Blueprint





 







Exhibit 10.4

 



SECURITY AGREEMENT

 


This SECURITY
AGREEMENT, dated as of June 20,
2018 (this “Agreement”),
is by and among New Ages Beverages Corp. (the “Company”),
any subsidiary of the Company that is a signatory hereto either now
joined or joined in the future (such subsidiaries, together with
the Company, the “Debtors”)
and the holder(s) of the Company’s Convertible Promissory
Note (the “Note”)
in the principal amount of $4,500,000 signatory hereto, its
endorsees, transferees and assigns (collectively, the
“Secured
Lender”).

 



W I T N E S S E T H:

 


WHEREAS, pursuant to that certain Securities
Purchase Agreement, dated as of even date herewith, by and among
the Company and the purchasers signatory thereto (the
“Purchase
Agreement”), the Secured
Lender has agreed to fund the Company with respect to the issuance
of the Note due, subject to the terms therein, one year from its
date of issuance, issued by the Company to the Secured Lender; and
together with the Note, any other securities that may be issued
from time-to-time (the “Securities”).

 


WHEREAS,
in order to induce the Secured Lender to fund the Company, each
Debtor has agreed to execute and deliver to the Secured Lender this
Agreement and to grant the Secured Lender a security interest in
certain property of such Debtor to secure the prompt payment,
performance and discharge in full of all of the Company’s
obligations under the Transaction Documents (as defined in the
Purchase Agreement) and the obligations required by any guarantors
under any guarantee that now or hereinafter may come into
effect.

 


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

 

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

 

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

 


 




 

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

 

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

 

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

 

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

 

(v) All
commercial tort claims;

 

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

 

(vii) All
investment property;

 

(viii) All
supporting obligations;

 

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

 

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

 


Without limiting the generality of the foregoing,
the “Collateral”
shall include all investment property and any other shares of
capital stock and/or other equity interests of any Debtor obtained
in the future, and, in each case, all certificates representing
such shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity interests
that may hereafter be received, receivable or distributed in
respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and
cash.

 




 

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

 

(b) “Excluded
Collateral” means (i)
motor vehicles, trucks and other assets subject to certificates of
title and (ii) any Intellectual Property to the extent that the
attachment of the security interest of this Agreement thereto, or
any assignment thereof, would result in the forfeiture,
cancellation, invalidation, unenforceability or other loss of the
Debtors’ rights in such property.

 

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

 

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

 

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

 


 




 

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

 

(g) “Permitted
Liens” means the
following:

 

(i) Liens
imposed by law for taxes that are not yet due or are being
contested in good faith, which in each case, have been
appropriately reserved for;

 

(ii) Carriers’,
warehousemen’s, mechanics’, materialmen’s,
repairmen’s and other like Liens imposed by law, arising in
the ordinary course of business and securing obligations that are
not overdue by more than thirty (30) days or are being contested in
good faith;

 

(iii) Pledges
and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other
social security laws or regulations;

 

(iv) Deposits
to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the
ordinary course of business;

 

(v) Liens
under this Agreement; and

 

(vi) Any
other liens in favor of the Secured Lender.

 

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

 

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

 

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

 

2. Grant
of Security Interest in Collateral. As an inducement for the Secured Lender to fund
the Company and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of
the Obligations, each Debtor hereby unconditionally and irrevocably
pledges, grants and hypothecates to the Secured Lender a perfected,
first priority security interest in and to, a lien upon and a right
of set-off against all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (a
“Security
Interest” and,
collectively, the “Security
Interests”), provided
that, nothwithstanding anything to the contrary in this Agreement,
this Agreement shall not constitute a grant of a security interest
in any Excluded Collateral.

 




 

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3. Delivery of Certain
Collateral. Within ten (10)
days after the execution of this Agreement, each Debtor shall
deliver or cause to be delivered to the Secured Lender (a) any and
all certificates and other instruments representing or evidencing
the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral,
in each case, together with all Necessary Endorsements. The Debtors
are, contemporaneously with the execution hereof, delivering to
Secured Lender, or have previously delivered to Secured Lender, a
true and correct copy of each Organizational Document governing any
of the Pledged Securities.

 


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

 

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

 

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

 

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

 




 

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

 

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

 

(f) This
Agreement creates in favor of the Secured Lender a valid first
priority security interest in the Collateral, subject only to
Permitted Liens, securing the payment and performance of the
Obligations. Upon making the filings described in the immediately
following paragraph, all security interests created hereunder in
any Collateral which may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected. Except
for (i) the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, (ii)
the recordation of the Intellectual Property Security Agreement (as
defined in Section 4(p) hereof) with respect to copyrights and
copyright applications in the United States Copyright Office
referred to in paragraph (mm), (iii) the recordation of the
Intellectual Property Security Agreement (as defined in Section
4(p) hereof) with respect to patents and trademarks of the Debtors
in the United States Patent and Trademark Office referred to in
paragraph (oo), (iv) the execution and delivery of deposit account
control agreements satisfying the requirements of Section
9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, (v) if there is any investment property or deposit account
included as Collateral that can be perfected by
“control” through an account control agreement, the
execution and delivery of securities account control agreements
satisfying the requirements of 9-106 of the UCC with respect to
each such investment property of the Debtors, and (vi) the delivery
of the certificates and other instruments provided in Section 3,
Section 4(aa) and Section 4(cc), no action is necessary to create,
perfect or protect the security interests created hereunder.
Without limiting the generality of the foregoing, except for the
foregoing, no consent of any third parties and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (x) the
execution, delivery and performance of this Agreement, (y) the
creation or perfection of the Security Interests created hereunder
in the Collateral or (z) the enforcement of the rights of the
Secured Lender and the Secured Lender hereunder.

 

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

 




 

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

 

(i) The
capital stock and other equity interests (whether or not
certificated) listed on Schedule H
hereto (the “Pledged
Securities”) represent
all capital stock and other equity interests of the Debtors (other
than the Company) and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company. All of the
Pledged Securities are validly issued, fully paid and
nonassessable, and the Debtors are the legal and beneficial owners
of the Pledged Securities, free and clear of any lien, security
interest or other encumbrance except for the security interests
created by this Agreement and other Permitted
Liens.

 

(j) Each
Debtor hereby represents and warrants that no ownership or other
equity interests in partnerships and limited liability companies
(if any) included in the Collateral (the “Pledged
Interests”) is a
“security” for purposes of Article 8 of the UCC of the
jurisdiction of organization of the issuer of such Pledged
Interests. Each Debtor agrees that it shall not opt to have any
uncertificated Pledged Interests be treated as a
“security” for purposes of Article 8 of the UCC of the
jurisdiction of organization of the issuer of such Pledged
Interests.

 

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

 

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

 




 

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

 

(n) Each
Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds
and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. If no Event
of Default (as defined in the Note ) exists and if the proceeds
arising out of any claim or series of related claims do not exceed
$100,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with
respect to which the loss was incurred to the extent reasonably
feasible, and any loss payments or the balance thereof remaining,
to the extent not so applied, shall be payable to the applicable
Debtor; provided,
however,
that payments received by any Debtor after an Event of Default (as
defined in the Note) or an Event of Default occurs and is
continuing or in excess of $100,000 for any occurrence or series of
related occurrences, upon approval by Secured Lender, which
approval shall not be unreasonably withheld, delayed, denied or
conditioned, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with
respect to which the loss was incurred to the extent reasonably
feasible, and any loss payments or the balance thereof remaining,
to the extent not so applied, shall be paid to the Secured Lender
on behalf of the Secured Lender and, if received by such Debtor,
shall be held in trust for the Secured Lender and immediately paid
over to the Secured Lender unless otherwise directed in writing by
the Secured Lender. Copies of such policies or the related
certificates, in each case, naming the Secured Lender as
lender-loss-payee and additional insured shall be delivered to the
Secured Lender at least annually and at the time any new policy of
insurance is issued.

 

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

 

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

 

(q) Upon
prior notice (so long as no Event of Default (as defined in the
Note) or a breach under any of the Transaction Documents (as
defined in the Purchase Agreement) has occurred or continuing,
which in either such event, no prior notice is required), each
Debtor shall permit the Secured Lender and its representatives and
agents to inspect the Collateral during normal business hours and
to make copies of records pertaining to the Collateral as may be
reasonably requested by the Secured Lender from time to
time.

 


 




 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(z) (i)
The actual name of each Debtor is the name set forth in
Schedule
D attached hereto; (ii) no
Debtor has any trade names except as set forth on
Schedule
E attached hereto; (iii) no
Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule E
for the preceding five (5) years; and
(iv) no entity has merged into any Debtor or been acquired by any
Debtor within the past five years except as set forth on
Schedule
E.

 


 




 

9








 






 

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

 

(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any
and all orders and instructions of Secured Lender regarding the
Pledged Interests consistent with the terms of this Agreement
without the further consent of any Debtor.

 

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

 

(dd) If
there is any investment property or deposit account included as
Collateral that can be perfected by “control” through
an account control agreement, the applicable Debtor shall cause
such an account control agreement within 30 days of the date
hereof, in form and substance in each case satisfactory to the
Secured Lender, to be entered into and delivered to the Secured
Lender for the benefit of the Secured Lender.

 

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

 

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

 

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

 

(hh) Each
Debtor shall immediately provide written notice to the Secured
Lender of any and all accounts that are equal to or in excess of $1
million and which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the
perfected status of the Security Interests in such accounts and
proceeds thereof, shall execute and deliver to the Secured Lender
an assignment of claims for such accounts and cooperate with the
Secured Lender in taking any other steps required, in its judgment,
under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected
status of the Security Interests in such accounts and proceeds
thereof.

 


 




 

10








 






 

(ii) Each
Debtor shall cause each subsidiary of such Debtor to immediately
become a party hereto (an “Additional
Debtor”), by executing
and delivering an Additional Debtor Joinder in substantially the
form of Annex A
attached hereto and comply with the
provisions hereof applicable to the Debtors. Concurrently
therewith, the Additional Debtor shall deliver replacement
schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement, as applicable, which replacement
schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver
such opinions of counsel, authorizing resolutions, good standing
certificates, incumbency certificates, organizational documents,
financing statements and other information and documentation as the
Secured Lender may reasonably request. Upon delivery of the
foregoing to the Secured Lender, the Additional Debtor shall be and
become a party to this Agreement with the same rights and
obligations as the Debtors, for all purposes hereof as fully and to
the same extent as if it were an original signatory hereto and
shall be deemed to have made the representations, warranties and
covenants set forth herein as of the date of execution and delivery
of such Additional Debtor Joinder, and all references herein to the
“Debtors” shall be deemed to include each Additional
Debtor.

 

(jj) Each
Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Transaction
Documents (as defined in the Purchase Agreement).

 

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

 

(ll) In
the event that, upon an occurrence of an Event of Default, Secured
Lender shall sell all or any of the Pledged Securities to another
party or parties (herein called the “Transferee”)
or shall purchase or retain all or any of the Pledged Securities,
each Debtor shall, to the extent applicable: (i) deliver to Secured
Lender or the Transferee, as the case may be, the articles of
incorporation, bylaws, minute books, stock certificate books,
corporate seals, deeds, leases, indentures, agreements, evidences
of indebtedness, books of account, financial records and all other
Organizational Documents and records of the Debtors and their
direct and indirect subsidiaries (but not including any items
subject to the attorney-client privilege related to this Agreement
or any of the transactions hereunder); (ii) use its best efforts to
obtain resignations of the persons then serving as officers and
directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use its best efforts to
obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the
Pledged Securities by Secured Lender and allow the Transferee or
Secured Lender to continue the business of the Debtors and their
direct and indirect subsidiaries.

 


 




 

11








 






 

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

 

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

 

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

 

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

 

(qq) Until
the Obligations shall have been paid and performed in full, the
Company covenants that it shall promptly direct any direct or
indirect subsidiary of the Company formed or acquired after the
date hereof to enter into a guarantee in favor of the Secured
Party, in the form of attached as an exhibit to the Purchase
Agreement.

 

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

 


 




 

12








 






 

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

 

(a) The
occurrence and during the continuance of an Event of Default (as
defined in the Note);

 

(b) The
occurrence of an event of default or breach under any of the
Transaction Documents (as defined in the Purchase
Agreement);

 

(c) Any
representation or warranty of any Debtor in this Agreement shall
prove to have been incorrect in any material respect when made;
or

 

(d) The
failure by any Debtor to observe or perform any of its obligations
hereunder for seven (7) Trading Days after delivery to such Debtor
of notice of such failure by or on behalf of a Secured Party unless
such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a
timely fashion.

 

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

 


7. Duty
to Hold in Trust.

 

(a) Upon
the occurrence and during the continuance of any Event of Default
and at any time thereafter, each Debtor shall, upon receipt of any
revenue, income, dividend, interest or other sums subject to the
Security Interests, whether payable pursuant to the Transaction
Documents (as defined in the Purchase Agreement) or otherwise, or
of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in
trust for the Secured Lender and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured
Lender.

 

(b) If
any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares
of Pledged Securities or instruments representing Pledged
Securities acquired after the date hereof, or any options,
warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of
capital, or issued in connection with any reorganization of such
Debtor or any of its direct or indirect subsidiaries) in respect of
the Pledged Securities (whether as an addition to, in substitution
of, or in exchange for, such Pledged Securities or otherwise), such
Debtor agrees to (i) accept the same as the agent of the Secured
Lender; (ii) hold the same in trust on behalf of and for the
benefit of the Secured Lender and (iii) to deliver any and all
certificates or instruments evidencing the same to Secured Lender
on or before the close of business on the fifth
(5th)
business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be
held by Secured Lender subject to the terms of this Agreement as
Collateral.

 




 

13








 






 


8. Rights
and Remedies Upon Default.

 

(a) If
any Event of Default shall have occurred and be continuing, the
Secured Lender shall have the right to exercise all of the remedies
conferred hereunder and under the Transaction Documents (as defined
in the Purchase Agreement), and the Secured Lender shall have all
the rights and remedies of a secured party under the UCC. Without
limitation, the Secured Lender shall have the following rights and
powers:

 

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

 

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

 

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

 


 




 

14








 






 

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

 

(v) The
Secured Lender may (but is not obligated to) direct any financial
intermediary or any other person or entity holding any investment
property to transfer the same to the Secured Lender or its
designee.

 

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

 

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

 

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

 

9. Applications
of Proceeds. The proceeds of
any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy
insuring any portion of the Collateral shall be applied first, to
the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs incurred in connection
therewith) of the Collateral, to the reasonable attorneys’
fees and expenses incurred by the Secured Lender in enforcing the
Secured Lender’ rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to
satisfaction of the Obligations pro rata among the Secured Lender
(based on then issued and outstanding Securities at the time of any
such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Lender shall
pay to the applicable Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds
thereof are insufficient to pay all amounts to which the Secured
Lender is legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at such rate as set
forth in the Note (including without limitation the Late Fees) and
the reasonable fees of any attorneys employed by the Secured Lender
to collect such deficiency. To the extent permitted by applicable
law, each Debtor waives all claims, damages and demands against the
Secured Lender arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Lender as
determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

 


 




 

15








 






 

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

 

11. Costs
and Expenses. Each Debtor
agrees to pay all reasonable fees, costs and expenses incurred in
connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC,
continuation statements, partial releases and/or termination
statements related thereto, or any expenses of any searches
required by the Secured Lender. The Debtors will also, upon demand,
pay to the Secured Lender the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Secured Lender, for the
benefit of the Secured Lender, may incur in connection with the
creation, perfection, protection, satisfaction, foreclosure,
collection or enforcement of the Security Interest and the
preparation, administration, continuance, amendment or enforcement
of this Agreement and pay to the Secured Lender the amount of any
and all expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Secured Lender,
for the benefit of the Secured Lender, and the Secured Lender may
incur in connection with (i) the enforcement of this Agreement,
(ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured
Lender under the Transaction Documents (as defined in the Purchase
Agreement). Until so paid, any reasonable fees payable hereunder
shall be added to the amounts owed under the Transaction Documents
(as defined in the Purchase Agreement) and shall bear interest at
the Default Rate.

 

12. Responsibility
for Collateral. The Debtors
assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or
diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing and except as required by
applicable law, (a) neither the Secured Lender nor any Secured
Party (i) has any duty (either before or after an Event of Default)
to collect any amounts in respect of the Collateral or to preserve
any rights relating to the Collateral, or (ii) has any obligation
to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract
or agreement included in the Collateral to be observed or performed
by such Debtor thereunder. Neither the Secured Lender nor any
Secured Party shall have any obligation or liability under any such
contract or agreement by reason of or arising out of this Agreement
or the receipt by the Secured Lender or any Secured Party of any
payment relating to any of the Collateral, nor shall the Secured
Lender or any Secured Party be obligated in any manner to perform
any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Secured Lender or any
Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts
which may have been assigned to the Secured Lender or to which the
Secured Lender or any Secured Party may be entitled at any time or
times.

 


 




 

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

 

14. Term
of Agreement. This Agreement
shall terminate on the date on which all payments under the
Securities and the Transaction Documents (as defined in the
Purchase Agreement) have been indefeasibly paid in full and all
other Obligations have been paid or discharged; provided, however,
that all indemnities of the Debtors contained in this Agreement
shall survive and remain operative and in full force and effect
regardless of the termination of this
Agreement.

 


 




 

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15. Power
of Attorney; Further Assurances.

 

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

 

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

 

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

 


 




 

18








 






 


16. Notices. All notices, requests, demands and other
communications hereunder shall be subject to the notice provision
of the Purchase Agreement.

 


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

 


18. Miscellaneous.

 

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

 

(b) All
of the rights and remedies of the Secured Lender with respect to
the Collateral, whether established hereby, the Securities or the
Transaction Documents (as defined in the Purchase Agreement) or by
any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or
concurrently.

 

(c) This
Agreement, together with the exhibits and schedules hereto,
contains the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into this Agreement
and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Lender holding two-thirds
(2/3rds)
or more of the Principal Amount, as defined in the Note, then
issued and outstanding, or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is
sought.

 

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

 

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

 




 

19








 






 

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

 

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

 

(h) Except
to the extent mandatorily governed by the jurisdiction or situs
where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Except to the
extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Transaction
Documents (as defined in the Purchase Agreement) (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts
sitting in the City of New York, Borough of Manhattan. Except to
the extent mandatorily governed by the jurisdiction or situs where
the Collateral is located, each Debtor hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such proceeding is improper.
Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby.

 

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

 

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

 

(k) Each
Debtor shall indemnify, reimburse and hold harmless the Secured
Lender and the Secured Lender and their respective partners,
members, shareholders, officers, directors, employees and agents
(and any other persons with other titles that have similar
functions) (collectively, “Indemnitees”)
from and against any and all losses, claims, liabilities, damages,
penalties, suits, costs and expenses, of any kind or nature,
(including fees relating to the cost of investigating and defending
any of the foregoing) imposed on, incurred by or asserted against
such Indemnitee in any way related to or arising from or alleged to
arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and
expenses which result from the gross negligence or willful
misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation
of, any other indemnification provision in the Purchase Agreement,
the Transaction Documents (as defined in the Purchase Agreement),
or any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.

 




 

20








 






 

(l) Nothing
in this Agreement shall be construed to subject Secured Lender or
any Secured Party to liability as a partner in any

 

(m) Debtor
or any if its direct or indirect subsidiaries that is a partnership
or as a member in any Debtor or any of its direct or indirect
subsidiaries that is a limited liability company, nor shall Secured
Lender or any Secured Party be deemed to have assumed any
obligations under any partnership agreement or limited liability
company agreement, as applicable, of any such Debtor or any of its
direct or indirect subsidiaries or otherwise, unless and until any
such Secured Party exercises its right to be substituted for such
Debtor as a partner or member, as applicable, pursuant
hereto.

 

(n) To
the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as
applicable, of any Debtor or any direct or indirect subsidiary of
any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby represent that all
such consents and approvals have been obtained.

 



[SIGNATURE PAGE OF DEBTORS FOLLOWS]

 


 




 

21








 






 

 


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

 



NEW AGES BEVERAGES CORPORATION

 




By:                                                                 






Name:


Title:

 



NABC, INC.

 




By:                                                                 






Name:


Title:

 



NABC PROPERTIES, LLC

 




By:                                                                 






Name:


Title:

 



NEW AGE HEALTH SCIENCES, INC.

 




By:                                                                 






Name:


Title:

 



[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 




 

22








 






 



[SIGNATURE PAGE OF HOLDERS TO SECURITY AGREEMENT]

 




Name of Secured Party: Dominion Capital LLC





 



Signature of Authorized Signatory of Secured
Party:/s/
Mikhail Gurevich 

 



Name of Authorized
Signatory:


Mikhail
Gurevich






 



Title of Authorized Signatory:

Managing
Member






 


 




 

23








 






 

 



DISCLOSURE SCHEDULES

 



(Security Agreement)

 


The following are the Disclosure Schedules (the
“Disclosure
Schedules”) referred to
in that certain Security Agreement, dated as of May 15, 2018 (the
“Agreement”),
among New Ages Beverages Corp. (the “Company”),
any subsidiary and affiliate of the Company that is a signatory
hereto either now or joined in the future (such subsidiaries,
together with the Company, the “Debtors”)
and the holder(s) of the Note (as defined in the Agreement), their
endorsees, transferees and assigns (collectively, the
“Secured
Lender”).

 


 




 

24








 






 

 



ANNEX A

 



to

 



SECURITY AGREEMENT

 



FORM OF ADDITIONAL DEBTOR JOINDER

 


Reference is hereby made to the Security
Agreement, dated as of May 15, 2018, made by and among New
Ages Beverages Corp. and its
subsidiaries party thereto from time to time, as Debtors to and in
favor of the Secured Lender identified therein (the
“Security
Agreement”). Capitalized
terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Security
Agreement.

 


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

 


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

 


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

 


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

 


[Name
of Additional Debtor]

 


By:


Name:


Title:

 


Address:

 



Dated:

 




 

25