Document:

EXHIBIT 10.2

 

NOTE PURCHASE AGREEMENT

 

    	 

    	 

    

 

VINYL PRODUCTS, INC.

 

NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT (this “Agreement”)
is made as of June 14, 2013, by and among VINYL PRODUCTS, INC., a Nevada corporation (the “Company”) and the
investors set forth on Schedule A hereto (each, an “Investor”
and collectively, the “Investors”).

 

THE PARTIES HEREBY AGREE AS FOLLOWS:

 

1.          Issuance
of Notes. Subject to the terms and conditions of this Agreement, at each Closing (as defined below), the Company shall issue
and sell to Investor secured convertible promissory notes (each such note, a “Note,” and collectively, the “Notes”)
in the principal amount (the “Principal Amount”) equal to the amount set forth on the signature page hereof,
against payment by Investor to the Company of the Principal Amount. The maximum aggregate Principal Amount of Notes under this
Agreement is $500,000 (“Maximum Amount”). There is no minimum amount required to perform a first closing. The
Notes shall each be substantially in the form set forth in Exhibit A attached hereto.

 

The Investor shall have
the ability to convert all outstanding principal and interest at a rate of one (1) share of Company’s common stock, par value
$0.0001 per share (“Common Stock”) for every $1.00 of principal and interest outstanding.

 

The Minimum Note purchase is $100,000.

 

Capitalized but otherwise
undefined terms used herein have the meanings provided therefor in the Notes.

 

2.          Closings.

 

2.1           Closings.
The Company may issue and sell Notes to Investors up to the Maximum Amount at any time. The closing of the purchase and sale of
such Notes hereunder shall take place via the exchange of documents on such date as is mutually agreeable to the Company and Investors
(which each such date and place as a “Closing”). Subscriptions from Investors will be held in escrow pursuant
to an Escrow Agreement entered into between the Company and Richardson & Patel LLP (“Escrow Agent”) until
the Maximum Amount has been received.

 

2.2           Delivery.
The obligations of the parties to consummate the transactions under this Agreement shall be subject to the satisfaction of the
following conditions, prior to and specific to each Closing: (a) each Investor shall deliver to the Escrow Agent on behalf of the
Company a check or wire transfer of immediately available funds in the amount of Investor’s Principal Amount with respect
to such Closing; (b) the Company shall execute and deliver to the Escrow Agent (i) a Note reflecting the name of Investor, a principal
amount equal to Investor’s Principal Amount for such Closing as set forth on the signature page of such Note and the date
of such Closing, and (ii) the security agreement substantially in the form set forth in Exhibit B pursuant to which the
Note is secured (“Security Agreement”). Each such Note shall be a binding obligation of the Company upon execution
thereof by the Company and delivery thereof to an Investor; and (c) each party shall have executed the Escrow Agreement and delivered
the same to the Escrow Agent. Upon satisfaction of these conditions for the Closing, Escrow Agent shall be authorized to release
the Maximum Amount to the Company.

 

3.          Representations,
Warranties and Covenants of Investor. Investor hereby represents, warrants and covenants to the Company as follows:

 

3.1           Purchase
for Own Account. Investor represents that he is acquiring the Notes and the shares of Common Stock issuable upon conversion
of the Notes (collectively, the “Securities”) solely for investment for its own account and not as a nominee
or agent or with a view to the resale or distribution of any part thereof, and that it has no present intention of selling, granting
any participation in, or otherwise distributing the same. The acquisition by Investor of any of the Securities shall constitute
confirmation of the representation by Investor that it does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.

 

    	 

    	 

    

 

3.2           Disclosure
of Information. Investor has received all the information it considers necessary or appropriate for deciding whether to make
an investment in the Securities. Investor further represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the Securities and the business, properties, prospects and
financial condition of the Company.

 

3.3           Investment
Experience. Investor has (a) a preexisting personal or business relationship with the Company or its officers and directors
or controlling persons, and/or (b) by reason of its own business and financial experience, has the capacity to protect its own
interests in connection with the investment contemplated hereby. Investor represents that it is an investor in securities of companies
in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the
investment in the Securities.

 

3.4           Accredited
Investor. Investor represents that it is an “accredited investor” within the meaning of Securities and Exchange
Commission (“SEC”) Rule 501 of Regulation D, as presently in effect.

 

3.5           Restrictions
on Transfer. Investor understands that the Securities are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933,
as amended (the “Act”), only in certain limited circumstances. In this connection, Investor represents that
it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act.
INVESTOR UNDERSTANDS AND ACKNOWLEDGES HEREIN THAT AN INVESTMENT IN THE COMPANY’S SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE
OF RISK AND MAY RESULT IN A COMPLETE LOSS OF ITS INVESTMENT. Investor understands that the Securities have not been and will not
be registered under the Act and have not been and will not be registered or qualified in any state in which they are offered, and
thus Investor will not be able to resell or otherwise transfer its Securities unless they are registered under the Act and registered
or qualified under applicable state securities laws, or an exemption from such registration or qualification is available. Investor
has no immediate need for liquidity in connection with this investment and does not anticipate that it will need to sell its Securities
in the foreseeable future.

 

3.6           Restrictive
Legend. Investor consents to the placement of a legend on the Securities, when issued to Investor in connection with this Agreement,
stating that they have not been registered under the Act and setting forth or referring to the restrictions of transferability
and sale thereof. Investor is aware that the Company will make a notation in its appropriate records with respect to the restrictions
on the transferability of such Securities.

 

3.7           Further
Limitations on Disposition. Without in any way limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Securities unless:

 

(a)          there
is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance
with such registration statement; or

 

(b)          Investor
is eligible to dispose of the Securities pursuant to Rule 144 and such disposition is made in accordance with such Rule; or

 

(c)          (i)
Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement
of the circumstances surrounding the proposed disposition, and (ii) if requested by the Company, Investor shall have furnished
the Company with an opinion of counsel reasonably satisfactory to the Company that such disposition will not require registration
of such shares under the Act.

 

    	 

    	 

    

 

4.          Representations
and Warranties of the Company. The Company hereby represents and warrants to each Investor, as of the date of this Agreement,
as follows:

 

4.1           Offering.
Subject in part to the truth and accuracy of Investor’s representations set forth in Section 3, the offer, sale and issuance
of the Securities as contemplated by this Agreement and issued in connection therewith are exempt from the registration requirements
of the Act and will not result in a violation of the qualification or registration requirements of the any applicable state securities
laws.

 

4.2           Valid
Issuance of Securities. The Securities issuable upon conversion of the Notes, when issued, sold and delivered in accordance
with the terms of the Notes for the consideration expressed therein, will be duly and validly issued, fully paid, and nonassessable,
and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state
and federal securities laws.

 

4.3           Security
Agreement. The Security Agreement grants a continuing priority security interest in, and lien upon, the Collateral (as defined
therein), subject to no prior lien, encumbrance, charge, or security interest.

 

4.4           Reports
Filed under the Securities Exchange Act of 1934 (“Exchange Act”). The Company is current in its filings with the
SEC under the Exchange Act.

 

4.5           Capitalization.
The authorized shares of the Company are 100,000,000 common shares, and of this amount, there are a total of 22,564,000 shares
of common stock outstanding. The foregoing amount does not take into account a proposed cancellation of shares of common stock
in connection with a proposed corporate transaction, nor does it include up to 3,000,000 shares of common stock which are proposed
to be issued as contingent “performance shares” in connection with this offering.

 

5.          Miscellaneous.

 

5.1           Survival
of Representations, Warranties and Covenants. The warranties, representations and covenants of the Company and Investor contained
in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and all Closings for a period
of one year after the execution and deliver hereof.

 

5.2           Successors
and Assigns. Except as otherwise provided therein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties; provided that the Company may not assign or transfer
its rights or obligations hereunder without the prior written consent of Investor. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

5.3           Governing
Law; Venue. This Agreement been negotiated and consummated in the State of California and shall be construed in accordance
with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause
the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties
of the parties. All disputes and controversies arising out of or in connection with this Note shall be resolved exclusively by
the state or federal courts located in Los Angeles County in the State of California, and each party hereto agrees to submit to
the jurisdiction of said courts and agrees that venue shall lie exclusively with such courts.

 

5.4           Counterparts.
This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

    	 

    	 

    

 

5.5           Titles
and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

5.6           Notice.
Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement
shall be in writing and shall be conclusively deemed to have been duly given: (a) when hand delivered to the other party; (b) three
business days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed
to the other party at the address set forth below; or (c) the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below with next business day delivery guaranteed, provided that
the sending party receives a confirmation of delivery from the delivery service provider. Each party making a communication hereunder
by facsimile shall promptly confirm by telephone to the party to whom such communication was addressed each communication made
by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication.
A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 5.6
by giving the other party written notice of the new address in the manner set forth above.

 

5.7           Amendments
and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively), only if such amendment, modification or waiver
is in writing and only with the written consent of the Company and Investor.

 

5.8           Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.

 

5.9           Corporate
Securities Law. THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

 

5.10         Expenses.
Each party shall pay all of its own costs and expenses (including attorneys’ fees and disbursements) that it incurs with
respect to the negotiation, execution and delivery of this Agreement.

 

5.11         Finder’s
Fee. Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in
the nature of a finders’ fee (and the costs and expenses of defending against such liability or asserted liability) for which
Investor or any of its officers, partners, employees or representatives is responsible. The Company has engaged Monarch Bay Securities,
LLC as its placement agent for the placement of the Notes and agrees to indemnify and hold harmless Investor from any liability
for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

 

5.12         Entire
Agreement. This Agreement, its exhibits, and the documents and instruments referred to herein constitute the entire agreement
among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth herein or therein.

 

[Signature Page Follows]

 

    	 

    	 

    

 

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

 

 

	COMPANY:	 	INVESTOR:
	 	 	 
	VINYL PRODUCTS, INC.	 	 
	 	 	Print Name

 

	By:	 	 	 	By:	 	 
	 	 	 	 	 
	 	 	Name:	 	 
	Name: Keith Moore	 	 	 	 
	 	 	Title:	 	 
	Title: Treasurer	 	 	 	 

 

	 	 	Address for Notices and Transfer Agent:
	Address:	 	 
	 	 	 
	5000 Birch, Suite 4800	 	 
	Newport Beach, CA 92660	 	 

 

	 	 	Taxpayer ID 	 
	 	 	 	 	 
	 	 	Principal Amount of Note Purchased:
	 	 	 	 	 
	 	 	$	 	 

 

Note Purchase Agreement

  

    	 

    	 

    

 

SCHEDULE A

 

INVESTORSEXHIBIT 10.3

 

SECURITY AGREEMENT

 

    	 

    	 

    

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”),
dated as of June 14, 2013, by and among VINYL PRODUCTS, INC., a Nevada corporation with an address at 5000 Birch, Suite 4800, Newport
Beach, California 92660 (the “Company”) and the persons set forth on Schedule A hereto (the “Secured
Parties”), who are purchasers of the Company’s Senior Secured Promissory Notes (the “Notes”).

 

RECITALS

 

WHEREAS, the Secured Parties have made loans
to the Company by purchasing Notes issued by the Company in the aggregate principal amount of $500,000;

 

WHEREAS, the Company and the Secured Parties
have entered into a Note Purchase Agreement with respect to the Notes; and

 

WHEREAS, in consideration of, and as a condition
to, the extension of credit under the Notes, the Company is entering into this Agreement with the Secured Parties in order to grant
a security interest in certain collateral to the Secured Parties.

 

AGREEMENT

 

NOW, THEREFORE, the parties hereby agree
as follows:

 

1.          Grant
of a Security Interest. To secure the prompt payment, observance and performance in full of each and every obligation (collectively,
the “Obligations”) of the Company under the Notes, the Company hereby grants to each of the Secured Parties
a continuing priority security interest in, and lien upon, the Collateral (as defined in Section 3), subject to no prior lien,
encumbrance, charge, or security interest.

 

2.          Definitions
and Construction.

 

(a)          All
capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Uniform Commercial Code
as in effect in the State of California (the “UCC”).

 

(b)          Unless
the context of this Agreement requires otherwise: (a) references in this Agreement to sections, schedules and exhibits are to sections
of, and schedules and exhibits to, this Agreement; (b) words in the singular include the plural and in the plural include the singular;
(c) the word “or” connotes both the disjunctive and conjunctive of the terms affected, unless otherwise expressly stated;
(d) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire
Agreement; (e) the terms “include”, “includes” “including” and derivative or similar words
shall be deemed to include the phrase “without limitation”; (f) the phrase “ordinary course of business”
and “ordinary course of business consistent with past practice” refer to the business and practice of the Company;
and (g) words of any gender include each other gender. As used in this Agreement, any reference to any event, change or effect
being “material” or “materially adverse” or having a “material adverse effect” on or with respect
to any entity (or group of entities taken as a whole) means such event, change or effect is material or materially adverse, as
the case may be, to the business, condition (financial or otherwise), properties, assets (including intangible assets), liabilities
(including contingent liabilities), prospects or results of operations of such entity (or, if with respect thereto, of such group
of entities taken as a whole). Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless
business days are specified.

 

    	 

    	 

    

 

3.          Collateral.

 

(a)          The
collateral covered by this Agreement (the “Collateral”) consists of the following property:

 

(i)          Accounts
Receivable. All Accounts, Chattel Paper, contracts, contract rights, Accounts Receivable, tax refunds, notes receivable, documents,
other choses in action and general intangibles, including, but not limited to, proceeds of inventory and returned goods and proceeds
from the sale of goods and services, and all rights, liens, securities, guaranties, remedies and privileges related thereto, including
the right of stoppage in transit and rights and property of any kind forming the subject matter of any of the foregoing; and

 

(ii)         Deposit
Accounts. All time, savings, demand, certificate of deposit or other accounts in the name of the Company or in which the Company
has any right, title or interest, including but not limited to all sums now or at any time hereafter on deposit, and any renewals,
extensions or replacements of and all other property which may from time to time be acquired directly or indirectly using the proceeds
of any of the foregoing; and

 

(iii)        Inventory
and Equipment. All inventory and equipment of every type or description wherever located, including, but not limited to, all
raw materials, parts, containers, work in process, finished goods, goods in transit, wares, merchandise furniture, fixtures, hardware,
machinery, tools, parts, supplies, automobiles, trucks, other intangible personalty of whatever kind and wherever located associated
with the Company’s business, tools and goods returned for credit, repossessed, reclaimed or otherwise reacquired by the Company;
and

 

(iv)        Documents
of Title. All documents of title and other property from time to time received, receivable or otherwise distributed in respect
of, exchange or substitution for or addition to any of the foregoing, including, but not limited to, any documents of title; and

 

(v)         Other
Property.

 

(i)          All
proceeds (including but not limited to insurance proceeds) and products of and accessions and annexations to any of the foregoing;
and

 

(ii)         All
assets of any type or description that may at any time be assigned or delivered to, or come into possession of, the Company or
as to which the Company may have any right, title, interest or power, and property in the possession or custody of or in transit
to anyone for the account of the Company, as well as all proceeds and products thereof and accessions and annexations thereto;
and

 

(iii)        All
know-how, information, permits, patents, copyrights, goodwill, trade marks, trade names, licenses and approvals held by the Company
in its subsidiaries and affiliates, provided however subject to license rights of third parties; and

 

(iv)        All
of the books, records and documents pertaining to any of the foregoing.

 

(b)          Any
and all Collateral described or referred to in this Agreement which is hereafter acquired shall, and without any further conveyance,
assignment or act on the part of the Company or the Secured Parties, become and be subject to the security interest created hereby
as fully and completely as though specifically described herein.

 

    	 

    	 

    

 

4.          Company’s
Representations and Warranties. The Company represents and warrants to the Secured Parties as of the date of this Agreement
that:

 

(a)          The
Company owns the Collateral free and clear of any lien other than as set forth in Exhibit A, and except for third party
license rights, and rights of lessors under leases.

 

(b)          The
Company has all necessary corporate power and authority and has taken all corporate action necessary to execute, deliver and perform
this Agreement and the Notes and to encumber and grant a security interest in the Collateral.

 

(c)          There
is no effective financing statement or other instrument similar in effect covering all or any part of the Collateral on file in
any recording office, except as may have been filed in favor of the Secured Parties and except as provided in Exhibit A.

 

(d)          This
Agreement creates a valid first priority security interest of the Secured Parties in the Collateral securing payment of the Obligations.
Upon the filing of the financing statements and the other instruments similar in effect in accordance with Sections 5(b) and 5(c),
the Secured Parties will have a valid and perfected first priority lien on, and security interest in, the Collateral subject only
to the perfected first priority lien on, and security interest in, the Collateral as set forth in Exhibit A.

 

(e)          No
consent, authorization, approval or other action by, and no notice to or

 

filing with, any governmental authority, regulatory body, lessor,
franchiser or other person or entity is required for the grant by the Company of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by the Company.

 

(f)          The
Company does not transact any part of its business under any trade names, division names, assumed names or other name, except for
its name set forth in the preamble hereto; the Company’s principal business address and chief executive office is as set
forth in the preamble hereto; and the Company’s records concerning the Collateral are kept as such address.

 

(g)          Each
Instrument and each Document constituting Collateral is genuine and in all material respects what it purports to be.

 

(h)          All
tangible Collateral and all records relating to intangible Collateral are located at the Company’s address listed in
the preamble hereto or are otherwise under its control. The Company shall not remove any such Collateral or records from said
locations without five days’ prior written notice to the Secured Parties.

 

5.          Company’s
Covenants. The Company agrees and covenants that:

 

(a)          The
Collateral will be used solely for business purposes of the Company and will remain in the possession or under the control of the
Company (sale or replacement in the ordinary course excepted) and will not be used for any unlawful purpose. The Collateral will
not be misused, abused, wasted, or allowed to deteriorate (ordinary wear and tear excepted). The Company will keep the Collateral,
as appropriate and applicable, in good condition and repair (ordinary wear and tear excepted), and will clean, shelter, and otherwise
deal with the Collateral in such ways as are considered good practice by owners of like property.

 

    	 

    	 

    

 

(b)          The
Company shall, upon request of the Secured Parties, deliver to the Secured Parties all other documents, instruments and other items
as may be reasonably necessary for the Secured Parties to perfect its security interest in the Company’s intellectual property,
if any.

 

(c)          The
Company will use its best reasonable efforts to defend the Collateral against the claims and demands of all other parties, will
keep the Collateral free from all security interests or other encumbrances other than liens listed on Exhibit A hereto,
with the exception of leases and inbound or outbound licenses in the ordinary course of business; and will not sell, transfer,
lease, assign, deliver or otherwise dispose of any Collateral or any interest therein without the prior written consent of the
Secured Parties, which consent will not be unreasonably withheld, except that the Company may sell or lease Inventory and other
property in the ordinary course of the Company’s business.

 

(d)          The
Company will notify the Secured Parties promptly in writing of any change in the Company’s business address or chief executive
office, any change in the address at which records concerning the Collateral are kept and any change in the Company’s name,
identity, or organizational or other structure.

 

(e)          The
Company shall pay all reasonable expenses, including attorneys’ fees and costs, incurred by the Secured Parties in the preservation,
realization, enforcement or exercise of any of the Secured Parties’ rights under this Agreement.

 

6.          Certain
Provisions Concerning Collateral.

 

(a)          Upon
the occurrence of an Event of Default (defined below) and the principal sum under the Notes being due and payable by acceleration
or otherwise, the Secured Parties may notify any or all Account Debtors of the security interest created hereby and may also direct
such Account Debtors to make all payments on Collateral to the Secured Parties. In such event, all payments on and from Collateral
received by the Secured Parties directly or from the Company shall be applied to the Obligations in accordance with Section 8 and
the Secured Parties may demand of the Company in writing, before or after notification to Account Debtors and without waiving in
any manner the security interest created hereby, that any payments on and from the Collateral:

 

			(i)          shall be held by the Company in trust for the Secured Parties
in the same medium in which received;

 

			(ii)         shall not be commingled with any assets of the Company; and

 

			(iii)        shall be delivered to the Secured Parties in the form received, properly
indorsed to permit collection, promptly following their receipt; and

 

the Company shall comply with such demand. The Company shall
also promptly notify the Secured Parties of the return to, or repossession by, the Company of Goods underlying any Collateral,
and the Company shall hold the same in trust for the Secured Parties and shall dispose of the same as the Secured Parties directs.

 

(b)          Until
(i) the occurrence of an Event of Default and (ii) the principal sum under the Notes shall become due and payable by acceleration
or otherwise (an “Acceleration”), the Company reserves the right to receive all income from or interest on the
Collateral consisting of Instruments. Upon such an Event of Default, the Company will not demand or receive any income from or
interest on such Collateral other than from Inventory, royalties, licensing fees, milestone payments, research sponsorship payments,
joint ventures or loan proceeds and, if the Company receives any such income or interest without any demand by it, the same shall
be held by the Company in trust for the Secured Parties in the same medium in which received, shall not be commingled with any
assets of the Company and shall be delivered to the Secured Parties in the form received, properly indorsed to permit collection,
promptly following its receipt. The Secured Parties may apply the net cash receipts from such income or interests to payment of
the Obligations; provided that the Secured Parties shall account for, and pay over to the Company, any such income or interest
remaining after payment in full of the Obligations. Until an Acceleration, notwithstanding any provision of this Agreement to the
contrary, the Company may conduct its business in the ordinary course and may use its cash, cash equivalents, royalties, licensing
fees, milestone payments, research sponsorship payments, interest, dividends, income, proceeds of loans and sales of securities,
sales of inventory and joint venture distributions for general corporate purposes.

 

    	 

    	 

    

 

(c)          If
an Event of Default has occurred, the Company authorizes the Secured Parties to:

 

(i)          receive
any increase in or profits on the Collateral and hold the same as part of the Collateral;

 

(ii)         receive
any payment or distribution on the Collateral upon redemption by, or dissolution and liquidation of, the issuer thereof;

 

(iii)        surrender
such Collateral or any part thereof in exchange for cash or securities of equivalent fair market value; and

 

(iv)        hold
the net cash receipts from any such payment or distribution described in clause (ii) above as part of the Collateral.

 

7.          Events
of Default. The occurrence of any “Event of Default” under the Notes, or any material breach of this Agreement
by the Company, shall constitute an “Event of Default” under this Agreement.

 

8.          Remedies
on Default. Upon the occurrence of an Event of Default, the Secured Parties shall have all rights, privileges, powers and remedies
provided a secured party under the UCC and any other applicable law and such additional rights, privileges, powers and remedies
as are set forth herein.

 

9.          Payments
After an Event of Default. All payments received and amounts realized by the Secured Parties pursuant to Section 8, including
all such payments and amounts received after the entire unpaid principal of, and interest on, the Notes have been declared due
and payable, as well as all payments or amounts then held or thereafter received by the Secured Parties as part of the Collateral
while an Event of Default shall be continuing, shall be promptly applied and distributed to the Secured Parties in the following
order of priority:

 

(a)          first,
to the payment of all reasonable costs and expenses, including reasonable attorneys’ fees and expenses, incurred or made
hereunder by the Secured Parties, including any such costs and expenses of foreclosure or suit, if any, and of any sale or the
exercise of any other remedy under Section 8, and of all taxes, assessments, or liens superior to the lien granted under
this Agreement, except any taxes, assessments, or other superior lien subject to which any said sale under Section 8 may
have been made; and

 

(b)          second,
to the payment to the Secured Parties of the amount then owing or unpaid on the Notes, with application on the Notes to be made
first to the unpaid interest thereon (if any), and second, to the unpaid principal thereof, such application to be
made upon presentation of the Notes and the notation thereon of the payment, if partially paid, or the surrender and cancellation
thereof, if fully paid shall be made; and

 

(c)          third,
to the payment of the balance or surplus, if any, to the Company, its successors and assigns, or to whomsoever may be lawfully
entitled to receive the same.

 

    	 

    	 

    

 

10.         Power
of Attorney. The Company hereby appoints the Secured Parties, the attorney-in-fact of the Company to (i) prepare, sign and
file or record, for the Company, in the Company’s name, any financing statement and to take any other action reasonably deemed
by the Secured Parties necessary or desirable to perfect and continue the security interest of the Secured Parties hereunder, and
to perform any obligations of the Company hereunder, but without obligation to do so; and (ii) after an Acceleration, to take any
and all actions necessary or appropriate in compliance with the terms and conditions of this Agreement, to collect, compromise,
settle, sell, or otherwise deal with any or all of the Collateral or proceeds thereof. Such power of attorney is coupled with an
interest and is irrevocable so long as any of the Obligations remains outstanding.

 

11.         Secured
Parties’ Right to Cure; Reimbursement. If the Company should fail to do any act as herein provided, the Secured Parties
may, but shall have no obligation to do so, with reasonable notice to the Company, and without releasing the Company from any obligation
hereof, make or do the same in such manner and to such extent as the Secured Parties may deem necessary to protect the Collateral,
including without limitation, the defense of any action purporting to affect the Collateral or the rights or powers of the Secured
Parties hereunder, at the Company’s expense. The Company shall reimburse the Secured Parties for reasonable expenses incurred
under this Section 11.

 

12.         Miscellaneous.

 

(a)          This
Agreement, together with the covenants and warranties contained in it, shall inure to the benefit of the Secured Parties and its
permitted successors, assigns, heirs and personal representatives, and shall be binding upon the Company and its successors and
assigns.

 

(b)          All
notices and other communications provided for hereunder shall be in writing and, if to the Company or the Secured Parties, mailed
or delivered to it, addressed to it at the address specified in the preamble hereto, or as to any party hereto at such other address
as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section
12. All such notices and other communications shall, when mailed, be effective when deposited in the mails, addressed as aforesaid.

 

(c)          This
Agreement shall terminate on the discharge or satisfaction in full of all the Obligations for the payment of money under the Notes
(including by means of repayment of the Notes or conversion of said Notes into Common Stock, by their terms) and, on such termination,
the Secured Parties shall promptly take all steps necessary and appropriate to release the security interest granted in the Collateral
hereunder; provided, however, that if after receipt of any payment of any payment of all or any part of the Obligations,
the Secured Parties is for any reason compelled to surrender such payment to any person or entity, because such payment is determined
to be void or voidable as a preference, an impermissible setoff, or a diversion of trust funds or for any other reason relating
to the Company’s status, this Agreement shall continue in full force notwithstanding any contrary action which may have been
taken by the Secured Parties in reliance upon such payment, and any such contrary action so taken shall be without prejudice to
the Secured Parties’ rights under this Agreement and shall be deemed to have been conditioned upon such payment having become
final and irrevocable.

 

(d)          If
any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and
if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and
circumstances.

 

(e)          The
headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation
of this Agreement.

 

(f)          This
Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

    	 

    	 

    

 

(g)          This
Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles
of conflicts of laws. Unless otherwise defined herein, terms defined in Articles 8 and 9 of the UCC are used herein as therein
defined. Any action, suit, or proceeding arising out of, based on, or in connection with this Agreement or the transactions contemplated
hereby may be brought in the United States District Court for Los Angeles County in the state of California and each party covenants
and agrees not to assert, by way of motion, as a defense, or otherwise, in any such action, suit, or proceeding, any claim that
it or he is not subject personally to the jurisdiction of such court, that its or his property is exempt or immune from attachment
or execution, that the action, suit, or proceeding is brought in an inconvenient forum, that the venue of the action, suit, or
proceeding is improper, or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

(h)          No
course of dealing and no delay or omission on the part of the Secured Party in exercising any right or remedy shall operate as
a waiver thereof or otherwise prejudice the Secured Parties’ rights, powers, or remedies. No right, power or remedy conferred
by this Agreement upon the Secured Parties shall be exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise, and all such remedies may be exercised singly or concurrently.

 

(i)          This
Agreement, together with the Notes, the Note Purchase Agreement, and the attachments thereto set forth the entire understanding
of the parties with respect to the subject matter hereof, supersedes all existing agreements among them concerning such subject
matter and may be modified only by a written instrument duly executed by the party intended to be bound thereby.

 

[Signature Page Follows]

 

    	 

    	 

    

 

IN WITNESS WHEREOF, the parties have executed
this Security Agreement on the date set forth above. 

 

	 	 	VINYL PRODUCTS, INC.
	 	 	 	 	 
	 	 	By: 	 	 
	 	 	 	Keith Moore	 
	 	 	 	Treasurer	 

 

	SECURED PARTY:	 	 
	 	 	 
	 	 	 	 	 
	Print Name	 	 	 
	 	 	 	 	 
	By: 	 	 	 	 
	 	 	 	 	 
	Name:	 	 	 	 
	 	 	 	 	 
	Title: 	 	 	 	 

 

    	 

    	 

    

 

SCHEDULE A

 

SECURED PARTIES

 

    	 

    	 

    

 

Exhibit
A

 

Permitted
Liens

 

None

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