Exhibit 10.42


 


SECURITY
AGREEMENT


 


This Security Agreement
("Agreement") is made and entered into as of this 9th day of May, 2014, by and between JADIAN, INC.,
an Illinois corporation, whose address is 205 W. Wacker Drive, Suite 1320, Chicago, Illinois 60606 ("Debtor"), and
JADIAN ENTERPRISES, INC., a Michigan corporation, whose address is 320 W. Ottawa Street, Lansing, Michigan 48933 ("Secured
Party").


 


RECITALS


 


A.Pursuant
to a Promissory Note of even date herewith (the "Promissory Note"), Debtor is indebted to Secured Party in
the amount of up to $210,000 (the Promissory Note and this Security Agreement are, collectively, the "Loan
Documents"); and


 


B.Pursuant to
an Asset Purchase Agreement of even date herewith (the "APA"), Debtor may be obligated to pay Secured Party certain
earn-out payments up to a maximum amount of $300,000 ("Earn-out"); and


 


C.Debtor agrees
to grant Secured Party a security interest in all of Debtor's assets to secure all indebtedness of Debtor to Secured Party, as more fully set forth herein.


 


NOW, THEREFORE, the parties hereto agree as follows:


 


1.Grant
of Security Interest. Debtor, for valuable consideration, hereby grants to Secured Party a security interest in and so
pledges and assigns to Secured Party the following assets of Debtor, and all proceeds and products thereof ("Collateral"):
all personal and fixture property of every kind and nature, including, without limitation, all goods (including inventory,
machinery, equipment, and any accessions thereto), instruments (including promissory notes), documents, accounts receivable, accounts,
chattel paper (whether tangible or electronic), deposit accounts, letter of credit rights (whether or not the letter of credit
is evidenced by a writing), commercial tort claims, securities and all other investment property, supporting obligations, any
other contract rights or rights to the payment of money, insurance claims and proceeds, tort claims, and all general intangibles
(including all payment intangibles).


 


2.Indebtedness
Secured. Debtor grants the foregoing security interest to Secured Party to secure Debtor's payment and performance of
all of Debtor's obligations to Secured Party under the Loan Documents and the APA, including without limitation any Earn-out that
becomes due and payable under the APA, and all amounts owed under any modifications, renewals or extensions of the Loan Documents
and/or the APA (collectively referred to as the "Indebtedness").


 


3.Representations,
Covenants and Warranties of Debtor. Debtor represents, covenants and warrants to Secured Party as follows:


 


3.1Debtor is the owner of the Collateral and
the Collateral is not subject to any prior lien, security interest, encumbrance.


 





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3.2Debtor's address set forth in Section 8 of this
Agreement is the location of Debtor's principal place of business.


 


3.3Debtor shall keep the Collateral insured, at
Debtor's expense, against risk of damage, destruction or theft.


 


3.4Debtor shall not sell or offer to sell, assign,
pledge, lease or otherwise transfer or encumber the Collateral without the prior written consent of Secured Party.


 


3.5Debtor shall pay promptly when due all taxes
and assessments upon the Collateral or for its use or operation.


 


3.6Debtor shall immediately notify Secured Party
in writing of any name change or any change in business organization.


 


3.7Secured Party may inspect any Collateral at
any time upon reasonable notice.


 


4.Secured
Party's Right to Perform. If Debtor fails to perform any obligation of Debtor under this Agreement, Secured Party may,
without giving notice to or obtaining the consent of Debtor, perform that obligation on behalf of Debtor. Debtor shall reimburse
Secured Party within ten (10) days for any expense that Secured Party reasonably incurs in performing any such obligation upon
written notice, plus eight percent (8%) per year on any sums from the date Secured Party incurred such obligation or obligations.


 


5.Default.
Debtor shall be in default under this Agreement if:


 


5.1Debtor fails to perform any obligation of Debtor
under this Agreement;


 


5.2There
is any incorrectness or inaccuracy in any representation or warranty contained in this Agreement;


 


5.3There is an attachment, execution or levy on
any of the Collateral;


 


5.4Debtor voluntarily or involuntarily becomes
subject to any proceeding under (a) the Bankruptcy Code, or (b) any similar remedy under state statutory or common law;


 


5.5Debtor shall fail to comply with, or become
subject to: (a) any administrative or judicial proceeding under any federal, state or local law; (b) asset forfeiture or similar
law which can result in the forfeiture of property, or (c) any other law, where noncompliance may have any significant effect
on the Collateral;


 


5.6Debtor otherwise breaches this Agreement in any
respect; or


 


5.7Debtor defaults under the APA, the Promissory
Note, or any of the other Loan Documents.


 





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6.Secured
Party's Rights and Remedies. Secured Party shall have all rights and remedies of a secured party under applicable laws.
Without limiting these rights and remedies:


 


6.1If all or any part of the Indebtedness is not
paid when due, subject to rights of Senior Lender, Debtor, upon demand by Secured Party, shall deliver the Collateral and proceeds
of the Collateral to Secured Party at such place as Secured Party shall designate in writing to Debtor, and Secured Party may
dispose of the Collateral in any commercially reasonable manner, subject to the rights of any superior lien holder. Any notification
required to be given by Secured Party to Debtor regarding any sale or other disposition of the Collateral shall be considered
reasonable if mailed at least seven (7) days before the sale or other disposition.


 


6.2Subject to the rights of any superior lien holder,
the proceeds of any collection or disposition of the Collateral shall be applied first to Secured Party's reasonable expenses,
and then to the Indebtedness, and Debtor shall be liable for any remaining deficiency.


 


6.3All rights of Secured Party shall inure to the
benefit of Secured Party's successor and assigns, and all obligations of Debtor shall bind Debtor's successor and assigns.


 


7.Amendment
and Non-Waiver. No provision of this Agreement may be modified or waived except by written agreement signed by Secured Party. No delay or omission by Secured Party to exercise any right
or remedy accruing upon any default shall; (a) impair any right or remedy, (b) waive any default or operate as an acquiescence
to the default; or (c) affect any subsequent default of the same or of a different nature.


 


8.Notices.
Any notice to Debtor or to Secured Party shall be deemed to be given if and when either personally delivered or mailed, with postage prepaid, to the respective address of Debtor or Secured Party as set
forth above.


 


9.Assignment.


 


9.1Binds
Assignees. This Agreement shall bind and shall inure to the benefit of the successors and assigns of Secured Party and shall
bind all persons who become bound as a debtor to this Agreement.


 


9.2No Assignments by Debtor. Secured Party
does not consent to any assignment by Debtor except as expressly provided in this Agreement.


 


9.3Secured Party Assignments. Secured Party
may assign its rights and interests under this Agreement. If an assignment is made, Debtor shall render performance under this
Agreement to the assignee. Debtor waives and will not assert against any assignee any claims, defenses or set-offs which Debtor
could assert against Secured Party except defenses which cannot be waived.


 


10.Severability. Should any provision of this Agreement be found to be void, invalid or unenforceable by a court or panel of arbitrators
of competent jurisdiction, that finding shall only affect the provisions found to be void, invalid or unenforceable and shall
not affect the remaining provisions of this Agreement.


 





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11.No Marshalling.
Secured Party has no obligation to marshal any assets in favor of Debtor, or against or in payment of: the Note; any of the Indebtedness, or any other obligations owed to Secured Party by Debtor
or any other person.


 


12.General
Construction. This Agreement shall be governed by and construed under the laws (statue and common) of the State of Michigan. Headings are for convenience only; in no event shall any such title
or caption be deemed to be part of this Agreement or interpretive of any of its language or intent. Reference to the singular
shall include the plural, and vice versa, when the context so suggests. No provision of this Agreement is to be interpreted for
or against any party because that party or that party's legal representative drafted the Agreement or any of its provisions. Time
shall be of the essence.


 


13.Authorization
to File Financing Statements. Debtor hereby irrevocably authorizes Secured Party at any time and from time to time to file in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments for secured Party to perfect its security interest in the Collateral. Debtor agrees to furnish any such
information to Secured Party promptly upon request.


 


IN WITNESS WHEREOF, the parties
have executed this Agreement as of date first set forth above.




 


 


 


DEBTOR:


 


JAIDAN, INC., an Illinois corporation


 


/s/ Shaun Passley               


By: Shaun Passley


Its: President


 


 


DEBTOR:


 


JAIDAN ENTERPRISES, INC., a
Michigan corporation


 


/s/ Karen
Griggs               


By:  Karen
Griggs


Its: Director




 


 


 





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