Exhibit 10.2


 


PLEDGE
AND SECURITY AGREEMENT


 


This PLEDGE AND SECURITY AGREEMENT, dated
as of May 29, 2015 (as amended or otherwise modified from time to time, this “Security Agreement”), is made
by and among ALLIQUA BIOMEDICAL, INC., a Delaware corporation (the “Borrower”) and the Guarantors (defined
below), for the benefit of PERCEPTIVE CREDIT OPPORTUNITIES FUND, LP (together with its successors, transferees or assignees, the
“Secured Party”), pursuant to the Credit Agreement (defined below).


 


WITNESSETH:


 


WHEREAS, pursuant to a Credit Agreement
and Guaranty, dated as of May 29, 2015, (as amended or otherwise modified from time to time, the “Credit Agreement”),
by and among the Borrower, each guarantor party thereto (a “Guarantor”) and the Secured Party, the Secured
Party has extended the Commitment to make a Loan to the Borrower; and


 


WHEREAS, as a condition precedent to the
making of the Loan under the Credit Agreement, the Borrower and the Guarantors (together with any of their Subsidiaries that becomes
a party to this Security Agreement pursuant to the terms of the Credit Agreement, the “Grantors”) are required
to execute and deliver this Security Agreement.


 


NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees, for the benefit of the Secured Party, as follows:


 


ARTICLE
I

DEFINITIONS


 


SECTION 1.1  Certain Terms.
The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, have
the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):


 


“Borrower” is defined
in the preamble.


 


“CFC” means a Person
that is a controlled foreign corporation under Section 957 of the Code.


 


“Collateral” is defined
in Section 2.1.


 


“Collateral Account”
is defined in clause (b) of Section 4.3.


 


“Computer Hardware and Software
Collateral” means:


 


(a)     all
computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display
terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply
hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware, including
all operating system software, utilities and application programs in whatsoever form;


 




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(b)     all
software programs (including both source code, object code and all related applications and data files), designed for use on the
computers and electronic data processing hardware described in clause (a) above;


 


(c)     all
firmware associated therewith;


 


(d)     all
documentation (including flow charts, logic diagrams, manuals, guides, specifications, training materials, charts and pseudo codes)
with respect to such hardware, software and firmware described in the preceding clauses (a) through (c);and


 


(e)     all
rights with respect to all of the foregoing, including copyrights, licenses, options, warranties, service contracts, program services,
test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions,
replacements, improvements, error corrections, updates, additions or model conversions of any of the foregoing.


 


“Control Agreement”
means an authenticated agreement or document, in form and substance reasonably satisfactory to the Secured Party, that provides
for the Secured Party to have “control” (as defined in the UCC) over the Controlled Accounts.


 


“Copyright Collateral”
means all copyrights of any Grantor, whether statutory or common law, registered or unregistered and whether published or unpublished,
now or hereafter in force throughout the world including all of such Grantor’s right, title and interest in and to all copyrights
registered in the United States Copyright Office or anywhere else in the world and also including the copyrights referred to in
Item A of Schedule V, and registrations and recordings thereof and all applications for registration thereof, all
copyright licenses, including each copyright license referred to in Item B of Schedule V, the right to sue for past,
present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any
thereof and all Proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and Proceeds of suit.


 


“Credit Agreement” is
defined in the first recital.


 


“Distributions” means
all dividends or other distributions paid on Capital Securities, including in connection with (or in connection with the exercise
of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, and all other distributions
(whether similar or dissimilar to the foregoing) on or with respect to any Capital Securities.


 


“Excluded Equity” means
any voting stock in excess of sixty-five percent (65%) of the outstanding voting stock of any CFC.


 


“Excluded Assets” means,
collectively, (a) Excluded Equity, (b) any property owned by any Grantor that is subject to a purchase money Lien or a capital
lease, or (c) any assets of a CFC; provided, however, “Excluded Assets” shall not include any
proceeds, products, substitutions, or replacements of Excluded Assets (unless such proceeds, products, substitutions, or replacements
would otherwise constitute Excluded Assets).


 


“Filing Statements”
is defined in clause (b) of Section 3.7.


 




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“General Intangibles”
means all “general intangibles” and all “payment intangibles”, each as defined in the UCC.


 


“Grantor” is defined
in the preamble.


 


“Guarantor” is defined
in the first recital and shall also include each additional Subsidiary of the Borrower or any Guarantor formed, created
or acquired after the Closing Date.


 


“Intellectual Property Collateral”
means, collectively, the Computer Hardware and Software Collateral, the Copyright Collateral, the Patent Collateral, the Trademark
Collateral and the Trade Secrets Collateral.


 


“Patent Collateral”
means:


 


(a)     Inventions,
invention disclosures and discoveries, whether patentable or not, all letters patent and applications for letters patent throughout
the world, including provisional, design and utility patents each patent and patent application referred to in Item A of
Schedule III;


 


(b)     all
reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described
in clause (a);


 


(c)     all
patent licenses, and other agreements providing any Grantor with the right to use any items of the type referred to in clauses (a)
and (b) above, including each patent license referred to in Item B of Schedule III; and


 


(d)     all
Proceeds of, and rights associated with, the foregoing (including licenses, royalties and Proceeds of infringement suits), the
right to sue third parties for past, present or future infringements of any patent or patent application, and for breach or enforcement
of any patent license.


 


“Secured Party” is defined
in the preamble.


 


“Security Agreement”
is defined in the preamble.


 


“Trademark Collateral”
means:


 


(a)     (i)     all
trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos and other source or business identifiers, and all goodwill of the business associated
therewith, now existing or hereafter adopted or acquired including those referred to in Item A of Schedule IV, whether
currently in use or not, all registrations and recordings thereof and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of
America, or any State thereof or any other country or political subdivision thereof or otherwise, and all common-law rights relating
to the foregoing, and (ii) the right to obtain all reissues, extensions or renewals of the foregoing (collectively referred to
as the “Trademark”);


 




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(e)     all
Trademark licenses for the grant by or to any Grantor of any right to use any trademark, including each trademark license referred
to in Item B of Schedule IV; and


 


(f)     all
of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (a) above,
and to the extent applicable clause (b) above;


 


(g)     the
right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (a)
above and, to the extent applicable, clause (b) above; and


 


(h)     all
Proceeds of, and rights associated with, the foregoing, including any claim by any Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill
associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding
thereto throughout the world.


 


“Trade Secrets Collateral”
means all common law and statutory trade secrets and all other confidential, proprietary or useful information and all know-how
(all of the foregoing being collectively called a “Trade Secret”), whether or not such Trade Secret has been
reduced to a writing or other tangible form, including all Documents and things embodying, incorporating or referring in any way
to such Trade Secret, all Trade Secret licenses, including each Trade Secret license referred to in Schedule VI, and including
the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and
for the breach or enforcement of any such Trade Secret license.


 


SECTION 1.2  Credit
Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit Agreement, including, without limitation, Section 1.4
thereof.


 


SECTION 1.3  UCC
Definitions. When used herein the terms “Account”, “Certificate of Title”, “Certificated Securities”,
“Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contract”,
“Deposit Account”, “Document”, “Electronic Chattel Paper”, “Equipment”, “Goods”,
“Instrument”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Payment
Intangibles”, “Proceeds”, “Promissory Notes”, “Securities Account”, “Security
Entitlement”, “Supporting Obligations” and “Uncertificated Securities” have the meaning provided
in Article 8 or Article 9, as applicable, of the UCC. “Letters of Credit” has the meaning provided in Section 5-102
of the UCC.


 


ARTICLE
II

SECURITY INTEREST


 


SECTION 2.1  Grant of Security
Interest. Each Grantor hereby grants to the Secured Party, a continuing security interest in all of such Grantor’s right,
title, and interest in and to the following property, whether now or hereafter existing, owned or acquired by such Grantor, and
wherever located, (collectively, the “Collateral”):


 


(a)     Accounts;


 


(b)     Chattel
Paper;


 




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(c)     Commercial
Tort Claims listed on Item I of Schedule II (as such schedule may be amended or supplemented from time to time);


 


(d)     Deposit
Accounts;


 


(e)     Documents;


 


(f)     General
Intangibles;


 


(g)     Goods;


 


(h)     Instruments;


 


(i)     Intellectual
Property Collateral;


 


(j)     Investment
Property;


 


(k)     Letter-of-Credit
Rights and Letters of Credit;


 


(l)     Supporting
Obligations;


 


(m)     all
books, records, writings, databases, information and other property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this Section;


 


(n)     all
Proceeds of the foregoing and, to the extent not otherwise included, (A) all payments under insurance (whether or not the Secured
Party is the loss payee thereof) and (B) all tort claims; and


 


(o)     all
other property and rights of every kind and description and interests therein.


 


Notwithstanding the foregoing or anything
contained herein to the contrary, the Collateral shall exclude, and no lien or security interest is hereby granted on, any Excluded
Assets.


 


SECTION 2.2  Security for
Obligations. This Security Agreement and the Collateral in which the Secured Party is granted a security interest hereunder
by the Grantors secures the payment and performance by the Grantors of all of the Obligations under the Credit Agreement and each
other Loan Document including, without limitation, the payment of all principal of and premium, if any, and interest (including
interest accruing during the pendency of any proceeding of the type described in Section 9.1.8 of the Credit Agreement) on
the Loan.


 


SECTION 2.3  Grantors Remain
Liable. Anything herein to the contrary notwithstanding:


 


(a)     the
Grantors will remain liable under their respective contracts and agreements included in the Collateral to the extent set forth
therein, and will perform all of their respective duties and obligations under such contracts and agreements to the same extent
as if this Security Agreement had not been executed;


 




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(b)     the
exercise by the Secured Party of any of its rights hereunder will not release any Grantor from any of its duties or obligations
under any such contracts or agreements included in the Collateral; and


 


(c)     the
Secured Party will have no obligation or liability under any contracts or agreements included in the Collateral by reason of this
Security Agreement, nor will it be obligated to perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.


 


SECTION 2.4  Distributions
on Pledged Shares. In the event that any Distribution with respect to any Capital Securities pledged hereunder is permitted
to be paid (in accordance with Section 8.6 of the Credit Agreement), such Distribution or payment may be paid directly to
the relevant Grantor. If any Distribution is made in contravention of Section 8.6 of the Credit Agreement, the relevant Grantor
shall hold the same segregated and in trust for the Secured Party until paid to the Secured Party in accordance with Section 4.1.5.


 


SECTION 2.5  Security Interest
Absolute, etc. This Security Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable grant
of security interest, and shall remain in full force and effect until the Termination Date. All rights of the Secured Party and
the security interests granted to the Secured Party hereunder, and all obligations of the each Grantor hereunder, shall, in each
case, be absolute, unconditional and irrevocable irrespective of:


 


(a)     any
lack of validity, legality or enforceability of any Loan Document;


 


(b)     the
failure of the Secured Party (i) to assert any claim or demand or to enforce any fight or remedy against any Obligor or any other
Person (including any Grantor) under the provisions of any Loan Document or otherwise, or (ii) to exercise any right or remedy
against any other guarantor (including any Grantor) of, or collateral securing, any Obligations;


 


(c)     any
change in the time, manner or place of payment of, or in any other term of, all or any part of the Obligations, or any other extension,
compromise or renewal of any Obligations;


 


(d)     any
reduction, limitation, impairment or termination of any Obligations for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and each Grantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, non-genuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence affecting, any Obligations or otherwise;


 


(e)     any
amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Loan
Document;


 


(f)     any
addition, exchange or release of any Collateral or of any Person that is (or will become) a Grantor (including each Grantor hereunder)
of the Obligations, or any surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition
to, or consent to or departure from, any other guarantee held by the Secured Party securing any of the Obligations; or


 




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(g)     any
other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Obligor,
any surety or any guarantor.


 


ARTICLE
III

REPRESENTATIONS AND WARRANTIES


 


In order to induce the Secured Party to
enter into the Credit Agreement and make the Loan thereunder, the Grantors represent and warrant to the Secured Party as set forth
below.


 


SECTION 3.1  As to Capital
Securities of the Subsidiaries, Investment Property.


 


(a)         With
respect to any direct Subsidiary of each Grantor that is


 


(i)     a
corporation, business trust, joint stock company or similar Person, all Capital Securities issued by such Subsidiary are duly
authorized and validly issued, fully paid and non-assessable, and represented by a certificate; and


 


(ii)         a
partnership or limited liability company, no Capital Securities issued by such Subsidiary (A) are dealt in or traded on securities
exchanges or in securities markets, (B) expressly provide that such Capital Securities is a security governed by Article 8 of
the UCC or (C) are held in a Securities Account, except, with respect to this clause (a)(ii), Capital Securities (x)
for which the Secured Party is the registered owner or (y) with respect to which the issuer has agreed in an authenticated record
with such Grantor and the Secured Party to comply with any instructions of the Secured Party without the consent of such Grantor.


 


(b)     Each
Grantor has delivered all Certificated Securities constituting Collateral held by such Grantor on the Closing Date to the Secured
Party, together with duly executed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Secured
Party.


 


(c)     With
respect to Uncertificated Securities constituting Collateral owned by any Grantor, such Grantor has caused the issuer thereof
either to (i) register the Secured Party as the registered owner of such security or (ii) agree in an authenticated record with
such Grantor and the Secured Party that such issuer will comply with instructions with respect to such security originated by
the Secured Party without further consent of such Grantor.


 


(d)     The
percentage of the issued and outstanding Capital Securities of each Subsidiary pledged by each Grantor hereunder is as set forth
on Schedule I.


 


(e)     All
deposit accounts, lockboxes, disbursement accounts, investment accounts or other similar accounts of each Grantor are Controlled
Accounts.


 


SECTION 3.2  Grantor Name,
Location, etc.


 


(a)     The
jurisdictions in which the Grantors are located for purposes of Sections 9-301 and 9-307 of the UCC are set forth in Item
A of Schedule II.


 




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(b)      Each
location in which a secured party would have filed a UCC financing statement in the five years prior to the date hereof to perfect
a security interest in Equipment, Inventory and General Intangibles owned by a Grantor is set forth in Item B of Schedule
II.


 


(c)      No
Grantor has any trade names other than those set forth in Item C of Schedule II hereto.


 


(d)      During
the four months preceding the date hereof, no Grantor has been known by any legal name different from the one set forth on the
signature page hereto and no Grantor has been the subject of any merger or other corporate reorganization, except as set forth
in Item D of Schedule II hereto.


 


(e)      Each
Grantor’s federal taxpayer identification number is (and, during the four months preceding the date hereof, such Grantor
has not had a federal taxpayer identification number different from that) set forth in Item E of Schedule II hereto.


 


(f)      No
Grantor is a party to any federal, state or local government contract except as set forth in Item F of Schedule II
hereto.


 


(g)      No
Grantor maintains any Deposit Accounts, Securities Accounts or Commodity Accounts with any Person, in each case, except as set
forth on Item G of Schedule II.


 


(h)      No
Grantor is the beneficiary of any Letters of Credit, except as set forth on Item H of Schedule II.


 


(i)      No
Grantor has Commercial Tort Claims except as set forth on Item I of Schedule II.


 


(j)      The
name set forth on the signature page attached hereto is the true and correct legal name (as defined in the UCC) of each Grantor.


 


(k)      Each
Grantor has obtained a legal, valid and enforceable consent of each issuer of any Letter of Credit having a face amount (or equivalent)
in excess of $100,000 pledged by such Grantor to the assignment of the Proceeds of such Letter of Credit to the Secured Party
and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Secured Party pursuant hereto)
having control (within the meaning of Section 9-104 of the UCC) over, or any other interest in any of such Grantor’s
rights in respect thereof.


 


SECTION 3.3  Ownership, No
Liens, etc. Except as disclosed on Schedules III through V, each Grantor owns its Collateral free and clear
of any Lien, except for (A) any security interest (i) created by the Loan Documents, or (ii) which will be released simultaneously
with the making of the Loan under the Credit Agreement and (B) Permitted Liens. No effective UCC financing statement or other
filing similar in effect covering all or any part of the Collateral is on file in any recording office, except those filed in
favor of the Secured Party relating to this Security Agreement or as to which a duly authorized termination statement relating
to such UCC financing statement or other instrument has been delivered to the Secured Party on the Closing Date.


 


 




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SECTION 3.4  Possession of
Inventory, Control; etc.


 


(a)     Except
as otherwise permitted in the Credit Agreement, each Grantor has, and agrees that it will maintain, exclusive possession of
its Documents, Instruments, Promissory Notes, Goods, Equipment and Inventory, other than (i) Equipment and Inventory in
transit in the ordinary course of business, (ii) Equipment and Inventory that is in the possession or control of a
warehouseman, bailee agent or other Person (other than a Person controlled by or under common control with such Grantor) that
has been notified of the security interest created in favor of the Secured Party pursuant to this Security Agreement, and has
authenticated a record acknowledging that it holds possession of such Collateral for the Secured Party’s benefit and
waives any Lien held by it against such Collateral, and (iii) Instruments or Promissory Notes that have been delivered to the
Secured Party pursuant to Section 3.5. In the case of Equipment or Inventory described in clause (ii)
above, no lessor or warehouseman of any premises or warehouse upon or in which such Equipment or Inventory is located has (i)
issued any warehouse receipt or other receipt in the nature of a warehouse receipt in respect of any such Equipment or
Inventory, (ii) issued any Document for any such Equipment or Inventory, (iii) received notification of the Secured
Party’s interest (other than the security interest granted hereunder) in any such Equipment or Inventory or (iv) any
Lien on any such Equipment or Inventory.


 


(b)     Each
Grantor is the sole entitlement holder of its Accounts and no other Person (other than the Secured Party pursuant to this Security
Agreement) has control or possession of, or any other interest in, any of its Accounts or any other securities or property credited
thereto.


 


SECTION 3.5  Negotiable Documents,
Instruments and Chattel Paper. Subject to Section 7.8(b) of the Credit Agreement, each Grantor has delivered to the Secured
Party possession of all originals of all negotiable Documents, Instruments, Promissory Notes, and tangible Chattel Paper having
a face amount (or equivalent) in excess of $100,000 owned or held by such Grantor on the Closing Date.


 


SECTION 3.6  Intellectual
Property Collateral. Except as disclosed on Schedules III through V and except for standard off-the-shelf software
used by any Grantor, with respect to any Intellectual Property Collateral:


 


(a)     each
Grantor has made all necessary filings and recordations to protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark Collateral in the United States Patent and Trademark
Office and in corresponding offices throughout the world, and its claims to the Copyright Collateral in the United States Copyright
Office and in corresponding offices throughout the world;


 


(b)     no
Grantor has made a previous assignment, sale, transferor agreement constituting a present or future assignment, sale or transfer
of any Intellectual Property for purposes of granting a security interest or as Collateral that has not been terminated or released;


 


(c)     each
Grantor has executed and delivered to the Secured Party, Intellectual Property Collateral security agreements for all Copyrights,
Patents and Trademarks owned by such Grantor, including all Copyrights, Patents and Trademarks on Schedule III through
V (as such schedules may be amended or supplemented from time to time); and


 




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(d)     the
consummation of the transactions contemplated by the Credit Agreement and this Security Agreement will not result in the termination
or material impairment of any of the Intellectual Property Collateral.


 


SECTION 3.7  Validity, etc.


 


(a)     This
Security Agreement creates a valid security interest in the Collateral securing the payment of the Obligations.


 


(b)     Each
Grantor has authorized Lender to file or caused to be filed all UCC-1 financing statements in the filing office for such Grantor’s
jurisdiction of organization listed in Item A of Schedule II (collectively, the “Filing Statements”)
and has taken all other actions requested by the Secured Party necessary for the Secured Party to obtain control of the Collateral
as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC.


 


(c)     Upon
the filing of the Filing Statements with the appropriate agencies therefor, the security interests created under this Security
Agreement shall constitute a perfected security interest in the Collateral described on such Filing Statements in favor of the
Secured Party to the extent that a security interest therein may be perfected by filing pursuant to the relevant UCC prior to
all other Liens.


 


SECTION 3.8  Authorization,
Approval, etc. Except as have been obtained or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority or any other third party is required either:


 


(a)     for
the grant by any Grantor of the security interest granted hereby or for the execution, delivery and performance of this Security
Agreement by any Grantor;


 


(b)     for
the perfection or maintenance of the security interests hereunder including the first priority nature of such security interest
(except with respect to the Filing Statements or, with respect to Intellectual Property Collateral, the recordation of any agreements
with the U.S. Patent and Trademark Office or the U.S. Copyright Office) or the exercise by the Secured Party of its rights and
remedies hereunder; or


 


(c)     for
the exercise by the Secured Party of the voting or other rights provided for in this Security Agreement, or, except (i) with respect
to any securities issued by a Subsidiary of a Grantor, as may be required in connection with a disposition of such securities
by laws affecting the offering and sale of securities generally, the remedies in respect of the Collateral pursuant to this Security
Agreement and (ii) any “change of control” or similar filings required by state licensing agencies.


 


ARTICLE
IV

COVENANTS


 


Each Grantor covenants and agrees that,
until the Termination Date, such Grantor will perform, comply with and be bound by the obligations set forth below.


 


SECTION 4.1  As to Investment
Property, etc. Capital Securities of Subsidiaries. No Grantor will allow any of its Subsidiaries:


 




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(a)     that
is a corporation, business trust, joint stock company or similar Person, to issue Uncertificated Securities;


 


(b)     that
is a partnership or limited liability company, to (i) issue Capital Securities that are to be dealt in or traded on securities
exchanges or in securities markets, expressly provide in its Organic Documents that its Capital Securities are securities governed
by Article 8 of the UCC, or (ii) place such Subsidiary’s Capital Securities in a Securities Account; and


 


(c)     to
issue Capital Securities in addition to or in substitution for the Capital Securities pledged hereunder, except to such Grantor
(and such Capital Securities are immediately pledged and delivered to the Secured Party pursuant to the terms of this Security
Agreement).


 


SECTION 4.1.1  Investment Property
(other than Certificated Securities).


 


(a)     With
respect to any Deposit Accounts, Securities Accounts, Commodity Accounts, Commodity Contracts or Security Entitlements constituting
Investment Property owned or held by any Grantor, such Grantor will, upon the Secured Party’s request, cause the intermediary
maintaining such Investment Property to execute a Control Agreement relating to such Investment Property pursuant to which such
intermediary agrees to comply with the Secured Party’s instructions with respect to such Investment Property without further
consent by such Grantor. The provisions of this Section 4.1.1(a) shall not apply to Deposit Accounts specially and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of a Grantor's salaried employees;
provided that the funds on deposit in such Deposit Accounts shall at no time exceed the actual payroll, payroll taxes and
other employee wage and benefit payments then owing by such Grantor for the immediately succeeding payroll period. For the avoidance
of doubt, and notwithstanding anything herein to the contrary, the execution and delivery of such Control Agreements shall not
be a condition precedent to the Lender’s obligation to make the Loan on the Closing Date, except with respect to Deposit
Accounts maintained with PNC Bank, National Association.


 


(b)     With
respect to any Uncertificated Securities (other than Uncertificated Securities credited to a Securities Account) constituting
Investment Property owned or held by any Grantor, such Grantor will cause the issuer of such securities to either (i) register
the Secured Party as the registered owner thereof on the books and records of the issuer or (ii) execute a Control Agreement relating
to such Investment Property pursuant to which the issuer agrees to comply with the Secured Party’s instructions with respect
to such Uncertificated Securities without further consent by such Grantor.


 


SECTION 4.1.2  Certificated
Securities (Stock Powers). Each Grantor agrees that all Certificated Securities delivered to the Secured Party by such Grantor
pursuant to this Security Agreement, will be accompanied by duly executed undated blank stock powers, or other equivalent instruments
of transfer reasonably acceptable to the Secured Party.


 




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SECTION 4.1.3      Continuous
Pledge. Each Grantor will (except as otherwise permitted under the Credit Agreement or this Security Agreement) deliver to
the Secured Party and at all times keep pledged to the Secured Party pursuant hereto, on a first-priority, perfected basis all
of its Investment Property, all Dividends and Distributions with respect thereto, all of its Payment Intangibles in excess of
$100,000 to the extent they are evidenced by a Document, Instrument, Promissory Note or Chattel Paper, and all interest and principal
with respect to such Payment Intangibles, and all Proceeds and rights from time to time received by or distributable to such Grantor
in respect of any of the foregoing Collateral. Each Grantor agrees that it will, promptly following receipt thereof, deliver to
the Secured Party possession of all originals of negotiable Documents, Instruments, Promissory Notes and Chattel Paper that it
acquires following the Closing Date.


 


SECTION 4.1.4      Voting
Rights; Dividends, etc. Each Grantor agrees:


 


(a)         promptly
upon receipt of notice of the occurrence and continuance of an Event of Default from the Secured Party and without any request
therefor by the Secured Party, so long as such Event of Default shall continue, to deliver (properly endorsed where required hereby
or requested by the Secured Party) to the Secured Party all Dividends and Distributions with respect to Investment Property, all
interest, principal, other cash payments on Payment Intangibles, and all Proceeds of the Collateral, in each case thereafter received
by such Grantor, all of which shall be held by the Secured Party as additional Collateral; and


 


(b)        with
respect to Collateral consisting of general partner interests or limited liability company interests, to promptly modify its Organic
Documents to admit the Secured Party as a general partner or member, as applicable, immediately upon the occurrence and continuance
of an Event of Default and so long as the Secured Party has notified such Grantor of the Secured Party’s intention to exercise
its voting power under this clause,


 


(i)     that
the Secured Party may exercise (to the exclusion of such Grantor) the voting power and all other incidental rights of ownership
with respect to any Investment Property constituting Collateral and such Grantor hereby grants the Secured Party an irrevocable
proxy, exercisable under such circumstances, to vote such Investment Property; and


 


(ii)         to
promptly deliver to the Secured Party such additional proxies and other documents as may be necessary to allow the Secured Party
to exercise such voting power.


 


All dividends, Distributions, interest, principal,
cash payments, Payment Intangibles and Proceeds that may at any time and from time to time be held by any Grantor, but which such
Grantor is then obligated to deliver to the Secured Party, shall, until delivery to the Secured Party, be held by such Grantor
separate and apart from its other property in trust for the Secured Party. The Secured Party agrees that unless an Event of Default
shall have occurred and be continuing and the Secured Party shall have given the notice referred to in clause (b), the Grantors
will have the exclusive voting power with respect to any of their Investment Property constituting Collateral and the Secured
Party will, upon the written request of a Grantor, promptly deliver such proxies and other documents, if any, as shall be reasonably
requested by such Grantor which are necessary to allow such Grantor to exercise that voting power; provided that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by any Grantor that would impair any such Collateral
or be inconsistent with or violate any provision of any Loan Document.


 




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SECTION 4.2  Change of Name,
etc. No Grantor will change its name or place of incorporation or organization or federal taxpayer identification number except
upon 30 days’ prior written notice to the Secured Party.


 


SECTION 4.3  As to Accounts.


 


(a)     The
Grantors shall have the right to collect all Accounts so long as no Event of Default shall have occurred and be continuing.


 


(b)     Upon
(i) the occurrence and continuance of an Event of Default and (ii) the delivery of notice by the Secured Party to a Grantor, all
Proceeds of Collateral received by such Grantor shall be delivered in kind to the Secured Party for deposit in a Deposit Account
of such Grantor maintained with the Secured Party or with any depositary institution that has entered into a Control Agreement
in favor of the Secured Party (together with any other Accounts pursuant to which any portion of the Collateral is deposited with
the Secured Party, the “Collateral Accounts”), and such Grantor shall not commingle any such Proceeds, and
shall hold separate and apart from all other property, all such Proceeds in express trust for the benefit of the Secured Party
until delivery thereof is made to the Secured Party.


 


(c)     Following
the delivery of notice pursuant to clause (b)(ii) and during the continuance of an Event of Default, the Secured Party
shall have the right to apply any amount in the Collateral Account to the payment of any Obligations which are due and payable.


 


(d)     With
respect to each of the Collateral Accounts, it is hereby confirmed and agreed that (i) deposits in such Collateral Account are
subject to a security interest as contemplated hereby, and (ii) such Collateral Account shall be under the control of the Secured
Party.


 


SECTION 4.4  As to Grantors’
Use of Collateral.


 


(a)     Subject
to clause (b), each Grantor (i) may in the ordinary course of its business, at its own expense, sell, lease or furnish
under the contracts of service any of the Inventory normally held by such Grantor for such purpose, and use and consume, in the
ordinary course of its business, any raw materials, work in process or materials normally held by such Grantor for such purpose,
(ii) will, at its own expense, endeavor to collect, as and when due and in accordance with its customary practices, all amounts
due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Secured
Party may request following the occurrence and during the continuance of an Event of Default or, in the absence of such request,
as such Grantor may deem advisable, and (iii) may grant, in the ordinary course of business, to any party obligated on any of
the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith,
the return of Goods, the sale or lease of which shall have given rise to such Collateral.


 




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(b)     At
any time following the occurrence and during the continuance of an Event of Default, whether before or after the maturity of any
of the Obligations, the Secured Party may (i) revoke any or all of the rights of any Grantor set forth in clause (a),
(ii) notify any parties obligated on any of the Collateral to make payment to the Secured Party of any amounts due or to become
due thereunder and (iii) enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange
all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby.


 


(c)     Upon
request of the Secured Party following the occurrence and during the continuance of an Event of Default, each Grantor will, at
its own expense, notify any parties obligated on any of its Collateral to make payment to the Secured Party of any amounts due
or to become due thereunder.


 


(d)     At
any time following the occurrence and during the continuation of an Event of Default, the Secured Party may endorse, in the name
of any Grantor, any item, howsoever received by the Secured Party, representing any payment on or other Proceeds of any of the
Collateral.


 


SECTION 4.5  As to Intellectual
Property Collateral. Each Grantor covenants and agrees to comply with the following provisions as such provisions relate to
any Intellectual Property Collateral material to the operations or business of such Grantor:


 


(a)     the
Grantor shall use commercially reasonable efforts to pursue and maintain, at its own expense, legal protection for all Intellectual
Property owned or controlled by the Borrower or any of the Subsidiaries, including (i) initiating proceedings before the United
States Patent and Trademark Office, the United States Copyright Office or similar offices or agencies in other countries or political
subdivisions thereof, and filing applications for renewal, affidavits of use, affidavits of in contestability and opposition,
interference and cancellation proceedings and the paying fees and taxes and (ii) not doing or failing to perform acts whereby
such Intellectual Property may lapse or become abandoned or dedicated to the public, invalid or unenforceable;


 


(b)     the
Grantor shall promptly notify the Secured Party if it knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any
such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright
Office or any foreign counterpart thereof or any court) regarding such Grantor’s ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and enforce the same;


 


(c)     in
no event will the Grantor or any of its agents, employees, designees or licensees file an application for the registration of
any Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency in any other country or any political subdivision thereof, unless it promptly informs the Secured
Party, and upon request of the Secured Party (subject to the terms of the Credit Agreement), executes and delivers all agreements,
instruments and documents as the Secured Party may request to evidence the Secured Party’s security interest in such Intellectual
Property Collateral; and


 




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(d)     Within
30 days from the end of each Fiscal Quarter the Grantor will execute and deliver to the Secured Party (as applicable) a Patent
Security Agreement, Trademark Security Agreement and/or Copyright Security Agreement, as the case may be, in the forms of Exhibit
A, Exhibit B and Exhibit C hereto in connection with its obtaining an interest in any such Intellectual Property,
and shall execute and deliver to the Secured Party any other document reasonably required to acknowledge or register or perfect
the Secured Party’s interest in any part of such item of Intellectual Property Collateral unless such Grantor shall determine
in good faith (with the consent of the Secured Party) that any Intellectual Property Collateral is of negligible economic value
to such Grantor.


 


SECTION 4.6  As to Letter-of-Credit
Rights.


 


(a)     Each
Grantor, by granting a security interest in its Letter-of-Credit Rights to the Secured Party, intends to (and hereby does) collaterally
assign to the Secured Party its rights (including its contingent rights) to the Proceeds of all Letter-of-Credit Rights of which
it is or hereafter becomes a beneficiary or assignee. Each Grantor will promptly use commercially reasonable efforts to cause
the issuer of each Letter of Credit having a face amount (or equivalent) in excess of $100,000 and each nominated person (if any)
with respect thereto to consent to such assignment of the Proceeds thereof in a consent agreement in form and substance reasonably
satisfactory to the Secured Party and deliver written evidence of such consent to the Secured Party.


 


(b)     Upon
the occurrence and during the continuance of an Event of Default, each Grantor will, promptly upon request by the Secured Party,
(i) notify (and such Grantor hereby authorizes the Secured Party to notify) the issuer and each nominated person with respect
to each of the Letters of Credit that the Proceeds thereof have been assigned to the Secured Party hereunder and any payments
due or to become due in respect thereof are to be made directly to the Secured Party and (ii) arrange for the Secured Party to
become the transferee beneficiary Letter of Credit.


 


SECTION 4.7  As to Commercial
Tort Claims. Each Grantor covenants and agrees that, until the payment in full of the Obligations and termination of all Commitments,
with respect to any Commercial Tort Claim hereafter arising asserting damages in excess of $100,000 (individually or in the aggregate
for all such claims), it shall deliver to the Secured Party a supplement in form and substance satisfactory to the Secured Party,
together with all supplements to schedules thereto identifying such new Commercial Tort Claims.


 


SECTION 4.8  Electronic Chattel
Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any electronic chattel paper or
any “transferable record,” as that term is defined in Section 201 of the U.S. Federal Electronic Signatures in
Global and National Commerce Act, or in Section 16 of the U.S. Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, with a value in excess of $1,000,000, such Grantor shall promptly notify the Secured Party thereof and, at the request
of the Secured Party, shall take such action as the Secured Party may request to vest in the Secured Party control under Section 9-105
of the U.C.C. of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect
in such jurisdiction, of such transferable record. The Secured Party agrees with each Grantor that the Secured Party will arrange,
pursuant to procedures satisfactory to the Secured Party and so long as such procedures will not result in the Secured Party’s
loss of control, for such Grantor to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105
of the U.C.C. or, as the case may be, Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce
Act or Section 16 of the U.S. Uniform Electronic Transactions Act for a party in control to allow without loss of control,
unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor
with respect to such electronic chattel paper or transferable record.


 




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SECTION 4.9  Further Assurances,
etc. Each Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or that the Secured Party may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise
and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing,
each Grantor will:


 


(a)     from
time to time upon the request of the Secured Party, promptly deliver to the Secured Party such stock powers, instruments and similar
documents, reasonably satisfactory in form and substance to the Secured Party, with respect to such Collateral as the Secured
Party may request and will, from time to time upon the request of the Secured Party, after the occurrence and during the continuance
of any Event of Default, promptly transfer any securities constituting Collateral into the name of any nominee designated by the
Secured Party; if any Collateral shall be evidenced by an Instrument, negotiable Document, Promissory Note or tangible Chattel
Paper, deliver and pledge to the Secured Party hereunder such Instrument, negotiable Document, Promissory Note or tangible Chattel
Paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory
to the Secured Party;


 


(b)     file
(and hereby authorize the Secured Party to file) such Filing Statements or continuation statements, or amendments thereto, and
such other instruments or notices (including any assignment of claim form under or pursuant to the federal assignment of claims
statute, 31 U.S.C. § 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any
version thereof), as may be necessary or that the Secured Party may request in order to perfect and preserve the security interests
and other rights granted or purported to be granted to the Secured Party hereby;


 


(c)     deliver
to the Secured Party and at all times keep pledged to the Secured Party pursuant hereto, on a first-priority, perfected basis,
at the request of the Secured Party, all Investment Property constituting Collateral, all Dividends and Distributions with respect
thereto, and all interest and principal with respect to Promissory Notes, and all Proceeds and rights from time to time received
by or distributable to such Grantor in respect of any of the foregoing Collateral;


 


(d)     not
take or omit to take any action the taking or the omission of which would result in any material impairment or alteration of any
obligation of the maker of any Payment Intangible or other Instrument constituting Collateral, except as provided in Section 4.4;


 


(e)     not
create any tangible Chattel Paper without placing a legend on such tangible Chattel Paper reasonably acceptable to the Secured
Party indicating that the Secured Party has a security interest in such Chattel Paper;


 




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(f)     furnish
to the Secured Party, from time to time at the Secured Party’s request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the Collateral as the Secured Party may request, all in reasonable
detail; and


 


(g)     subject
to other provisions of this Agreement, do all things reasonably requested by the Secured Party in accordance with this Security
Agreement in order to enable the Secured Party to have and maintain control over the Collateral consisting of Investment Property,
Deposit Accounts, Letter-of-Credit-Rights and Electronic Chattel Paper.


 


With respect to the foregoing and the grant of the security
interest hereunder, each Grantor hereby authorizes the Secured Party to file one or more financing or continuation or financing
change statements, and amendments thereto, relative to all or any part of the Collateral. Each Grantor agrees that a carbon, photographic
or other reproduction of this Security Agreement or any UCC financing statement covering the Collateral or any part thereof shall
be sufficient as a UCC financing statement where permitted by law. Each Grantor hereby authorizes the Secured Party to file financing
statements describing as the collateral covered thereby “all of the debtor’s personal property or assets” or
words to that effect, notwithstanding that such wording may be broader in scope than the Collateral described in this Security
Agreement.


 


SECTION 4.10  Deposit Accounts.
Following the occurrence and during the continuance of an Event of Default, at the request of the Secured Party, each Grantor
will maintain all of its Deposit Accounts only with the Secured Party or with any depositary institution that has entered into
a Control Agreement in favor of the Secured Party.


 


SECTION 4.11  Inbound Licenses.
Each Grantor will, promptly after entering into or becoming bound by any inbound license or similar agreement relating to the
sale, distribution, licensing or other commercialization of any Product or any Intellectual Property covering any Product (other
than over-the-counter software that is commercially available to the public), take all action necessary to cause the Secured Party
to be granted a perfected and valid security interest in such license or similar agreement, including obtaining the consent of,
or waiver by, any Person whose consent or waiver is necessary for the Secured Party to be granted a perfected and valid security
interest in such license or similar agreement and to fully exercise its rights under any of the Loan Documents in the event of
a disposition or liquidation of the rights, assets or property that is the subject of such license or similar agreement.


 


ARTICLE
V

THE SECURED PARTY


 


SECTION 5.1  Secured Party
Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Secured Party its attorney-in-fact, with full authority
in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Secured Party’s
discretion, following the occurrence and during the continuance of an Event of Default, to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish the purposes of this Security Agreement, including:


 


(a)     to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral;


 




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(b)     to
receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper, in connection with clause (a)
above;


 


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


 


(d)     dispose
of all or any part of any Collateral as provided in Section 6.1(a)(iv) below; and


 


(e)     to
perform the affirmative obligations of such Grantor hereunder.


 


Each Grantor hereby acknowledges, consents and agrees
that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest.


 


SECTION 5.2  Secured Party
May Perform. If any Grantor fails to perform any agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable by the
Borrower pursuant to Section 10.3 of the Credit Agreement.


 


SECTION 5.3  Secured Party
Has No Duty. The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or responsibility
for


 


(a)     ascertaining
or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Investment
Property, whether or not the Secured Party has or is deemed to have knowledge of such matters, or


 


(b)     taking
any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.


 


SECTION 5.4  Reasonable Care.
The Secured Party is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession;
provided that the Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as any Grantor reasonably requests in writing at times other than
upon the occurrence and during the continuance of any Event of Default, but failure of the Secured Party to comply with any such
request at any time shall not in itself be deemed a failure to exercise reasonable care.


 


ARTICLE
VI

REMEDIES


 


SECTION 6.1  Certain Remedies.
If any Event of Default shall have occurred and be continuing:


 


(a)     The
Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a Secured Party on default under the UCC (whether or not the UCC applies to the
affected Collateral) and also may:


 




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(i)          take
possession of any Collateral not already in its possession without demand and without legal process;


 


(ii)         require
any Grantor to, and each Grantor hereby agrees that it will, at its expense and upon request of the Secured Party forthwith, assemble
all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated
by the Secured Party that is reasonably convenient to both parties,


 


(iii)        enter
onto the property where any Collateral is located and take possession thereof without demand and without legal process;


 


(iv)        without
notice except as specified below, lease, license, sell or otherwise dispose of the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Secured Party’s offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Secured Party may deem commercially reasonable. Each Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days’ prior notice to such Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Party shall
not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn
any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.


 


(b)         All
cash Proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral shall be applied by the Secured Party against, all or any part of the Obligations as set forth in Section 4.4
of the Credit Agreement.


 


(c)          The
Secured Party may:


 


(i)          transfer
all or any part of the Collateral into the name of the Secured Party or its nominee, with or without disclosing that such Collateral
is subject to the Lien hereunder,


 


(ii)         notify
the parties obligated on any of the Collateral to make payment to the Secured Party of any amount due or to become due thereunder,


 


(iii)        withdraw,
or cause or direct the withdrawal, of all funds with respect to the Collateral Account;


 


(iv)        enforce
collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise
or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party
with respect thereto,


 




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(v)         endorse
any checks, drafts, or other writings in any Grantor’s name to allow collection of the Collateral,


 


(vi)        take
control of any Proceeds of the Collateral, and


 


(vii)       execute
(in the name, place and stead of any Grantor) endorsements, assignments, stock powers and other instruments of conveyance or transfer
with respect to all or any of the Collateral.


 


SECTION 6.2  Securities Laws.
If the Secured Party shall determine to exercise its right to sell all or any of the Collateral that are Capital Securities pursuant
to Section 6.1, each Grantor agrees that, upon request of the Secured Party, such Grantor will, at its own expense:


 


(a)     execute
and deliver, and cause (or, with respect to any issuer which is not a Subsidiary of such Grantor, use commercially reasonable
efforts to cause) each issuer of the Collateral contemplated to be sold and the directors and officers thereof to execute and
deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or,
in the opinion of the Secured Party, advisable to permit the transfer of such Collateral pursuant to exemption from registration
under the Securities Act of 1933, as from time to time amended (the “Securities Act”). In the event that the
Secured Party determines, in its reasonable discretion, that an exemption from registration is unavailable to effect a transfer
or sale of such Collateral, such Grantor agrees that it will file and cause a resale registration statement to be declared effective;


 


(b)     use
commercially reasonable efforts to exempt the Collateral under the state securities or “Blue Sky” laws and to obtain
all necessary governmental approvals for the sale of the Collateral, as requested by the Secured Party;


 


(c)     cause
(or, with respect to any issuer that is not a Subsidiary of such Grantor, use commercially reasonable efforts to cause) each such
issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions
of Section 11(a) of the Securities Act; and


 


(d)     do
or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.


 


SECTION 6.3  Compliance with
Restrictions. Each Grantor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Secured Party is hereby authorized to comply with any limitation or restriction in connection with such
sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with
such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral),
or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority or official, and each
Grantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in
a commercially reasonable manner, nor shall the Secured Party be liable nor accountable to any Grantor for any discount allowed
by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction.


 




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SECTION 6.4  Protection of
Collateral. The Secured Party may from time to time, at its option, perform any act which any Grantor fails to perform after
being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during
the continuance of an Event of Default) and the Secured Party may from time to time take any other action which the Secured Party
deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein.


 


ARTICLE
VII

MISCELLANEOUS PROVISIONS


 


SECTION 7.1  Loan Document.
This Security Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof.


 


SECTION 7.2  Binding on Successors,
Transferees and Assigns; Assignment. This Security Agreement shall remain in full force and effect until the Termination Date
has occurred, shall be binding upon each Grantor and its successors, transferees and assigns and shall inure to the benefit of
and be enforceable by the Secured Party and its successors, transferees and assigns; provided that no Grantor may (unless
otherwise permitted under the terms of the Credit Agreement or this Security Agreement) assign any of its obligations hereunder
without the prior written consent of the Secured Party.


 


SECTION 7.3  Amendments, etc.
No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by any Grantor from its obligations
under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Secured Party
and the Grantors and then such waiver or consent shall be effective only in the specific instance and for the specific purpose
for which given.


 


SECTION 7.4  Notices.
All notices and other communications provided for hereunder shall be in writing or by facsimile and addressed, delivered or transmitted
to the appropriate party at the address or facsimile number of such party specified in the Credit Agreement or at such other address
or facsimile number as may be designated by such party in a notice to the other party. Any notice or other communication, if mailed
and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any such notice or other communication, if transmitted by facsimile, shall be deemed given when transmitted and
electronically confirmed.


 


SECTION 7.5  Release of Liens.
Upon (a) the Disposition of Collateral in accordance with the Credit Agreement or (b) the occurrence of the Termination Date,
the security interests granted herein shall automatically terminate with respect to (i) such Collateral (in the case of clause (a))
or (ii) all Collateral (in the case of clause (b)). Upon any such Disposition or termination, the Secured Party will,
at the Grantors’ sole expense, deliver to the relevant Grantor, without any representations, warranties or recourse of any
kind whatsoever, all Collateral held by the Secured Party hereunder, and execute and deliver to such Grantor such documents as
such Grantor shall reasonably request to evidence such termination.


 




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SECTION 7.6  Additional Grantor.
Upon the execution and delivery by any other Person of a supplement in the form of Annex I hereto, such Person shall become
a “Grantor” hereunder with the same force and effect as if it were originally a party to this Security Agreement
and named as a “Grantor” hereunder. The execution and delivery of such supplement shall not require the consent
of any Grantor hereunder, and the rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Security Agreement.


 


SECTION 7.7  No Waiver; Remedies.
In addition to, and not in limitation of Section 2.5, no failure on the part of the Secured Party to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.


 


SECTION 7.8  Headings.
The various headings of this Security Agreement are inserted for convenience only and shall not affect the meaning or interpretation
of this Security Agreement or any provisions thereof.


 


SECTION 7.9  Severability.
Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision
and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining
provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.


 


SECTION 7.10  Governing Law,
Entire Agreement, etc. THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK), EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR NON-PERFECTION, AND PRIORITY OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN
THE STATE OF NEW YORK. This Security Agreement and the other Loan Documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect
thereto.


 


SECTION 7.11  Counterparts.
This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same agreement. Delivery of an executed counterpart of a signature
page to this Security Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Security
Agreement.


 




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IN WITNESS WHEREOF, each of the parties
hereto has caused this Security Agreement to be duly executed and delivered by its Authorized Officer as of the date first above
written.


 


	 	ALLIQUA BIOMEDICAL, INC.	 
	 	 	 
	 	By: 	/s/ Brian M. Posner	 
	 	Name: Brian M. Posner	 
	 	Title: Chief Financial Officer	 
	 	 	 
	 	AQUAMED TECHNOLOGIES, INC.	 
	 	 	 
	 	By: 	/s/ Brian M. Posner	 
	 	Name: Brian M. Posner	 
	 	Title: Secretary 	 
	 	 	 
	 	CHOICE THERAPEUTICS, INC.	 
	 	 	 
	 	By:	 /s/ Brian M. Posner	 
	 	Name: Brian M. Posner	 
	 	Title: Secretary 	 
	 	 	 
	 	ALLIQUA BIOMEDICAL SUB, INC.	 
	 	 	 
	 	By: 	/s/ Brian M. Posner	 
	 	Name: Brian M. Posner	 
	 	Title: Secretary 	 
	 	 	 
	 	ALQA CEDAR, INC.	 
	 	 	 
	 	By:	 /s/ Brian M. Posner	 
	 	Name: Brian M. Posner	 
	 	Title: Secretary 	 



  



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	 	PERCEPTIVE CREDIT OPPORTUNITIES

 FUND, LP	 
	 	 	 
	 	By: Perceptive Credit Opportunities GP, LLC	 
	 	 	 
	 	By:	 /s/ Joseph Edelman	 
	 	Name: Joseph Edelman	 
	 	Title: Managing Member	 


 




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