f8k032010ex10iii_ecoblu.htm


     

    Exhibit 10.3

    
      


      SECURITY
AGREEMENT

      


      This
SECURITY AGREEMENT (this
“Agreement”), dated as
of March 26, 2010, is made by and among the grantors listed on the signature
pages hereof (collectively, jointly and severally, the “Grantors” and each,
individually, a “Grantor”), and the secured
parties listed on the signature pages hereof (collectively, the “Secured Parties” and each,
individually, a “Secured
Party”).

       

      RECITALS

       

      WHEREAS, pursuant to that
certain Securities Purchase Agreement, dated as of March 26, 2010 (as may be
amended, restated, supplemented, or otherwise modified from time to time,
including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among EcoBlu Products, Inc., a Colorado corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes and Warrants;
and

       

      WHEREAS, each Grantor other
than Parent is a direct or indirect wholly-owned Subsidiary (as defined below)
of Parent and will receive direct and substantial benefits from the purchase by
each of the Secured Parties of the Notes and Warrants; and

       

      WHEREAS, in order to induce
the Secured Parties to purchase, severally and not jointly, the Notes and
Warrants as provided for in the Securities Purchase Agreement, Grantors have
agreed to grant a continuing security interest in and to the Collateral in order
to secure the prompt and complete payment, observance and performance of the
Secured Obligations.

       

      AGREEMENTS

       

      NOW, THEREFORE, for and in
consideration of the recitals made above and other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:

       

      1. Defined Terms. All
capitalized terms used herein (including in the preamble and recitals hereof)
without definition shall have the meanings ascribed thereto in the Notes. Any
terms used in this Agreement that are defined in the Code shall be construed and
defined as set forth in the Code unless otherwise defined herein or in the
Notes; provided, however, if the Code is used to define any term used herein and
if such term is defined differently in different Articles of the Code, the
definition of such term contained in Article 9 of the Code shall govern. In
addition to those terms defined elsewhere in this Agreement, as used in this
Agreement, the following terms shall have the following meanings:

       

      (a) “Account” means an account (as
that term is defined in the Code).

       

      (b) “Account Debtor” means an
account debtor (as that term is defined in the Code).

       

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      (c) “Bankruptcy Code” means title
11 of the United States Code, as in effect from time to time.

       

      (d) “Books” means books and records
(including, without limitation, each Grantor’s Records) indicating, summarizing,
or evidencing each Grantor’s assets (including the Collateral) or liabilities,
each Grantor’s Records relating to its business operations (including, without
limitation, stock ledgers) or financial condition, and each Grantor’s goods or
General Intangibles related to such information.

       

      (e) “Chattel Paper” means chattel
paper (as that term is defined in the Code) and includes tangible chattel paper
and electronic chattel paper.

       

      (f) “Code” means the Illinois
Uniform Commercial Code, as in effect from time to time; provided, however, in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to any Secured
Party’s Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of Illinois, the
term “Code” shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.

       

      (g) “Collateral” has the meaning
specified therefor in Section 2.

       

      (h) “Collateral Access Agreement”
means a landlord waiver, bailee letter, or acknowledgement agreement of any
lessor, warehouseman, processor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in any Grantor’s books and
records, Equipment, or Inventory, in each case, in form and substance
satisfactory to Secured Parties.

       

      (i) “Commencement Notice” means a
written notice, given by any Secured Party to the other Secured Parties in
accordance with the notice provisions set forth in the Securities Purchase
Agreement, pursuant to which such Secured Party notifies the other Secured
Parties of the existence of one or more Events of Default and of such Secured
Party’s intent to commence the exercise of one or more of the remedies provided
for under this Agreement with respect to all or any portion of the Collateral as
a consequence thereof, which notice shall incorporate a reasonably detailed
description of each Event of Default then existing and of the remedial action
proposed to be taken.

       

      (j) “Commercial Tort Claims” means
commercial tort claims (as that term is defined in the Code), and includes those
commercial tort claims listed on Schedule
1 attached hereto.

       

      (k) “Control Agreement” means a
control agreement, in form and substance satisfactory to Secured Parties,
executed and delivered by a Grantor, one or more Secured Parties, and the
applicable securities intermediary (with respect to a Securities Account) or
bank (with respect to a Deposit Account), as may be amended, restated,
supplemented, or otherwise modified from time to time.

       

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

       

      (l) “Copyrights” means all
copyrights and copyright registrations, and also includes (i) the copyright
registrations and recordings thereof and all applications in connection
therewith listed on Schedule
2 attached hereto and made a part hereof, (ii) all reissues,
continuations, extensions or renewals thereof, (iii) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (iv) the right to sue for past, present and future infringements and
dilutions thereof, (v) the goodwill of each Grantor’s business symbolized by the
foregoing or connected therewith, and (vi) all of each Grantor’s rights
corresponding thereto throughout the world.

       

      (m) “Copyright Security Agreement”
means each Copyright Security Agreement among Grantors, or any of them, and
Secured Parties, in substantially the form of Exhibit
A attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective Copyrights, as may be
amended, restated, supplemented, or otherwise modified from time to
time.

       

      (n) “Deposit Account” means a
deposit account (as that term is defined in the Code).

       

      (o) “Equipment” means equipment (as
that term is defined in the Code).

       

      (p) “Event of Default” has the
meaning specified therefor in the Notes.

       

      (q) “General Intangibles” means
general intangibles (as that term is defined in the Code) and, in any event,
includes payment intangibles, contract rights, rights to payment, rights arising
under common law, statutes, or regulations, choses or things in action, goodwill
(including the goodwill associated with any Trademark, Patent, or Copyright),
Patents, Trademarks, Copyrights, URLs and domain names, industrial designs,
other industrial or Intellectual Property or rights therein or applications
therefor, whether under license or otherwise, programs, programming materials,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, including Intellectual Property Licenses,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, pension plan refunds, pension
plan refund claims, insurance premium rebates, tax refunds, and tax refund
claims, interests in a partnership or limited liability company which do not
constitute a security under Article 8 of the Code, and any other personal
property other than Commercial Tort Claims, money, Accounts, Chattel Paper,
Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and
oil, gas, or other minerals before extraction.

       

      (r) “Governmental Authority” means
any domestic or foreign federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.

       

       

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      (s) “Guaranties” means each
Guaranty, in the form attached hereto as Exhibit
D, executed by a Guarantor in favor of any or all of the Secured Parties,
together with any other guaranty or similar agreement now or hereafter executed
by a Guarantor in favor of any or all of the Secured Parties in connection with
the Notes or any of the other Transaction Documents, as may be amended,
restated, supplemented, or otherwise modified from time to time.

       

      (t) “Guarantor” means each Grantor,
other than Parent, and each other Person that now or hereafter executes a
Guaranty.

       

      (u) “Insolvency Proceeding” means
any proceeding commenced by or against any Person under any provision of the
Bankruptcy Code or under any other state or federal bankruptcy or insolvency law
or any equivalent laws in any other jurisdiction, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.

       

      (v) “Intellectual Property” means
Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks,
trade secrets and customer lists, and Intellectual Property
Licenses.

       

      (w) “Intellectual Property
Licenses” means rights under or interests in any patent, trademark,
copyright or other intellectual property, including software license agreements
with any other party, whether the applicable Grantor is a licensee or licensor
under any such license agreement, including the license agreements listed on
Schedule
3 attached hereto and made a part hereof, as may be amended, restated,
supplemented, or otherwise modified from time to time.

       

      (x) “Inventory” means inventory (as
that term is defined in the Code).

       

      (y) “Investment Related Property”
means (i) investment property (as that term is defined in the Code), and (ii)
all of the following (regardless of whether classified as investment property
under the Code): all Pledged Interests, Pledged Operating Agreements, and
Pledged Partnership Agreements.

       

      (z) “Lien” has the meaning
specified therefor in the Notes.

       

      (aa) “Negotiable Collateral” means
letters of credit, letter-of-credit rights, instruments, promissory notes,
drafts, and documents.

       

      (bb) “New Subsidiary” has the
meaning specified therefor in the Notes.

       

      (cc) “Notes” has the meaning
specified therefor in the Securities Purchase Agreement.

       

      (dd) “Patents” means all patents and
patent applications, and also includes (i) the patents and patent applications
listed on Schedule
4 attached hereto and made a part hereof, (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, and (v) all of each Grantor’s rights
corresponding thereto throughout the world.

       

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

       

      (ee) “Patent Security Agreement”
means each Patent Security Agreement among Grantors and Secured Parties in
substantially the form of Exhibit
B attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective Patents, as may be
amended, restated, supplemented, or otherwise modified from time to
time.

       

      (ff) “Permitted Liens” has the
meaning specified therefor in the Notes.

       

      (gg) “Permitted Secured Party”
means, with respect to the exercise of any remedy provided for under this
Agreement, any Secured Party that has delivered a Commencement Notice with
respect to the exercise of such remedy to the other Secured Parties and has not
received a Veto Notice with respect thereto within the Veto Period; provided,
however, there shall only be a single Permitted Secured Party that may exercise
any specific remedy at any one time (it being agreed that if a Commencement
Notice is delivered by more than one Secured Party with respect to any remedy
provided for under this Agreement, then the first Secured Party to deliver a
Commencement Notice and not receive a Veto Notice within the Veto Period shall
be the only Secured Party that may exercise such remedy).

       

      (hh) “Person” has the meaning
specified therefor in the Securities Purchase Agreement.

       

      (ii) “Pledged Companies” means, each
Person listed on Schedule
5 hereto as a “Pledged Company,” together with each other Person all or a
portion of whose Stock is acquired or otherwise owned by a Grantor after the
date hereof.

       

      (jj) “Pledged Interests” means all
of each Grantor’s right, title and interest in and to all of the Stock now or
hereafter owned by such Grantor, regardless of class or designation, including
all substitutions therefor and replacements thereof, all proceeds thereof and
all rights relating thereto, also including any certificates representing the
Stock, the right to receive any certificates representing any of the Stock, all
warrants, options, share appreciation rights and other rights, contractual or
otherwise, in respect thereof, and the right to receive dividends, distributions
of income, profits, surplus, or other compensation by way of income or
liquidating distributions, in cash or in kind, and cash, instruments, and other
property from time to time received, receivable, or otherwise distributed in
respect of or in addition to, in substitution of, on account of, or in exchange
for any or all of the foregoing.

       

      (kk) “Pledged Operating Agreements”
means all of each Grantor’s rights, powers, and remedies under the limited
liability company operating agreements of each of the Pledged Companies that are
limited liability companies, as may be amended, restated, supplemented, or
otherwise modified from time to time.

       

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

       

      (ll) “Pledged Partnership
Agreements” means all of each Grantor’s rights, powers, and remedies
under the partnership agreements of each of the Pledged Companies that are
partnerships, as may be amended, restated, supplemented, or otherwise modified
from time to time.

       

      (mm) “Proceeds” has the meaning
specified therefor in Section 2.

       

      (nn) “Real Property” means any
estates or interests in real property now owned or hereafter acquired by any
Grantor and the improvements thereto.

       

      (oo) “Records” means information
that is inscribed on a tangible medium or which is stored in an electronic or
other medium and is retrievable in perceivable form.

       

      (pp) “Secured Obligations” mean all
of the present and future payment and performance obligations of Grantors
arising under this Agreement, the Notes, the Guaranties, and the other
Transaction Documents, including, without duplication, reasonable attorneys’
fees and expenses and any interest, fees, or expenses that accrue after the
filing of an Insolvency Proceeding, regardless of whether allowed or allowable
in whole or in part as a claim in any Insolvency Proceeding.

       

      (qq) “Securities Account” means a
securities account (as that term is defined in the Code).

       

      (rr) “Security Documents” means,
collectively, this Agreement, each Copyright Security Agreement, each Patent
Security Agreement, each Trademark Security Agreement, each Control Agreement,
and each other security agreement, pledge agreement, assignment, mortgage,
security deed, deed of trust, and other agreement or document executed and
delivered by a Grantor as security for any of the Secured Obligations, as may be
amended, restated, supplemented, or otherwise modified from time to
time.

       

      (ss) “Security Interest” and “Security Interests” have the
meanings specified therefor in Section 2.

       

      (tt) “Significant Secured Party”
means, on any date of determination, any Secured Party holding 17.5% or more of
the aggregate principal amount of Notes outstanding on such date.

       

      (uu) “Stock” means all shares,
options, warrants, interests (including, without limitation, membership and
partnership interests), participations, or other equivalents (regardless of how
designated) of or in a Person, whether voting or nonvoting, including common
stock, preferred stock, or any other “equity security” (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the United
States Securities and Exchange Commission and any successor thereto under the
Securities Exchange Act of 1934, as in effect from time to time).

       

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

       

      (vv) “Subsidiaries” and “Subsidiary” each have the
meanings specified therefor in the Notes.

       

      (ww) “Supporting Obligations” means
supporting obligations (as such term is defined in the Code).

       

      (xx) “Trademarks” means all
trademarks, trade names, trademark applications, service marks, service mark
applications, and also includes (i) the trade names, trademarks, trademark
applications, service marks, and service mark applications listed on Schedule
6 attached hereto and made a part hereof, and (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, (v) the goodwill of each Grantor’s
business symbolized by the foregoing or connected therewith, and (vi) all of
each Grantor’s rights corresponding thereto throughout the world.

       

      (yy) “Trademark Security Agreement”
means each Trademark Security Agreement among Grantors and Secured Parties in
substantially the form of Exhibit
C attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective
Trademarks.

       

      (zz) “Transaction Documents” has the
meaning specified therefor in the Securities Purchase Agreement.

       

      (aaa) “URL” means “uniform resource
locator,” an internet web address.

       

      (bbb) “Veto Notice” means, with
respect to any Commencement Notice, a written notice given by any Significant
Secured Party to the other Secured Parties in accordance with the notice
provisions set forth in the Securities Purchase Agreement pursuant to which such
Significant Secured Party notifies the other Secured Parties of its objection to
the commencement of the remedial action specified in such Commencement Notice
and certifies that, to the best of its knowledge, it is a Significant Secured
Party.

       

      (ccc) “Veto Period” means, with
respect to any Commencement Notice, the period of ten (10) consecutive calendar
days following the delivery of such Commencement Notice to the Secured
Parties.

       

      (ddd) “Warrants” has the meaning
specified therefor in the Securities Purchase Agreement.

       

      2. Grant of Security.
Each Grantor hereby unconditionally grants, assigns, and pledges to each Secured
Party a separate, continuing security interest (each, a “Security Interest” and,
collectively, the “Security
Interests”) in all assets of such Grantor (other than Real Property)
whether now owned or hereafter acquired or arising and wherever located
(collectively, the “Collateral”), including,
without limitation, such Grantor’s right, title, and interest in and to the
following, whether now owned or hereafter acquired or arising and wherever
located:

       

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      (a) all of
such Grantor’s Accounts;

       

      (b) all of
such Grantor’s Books;

       

      (c) all of
such Grantor’s Chattel Paper;

       

      (d) all of
such Grantor’s Deposit Accounts;

       

      (e) all of
such Grantor’s Equipment and fixtures;

       

      (f) all of
such Grantor’s General Intangibles;

       

      (g) all of
such Grantor’s Inventory;

       

      (h) all of
such Grantor’s Investment Related Property;

       

      (i) all of
such Grantor’s Negotiable Collateral;

       

      (j) all of
such Grantor’s rights in respect of Supporting Obligations;

       

      (k) all of
such Grantor’s Commercial Tort Claims;

       

      (l) all of
such Grantor’s money, cash, cash equivalents, or other assets of each such
Grantor that now or hereafter come into the possession, custody, or control of
any Secured Party;

       

      (m) all of
the proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance or Commercial Tort Claims covering or
relating to any or all of the foregoing, and any and all Accounts, Books,
Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory,
Investment Related Property, Negotiable Collateral, Supporting Obligations,
money, or other tangible or intangible property resulting from the sale, lease,
license, exchange, collection, or other disposition of any of the foregoing, the
proceeds of any award in condemnation with respect to any of the foregoing, any
rebates or refunds, whether for taxes or otherwise, and all proceeds of any such
proceeds, or any portion thereof or interest therein, and the proceeds thereof,
and all proceeds of any loss of, damage to, or destruction of the above, whether
insured or not insured, and, to the extent not otherwise included, any
indemnity, warranty, or guaranty payable by reason of loss or damage to, or
otherwise with respect to any of the foregoing (the “Proceeds”). Without limiting
the generality of the foregoing, the term “Proceeds” includes whatever is
receivable or received when Investment Related Property or proceeds are sold,
exchanged, collected, or otherwise disposed of, whether such disposition is
voluntary or involuntary, and includes proceeds of any indemnity or guaranty
payable to any Grantor or any Secured Party from time to time with respect to
any of the Investment Related Property.

       

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

       

      3. Security for
Obligations. This Agreement and the Security Interests created hereby
secure the payment and performance of the Secured Obligations, whether now
existing or arising hereafter.  Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to Secured Parties, or any of them, but for the fact that they are unenforceable
or not allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

       

      4. Grantors Remain
Liable.  Anything herein to the contrary notwithstanding, (a)
each of the Grantors shall remain liable under the contracts and agreements
included in the Collateral, including the Pledged Operating Agreements and the
Pledged Partnership Agreements, to perform all of the duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Secured Parties, or any of them, of any of the rights hereunder
shall not release any Grantor from any of its duties or obligations under such
contracts and agreements included in the Collateral, and (c) no Secured Party
shall have any obligation or liability under such contracts and agreements
included in the Collateral by reason of this Agreement, nor shall any Secured
Party be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.  Until an Event of Default shall occur and be
continuing, except as otherwise provided in this Agreement or any other
Transaction Document, Grantors shall have the right to possession and enjoyment
of the Collateral for the purpose of conducting the ordinary course of their
respective businesses, subject to and upon the terms hereof and the other
Transaction Documents.  Without limiting the generality of the
foregoing, it is the intention of the parties hereto that record and beneficial
ownership of the Pledged Interests, including all voting, consensual, and
dividend rights, shall remain in the applicable Grantor until the occurrence of
an Event of Default and until any Secured Party shall notify the applicable
Grantor of such Secured Party’s exercise of voting, consensual, or dividend
rights with respect to the Pledged Interests pursuant to Section 15
hereof.

       

      5. Representations and
Warranties.  Each Grantor hereby represents and warrants as
follows:

       

      (a) The exact
legal name of each of the Grantors is set forth on the signature pages of this
Agreement.

       

      (b) Schedule
7 attached hereto sets forth (i) all Real Property owned or leased by
Grantors, together with all other locations of Collateral, as of the date
hereof, and (ii) the chief executive office of each Grantor as of the date
hereof.  As of the date hereof, the Inventory and Equipment (other
than Equipment out for repair) of the Grantors are not stored with a bailee,
warehouseman, or similar party (unless, in any such case, such bailee,
warehouseman or other party has entered into a Collateral Access Agreement with
respect to such Inventory and Equipment).

       

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

       

      (c) As of the
date hereof, no Grantor has any interest in, or title to, any Copyrights,
Intellectual Property Licenses, Patents, or Trademarks except as set forth on
Schedules
2, 3, 4 and 6,
respectively, attached hereto.  This Agreement is effective to create
a valid and continuing Lien on such Copyrights, Intellectual Property Licenses,
Patents and Trademarks and, upon filing of the Copyright Security Agreement with
the United States Copyright Office and filing of the Patent Security Agreement
and the Trademark Security Agreement with the United States Patent and Trademark
Office, and the filing of appropriate financing statements in the jurisdictions
listed on Schedule
8 hereto, all action necessary or desirable to protect and perfect the
Security Interests in and to each Grantor’s Patents, Trademarks, or Copyrights
has been taken and such perfected Security Interests are enforceable as such as
against any and all creditors of and purchasers from any Grantor.  No
Grantor has any interest in any Copyright that is necessary in connection with
the operation of such Grantor’s business, except for those Copyrights identified
on Schedule
2 attached hereto which have been registered with the United States
Copyright Office.

       

      (d) This
Agreement creates a valid security interest in all of the Collateral of each
Grantor, to the extent a security interest therein can be created under the
Code, securing the payment of the Secured Obligations. Except to the extent a
security interest in the Collateral cannot be perfected by the filing of a
financing statement under the Code, all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken or
will have been taken upon the filing of financing statements listing each
applicable Grantor, as a debtor, and Secured Parties, as secured parties, in the
jurisdictions listed next to such Grantor’s name on Schedule
8 attached hereto. Upon the making of such filings, Secured Parties shall
each have a first priority perfected security interest in all of the Collateral
of each Grantor to the extent such security interest can be perfected by the
filing of a financing statement.  All action by any Grantor necessary
to protect and perfect such security interest on each item of Collateral has
been duly taken.

       

      (e) (i)
Except for the Security Interests created hereby, such Grantor is and will at
all times be the sole holder of record and the legal and beneficial owner, free
and clear of all Liens other than Permitted Liens, of the Pledged Interests
indicated on Schedule
5 as being owned by such Grantor and, when acquired by such Grantor, any
Pledged Interests acquired after the date hereof; (ii) all of the Pledged
Interests are duly authorized, validly issued, fully paid and nonassessable and
the Pledged Interests constitute or will constitute the percentage of the issued
and outstanding Stock of the Pledged Companies of such Grantor identified on
Schedule
5 hereto; (iii) such Grantor has the right and requisite authority to
pledge all Investment Related Property pledged by such Grantor to each Secured
Party as provided herein; (iv) all actions necessary or desirable to perfect,
establish the first priority of, or otherwise protect, Secured Parties’
respective Liens in the Investment Related Property pledged hereunder, and the
proceeds thereof, have been duly taken, (A) upon the execution and delivery of
this Agreement; (B) upon the taking of possession by any Secured Party of any
certificates constituting the Pledged Interests, to the extent such Pledged
Interests are represented by certificates, together with undated powers endorsed
in blank by the applicable Grantor; (C) upon the 

       

       

       

      
        
           

        

        
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      filing of
financing statements in the applicable jurisdiction set forth on Schedule
8 attached hereto for such Grantor with respect to the Pledged Interests
of such Grantor that are not represented by certificates, and (D) with respect
to any Securities Accounts, upon the delivery of Control Agreements with respect
thereto; and (v) each Grantor has delivered to and deposited with any Secured
Party (or, with respect to any Pledged Interests created or obtained after the
date hereof, will deliver and deposit in accordance with Sections 6(a) and 8
hereof) all certificates representing the Pledged Interests now or hereafter
owned by such Grantor to the extent such Pledged Interests are represented by
certificates, and undated powers endorsed in blank with respect to such
certificates. None of the Pledged Interests owned or held by such Grantor has
been issued or transferred in violation of any securities registration,
securities disclosure, or similar laws of any jurisdiction to which such
issuance or transfer may be subject.

       

      (f) No
consent, approval, authorization, or other order or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required (i) for the grant of a Security Interest by such Grantor in and to the
Collateral pursuant to this Agreement or for the execution, delivery, or
performance of this Agreement by such Grantor, or (ii) for the exercise by any
Secured Party of the voting or other rights provided in this Agreement with
respect to Investment Related Property pledged hereunder or the remedies in
respect of the Collateral pursuant to this Agreement, except (A) as may be
required in connection with such disposition of Investment Related Property by
laws affecting the offering and sale of securities generally and (B) for any
consent that may be required for the assignment of any Intellectual Property
License that expressly provides that such Intellectual Property License is not
assignable (or is not assignable without the consent of the other party to such
Intellectual Property License).

       

      (g) Schedule
9 contains a complete and accurate list of all of each Grantor’s
Deposit Accounts and Securities Accounts, including, without limitation, with
respect to each bank or securities intermediary (a) the name and address of such
Person and (b) the account numbers of such accounts maintained with such
Person.

       

      6. Covenants.  Each
Grantor, jointly and severally, covenants and agrees with each Secured Party
that from and after the date of this Agreement and until the date of termination
of this Agreement in accordance with Section 24 hereof (but only to the extent
the particular assets described in this Section 6 constitute Collateral
hereunder):

       

      (a) Possession of
Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, and if and to the extent that perfection or
priority of Secured Parties’ respective Security Interests is dependent on or
enhanced by possession, the applicable Grantor, immediately upon the request of
any Secured Party, shall execute such other documents and instruments as shall
be requested by such Secured Party or, if applicable, endorse and deliver
physical possession of such Negotiable Collateral, Investment Related Property,
or Chattel Paper to such Secured Party, together with such undated powers
endorsed in blank as shall be requested by such Secured Party.

       

       

      
        
           

        

        
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      (b) Chattel
Paper.

       

      (i) Each
Grantor shall take all steps reasonably necessary to grant each Secured Party
control of all Chattel Paper in accordance with the Code and all “transferable
records” as that term is defined in Section 16 of the Uniform Electronic
Purchase Act and Section 201 of the federal Electronic Signatures in Global and
National Commerce Act as in effect in any relevant jurisdiction;
and

       

      (ii) If any
Grantor retains possession of any Chattel Paper or instruments (which retention
of possession shall be subject to the extent permitted hereby and by the
Securities Purchase Agreement), promptly upon the request of any Secured Party,
such Chattel Paper and instruments shall be marked with the following legend:
“This writing and the obligations evidenced or secured hereby are subject to the
Security Interests of [names of Secured Parties].”

       

      (c) Control
Agreements.  Except as set forth on Schedule
9, no Grantor shall establish or maintain any Deposit Account or
Securities Account (or any other similar account) unless (i) Grantors shall have
provided each Secured Party with 10 days’ advance written notice of each such
account and (ii) the Secured Parties shall have received a Control Agreement in
respect of such account concurrently with the opening thereof.  Each
Grantor shall ensure that all of its Account Debtors forward payment of the
amounts owed by them directly to a Deposit Account that is subject to a Control
Agreement and deposit or cause to be deposited promptly, and in any event no
later than the first Business Day after the date of receipt thereof, all of
their collections (including those sent directly by their Account Debtors to a
Grantor) into a Deposit Account subject to a Control Agreement.

       

      (d) Letter-of-Credit
Rights.  Each Grantor that is or becomes the beneficiary of a
letter of credit shall promptly (and in any event within 2 Business Days after
becoming a  beneficiary) notify Secured Parties thereof and, upon the
request by any Secured Party, enter into a multi-party agreement with Secured
Parties and the issuing or confirming bank with respect to letter-of-credit
rights assigning such letter-of-credit rights to Secured Parties and directing
all payments thereunder to Secured Parties, all in form and substance
satisfactory to Secured Parties.

       

      (e) Commercial Tort
Claims.  Each Grantor shall promptly (and in any event within 2
Business Days of receipt thereof) notify Secured Parties in writing upon
incurring or otherwise obtaining a Commercial Tort Claim after the date hereof
and, upon request of any Secured Party, promptly amend Schedule
1 to this Agreement to describe such after-acquired Commercial Tort Claim
in a manner that reasonably identifies such Commercial Tort Claim, and hereby
authorizes the filing of additional financing statements or amendments to
existing financing statements describing such Commercial Tort Claims, and agrees
to do such other acts or things deemed necessary or desirable by any Secured
Party to give Secured Parties a first priority, perfected security interest in
any such Commercial Tort Claim.

       

       

      
        
           

        

        
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      (f) Government
Contracts.  If any Account or Chattel Paper arises out of a
contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, Grantors shall promptly (and in any event
within 2 Business Days of the creation thereof) notify Secured Parties thereof
in writing and execute any instruments or take any steps reasonably required by
any Secured Party in order that all moneys due or to become due under such
contract or contracts shall be assigned to Secured Parties, and shall provide
written notice thereof and take all other appropriate actions under the
Assignment of Claims Act or other applicable law to provide each Secured Party a
first-priority perfected security interest in such contract.

       

      (g) Intellectual
Property.

       

      (i) Upon
request of any Secured Party, in order to facilitate filings with the United
States Patent and Trademark Office and the United States Copyright Office or any
other applicable Governmental Authority, each Grantor shall execute and deliver
to Secured Parties one or more Copyright Security Agreements, Trademark Security
Agreements, or Patent Security Agreements to further evidence Secured Parties’
respective Liens on such Grantor’s Copyrights, Trademarks or
Patents.

       

      (ii) Each
Grantor shall have the duty (A) to promptly sue for infringement,
misappropriation, or dilution with respect to its rights in Intellectual
Property and to recover any and all damages for such infringement,
misappropriation, or dilution, (B) to prosecute diligently any trademark
application or service mark application that is part of the Trademarks pending
as of the date hereof or hereafter until the termination of this Agreement, (C)
to prosecute diligently any patent application that is part of the Patents
pending as of the date hereof or hereafter until the termination of this
Agreement, and (D) to take all reasonable and necessary action to preserve and
maintain all of each Grantor’s Trademarks, Patents, Copyrights, Intellectual
Property Licenses, and its rights therein, including the filing of applications
for renewal, affidavits of use, affidavits of noncontestability and opposition
and interference and cancellation proceedings.  Each Grantor shall
promptly file an application with the United States Copyright Office for any
Copyright that has not been registered with the United States Copyright Office.
Each Grantor shall promptly file an application with the United States Patent
and Trademark Office for any Patent or Trademark that has not been registered
with the United States Patent and Trademark Office. Any expenses incurred in
connection with the foregoing shall be borne by Grantors.  Each
Grantor further agrees not to abandon any Trademark, Patent, Copyright, or
Intellectual Property License.

       

      (iii) Grantors
acknowledge and agree that Secured Parties shall have no duties with respect to
the Trademarks, Patents, Copyrights, or Intellectual Property
Licenses.  Without limiting the generality of this Section 6(g),
Grantors acknowledge and agree that no Secured Party shall be under any
obligation to take any steps necessary to preserve rights in the Trademarks,
Patents, Copyrights, or Intellectual Property Licenses against any other Person,
but any Secured Party may do so at its option from and after the occurrence and
during the continuance of an Event of Default, and all expenses incurred in
connection therewith (including fees and expenses of attorneys and other
professionals) shall be for the sole account of the Grantors and shall be deemed
to be Secured Obligations.

       

       

      
        
           

        

        
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      (h) Investment Related
Property.

       

      (i) If any
Grantor shall receive or become entitled to receive any Pledged Interests after
the date hereof, it shall promptly (and in any event within 2 Business Days of
receipt thereof) identify such Pledged Interests in a written notice to Secured
Parties;

       

      (ii) All sums
of money and property paid or distributed in respect of the Investment Related
Property pledged hereunder which are received by any Grantor shall be held by
the Grantors in trust for the benefit of Secured Parties segregated from such
Grantor’s other property, and such Grantor shall deliver it forthwith to the
Secured Parties in the exact form received;

       

      (iii) Each
Grantor shall promptly deliver to Secured Parties a copy of each notice or other
communication received by it in respect of any Pledged Interests;

       

      (iv) No
Grantor shall make or consent to any material amendment or other modification or
waiver with respect to any Pledged Interests, Pledged Operating Agreement, or
Pledged Partnership Agreement, or enter into any agreement or permit to exist
any restriction with respect to any Pledged Interests;

       

      (v) Each
Grantor agrees that it will cooperate with Secured Parties in obtaining all
necessary approvals and making all necessary filings under federal, state,
local, or foreign law in connection with the Security Interests on the
Investment Related Property pledged hereunder or any sale or transfer thereof;
and

       

      (vi) As to all
limited liability company or partnership interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, each Grantor hereby
represents, warrants and covenants that the Pledged Interests issued pursuant to
such agreement (A) are not and shall not be dealt in or traded on securities
exchanges or in securities markets, (B) do not and will not constitute
investment company securities, and (C) are not and will not be held by such
Grantor in a securities account.  In addition, none of the Pledged
Operating Agreements, the Pledged Partnership Agreements, or any other
agreements governing any of the Pledged Interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, provide or shall provide
that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.

       

       

      
        
           

        

        
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      (i) Transfers and Other
Liens.  Grantors shall not (i) sell, lease, license, assign (by
operation of law or otherwise), transfer or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except as expressly permitted by
this Agreement and the other Transaction Documents, or (ii) create or permit to
exist any Lien upon or with respect to any of the Collateral of any of Grantors,
except for Permitted Liens.  The inclusion of Proceeds in the
Collateral shall not be deemed to constitute consent by any Secured Party to any
sale or other disposition of any of the Collateral except as expressly permitted
in this Agreement or the other Transaction Documents. Notwithstanding anything
contained in this Agreement to the contrary, Permitted Liens shall not be
permitted with respect to any Pledged Interests.

       

      (j) Preservation of
Existence.  Each Grantor shall maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary.

       

      (k) Maintenance of
Properties. Each Grantor shall maintain and preserve all of its
properties which are necessary or useful in the proper conduct of its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which it is a party as lessee
or under which it occupies property, so as to prevent any loss or forfeiture
thereof or thereunder.

       

      (l) Maintenance of
Insurance. Each Grantor shall maintain insurance with responsible
and reputable insurance companies or associations acceptable to Secured Parties
(including, without limitation, comprehensive general liability, property,
hazard, rent and business interruption insurance) with respect to its assets and
properties (including ,without limitation, all real properties leased or owned
by it and any and all Inventory and Equipment) and business, in such amounts and
covering such risks as is required by any governmental authority having
jurisdiction with respect thereto or as is carried generally in accordance with
sound business practice by companies in similar businesses similarly situated
and, in each case, acceptable to Secured Parties.

       

      (m) Locations of Inventory and
Equipment.  Each Grantor shall keep its Inventory and Equipment
(other than Equipment out for repair) only at the locations identified in part
(c) on Schedule 7 and shall maintain its chief executive office only at the
location identified in part (b) on Schedule
7.  Promptly upon the request of any Secured Party (but in no
event later than five (5) days following the date of such request), each Grantor
shall obtain a Collateral Access Agreement from each Person holding or otherwise
in possession of or having a Lien on (as bailee or otherwise) any books and
records, Inventory, Equipment or other Collateral of such Grantor.

       

      (n) Other Actions as to Any and
All Collateral.  Each Grantor shall promptly (and in any event
within 2 Business Days of acquiring or obtaining such Collateral) notify Secured
Parties in writing upon (i) acquiring or otherwise obtaining any Collateral
after the date hereof consisting of Trademarks, Patents, registered Copyrights,
Intellectual Property Licenses, Investment Related Property, Chattel Paper
(electronic, tangible or otherwise), documents (as defined in Article 9 of the
Code), promissory notes (as defined in the Code, or instruments (as defined in
the Code) or (ii) any amount payable under or in connection with any of the
Collateral being or becoming evidenced after the date hereof by any Chattel
Paper, documents, promissory notes, or instruments and, in each such case upon
the request of any Secured Party, promptly execute such other documents, or if
applicable, deliver such Chattel Paper, other documents or certificates
evidencing any Investment Related Property and do such other acts or things
deemed necessary or desirable by any Secured Party to protect Secured Parties’
respective Security Interests therein.

       

       

      
        
           

        

        
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      (o) Insurance.  Not
later than ten (10) Business Days after the Closing Date (as defined in the
Securities Purchase Agreement), each Grantor shall deliver or cause to be
delivered evidence of its liability and property insurance together with loss
payee and additional insured endorsements with respect to such insurance, as
applicable, in favor of each Secured Party, in each case, in form and substance
acceptable to such Secured Parties.

       

      7. Relation to Other
Transaction Documents.  The provisions of this Agreement shall
be read and construed with the Transaction Documents referred to below in the
manner so indicated.

       

      (a) Securities Purchase
Agreement and Notes. In the event of any conflict between any provision
in this Agreement and any provision in the Securities Purchase Agreement or
Notes, such provision of the Securities Purchase Agreement or Notes shall
control, except to the extent the applicable provision in this Agreement is more
restrictive with respect to the rights of Grantors or imposes more burdensome or
additional obligations on Grantors, in which event the applicable provision in
this Agreement shall control.

       

      (b) Patent, Trademark, Copyright
Security Agreements.  The provisions of the Copyright Security
Agreements, Trademark Security Agreements, and Patent Security Agreements are
supplemental to the provisions of this Agreement, and nothing contained in the
Copyright Security Agreements, Trademark Security Agreements or the Patent
Security Agreements shall limit any of the rights or remedies of any Secured
Party hereunder.

       

      8. Further
Assurances.

       

      (a) Each
Grantor agrees that from time to time, at its own expense, such Grantor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that any Secured Party may reasonably
request, in order to perfect and protect the Security Interests granted or
purported to be granted hereby or to enable any Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any of the
Collateral.

       

      (b) Each
Grantor authorizes the filing by any Secured Party of financing or continuation
statements, or amendments thereto, and such Grantor will execute and deliver to
such Secured Party such other instruments or notices, as may be necessary or as
such Secured Party may reasonably request, in order to perfect and preserve the
Security Interests granted or purported to be granted hereby.

       

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

       

      (c) Each
Grantor authorizes any Secured Party at any time and from time to time to file,
transmit, or communicate, as applicable, financing statements and amendments (i)
describing the Collateral as “all personal property of debtor” or “all assets of
debtor” or words of similar effect, (ii) describing the Collateral as being of
equal or lesser scope or with greater detail, or (iii) that contain any
information required by part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance.  Each Grantor also hereby ratifies any and
all financing statements or amendments previously filed by any Secured Party in
any jurisdiction.

       

      (d) Each
Grantor acknowledges that it is not authorized to file any financing statement
or amendment or termination statement with respect to any financing statement
filed in connection with this Agreement without the prior written consent of
each Secured Party affected thereby, subject to such Grantor’s rights under
Section 9-509(d)(2) of the Code.

       

      (e) Each
Grantor shall permit each Secured Party or its employees, accountants, attorneys
or agents, to examine and inspect any Collateral or any other property of such
Grantor at any time during ordinary business hours.

       

      9. Secured Parties’ Right to
Perform Contracts, Exercise Rights, etc.  Upon the occurrence
and during the continuance of an Event of Default, any Secured Party (a) may
proceed to perform any and all of the obligations of any Grantor contained in
any contract, lease, or other agreement and exercise any and all rights of any
Grantor therein contained as fully as such Grantor itself could, (b) shall have
the right to use any Grantor’s rights under Intellectual Property Licenses in
connection with the enforcement of the Secured Party’s rights hereunder,
including the right to prepare for sale and sell any and all Inventory and
Equipment now or hereafter owned by any Grantor and now or hereafter covered by
such licenses, and (c) shall have the right to request that any Stock that is
pledged hereunder be registered in the name of such Secured Party or any of its
nominees.

       

      10. Secured Parties Appointed
Attorney-in-Fact. Each Grantor, on behalf of itself and each New
Subsidiary of such Grantor, hereby irrevocably appoints each Secured Party as
the attorney-in-fact of such Grantor and each such New Subsidiary. In the event
any Grantor or any New Subsidiary fails to execute or deliver in a timely manner
any Transaction Document or other agreement, document, certificate or instrument
which such Grantor or New Subsidiary now or at any time hereafter is required to
execute or deliver pursuant to the terms of the Securities Purchase Agreement or
any other Transaction Document, each Secured Party shall have full authority in
the place and stead of such Grantor or New Subsidiary, and in the name of such
Grantor, such New Subsidiary or otherwise, to execute and deliver each of the
foregoing. Without limitation of the foregoing, each Secured Party shall have
full authority in the place and stead of each Grantor and each New Subsidiary,
and in the name of any such Grantor, any such New Subsidiary or otherwise, at
such time as an Event of Default has occurred and is continuing, to take any
action and to execute any instrument which such Secured Party may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:

       

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

       

      (a) to ask,
demand, collect, sue for, recover, compromise, receive and give acquittance and
receipts for moneys due and to become due under or in connection with any
Collateral of such Grantor or New Subsidiary;

       

      (b) to
receive and open all mail addressed to such Grantor or New Subsidiary and to
notify postal authorities to change the address for the delivery of mail to such
Grantor or New Subsidiary to that of such Secured Party;

       

      (c) to
receive, indorse, and collect any drafts or other instruments, documents,
Negotiable Collateral or Chattel Paper;

       

      (d) to file
any claims or take any action or institute any proceedings which such Secured
Party may deem necessary or desirable for the collection of any of the
Collateral of such Grantor or New Subsidiary or otherwise to enforce the rights
of any Secured Party with respect to any of the Collateral;

       

      (e) to
repair, alter, or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any Person obligated to such Grantor or New Subsidiary in
respect of any Account of such Grantor or New Subsidiary;

       

      (f) to use
any labels, Patents, Trademarks, trade names, URLs, domain names, industrial
designs, Copyrights, customer lists, advertising matter or other industrial or
intellectual property rights, in advertising for sale and selling Inventory and
other Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor or New Subsidiary; and

       

      (g) such
Secured Party shall have the right, but shall not be obligated, to bring suit in
its own name to enforce the Trademarks, Patents, Copyrights and Intellectual
Property Licenses and, if such Secured Party shall commence any such suit, the
appropriate Grantor or New Subsidiary shall, at the request of such Secured
Party, do any and all lawful acts and execute any and all proper documents
reasonably required by such Secured Party in aid of such
enforcement.

       

      To the
extent permitted by law, each Grantor hereby ratifies, for itself and each of
its New Subsidiaries, all that such attorney-in-fact shall lawfully do or cause
to be done by virtue hereof.  This power-of-attorney granted pursuant
to this Section 10 is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

       

      11. Secured Parties May
Perform.  If any Grantor fails to perform any agreement
contained herein, any Secured Party may itself perform, or cause performance of,
such agreement, and the reasonable expenses of such Secured Party incurred in
connection therewith shall be payable, jointly and severally, by
Grantors.

       

      
        
           

        

        
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      12. Secured Parties’ Duties;
Bailee for Perfection.  The powers conferred on Secured Parties
hereunder are solely to protect the Secured Parties’ respective interests in the
Collateral and shall not impose any duty upon any Secured Party in favor of any
Grantor or any other Secured Party to exercise any such
powers.  Except for the safe custody of any Collateral in its actual
possession and the accounting for moneys actually received by it hereunder, no
Secured Party shall have any duty to any Grantor or any other Secured Party as
to any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any
Collateral.  A Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its actual
possession if such Collateral is accorded treatment substantially equal to that
which such Secured Party accords its own property.  Each Secured Party
agrees that, with respect to any Collateral at any time or times in its
possession and in which any other Secured Party has a Lien, the Secured Party in
possession of any such Collateral shall be the bailee of each other Secured
Party solely for purposes of perfecting (to the extent not otherwise perfected)
each other Secured Party’s Lien in such Collateral, provided that no Secured
Party shall be obligated to obtain or retain possession of any such
Collateral.  Without limiting the generality of the foregoing, Secured
Parties and Grantors hereby agree that any Secured Party that is in possession
of any Collateral at such time as the Secured Obligations owing to such Secured
Party have been paid in full may re-deliver such Collateral to the applicable
Grantor or, if requested by any Secured Party prior to such re-delivery, may
deliver such Collateral (unless otherwise restricted by applicable law or court
order and subject in all events to the receipt of an indemnification of all
liabilities arising from such delivery) to the requesting Secured Party, without
recourse to or representation or warranty by the Secured Party in such
possession.

       

      13. Collection of Accounts,
General Intangibles and Negotiable Collateral.  At any time
upon the occurrence and during the continuation of an Event of Default, any
Secured Party may (a) notify Account Debtors of any Grantor that the Accounts,
General Intangibles, Chattel Paper or Negotiable Collateral have been assigned
to such Secured Party or that such Secured Party has a security interest
therein, and (b) collect the Accounts, General Intangibles and Negotiable
Collateral directly, and any collection costs and expenses shall constitute part
of the Secured Obligations.

       

      14. Disposition of Pledged
Interests by Secured Party.  None of the Pledged Interests
existing as of the date of this Agreement are, and none of the Pledged Interests
hereafter acquired on the date of acquisition thereof will be, registered or
qualified under the various federal, state or other securities laws of the
United States or any other jurisdiction, and disposition thereof after an Event
of Default may be restricted to one or more private (instead of public) sales in
view of the lack of such registration.  Each Grantor understands that
in connection with such disposition, any Secured Party may approach only a
restricted number of potential purchasers and further understands that a sale
under such circumstances may yield a lower price for the Pledged Interests than
if the Pledged Interests were registered and qualified pursuant to federal,
state and other securities laws and sold on the open market.  Each
Grantor, therefore, agrees that:  (a) if a Secured
Party  shall, pursuant to the terms of this Agreement, sell or cause
the Pledged Interests or any portion thereof to be sold at a private sale, such
Secured Party shall have the right to rely upon the advice and opinion of any
nationally recognized brokerage or investment firm (but shall not be obligated
to seek such advice and the failure to do so shall not be considered in
determining the commercial reasonableness of such action) as to the best manner
in which to offer the Pledged Interest or any portion thereof for sale and as to
the best price reasonably obtainable at the private sale thereof; and (b) such
reliance shall be conclusive evidence that such Secured Party has handled the
disposition in a commercially reasonable manner.

       

       

      
        
           

        

        
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      15. Voting
Rights.

       

      (a) Upon the
occurrence and during the continuation of an Event of Default, (i) any Secured
Party may, at its option, and with 2 Business Days prior notice to any Grantor,
and in addition to all rights and remedies available to Secured Parties under
any other agreement, at law, in equity, or otherwise, exercise all voting
rights, and all other ownership or consensual rights in respect of the Pledged
Interests owned by such Grantor, but under no circumstances is any Secured Party
obligated by the terms of this Agreement to exercise such rights, and (ii) if
such Secured Party duly exercises its right to vote any of such Pledged
Interests, each Grantor hereby appoints such Secured Party as such Grantor’s
true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged
Interests in any manner that such Secured Party deems advisable for or against
all matters submitted or which may be submitted to a vote of shareholders,
partners or members, as the case may be.  This power-of-attorney
granted pursuant to this Section 15 is coupled with an interest and shall be
irrevocable until this Agreement is terminated.

       

      (b) For so
long as any Grantor shall have the right to vote the Pledged Interests owned by
it, such Grantor covenants and agrees that it will not, without the prior
written consent of Secured Parties, vote or take any consensual action with
respect to such Pledged Interests which would materially or adversely affect the
rights of Secured Parties exercising the voting rights owned by such Grantor or
the value of the Pledged Interests.

       

      16. Remedies.  Upon
the occurrence and during the continuance of an Event of Default:

       

      (a) Any
Secured Party may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, in the other Transaction Documents, or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code or any other applicable law.  Without limiting
the generality of the foregoing, each Grantor expressly agrees that, in any such
event, any Secured Party without any demand, advertisement, or notice of any
kind (except a notice specified below of time and place of public or private
sale) to or upon any Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code or by any other applicable law), may take immediate
possession of all or any portion of the Collateral and (i) require Grantors to,
and each Grantor hereby agrees that it will at its own expense and upon request
of such Secured Party forthwith, assemble all or part of the Collateral as
directed by such Secured Party and make it available to such Secured Party at
one or more locations where such Grantor regularly maintains Inventory, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of such Secured
Party’s offices or elsewhere, for cash, on credit, and upon such other terms as
such Secured Party may deem commercially reasonable.  Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10
days notice to any Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification and specifically such notice shall constitute a reasonable
“authenticated notification of disposition” within the meaning of Section 9-611
of the Code.  No Secured Party shall be obligated to make any sale of
Collateral regardless of notice of sale having been given.  Any
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.

       

      (b) Each
Secured Party is hereby granted a license or other right to use, without
liability for royalties or any other charge, each Grantor’s labels, Patents,
Copyrights, rights of use of any name, trade secrets, trade names, Trademarks,
service marks and advertising matter, URLs, domain names, industrial designs,
other industrial or intellectual property or any property of a similar nature,
whether owned by any Grantor or with respect to which any Grantor has rights
under license, sublicense, or other agreements (but only to the extent (i) such
license, sublicense or agreement does not prohibit such use by such Secured
Party and (ii) such Grantor will not be in default under such license,
sublicense, or other agreement as a result of such use by such Secured Party),
as it pertains to the Collateral, in preparing for sale, advertising for sale
and selling any Collateral, and each Grantor’s rights under all licenses and all
franchise agreements shall inure to the benefit of such Secured
Party.

       

      (c)  Each
Secured Party may, in addition to other rights and remedies provided for herein,
in the other Transaction Documents, or otherwise available to it under
applicable law and without the requirement of notice to or upon any Grantor or
any other Person (which notice is hereby expressly waived to the maximum extent
permitted by the Code or any other applicable law), (i) with respect to any
Grantor’s Deposit Accounts in which any such Secured Party’s Liens are
perfected by control under Section 9-104 of the Code, instruct the bank
maintaining such Deposit Account for the applicable Grantor to pay the balance
of such Deposit Account to or for the benefit of such Secured Party, and
(ii) with respect to any Grantor’s Securities Accounts in which Agent’s Liens
are perfected by control under Section 9-106 of the Code, instruct the
securities intermediary maintaining such Securities Account for the applicable
Grantor to (A) transfer any cash in such Securities Account to or for the
benefit of such Secured Party, or (B) liquidate any financial assets in such
Securities Account that are customarily sold on a recognized market and transfer
the cash proceeds thereof to or for the benefit of such Secured
Party.

       

      (d) Any cash
held by any Secured Party as Collateral and all proceeds received by any Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied against the Secured Obligations
in the order set forth in Section 17 hereof. In the event the proceeds of
Collateral are insufficient for the Satisfaction in Full of the Secured
Obligations (as defined below), each Grantor shall remain jointly and severally
liable for any such deficiency.

       

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

       

      (e) Each
Grantor hereby acknowledges that the Secured Obligations arose out of a
commercial transaction, and agrees that if an Event of Default shall occur and
be continuing any Secured Party shall have the right to an immediate writ of
possession without notice of a hearing. Each Secured Party shall have the right
to the appointment of a receiver for the properties and assets of each Grantor,
and each Grantor hereby consents to such rights and such appointment and hereby
waives any objection such Grantor may have thereto or the right to have a bond
or other security posted by any Secured Party.

       

      (f) Notwithstanding
anything in this Agreement to the contrary, each Secured Party agrees that it
will not exercise any remedy provided for under this Agreement with respect to
all or any portion of the Collateral (including, without limitation, pursuant to
a Collateral Access Agreement) unless such Secured Party is a Permitted Secured
Party (provided that the foregoing shall not prevent any Secured Party from
commencing or participating in any Insolvency Proceeding or taking any action
(other than with respect to the Collateral) to enforce the payment or
performance of any Grantors’ obligations under any of the Notes, Guaranties or
other Transaction Documents).  This Section 16(f) is not intended to
confer any rights or benefits upon Grantors, or any of them, or any other Person
except Secured Parties, and no Person (including any or all Grantors) other than
Secured Parties shall have any right to enforce any of the provisions of
this Section 16(f). As between Grantors, or any of them, and any Secured
Party, any action that such Secured Party may take under this Agreement shall be
conclusively presumed to have been authorized and approved by the other Secured
Parties.

       

      17. Priority of Liens;
Application of Proceeds of Collateral.  Each Secured Party
hereby acknowledges and agrees that, notwithstanding the time or order of the
filing of any financing statement or other registration or document with respect
to the Collateral and the Security Interests, or any provision of this
Agreement, any other Security Document, the Code or other applicable law, solely
as amongst the Secured Parties, the separate Security Interests of the Secured
Parties shall have the same rank and priority; provided, that, the foregoing
shall not apply to any Security Interest of a Secured Party that is void or
voidable as  a matter of law.  In furtherance thereof, all
proceeds of Collateral received by any Secured Party shall be applied as
follows:

       

      (a)           first, ratably to pay
any expenses due to any of the Secured Parties (including, without limitation,
the reasonable costs and expenses paid or incurred by any Secured Party to
correct any default under or enforce any provision of the Transaction Documents,
or after the occurrence of any Event of Default in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated) or indemnities then due to any of
the Secured Parties under the Transaction Documents, until paid in
full;

       

       

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

       

       

      (b)           second, ratably to
pay any fees or premiums then due to any of the Secured Parties under the
Transaction Documents, until paid in full;

       

      (c)           third, ratably to pay
interest due in respect of the Secured Obligations then due to any of the
Secured Parties, until paid in full;

       

      (d)           fourth, ratably to
pay the principal amount of all Secured Obligations then due to any of the
Secured Parties, until paid in full;

       

      (e)           fifth, ratably to pay
any other Secured Obligations then due to any of the Secured Parties;
and

       

      (f)           sixth, to Grantors or
such other Person entitled thereto under applicable law.

       

      18. Remedies
Cumulative.  Each right, power, and remedy of any Secured Party
as provided for in this Agreement or in any other Transaction Document or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the other Transaction Documents
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by any Secured Party, of any one or
more of such rights, powers, or remedies shall not preclude the simultaneous or
later exercise by such Secured Party of any or all such other rights, powers, or
remedies.

       

      19. Marshaling. No
Secured Party shall be required to marshal any present or future collateral
security (including but not limited to the Collateral) for, or other assurances
of payment of, the Secured Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising.  To the
extent that it lawfully may, each Grantor hereby agrees that it will not invoke
any law relating to the marshaling of collateral which might cause delay in or
impede the enforcement of any Secured Party’s rights and remedies under this
Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, each Grantor hereby
irrevocably waives the benefits of all such laws.

       

       

       

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

       

      20. Acknowledgment.

       

      (a)           Each
Secured Party hereby agrees and acknowledges that no other Secured Party has
agreed to act for it as an administrative or collateral agent, and each Secured
Party is and shall remain solely responsible for the attachment, perfection and
priority of all Liens created by this Agreement or any other Security Document
in favor of such Secured Party.  No Secured Party shall have by reason
of this Agreement or any other Transaction Document an agency or fiduciary
relationship with any other Secured Party.  No Secured Party (which
term, as used in this sentence, shall include reference to each Secured Party’s
officers, directors, employees, attorneys, agents and affiliates and to the
officers, directors, employees, attorneys and agents of such Secured Party’s
affiliates) shall: (i) have any duties or responsibilities except those
expressly set forth in this Agreement and the other Security Documents or
(ii) be required to take, initiate or conduct any enforcement action
(including any litigation, foreclosure or collection proceedings hereunder or
under any of the other Security Documents).  Without limiting the
foregoing, no Secured Party shall have any right of action whatsoever against
any other Secured Party as a result of such Secured Party acting or refraining
from acting hereunder or under any of the Security Documents except as a result
and to the extent of losses caused by such Secured Party’s actual gross
negligence or willful misconduct (it being understood and agreed by each
Secured Party that the delivery by any Significant Secured Party of one or more
Veto Notices shall not be deemed to be or construed as gross negligence or
willful misconduct on the part of the Secured Party delivering any such Veto
Notice).  No Secured Party assumes any responsibility for any failure
or delay in performance or breach by any Grantor or any Secured Party of
its obligations under this Agreement or any other Transaction
Document.  No Secured Party makes to any other Secured Party any
express or implied warranty, representation or guarantee with respect to any
Secured Obligations, Collateral, Transaction Document or Grantor.  No
Secured Party nor any of its officers, directors, employees, attorneys or agents
shall be responsible to any other Secured Party or any of its officers,
directors, employees, attorneys or agents for: (i) any recitals,
statements, information, representations or warranties contained in any of the
Transaction Documents or in any certificate or other document furnished pursuant
to the terms hereof; (ii) the execution, validity, genuineness,
effectiveness or enforceability of any of the Transaction Documents;
(iii) the validity, genuineness, enforceability, collectability, value,
sufficiency or existence of any Collateral, or the attachment, perfection or
priority of any Lien therein; or (iv) the assets, liabilities, financial
condition, results of operations, business, creditworthiness or legal status of
any Grantor or any Account Debtor.  No Secured Party nor any of its
officers, directors, employees, attorneys or agents shall have any obligation to
any other Secured Party to ascertain or inquire into the existence of any
default or Event of Default, the observance or performance by any Grantor
of any of the duties or agreements of such Grantor under any of the Transaction
Documents or the satisfaction of any conditions precedent contained in any of
the Transaction Documents.

       

      (b)           Each
Secured Party hereby acknowledges and represents that it has, independently and
without reliance upon any other Secured Party, and based upon such documents,
information and analyses as it has deemed appropriate, made its own credit
analysis of each Grantor and its own decision to enter into the Transaction
Documents and to purchase the Notes and Warrants, and each Secured Party
has made such inquiries concerning the Transaction Documents, the Collateral and
each Grantor as such Secured Party feels necessary and appropriate, and has
taken such care on its own behalf as would have been the case had it entered
into the Transaction Documents without any other Secured Party.  Each
Secured Party hereby further acknowledges and represents that the other Secured
Parties have not made any representations or warranties to it concerning any
Grantor, any of the Collateral or the legality, validity, sufficiency or
enforceability of any of the Transaction Documents.  Each Secured
Party also hereby acknowledges that it will, independently and without reliance
upon the other Secured Parties, and based upon such financial statements,
documents and information as it deems appropriate at the time, continue to make
and rely upon its own credit decisions in taking or refraining to take any
other action under this Agreement or the Transaction Documents.  No
Secured Party shall have any duty or responsibility to provide any other Secured
Party with any notices, reports or certificates furnished to such Secured Party
by any Grantor or any credit or other information concerning the affairs,
financial condition, business or assets of any Grantor (or any of its
affiliates) which may come into possession of such Secured Party.

       

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

       

       

       

      21. Indemnity and
Expenses.

       

      (a) Without
limiting any obligations of Parent under the Securities Purchase Agreement, each
Grantor agrees to indemnify all Secured Parties from and against all claims,
lawsuits and liabilities (including attorneys’ fees) arising out of or resulting
from this Agreement (including enforcement of this Agreement) or any other
Transaction Document, except claims, losses or liabilities resulting from the
gross negligence or willful misconduct of the party seeking indemnification as
determined by a final non-appealable order of a court of competent jurisdiction.
This provision shall survive the termination of this Agreement and the
Transaction Documents and the Satisfaction in Full of the Secured
Obligations.

       

      (b) Grantors,
jointly and severally, shall, upon demand, pay to each Secured Party all of the
costs and expenses which such Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or, upon an Event of Default, the sale of, collection from, or
other realization upon, any of the Collateral in accordance with this Agreement
and the other Transaction Documents, (iii) the exercise or enforcement of any of
the rights of such Secured Party hereunder or (iv) the failure by any Grantor to
perform or observe any of the provisions hereof.

       

      22. Merger, Amendments;
Etc.  THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES SOLELY WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.  THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES.  No provision of this Agreement may be amended other than by
an instrument in writing signed by each Grantor and each Significant Secured
Party, and any amendment to any provision of this Agreement made in conformity
with the provisions of this Section 22 shall be binding on all Secured Parties,
provided that no such amendment shall be effective to the extent that it (1)
applies to less than all of the Secured Parties, (2) imposes any obligation or
liability on any Secured Party without such Secured Party’s prior written
consent (which may be granted or withheld in such Secured Party’s sole
discretion) or (3) applies retroactively. No waiver shall be effective unless it
is in writing and signed by an authorized representative of the waiving party,
provided that all of the Significant Secured Parties (in a writing signed by all
of the Significant Secured Parties) may waive any provision of this Agreement,
and any waiver of any provision of this Agreement made in conformity with the
provisions of this Section 22 shall be binding on all Secured Parties, provided
that no such waiver shall be effective to the extent that it (1) applies to less
than all the Secured Parties (unless a party gives a waiver as to itself only),
(2) imposes any obligation or liability on any Secured Party without such
Secured Party’s prior written consent (which may be granted or withheld in such
Secured Party’s sole discretion) or (3) applies retroactively.

       

       

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

       

       

      23. Addresses for
Notices. All notices and other communications provided for hereunder (a)
shall be given in the form and manner set forth in the Securities Purchase
Agreement and (b) shall be delivered, (i) in the case of notice to any Grantor,
by delivery of such notice to Parent at Parent’s address specified in the
Securities Purchase Agreement or at such other address as shall be designated by
Parent in a written notice to each of the Secured Parties in accordance with the
provisions thereof, and (ii) in the case of notice to any Secured Party, by
delivery of such notice to such Secured Party at its address specified in the
Securities Purchase Agreement or at such other address as shall be designated by
such Secured Party in a written notice to Parent and each other Secured Party in
accordance with the provisions thereof.

       

      24. Separate, Continuing
Security Interests; Assignments under Transaction
Documents.  This Agreement shall create a separate, continuing
security interest in the Collateral in favor of each Secured Party and shall (a)
remain in full force and effect until Satisfaction in Full of the Secured
Obligations, (b) be binding upon each of Grantors, and their respective
permitted successors and permitted assigns, and (c) inure to the benefit of, and
be enforceable by, the Secured Parties and their respective successors,
transferees and assigns.  Without limiting the generality of the
foregoing clause (c), any Secured Party may, in accordance with the provisions
of the Transaction Documents, assign or otherwise transfer all or any portion of
its rights and obligations under the Transaction Documents to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Secured Party herein or otherwise. Upon
Satisfaction in Full of the Secured Obligations, the Security Interests granted
hereby shall terminate and all rights to the Collateral shall revert to Grantors
or any other Person entitled thereto. At such time, each Secured Party will
authorize the filing of appropriate termination statements to terminate such
Security Interests.  No transfer or renewal, extension, assignment, or
termination of this Agreement or any other Transaction Document, or any other
instrument or document executed and delivered by any Grantor to any Secured
Party nor any additional loans made by any Secured Party to any Grantor, nor the
taking of further security, nor the retaking or re-delivery of the Collateral to
Grantors, or any of them, by any Secured Party, nor any other act of Secured
Parties, or any of them, shall release any of Grantors from any obligation,
except a release or discharge executed in writing by all Secured
Parties.  No Secured Party shall by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder,
unless such waiver is in writing and signed by such Secured Party and then only
to the extent therein set forth.  A waiver by any Secured Party of any
right or remedy on any occasion shall not be construed as a bar to the exercise
of any such right or remedy which such Secured Party would otherwise have had on
any other occasion.

       

       

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

       

       

      25. Governing Law; Jurisdiction;
Service of Process; Jury Trial. The parties hereby agree that pursuant to
735 Illinois Compiled Statutes 105/5-5 they have chosen that all questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in Chicago, Illinois, 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 suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper; provided, however, any suit seeking
enforcement against any Collateral or other property may be brought, at any
Secured Party’s option, in the courts of any jurisdiction where such Secured
Party elects to bring such action or where such Collateral or other property may
be found.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Without limitation of
the foregoing, each Grantor other than Parent hereby irrevocably appoints Parent
as such Grantor’s agent for purposes of receiving and accepting any service of
process hereunder or under any of the other Security
Documents.  Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

       

      26. Miscellaneous.

       

      (a) This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original thereof. Any
party delivering an executed counterpart of this Agreement by facsimile or other
electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Security Document mutatis
mutandis.

       

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

       

       

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

       

       

      (c) Headings
used in this Agreement are for convenience only and shall not be used in
connection with the interpretation of any provision hereof.

       

      (d) The
pronouns used herein shall include, when appropriate, either gender and both
singular and plural, and the grammatical construction of sentences shall conform
thereto.

       

      (e) The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. For clarification purposes, the Recitals are part
of this Agreement.

       

      (f) Unless
the context of this Agreement or any other Transaction Document clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “includes” and  “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any
other Transaction Document refer to this Agreement or such other Transaction
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Transaction Document, as the case may
be.  Section, subsection, clause, schedule, and exhibit references
herein are to this Agreement unless otherwise specified.  Any
reference in this Agreement or in any other Transaction Document to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). “Satisfaction in Full of the Secured
Obligations” shall mean the indefeasible payment in full in cash and
discharge, or other satisfaction in accordance with the terms of the Transaction
Documents and discharge, of all Secured Obligations in full. Any reference
herein to any Person shall be construed to include such Person’s permitted
successors and permitted assigns. Any requirement of a writing contained herein
or in any other Transaction Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.

       

      (g) All
dollar amounts referred to in this Agreement and the other Transaction Documents
are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies shall be
converted in the U.S. Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

       

      [signature pages
follow]

       

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

       

       

       

      IN
WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by
and through their duly authorized officers, as of the day and year first above
written.

       

      
        
          	      
                  GRANTORS:

                	ECOBLU
      PRODUCTS, INC., a Colorado corporation
	 	 	 	 
	
                   

                	
                  By:
      

                	 	 
	 	Name	 	 
	 	Title 	 	 
	 	 	 	 


        

      

       

       

       

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

       

       

       

       

       

      
        
          
            	      
                          
                      SECURED
      PARTIES:

                    

                  	IROQUOIS
      MASTER FUND LTD.
	 	 	 	 
	
                     

                  	
                     

                  	 	 
	 	 	By:
      Joshua Silverman, Authorized Signatory	 
	 	 	 	 
	 	 	 	 


          

        

         

      

       

       

       

       

       

       

       

       

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

       

       

      SCHEDULE
1

       

      COMMERCIAL
TORT CLAIMS

       

      


       

      NONE

       

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SCHEDULE
2

       

      COPYRIGHTS

       

      


       

      NONE

       

       

       

       

       

       

      
 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SCHEDULE
3

       

      INTELLECTUAL
PROPERTY LICENSES

       

      1)   License
of Purchase, Distribution and Services Agreement by Bluwood USA in favor of
EcoBlu Products, Inc., dated as of August 24th
2009.

       

      2)   License
of Hartindo AF21 Product, Purchase, Sales, Distribution, Marketing and Service
Agreement by Megola in favor of EcoBlu Products, Inc., dated as of November
11th
2009.

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      SCHEDULE
4

       

      PATENTS

       

      


       

      


       

      NONE

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SCHEDULE
5

       

      PLEDGED
COMPANIES

       

      


       

      
        	
                Name
      of Pledgor

              	
                Name
      of Pledged Company

              	
                Percentage
      of Class Owned

              
	
                NONE

              	 
      	 
      
	 
      	 
      	 
      


      

      


       

      


       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

      SCHEDULE
6

       

      TRADEMARKS

       

      


       

      
        	
                Grantor

              	
                Country

              	
                Mark

              	
                Application/
      Registration No.

              	
                App/Reg
      Date

              
	
                EcoBlu
      Products, Inc.

              	
                US

              	
                ECOBLU

              	
                77769468

              	
                June
      26, 2009

              
	
                EcoBlu
      Products, Inc.

              	
                US

              	
                ECOBLU

              	
                77768573

              	
                June
      25, 2009

              


      

      


       

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SCHEDULE
7

       

      


       

      Part (a)

       

      Owned Real
Property

       

      NONE

       

      Leased Real
Property

       

      909 West
Vista Way, Vista, California 92083 (Corporate office)

       

      
        	
                o  

              	
                Landlord
      is “James A Meredith Trust”

              


      

       

      1280
Jefferson Lane, Colton, California 92324 (Manufacturing Plant)

       

      
        	
                o  

              	
                Landlord
      is “Cascade Warehouse/Scott
Cantonwine”

              


      

       

      300 South
McKinley Street, Prosper, Texas 75078

       

      
        	
                o  

              	
                Landlord
      is “Guthrie Properties, Ltd.”

              


      

       

      Other Locations of
Collateral                                                      

       

      NONE

       

      Part (b)

       

      Chief
Executive Office of each Grantor:

       

      909 West
Vista Way, Vista CA 92083

       

      Part (c)

       

      Locations
of Inventory and Equipment:

       

      1280
Jefferson Lane, Colton CA 92324

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SCHEDULE
8

       

      LIST OF
UNIFORM COMMERCIAL CODE FILING JURISDICTIONS

       

      
        	
                Grantor

              	
                Jurisdictions

              
	
                EcoBlu
      Products, Inc.

              	
                Colorado

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      


      

      


       

      


       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SCHEDULE
9

       

      DEPOSIT
ACCOUNTS AND SECURITIES ACCOUNTS

       

      Deposit
Accounts

      


      Regents
Bank

      501 West
Broadway Suite 550

      San
Diego, CA 92101

      Account
Number: 002107852

      ABA
Routing Number: 122243321

      


      Regents
Bank

      501 West
Broadway Suite 550

      San
Diego, CA 92101

      Account
Number: 002108330

      ABA
Routing Number: 122243321

      


      Securities
Accounts

       

      None.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
A

       

      COPYRIGHT SECURITY
AGREEMENT

       

      This
COPYRIGHT SECURITY AGREEMENT (this “Copyright Security Agreement”)
is made this 26th day
of March 2010, by the Grantors listed on the signature pages hereof
(collectively, jointly and severally, “Grantors” and each
individually “Grantor”),
in favor of the Secured Parties under and as defined in the below-described
Security Agreement.

       

      RECITALS

       

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of March 26,
2010 (as may be amended, restated, supplemented, or otherwise modified from time
to time, including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among EcoBlu Products, Inc., a Colorado corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes and Warrants;
and

       

      WHEREAS,
in order to induce each of the Secured Parties to purchase, severally and not
jointly, the Notes and Warrants as provided for in the Securities Purchase
Agreement, Grantors have executed and delivered to each of the Secured Parties
that certain Security Agreement of even date herewith (including all annexes,
exhibits or schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the “Security Agreement”);
and

       

      WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to each of the Secured Parties this Copyright Security Agreement.

       

      AGREEMENTS

       

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:

       

      1. DEFINED
TERMS.  All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement.

       

      2. GRANT OF SECURITY INTEREST
IN COPYRIGHT COLLATERAL.  Each Grantor hereby grants to each
Secured Party a continuing first priority security interest in all of such
Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Copyright
Collateral”):

       

      (a) all of
each Grantor’s Copyrights and Copyright Intellectual Property Licenses to which
it is a party including those referred to on Schedule
I hereto;

       

      (b) all
reissues, continuations or extensions of the foregoing; and

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      (c) all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future infringement or dilution of
any Copyright or any Copyright licensed under any Intellectual Property
License.

       

      3. SECURITY FOR
OBLIGATIONS.  This Copyright Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising
hereafter.  Without limiting the generality of the foregoing, this
Copyright Security Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to Secured Parties, or any of them, whether or not they are unenforceable or not
allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

       

      4. SECURITY
AGREEMENT.  The security interests granted pursuant to this
Copyright Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security
Agreement.  Each Grantor hereby acknowledges and affirms that the
rights and remedies of Secured Parties with respect to their respective security
interests in the Copyright Collateral made and granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.

       

      5. AUTHORIZATION TO
SUPPLEMENT.  To the extent required under the Security
Agreement, Grantors shall give Secured Parties prompt notice in writing of any
additional copyright registrations or applications therefor after the date
hereof. Grantors hereby authorize Secured Parties unilaterally to modify this
Agreement by amending Schedule
I to include any future registered copyrights or applications therefor of
Grantors.  Notwithstanding the foregoing, no failure to so modify this
Copyright Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on Schedule
I.

       

      6. COUNTERPARTS.  This
Copyright Security Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.  In proving this Copyright Security
Agreement or any other Transaction Document in any judicial proceedings, it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom such enforcement is sought.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      7. CONSTRUCTION.  Unless
the context of this Copyright Security Agreement or any other Transaction
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase “and/or.”
The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Copyright Security Agreement or any other Transaction Document refer to this
Copyright Security Agreement or such other Transaction Document, as the case may
be, as a whole and not to any particular provision of this Copyright Security
Agreement or such other Transaction Document, as the case may
be.  Section, subsection, clause, schedule, and exhibit references
herein are to this Copyright Security Agreement unless otherwise specified. Any
reference in this Copyright Security Agreement or in any other Transaction
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein).  Any reference herein to
any Person shall be construed to include such Person’s permitted successors and
permitted assigns.  Any requirement of a writing contained herein or
in any other Transaction Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein. The language used in this Copyright Security Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.  For
clarification purposes, the Recitals are part of this Copyright Security
Agreement.

       

      [signature pages
follow]

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

       

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

       

      
         

        
          
            	      
                    GRANTORS:

                  	ECOBLU
      PRODUCTS, INC., a Colorado corporation
	 	 	 	 
	
                     

                  	
                    By:
      

                  	 	 
	 	Name	 	 
	 	Title 	 	 
	 	 	 	 


          

        

         

      

       

       

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


       

      SCHEDULE
I

      to

      COPYRIGHT SECURITY
AGREEMENT

       

      Copyright
Registrations

       

      
        	
                Grantor

              	
                Country

              	
                Copyright

              	
                Registration
      No.

              	
                Registration
      Date

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


      

      


       

      Copyright
Licenses

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

      EXHIBIT
B

       

      PATENT SECURITY
AGREEMENT

       

      This
PATENT SECURITY AGREEMENT (this “Patent Security Agreement”) is
made this 26th day
of March 2010, by the Grantors listed on the signature pages hereof
(collectively, jointly and severally, “Grantors” and each
individually “Grantor”),
in favor of the Secured Parties under and as defined in the below-described
Security Agreement.

       

      RECITALS

       

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of March 26,
2010 (as may be amended, restated, supplemented, or otherwise modified from time
to time, including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among EcoBlu Products, Inc., a Colorado corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes and Warrants;
and

       

      WHEREAS,
in order to induce each of the Secured Parties to purchase, severally and not
jointly, the Notes and Warrants as provided for in the Securities Purchase
Agreement, Grantors have executed and delivered to each of the Secured Parties
that certain Security Agreement of even date herewith (including all annexes,
exhibits or schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the “Security Agreement”);
and

       

      WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to each of the Secured Parties this Patent Security Agreement.

       

      AGREEMENTS

       

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:

       

      1. DEFINED
TERMS.  All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement.

       

      2. GRANT OF SECURITY INTEREST
IN PATENT COLLATERAL.  Each Grantor hereby grants to each
Secured Party a continuing first priority security interest in all of such
Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Patent
Collateral”):

       

      (a) all of
its Patents and Patent Intellectual Property Licenses to which it is a party
including those referred to on Schedule
I hereto;

       

      (b) all
reissues, continuations or extensions of the foregoing; and

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      (c) all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future infringement or dilution of
any Patent or any Patent licensed under any Intellectual Property
License.

       

      3. SECURITY FOR
OBLIGATIONS.  This Patent Security Agreement and the Security
Interests created hereby secures the payment and performance of all the Secured
Obligations, whether now existing or arising hereafter.  Without
limiting the generality of the foregoing, this Patent Security Agreement secures
the payment of all amounts which constitute part of the Secured Obligations and
would be owed by Grantors, or any of them, to Secured Parties, or any of them,
whether or not they are unenforceable or not allowable due to the existence of
an Insolvency Proceeding involving any Grantor.

       

      4. SECURITY
AGREEMENT.  The security interests granted pursuant to this
Patent Security Agreement are granted in conjunction with the security interests
granted to Secured Parties pursuant to the Security Agreement.  Each
Grantor hereby acknowledges and affirms that the rights and remedies of Secured
Parties with respect to their respective security interests in the Patent
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

       

      5. AUTHORIZATION TO
SUPPLEMENT.  If any Grantor shall obtain rights to any new
patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any patent,
the provisions of this Patent Security Agreement shall automatically apply
thereto. To the extent required under the Security Agreement, Grantors shall
give prompt notice in writing to Secured Parties with respect to any such new
patent rights.  Without limiting each Grantor’s obligations under this
Section 5, Grantors hereby authorize Secured Parties unilaterally to modify this
Agreement by amending Schedule
I to include any such new patent rights of
Grantors.  Notwithstanding the foregoing, no failure to so modify this
Patent Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on Schedule
I.

       

      6. COUNTERPARTS.  This
Patent Security Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. In the event that any signature is delivered by facsimile
transmission or by an e-mail which contains a portable document format (.pdf)
file of an executed signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof. In proving this Patent Security Agreement or any other
Transaction Document in any judicial proceedings, it shall not be necessary to
produce or account for more than one such counterpart signed by the party
against whom such enforcement is sought.

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      7. CONSTRUCTION.  Unless
the context of this Patent Security Agreement or any other Transaction Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase
“and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Patent Security Agreement or any other Transaction
Document refer to this Patent Security Agreement or such other Transaction
Document, as the case may be, as a whole and not to any particular provision of
this Patent Security Agreement or such other Transaction Document, as the case
may be. Section, subsection, clause, schedule, and exhibit references herein are
to this Patent Security Agreement unless otherwise specified.  Any
reference in this Patent Security Agreement or in any other Transaction Document
to any agreement, instrument, or document shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements, thereto and thereof, as applicable
(subject to any restrictions on such alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements set forth herein). Any reference herein to any Person shall be
construed to include such Person’s permitted successors and permitted assigns.
Any requirement of a writing contained herein or in any other Transaction
Document shall be satisfied by the transmission of a Record and any Record so
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein. The language used in this
Patent Security Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. For clarification purposes, the Recitals are part
of this Patent Security Agreement.

       

      [signature pages
follow]

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

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

       

      
        
           

          
            
              	      
                      GRANTORS:

                    	ECOBLU
      PRODUCTS, INC., a Colorado corporation
	 	 	 	 
	
                       

                    	
                      By:
      

                    	 	 
	 	Name	 	 
	 	Title 	 	 
	 	 	 	 


            

          

           

        

         

      

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

      EXHIBIT
C

      


      TRADEMARK SECURITY
AGREEMENT

       

      This
TRADEMARK SECURITY AGREEMENT (this “Trademark Security Agreement”)
is made this 26th day
of March 2010, by the Grantors listed on the signature pages hereof
(collectively, jointly and severally, “Grantors” and each
individually “Grantor”),
in favor of the Secured Parties under and as defined in the below-described
Security Agreement.

       

      RECITALS

       

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of March 26,
2010 (as may be amended, restated, supplemented, or otherwise modified from time
to time, including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among EcoBlu Products, Inc., a Colorado corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes and Warrants;
and

       

      WHEREAS,
in order to induce each of the Secured Parties to purchase, severally and not
jointly, the Notes and Warrants as provided for in the Securities Purchase
Agreement, Grantors have executed and delivered to each of the Secured Parties
that certain Security Agreement of even date herewith (including all annexes,
exhibits or schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the “Security Agreement”);
and

       

      WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to each of the Secured Parties this Trademark Security Agreement.

       

      AGREEMENTS

       

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:

       

      1. DEFINED
TERMS.  All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement.

       

      2. GRANT OF SECURITY INTEREST
IN TRADEMARK COLLATERAL.  Each Grantor hereby grants to each
Secured Party a continuing first priority security interest in all of such
Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Trademark
Collateral”):

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      (a) all of
its Trademarks and Trademark Intellectual Property Licenses to which it is a
party including those referred to on Schedule
I hereto;

       

      (b) all
goodwill, trade secrets, proprietary or confidential information, technical
information, procedures, formulae, quality control standards, designs, operating
and training manuals, customer lists, and other General Intangibles with respect
to the foregoing;

       

      (c) all
reissues, continuations or extensions of the foregoing;

       

      (d) all
goodwill of the business connected with the use of, and symbolized by, each
Trademark and each Trademark Intellectual Property License; and

       

      (e) all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future (i) infringement or dilution
of any Trademark or any Trademark licensed under any Intellectual Property
License or (ii) injury to the goodwill associated with any Trademark or any
Trademark licensed under any Intellectual Property License.

       

      3. SECURITY FOR
OBLIGATIONS.  This Trademark Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising
hereafter.  Without limiting the generality of the foregoing, this
Trademark Security Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to Secured Parties, or any of them, whether or not they are unenforceable or not
allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

       

      4. SECURITY
AGREEMENT.  The security interests granted pursuant to this
Trademark Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security
Agreement.  Each Grantor hereby acknowledges and affirms that the
rights and remedies of Secured Parties with respect to their respective security
interests in the Trademark Collateral made and granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.

       

      5. AUTHORIZATION TO
SUPPLEMENT.  If any Grantor shall obtain rights to any new
trademarks, the provisions of this Trademark Security Agreement shall
automatically apply thereto. To the extent required under the Security
Agreement, Grantors shall give prompt notice in writing to Secured Parties with
respect to any such new trademarks or renewal or extension of any trademark
registration.   Without limiting each Grantor’s obligations under
this Section 5, Grantors hereby authorize Secured Parties unilaterally to modify
this Agreement by amending Schedule
I to include any such new trademark rights of
Grantors.  Notwithstanding the foregoing, no failure to so modify this
Trademark Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on Schedule
I.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

      6. COUNTERPARTS.  This
Trademark Security Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof. In proving this Trademark Security Agreement or any
other Transaction Document in any judicial proceedings, it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom such enforcement is sought.

       

      7. CONSTRUCTION.  Unless
the context of this Trademark Security Agreement or any other Transaction
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase
“and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Trademark Security Agreement or any other Transaction
Document refer to this Trademark Security Agreement or such other Transaction
Document, as the case may be, as a whole and not to any particular provision of
this Trademark Security Agreement or such other Transaction Document, as the
case may be.  Section, subsection, clause, schedule, and exhibit
references herein are to this Agreement unless otherwise specified. Any
reference in this Trademark Security Agreement or in any other Transaction
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person
shall be construed to include such Person’s permitted successors and permitted
assigns. Any requirement of a writing contained herein or in any other
Transaction Document shall be satisfied by the transmission of a Record and any
Record so transmitted shall constitute a representation and warranty as to the
accuracy and completeness of the information contained therein. The language
used in this Trademark Security Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. For clarification purposes, the
Recitals are part of this Trademark Security Agreement.

       

      [signature pages
follow]

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

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

       

       

      
        
           

          
            
              	      
                      GRANTORS:

                    	ECOBLU
      PRODUCTS, INC., a Colorado corporation
	 	 	 	 
	
                       

                    	
                      By:
      

                    	 	 
	 	Name	 	 
	 	Title 	 	 
	 	 	 	 


            

          

           

        

         

         

         

         

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

       

      


      SCHEDULE
I

      to

      TRADEMARK SECURITY
AGREEMENT

      


      Trademark
Registrations/Applications

       

      
        	
                Grantor

              	
                Country

              	
                Mark

              	
                Application/
      Registration No.

              	
                App/Reg
      Date

              
	
                EcoBlu
      Products, Inc.

              	
                US

              	
                ECOBLU

              	
                77769468

              	
                June
      26, 2009

              
	
                EcoBlu
      Products, Inc.

              	
                US

              	
                ECOBLU

              	
                77768573

              	
                June
      25, 2009

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


      

      


       

      Trade
Names

      
 

      Common Law
Trademarks

       

       

      Trademarks Not Currently In
Use

       

       

      Trademark
Licenses

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

       

       

      EXHIBIT
D

       

      Form
of Guaranty

       

      See
attached