements, amendments and other documents
and do such acts as Secured Party deems necessary in order to establish and maintain valid, attached and perfected, first priority
security interests in the Collateral in favor of Secured Party, free and clear of all Liens and
claims and rights of third parties whatsoever, except Permitted Liens. Grantor hereby irrevocably authorizes Secured Party at any
time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto that (a) indicate
the Collateral is comprised of all assets of Grantor (or words of similar effect), regardless of whether any particular asset comprising
a part of the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement or
amendment is filed, and (b) contain any other information required by Section 5 of Article 9 of the UCC of the jurisdiction wherein
such financing statement or amendment is filed regarding the sufficiency or filing office acceptance of any financing statement
or amendment, including (i) whether Grantor is an organization, the type of organization, and (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of
the real property to which the Collateral relates. Grantor agrees to furnish any such information to Secured Party promptly upon
request. In addition, Grantor shall make appropriate entries on its books and records disclosing the security interests of Secured
Party in the Collateral. Grantor hereby agrees that a photogenic or other reproduction of this
Security Agreement is sufficient for filing as a financing statement and Grantor authorizes Secured Party to file this Security
Agreement as a financing statement in any jurisdiction.


 




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2.4           Preservation
of the Collateral. Secured Party may, but is not required to, take such actions from time to time as Secured Party reasonably
deems appropriate to maintain or protect the Collateral. Secured Party shall have exercised reasonable care in the custody and
preservation of the Collateral if Secured Party takes such action as Grantor shall reasonably request in writing which is not inconsistent
with Secured Party's status as a secured party, but the failure of Secured Party to comply with any such request shall not be deemed
a failure to exercise reasonable care; provided, however, Secured Party's responsibility for the safekeeping of the
Collateral shall (i) be deemed reasonable if such Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property, and (ii) not extend to matters beyond the control of Secured Party, including acts of God, war, insurrection,
riot or governmental actions. In addition, any failure of Secured Party to preserve or protect any rights with respect to the Collateral
against prior or third parties, or to do any act with respect to preservation of the Collateral, not so requested by Grantor, shall
not be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral. Grantor shall have the sole
responsibility for taking such action as may be necessary, from time to time, to preserve all rights of Grantor and Secured Party
in the applicable Collateral against prior or third parties. Without limiting the generality of the foregoing, where Collateral
consists in whole or in part of Capital Securities, Grantor represents to, and covenants with, Secured Party that Grantor has made
arrangements for keeping informed of changes or potential changes affecting the Capital Securities (including rights to convert
or subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and Grantor agrees that
Secured Party shall have no responsibility or liability for informing Grantor of any such or other changes or potential changes
or for taking any action or omitting to take any action with respect thereto.


 


2.5           Other
Actions as to any and all Collateral. Grantor further agrees to take any other action reasonably requested by Secured Party
to ensure the attachment, perfection and first priority of, and the ability of Secured Party to enforce, the security interest
of Secured Party in any and all of the Collateral including (a) causing Secured Party’s name to be noted as secured party
on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability
of the Secured Party to enforce, the security interest of Secured Party in such Collateral, (b) if within the control of the Grantor,
complying with, and, if not within the control of the Grantor, using best efforts to comply with, any provision of any statute,
regulation or treaty of the United States as to any material portion of the Collateral as soon as possible but not more than forty-five
(45) days after such request if compliance with such provision is a condition to attachment, perfection or priority of, or ability
of Secured Party to enforce, the security interest of Secured Party in such Collateral, (c) using best efforts to obtain governmental
and other third party consents and approvals, including without limitation any consent of any licensor, lessor or other Person
with authority or control over or an interest in any material portion of the Collateral as soon as possible but not more than forty-five
(45) days after such request, (d) using best efforts to obtain waivers from mortgagees and landlords in form and substance reasonably
satisfactory to Secured Party which affect any material portion of the Collateral as soon as possible but not more than forty-five
(45) days after such request, and (e) taking all actions required by the UCC in effect from time to time or by other law, as applicable
in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction. Grantor further agrees to indemnify
and hold Secured Party harmless against claims of any Persons not a party to this Security Agreement concerning disputes arising
over the Collateral except to the extent resulting from the gross negligence or willful misconduct of Secured Party or its Affiliates.


 


2.6           Collateral
in the Possession of a Warehouseman or Bailee. If any material portion of the Collateral at any time is in the possession of
a warehouseman or bailee, Grantor shall promptly notify Secured Party thereof, and, as soon as possible but not more than forty-five
(45) days later, shall use best efforts to obtain a Collateral Access Agreement in form and substance reasonably satisfactory to
Secured Party from such warehouseman or bailee.


 






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2.7           Letter-of-Credit
Rights. If Grantor at any time is a beneficiary under a letter of credit now or hereafter issued in favor of Grantor, Grantor
shall promptly notify Secured Party thereof and, at the request and option of Secured Party, Grantor shall, pursuant to an agreement
in form and substance reasonably satisfactory to Secured Party, either (i) arrange for the issuer and any confirmer of such letter
of credit to consent to an assignment to Secured Party of the proceeds of any drawing under the
letter of credit, or (ii) arrange for Secured Party to become the transferee beneficiary of the letter of credit, with Secured
Party agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in the
Credit Agreement.


 


2.8           Commercial
Tort Claims. If Grantor shall at any time hold or acquire a Commercial Tort Claim, Grantor shall promptly notify Secured Party
in writing signed by Grantor of the details thereof and grant to Secured Party in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Security Agreement, in each case in form and substance reasonably satisfactory
to Secured Party, and shall execute any amendments hereto deemed reasonably necessary by Secured Party to perfect the security
interest of Secured Party in such Commercial Tort Claim.


 


2.9           Electronic
Chattel Paper and Transferable Records. If Grantor at any time holds or acquires an interest in any electronic chattel paper
or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global
and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
Grantor shall promptly notify Secured Party thereof and, at the request of Secured Party, shall take such action as Secured Party
may reasonably request to vest in Secured Party control under Section 9-105 of the UCC of such electronic chattel paper or control
under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of
the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. Secured Party agrees
with Grantor that Secured Party will arrange, pursuant to procedures reasonably satisfactory to Secured Party and so long as such
procedures will not result in Secured Party's loss of control, for Grantor to make alterations to the electronic chattel paper
or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic Signatures
in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to make without
loss of control.


 


Section
3          REPRESENTATIONS AND WARRANTIES.


 


Grantor makes the following
representations and warranties to Secured Party:


 


3.1           Grantor
Organization and Name. Grantor is a corporation duly incorporated, existing and in good standing under the laws of the State
of Texas, with full and adequate power to carry on and conduct its business as presently conducted. Grantor is duly licensed or
qualified in all foreign jurisdictions wherein the nature of its activities requires such qualification or licensing except where
the failure to be so licensed or qualified would not cause a Material Adverse Effect. The exact legal name of Grantor is as set
forth in the first paragraph of this Security Agreement and Grantor currently does not conduct, nor has it during the last five
(5) years, conducted business under any other name or trade name.


 






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3.2           Authorization.
Grantor has full right, power and authority to enter into this Security Agreement and to perform all of its duties and obligations
under this Security Agreement. The execution and delivery of this Security Agreement and the other Loan Documents to which Grantor
is a party will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate
or contravene any provision of law or of the articles of incorporation, articles of organization, operating agreement or bylaws
of Grantor. All necessary and appropriate action has been taken on the part of Grantor to authorize the execution and delivery
of this Security Agreement.


 


3.3           Validity
and Binding Nature. This Security Agreement is the legal, valid and binding obligation of Grantor, enforceable against Grantor
in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors' rights
generally and to general principles of equity.


 


3.4           Consent;
Absence of Breach. The execution, delivery and performance of this Security Agreement and any other documents or instruments
to be executed and delivered by Grantor in connection herewith, do not and will not (a) require any consent, approval, authorization,
or filings with, notice to or other act by or in respect of, any governmental authority or any other Person (other than filings
or notices in connection with the Liens granted pursuant to his Security Agreement, or pursuant to federal or state securities
laws or other than any consent or approval which has been obtained and is in full force and effect); (b) conflict with (i) any
provision of law or any applicable regulation, order, writ, injunction or decree of any court or governmental authority except
for such conflicts which would not result in a Material Adverse Effect, (ii) the articles of incorporation, articles of organization,
bylaws, operating agreement or other organic document of Grantor, or (iii) any material agreement, indenture, instrument or other
document, or any judgment, order or decree, which is binding upon Grantor or any of its properties or assets except for such conflicts
which would not result in a Material Adverse Effect; or (c) require, or result in, the creation or imposition of any Lien on any
asset of Grantor, other than Liens in favor of Secured Party created pursuant to this Security Agreement and Permitted Liens.


 


3.5           Ownership
of Collateral; Liens. Grantor is the sole owner of all of the Collateral, free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, service marks, copyrights and the like), other than Permitted Liens.


 


3.6           Adverse
Circumstances. No condition, circumstance, event, agreement, document, instrument, restriction, litigation or proceeding (or,
to Grantor's knowledge, threatened litigation or proceeding or basis therefor) exists which (a) would have a Material Adverse Effect
upon Grantor, or (b) would constitute an Event of Default or an Unmatured Event of Default.


 


3.7           Security
Interest. This Security Agreement creates a valid security interest in favor of Secured Party in the Collateral and, when properly
perfected by filing in the appropriate jurisdictions, or by possession or Control of such Collateral by Secured Party or delivery
of such Collateral to Secured Party, shall constitute a valid, perfected, first-priority security interest in such Collateral.


 






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3.8           Place
of Business. The principal place of business and books and records of Grantor is set forth in the preamble to this Security
Agreement, and the location of all Collateral, if other than at such principal place of business, is as set forth on Schedule
3.8 attached hereto and made a part hereof, and Grantor shall promptly notify Secured Party of any change in such locations.
Grantor will not remove or permit the Collateral to be removed from such locations without the prior written consent of Secured
Party, except as permitted pursuant to the Credit Agreement.


 


3.9           Complete
Information. This Security Agreement and all financial statements, schedules, certificates, confirmations, agreements, contracts,
and other materials and information heretofore or contemporaneously herewith furnished in writing by Grantor to Secured Party for
purposes of, or in connection with, this Security Agreement and the transactions contemplated hereby is, and all written information
hereafter furnished by or on behalf of Grantor to Secured Party pursuant hereto or in connection herewith will be, true and accurate
in every material respect on the date as of which such information is dated or certified, and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances
under which made (it being recognized by Secured Party that any projections and forecasts provided by Grantor are based on good
faith estimates and assumptions believed by Grantor to be reasonable as of the date of the applicable projections or assumptions
and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or
forecasted results).


 


Section
4          REMEDIES.


 


Upon the occurrence
and during the continuation of any Event of Default, Secured Party shall have all rights, powers and remedies set forth in this
Security Agreement or the other Loan Documents or in any other written agreement or instrument relating to any of the Obligations
or any security therefor, as a secured party under the UCC or as otherwise provided at law or in equity. Without limiting the generality
of the foregoing, Secured Party may, at its option upon the occurrence and during the continuation of any Event of Default, declare
its commitments to Grantor to be terminated and all Obligations to be immediately due and payable, or, if provided in the Loan
Documents, all commitments of Secured Party to Grantor shall immediately terminate and all Obligations shall be automatically due
and payable, all without demand, notice or further action of any kind required on the part of Secured Party, except as required
by the Credit Agreement. Grantor hereby waives any and all presentment, demand, notice of dishonor, protest, and all other notices
and demands, except as required by the Credit Agreement, in connection with the enforcement of Secured Party's rights under the
Loan Documents, and hereby consents to, and waives notice of release, with or without consideration, of any Collateral, notwithstanding
anything contained herein or in the Loan Documents to the contrary. In addition to the foregoing upon the occurrence and during
the continuation of an Event of Default:


 


4.1           Possession
and Assembly of Collateral. Secured Party may, without notice, demand or initiate legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which Secured Party already has possession), wherever it may be found,
and for that purpose may pursue the same wherever it may be found, and may at any time enter into any of Grantor's premises where
any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of and Secured Party shall have the right to store and conduct a sale of the
same in any of Grantor's premises without cost to Secured Party. At Secured Party's request, Grantor will, at Grantor’s sole
expense, assemble the Collateral and make it available to Secured Party at a place or places to be designated by Secured Party
which is reasonably convenient to Secured Party and Grantor.


 






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4.2           Sale
of Collateral. Secured Party may sell any or all of the Collateral at public or private sale, upon such terms and conditions
as Secured Party may deem proper, and Secured Party may purchase any or all of the Collateral at any such sale. Grantor acknowledges
that Secured Party may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or
practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one
or more private sales to a restricted group of offerees and purchasers. Grantor consents to any such private sale so made even
though at places and upon terms less favorable than if the Collateral were sold at public sale. Secured Party shall have no obligation
to clean-up or otherwise prepare the Collateral for sale. Secured Party may apply the net proceeds, after deducting all costs,
expenses, attorneys' and paralegals' fees incurred or paid at any time in the collection, protection and sale of the Collateral
and the Obligations, to the payment of the Obligations, returning the excess proceeds, if any, to Grantor. Grantor shall remain
liable for any amount remaining unpaid after such application, with interest at the Default Rate. Any notification of intended
disposition of the Collateral required by law shall be conclusively deemed reasonably and properly given if given by Secured Party
at least ten (10) calendar days before the date of such disposition. Grantor hereby confirms, approves and ratifies all acts and
deeds of Secured Party relating to the foregoing, and each part thereof, and expressly waives any and all claims of any nature,
kind or description which it has or may hereafter have against Secured Party or its representatives, by reason of taking, selling
or collecting any portion of the Collateral other than in the event of any intentional misconduct or gross negligence. Grantor
consents to releases of the Collateral at any time (including prior to default) and to sales of the Collateral in groups, parcels
or portions, or as an entirety, as Secured Party shall deem appropriate. Grantor expressly absolves Secured Party from any loss
or decline in market value of any Collateral by reason of delay in the enforcement or assertion or non-enforcement of any rights
or remedies under this Security Agreement.


 





4.3           Standards
for Exercising Remedies. To the extent that applicable law imposes duties on Secured Party to exercise remedies in a
commercially reasonable manner, Grantor acknowledges and agrees that it is not commercially unreasonable for Secured Party (a)
to incur expenses deemed necessary by Secured Party to prepare Collateral for disposition or otherwise to complete raw material
or work-in-process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for
access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against Account Grantors or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse
claims against Collateral, (d) to exercise collection remedies against Account Grantors and other Persons obligated on Collateral
directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact
other Persons, whether or not in the same business as Grantor, for expressions of interest in acquiring all or any portion of the
Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral
is of a specialized nature, (h) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets,
(i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, including any warranties
of title, (k) to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition
of Collateral or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral, or (l) to the
extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other
professionals to assist Secured Party in the collection or disposition of any of the Collateral. Grantor acknowledges that the
purpose of this section is to provide non-exhaustive indications of what actions or omissions by Secured Party would not be commercially
unreasonable in Secured Party's exercise of remedies against the Collateral and that other actions or omissions by Secured Party
shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation upon
the foregoing, nothing contained in this Section shall be construed to grant any rights to Grantor or to impose any duties on Secured
Party that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section.


 






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4.4           UCC
and Offset Rights. Secured Party may exercise, from time to time, any and all rights and remedies available to it under the
UCC or under any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Security
Agreement or in any other agreements between any Obligor and Secured Party, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or unmatured, including costs of collection and attorneys'
and paralegals' fees and costs, and in such order of application as Secured Party may, from time to time, elect, any indebtedness
of Secured Party to any Obligor, however created or arising, including balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to Secured Party. Grantor, on behalf of itself and any Obligor,
hereby waives the benefit of any law that would otherwise restrict or limit Secured Party in the exercise of its right, which is
hereby acknowledged, to appropriate at any time hereafter any such indebtedness owing from Secured Party to any Obligor.


 


4.5           Additional
Remedies. Upon the occurrence and during the continuation of an Event of Default, Secured Party shall have the right and power
to:


 





(a)          instruct
Grantor, at its own expense, to notify any parties obligated on any of the Collateral, including any Account Grantors, to make
payment directly to Secured Party of any amounts due or to become due thereunder, or Secured Party may directly notify such obligors
of the security interest of Secured Party, and/or of the assignment to Secured Party of the Collateral and direct such obligors
to make payment to Secured Party of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts
due on the Collateral directly from such Persons obligated thereon;


 


(b)          enforce
collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect
to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period
(whether or not longer than the original period) any indebtedness thereunder;


 






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(c)          take
possession or control of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon;


 


(d)          extend,
renew or modify for one or more periods (whether or not longer than the original period) the Obligations or any obligation of any
nature of any other obligor with respect to the Obligations;


 


(e)          grant
releases, compromises or indulgences with respect to the Obligations, any extension or renewal of any of the Obligations, any security
therefor, or to any other obligor with respect to the Obligations;


 


(f)          transfer
the whole or any part of Capital Securities which may constitute Collateral into the name of Secured Party or Secured Party's nominee
without disclosing, if Secured Party so desires, that such Capital Securities so transferred are subject to the security interest
of Secured Party, and any corporation, association, or any of the managers or trustees of any trust issuing any of such Capital
Securities, or any transfer agent, shall not be bound to inquire, in the event that Secured Party or such nominee makes any further
transfer of such Capital Securities, or any portion thereof, as to whether Secured Party or such nominee has the right to make
such further transfer, and shall not be liable for transferring the same;


 


(g)          vote
the Collateral;


 


(h)          make
an election with respect to the Collateral under Section 1111 of the Bankruptcy Code or take action under Section 364 or any other
section of Bankruptcy Code; provided, however, that any such action of Secured Party as set forth herein shall not,
in any manner whatsoever, impair or affect the liability of Grantor hereunder, nor prejudice, waive, nor be construed to impair,
affect, prejudice or waive Secured Party's rights and remedies at law, in equity or by statute, nor release, discharge, nor be
construed to release or discharge, Grantor, any guarantor or other Person liable to Secured Party for the Obligations; and


 


(i)          at
any time, and from time to time, accept additions to, releases, reductions, exchanges or substitution of the Collateral, without
in any way altering, impairing, diminishing or affecting the provisions of this Security Agreement, the Loan Documents, or any
of the other Obligations, or Secured Party's rights hereunder, under the Obligations.


 


Grantor hereby ratifies and confirms whatever
Secured Party may do with respect to the Collateral and agrees that Secured Party shall not be liable for any error of judgment
or mistakes of fact or law with respect to actions taken in connection with the Collateral other than as a result of intentional
misconduct or gross negligence.


 






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4.6           Attorney-in-Fact.
Grantor hereby irrevocably makes, constitutes and appoints Secured Party (and any officer of Secured Party or any Person designated
by Secured Party for that purpose) as Grantor's true and lawful proxy and attorney-in-fact (and agent-in-fact) in Grantor's name,
place and stead, with full power of substitution, to (i) take such actions as are permitted in this Security Agreement, (ii) execute
such financing statements and other documents and to do such other acts as Secured Party may require to perfect and preserve Secured
Party's security interest in, and to enforce such interests in the Collateral, and (iii) upon the occurrence of an Event of Default,
carry out any remedy provided for in this Security Agreement, including endorsing Grantor's name to checks, drafts, instruments
and other items of payment, and proceeds of the Collateral, executing change of address forms with the postmaster of the United
States Post Office serving the address of Grantor, changing the address of Grantor to that of Secured Party, opening all envelopes
addressed to Grantor and applying any payments contained therein to the Obligations. Grantor hereby acknowledges that the constitution
and appointment of such proxy and attorney-in-fact are coupled with an interest and are irrevocable. Grantor hereby ratifies and
confirms all that such attorney-in-fact may do or cause to be done by virtue of any provision of this Security Agreement.


 


4.7           No
Marshaling. Secured Party shall not be required to marshal any present or future collateral security (including this Security
Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order. To the extent that it lawfully may, Grantor hereby agrees that
it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Secured
Party's rights under this Security 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, Grantor hereby irrevocably waives the benefits of all such laws.


 


4.8           No
Waiver. No Event of Default shall be waived by Secured Party except in writing. No failure or delay on the part of Secured
Party in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right
at any other time; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There shall be no obligation on the part of Secured Party
to exercise any remedy available to Secured Party in any order. The remedies provided for herein are cumulative and not exclusive
of any remedies provided at law or in equity. Grantor agrees that in the event that Grantor fails to perform, observe or discharge
any of its Obligations or liabilities under this Security Agreement or any other agreements with Secured Party, no remedy of law
will provide adequate relief to Secured Party, and further agrees that Secured Party shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual damages.


 


4.9           
Application of Proceeds. Secured Party will within three (3) Business Days after receipt of cash or solvent credits from collection
of items of payment, proceeds of Collateral or any other source, apply the whole or any part thereof against the Obligations secured
hereby. Secured Party shall further have the exclusive right to determine how, when and what application of such payments and such
credits shall be made on the Obligations, and such determination shall be conclusive upon Grantor. Any proceeds of any disposition
by Secured Party of all or any part of the Collateral may be first applied by Secured Party to the payment of expenses incurred
by Secured Party in connection with the Collateral, including reasonable attorneys’ fees and legal expenses and costs as
provided for in Section 5.13 hereof.


 






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Section
5          MISCELLANEOUS.


 


5.1           Entire
Agreement. This Security Agreement and the other Loan Documents (i) are valid, binding and enforceable against Grantor and
Secured Party in accordance with their respective provisions and no conditions exist as to their legal effectiveness; (ii) constitute
the entire agreement between the parties with respect to the subject matter hereof and thereof; and (iii) are the final expression
of the intentions of Grantor and Secured Party. No promises, either expressed or implied, exist between Grantor and Secured Party,
unless contained herein or therein. This Security Agreement, together with the other Loan Documents, supersedes all negotiations,
representations, warranties, commitments, term sheets, discussions, negotiations, offers or contracts (of any kind or nature, whether
oral or written) prior to or contemporaneous with the execution hereof with respect to any matter, directly or indirectly related
to the terms of this Security Agreement and the other Loan Documents. This Security Agreement and the other Loan Documents are
the result of negotiations between Secured Party and Grantor and have been reviewed (or have had the opportunity to be reviewed)
by counsel to all such parties, and are the products of all parties. Accordingly, this Security Agreement and the other Loan Documents
shall not be construed more strictly against Secured Party merely because of Secured Party's involvement in their preparation.


 


5.2           Notices.
Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Security Agreement
must be in writing and in each case properly addressed to the party to receive the same in accordance with the information below,
and will be deemed to have been delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly
addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle;
or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, next business morning delivery,
then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand
delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a Business Day. Any notice
hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following Business Day. Notwithstanding the foregoing, notice,
consents, waivers or other communications referred to in this Security Agreement may be sent by facsimile, e-mail, or other method
of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other
form of written confirmation) that the notice has been received by the other party.  The addresses and facsimile numbers for
such communications shall be as set forth below, unless such address or information is changed by a notice conforming to the requirements
hereof. No notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in
similar or other circumstances:


 


	If to the Grantor:	 	2915 Waters Road, Suite 108
	 	 	Eagan, MN 55121
	 	 	Attention:  Kenneth Brimmer
	 	 	Facsimile: (952) 545-2795
	 	 	 
	With a copy to:	 	Maslon Edelman Borman & Brand LLP
	(which shall not constitute notice)	 	3300 Wells Fargo Center
	 	 	90 South Seventh Street
	 	 	Minneapolis, MN 55402
	 	 	Attention: Doug Holod
	 	 	Facsimile: (612) 642-8313


 




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	If to Secured Party:	 	TCA Global Credit Master Fund, LP
	 	 	1404 Rodman Street
	 	 	Hollywood, FL 33020
	 	 	Attention: Robert Press
	 	 	Facsimile: (786) 323-1651
	 	 	 
	With a copy to:	 	Lucosky Brookman LLP
	(which shall not constitute notice)	 	101 Wood Avenue South, 5th Floor
	 	 	Woodbridge, NJ 08830
	 	 	Attention: Seth A. Brookman, Esq.
	 	 	Facsimile: (732) 395-4401


 


5.3           Amendments;
Waivers. No delay on the part of Secured Party in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by Secured Party of any right, power or remedy preclude other or further exercise thereof,
or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision
of this Security Agreement or the other Loan Documents shall in any event be effective unless the same shall be in writing and
acknowledged by Secured Party, and then any such amendment, modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.


 


5.4           WAIVER
OF DEFENSES. GRANTOR WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH GRANTOR MAY NOW
HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY SECURED PARTY IN ENFORCING THIS SECURITY AGREEMENT. PROVIDED SECURED PARTY ACTS IN
GOOD FAITH, GRANTOR RATIFIES AND CONFIRMS WHATEVER SECURED PARTY MAY DO PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY GRANTING ANY FINANCIAL ACCOMMODATION TO GRANTOR.


 


5.5           MANDATORY
FORUM SELECTION. Any dispute arising under, relating to, or in connection with the
Agreement or related to any matter which is the subject of or incidental to the Agreement (whether or not such claim is based upon
breach of contract or tort) shall be subject to the exclusive jurisdiction and venue of the state and/or federal courts located
in Broward County, Florida.  This provision is intended to be a “mandatory” forum selection clause and governed
by and interpreted consistent with Florida law.


 






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5.6           WAIVER
OF JURY TRIAL. GRANTOR AND SECURED PARTY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS SECURITY AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH
OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF
DEALING IN WHICH SECURED PARTY AND GRANTOR ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY GRANTING ANY FINANCIAL ACCOMMODATION
TO GRANTOR.


 


5.7           Assignability.
Secured Party, prior to the occurrence of an Event of Default and with the consent of Grantor, which consent will not be unreasonably
withheld, and after the occurrence and during the continuation of an Event of Default without consent from or notice to anyone,
may at any time assign Secured Party's rights in this Security Agreement, the other Loan Documents, the Obligations, or any part
thereof and transfer Secured Party's rights in any or all of the Collateral, and Secured Party thereafter shall be relieved from
all liability with respect to such Collateral. This Security Agreement shall be binding upon Secured Party and Grantor and its
respective legal representatives and successors. All references herein to Grantor shall be deemed to include any successors, whether
immediate or remote. In the case of a joint venture or partnership, the term “Grantor” shall be deemed to include all
joint venturers or partners thereof, who shall be jointly and severally liable hereunder.


 


5.8           Binding
Effect. Except in the case of the Mandatory Forum Selection clause set forth in Section 5.4 hereof, this Security Agreement
shall become effective upon execution by Grantor and Secured Party.


 


5.9           Governing
Law. Except in the case of the Mandatory Forum Selection clause set forth in Section 5.4 hereof, this Agreement shall be construed
and interpreted in accordance with the laws of the State of Nevada without regard to the principles of conflicts of laws.


 


5.10         Enforceability.
Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction,
such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction.


 


5.11         Time
of Essence. Time is of the essence in making payments of all amounts due Secured Party under the Loan Documents and in the
performance and observance by Grantor of each covenant, agreement, provision and term of this Security Agreement and the other
Loan Documents.


 






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5.12         Counterparts;
Facsimile Signatures. This Security Agreement may be executed in any number of counterparts and by the different parties hereto
on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Security Agreement. Receipt of an executed signature page to this Security Agreement by facsimile
or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained
by Secured Party shall be deemed to be originals thereof.


 


5.13         Costs,
Fees and Expenses. Grantor shall pay or reimburse Secured Party for all reasonable costs, fees and expenses incurred by Secured
Party or for which Secured Party becomes obligated in connection with the enforcement of this Security Agreement, including search
fees, costs and expenses and attorneys' fees, costs and time charges of counsel to Secured Party and all taxes payable in connection
with this Security Agreement. In furtherance of the foregoing, Grantor shall pay any and all stamp and other taxes, UCC search
fees, filing fees and other costs and expenses in connection with the execution and delivery of this Security Agreement and the
other Loan Documents to be delivered hereunder, and agrees to save and hold Secured Party harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses. That portion of the
Obligations consisting of costs, expenses or advances to be reimbursed by Grantor to Secured Party pursuant to this Security Agreement
or the other Loan Documents which are not paid on or prior to the date hereof shall be payable by Grantor to Secured Party on demand.
If at any time or times hereafter Secured Party: (a) employs counsel for advice or other representation (i) with respect to this
Security Agreement or the other Loan Documents, (ii) to represent Secured Party in any litigation, contest, dispute, suit or proceeding
or to commence, defend, or intervene or to take any other action in or with respect to any litigation, contest, dispute, suit,
or proceeding (whether instituted by Secured Party, Grantor, or any other Person) in any way or respect relating to this Security
Agreement, or (iii) to enforce any rights of Secured Party against Grantor or any other Person under of this Security Agreement;
(b) takes any action to protect, collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or (c) attempts to
or enforces any of Secured Party's rights or remedies under this Security Agreement, the costs and expenses incurred by Secured
Party in any manner or way with respect to the foregoing, shall be part of the Obligations, payable by Grantor to Secured Party
on demand.


 


5.14         Termination.
This Security Agreement and the Liens and security interests granted hereunder shall not terminate until the termination of the
Credit Agreement and the commitments to make Loans thereunder and the full and complete performance and satisfaction and payment
in full of all the Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has
been asserted). Upon termination of this Security Agreement, Secured Party shall also deliver to Grantor (at the sole expense of
Grantor) such UCC termination statements and such other documentation, without recourse, warranty or representation whatsoever,
as shall be reasonably requested by Grantor to effect the termination and release of the Liens and security interests in favor
of Secured Party affecting the Collateral.


 


5.15         Reinstatement.
This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any significant part of Grantor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise,
all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.


 


[-Remainder of Page Deliberately
Left Blank-]


 




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IN WITNESS WHEREOF,
Grantor and Secured Party have executed this Security Agreement as of the date first above written.


 


	 	GRANTOR:
	 	 
	 	HDI PLASTICS, INC.
	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 


 


	 	SECURED PARTY:
	 	 
	 	TCA GLOBAL CREDIT MASTER FUND, LP
	 	 
	 	By: 	TCA Global Credit Fund GP, Ltd.
	 	Its: 	General Partner
	 	 
	 	By: 	 
	 	Name: 	Robert Press
	 	Title: 	Director


 


[signature page to Security
Agreement (subsidiary)]


 




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