Viscount Systems Inc.: Exhibit 10.1 - Filed by newsfilecorp.com






SECURITY AND PLEDGE AGREEMENT

This SECURITY AND PLEDGE
AGREEMENT, dated as of November 24, 2015 (this “Agreement”), is among
Viscount Systems, Inc., a Nevada corporation (the “Company”), all of the
subsidiaries of the Company (such subsidiaries, the “Guarantors” and
together with the Company, collectively, the “Debtors”) and the holders
of the Company’s (i) 14% Senior Secured Convertible Promissory A Notes (the
“A Notes”) and (ii) Senior Secured Convertible Promissory B Notes (the
“B Notes”, and collectively with the A Notes, the “Notes”)
following their issuance, signatory hereto, their respective endorsees,
transferees and assigns (each a Secured Party collectively, the “Secured
Parties”). 

W I T N E S S E T H:


WHEREAS, the Company is selling B
Notes and issuing the A Notes as provided in the Notes;

WHEREAS, pursuant to a certain
Subsidiary Guarantee, dated as of the date hereof (the “Guarantee”), the
Guarantors have jointly and severally guaranteed and act as surety for payment
to the Secured Parties of the Notes including, but not limited to all future
Notes issued; and 

WHEREAS, each Debtor has agreed
to execute and deliver to the Secured Parties this Agreement and to grant the
Secured Parties, pari passu with each other Secured Party and
through the Agent (as defined in Section 17 hereof), a security interest in all
of the assets of each such Debtor to secure the prompt payment, performance and
discharge in full of each of the Debtor’s obligations under the Notes and the
other Transaction Documents (as defined in Section 1(e)) and the Guarantors’
obligations under the Guarantee. 

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

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

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

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

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

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

(x)      the
Pledged Securities; and 

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


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

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

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

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(c)      “Majority
in Interest” means, at any time of determination, at least 50.01% of the
then aggregate outstanding principal amount of Notes. 

(d)      “Necessary
Endorsement” means undated stock powers endorsed in blank medallion
guaranteed (or notarized for the Company’s wholly owned Canadian subsidiary,
Viscount Communication and Control Systems Inc.) or other proper instruments of
assignment duly executed and such other instruments or documents as the Agent
(as that term is defined below) may reasonably request. 

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

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

(g)      “Pledged
Interest” has the meaning set forth on Section 4(_) hereto. 

(h)      “Pledged
Securities” have the meaning set forth on Section 4(_) hereto. 

(i)     
“Subsidiary” means, with respect to any Person, a corporation,
partnership, limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person and
“Subsidiaries” means collectively each and every Subsidiary of a Person.
The signature page hereto of the Debtors lists, in addition to the Company, all
Subsidiaries of the Company. 

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

2.      Grant
of Security Interest in Collateral. 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 Agent, on behalf of the Secured Parties, a security
interest in and to, a lien upon and a right of set-off against all of their
respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a
“Security Interest” and, collectively, the “Security Interests”). 

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

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

(a)      Organization
and Qualification. Each Debtor is a corporation, duly incorporated, validly
existing and in good standing under the laws of the applicable jurisdiction set
forth on Schedule     , with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as currently
conducted. Each Debtor has no Subsidiaries other than those identified as such
on Schedule      hereto. Each Debtor is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this
Guarantee in any material respect, (y) have a material adverse effect on the
results of operations, assets, prospects, or financial condition of the
Guarantor or (z) adversely impair in any material respect the Guarantor's
ability to perform fully on a timely basis its obligations under this Guarantee
(a “Material Adverse Effect”). 

(b)      Authorization;
Enforcement. Each Debtor has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by this Agreement,
and otherwise to carry out its obligations hereunder . The execution, delivery
and performance of this Agreement and the other Transaction Documents by each
Debtor and the consummation by such Debtor of the transactions contemplated
hereby (including all filings) have been duly authorized by all requisite
corporate action on the part of such Debtor. This Agreement and the other
Transaction Documents have been duly executed and delivered by each Debtor and
constitutes the valid and binding obligation of each Debtor enforceable against
such Debtor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. 

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(c)      No
Conflicts. The execution, delivery and performance of this Agreement and the
other Transaction Documents by each Debtor and the consummation by each Debtor
of the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of any of its Organizational Documents,
each as amended, or (ii) conflict with, constitute a default (or an event which
with notice or lapse of time or both would become a default), and/or event of
default under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, credit facility or
instrument and/or other undersigned to which such Debtor is a party (evidencing
Debtor’s debt or otherwise) or by which any property and/or other assets are
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which such Debtor is subject (including Federal and
State securities laws and regulations), or by which any material property or
asset of such Debtor is bound or affected, except in the case of each of clauses
(ii) and (iii), such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as could not, individually or in the
aggregate, have or result in a Material Adverse Effect. The business of each
Debtor is not being conducted in violation of any law, ordinance or regulation
of any governmental authority, except for violations which, individually or in
the aggregate, do not have a Material Adverse Effect. 

(d)      Consents
and Approvals. No Debtor is required to obtain any consent, approval,
(including, but not limited to, from stockholder and/or creditors of each
Debtor) waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local, foreign or other governmental
authority or other person in connection with the execution, delivery and
performance by such Debtor of this Agreement and the other Transaction
Documents. 

(e)      Transaction
Documents. The representations and warranties of each Debtor set forth in
the Transaction Documents as they relate to such Debtor, each of which is hereby
incorporated herein by reference, are true and correct as of each time such
representations are deemed to be made pursuant to such Transaction Documents,
and the Secured Parties shall be entitled to rely on each of them as if they
were fully set forth herein, provided that each reference in each such
representation and warranty to the Company's knowledge shall, for the purposes
of this Section 4, be deemed to be a reference to such Debtor's
knowledge.

(f)      Foreign
Law. Each Debtor has consulted with appropriate foreign legal counsel with
respect to any of the above representations for which non-U.S. law is applicable. Such foreign counsel have advised each
applicable Debtor that such counsel knows of no reason why any of the above
representations would not be true and accurate. Such foreign counsel were
provided with copies of this Agreement and the other Transaction Documents prior
to rendering their advice. 

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(g)      Each
Debtor has 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      attached hereto. Except as
specifically set forth on Schedule     , Debtors are 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 as disclosed on Schedule     , none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor. 

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

(i)      Except
as set forth on Schedule      attached hereto, no written claim has been
received that any Collateral or Debtors’ use of any Collateral violates the
rights of any third party. Except as set forth on Schedule      attached
hereto, there has been no adverse decision to Debtors’ claim of ownership rights
in or exclusive rights to use the Collateral in any jurisdiction or to Debtors’
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
Debtors, threatened before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority. 

(j)      The
Debtors 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      attached hereto and may not relocate
such books of account and records or tangible Collateral unless it delivers to
the Secured Parties at least 30 days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate financing
statements under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security Interests to
create in favor of the Secured Parties a valid, perfected and continuing
perfected first priority lien in the Collateral. 

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(k)      This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral securing the payment and performance of the Obligations. Upon
making the filings described in the immediately following paragraph, all
security interests created hereunder in any Collateral which may be perfected by
filing Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation
of the Intellectual Property Security Agreement and other required documents
with respect to, among other items, patents, patents pending, trademarks and
related items with the United States Patent and Trademark Office and copyrights
and copyright applications in the United States Copyright Office, the execution
and delivery of the Canadian Financing Statement to perfect the security
interest in any Collateral Located in Canada in favor of the Agent on behalf of
the Secured Parties satisfying the requirements of Section ___ of the Canada’s
Personal Property Security Act, the execution on delivery of the Guarantee and
the delivery of the certificates and other instruments provided in Section 3 and
delivery of the Pledged Securities to the Agent, no action is necessary to
create, perfect or protect the security interests created hereunder and in the
other Transaction Documents. Without limiting the generality of the foregoing,
except for the taking of the above actions, the filing of the Canadian Financing
Agreement with the Ministry of Finance and Corporate Relations of British
Columbia, no consent of any third parties and no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the execution, delivery and performance of
this Agreement and/or the other Transaction Documents, (ii) the creation or
perfection of the Security Interests created hereunder in the Collateral or
(iii) the enforcement of the rights of the Agent and the Secured Parties
hereunder and thereunder. 


(l)      Debtors hereby authorize the Agent to
file one or more (i) financing statements under the UCC or any other similar law
(domestic and/or foreign) with respect to the Obligations of the Debtors to the
Secured Parties, (ii) amend and restate all prior financing statements under the
UCC, and (iii) take all such other actions so that all Obligations hereunder are
pari passu between each of the Secured Parties with respect to the
Security Interests, with the proper filing and recording agencies in any
jurisdiction deemed proper by it, including foreign jurisdictions, including but
not limited to filing a fixed and floating charge over the Security Interests in
the 

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(m)      The capital stock and other equity
interests listed on Schedule __ hereto (the “Pledged Securities”)
represent all of the capital stock and other equity interests of all of the
subsidiaries of the Debtors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Debtors. All of the Pledged
Securities are validly issued, fully paid and nonassessable, and except as set
forth on Schedule __ attached hereto, the Debtors are the legal and beneficial
owner of the Pledged Securities, free and clear of any lien, security interest
or other encumbrance except for the security interests created by this
Agreement.

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

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

(p)      Debtors
will not transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by
Debtors in their ordinary course of business (and sales of inventory by Debtors
in their ordinary course of business) without the prior written consent as
provided herein. 

(q)      Debtors
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. 

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(r)      Debtors 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. Debtors shall cause
each insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Agent, that (a) the Agent will be named as
lender loss payee and additional insured under each such insurance policy; (b)
if such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the Notes) exists
and if the proceeds arising out of any claim or series of related claims do not
exceed $50,000, loss payments in each instance will be applied by the Debtors 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
Debtors; provided, however, that payments received by Debtors after an Event of
Default occurs and is continuing or in excess of $50,000 for any occurrence or
series of related occurrences shall be paid to the Agent on behalf of the
Secured Parties and, if received by Debtors, shall be held in trust for the
Secured Parties and immediately paid over to the Agent unless otherwise directed
in writing by the Agent. Copies of such policies or the related certificates, in
each case, naming the Agent as lender loss payee and additional insured shall be
delivered to the Agent at least annually and at the time any new policy of
insurance is issued.

(s)     
Debtors shall promptly but in no event later than two (2) days of obtaining
knowledge thereof, advise the Secured Parties, in sufficient detail, of any
material adverse change in the Collateral, and of the occurrence of any event
which would have a material adverse effect on the value of the Collateral or on
the Secured Parties’ security interest, through the Agent, therein. 


(t)      Debtors shall promptly execute and
deliver to the Agent such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents, certificates
and assurances and take such further action as the Agent may from time to time
request and may in its sole discretion deem necessary to perfect, protect or
enforce the Secured Parties’ security interest in the Collateral including,
without limitation, if applicable, the execution and delivery of a separate
security agreement with respect to Debtors’ Intellectual Property in which the Secured Parties have been granted a
security interest hereunder, in form and substance acceptable to the Agent,
which Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof. 

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(u)      Debtors
shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time (except upon an Event of Default, an
event of default (and/or an event of default or an event of default that would
occur upon the passage of time and/or the giving of notice), in which event
inspection shall be at any time as requested by all of the above parties. 

(v)      Debtors
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. 

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

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

(y)      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. 

(z)      Debtors
will not change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, Debtors provide any financing statements
or fixture filings necessary to perfect and continue the perfection of the
Security Interests granted and evidenced by this Agreement. 

(aa)      Except
in the ordinary course of business, Debtors may not consign any of its inventory
or sell any of its inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the Agent which shall
not be unreasonably withheld. 

(bb)      Debtors
may not relocate their chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and so long as, at the time of such written
notification, Debtors provide any financing statements or fixture filings
necessary to perfect and continue the perfection of the Security Interests
granted and evidenced by this Agreement. 

12






(cc)      (i) The actual name of Debtors are the
name set forth in Schedule      attached hereto; (ii) Debtors have no trade
names except as set forth on Schedule     attached hereto; (iii) Debtors
have not used any name other than that stated in the preamble hereto or as set
forth on Schedule     for the preceding five years; and (iv) no entity has
merged into Debtors or been acquired by Debtors within the past five years
except as set forth on Schedule     . 

(dd)      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 Debtors shall
deliver such Collateral to the Agent. 

(ee)      Debtors,
in their capacity as issuer, hereby agree to comply with any and all orders and
instructions of Agent regarding the Pledged Interests and Pledged Securities
consistent with the terms of this Agreement and the other Transaction Documents
without the further consent of Debtors as contemplated by Section 8-106 (or any
successor section) of the UCC and applicable Canadian law. Further, Debtors
agree that they shall not enter into a similar agreement (or one that would
confer “control” within the meaning of Article 8 of the UCC and applicable
Canadian law) with any other person or entity. 

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

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

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

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

13





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

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


(ll)      Debtors shall cause each Subsidiary of
Debtors to immediately become a party hereto (an “Additional Debtor”), by
executing and delivering an Additional Debtor Joinder in substantially the form
of Annex B attached hereto and comply with the provisions hereof
applicable to the Debtors. Concurrent therewith, the Additional Debtor shall
deliver replacement schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement and the other Transaction Documents, 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 Agent may reasonably request. Upon
delivery of the foregoing to the Agent, the Additional Debtor shall be and
become a party to this Agreement with the same rights and obligations as the
Debtors, for all purposes hereof as fully and to the same extent as if it were
an original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of the date of
execution and delivery of such Additional Debtor Joinder, and all references
herein to the “Debtor” shall be deemed to include each Additional Debtor. 

(mm)      Debtors
shall vote the Pledged Securities to comply with the covenants and agreements
set forth herein and in the Notes. 

(nn)      Upon
execution of this Agreement, Debtors shall provide the Agent (i) undated
Necessary Endorsements for the transfer to and in the name of the Agent of all
Pledged Securities so that all such Pledged Securities can be dealt with by the
Agent upon the occurrence and in the manner as provided herein, and (ii) all Pledged Securities to the Agent. Upon execution of
this Agreement register the pledge of the applicable Pledged Securities on the
books of Debtors. Debtors shall notify each issuer of Pledged Securities to
register the pledge of the applicable Pledged Securities in the name of the
Secured Parties on the books of such issuer. Further, except with respect to
certificated securities delivered to the Agent, the Debtors shall deliver to
Agent an acknowledgement of pledge (which, where appropriate, shall comply with
the requirements of the relevant UCC and applicable Canadian law with respect to
perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by Agent during
the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of Agent,
will take such steps as may be necessary to effect the transfer, and will comply
with all other instructions of Agent regarding such Pledged Securities without
the further consent of the Debtors. 

14





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

(pp)      Without
limiting the generality of the other obligations of the Debtors hereunder,
Debtors 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 and the United States Patent and Trademark Office
to be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property. 


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

15





(rr)     
Schedule __ attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights, and
domain names owned by the Debtors as of the date hereof. Schedule     lists all material licenses in favor of Debtors 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. 

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


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

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

	 	(a) 	
      The occurrence of an Event of Default (as defined in the
      Notes) under the Notes and/or event of default under any other Transaction
  Documents; or

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

	 	 	 
	 	(c) 	
      The failure by Debtors to observe or perform any of its
      obligations hereunder for five (5) days after delivery to Debtors 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
      Debtors are using best efforts to cure same in a timely fashion;
  or

	 	 	 
	 	(d) 	
      Any material diminution in the value of the Collateral as
      determined by the Agent in its reasonable discretion;
or



16





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

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

8.      Rights
and Remedies Upon Default.

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

17





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

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

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


18




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

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

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

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

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

9.      Applications
of Proceeds. The proceeds of any such sale, lease or other disposition of
the Collateral hereunder or from payments made on account of any insurance
policy insuring any portion of the Collateral shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Agent in enforcing the Secured
Parties’ rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then
to satisfaction of the Obligations pro rata among the Secured Parties (based on
then-outstanding principal amounts of Notes at the time of any such
determination), and to the payment of any other amounts required by applicable
law, after which the Secured Parties shall pay to the applicable Debtor any
surplus proceeds. If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Parties are legally entitled, the Debtors will be jointly and
severally liable for the deficiency, together with interest thereon, at the rate
of 22% per annum or the lesser amount permitted by applicable law (the
“Default Rate”), and the reasonable fees and expenses of any attorneys
employed by the Secured Parties to collect such deficiency. To the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction. 

19





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

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

20





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

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


21




14.      Power
of Attorney; Further Assurances.


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


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

22




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


15.        Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Notes. 

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

17.      Appointment
of Agent. By execution of this Agreement, each Secured Party hereby appoint
One East Capital Advisors, L.P. to act as their agent (“Agent”) for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder, in Annex A hereto, in the Intellectual Property Security
Agreement, the Guaranty and in any other documents, instruments and/or
agreements relating to securing all obligations of each Debtor to any Secured
Party under the Transaction Documents by all of the assets of each Debtor and
perfecting such security interests. Such appointment shall continue until
revoked in writing by a Majority in Interest, at which time a Majority in
Interest shall appoint a new Agent. In addition to those hereunder, the Agent
shall have the rights, responsibilities and immunities set forth in Annex
A hereto. 

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

23





19.     
Miscellaneous. 

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

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

(c)      This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this Agreement
may be waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Debtors and the Agent, 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.

24





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

(f)      This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. No Debtor may assign this Agreement or
any rights or obligations hereunder without the prior written consent of each
Secured Party (other than by merger). Any Secured Party may assign any or all of
its rights under this Agreement to any Person (as defined in the Notes) to whom
such Secured Party assigns or transfers any Obligations, provided such
transferee agrees in writing to be bound, with respect to the transferred
Obligations, by the provisions of this Agreement that apply to the “Secured
Parties.” 

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

(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, the Notes and/or the other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York, Borough of Manhattan. Except to the extent mandatorily governed by the
jurisdiction or situs where the Collateral is located, each Debtor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

25





(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)      Each
Debtor shall be jointly and severally liable for all Obligations. 

(k)     
Each Debtor shall indemnify, reimburse and hold harmless the Agent and the
Secured Parties and their respective partners, successors, predecessors,
Affiliates (as defined under the Federal Securities Laws) members, shareholders,
attorneys, officers, directors, employees, representatives 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 Notes or any
other agreement, instrument or other document executed or delivered in
connection herewith or therewith (including, but not limited to the other
Transaction Documents). 

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

26




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

20.      Seniority,
Etc. Except for the right of each holder of B Notes to allocate certain
payments related to their B Notes to the A Notes owned by the holder, if any, as
provided and to the extent so provided in the B Notes, all payments under this
Agreement, the Notes and the other Transaction Documents to be made and/or
required to be made to the Secured Parties (or the Agent on behalf of itself and
the other Secured Parties) shall be paid pari passu to each Secured Party on a
pro-rated basis based upon the accrued but unpaid principal amount of each
holder’s Note on the date of determination, and senior in all respects to all
other Indebtedness of any Debtors including, but not limited to any Permitted
Indebtedness (as both terms are defined in the Notes). 

[SIGNATURE PAGES FOLLOW]


27




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


	VISCOUNT SYSTEMS, INC. (a Nevada
      corporation) 
	  	 
	By:	 
	       	Name:  
	       	Title:  





	VISCOUNT COMMUNICATION AND CONTROL
      SYSTEMS INC. 
	 
	By:	 
	       	Name:  
	       	Title:  



[SIGNATURE PAGE OF HOLDERS FOLLOWS] 

28





	[SIGNATURE PAGE OF SECURED PARTIES TO SECURITY
      AND PLEDGE AGREEMENT] 
	 	 
	Name of Investing Entity: 	 
	 	 
	Signature of Authorized Signatory of Investing
      entity: 	 
	 	 
	Name of Authorized Signatory: 	 
	 	 
	Title of Authorized Signatory: 	 
	 	 
	Aggregate Principal Amount of A Notes owned: $	 
	 	 
	Aggregate Principal Amount of B Notes owned: $	 



	Appointment as Collateral Agent accepted and
      agreed to: 	 
	 	 
	ONE EAST CAPITAL ADVISORS, L.P. 	 
	 	 
	Signature of Authorized Signatory of
      Investing entity: 	 
	 	 
	Name of Authorized Signatory: 	 
	 	 
	Title of Authorized Signatory: 	 


29




ANNEX A 
to 
SECURITY

AGREEMENT



  THE AGENT 



1. Appointment. The Secured Parties (all
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided in the Security and Pledge Agreement dated as of
November 24, 2015 to which this Annex A is attached (the "Agreement")),
by their acceptance of the benefits of the Agreement, hereby designate One East
Capital Advisors L.P. (“Agent”) as the Agent to act as specified herein
and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and the Notes and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Agent may perform any of its duties hereunder
by or through its agents or employees. 

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

3. Lack of Reliance on the Agent. Independently
and without reliance upon the Agent, each Secured Party, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s investment in the Debtors,
the creation and continuance of the Obligations, the transactions contemplated
by the Transaction Documents, and the taking or not taking of any action in
connection therewith, and (ii) its own appraisal of the creditworthiness of each
Debtor, and of the value of the Collateral from time to time, and the Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Secured Party with any credit, market or other information with
respect thereto, whether coming into its possession before any Obligations are
incurred or at any time or times thereafter. The Agent shall not be responsible to the Debtors
or any Secured Party for any recitals, statements, information, representations
or warranties herein or in any document, certificate or other writing delivered
in connection herewith, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectibility, priority or sufficiency of
the Agreement or any other Transaction Document, or for the financial condition
of the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Notes or any of the other Transaction Documents. 

30





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


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

31




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


7. Resignation by the Agent.

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

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

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

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

32




ANNEX B 
to 
SECURITY

AGREEMENT


FORM OF ADDITIONAL DEBTOR JOINDER

Security and Pledge Agreement dated as of November 24, 2015 made
by 
VISCOUNT SYSTEMS INC (a Nevada corporation) 
and each of its
Subsidiaries party thereto from time to time, as Debtors 
to and in favor of

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


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

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

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

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

33




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


	[Name of Additional Debtor] 
	By: 	 
	 	 
	Name: 	 
	 	 
	Title: 	 
	 	 
	Address: 	 
	 	 
	Dated: 	 



34