Document:

Amended and Restated Security Agreement

 EXHIBIT 10.2 
 EXECUTION VERSION 
 AMENDED AND RESTATED SECURITY AGREEMENT 

Dated July 12, 2011 
 from 
 The Grantors referred to herein 

as Grantors 
 to 
 THE BANK OF NOVA SCOTIA 

as Collateral Agent 
 Amended and Restated KCSR Security Agreement 

 T A B L E   O F  
C O N T E N T S 
  

							
	Section	  	 	  	Page	 
			
	 Section 1.
	  	Grant of Security	  	 	2	  
			
	 Section 2.
	  	Security for Obligations; Excluded Property	  	 	6	  
			
	 Section 3.
	  	Grantors Remain Liable	  	 	7	  
			
	 Section 4.
	  	Delivery and Control of Security Collateral	  	 	7	  
			
	 Section 5.
	  	Maintaining the Account Collateral	  	 	8	  
			
	 Section 6.
	  	Investing of Amounts in the L/C Collateral Account	  	 	10	  
			
	 Section 7.
	  	Release of Amounts	  	 	10	  
			
	 Section 8.
	  	Representations and Warranties	  	 	10	  
			
	 Section 9.
	  	Further Assurances	  	 	12	  
			
	 Section 10.
	  	As to Equipment and Inventory	  	 	12	  
			
	 Section 11.
	  	Insurance	  	 	12	  
			
	 Section 12.
	  	Post-Closing Changes; Bailees; Collections on Receivables and Related Contracts	  	 	13	  
			
	 Section 13.
	  	As to Intellectual Property Collateral	  	 	13	  
			
	 Section 14.
	  	Voting Rights; Dividends; Etc.	  	 	14	  
			
	 Section 15.
	  	Transfers and Other Liens; Additional Shares	  	 	16	  
			
	 Section 16.
	  	Collateral Agent Appointed Attorney-in-Fact	  	 	16	  
			
	 Section 17.
	  	Collateral Agent May Perform	  	 	16	  
			
	 Section 18.
	  	The Collateral Agent’s Duties	  	 	16	  
			
	 Section 19.
	  	Remedies	  	 	17	  
			
	 Section 20.
	  	Indemnity and Expenses	  	 	19	  
			
	 Section 21.
	  	Amendments; Waivers; Additional Grantors; Etc.	  	 	20	  
			
	 Section 22.
	  	Notices, Etc.	  	 	20	  
			
	 Section 23.
	  	Continuing Security Interest; Assignments under the Credit Agreement	  	 	20	  

  
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	 Section 24.
	    	Release; Termination	  	 	21	  
			
	 Section 25.
	    	Execution in Counterparts	  	 	21	  
			
	 Section 26.
	    	The Mortgages	  	 	21	  
			
	 Section 27.
	    	Governing Law	  	 	22	  
			
	 Section 28.
	    	Amendment and Restatement	  	 	22	  

 Schedules 
  

					
	 Schedules I
	  	-	    	Location, Chief Executive Office, Place Where Agreements Are Maintained, Type Of Organization, Jurisdiction Of Organization And Organizational Identification
Number
	 Schedule II
	  	-	    	Pledged Equity
	 Schedule III
	  	-	    	Locations of Equipment and Inventory
	 Schedule IV
	  	-	    	Changes in Name, Location, Etc.
	 Schedule V
	  	-	    	Patents, Trademarks and Trade Names and Copyrights
	 Schedule VI
	  	-	    	Account Collateral
	 Schedule VII
	  	-	    	Account Collateral not Subject to Account Control Agreement
	 Schedule VIII
	  	-	    	Securities Accounts
	 Schedule IX
	  	-	    	Immaterial Assets
	 Schedule X
	  	-	    	Rolling Stock
			
	Exhibits	  		    	
			
	 Exhibit A
	  	-	    	Form of Security Agreement Supplement
	 Exhibit B
	  	-	    	Form of Intellectual Property Security Agreement
	 Exhibit C
	  	-	    	Form of Intellectual Property Security Agreement Supplement
	 Exhibit D
	  	-	    	Form of Memorandum of Security Agreement

  
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 AMENDED AND RESTATED SECURITY AGREEMENT 

AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”) dated July 12, 2011 made by The Kansas City
Southern Railway Company, a Missouri corporation (the “Borrower”), Kansas City Southern (the “Parent”), the other Persons described on the signature pages hereof and the Additional Grantors (as defined
in Section 21) (the Borrower, the Persons so described on the signature pages hereof and the Additional Grantors being, collectively, the “Grantors”), to The Bank of Nova Scotia, as collateral agent (in such capacity,
together with any successor collateral agent appointed pursuant to Article VII of the Credit Agreement (as hereinafter defined), the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement).

 PRELIMINARY STATEMENTS. 
 (1) The Grantors and the Collateral Agent are party to that certain Security Agreement dated as of March 30, 2004 (as amended, restated, amended and restated, supplemented and/or otherwise modified
from time to time prior to the date hereof, the “Existing Security Agreement”). 
 (2) The Borrower has
entered into an Amended and Restated Credit Agreement dated as of July 12, 2011 (said agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the “Credit
Agreement”) with the Parent, the Lender Parties, Bank of America, the Lead Arrangers and the Agents (each as defined therein). 
 (3) Pursuant to the Credit Agreement, the parties hereto have agreed to amend and restate the Existing Security Agreement in its entirety as set forth in this Agreement in order to grant to the Collateral
Agent for the ratable benefit of the Secured Parties a security interest in the Collateral (as hereinafter defined). 
 (4) Each
Grantor is the owner of the shares of stock or other Equity Interests set forth opposite such Grantor’s name on and as otherwise described in Part I of Schedule II hereto (together with 100% of the Equity Interests in North American
Freight Transportation Alliance Railroad Corporation, the “Initial Pledged Equity”) and issued by the Persons named therein and of the indebtedness for borrowed money represented by a promissory note or other instrument (the
“Initial Pledged Debt”) set forth opposite such Grantor’s name on and as otherwise described in Part II of Schedule II hereto and issued by the obligors named therein. 

(5) One or more of the Grantors have security entitlements (the “Pledged Security Entitlements”) with respect to
all the financial assets (the “Pledged Financial Assets”) credited from time to time to the investment and securities accounts described on Schedule VIII hereto (together with any successor or replacement account, the
“Securities Accounts”). 
 (6) Upon the request of the Collateral Agent, the Borrower will open a Letter
of Credit collateral deposit account (the “L/C Collateral Account”), in the name of the Collateral Agent and under the sole control and dominion of the Collateral Agent and subject to the terms of this Agreement. 

(7) It is a condition precedent to the making of Advances and the issuance of Letters of Credit by the Lender Parties under the Credit
Agreement and the entry into Secured Hedge Agreements by the Hedge Banks from time to time that the Grantors shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Agreement. 

 (8) Each Grantor will derive substantial direct and indirect benefit from the transactions
contemplated by the Loan Documents. 
 (9) Unless a contrary intention appears, terms defined in the Credit Agreement and not
otherwise defined in this Agreement are used in this Agreement as defined in the Credit Agreement. Further, unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below)
and/or in the Federal Book Entry Regulations (as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9 and/or the Federal Book Entry Regulations. “UCC” means the Uniform
Commercial Code as in effect, from time to time, in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority. The term “Federal Book Entry Regulations” means (a) the federal regulations contained in Subpart B (“Treasury/Reserve Automated Debt
Entry System (TRADES)”) governing book-entry securities consisting of U.S. Treasury bills, notes and bonds and Subpart D (“Additional Provisions”) of 31 C.F.R. Part 357, 31 C.F.R. § 357.2,
§ 357.10 through § 357.15 and § 357.40 through § 357.45 and (b) to the extent substantially identical to the federal regulations referred to in clause (a) above (as in effect from time to time),
the federal regulations governing other book-entry securities. 
 NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender Parties to make Advances and issue Letters of Credit under the Credit Agreement and to induce the Hedge Banks to enter into Secured Hedge Agreements from time to time, each Grantor hereby agrees with the Collateral Agent for the
ratable benefit of the Secured Parties as follows: 
 Section 1. Grant of Security. Subject to Section 2(b),
each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in, such Grantor’s right, title and interest in and to the following, in each case, as to each type of property described
below, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (collectively, the “Collateral”): 

(a) all equipment in all of its forms, including, without limitation, all gondolas, boxcars, tankers, locomotives and
railcars of any type (collectively “Rolling Stock”) (other than any Rolling Stock subject to a purchase-money security interest as of the date hereof and any Rolling Stock acquired after the Effective Date that is subject to
a purchase-money security interest within 270 days of acquisition, or if such Rolling Stock is purchased in installments, within 270 days of the final purchased installment), all machinery, tools, motor vehicles, vessels, aircraft, furniture and
fixtures, and all parts thereof and all accessions thereto and all software related thereto, including, without limitation, software that is embedded in and is part of the equipment (any and all such property being the
“Equipment”); 
 (b) all inventory in all of its forms, including, without limitation,
(i) all raw materials, work in process, finished goods and materials used or consumed in the manufacture, production, preparation or shipping thereof, (ii) goods in which such Grantor has an interest in mass or a joint or other interest or
right of any kind (including, without limitation, goods in which such Grantor has an interest or right as consignee) and (iii) goods that are returned to or repossessed or stopped in transit by such Grantor), and all accessions thereto and
products thereof and documents therefor, and all software related thereto, including, without limitation, software that is embedded in and is part of the inventory (any and all such property being the “Inventory”);

  
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 (c) all accounts (including, without limitation, health-care-insurance
receivables), chattel paper (including, without limitation, tangible chattel paper and electronic chattel paper), instruments (including, without limitation, promissory notes), deposit accounts, letter-of-credit rights, general intangibles
(including, without limitation, payment intangibles) and other obligations of any kind, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services and whether or not earned by performance, and all
rights now or hereafter existing in and to all supporting obligations and in and to all security agreements, mortgages, Liens, leases, letters of credit and other contracts securing or otherwise relating to the foregoing property (any and all of
such accounts, chattel paper, instruments, deposit accounts, letter-of-credit rights, general intangibles and other obligations, to the extent not referred to in clause (d), (e) or (f) below, being the
“Receivables”, and any and all such supporting obligations, security agreements, mortgages, Liens, leases, letters of credit and other contracts being the “Related Contracts”); 

(d) the following (the “Security Collateral”): 

(i) the Initial Pledged Equity and the certificates, if any, representing the Initial Pledged Equity, and all dividends,
distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Equity and all subscription warrants, rights or
options issued thereon or with respect thereto; 
 (ii) the Initial Pledged Debt and the instruments, if any,
evidencing the Initial Pledged Debt, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Debt; 

(iii) all additional shares of stock and other Equity Interests acquired after the date hereof (other than Equity
Interests of any entity which is not a Subsidiary or a Subsidiary that is not formed under a jurisdiction in the United States of America) from time to time by such Grantor in any manner (such shares and other Equity Interests, together with the
Initial Pledged Equity, being the “Pledged Equity”), and the certificates, if any, representing such additional shares or other Equity Interests, and all dividends, distributions, return of capital, cash, instruments and
other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other Equity Interests and all subscription warrants, rights or options issued thereon or with respect
thereto; 
 (iv) all additional indebtedness from time to time owed to such Grantor (such indebtedness, together
with the Initial Pledged Debt, being the “Pledged Debt”) and the instruments, if any, evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness; 
 (v) the Securities Accounts, all
Pledged Security Entitlements with respect to all Pledged Financial Assets from time to time credited to the Securities Accounts, and all Pledged Financial Assets, and all dividends, distributions, return of capital, interest, cash, instruments and
other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Pledged Security Entitlements or such Pledged Financial Assets and all subscription warrants, rights or options issued
thereon or with respect thereto; 

  
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 (vi) all other investment property (including, without limitation, all
(A) securities, whether certificated or uncertificated, (B) security entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity accounts) in which such Grantor has now, or acquires from time to time
hereafter, any right, title or interest in any manner, and the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, distributions, value, cash,
instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property and all subscription warrants, rights or options issued thereon or with respect
thereto; 
 (e) each of the Intellectual Property Agreements (as hereinafter defined) and each Hedge Agreement to
which such Grantor is now or may hereafter become a party, in each case as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time (collectively, the “Assigned Agreements”),
including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect to the Assigned Agreements, (iii) claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements and (iv) the right of such Grantor to terminate the Assigned Agreements,
to perform thereunder and to compel performance and otherwise exercise all remedies thereunder; 
 (f) the
following (collectively, the “Account Collateral”): 
 (i) the L/C Collateral Account and
all deposit accounts including, without limitation, those listed on Schedule VI hereto (the “Deposit Accounts”), and all funds and financial assets from time to time credited thereto (including, without limitation, all Cash
Equivalents), all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds and financial assets, and all
certificates and instruments, if any, from time to time representing or evidencing the L/C Collateral Account and the Deposit Accounts; 
 (ii) all promissory notes, certificates of deposit, checks and other instruments from time to time delivered to or otherwise possessed by the Collateral Agent for or on behalf of such Grantor, including,
without limitation, those delivered or possessed in substitution for or in addition to any or all of the then existing Account Collateral; and 
 (iii) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then
existing Account Collateral; and 
 (g) the following (collectively, the “Intellectual Property
Collateral”): 
 (i) all patents, patent applications, utility models and statutory invention
registrations, all inventions claimed or disclosed therein and all improvements thereto (“Patents”); 
 (ii) all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source identifiers, whether registered or unregistered
(provided that no security interest shall be granted in 

  
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United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability
of such intent-to-use trademark applications under applicable federal law), together, in each case, with the goodwill symbolized thereby (“Trademarks”); 

(iii) all copyrights, including, without limitation, copyrights in Computer Software (as hereinafter defined), internet
web sites and the content thereof, whether registered or unregistered (“Copyrights”); 

(iv) all computer software, programs and databases (including, without limitation, source code, object code and all
related applications and data files), firmware and documentation and materials relating thereto, together with any and all maintenance rights, service rights, programming rights, hosting rights, test rights, improvement rights, renewal rights and
indemnification rights and any substitutions, replacements, improvements, error corrections, updates and new versions of any of the foregoing (“Computer Software”); 

(v) all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing
and production processes and techniques, inventions, research and development information, databases and data, including, without limitation, technical data, financial, marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, and all other intellectual, industrial and intangible property of any type, including, without limitation, industrial designs and mask works; 

(vi) all registrations and applications for registration for any of the foregoing, including, without limitation, those
registrations and applications for registration set forth in Schedule V hereto, together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof; 

(vii) all tangible embodiments of the foregoing, all rights in the foregoing provided by international treaties or
conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto; 

(viii) all agreements, permits, consents, orders and franchises relating to the license, development, use or disclosure of
any of the foregoing to which such Grantor, now or hereafter, is a party or a beneficiary (“Intellectual Property Agreements”); and 
 (ix) any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the
right, but not the obligation, to sue for and collect, or otherwise recover, such damages; 
 (h) all books and
records (including, without limitation, customer lists, credit files, printouts and other computer output materials and records) of such Grantor pertaining to any of the Collateral; and 

(i) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect
to, and supporting obligations relating to, any and all of the Collateral (including, without limitation, proceeds, collateral and supporting obligations that 

  
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constitute property of the types described in clauses (a) through (h) of this Section 1 and this clause (h)) and, to the extent not otherwise included, all (A) payments
under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, (B) tort claims,
including, without limitation, all commercial tort claims and (C) cash. 
 Section 2. Security for Obligations;
Excluded Property. (a) This Agreement secures, in the case of each Grantor, the payment of all Obligations of such Grantor now or hereafter existing under the Loan Documents, whether direct or indirect, absolute or contingent, and whether for
principal, reimbursement obligations, interest, fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise (all such Obligations being the “Secured Obligations”). 

(b) In no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in, any
of such Grantor’s right, title or interest in the following (together with any assets with respect to which the Administrative Agent and the Borrower reasonably agree in writing that the cost of obtaining a security interest in such assets is
excessive in relation to the value afforded to the Secured Parties thereby, collectively, the “Excluded Property”): 
 (i) voting Equity Interest (A) in excess of 66% of the issued and outstanding voting Equity Interest of any Subsidiary that is a “controlled foreign corporation” (within the meaning of
Section 957 of the Internal Revenue Code) and (B) in excess of 66% of the issued and outstanding voting Equity Interest of any Subsidiary that is organized under the laws of the United States of America, any State thereof or the District
of Columbia, the sole assets (other than immaterial assets) of which consist of stock of controlled foreign corporations (a “US Holdco”) (provided that if a US Holdco is a Grantor and is a direct Subsidiary of another
Grantor, voting Equity Interests of such US Holdco (“Excluded US Holdco Equity Interests”) and voting Equity Interests in excess of 66% of the issued and outstanding voting Equity Interests of such US Holdco’s direct
Subsidiaries that are controlled foreign corporations shall constitute Excluded Property); 
 (ii) any Equity
Interests in, and any assets of, Meridian Speedway, Kansas City Southern de México, S.A. de C.V., NAFTA Rail, S.A. de C.V., The Texas Mexican Railway Company and Mexrail; 

(iii) any Equity Interests in any Subsidiary of the Parent whose sole assets (other than such immaterial assets listed on
Schedule IX (held by such Subsidiary to the extent required for tax planning and similar purposes)) are the direct or indirect Equity Interests in Kansas City Southern de México, S.A. de C.V. or NAFTA Rail, S.A. de C.V; 

(iv) Equity Interests in any Person (other than any wholly owned Restricted Subsidiaries) to the extent a pledge thereof
is not permitted by the terms of such Person’s organizational or joint venture documents and a waiver of or amendment rendering such restrictive terms ineffective is not in effect; 

(v) to the extent that applicable law requires that a Subsidiary of any Grantor issue nominee or directors’
qualifying shares, such nominee or directors’ qualifying shares; 

  
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 (vi) any lease, license or other agreement with any Person if, to the extent
and for so long as the grant of a Lien thereon to secure the Secured Obligations constitutes a breach of or a default under, or creates a right of termination in favor of any party (other than any Grantor or any Subsidiary of a Grantor) to, such
lease, license or other agreement (but only to the extent any of the foregoing is not rendered ineffective by, or is otherwise unenforceable under, the UCC or any applicable law); 

(vii) any asset subject to a Lien of the type permitted by Section 5.02(a)(iv) or (v) of the Credit Agreement
(whether or not incurred pursuant to such Sections) or a Lien permitted by Section 5.02(a)(vi) of the Credit Agreement, in each case if, to the extent and for so long as the grant of a Lien thereon to secure the Secured Obligations constitutes
a breach of or a default under, or creates a right of termination in favor of any party (other than any Grantor or any Subsidiary of a Grantor) to, any agreement pursuant to which such Lien has been created (but only to the extent any of the
foregoing is not rendered ineffective by, or is otherwise unenforceable under, the UCC or any applicable law); 

(viii) the “MERIDIAN SPEEDWAY” Trademark owned by The Kansas City Southern Railway Company; and 

(ix) any Proceeds, substitutions or replacements of any Excluded Property described in preceding clauses (i) through
(viii). 
 Section 3. Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each Grantor
shall remain liable under the contracts and agreements included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Secured Party shall have
any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party 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 4. Delivery
and Control of Security Collateral. (a) Subject to the next following sentence, all certificates or instruments representing or evidencing Security Collateral (other than instruments consisting of promissory notes, a security interest in which
may be perfected by filing, provided that such instruments shall not be pledged as collateral and delivered to a third party) shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent. Within 60 days after North American Freight Transportation Alliance
Railroad Corporation shall become a Significant Subsidiary, as such time period may be extended in the Collateral Agent’s reasonable discretion, the Grantors shall cause stock certificates representing 100% of the Equity Interests therein to be
delivered to the Collateral Agent, which certificates shall be held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Collateral Agent. The Collateral Agent shall have the right, at any time and for reasonable credit purposes and with notice to the applicable Grantor, to transfer to or to register
in the name of the Collateral Agent or any of its nominees any or all of the Security Collateral, subject only to the revocable rights specified in Section 14(a). 

  
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 (b) With respect to Security Collateral with a value, at any one time, in excess of
$5,000,000 in the aggregate, which any Grantor has any right, title or interest and that constitutes an uncertificated security, such Grantor will cause the issuer thereof either (i) to register the Collateral Agent as the registered owner of
such security or (ii) to agree in an authenticated record with such Grantor and the Collateral Agent that such issuer will comply with instructions with respect to such security originated by the Collateral Agent without further consent of such
Grantor, such authenticated record to be in form and substance satisfactory to the Collateral Agent. 
 (c) With respect to each
Securities Account in which the Collateral Agent is not the entitlement holder, such Grantor will cause the securities intermediary with respect to such security entitlement either (i) to identify in its records the Collateral Agent as the
entitlement holder of such security entitlement against such securities intermediary or (ii) to agree in an authenticated record with such Grantor and the Collateral Agent that such securities intermediary will comply with entitlement orders
(that is, notifications communicated to such securities intermediary directing transfer or redemption of the financial asset to which such Grantor has a security entitlement) originated by the Collateral Agent without further consent of such
Grantor, such authenticated record to be in form and substance satisfactory to the Collateral Agent (such agreement being a “Securities Account Control Agreement”). 

(d) No Grantor will change or add any securities intermediary that maintains any Securities Account in which any of the Collateral is
credited or carried, or change or add any such Securities Account, in each case without first complying with the above provisions of this Section 4 in order to perfect the security interest granted hereunder in such Collateral. 

(e) Upon the request of the Collateral Agent upon the occurrence and during the continuance of an Event of Default, such Grantor will
notify each such issuer of Pledged Debt that such Pledged Debt is subject to the security interest granted hereunder. 

Section 5. Maintaining the Account Collateral. So long as any Advance or any other Obligation of any Loan Party under any
Loan Document shall remain unpaid (other than contingent Obligations in respect of indemnities for which a claim has not been made), any Letter of Credit shall be outstanding, any Secured Hedge Agreement shall be in effect or any Lender Party shall
have any Commitment: 
 (a) Each Grantor will maintain all Account Collateral only with the Collateral Agent or
with banks (the “Pledged Account Banks”) that have agreed, in a record authenticated by the Grantor, the Collateral Agent and the Pledged Account Banks, to comply with instructions originated by the Collateral Agent directing
the disposition of funds in the Account Collateral without the further consent of the Grantor to the Account Collateral, which authenticated record shall be in form and substance satisfactory to the Collateral Agent (the “Account Control
Agreement”); provided, however, this Section 5(a) shall not apply to any (i) payroll, tax escrow, fiduciary or trust (where held for the benefit of Persons that are not Grantors or Affiliates of Grantors), zero
balance, pensions and 401(k) accounts listed in Schedule VII hereto or notified in writing to the Collateral Agent after the date hereof, (ii) deposit accounts listed in Schedule VII hereto or notified in writing to the Collateral Agent after
the date hereof, provided that the Grantors will not at any time maintain more than $50 million in the aggregate in such deposit accounts for a period exceeding five consecutive Business Days (all accounts described in the preceding clauses
(i) and (ii) being the “Excluded Accounts”). 
 (b) Except with respect to
Excluded Accounts, each Grantor agrees that it will not add any bank that maintains a deposit account for such Grantor or open any new deposit account with any then existing Pledged Account Bank unless (i) the Collateral Agent shall have
received prior written notice of such additional bank or such new deposit account and (ii) the Collateral 

  
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Agent shall have received, in the case of a bank or Pledged Account Bank that is not the Collateral Agent, an Account Control Agreement authenticated by such new bank and such Grantor, or a
supplement to an existing Account Control Agreement with such then existing Pledged Account Bank, covering such new deposit account (and, upon the receipt by the Collateral Agent of such Account Control Agreement or supplement, Schedule VI hereto
shall be automatically amended to include such Deposit Account). Each Grantor agrees that it will not terminate any bank as a Pledged Account Bank or terminate any Account Collateral (other than an Excluded Account), except that the Grantor may
terminate a Deposit Account, and terminate a bank as a Pledged Account Bank with respect to such Deposit Account, if it gives the Collateral Agent at least 10 days’ prior written notice of such termination (and, upon such termination,
Schedule VI hereto shall be automatically amended to delete such Pledged Account Bank and Deposit Account). 

(c) Upon any termination by a Grantor of any Deposit Account (other than an Excluded Account) by such Grantor, or any
Pledged Account Bank with respect thereto, such Grantor will immediately (i) transfer all funds and property held in such terminated Deposit Account to another Deposit Account listed (or deemed to be listed pursuant to Section 5(b)) in
Schedule VI and (ii) notify all Obligors that were making payments to such Deposit Account to make all future payments to another Deposit Account listed (or deemed to be listed pursuant to Section 5(b)) in Schedule VI hereto so that the
Collateral Agent shall have a continuously perfected security interest in such Account Collateral, funds and property. 
 (d) The Collateral Agent shall have sole right, upon the occurrence and during the continuance of an Event of Default under Sections 6.01(a) or 6.01(f) of the Credit Agreement, to direct the
disposition of funds with respect to each of the L/C Collateral Account and the Deposit Accounts; and it shall be a term and condition of each of the L/C Collateral Account and the Deposit Accounts, notwithstanding any term or condition to the
contrary in any other agreement relating to the L/C Collateral Account or the Deposit Accounts, as the case may be, that, upon the occurrence and during the continuance on an Event of Default under Sections 6.01(a) or 6.01(f), no amount
(including, without limitation, interest on Cash Equivalents credited thereto) will be paid or released to or for the account of, or withdrawn by or for the account of, the Borrower or any other Person from the L/C Collateral Account or the Deposit
Accounts, as the case may be. 
 (e) The Collateral Agent may, at any time and without notice to, or consent
from, the Grantor, transfer, or direct the transfer of, funds from the Account Collateral to satisfy the Grantor’s payment obligations under the Loan Documents if an Event of Default under Sections 6.01(a) or 6.01(f) shall have occurred
and be continuing. 

  
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 Section 6. Investing of Amounts in the L/C Collateral Account. The Collateral
Agent will, subject to the provisions of Sections 5, 7 and 19, from time to time (a) invest, or direct the applicable Pledged Account Bank to invest, amounts received with respect to the L/C Collateral Account in such Cash Equivalents
credited to (A) the L/C Collateral Account as the Borrower may select or (B) in the case of Cash Equivalents consisting of Securities Collateral, a securities account in which the Collateral Agent is the securities intermediary or a
securities account subject to a Securities Account Control Agreement, and (b) invest interest paid on the Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of any such Cash Equivalents that may mature or be
sold, in each case in such Cash Equivalents credited in the same manner. Interest and proceeds that are not invested or reinvested in Cash Equivalents as provided above shall be deposited and held in the relevant L/C Collateral Account. In addition,
the Collateral Agent shall have the right at any time to exchange, or direct the applicable Pledged Account Bank to exchange, such Cash Equivalents for similar Cash Equivalents of smaller or larger determinations, or for other Cash Equivalents,
credited to the L/C Collateral Account. 
 Section 7. Release of Amounts. So long as no Event of Default under
Section 6.01(a) or (f) of the Credit Agreement shall have occurred and be continuing, the Collateral Agent will pay and release, and/or direct the applicable Pledged Account Bank to pay and release to the Administrative Agent to be applied
to the Obligations of the Borrower under Letters of Credit, such amount, if any, as is then on deposit in the L/C Collateral Account to the extent required to satisfy Obligations under the Letter of Credit Facility. 

Section 8. Representations and Warranties. Each Grantor represents and warrants as follows: 

(a) Such Grantor’s exact legal name, as defined in Section 9-503(a) of the UCC, is correctly set forth in
Schedule I hereto. Such Grantor has only the trade names, domain names and marks listed on Schedule V hereto. Such Grantor is located (within the meaning of Section 9-307 of the UCC) and has its chief executive office and the
office in which it maintains the original copies of each Related Contract to which such Grantor is a party and all originals of all chattel paper that evidence Receivables of such Grantor, in the state or jurisdiction set forth in Schedule I hereto.
The information set forth in Schedule I hereto with respect to such Grantor is true and accurate in all material respects. Such Grantor has not, within the four month period ending on the date hereof, changed its name, location, chief executive
office, place where it maintains its agreements, type of organization, jurisdiction of organization or organizational identification number (if applicable) from those set forth in Schedule I hereto except as disclosed in Schedule IV hereto.

 (b) Substantially all of the Equipment (other than Rolling Stock and Equipment which is moved between
locations in the ordinary course of business) and substantially all of the Inventory of such Grantor as of the date hereof are located at the places specified therefor in Schedule III hereto. All Security Collateral represented by certificated
securities have been delivered to the Collateral Agent. 
 (c) All of the Rolling Stock of such Grantor as of the
date hereof are listed in Schedule X hereto. 
 (d) Such Grantor is the legal and beneficial owner of the
Collateral of such Grantor free and clear of any Lien, except for any security interest created under this Agreement or permitted under the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any
part of such Collateral or listing such Grantor or any trade name of such Grantor as debtor is on file in any recording office, including, without limitation, the STB, except such as may have been filed in favor of the Collateral Agent relating to
the Loan Documents or as otherwise permitted under the Credit Agreement. 

  
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 (e) The Pledged Equity pledged by such Grantor hereunder has been duly
authorized and validly issued and is fully paid and non-assessable. With respect to the Pledged Equity that is an uncertificated security, such Grantor has caused the issuer thereof either (i) to register the Collateral Agent as the registered
owner of such security or (ii) to agree in an authenticated record with such Grantor and the Collateral Agent that such issuer will comply with instructions with respect to such security originated by the Collateral Agent without further
consent of such Grantor. If such Grantor is an issuer of Pledged Equity, such Grantor confirms that it has received notice of such security interest. 
 (f) Except with respect to the Equity Interests in North American Freight Transportation Alliance Railroad Corporation, the Initial Pledged Equity pledged by such Grantor constitutes the percentage of the
issued and outstanding Equity Interests of the issuers thereof indicated on Schedule II hereto and all of the Initial Pledged Equity owned by such Grantor is listed on Schedule II hereto. Except as pledged hereunder to the Collateral Agent for
the ratable benefit of the Secured Parties, none of the Equity Interests in North American Freight Transportation Alliance Railroad Corporation or TranFin Insurance, Ltd. have been pledged to any Person. 

(g) As of the date hereof, no indebtedness owed to any of the Grantors (other than the Initial Pledged Debt) in excess of
$5,000,000 is evidenced by promissory notes, instruments or any other form with respect to which a security interest thereon may be perfected by delivery of such form to a secured party. 

(h) As of the date of delivery of Schedule VI pursuant to the terms of the Credit Agreement, such Grantor has no deposit
accounts, other than the Account Collateral listed on Schedule VI hereto, as such Schedule VI may be amended from time to time pursuant to Section 5(c), and legal, binding and enforceable Account Control Agreements are (or shall be
provided as specified in the Credit Agreement) in effect for each deposit account that constitutes Account Collateral (other than Account Collateral consisting of deposit accounts maintained with the Collateral Agent and Excluded Accounts).

 (i) Except as otherwise contemplated in the Credit Agreement and this Agreement, all filings and other actions
(including, without limitation, actions necessary to obtain control of Collateral as provided in Section 9-106 of the UCC with respect to the Pledged Equity) necessary to perfect the security interest in the Collateral of such Grantor created
under this Agreement have been duly made or taken and are in full force and effect, and this Agreement creates in favor of the Collateral Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions,
perfected first priority (subject to any lien subordination agreement between any such Secured Party and any other creditor of such Grantor) security interest in the Collateral of such Grantor (other than Liens expressly permitted to be prior to the
security interest of the Secured Parties under the Credit Agreement), securing the payment of the Secured Obligations. 
 (j) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the grant by such
Grantor of the security interest granted hereunder or for the execution, delivery or performance of this Agreement by such Grantor, or (ii) the exercise by the Collateral Agent of its voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with the disposition of any portion of the Security Collateral by laws affecting the offering and sale of securities generally. 

  
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 Section 9. Further Assurances. (a) Each Grantor agrees that from time to
time, at the expense of such Grantor, such Grantor will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be reasonably necessary, or that the Collateral Agent may
reasonably request, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Grantor hereunder or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect
to any Collateral of such Grantor. 
 (b) Each Grantor hereby authorizes the Collateral Agent to file one or more financing or
continuation statements, and amendments thereto, including, without limitation, one or more financing statements indicating that such financing statements cover all assets or all personal property (or words of similar effect) of such Grantor, in
each case without the signature of such Grantor, and regardless of whether any particular asset described in such financing statements falls within the scope of the UCC or the granting clause of this Agreement. A photocopy or other reproduction of
this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. Each Grantor hereby authorizes the Collateral Agent to file one or more filings covering the
Rolling Stock and related accessories (including a memorandum of Security Agreement in the form of Exhibit D hereto (the “Memorandum of Security Agreement”)) with the STB pursuant to 49 U.S.C. Section 11301 et. Seq. as
the Collateral Agent determines is necessary to obtain a first priority security interest in such property. Each Grantor ratifies its authorization for the Collateral Agent to have filed such financing statements, continuation statements, other
filings or amendments filed prior to the date hereof. 
 (c) Each Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral of such Grantor and such other reports in connection with such Collateral as the Collateral Agent may reasonably request, all in reasonable detail. 

(d) No further action shall be required in order to perfect any pledge or security interest granted by the Grantors hereunder in any
motor vehicles and other assets (other than Rolling Stock) subject to certificates of title or ownership, letter of credit rights and commercial tort claims with a fair market value less than $5,000,000 (in the aggregate for such motor vehicles and
other assets, letter of credit rights and commercial tort claims). 
 (e) None of the Grantors shall pledge any of the Excluded
US Holdco Equity Interests, or create or incur any Lien on or with respect thereto, to or in favor of any Person other than the Collateral Agent pursuant to this Agreement. 
 Section 10. As to Equipment and Inventory. (a) Each Grantor will use its commercially reasonable efforts to give the Collateral Agent prior notice of the transfer of any material
Equipment (other than Rolling Stock and Equipment which is moved between locations in the ordinary course of business) from the places therefor specified in Section 8(b). 
 Section 11. Insurance. (a) Each Grantor will use commercially reasonable efforts to cause all insurance policies required to be maintained under the Credit Agreement to be endorsed or
otherwise amended to include a Lender’s loss payable endorsement, in form and substance satisfactory to the Collateral Agent. Each such policy shall in addition name the Collateral Agent as additional insured thereunder (without representation
or warranty by or obligation upon the Collateral Agent). Each Grantor will, if so requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate policies of such insurance and, as often as the Collateral Agent may
reasonably request, a report of a reputable insurance broker with respect to such insurance. 

  
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 (b) Reimbursement under any liability insurance maintained by any Grantor pursuant to this
Section 11 may be paid directly to the Person who shall have incurred liability covered by such insurance. 

Section 12. Post-Closing Changes; Bailees; Collections on Receivables and Related Contracts. (a) No Grantor will change
its name, type of organization, jurisdiction of organization, organizational identification number or location from those set forth on Schedule I of this Agreement without giving written notice to the Collateral Agent, prior to or within 30 days
thereafter, and taking all action reasonably required by the Collateral Agent for the purpose of perfecting or protecting the security interest granted by this Agreement. No Grantor will become bound by a security agreement authenticated by another
Person (determined as provided in Section 9-203(d) of the UCC) without giving the Collateral Agent 30 days’ prior written notice thereof and taking all action required by the Collateral Agent to ensure that the perfection and first
priority nature of the Collateral Agent’s security interest in the Collateral will be maintained. Each Grantor will hold and preserve its records relating to the Collateral, including, without limitation, the Assigned Agreements, and will
permit representatives of the Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and other documents. If the Grantor does not have an organizational identification number and later obtains one,
it will forthwith notify the Collateral Agent of such organizational identification number. 
 (b) Except as otherwise provided
in this subsection (b), each Grantor will continue to collect, at its own expense, all amounts due or to become due to such Grantor under the Receivables and Related Contracts. In connection with such collections, the Collateral Agent shall
have the right at any time, upon the occurrence and during the continuance of an Event of Default under Section 6.01(a) or (f) of the Credit Agreement and upon written notice to such Grantor of its intention to do so, to notify the
Obligors under any Receivables and Related Contracts of the assignment of such Receivables and Related Contracts to the Collateral Agent and to direct such Obligors to make payment of all amounts due or to become due to such Grantor thereunder
directly to the Collateral Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Receivables and Related Contracts, to adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as such Grantor might have done, and to otherwise exercise all rights with respect to such Assigned Agreements, Receivables and Related Contracts, including, without limitation, those set forth set forth in Section 9-607
of the UCC. After receipt by any Grantor of the notice from the Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including, without limitation, instruments) received by such Grantor in respect
of the Receivables and Related Contracts of such Grantor shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in
the same form as so received (with any necessary indorsement) to be deposited in the collateral account and either (A) released to such Grantor upon the waiver or cure of such Event of Default or (B) if any Event of Default under
Section 6.01(a) or (f) of the Credit Agreement shall have occurred and be continuing, applied as provided in Section 19(b) and (ii) such Grantor will not adjust, settle or compromise the amount or payment of any Receivable or
amount due on any Assigned Agreement or Related Contract, release wholly or partly any Obligor thereof, or allow any credit or discount thereon. 
 Section 13. As to Intellectual Property Collateral. (a) With respect to each item of its Intellectual Property Collateral which in its reasonable business judgment is material to its
business, each Grantor agrees to take, at its expense, all necessary steps, including, without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authority, to (i) maintain the validity and
enforceability of such Intellectual Property Collateral and maintain such Intellectual 

  
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Property Collateral in full force and effect, and (ii) pursue the registration and maintenance of each patent, trademark, or copyright registration or application which in its reasonable
business judgment is material to its business, now or hereafter included in such Intellectual Property Collateral of such Grantor. No Grantor shall, without the written consent of the Collateral Agent, discontinue use of or otherwise abandon any
Intellectual Property Collateral which is material to its business, or abandon any right to file an application for patent, trademark, or copyright for any such Intellectual Property Collateral, unless such Grantor shall have previously determined
that such use or the pursuit or maintenance of such Intellectual Property Collateral is no longer desirable in the conduct of such Grantor’s business and that the loss thereof would not be reasonably likely to have a Material Adverse Effect, in
which case, such Grantor will give prompt notice of any such abandonment to the Collateral Agent. For the purposes of this Section 13(a), it is acknowledged and agreed that the “Business Without Borders” trademark application shall
not be regarded as material to the business of any Grantor. 
 (b) With respect to its Intellectual Property Collateral, each
Grantor agrees to execute or otherwise authenticate an agreement, in substantially the form set forth in Exhibit B hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “Intellectual Property Security
Agreement”), for recording the security interest granted hereunder to the Collateral Agent in such Intellectual Property Collateral with the U.S. Patent and Trademark Office, the U.S. Copyright Office and, to the extent reasonably
requested by the Collateral Agent, any other governmental authorities necessary to perfect the security interest hereunder in such Intellectual Property Collateral. 
 (c) Each Grantor agrees that should it obtain an ownership interest in any item of the type set forth in Section 1(g) that is not on the date hereof a part of the Intellectual Property Collateral
(“After-Acquired Intellectual Property”) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property and, in the case of trademarks, the goodwill
symbolized thereby, shall automatically become part of the Intellectual Property Collateral subject to the terms and conditions of this Agreement with respect thereto. At the end of each Fiscal Year, each Grantor shall give notice to the Collateral
Agent identifying any patent, patent applications, trademark registrations, trademark applications, copyright registrations and copyright applications included in the After-Acquired Intellectual Property, and such Grantor shall execute and deliver
to the Collateral Agent with such written notice, or otherwise authenticate, an agreement substantially in the form of Exhibit C hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “IP Security
Agreement Supplement”) covering such After-Acquired Intellectual Property, which IP Security Agreement Supplement shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and, to the extent reasonably
requested by the Collateral Agent, any other governmental authorities necessary to perfect the security interest hereunder in such After-Acquired Intellectual Property. 
 Section 14. Voting Rights; Dividends; Etc. (a) So long as no Event of Default under Section 6.01(a) or (f) of the Credit Agreement shall have occurred and be continuing and the
Collateral Agent shall not have given the notice required pursuant to paragraph (b) of this Section 14 to the relevant Grantor of the Collateral Agent’s intent to exercise its rights hereunder: 

(i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security
Collateral of such Grantor or any part thereof for any purpose with respect to the Securities Accounts; provided however, that such Grantor will not exercise or will refrain from exercising any such right if such action would be inconsistent
with the provisions of the Loan Documents or any Securities Account Control Agreement. 

  
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 (ii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest and other distributions paid in respect of the Security Collateral of such Grantor if and to the extent that the payment thereof is not otherwise prohibited by the terms of the Loan Documents; provided, however,
that if an Event of Default under Section 6.01(a) or (f) of the Credit Agreement shall have occurred and be continuing, any and all: 
 (A) dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in
exchange for, any Security Collateral, 
 (B) dividends and other distributions paid or payable in cash in
respect of any Security Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and 

(C) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any
Security Collateral, 
 shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Security Collateral and
shall, if received by such Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to the Collateral Agent as Security Collateral in the same
form as so received (with any necessary indorsement). 
 (iii) The Collateral Agent will execute and deliver (or
cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above. 
 (b) Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a) or (f) of the Credit Agreement, provided that the Collateral Agent shall have given a one
Business Day prior written notice (unless such Event of Default is an Event of Default specified in Section 6.01(f) of the Credit Agreement, in which case no such notice need be given) to the relevant Grantor of the Collateral Agent’s
intent to exercise its rights hereunder: 
 (i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 14(a)(i) shall, upon notice to such Grantor by the Collateral Agent, cease and (y) to receive the dividends, interest and
other distributions that it would otherwise be authorized to receive and retain pursuant to Section 14(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the
sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends, interest and other distributions. 

(ii) All dividends, interest and other distributions that are received by any Grantor contrary to the provisions of
paragraph (i) of this Section 14(b) shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent as Security Collateral in
the same form as so received (with any necessary indorsement). 
 (iii) The Collateral Agent shall be authorized
to send to each securities intermediary as defined in and under any Securities Account Control Agreement a Notice of Exclusive Control as defined in and under such Securities Account Control Agreement. 

  
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 Section 15. Transfers and Other Liens; Additional Shares. (a) Each Grantor
agrees that it will not (i) sell, assign or otherwise dispose of, or grant any option with respect to, any of the Collateral, other than sales, leases, assignments and other dispositions of Collateral, and options relating to Collateral,
permitted under the terms of the Credit Agreement, or (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral of such Grantor except for the pledge, assignment and security interest created under this Agreement and
Liens permitted under the Credit Agreement. 
 (b) Each Grantor agrees that it will (i) cause each issuer of the Pledged
Equity pledged by such Grantor not to issue any Equity Interests or other securities in addition to or in substitution for the Pledged Equity issued by such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional Equity Interests or other securities of each issuer of the Pledged Equity. 
 Section 16. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor’s 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, upon the occurrence and during the continuance of an Event of Default, in the Collateral Agent’s discretion, to take any action and to execute any
instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: 
 (a) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section 11, 
 (b) to ask for, 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, 

(c) to receive, indorse and collect any drafts or other instruments, documents and chattel paper, in connection with
clause (a) or (b) above, 
 (d) to file any claims or take any action or institute any proceedings that
the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Collateral Agent with respect to any of
the Collateral, and 
 (e) to settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral. 
 Section 17. Collateral Agent May Perform. Upon the occurrence of and
during the continuation of any Event of Default, if any Grantor fails to perform any agreement contained herein, the Collateral Agent may, as the Collateral Agent deems necessary to protect the security interest granted hereunder in the Collateral,
to protect the value thereof or to do any other act or thing necessary to carry out the purposes of this Agreement as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes, but without any
obligation to do so, itself perform, or cause performance of, such agreement, and the reasonable and documented out-of-pocket expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor under Section 20.

 Section 18. The Collateral Agent’s Duties. (a) The powers conferred on the Collateral Agent hereunder
are solely to protect the Secured Parties’ interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Collateral Agent shall 

  
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have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or
not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property. 

(b) Anything contained herein to the contrary notwithstanding, the Collateral Agent may from time to time, when the Collateral Agent
deems it to be necessary, appoint one or more subagents (each a “Subagent”) for the Collateral Agent hereunder with respect to all or any part of the Collateral. In the event that the Collateral Agent so appoints any Subagent
with respect to any Collateral, (i) the assignment and pledge of such Collateral and the security interest granted in such Collateral by each Grantor hereunder shall be deemed for purposes of this Agreement to have been made to such Subagent,
in addition to the Collateral Agent, for the ratable benefit of the Secured Parties, as security for the Secured Obligations of such Grantor, (ii) such Subagent shall automatically be vested, in addition to the Collateral Agent, with all
rights, powers, privileges, interests and remedies of the Collateral Agent hereunder with respect to such Collateral, and (iii) the term “Collateral Agent,” when used herein in relation to any rights, powers, privileges, interests and
remedies of the Collateral Agent with respect to such Collateral, shall include such Subagent; provided, however, that no such Subagent shall be authorized to take any action with respect to any such Collateral unless and except to the
extent expressly authorized in writing by the Collateral Agent. 
 Section 19. Remedies. If any Event of Default
shall have occurred and be continuing: 
 (a) The Collateral Agent 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 upon default under the UCC (whether or not the UCC applies to the affected Collateral) and also may:
(i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the
Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable; (iii) occupy any premises owned or
leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such
occupation; and (iv) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral, including, without limitation, (A) any and all rights of such
Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Assigned Agreements, the Receivables, the Related Contracts and the other Collateral, (B) withdraw, or cause or direct the withdrawal,
of all funds with respect to the Account Collateral and (C) exercise all other rights and remedies with respect to the Assigned Agreements, the Receivables, the Related Contracts and the other Collateral, including, without limitation, those
set forth in Section 9-607 of the UCC. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser
or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for 

  
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the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this
Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured
Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent
may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days’ 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 Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent 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) Any cash held by or on behalf of the Collateral Agent and all cash proceeds received by or on behalf of the Collateral Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to
Section 20) in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations, in the following manner: 

(i) first, paid to the Agents for any amounts then owing to the Agents pursuant to Section 9.04 of the Credit
Agreement or otherwise under the Loan Documents, ratably in accordance with such respective amounts then owing to the Agents; and 
 (ii) second, ratably (A) paid to the Lender Parties and the Hedge Banks, respectively, for any amounts then owing to them, in their capacities as such, under the Loan Documents ratably in
accordance with such respective amounts then owing to such Lender Parties and the Hedge Banks, provided that, for purposes of this Section 19, the amount owing to any such Hedge Bank pursuant to any Secured Hedge Agreement to which it is
a party (other than any amount therefore accrued and unpaid) shall be deemed to be equal to the agreement value therefor and (B) deposited as Collateral in the L/C Collateral Account up to an amount equal to 103% of the aggregate Available
Amount of all outstanding Letters of Credit, provided that in the event that any such Letter of Credit is drawn, the Collateral Agent shall pay to the Issuing Bank that issued such Letter of Credit the amount held in the L/C Collateral
Account in respect of such Letter of Credit, provided further that, to the extent that any such Letter of Credit shall expire or terminate 

  
 18 

 
undrawn and as a result thereof the amount of the Collateral in the L/C Collateral Account shall exceed 103% of the aggregate Available Amount of all then outstanding Letters of Credit, such
excess amount of such Collateral shall be applied in accordance with the remaining order of priority set out in this Section 19(b). 
 Any surplus of such cash or cash proceeds held by or on the behalf of the Collateral Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantor
or to whomsoever may be lawfully entitled to receive such surplus. 
 (c) All payments received by any Grantor
under or in connection with any Assigned Agreement or otherwise in respect of the Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary indorsement). 
 (d) The Collateral
Agent may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Secured Obligations against any funds held with respect to the Account Collateral or
in any other deposit account. 
 (e) In the event of any sale or other disposition of any of the Intellectual
Property Collateral of any Grantor, the goodwill symbolized by any Trademarks subject to such sale or other disposition shall be included therein, and such Grantor shall supply to the Collateral Agent or its designee such Grantor’s know-how and
expertise, and documents and things relating to any Intellectual Property Collateral subject to such sale or other disposition, and such Grantor’s customer lists and other records and documents relating to such Intellectual Property Collateral
and to the manufacture, distribution, advertising and sale of products and services of such Grantor. 
 Section 20.
Indemnity and Expenses. (a) Each Grantor jointly and severally agrees to indemnify, defend and save and hold harmless each Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an “Indemnified Party”) from and against, and shall pay, within 10 days after receipt of a written request together with backup documentation supporting such reimbursement request, any and all claims, damages,
losses, liabilities and expenses (including, but not limited to, reasonable attorneys’ fees of one counsel for the Indemnified Parties and, if reasonably necessary, a single local counsel to the Indemnified Parties in each relevant jurisdiction
and a special or regulatory counsel in each specialty (and, in the case of an actual or perceived conflict of interest, one additional counsel and, if reasonably necessary, one additional local counsel and one additional special or regulatory
counsel for each Indemnified Party affected by such conflict)) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except to the extent such claim, damage, loss, liability or expense (x) is found by a court of competent jurisdiction in a final and non-appealable judgment to have resulted from the gross negligence
or willful misconduct of such Indemnified Party (or any Related Indemnified Party of such Indemnified Party) or a material breach in bad faith by such Indemnified Party (or any Related Indemnified Party of such Indemnified Party) of its obligations
under the Loan Documents or (y) has resulted from any dispute solely among Indemnified Parties or their Related Indemnified Parties other than claims against any Indemnified Party in its capacity or in fulfilling its role as an Administrative
Agent, Collateral Agent or Lead Arranger or any similar role under any Facility and other than claims arising out of any act or omission on the part of you or your affiliates. 

  
 19 

 (b) Each Grantor will, within 10 days after receipt of a written request together with
backup documentation supporting such reimbursement request, pay to the Collateral Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of one counsel and of any experts and agents, that
the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral of such
Grantor, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or the other Secured Parties hereunder or (iv) the failure by such Grantor to perform or observe any of the provisions hereof. 

Section 21. Amendments; Waivers; Additional Grantors; Etc. (a) No amendment or waiver of any provision of this Agreement, and
no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No failure on the part of the Collateral Agent or any other 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 such right preclude any other or further exercise thereof or the exercise of any other right. 
 (b) Upon the execution and
delivery, or authentication, by any Person of a security agreement supplement in substantially the form of Exhibit A hereto (each a “Security Agreement Supplement”), (i) such Person shall be referred to as an
“Additional Grantor” and shall be and become a Grantor hereunder, and each reference in this Agreement and the other Loan Documents to “Grantor” shall also mean and be a reference to such Additional Grantor, and
each reference in this Agreement and the other Loan Documents to “Collateral” shall also mean and be a reference to the Collateral of such Additional Grantor, and (ii) the supplemental schedules I-X attached to each Security Agreement
Supplement shall be incorporated into and become a part of and supplement Schedules I-X, respectively, hereto, and the Collateral Agent may attach such supplemental schedules to such Schedules; and each reference to such Schedules shall mean and be
a reference to such Schedules as supplemented pursuant to each Security Agreement Supplement. 
 Section 22. Notices,
Etc. All notices and other communications provided for hereunder shall be either (i) in writing (including telegraphic, telecopier or telex communication) and mailed, telegraphed, faxed, telexed or otherwise delivered or (ii) by
electronic mail (if electronic mail addresses are designated as provided below) confirmed immediately in writing, in the case of the Borrower or the Collateral Agent, addressed to it at its address specified in the Credit Agreement and, in the case
of each Grantor other than the Borrower, addressed to it at its address set forth opposite such Grantor’s name on the signature pages hereto or on the signature page to the Security Agreement Supplement pursuant to which it became a party
hereto; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications shall, when mailed, telegraphed, faxed, telexed, sent by electronic mail or
otherwise, be effective when deposited in the mails, delivered to the telegraph company, telecopied, confirmed by telex answerback, sent by electronic mail and confirmed in writing, or otherwise delivered (or confirmed by a signed receipt),
respectively, addressed as aforesaid; except that notices and other communications to the Collateral Agent shall not be effective until received by the Collateral Agent. Delivery by facsimile of an executed counterpart of any amendment or waiver of
any provision of this Agreement or of any Security Agreement Supplement or Schedule hereto shall be effective as delivery of an original executed counterpart thereof. 
 Section 23. Continuing Security Interest; Assignments under the Credit Agreement. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full
force and effect until the latest of (i) the payment in full in cash of the Secured Obligations other than under indemnification and reimbursement provisions for which claims have not been asserted, (ii) the 

  
 20 

 
Termination Date and (iii) the termination or expiration of all Letters of Credit and all Secured Hedge Agreements which have not otherwise been provided for in a manner satisfactory to the
Issuing Bank or the Hedge Bank, as the case may be, (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties
and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitments, the Advances owing to it and the Note or Notes, if any, held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender Party herein or otherwise, in each case as provided in Section 9.07 of the Credit Agreement. 
 Section 24. Release; Termination. (a) Upon any (x) sale, lease, transfer or other disposition of any item of Collateral of any Grantor in accordance with the terms of the Loan
Documents (other than sales and leases of Inventory in the ordinary course of business but including, without limitation, dispositions pursuant to any Securitization Transaction permitted under the Credit Agreement) or (y) any items of
Collateral becoming Designated Fixed Assets, the Collateral Agent will, at such Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral
from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release no Event of Default shall have occurred and be continuing, (ii) except in the case of items of
Collateral becoming Designated Fixed Assets or asset dispositions pursuant to Section 5.02(e)(i) of the Credit Agreement with a fair market value of less than $500,000, such Grantor shall have delivered to the Collateral Agent, at least ten
Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price
thereof and any expenses in connection therewith, together with a form of release for execution by the Collateral Agent and a certificate of such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such
other matters as the Collateral Agent may request and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied, or any payment to be made in connection therewith, in accordance with Section 2.06 of
the Credit Agreement shall, to the extent so required, be paid or made to, or in accordance with the instructions of, the Collateral Agent when and as required under Section 2.06 of the Credit Agreement. 

(b) Upon the latest of (i) the payment in full in cash of the Secured Obligations other than under indemnification and reimbursement
provisions for which claims have not been asserted, (ii) the Termination Date and (iii) the termination or expiration of all Letters of Credit and all Secured Hedge Agreements which have not otherwise been provided for in a manner
satisfactory to the Issuing Bank or the Hedge Bank, as the case may be, the pledge and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantor. Upon any such termination, the
Collateral Agent will, at the applicable Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. 

Section 25. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an
original executed counterpart of this Agreement. 
 Section 26. The Mortgages. In the event that any of the
Collateral hereunder is also subject to a valid and enforceable Lien under the terms of any Mortgage and the terms of such Mortgage are inconsistent with the terms of this Agreement, then with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of fixtures and real estate leases, letting and licenses of, and contracts and agreements relating to the lease of, real property, and the terms of this Agreement shall be controlling in the case of all other
Collateral. 

  
 21 

 Section 27. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. 
 Section 28. Amendment and Restatement. This Agreement amends
and restates the Existing Security Agreement in its entirety. 
 [Signature pages follow] 

  
 22 

 IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered
by its officer thereunto duly authorized as of the date first above written. 
  

			
	THE KANSAS CITY SOUTHERN
	RAILWAY COMPANY
		
	By	 	   /s/ MICHAEL W. UPCHURCH

		 	Name:  Michael W. Upchurch
		 	Title:  EVP & Chief Financial Officer

  
 23 

							
	Address for Notices:	 		 	KANSAS CITY SOUTHERN
	427 West 12th Street	 		 	
	Kansas City, Missouri 64105	 		 		 	
				
		 		 	By	 	   /s/ MICHAEL W. UPCHURCH

		 		 		 	Name:  Michael W. Upchurch
		 		 		 	Title:  EVP & Chief Financial Officer
			
	Address for Notices:	 		 	SOUTHERN INDUSTRIAL SERVICES, INC.
				
	 427 West
12th Street

Kansas City, Missouri 64105
	 		 		 	
				
		 		 	By	 	   /s/ MICHAEL W. UPCHURCH

		 		 		 	Name:  Michael W. Upchurch
		 		 		 	Title:  VP , Chief Financial Officer & Treasurer
			
	Address for Notices:	 		 	TRANS-SERVE, INC.
	427 West 12th Street	 		 		 	
	Kansas City, Missouri 64105	 		 		 	
				
		 		 	By	 	   /s/ MICHAEL W. UPCHURCH

		 		 		 	Name:  Michael W. Upchurch
		 		 		 	Title:  VP & Chief Financial Officer
			
	Address for Notices:	 		 	VEALS, INC.
	427 West 12th Street	 		 		 	
	Kansas City, Missouri 64105	 		 		 	
				
		 		 	By	 	   /s/ MICHAEL W. UPCHURCH

		 		 		 	Name:  Michael W. Upchurch
		 		 		 	Title:  VP, Chief Financial Officer, & Treasurer
			
	Address for Notices:	 		 	PABTEX, INC..
	427 West 12th Street	 		 		 	
	Kansas City, Missouri 64105	 		 		 	
		 		 		 	
				
		 		 	By	 	   /s/ MICHAEL W. UPCHURCH

		 		 		 	Name:  Michael W. Upchurch
		 		 		 	Title:  VP, Chief Financial Officer, & Treasurer
			
	Address for Notices:	 		 	GATEWAY EASTERN RAILROAD COMPANY
				
	 427 West
12th Street

Kansas City, Missouri 64105
	 		 		 	
				
		 		 	By	 	   /s/ MICHAEL W. UPCHURCH

		 		 		 	Name:  Michael W. Upchurch
		 		 		 	Title:  VP & Chief Financial Officer

 Amended and Restated KCSR Security Agreement 

							
	Address for Notices:	 		 	SOUTHERN DEVELOPMENT COMPANY
		 		 		 	
	 427 West
12th Street

Kansas City, Missouri 64105
	 		 		 	
				
		 		 	By  	 	 /s/ MICHAEL W. UPCHURCH

		 		 		 	Name: Michael W. Upchurch
		 		 		 	Title: VP, Chief Financial Officer, & Treasurer
			
	Address for Notices:	 		 	THE KANSAS CITY NORTHERN RAILWAY COMPANY
				
	 427 West
12th Street

Kansas City, Missouri 64105
	 		 		 	
				
		 		 	By  	 	 /s/ MICHAEL W. UPCHURCH

		 		 		 	Name: Michael W. Upchurch
		 		 		 	Title: VP & Chief Financial Officer
			
	Address for Notices:	 		 	KCS HOLDINGS I, INC.
			
	 427 West
12th Street

Kansas City, Missouri 64105
	 		 	
				
		 		 	By  	 	 /s/ MICHAEL W. UPCHURCH

		 		 		 	Name: Michael W. Upchurch
		 		 		 	Title: VP & Chief Financial Officer
			
	Address for Notices:	 		 	KCS VENTURES I, INC.
			
	 427 West
12th Street

Kansas City, Missouri 64105
	 		 	
				
		 		 	By  	 	 /s/ MICHAEL W. UPCHURCH

		 		 		 	Name: Michael W. Upchurch
		 		 		 	Title: VP & Chief Financial Officer

  
 2 

 
			
	THE BANK OF NOVA SCOTIA,
		 	    As Collateral Agent
		
	By  	 	 /s/ CHRISTOPHER USAS

		 	Name: Christopher Usas
		 	Title: Director

  
 Amended and
Restated KCSR Security Agreement 

 Exhibit A to the 
 Security Agreement 
 FORM OF SECURITY AGREEMENT SUPPLEMENT

 [Date of Security Agreement Supplement] 
 The Bank of Nova Scotia, 
 as the Collateral Agent for the 

Secured Parties referred to in the 
 Credit
Agreement referred to below 

[                    ] 

Attn:                      

[Name of Borrower] 

Ladies and Gentlemen: 

Reference is made to (i) the Amended and Restated Credit Agreement dated as of
[            ], 2011 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Kansas City
Southern Railway Company, a Missouri corporation, as the Borrower, the Lender Parties party thereto, The Bank of Nova Scotia, as collateral agent (together with any successor collateral agent appointed pursuant to Article VII of the Credit
Agreement, the “Collateral Agent”), and The Bank of Nova Scotia, as administrative agent for the Lender Parties, and (ii) the Amended and Restated Security Agreement dated
[            ], 2011 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) made by the Grantors
from time to time party thereto in favor of the Collateral Agent for the Secured Parties. Terms defined in the Credit Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement or the
Security Agreement. 
 SECTION 1. Grant of Security. The undersigned hereby grants to the Collateral Agent, for the
ratable benefit of the Secured Parties, a security interest in, all of its right, title and interest in and to all of the Collateral of the undersigned, whether now owned or hereafter acquired by the undersigned, wherever located and whether now or
hereafter existing or arising, including, without limitation, the property and assets of the undersigned set forth on the attached supplemental schedules to the Schedules to the Security Agreement. 

SECTION 2. Security for Obligations. The grant of a security interest in, the Collateral by the undersigned under this
Security Agreement Supplement and the Security Agreement secures the payment of all Obligations of the undersigned now or hereafter existing under or in respect of the Loan Documents, whether direct or indirect, absolute or contingent, and whether
for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise. 
 SECTION 3. Supplements to Security Agreement Schedules. The undersigned has attached hereto supplemental Schedules I through X to Schedules I through X, respectively, to the Security
Agreement, and the undersigned hereby certifies, as of the date first above written, that such supplemental schedules have been prepared by the undersigned in substantially the form of the equivalent Schedules to the Security Agreement and are
complete and correct. 

  
 Amended and
Restated KCSR Security Agreement 

 SECTION 4. Representations and Warranties. The undersigned hereby makes each
representation and warranty set forth in Section 8 of the Security Agreement (as supplemented by the attached supplemental schedules) to the same extent as each other Grantor. 

SECTION 5. Obligations Under the Security Agreement. The undersigned hereby agrees, as of the date first above written, to be
bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as each of the other Grantors. The undersigned further agrees, as of the date first above written, that each reference in the Security Agreement to an
“Additional Grantor” or a “Grantor” shall also mean and be a reference to the undersigned. 

SECTION 6. Governing Law. This Security Agreement Supplement shall be governed by, and construed in accordance with, the laws
of the State of New York. 
  

			
	Very truly yours,
	
	[NAME OF ADDITIONAL GRANTOR]
		
	By	 	  

		 	Title:
		
		 	         Address for notices:
                                  
                               
                                  
                               
                                  
                               

  
 Amended and
Restated KCSR Security Agreement 

 Exhibit B to the 
 Security Agreement 
 FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

 This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “IP Security Agreement”) dated [            ], 2011, is made by the Persons listed on the signature pages hereof (collectively, the
“Grantors”) in favor of THE BANK OF NOVA SCOTIA, as collateral agent (together with any successor collateral agent appointed pursuant to Article VII of the Credit Agreement, the “Collateral
Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below). 
 WHEREAS, Kansas City
Southern Railway Company, a Missouri corporation, as the Borrower, has entered into an Amended and Restated Credit Agreement dated as of [            ], 2011 (said Agreement, as it
may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the “Credit Agreement”; terms defined in the Credit Agreement and the Security Agreement not otherwise defined in
this Agreement are used in this Agreement as defined in the Credit Agreement and the Security Agreement, as applicable) with the Parent, the Lender Parties, Bank of America, the Lead Arrangers and the Agents (each as defined therein). 

WHEREAS, as a condition precedent to the making of Advances by the Lenders and the issuance of Letters of Credit by the Issuing Banks
under the Credit Agreement from time to time, each Grantor has executed and delivered that certain Amended and Restated Security Agreement dated [            ], 2011 made by the
Grantors to the Collateral Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”). 
 WHEREAS, under the terms of the Security Agreement, the Grantors have granted to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in, among other property, certain
intellectual property of the Grantors, and have agreed as a condition thereof to execute this IP Security Agreement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and other governmental authorities.

 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each
Grantor agrees as follows: 
 SECTION 1. Grant of Security. Each Grantor hereby grants to the Collateral Agent for
the ratable benefit of the Secured Parties a security interest in such Grantor’s right, title and interest in and to the following (collectively, the “Collateral”): 

(i) all patents, patent applications, utility models and statutory invention registrations, together with all inventions claimed or
disclosed therein, and all improvements thereto, including the patents and patent applications set forth in Schedule A hereto (the “Patents”); 
 (ii) all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source identifiers, whether registered or unregistered,
including the trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no security interest shall be granted in any United States intent-to-use trademark application for registration of a trademark
filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, prior to the filing of a “Statement of Use” pursuant to Section 1(d) of the Lanham Act or an “Amendment to Allege Use” pursuant to
Section 1(c) of the Lanham Act with respect thereto), together, in each case, with the goodwill symbolized thereby (the “Trademarks”); 

 (iii) all copyrights (whether or not the underlying works of authorship have been
published), including, without limitation, copyrights in Computer Software (as defined in the Security Agreement), internet web sites and the content thereof, whether registered or unregistered, including, without limitation, the copyright
registrations and applications and exclusive copyright licenses set forth in Schedule C hereto (the “Copyrights”); 
 (iv) all registrations and applications for registration for any of the foregoing, including, without limitation, those registrations and applications for registration set forth in Schedules A, B and C
hereto, together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto; 

(v) any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and 
 (vi) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral.

 SECTION 2. Security for Obligations. The grant of a security interest in, the Collateral by each Grantor under
this IP Security Agreement secures the payment of all Obligations of such Grantor now or hereafter existing under the Loan Documents, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest,
fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise (all such Obligations being the “Secured Obligations”). Without limiting the generality of the foregoing, this IP Security
Agreement secures, as to each Grantor, the payment of all amounts that constitute part of the Secured Obligations and would be owed by such Grantor to any Secured Party under the Loan Documents but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Obligor. 
 SECTION 3.
Recordation. Each Grantor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer record this IP Security Agreement. 

SECTION 4. Execution in Counterparts. This IP Security Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 

SECTION 5. Grants, Rights and Remedies. This IP Security Agreement has been entered into in conjunction with the provisions
of the Security Agreement. Each Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Collateral Agent with respect to the Collateral are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein. 

  
 2 

 SECTION 6. Governing Law. This IP Security Agreement and the other loan
documents, unless otherwise specified, shall be governed by the laws of the state of New York, without giving effect to any conflict of law principles (but giving effect to section 5-1401 of the New York General Obligation Law and federal laws
relating to national banks). 
 [Signatures pages to follow] 

  
 3 

 IN WITNESS WHEREOF, each Grantor has caused this IP Security Agreement to be duly executed
and delivered by its officer thereunto duly authorized as of the date first above written. 
  

			
	[NAME OF BORROWER]
		
	By	 	  

		 	Name:
		 	Title:
	
	Address for Notices:
	  

	  

	  

	
	[NAME OF GRANTOR]
		
	By	 	  

		 	Name:
		 	Title:
	
	Address for Notices:
	  

	  

	  

	
	[NAME OF GRANTOR]
		
	By	 	  

		 	Name:
		 	Title:
	
	Address for Notices:
	  

	  

	  

  
 4 

 Exhibit C to the 
 Security Agreement 
 FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
SUPPLEMENT 
 This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “IP Security Agreement”) dated [        ], 20[    ]11, is made by the Persons listed on the signature pages hereof
(collectively, the “Grantors”) in favor of THE BANK OF NOVA SCOTIA, as collateral agent (the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

 WHEREAS, Kansas City Southern Railway Company, a Missouri corporation, as the Borrower, has entered into an Amended and
Restated Credit Agreement dated as of [            ], 2011 (said Agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to
time, being the “Credit Agreement”; terms defined in the Credit Agreement and the Security Agreement not otherwise defined in this Agreement are used in this Agreement as defined in the Credit Agreement and the Security
Agreement, as applicable) with the Parent, the Lender Parties, Bank of America, the Lead Arrangers and the Agents (each as defined therein). 
 WHEREAS, pursuant to the Credit Agreement, each Grantor has executed and delivered that certain Amended and Restated Security Agreement dated
[            ], 2011 made by the Grantors to the Collateral Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security
Agreement”) and that certain Intellectual Property Security Agreement dated [            ], 2011 (as amended, amended and restated, supplemented or otherwise modified
from time to time, the “IP Security Agreement”). 
 WHEREAS, under the terms of the Security Agreement,
each Grantor has granted to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in the Additional Collateral (as defined in Section 1 below) of the Grantor and has agreed as a condition thereof to execute
this IP Security Agreement Supplement for recording with the U.S. Patent and Trademark Office, the United States Copyright Office and other governmental authorities. 
 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as follows: 

SECTION 1. Grant of Security. Each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured
Parties, a security interest in all of such Grantor’s right, title and interest in and to the following (the “Additional Collateral”): 

(i) all patents, patent applications, utility models and statutory invention registrations, together with all inventions
claimed or disclosed therein, and all improvements thereto, including the patents and patent applications set forth in Schedule A hereto (the “Patents”); 

(ii) all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names,
corporate names, certification marks, collective marks, and other source identifiers, whether registered or unregistered, including the trademark and service mark registrations and applications set forth in Schedule B hereto (provided that no
security interest shall be granted in any United States intent-to-use trademark application for registration of a trademark filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, prior to the

  
 Memorandum
of Amended and 
 Restated Security Agreement 

 
filing of a “Statement of Use” pursuant to Section 1(d) of the Lanham Act or an “Amendment to Allege Use” pursuant to Section 1(c) of the Lanham Act with respect
thereto), together, in each case, with the goodwill symbolized thereby (the “Trademarks”); 
 (iii) all copyrights (whether or not the underlying works of authorship have been published), including, without limitation, copyrights in Computer Software (as defined in the Security Agreement),
internet web sites and the content thereof, whether registered or unregistered , including, without limitation, the copyright registrations and applications and exclusive copyright licenses set forth in Schedule C hereto (the
“Copyrights”); 
 (iv) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such
Grantor accruing thereunder or pertaining thereto; 
 (v) all any and all claims for damages and injunctive
relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

 (vi) any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and
payable with respect to, and supporting obligations relating to, any and all of the foregoing or arising from any of the foregoing. 
 SECTION 2. Security for Obligations. The grant of a security interest in the Additional Collateral by the Grantor under this IP Security Agreement Supplement secures the payment of all
Obligations of the Grantor now or hereafter existing under or in respect of the Loan Documents, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise. 
 SECTION 3. Recordation. The Grantor
authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable government officer to record this IP Security Agreement Supplement. 

SECTION 4. Grants, Rights and Remedies. This IP Security Agreement Supplement has been entered into in conjunction with the
provisions of the Security Agreement. The Grantor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, the Collateral Agent with respect to the Additional Collateral are more fully
set forth in the Security Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein. 
 SECTION 5. Governing Law. This IP Security Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York. 

  
 Memorandum
of Amended and 
 Restated Security Agreement 

 IN WITNESS WHEREOF, the Grantor has caused this IP Security Agreement Supplement to be duly
executed and delivered by its officer thereunto duly authorized as of the date first above written. 
  

					
	By	 	  

		 	          Name:
		 	          Title:
	
	Address for Notices:
	  

	  

	  

  
 Memorandum
of Amended and 
 Restated Security Agreement 

 Exhibit D to the 
 Security Agreement 
 FORM OF MEMORANDUM OF 

AMENDED AND RESTATED SECURITY AGREEMENT 
 MEMORANDUM OF AMENDED AND RESTATED SECURITY AGREEMENT, dated as of July 12, 2011, among The Kansas City Southern Railway Company, a Missouri corporation (the “Borrower”),
Kansas City Southern (the “Parent”), the other Persons listed on the signature pages hereof, (the Borrower and the Persons so listed on the signature pages hereof being, collectively, the “Grantors”),
and The Bank of Nova Scotia, as collateral agent (in such capacity, together with any successor collateral agent appointed pursuant to Article VII of the Credit Agreement (as hereinafter defined), the “Collateral Agent”)
for the Secured Parties (as defined in the Credit Agreement) (the Grantors and Collateral Agent hereinafter together referred to as the “Parties”). 
 KNOW ALL PERSONS BY THESE PRESENTS THAT: 
 WHEREAS, the Parties did enter
into (i) that certain Amended and Restated Credit Agreement dated as of July 12, 2011 (said agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the “Credit
Agreement”) with the Parent, the Lender Parties, Bank of America, the Lead Arrangers and the Agents (each as defined therein) and (ii) that certain Amended and Restated Security Agreement, dated as of July 12, 2011, among the
Parties, the Secured Parties and the Collateral Agent (said agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the “Security Agreement”; capitalized
terms used herein and not otherwise defined shall have the meanings given such terms in the Security Agreement), whereby the Grantors have assigned, conveyed, mortgaged, pledged, hypothecated, transferred and set over to the Collateral Agent, for
the ratable benefit of the Secured Parties, a first priority Lien on and security interest in all of the Grantors’ right, title and interest now held or hereafter acquired in and to the following (collectively, the “Rolling Stock
Collateral”): 
 (a) all gondolas, boxcars, tankers, locomotives and railcars of any type
(collectively “Rolling Stock”) (other than any Rolling Stock subject to a purchase-money security interest as of the date hereof and any Rolling Stock acquired after the Effective Date that is subject to a purchase-money
security interest within 270 days of acquisition or, if such Rolling Stock is purchased in installments, within 270 days of the final purchased installment) including (without limitation) as listed on Schedule A, which is attached hereto;

 (b) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable
with respect to, and supporting obligations relating to, any and all of the Rolling Stock Collateral and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Rolling Stock Collateral. 
 WHEREAS, the Parties find it desirable to place of record the existence of the Security Agreement in the public files maintained by the Surface Transportation Board under the provisions of Title 49 of the
United States Code. 
 NOW THEREFORE, this Memorandum of Amended and Restated Security Agreement is entered into by the Parties
for the purpose of placing of record the existence of the aforesaid Security Agreement. 

  
 Memorandum
of Amended and 
 Restated Security Agreement 

 [Signature Page Follows.] 

  
 Memorandum
of Amended and 
 Restated Security Agreement 

 IN WITNESS WHEREOF, the Parties have each caused this Memorandum of Amended and Restated
Security Agreement to be duly executed by their duly authorized respective officers as of the day and year first above written. 
  

			
	THE KANSAS CITY SOUTHERN RAILWAY COMPANY
	(Borrower)
		
	By:	 	  

		 	Name:
		 	Title:
	
	KANSAS CITY SOUTHERN
	(Parent)
		
	By:	 	  

		 	Name:
		 	Title:
	
	[                    ]
	(Grantor)
		
	By:	 	  

		 	Name:
		 	Title:

  
 Memorandum
of Amended and 
 Restated Security Agreement 

			
	THE BANK OF NOVA SCOTIA
	(Collateral Agent)
		
	By:	 	  

		 	Name:
		 	Title:

  
 Memorandum
of Amended and 
 Restated Security Agreement 

			
	STATE OF [—]	  	)
		  	) SS
	COUNTY OF [—]	  	)

 On this
                     of             , 20    ,
before me personally appeared in the City of [—], State of [—]
                            , to me personally known, who being by me duly sworn, says that he is the
                             of THE KANSAS CITY SOUTHERN RAILWAY COMPANY, that the foregoing
instrument was signed and sealed on behalf of said corporation and, as attorney-in-fact on behalf of said corporation by authority of said corporation’s Board of Directors, and
             acknowledged that the execution of the foregoing instrument was the free act and deed of said corporation. 

 

	
	  

	Notary Public

 [NOTARIAL SEAL] 
 My commission expires:                      

  
 Memorandum
of Amended and 
 Restated Security Agreement 

			
	STATE OF [—]	  	)
		  	) SS
	COUNTY OF [—]	  	)

 On this
                     of             , 20    ,
before me personally appeared in the City of [—], State of [—]
                            , to me personally known, who being by me duly sworn, says that he is the
                             of THE KANSAS CITY SOUTHERN, that the foregoing instrument was signed and
sealed on behalf of said corporation and, as attorney-in-fact on behalf of said corporation by authority of said corporation’s Board of Directors, and              acknowledged
that the execution of the foregoing instrument was the free act and deed of said corporation. 
  

	
	  

	Notary Public

 [NOTARIAL SEAL] 
 My commission expires:                      

  
 Memorandum
of Amended and 
 Restated Security Agreement 

			
	STATE OF [—]	  	)
		  	) SS
	COUNTY OF [—]	  	)

 On this
                     of             , 20    ,
before me personally appeared in the City of [—], State of [—]
                            , to me personally known, who being by me duly sworn, says that he is the
                             of [Grantors to be listed], that the foregoing instrument was
signed and sealed on behalf of said corporation and, as attorney-in-fact on behalf of said corporation by authority of said corporation’s Board of Directors, and             
acknowledged that the execution of the foregoing instrument was the free act and deed of said corporation. 
  

	
	  

	Notary Public

 [NOTARIAL SEAL] 
 My commission expires:                      

  
 Memorandum
of Amended and 
 Restated Security Agreement 

			
	STATE OF [—]	  	)
		  	) SS
	COUNTY OF [—]	  	)

 On this
                     of             , 20    ,
before me personally appeared in the City of [—], State of [—]
                            , to me personally known, who being by me duly sworn, says that he is the
                             of THE BANK OF NOVA SCOTIA, that the foregoing instrument was signed and
sealed on behalf of said corporation and, as attorney-in-fact on behalf of said corporation by authority of said corporation’s Board of Directors, and              acknowledged
that the execution of the foregoing instrument was the free act and deed of said corporation. 
  

	
	  

	Notary Public

 [NOTARIAL SEAL] 
 My commission expires:                      

  
 Memorandum
of Amended and 
 Restated Security Agreement 

 SCHEDULE A 

  
 Memorandum
of Amended and 
 Restated Security Agreementf8k070811ex10i_dcbrands.htm

Exhibit 10.1

 

EQUITY PURCHASE AGREEMENT

BY AND BETWEEN

DC BRANDS INTERNATIONAL, INC.

AND

SOUTHRIDGE PARTNERS II, LP

Dated

July 08, 2011

 

  

1

  

 

THIS EQUITY PURCHASE AGREEMENT entered into as of the 8th day of July, 2011 (this "AGREEMENT"), by and between SOUTHRIDGE PARTNERS II, LP, Delaware limited partnership ("INVESTOR"), and DC BRANDS INTERNATIONAL, INC.,

a Colorado corporation (the "COMPANY").

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to Investor, from time to time as provided herein, and Investor shall purchase, up to Ten Million Dollars ($10,000,000) of its Common Stock (as defined below); and

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

 

Section 1.1  DEFINED TERMS as used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined)

"AGREEMENT" shall have the meaning specified in the preamble hereof.

"BLACKOUT NOTICE" shall mean a written notice from the Company to the Investor with respect to the existence of a Potential Blackout Event.

“BLACKOUT PERIOD" shall have the meaning specified in Section 2.6

“BLACKOUT SHARES" shall have the meaning specified in Section 2.6

"BY-LAWS" shall have the meaning specified in Section 4.8.

"CERTIFICATE" shall have the meaning specified in Section 4.8.

"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).

"CLOSING" shall mean one of the closings of a purchase and sale of shares of Common Stock pursuant to Section 2.3.

"CLOSING CERTIFICATE" shall mean the closing certificate of the Company in the form of Exhibit C hereto.

 

"CLOSING DATE" shall mean, with respect to a Closing, the sixth (6th) Trading Day following the Put Date related to such Closing, or such earlier date as the Company and Investor shall agree, provided all conditions to such Closing have been satisfied on or before such Trading Day.

 

  

2

  

 

“CLOSING PRICE” shall mean the closing bid price for the Company’s common stock on the Principal Market on a Trading Day as reported by Bloomberg Finance L.P.

 

"COMMITMENT PERIOD" shall mean the period commencing on the Effective Date, and ending on the earlier of (i) the date on which Investor shall have purchased Put Shares pursuant to this Agreement for an aggregate Purchase Price of the Maximum Commitment Amount, or (ii) the date occurring twenty four (24) months from the date of commencement of the Commitment Period.

 

"COMMON STOCK" shall mean the Company's common stock, $0.001 par value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company).

 

"COMMON STOCK EQUIVALENTS" shall mean any securities that are convertible into or exchangeable for Common Stock or any options or other rights to subscribe for or purchase Common Stock or any such convertible or exchangeable securities.

 

"COMPANY" shall have the meaning specified in the preamble to this Agreement.

"CONDITION SATISFACTION DATE" shall have the meaning specified in Section 7.2.

 

"DAMAGES" shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys' fees and disbursements and costs and expenses of expert witnesses and investigation).

"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).

“DOLLAR VOLUME” shall mean the product of (a) the Closing Price multiplied by (b) the trading volume on the Principal Market on a Trading Day.

"DTC" shall have the meaning specified in Section 2.3.

"DWAC" shall have the meaning specified in Section 2.3.

 

"EFFECTIVE DATE" shall mean the date on which the SEC first declares effective a Registration Statement, or any amendment thereof, registering the Registrable Securities as set forth in Section 7.2(a).

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

 

  

3

  

 

"FAST" shall have the meaning specified in Section 2.3.

"FINRA" shall mean the Financial Industry Regulatory Authority, Inc.

“FLOOR PRICE” shall have the meaning specified in Section 2.2 (c).

"INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).

"INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).

"INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).

 

"INVESTMENT AMOUNT" shall mean the dollar amount to be invested by Investor to purchase Put Shares with respect to any Put as notified by the Company to Investor in accordance with Section 2.2.

"INVESTOR" shall have the meaning specified in the preamble to this Agreement.

"LEGEND" shall have the meaning specified in Section 8.1.

"MARKET PRICE" shall mean the average of the lowest two (2) Closing Prices during the Valuation Period.

 

"MATERIAL ADVERSE EFFECT" shall mean any effect on the business, operations, properties, or financial condition of the Company that is material and adverse to the Company and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under any of (a) this Agreement and (b) the Registration Rights Agreement.

"MAXIMUM COMMITMENT AMOUNT" shall mean Ten Million Dollars ($10,000,000).

“MAXIMUM PUT AMOUNT” shall be Five Hundred Thousand Dollars ($500,000),.

"NEW PRICE" shall have the meaning specified in Section 2.6.

"OLD PRICE" shall have the meaning specified in Section 2.6.

  

4

  

 

"PERSON" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

"POTENTIAL BLACKOUT EVENT" shall mean any of the following: (a) the possession by the Company of material information ripe for disclosure in a Registration Statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the Registration Statement is required,, (b) receipt by the Company of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (c) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (d) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (e) the happening of any event that, in the good faith determination of the Board of Directors of the Company, makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any amendment or supplement in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

"PRINCIPAL MARKET" shall mean any of the national exchanges (i.e. NYSE, AMEX, Nasdaq), the OTC Bulletin Board, or other principal exchange which is at the time the principal trading exchange or market for the Common Stock.

"PURCHASE PRICE" shall mean 92% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of this Agreement.

"PUT" shall mean the right of the Company to require the Investor to purchase shares of Common Stock, subject to the terms and conditions of this Agreement.

"PUT DATE" shall mean any Trading Day during the Commitment Period that a Put Notice is deemed delivered pursuant to Section 2.2(b).

"PUT NOTICE" shall mean a written notice, substantially in the form of Exhibit B hereto, to Investor setting forth the Investment Amount with respect to which the Company intends to require Investor to purchase shares of Common Stock pursuant to the terms of this Agreement.

 

  

5

  

 

"PUT SHARES" shall mean all shares of Common Stock issued or issuable pursuant to a Put that has been exercised or may be exercised in accordance with the terms and conditions of this Agreement.

 

"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b) the Blackout Shares, and (c) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) a Registration Statement has been declared effective by the SEC and such Registrable Securities have been disposed of pursuant to a Registration Statement, (ii) such Registrable Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 are met, (iii) such time as such Registrable Securities have been otherwise transferred to holders who may trade such shares without restriction under the Securities Act or (iv) in the opinion of counsel to the Company, which counsel shall be reasonably acceptable to Investor, such Registrable Securities may be sold without registration under the Securities Act or the need for an exemption from any such registration requirements and without any time, volume or manner limitations pursuant to Rule 144(b)(i) (or any similar provision then in effect) under the Securities Act.

"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights agreement in the form of Exhibit A hereto.

 

"REGISTRATION STATEMENT" shall mean a registration statement on such form promulgated by the SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate and which form shall be available for the resale of the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and the Registration Rights Agreement and in accordance with the intended method of distribution of such securities, for the registration of the resale by Investor of the Registrable Securities under the Securities Act.

"REGULATION D" shall mean Regulation D promulgated under the Securities Act.

"REMAINING PUT SHARES" shall have the meaning specified in Section 2.6.

"RULE 144" shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.

"SEC" shall mean the Securities and Exchange Commission.

"SECURITIES ACT" shall have the meaning specified in the recitals of this Agreement.

 

  

6

  

 

"SEC DOCUMENTS" shall mean, as of a particular date, all reports and other documents filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the Company's then most recently completed and reported fiscal year as of the time in question (provided that if the date in question is within ninety days of the beginning of the Company's fiscal year, the term shall include all documents filed since the beginning of the preceding fiscal year).

 

“SHORT SALES” shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

"SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed and delivered by the Company and Investor.

"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).

“TRADING DAY” shall mean a day on which the Principal Market shall be open for business.

“TRANSACTION DOCUMENTS” shall mean this Equity Credit Agreement and the Registration Rights Agreement.

 

"TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and to any substitute or replacement transfer agent for the Common Stock upon the Company's appointment of any such substitute or replacement transfer agent).

"UNDERWRITER" shall mean any underwriter participating in any disposition of the Registrable Securities on behalf of Investor pursuant to a Registration Statement.

 

"VALUATION EVENT" shall mean an event in which the Company at any time during a Valuation Period takes any of the following actions:

(a)           subdivides or combines the Common Stock;

 

(b)           pays a dividend in shares of Common Stock or makes any other distribution of shares of Common Stock, except for dividends paid with respect to any series of preferred stock authorized by the Company, whether existing now or in the future;

 

(c)           issues any options or other rights to subscribe for or purchase shares of Common Stock other than pursuant to this Agreement and the price per share for which shares of Common Stock may at any time thereafter be issuable pursuant to such options or other rights shall be less than the Closing Price in effect immediately prior to such issuance;

 

  

7

  

 

(d)           issues any securities convertible into or exchangeable for shares of Common Stock and the consideration per share for which shares of Common Stock may at any time thereafter be issuable pursuant to the terms of such convertible or exchangeable securities shall be less than the Closing Price  in effect immediately prior to such issuance;

 

(e)           issues shares of Common Stock otherwise than as provided in the foregoing subsections (a) through (d), at a price per share less, or for other consideration lower, than the Closing Price in effect immediately prior to such issuance, or without consideration; or

 

(f)           makes a distribution of its assets or evidences of indebtedness to the holders of Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company's assets (other than under the circumstances provided for in the foregoing subsections (a) through (e).

 

"VALUATION PERIOD" shall mean the period of five (5) Trading Days immediately following the date on which the applicable Put Notice is deemed to be delivered and during which the Purchase Price of the Common Stock is valued; provided, however, that if a Valuation Event occurs during any Valuation Period, a new Valuation Period shall begin on the Trading Day immediately after the occurrence of such Valuation Event and end on the fifth (5th) Trading Day thereafter.

 

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

Section 2.1  INVESTMENTS.

 

(a)           PUTS.  Upon the terms and conditions set forth herein (including, without limitation, the provisions of Article VII), on any Put Date the Company may exercise a Put by the delivery of a Put Notice. The number of Put Shares that Investor shall purchase pursuant to such Put shall be determined by dividing the Investment Amount specified in the Put Notice by the Purchase Price with respect to such Put Notice.

 

Section 2.2  MECHANICS.

 

(a)           PUT NOTICE. At any time and from time to time during the Commitment Period, the Company may deliver a Put Notice to Investor, subject to the conditions set forth in Section 7.2; provided, however, that the Investment Amount identified in the applicable Put Notice shall not be greater than the Maximum Put Amount and, when taken together with any prior Put Notices, shall not exceed the Maximum Commitment.

 

  

8

  

 

(b)           DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the Trading Day it is received by facsimile or otherwise by Investor if such notice is received on or prior to 12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 12:00 noon New York time on a Trading Day or at anytime on a day which is not a Trading Day.

 

(c)           FLOOR PRICE.  In the event that, during a Valuation Period the Closing Price on any Trading Day is more than twenty five percent (25%) below the average of the five (5) most recent Closing Prices prior to the Put Date (a “Floor Price”), then for each such Trading Day the parties shall be under no obligation to purchase and sell one-fifth (1/5th) of the Investment Amount specified in the Put Notice, and the Investment Amount shall accordingly be deemed reduced by such amount.  In the event that during a Valuation Period the Closing Price is below the Floor Price for any two (2) Trading Days—not necessarily consecutive—then the balance of each party’s obligation to purchase and sell the Investment Amount under such Put Notice shall terminate on such second Trading Day (“Termination Day”), and the Investment Amount shall be adjusted to include only one-fifth (1/5th) of the initial Investment Amount for each Trading Day during the Valuation Period prior to the Termination Day that the Closing Price equals or exceeds the Floor Price.

 

Section 2.3  CLOSINGS. On or prior to each Closing Date for any Put, (a) the Company shall deliver to the Investor one or more certificates, at Investor's option, representing the Put Shares purchased by Investor pursuant to Section 2.1 herein, registered in the name of Investor and (b) Investor shall deliver the Investment Amount specified in the Put Notice by wire transfer of immediately available funds to an account designated by the Company within twenty four (24) hours of receipt of the Put Shares. In lieu of delivering physical certificates representing the Common Stock issuable in accordance with clause (a) of this Section 2.3, and provided that the Transfer Agent then is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of Investor, but subject to the applicable provisions of Article VIII hereof, the Company shall use its commercially reasonable efforts to cause the Transfer Agent to electronically transmit, prior to the applicable Closing Date, the applicable Put Shares by crediting the account of the Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system, and provide proof satisfactory to the Investor of such delivery.  In addition, on or prior to such Closing Date, each of the Company and Investor shall deliver to each other all documents, instruments and writings required to be delivered or reasonably requested by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.

 

  

9

  

 

Section 2.4  COVER.  If the Company fails for any reason to take or cause to be taken all steps necessary on the part of the Company to deliver the Put Shares on such Closing Date and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock (the "Covering Shares") in order to make delivery in satisfaction of a sale of Common Stock by the Investor (the "Sold Shares"), which delivery the Investor anticipated to make using the Put Shares (a "Buy-In"), then the Company shall pay to such Investor, in addition to all other amounts contemplated in other provisions of the Transaction Documents, and not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x) such Investor’s total purchase price (including brokerage commissions, if any) for the Covering Shares over (y) the net proceeds (after brokerage commissions, if any) received by such Investor from the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to such Investor in immediately available funds immediately upon demand by such Investor. By way of illustration and not in limitation of the foregoing, if such Investor purchases Covering Shares having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock that it sold for net proceeds of $10,000, the Buy-In Adjustment Amount that the Company will be required to pay to such Investor will be $1,000.

Section 2.5  [INTENTIONALLY OMITTED]

 

Section 2.6  BLACKOUT SHARES.

 

(a)           If at any time or from time to time after the date of effectiveness of the Registration Statement, the Company delivers a Blackout Notice to the Investor, the Investor shall not offer or sell any Put Shares, or Blackout Shares (as defined below), or engage in any other transaction involving or relating to such shares, from the time of the Blackout Notice until Investor receives written notice from the Company that such Potential Blackout Event either has been disclosed to the public or no longer constitutes a Potential Blackout Event (such period, a "Blackout Period").

 

(b)           In the event that, (i) within fifteen (15) Trading Days following any Closing Date, the Company delivers a Blackout Notice to Investor, and (ii) the Closing Price on the Trading Day immediately preceding the applicable Blackout Period ("OLD PRICE") is greater than the Closing Price on the first Trading Day following such Blackout Period that Investor may sell its Registrable Securities pursuant to an effective Registration Statement ("NEW PRICE"), then the Company shall issue to Investor the number of additional shares of Registrable Securities (the "BLACKOUT SHARES") equal to the excess of (x) the product of the number of Put Shares held by Investor immediately prior to the Blackout Period that were issued on the most recent Closing Date (the "REMAINING PUT SHARES") multiplied by the Old Price, divided by the New Price, over (y) the Remaining Put Shares.

Section 2.7  [INTENTIONALLY OMITTED]

 

Section 2.8  LIQUIDATED DAMAGES. Each of the Company and Investor acknowledge and agree that the requirement to issue Blackout Shares under Section 2.6 shall give rise to liquidated damages and not penalties. Each of the Company and Investor further acknowledge that (a) the amount of loss or damages likely to be incurred is incapable or is difficult to precisely estimate, (b) the amount specified in such Section bears a reasonable proportion and is not plainly or grossly disproportionate to the probable loss likely to be incurred by Investor in connection with a Blackout Period, and (c) each of the Company and Investor are sophisticated business parties and have been represented by sophisticated and able legal and financial counsel and negotiated this Agreement at arm's length.

 

  

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF INVESTOR

Investor represents and warrants to the Company that:

 

Section 3.1  INTENT. Investor is entering into this Agreement for its own account and Investor has no present arrangement (whether or not legally binding) at any time to sell the Registrable Securities to or through any person or entity; provided, however, that Investor reserves the right to dispose of the Registrable Securities at any time in accordance with federal and state securities laws applicable to such disposition.

 

Section 3.2  NO LEGAL ADVICE FROM THE COMPANY.  The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors.  The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.

 

Section 3.3  SOPHISTICATED INVESTOR. Investor is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule 501 of Regulation D), and Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Registrable Securities. Investor acknowledges that an investment in the Registrable Securities is speculative and involves a high degree of risk.

 

Section 3.4  AUTHORITY. (a) Investor has the requisite power and authority to enter into and perform its obligations under this Agreement and the transactions contemplated hereby in accordance with its terms; (b) the execution and delivery of this Agreement and the Registration Rights Agreement, and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization of Investor or its partners is required; and (c) each of this Agreement and the Registration Rights Agreement has been duly authorized and validly executed and delivered by Investor and constitutes a valid and binding obligation of Investor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

 

  

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Section 3.5  NOT AN AFFILIATE. Investor is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company. On the date hereof, Investor owns 5,589,204 shares of the Company’s Common Stock and holds no securities convertible into shares of the Company’s Common Stock.

Section 3.6  ORGANIZATION AND STANDING. Investor is a limited partnership duly organized, validly existing and in good standing under the laws of the Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Investor is duly qualified and in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a material adverse effect on Investor.

 

Section 3.7  ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and any other document or instrument contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, and compliance with the requirements hereof and thereof, will not (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Investor, (b) violate any provision of any indenture, instrument or agreement to which Investor is a party or is subject, or by which Investor or any of its assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by Investor to any third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which Investor is subject or to which any of its assets, operations or management may be subject.

 

Section 3.8  DISCLOSURE; ACCESS TO INFORMATION. Investor had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company.

 

Section 3.9  MANNER OF SALE. At no time was Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising.

 

Section 3.10 FINANCIAL CAPABILITY. Investor presently has the financial capacity and the necessary capital to perform its obligations hereunder.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Investor that, except as disclosed in the SEC Documents:

 

Section 4.1  ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Colorado and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect.

 

  

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Section 4.2  AUTHORITY. (a) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the Registration Rights Agreement and to issue the Put Shares, Restricted Shares and Blackout Shares, if any; (b) the execution and delivery of this Agreement and the Registration Rights Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required; and (c) each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

 

Section 4.3  CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 500,000,000 shares of Common Stock, $0.001 par value per share, of which 365,513,849 shares are outstanding as of the date hereof.

Except as otherwise disclosed in the SEC Documents, there are no outstanding securities which are convertible into shares of Common Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence of some event in the future.

All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable.

 

Section 4.4  COMMON STOCK. The Company is in full compliance with all reporting requirements of the Exchange Act, and the Company has maintained all requirements for the continued listing or quotation of the Common Stock, and such Common Stock is currently listed or quoted on the Principal Market. 

 

  

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Section 4.5  SEC DOCUMENTS. The Company may make available to Investor true and complete copies of the SEC Documents (including, without limitation, proxy information and solicitation materials). To the Company’s knowledge, the Company has not provided to Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

Section 4.6  VALID ISSUANCES. When issued and paid for as herein provided, the Put Shares, the Restricted Shares, and the Blackout Shares, if any, shall be duly and validly issued, fully paid, and non-assessable. Neither the sales of the Put Shares or the Blackout Shares, if any, pursuant to this Agreement or the Registration Rights Agreement, nor the Company's performance of its obligations thereunder,  shall (a) result in the creation or imposition of any liens, charges, claims or other encumbrances upon the Put Shares, Restricted Shares or Blackout Shares, if any, or any of the assets of the Company, or (b) entitle the holders of outstanding shares of Common Stock to preemptive or other rights to subscribe to or acquire the Common Stock or other securities of the Company. The Put Shares, Restricted Shares and Blackout Shares, if any, shall not subject Investor to personal liability, in excess of the subscription price by reason of the ownership thereof.  It being acknowledged that the holders of the Series A and Series B preferred stock do have certain voting and other rights to maintain a certain percentage of common shares upon conversion.

Section 4.7  [INTENTIONALLY OMITTED]

Section 4.8  [INTENTIONALLY OMITTED]

 

  

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Section 4.9  NO CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, including without limitation the issuance of the Put Shares, the Restricted Shares and the Blackout Shares, if any, do not and will not (a) result in a violation of the Certificate or By-Laws or (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party, other than the agreement between the Company and Centurion Private Equity, LLC or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Common Stock in accordance with the terms hereof (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to any Closing, any registration statement that may be filed pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Investor herein.

Section 4.10  NO MATERIAL ADVERSE CHANGE. Since March 31, 2011 no event has occurred that would have a Material Adverse Effect on the Company.

 

Section 4.11  [INTENTIONALLY OMITTED]

Section 4.12  [INTENTIONALLY OMITTED]

Section 4.13  [INTENTIONALLY OMITTED]

 

Section 4.14  LITIGATION AND OTHER PROCEEDINGS. There are no lawsuits or proceedings pending or to the knowledge of the Company threatened, against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect.

 

Section 4.15  DILUTION.  The number of shares of Common Stock issuable as Put Shares may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Commitment Period.  The Company’s executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect.  The board of directors of the Company has concluded in its good faith business judgment that such issuance is in the best interests of the Company.  The Company specifically acknowledges that, subject to Section 2.2(c), its obligation to issue the Put Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.

Section 4.16  [INTENTIONALLY OMITTED]

 

  

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Section 4.17  DIRECTORS AND OFFICERS LIABILITY POLICY. The Company intends to put in place a Directors' and Officers' liability insurance policy upon receipt of what it deems to be sufficient funding.

ARTICLE V

COVENANTS OF INVESTOR

 

Section 5.1  COMPLIANCE WITH LAW; TRADING IN SECURITIES. Investor's trading activities with respect to shares of the Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and the rules and regulations of FINRA and the Principal Market on which the Common Stock is listed or quoted.

 

Section 5.2  SHORT SALES AND CONFIDENTIALITY. Neither Investor nor any affiliate of the Investor acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period from the date hereof to the end of the Commitment Period.  For the purposes hereof, and in accordance with Regulation SHO, the sale after delivery of a Put Notice of such number of shares of Common Stock reasonably expected to be purchased under a Put Notice shall not be deemed a Short Sale.

Other than to other Persons party to this Agreement, Investor has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

ARTICLE VI

COVENANTS OF THE COMPANY

 

Section 6.1  REGISTRATION RIGHTS. The Company shall use its best efforts to cause the Registration Statement to remain in full force and effect and the Company shall comply in all respects with the terms thereof.

 

Section 6.2  RESERVATION OF COMMON STOCK. The Company will, from time to time as needed in advance of a Closing Date, reserve and keep available until the consummation of such Closing, free of preemptive rights sufficient shares of Common Stock for the purpose of enabling the Company to satisfy its obligation to issue the Put Shares to be issued in connection therewith. The number of shares so reserved from time to time, as theretofore increased or reduced as hereinafter provided, may be reduced by the number of shares actually delivered hereunder.

 

Section 6.3  LISTING OF COMMON STOCK.  If the Company applies to have the Common Stock traded on any other Principal Market, it shall include in such application the Put Shares, the Restricted Shares, and the Blackout Shares, if any, and shall take such other action as is necessary or desirable in the reasonable opinion of Investor to cause the Common Stock to be listed on such other Principal Market as promptly as possible. The Company shall use its commercially reasonable efforts to continue the listing and trading of the Common Stock on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the FINRA and the Principal Market.

 

  

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Section 6.4  [INTENTIONALLY OMITTED]

 

Section 6.5  NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify Investor upon the occurrence of any Potential Blackout Event. The Company shall not deliver to Investor any Put Notice during the continuation of any Blackout Period.

Section 6.6  [INTENTIONALLY OMITTED]

Section 6.7  [INTENTIONALLY OMITTED]

Section 6.8  [INTENTIONALLY OMITTED]

 

Section 6.9  CERTAIN AGREEMENTS. The Company covenants and agrees that it will not, without the prior written consent of the Investor, enter into any other equity line of credit agreement with a third party during the Commitment Period having terms and conditions substantially comparable to this Agreement.  For the avoidance of doubt, nothing contained in the Transaction Documents shall restrict, or require the Investor's consent for, any agreement providing for the issuance or distribution of (or the issuance or distribution of) any equity securities pursuant to any agreement or arrangement that is not commonly understood to be an "equity line of credit."

 

ARTICLE VII

CONDITIONS TO DELIVERY OF

PUT NOTICES AND CONDITIONS TO CLOSING

 

Section 7.1  CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell the Put Shares to Investor incident to each Closing is subject to the satisfaction, at or before each such Closing, of each of the conditions set forth below.

(a)           ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of Investor shall be true and correct in all material respects as of the date of this Agreement and as of the date of each such Closing as though made at each such time.

 

(b)           PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Investor at or prior to such Closing.

 

  

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(c)           Principal Market Regulation. The Company shall not issue any Put Shares, Restricted Shares or Blackout Shares, if any, and the Investor shall not have the right to receive any Put Shares, Restricted Shares or Blackout Shares, if the issuance of such shares would exceed the aggregate number of shares of Common Stock which the Company may issue without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “EXCHANGE CAP”), except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount, which such approval the Company will use its best efforts to obtain. Until such approval is obtained, Investor shall not be issued under the Transaction Documents, shares of Common Stock in an amount greater than the Exchange Cap.

 

Section 7.2  CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of the Company to deliver a Put Notice and the obligation of Investor hereunder to acquire and pay for the Put Shares incident to a Closing is subject to the satisfaction, on (i) the date of delivery of such Put Notice and (ii) the applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of the following conditions:

 

(a)           EFFECTIVE REGISTRATION STATEMENT. As set forth in the Registration Rights Agreement, a Registration Statement, and any amendment or supplement thereto, shall have previously become effective for the resale by Investor of the Registrable Securities subject to such Put Notice, and such Registration Statement shall remain effective on each Condition Satisfaction Date and (i) neither the Company nor Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC's concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist.

 

(b)           ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company shall be true and correct in all material respects as of each Condition Satisfaction Date as though made at each such time (except for representations and warranties specifically made as of a particular date) with respect to all periods, and as to all events and circumstances occurring or existing to and including each Condition Satisfaction Date, except for any conditions which have temporarily caused any representations or warranties herein to be incorrect and which have been corrected with no continuing impairment to the Company or Investor.

 

(c)           PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date.

 

  

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(d)           NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by this Agreement.

 

(e)           ADVERSE CHANGES. Since the date of filing of the Company's most recent SEC Document, no event that had or is reasonably likely to have a Material Adverse Effect has occurred.

 

(f)           NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the Principal Market or the FINRA and the Common Stock shall have been approved for listing or quotation on and shall not have been delisted from the Principal Market.

(g)           [INTENTIONALLY OMITTED]

 

(h)           TEN PERCENT LIMITATION. On each Closing Date, the number of Put Shares then to be purchased by Investor shall not exceed the number of such shares that, when aggregated with all other shares of Registrable Securities then owned by Investor beneficially or deemed beneficially owned by Investor, would result in Investor owning more than 9.99% of all of such Common Stock as would be outstanding on such Closing Date, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. For purposes of this Section, in the event that the amount of Common Stock outstanding as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder is greater on a Closing Date than on the date upon which the Put Notice associated with such Closing Date is given, the amount of Common Stock outstanding on such Closing Date shall govern for purposes of determining whether Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement and Blackout Shares, if any, would own more than 9.99% of the Common Stock following such Closing Date.

 

(i)           Principal Market Regulation. The Company shall not issue any Put Shares, Restricted Shares or Blackout Shares, if any, and the Investor shall not have the right to receive any Put Shares, Restricted Shares or Blackout Shares, if the issuance of such shares would exceed the Exchange Cap, except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount, which such approval the Company will use its best efforts to obtain. Until such approval is obtained, Investor shall not be issued under the Transaction Documents, shares of Common Stock in an amount greater than the Exchange Cap.

 

  

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(j)           NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing such Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen (15) Trading Days following the Trading Day on which such Put Notice is deemed delivered).

(k)          SHAREHOLDER VOTE. The issuance of shares of Common Stock with respect to the applicable Closing, if any, shall not violate the shareholder approval requirements of the Principal Market.

 

(l)           NO VALUATION EVENT. No Valuation Event shall have occurred since the Put Date.

 

(m)         OTHER. On each Condition Satisfaction Date, Investor shall have received a certificate in substantially the form and substance of Exhibit C hereto, executed by an executive officer of the Company and to the effect that all the conditions to such Closing shall have been satisfied as at the date of each such certificate.

ARTICLE VIII

LEGENDS

 

Section 8.1  LEGENDS. Until such time as the Registrable Securities have been registered under the Securities Act, as contemplated by the Registration Rights Agreement, and sold in accordance with an effective Registration Statement or otherwise in accordance with another effective registration statement, or until such Registrable Securities can otherwise be sold without restriction, whichever is earlier, each certificate representing Registrable Securities will bear the following legend (the "LEGEND"):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

The Company warrants that it will give its Transfer Agent no instructions inconsistent with the provisions hereof. It is the intent and purpose of such instructions, as provided therein, to require its Transfer Agent to issue to Investor certificates evidencing shares of Common Stock incident to a Closing, free of the Legend; provided that (a) a Registration Statement shall then be effective, (b) Investor confirms to the Transfer Agent and the Company that it has sold or intends to sell such Common Stock to a third party which is not an affiliate of Investor or the Company and Investor agrees to redeliver the certificate representing such shares of Common Stock to the Transfer Agent to add the Legend in the event the Common Stock is not sold, and (c) Investor confirms to the transfer agent and the Company that Investor has complied, or will comply  with the prospectus delivery requirement under the Securities Act.

 

  

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Section 8.2  NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other than the one specified in Section 8.1 has been or shall be placed on the share certificates representing the Registrable Securities.

 

Section 8.3  [INTENTIONALLY OMITTED]

 

Section 8.4  INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall affect in any way Investor's obligations under any agreement to comply with all applicable securities laws upon resale of the Common Stock.

ARTICLE IX

NOTICES; INDEMNIFICATION

 

Section 9.1  NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, facsimile, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, or email as a PDF, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.

 

  

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The addresses for such communications shall be:

 

If to the Company:

 

DC BRANDS INTERNATIONAL, INC.

9500 West 49th Avenue

Suite D-106

Wheat Ridge, CO 80033

Tel:  303 279-3800

Fax: 303 279-6165

Email: bobarmstrong@hardnutrition.com

 

If to Investor:

Southridge Partners II, LP

90 Grove Street

Ridgefield, Connecticut 06877

Tel: 203-431-8300

Fax: 203-431-8301

Email: info@southridgellc.com

 

Either party hereto may from time to time change its address or facsimile number for notices under this Section 9.1 by giving at least ten (10) days' prior written notice of such changed address or facsimile number to the other party hereto.

 

Section 9.2  INDEMNIFICATION.  Each party (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party  along with its officers, directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with the Controlling Persons (as defined in the Registration Rights Agreement) (an “Indemnified Party”) from and against any Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Indemnifying Party contained in this Agreement, as such Damages are incurred, except to the extent such Damages result primarily from Indemnified Party's failure to perform any covenant or agreement contained in this Agreement or Indemnified Party's negligence, recklessness or bad faith in performing its obligations under this Agreement.

 

  

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Section 9.3  METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any Indemnified Party (as defined below) under Section 9.2 shall be asserted and resolved as follows:

 

(a)           In the event any claim or demand in respect of which an Indemnified Party  might seek indemnity under Section 9.2 is asserted against or sought to be collected from such Indemnified Party by a person other than a party hereto or an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim for indemnification that is being asserted under any provision of Section 9.2 against an Indemnifying Party, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party's ability to defend has been prejudiced by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable within the period ending thirty (30) calendar days following receipt by the Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party under Section 9.2 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.

 

(i)           If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full pursuant to Section 9.2). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this clause (i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests; and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and except as provided in the preceding sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified Party may takeover the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right to indemnity under Section 9.2 with respect to such Third Party Claim.

 

  

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(ii)           If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified Party in a reasonable manner and in good faith or will be settled at the discretion of the Indemnified Party(with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability or the amount of its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.

 

(iii)           If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability or the amount of its liability to the Indemnified Party with respect to the Third Party Claim under Section 9.2 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with respect to such Third Party Claim, the amount of Damages specified in the Claim Notice shall be conclusively deemed a liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.

 

  

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(b)          In the event any Indemnified Party should have a claim under Section 9.2 against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under Section 9.2 specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim (an "INDEMNITY NOTICE") with reasonable promptness to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that the Indemnifying Party demonstrates that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim or the amount of the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim or the amount of the claim described in such Indemnity Notice, the amount of Damages specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.

 

(c)          The indemnity provisions contained herein shall be in addition to (i) any cause of action or similar rights of the Indemnified Party against the Indemnifying Party or others, and (ii) any liabilities the Indemnifying Party may be subject to.

ARTICLE X

MISCELLANEOUS

 

Section 10.1  GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to the principles of conflicts of law. Each of the Company and Investor hereby submit to the exclusive jurisdiction of the United States Federal and state courts located in New York with respect to any dispute arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby.

 

Section 10.2  JURY TRIAL WAIVER.  The Company and the Investor hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with the Transaction Documents.

 

  

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Section 10.3  ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Company and Investor and their respective successors. Neither this Agreement nor any rights of Investor or the Company hereunder may be assigned by either party to any other person.

 

Section 10.4  THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the Company and Investor and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

Section 10.5  TERMINATION. The Company may terminate this Agreement at any time by written notice to the Investor. Additionally, this Agreement shall terminate at the end of Commitment Period or as otherwise provided herein (unless extended by the agreement of the Company and Investor); provided, however, that the provisions of Articles V, VI, VIII, and Sections 9.2, 9.3 10.1, 10.2 and 10.4 shall survive the termination of this Agreement for a period of eighteen (18) months.

 

Section 10.6  ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the instruments referenced herein contain the entire understanding of the Company and Investor with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.

 

Section 10.7  FEES AND EXPENSES. Each of the Company and Investor agrees to pay its own expenses in connection with the preparation of this Agreement and performance of its obligations hereunder. The Company shall pay all stamp or other similar taxes and duties levied in connection with issuance of the Put Shares pursuant hereto.

Section 10.8  [INTENTIONALLY OMITTED]

 

Section 10.9  COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto by facsimile transmission or email of a copy of this Agreement bearing the signature of the parties so delivering this Agreement.

 

Section 10.10  SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.

 

  

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Section 10.11  FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

Section 10.12  NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

Section 10.13  EQUITABLE RELIEF. The Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to Investor. The Company therefore agrees that Investor shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

Section 10.14  TITLE AND SUBTITLES. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.

Section 10.15  REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied upon for the determination of the Closing Price for the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg Finance L.P. or any successor thereto. The written mutual consent of Investor and the Company shall be required to employ any other reporting entity.

Section 10.16  PUBLICITY.   The Company and Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other parties with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of Investor without the prior written consent of such Investor, except to the extent required by law. Investor acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.

[SIGNATURES ON FOLLOWING PAGE]

 

  

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[SIGNATURE PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Equity Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

 

	 	 SOUTHRIDGE PARTNERS II, LP	 
	 	 	 	 
	 	By:	 Southridge Advisors LLC	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	 /s/ Stephen Hicks	 
	 	 	 Name:  Stephen Hicks	 
	 	 	 Title: Manager	 
	 	 	 	 
	 	 	 	 
	 	
 DC BRANDS INTERNATIONAL, INC.

	 
	 	 	 	 
	 	By:	 /s/ Robert H. Armstrong	 
	 	 	 Name: Robert H. Armstrong	 
	 	 	 Title: C.F.O.	 
	 	 	 	 
	 	 	 	 

 

  

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EXHIBITS

 

 

	 EXHIBIT A	 Registration Rights Agreement
	 	 
	 EXHIBIT B  	 Put Notice
	 	 
	 EXHIBIT C   	 Closing Certificate
	 	 

 

 

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