f8k022610ex10iv_nxt.htm


    

      Exhibit 10.4

      
 

      SECURITY
AGREEMENT

      


                  This
SECURITY AGREEMENT, dated as of February 26, 2010 (this “Agreement”), is among
NXT Nutritionals Holdings, Inc., a Delaware corporation (the “Company”), all of the
Subsidiaries of the Company (such subsidiaries,
the “Guarantors” and together with
the Company, the “Debtors”) and the
holders of the Company’s Secured Original Issue Discount Convertible Notes due
15 months following their issuance (collectively, the “Notes”) signatory
hereto, their endorsees, transferees and assigns (collectively, the “Secured
Parties”).

      


      W
I T N E S S E T H:

      


                  WHEREAS,
pursuant to the Purchase Agreement (as defined in the Notes), the Secured
Parties have severally agreed to extend the loans to the Company evidenced by
the Notes;

      


                  WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
“Guarantee”),
the Guarantors
have jointly and severally agreed to guarantee and act as surety for payment of
such Notes; and

      


                  WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Notes, each Debtor has agreed to execute and deliver to the Secured Parties this
Agreement and to grant the Secured Parties, pari passu with each other
Secured Party and through the Agent (as defined in Section 18 hereof), a
security interest in certain property of such Debtor to secure the prompt
payment, performance and discharge in full of all of the Company’s obligations
under the Notes and the Guarantors’ obligations under the
Guarantee.

      


                  NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

      


                  1.          
Certain Definitions. As
used in this Agreement, the following terms shall have the meanings set forth in
this Section 1.  Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting
obligations”) shall have the respective meanings given such terms in Article 9
of the UCC.

      


      (a)           “Collateral” means the
collateral in which the Secured Parties are granted a security interest by this
Agreement and which shall include the following personal property of the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale or
transfer of the Collateral and of insurance covering the same and of any tort
claims in connection therewith, and all dividends,
interest, cash, notes, securities, equity interest or other property at any time
and from time to time acquired, receivable or otherwise distributed in respect
of, or in exchange for, any or all of the Pledged Securities (as defined
below):

       

      
        
          
          

        

        
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      (i)   All
goods, including, without limitation, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory;

      


      (ii)           All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights under any of the Organizational Documents,
agreements related to the Pledged Securities, licenses, distribution and
other agreements, computer software (whether “off-the-shelf”, licensed from any
third party or developed by any Debtor), computer software development rights,
leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, and income tax refunds;

       

      (iii)          All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;

      


      (iv)          All
documents, letter-of-credit rights, instruments and chattel paper;

      


      (v)           All
commercial tort claims;

      


      (vi)          All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);

      


      (vii)         All
investment property;

      


      (viii)        All
supporting obligations; and

      


      (ix)           All
files, records, books of account, business papers, and computer programs;
and

      


      (x)           the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.

       

      
        
          
          

        

        
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      Without limiting the generality of the foregoing, the
“Collateral” shall include all investment property and general
intangibles respecting ownership and/or other equity interests in each
Guarantor, including, without limitation, the shares of capital stock and the
other equity interests listed on Schedule H hereto (as the same may be modified from time to time
pursuant to the terms hereof), and any other shares of capital stock and/or
other equity interests of any other direct or indirect subsidiary of any Debtor
obtained in the future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights, options, warrants,
stock, other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing
and all rights arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and
cash.

       

      Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such
asset.

      


      (b)           “Intellectual
Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, (i) all copyrights arising under the laws of the United States, any
other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof, and all applications for letters patent of the United States or any
other country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service marks, logos,
domain names and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common law
rights related thereto, (iv) all trade secrets arising under the laws of the
United States, any other country or any political subdivision thereof, (v) all
rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all
licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

       

      
        
          
          

        

        
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      (c)           “Majority
in Interest” means, at any time of determination, the majority in interest
(based on then-outstanding Principal Amounts of Notes at the time of such
determination) of the Secured Parties.

       

      (d)           “Necessary
Endorsement” means undated stock powers endorsed in blank or other proper
instruments of assignment duly executed and such other instruments or documents
as the Agent (as that term is defined below) may reasonably request.

      


      (e)           “Obligations” means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Notes, the Guarantee and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time.  Without limiting the generality of the foregoing, the
term “Obligations” shall include, without limitation: (i) principal of, and
interest on the Notes and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with this Agreement, the Notes, the
Guarantee and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any
Debtor.

      


      (f)           “Organizational
Documents” means with respect to any Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

      


      (g)           “Pledged Interests”
shall have the meaning ascribed to such term in Section 4(j).

      


      (h)           “Pledged Securities”
shall have the meaning ascribed to such term in Section 4(i).

      


      (i)           “UCC” means the
Uniform Commercial Code of the State of New York and or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time.  It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense.  Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.

       

      
        
          
          

        

        
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                 2.           
Grant of Security Interest in
Collateral. As an inducement for the Secured Parties to extend the loans
as evidenced by the Notes and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a security interest in and to, a lien
upon and a right of set-off against all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest”
and, collectively, the “Security
Interests”).

      


                 3.         
  Delivery of Certain
Collateral.  Contemporaneously or
prior to the execution of this Agreement, each Debtor shall deliver or cause to
be delivered to the Agent (a) any and all certificates and other instruments
representing or evidencing the Pledged Securities, and (b) any and all
certificates and other instruments or documents representing any of the other
Collateral, in each case, together with all Necessary
Endorsements.  The Debtors are, contemporaneously with the execution
hereof, delivering to Agent, or have previously delivered to Agent, a true and
correct copy of each Organizational Document governing any of the Pledged
Securities.

      


                  4.           Representations, Warranties,
Covenants and Agreements of the Debtors. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Secured
Parties concurrently herewith (the “Disclosure
Schedules”), which Disclosure Schedules shall be deemed a part hereof,
each Debtor represents and warrants to, and covenants and agrees with, the
Secured Parties as follows:

      


      (a)   Each
Debtor has the requisite corporate, partnership, limited liability company or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor.  This Agreement has been duly
executed by each Debtor.  This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

      


       (b)           The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  Except as specifically set forth on Schedule A, each
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Notes).  Except as
disclosed on Schedule
A, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.

       

      
        
          
          

        

        
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      (c)           Except
for Permitted Liens (as defined in the Notes) and except as set forth on Schedule B attached
hereto, the Debtors are the sole owner of the Collateral (except for
non-exclusive licenses granted by any Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and are fully authorized to grant the Security
Interests.  Except as set forth on Schedule C attached
hereto, there is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those that
will be filed in favor of the Secured Parties pursuant to this Agreement)
covering or affecting any of the Collateral.  Except as set forth on
Schedule C
attached hereto and except pursuant to this Agreement, as long as this Agreement
shall be in effect, the Debtors shall not execute and shall not knowingly permit
to be on file in any such office or agency any other financing statement or
other document or instrument (except to the extent filed or recorded in favor of
the Secured Parties pursuant to the terms of this Agreement).

      


      (d)           No
written claim has been received that any Collateral or any Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.

      


      (e)           Each
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.

      


      (f)           This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral, subject only to Permitted Liens (as defined in the Notes)
securing the payment and performance of the Obligations.  Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected.  Except for the filing of the Uniform Commercial Code
financing statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined in
Section 4(p) hereof) with respect to copyrights and copyright applications in
the United States Copyright Office referred to in paragraph (m), the execution
and delivery of deposit account control agreements satisfying the requirements
of Section 9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, and the delivery of the certificates and other instruments
provided in Section 3, 

       

      
        
          
          

        

        
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      no action
is necessary to create, perfect or protect the security interests created
hereunder.  Without limiting the generality of the foregoing, except
for the filing of said financing statements, the recordation of said
Intellectual Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties
hereunder.

      


       (g)           Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.

      


       (h)           The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter
into and perform its obligations hereunder have been obtained.

      


       (i)           The capital stock and other equity interests listed on
Schedule
H hereto (the “Pledged
Securities”) represent all of the capital
stock and other equity interests of the Guarantors, and represent all capital
stock and other equity interests owned, directly or indirectly, by the
Company.  All of the Pledged Securities are validly issued, fully paid
and nonassessable, and the Company is the legal and beneficial owner of the
Pledged Securities, free and clear of any lien, security interest or other
encumbrance except for the security interests created by this Agreement and
other Permitted Liens (as defined in the Notes).

      


      (j)           The ownership and other equity interests in partnerships
and limited liability companies (if any)
included in the Collateral (the
“Pledged
Interests”) by their express terms do not
provide that they are securities governed by Article 8 of the UCC and are not
held in a securities account or by any financial
intermediary.

       

      
        
          
          

        

        
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      (k)           Except
for Permitted Liens (as defined in the Notes), each Debtor shall at all times
maintain the liens and Security Interests provided for hereunder as valid and
perfected first priority liens and security interests in the Collateral in favor
of the Secured Parties until this Agreement and the Security Interest hereunder
shall be terminated pursuant to Section 14 hereof.  Each Debtor hereby
agrees to defend the same against the claims of any and all persons and
entities. Each Debtor shall safeguard and protect all Collateral for the account
of the Secured Parties.  At the request of the Agent, each Debtor will
sign and deliver to the Agent on behalf of the Secured Parties at any time or
from time to time one or more financing statements pursuant to the UCC in form
reasonably satisfactory to the Agent and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the Agent to be,
necessary or desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, each Debtor shall pay all
fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interests hereunder, and each Debtor shall obtain and furnish to the
Agent from time to time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the priority of the Security
Interests hereunder.

      


      (l)           No
Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by a
Debtor in its ordinary course of business and sales of inventory by a Debtor in
its ordinary course of business) without the prior written consent of a Majority in Interest.

      


      (m)           Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

      


      (n)           Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds and in the
amounts customarily insured against by entities of established reputation having
similar properties similarly situated and in such amounts as are customarily
carried under similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof.  Each Debtor shall cause
each insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Agent, that (a) the Agent will be named as
lender loss payee and additional insured under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. 

       

      
        
          
          

        

        
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       If no Event of Default (as defined in the Notes)
exists and if the proceeds arising out of any claim or series of related claims
do not exceed $100,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with respect to
which the loss was incurred to the extent reasonably feasible, and any loss
payments or the balance thereof remaining, to the extent not so applied, shall
be payable to the applicable Debtor; provided, however, that payments received by any Debtor after an Event of
Default occurs and is continuing or in excess of $100,000 for any occurrence or
series of related occurrences shall be paid to the Agent on behalf of the
Secured Parties and, if received by such Debtor, shall be held in trust for the
Secured Parties and immediately paid over to the Agent unless otherwise directed
in writing by the Agent.   Copies of such policies or the related
certificates, in each case, naming the Agent as lender loss payee and additional
insured shall be delivered to the Agent at least annually and at the time any
new policy of insurance is issued.

      


      (o)           Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any material adverse change
in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured
Parties’ security interest, through the Agent, therein.

      


       (p)           Each
Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as the Agent may from time to time request and may in its sole discretion deem
necessary to perfect, protect or enforce the Secured Parties’ security interest
in the Collateral including, without limitation, if applicable, the execution
and delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual Property
Security Agreement”) in which the Secured Parties have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
the Agent, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.

      


      (q)           Each
Debtor shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.

      


      (r)           Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.

      


      (s)           Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties
hereunder.

       

      
        
          
          

        

        
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      (t)           All
information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished.

      


      (u)           The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.

      


      (v)           No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.

      


      (w)           Except
in the ordinary course of business, no Debtor may consign any of its inventory
or sell any of its inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the Agent which shall
not be unreasonably withheld.

      


      (x)           No
Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and
so long as, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.

      


       (y)           Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule D attached
hereto, which Schedule
D sets forth each Debtor’s organizational identification number or, if
any Debtor does not have one, states that one does not exist.

      


      (z)           
(i) The actual name of each Debtor is the name set forth in Schedule D attached
hereto; (ii) no Debtor has any trade names except as set forth on Schedule E attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on Schedule
E.

      


      (aa)           At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Agent.

      


                 (bb)           Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and instructions of Agent regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC.  Further, each Debtor agrees that it shall not
enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or
entity.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (cc)           Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement.  To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

      


      (dd)           If
there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Agent, to be entered into and
delivered to the Agent for the benefit of the Secured Parties.

      


      (ee)           To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to
consent to an assignment of the proceeds thereof to the Secured
Parties.

      


      (ff)           To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party of the
Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to the
Agent.

      


      (gg)           If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Parties in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent.

      


      (hh)          Each
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Agent an assignment of claims for such accounts and cooperate
with the Agent in taking any other steps required, in its judgment, under the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule to perfect or continue the perfected status of the Security Interests in
such accounts and proceeds thereof.

      


       (ii)           Each
Debtor shall cause each subsidiary of such
Debtor to immediately become a party hereto (an “Additional Debtor”), by
executing and delivering an Additional Debtor Joinder in substantially the form
of Annex A
attached hereto and comply with the provisions hereof applicable to the
Debtors.  Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in
effect. 

       

      
        
          
          

        

        
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       The
Additional Debtor shall also deliver such opinions of counsel, authorizing
resolutions, good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as the
Agent may reasonably request.  Upon delivery of the foregoing to the
Agent, the Additional Debtor shall be and become a party to this Agreement with
the same rights and obligations as the Debtors, for all purposes hereof as fully
and to the same extent as if it were an original signatory hereto and shall be
deemed to have made the representations, warranties and covenants set forth
herein as of the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the “Debtors” shall be deemed to include
each Additional Debtor.

      


      (jj)          Each Debtor shall vote the Pledged Securities to comply
with the covenants and agreements set forth herein and in the
Notes.

       

      (kk)           Each Debtor shall register the pledge of the applicable
Pledged Securities on the books of such Debtor.  Each Debtor shall
notify each issuer of Pledged Securities to register the pledge of the
applicable Pledged Securities in the name of the Secured Parties on the books of
such issuer.  Further, except with respect to certificated securities
delivered to the Agent, the applicable Debtor shall deliver to Agent an
acknowledgement of pledge (which, where appropriate, shall comply with the
requirements of the relevant UCC with respect to perfection by registration)
signed by the issuer of the applicable Pledged Securities, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such Pledged
Securities into the name of any designee of Agent, will take such steps as may
be necessary to effect the transfer, and will comply with all other instructions
of Agent regarding such Pledged Securities without the further consent of the
applicable Debtor.

       

      (ll)           In the event that, upon an occurrence of an Event of
Default, Agent shall sell all or any of the Pledged Securities to another party
or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged
Securities, each Debtor shall, to the extent applicable: (i) deliver to Agent or
the Transferee, as the case may be, the articles of incorporation, bylaws,
minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the Pledged
Securities by Agent and allow the Transferee or Agent to continue the business
of the Debtors and their direct and indirect subsidiaries.

       

      
        
          
          

        

        
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      (mm)           Without
limiting the generality of the other obligations of the Debtors hereunder, each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark Office to
be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.

      


       (nn)           Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Agent
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this Agreement.

      


      (oo)           Schedule F attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the
Debtors as of the date hereof.  Schedule F lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.

      


      (pp)           Except
as set forth on Schedule G attached
hereto, none of the account debtors or other persons or entities obligated on
any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute or rule
in respect of such Collateral.

      


                 5.        
   Effect of Pledge on Certain Rights. If any of the
Collateral subject to this Agreement consists of nonvoting equity or ownership
interests (regardless of class, designation, preference or rights) that may be
converted into voting equity or ownership interests upon the occurrence of
certain events (including, without limitation, upon the transfer of all or any
of the other stock or assets of the issuer), it is agreed that the pledge of
such equity or ownership interests pursuant to this Agreement or the enforcement
of any of Agent’s rights hereunder shall not be deemed to be the type of event
which would trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.

      


                 6.           Defaults. The following events
shall be “Events of
Default”:

      


      (a)   The
occurrence of an Event of Default (as defined in the Notes) under the
Notes;

       

      
        
          
          

        

        
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      (b)   Any
representation or warranty of any Debtor in this Agreement shall prove to have
been untrue or incorrect in any material respect as of the date when made or
deemed made;

      


      (c)   The
failure by any Debtor to observe or perform any of its obligations hereunder for
ten (10) days after delivery to such Debtor of notice of such failure by or on
behalf of a Secured Party unless such default is capable of cure but cannot be
cured within such time frame and such Debtor is using best efforts to cure same
in a timely fashion; or

      


      (d)   If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.

      


                  7.           Duty To Hold In Trust.

      


      (a)           Upon
the occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interests, whether payable pursuant to the Notes or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Parties, pro-rata in proportion to their
respective then-currently outstanding Principal Amount of Notes for application
to the satisfaction of the Obligations (and if any Note is not outstanding,
pro-rata in proportion to the initial purchases of the remaining Notes).

      


      (b)           If
any Debtor shall become entitled to receive or shall receive any securities or
other property (including, without limitation, shares of Pledged Securities or
instruments representing Pledged Securities acquired after the date hereof, or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business on
the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.

       

      
        
          
          

        

        
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                  8.          
Rights and Remedies Upon
Default.

      


               (a)          Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through the Agent, shall have the right to exercise all of the
remedies conferred hereunder and under the Notes, and the Secured Parties shall
have all the rights and remedies of a secured party under the
UCC.  Without limitation, the Agent, for the benefit of the Secured
Parties, shall have the following rights and powers:

      


      (i)   The
Agent shall have the right to take possession of the Collateral and, for that
purpose, enter, with the aid and assistance of any person, any premises where
the Collateral, or any part thereof, is or may be placed and remove the same,
and each Debtor shall assemble the Collateral and make it available to the Agent
at places which the Agent shall reasonably select, whether at such Debtor's
premises or elsewhere, and make available to the Agent, without rent, all of
such Debtor’s respective premises and facilities for the purpose of the Agent
taking possession of, removing or putting the Collateral in saleable or
disposable form.

      


      (ii)         Upon
notice to the Debtors by Agent, all rights of each Debtor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise and
all rights of each Debtor to receive the dividends and interest which it would
otherwise be authorized to receive and retain, shall cease.  Upon such
notice, Agent shall have the right to receive, for the benefit of the Secured
Parties, any interest, cash dividends or other payments on the Collateral and,
at the option of Agent, to exercise in such Agent’s discretion all voting rights
pertaining thereto.  Without limiting the generality of the foregoing,
Agent shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner thereof,
including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.

      


      (iii)   The Agent shall have the right to operate
the business of each Debtor using the Collateral and shall have the right to
assign, sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Agent may deem commercially
reasonable, all without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any Debtor or right
of redemption of a Debtor, which are hereby expressly waived.  Upon
each such sale, lease, assignment or other transfer of Collateral, the Agent,
for the benefit of the Secured Parties, may, unless prohibited by applicable law
which cannot be waived, purchase all or any part of the Collateral being sold,
free from and discharged of all trusts, claims, right of redemption and equities
of any Debtor, which are hereby waived and released.

       

      
        
          
          

        

        
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      (iv)         The
Agent shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly
to the Agent, on behalf of the Secured Parties, and to enforce the Debtors’
rights against such account debtors and obligors.

      


      (v)         The
Agent, for the benefit of the Secured Parties, may (but is not obligated to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.

      


      (vi)         The
Agent may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any
designee or any purchaser of any Collateral.

      


                      
(b)           The Agent
shall comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral.  The Agent
may sell the Collateral without giving any warranties and may specifically
disclaim such warranties.  If the Agent sells any of the Collateral on
credit, the Debtors will only be credited with payments actually made by the
purchaser.  In addition, each Debtor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Agent’s rights and remedies hereunder, including, without limitation, its right
following an Event of Default to take immediate possession of the Collateral and
to exercise its rights and remedies with respect thereto.

       

              
(c)           For the
purpose of enabling the Agent to further exercise rights and remedies under this
Section 8 or elsewhere provided by agreement or applicable law, each Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof.

      


                  9.           Applications of Proceeds. The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding Principal Amounts of Notes at the
time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, 

       

      
        
          
          

        

        
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      upon the sale, license or other disposition of the Collateral, the
proceeds thereof are insufficient to pay all amounts to which the Secured
Parties are legally entitled, the Debtors will be liable for the deficiency,
together with interest thereon, at the rate of 18% per annum or the lesser
amount permitted by applicable law (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Parties to collect
such deficiency.  To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

      


                 10.          Securities Law Provision.  Each
Debtor recognizes that Agent may be limited in its ability to effect a sale to
the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities Laws”), and may be
compelled to resort to one or more sales to a restricted group of purchasers who
may be required to agree to acquire the Pledged Securities for their own
account, for investment and not with a view to the distribution or resale
thereof.  Each Debtor agrees that sales so made may be at prices and
on terms less favorable than if the Pledged Securities were sold to the public,
and that Agent has no obligation to delay the sale of any Pledged Securities for
the period of time necessary to register the Pledged Securities for sale to the
public under the Securities Laws.  Each Debtor shall cooperate with
Agent in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.

       

                  11.         Costs and Expenses. Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Agent.  The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Agent is reasonably likely to prejudice, imperil or otherwise
affect the Collateral or the Security Interests therein.  The Debtors
will also, upon demand, pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Agent, for the benefit of the Secured Parties, may
incur in connection with the creation, perfection, protection, satisfaction,
foreclosure, collection or enforcement of the Security Interest and the
preparation, administration, continuance, amendment or enforcement of this
Agreement and pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Agent, for the benefit of the Secured Parties, and the Secured
Parties may incur in connection with (i) the enforcement of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Notes. Until so paid, any
fees payable hereunder shall be added to the Principal Amount of the Notes and
shall bear interest at the Default Rate.

      


                  12.         Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.  Without limiting the generality of the
foregoing, (a) neither the Agent nor any Secured Party (i) has any duty (either
before or after an Event of Default) to collect any amounts in respect of the
Collateral or to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder. 

       

      
        
          
          

        

        
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       Neither the Agent nor any Secured Party shall have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Agent or any Secured Party
of any payment relating to any of the Collateral, nor shall the Agent or any
Secured Party be obligated in any manner to perform any of the obligations of
any Debtor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Agent or any
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or times.

      


                 13.          Security Interests Absolute. All rights of the
Secured Parties and all obligations of the Debtors hereunder, shall be absolute
and unconditional, irrespective of: (a) any lack of validity or enforceability
of this Agreement, the Notes or any agreement entered into in connection with
the foregoing, or any portion hereof or thereof; (b) any change in the time,
manner or place of payment or performance of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Notes or any other agreement entered into in connection
with the foregoing; (c) any exchange, release or nonperfection of any of the
Collateral, or any release or amendment or waiver of or consent to departure
from any other collateral for, or any guarantee, or any other security, for all
or any of the Obligations; (d) any action by the Secured Parties to obtain,
adjust, settle and cancel in its sole discretion any insurance claims or matters
made or arising in connection with the Collateral; or (e) any other circumstance
which might otherwise constitute any legal or equitable defense available to a
Debtor, or a discharge of all or any part of the Security Interests granted
hereby.  Until the Obligations shall have been paid and performed in
full, the rights of the Secured Parties shall continue even if the Obligations
are barred for any reason, including, without limitation, the running of the
statute of limitations or bankruptcy.  Each Debtor expressly waives
presentment, protest, notice of protest, demand, notice of nonpayment and demand
for performance. In the event that at any time any transfer of any Collateral or
any payment received by the Secured Parties hereunder shall be deemed by final
order of a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than the
Secured Parties, then, in any such event, each Debtor’s obligations hereunder
shall survive cancellation of this Agreement, and shall not be discharged or
satisfied by any prior payment thereof and/or cancellation of this Agreement,
but shall remain a valid and binding obligation enforceable in accordance with
the terms and provisions hereof.  Each Debtor waives all right to
require the Secured Parties to proceed against any other person or entity or to
apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.

       

      
        
          
          

        

        
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                  14.         Term of Agreement. This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Notes have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and in full force
and effect regardless of the termination of this Agreement.

      


      15.     Power of Attorney; Further
Assurances.

      


       (a)          Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint the
Agent and its officers, agents, successors or assigns with full power of
substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Agent; (ii) to sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for, compromise, settle
and sue for monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Agent, and at the expense of the
Debtors, at any time, or from time to time, to execute and deliver any and all
documents and instruments and to do all acts and things which the Agent deems
necessary to protect, preserve and realize upon the Collateral and the Security
Interests granted therein in order to effect the intent of this Agreement and
the Notes all as fully and effectually as the Debtors might or could do; and
each Debtor hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof.  This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.  The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a
party.  Without limiting the generality of the foregoing, after the
occurrence and during the continuance of an Event of Default, each Secured Party
is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.

      


       (b)          On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies in
any jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule C
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by the
Agent, to perfect the Security Interests granted hereunder and otherwise to
carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Agent the grant or perfection of a perfected security interest
in all the Collateral under the UCC.

       

      
        
          
          

        

        
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      (c)           Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
with full authority in the place and instead of such Debtor and in the name of
such Debtor, from time to time in the Agent’s discretion, to take any action and
to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including the filing, in its sole
discretion, of one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of such Debtor
where permitted by law, which financing statements may (but need not) describe
the Collateral as “all assets” or “all personal property” or words of like
import, and ratifies all such actions taken by the Agent.  This power
of attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.

      


                  16.         
Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Notes).

      


                  17.         Other Security. To the extent
that the Obligations are now or hereafter  secured by property other
than the Collateral or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity, then the Agent shall have the right,
in its sole discretion, to pursue, relinquish, subordinate, modify or take any
other action with respect thereto, without in any way modifying or affecting any
of the Secured Parties’ rights and remedies hereunder.

      


                 18.           Appointment of Agent.  The Secured
Parties hereby appoint Genesis Asset Opportunity Fund LP to act as their agent
(“Genesis” or “Agent”) for purposes of exercising any and all rights and
remedies of the Secured Parties hereunder. Such appointment shall continue until
revoked in writing by a Majority in Interest, at which time a Majority in
Interest shall appoint a new Agent, provided that Genesis may not be removed as
Agent unless Genesis shall then hold less than $100,000 in Principal Amount of
Notes; provided, further, that such removal may occur only if each of the other
Secured Parties shall then hold not less than an aggregate of $500,000 in
Principal Amount of Notes. The Agent shall have the rights, responsibilities and
immunities set forth in Annex B hereto.

       

                  19.         Miscellaneous.

      


      (a)           No
course of dealing between the Debtors and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties,
any right, power or privilege hereunder or under the Notes shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      


      (b)           All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Notes or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.

      


      (c)           This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this Agreement
may be waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Debtors and the Secured Parties
holding 67% or more of the Principal Amount of Notes then outstanding, or, in
the case of a waiver, by the party against whom enforcement of any such waived
provision is sought.

      


      (d)           If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

      


      (e)           No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.

      


      (f)         This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company and the
Guarantors may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Secured Party (other than by
merger).  Any Secured Party may assign any or all of its rights under
this Agreement to any Person (as defined in the Purchase Agreement) to whom such
Secured Party assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred Obligations, by
the provisions of this Agreement that apply to the “Secured
Parties.”

      


      (g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      


      (h)  Except
to the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law
thereof.  Except to the extent mandatorily governed by the
jurisdiction or situs where the Collateral is located, each Debtor agrees that
all proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Notes (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan.  Except to the extent mandatorily governed by
the jurisdiction or situs where the Collateral is located, each Debtor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper.  Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

      


      (i)           This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.

      


      (j)           All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Parties hereunder.

      


      (k)           Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages,

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

       penalties,
suits, costs and expenses which result from the gross negligence or willful
misconduct of the Indemnitee as determined by a final, nonappealable decision of
a court of competent jurisdiction.  This indemnification provision is
in addition to, and not in limitation of, any other indemnification provision in
the Notes, the Purchase Agreement (as such term is defined in the Notes) or any
other agreement, instrument or other document executed or delivered in
connection herewith or therewith.

       

      (l)           Nothing
in this Agreement shall be construed to subject Agent or any Secured Party to
liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, nor shall
Agent or any Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any of its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto.

      


      (m)          To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      


       

      [SIGNATURE
PAGES FOLLOW]

      
 

                  IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.

       

       

      
        
          	
                  NXT
      NUTRITIONALS HOLDINGS, INC.

                	 
	 	 	 
	
                  By:
      

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

                	 
	 	
                  Name:
      Francis McCarthy

                	 
	 	Title:   President
      and CEO	 
	 	 	 
	 	 	 
	 HEALTHY DAIRY
    LLC	 
	 	 	 
	By: 	
                  /s/ Francis
      McCarthy

                	 
	 	Name:
      Francis McCarthy	 
	 	Title:   President
      and CEO	 
	 	 	 
	 	 	 
	 NXT, LLC	 
	 	 	 
	By: 	
                  /s/ Francis
      McCarthy

                	 
	 	Name:
      Francis McCarthy	 
	 	Title:   President
      and CEO	 
	 	 	 


        

      

       

      

        [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

         

      

      
        
          
             


          

          
            24

            
              

            

          

          
             


          

        



      [SIGNATURE
PAGE OF HOLDERS TO NXTH SA]

      


          

       

      Name of
Investing Entity: __________________________

       

      Signature of Authorized Signatory of
Investing entity: _________________________

       

      Name of
Authorized Signatory: _________________________

       

      Title of
Authorized Signatory: __________________________

       

       

      [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

      


        
          
             


          

          
            25

            
              

            

          

          
             


          

        



      ANNEX
A

      to

      SECURITY

      AGREEMENT

      


      
        	
                FORM
      OF ADDITIONAL DEBTOR JOINDER

              


      

      


      Security
Agreement dated as of February 26, 2010 made by

      NXT
Nutritionals Holdings, Inc.

      and its
subsidiaries party thereto from time to time, as Debtors

      to and in
favor of

      the
Secured Parties identified therein (the “Security
Agreement”)

      


                 Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.

      


                 The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO
THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF
JURY TRIAL PROVISIONS SET FORTH THEREIN.

      


                 Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.

      


                 An
executed copy of this Joinder shall be delivered to the Secured Parties, and the
Secured Parties may rely on the matters set forth herein on or after the date
hereof.  This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

      

        
          
             


          

          
            26

            
              

            

          

          
             


          

        



        

              IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the
name and on behalf of the undersigned.

       

      
        
          	 	 	 
	 	
                  [Name
      of Additional Debtor]

                	 
	 	 	 
	
                   

                	
                  By:
      

                	 
	 	Name 	 
	 	Title	 
	 	 	 
	 	
                  Address:

                	 
	
                  Dated:

                	 	 


        

         

         

      

      

        
          
             


          

          
            27

            
              

            

          

          
             


          

        



      ANNEX
B

      to

      SECURITY

      AGREEMENT

      


      THE
AGENT

      


                            1.    
Appointment. The Secured Parties
(all capitalized terms used herein and not otherwise defined shall have the
respective meanings provided in the Security Agreement to which this Annex B is
attached (the "Agreement")), by their
acceptance of the benefits of the Agreement, hereby designate Genesis Asset
Opportunity Fund LP (“Genesis” or “Agent”) as the Agent
to act as specified herein and in the Agreement.  Each Secured Party
shall be deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of the Agreement and any other Transaction Document
(as such term is defined in the Purchase Agreement) and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto.  The Agent may
perform any of its duties hereunder by or through its agents or
employees.

      


                            2.     
Nature of Duties.  The Agent shall
have no duties or responsibilities except those expressly set forth in the
Agreement.  Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused solely
by its or their gross negligence or willful misconduct as determined by a final
judgment (not subject to further appeal) of a court of competent
jurisdiction.  The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and
therein.

      


                            3.     
Lack of Reliance on the
Agent.  Independently and without reliance upon the Agent, each
Secured Party, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such Secured
Party’s investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. 

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

       The
Agent shall not be responsible to the Debtors or any Secured Party for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith, or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of the Agreement or any
other Transaction Document, or for the financial condition of the Debtors or the
value of any of the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of the Agreement or any other Transaction Document, or the financial
condition of the Debtors, or the value of any of the Collateral, or the
existence or possible existence of any default or Event of Default under the
Agreement, the Notes or any of the other Transaction Documents.

      


                            4.     
Certain Rights of the
Agent.  The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured
Parties.  To the extent practical, the Agent shall request
instructions from the Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any other
Transaction Document, and shall be entitled to act or refrain from acting in
accordance with the instructions of a Majority in Interest; if such instructions
are not provided despite the Agent’s request therefor, the Agent shall be
entitled to refrain from such act or taking such action, and if such action is
taken, shall be entitled to appropriate indemnification from the Secured Parties
in respect of actions to be taken by the Agent; and the Agent shall not incur
liability to any person or entity by reason of so refraining.  Without
limiting the foregoing, (a) no Secured Party shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the terms of the Agreement or any other
Transaction Document, and the Debtors shall have no right to question or
challenge the authority of, or the instructions given to, the Agent pursuant to
the foregoing and (b) the Agent shall not be required to take any action which
the Agent believes (i) could reasonably be expected to expose it to personal
liability or (ii) is contrary to this Agreement, the Transaction Documents or
applicable law.

      


                            5.     
Reliance.  The
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected by
it.  Anything to the contrary notwithstanding, the Agent shall have no
obligation whatsoever to any Secured Party to assure that the Collateral exists
or is owned by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or sufficiently or
lawfully created, perfected, or enforced or are entitled to any particular
priority.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      


                            6.     
Indemnification.  To the extent
that the Agent is not reimbursed and indemnified by the Debtors, the Secured
Parties will jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective Principal Amounts of Notes,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder or under the Agreement or
any other Transaction Document, or in any way relating to or arising out of the
Agreement or any other Transaction Document except for those determined by a
final judgment (not subject to further appeal) of a court of competent
jurisdiction to have resulted solely from the Agent's own gross negligence or
willful misconduct.  Prior to taking any action hereunder as Agent,
the Agent may require each Secured Party to deposit with it sufficient sums as
it determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.

      


                            7.     
Resignation by the
Agent.

      


      (a)  The
Agent may resign from the performance of all its functions and duties under the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties.  Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.

      


      (b)  Upon
any such notice of resignation, the Secured Parties, acting by a Majority in Interest, shall appoint a successor
Agent hereunder.

      


      (c) If a
successor Agent shall not have been so appointed within said 30-day period, the
Agent shall then appoint a successor Agent who shall serve as Agent until such
time, if any, as the Secured Parties appoint a successor Agent as provided
above.  If a successor Agent has not been appointed within such 30-day
period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.

      


                            8.     
Rights with respect to
Collateral.  Each Secured
Party agrees with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its security
interest in the Collateral, whether pursuant to any other agreement or otherwise
(other than pursuant to this Agreement), or take or institute any action against
the Agent or any of the other Secured Parties in respect of the Collateral or
its rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with respect to
the Collateral other than as set forth in this Agreement and the other
Transaction Documents.  Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its duties
and obligations under the Agreement.  After any retiring Agent’s
resignation or removal hereunder as Agent, the provisions of the Agreement
including this Annex B shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.

       

       

      30