Document:

SECURITY AGREEMENT

 

This SECURITY AGREEMENT
(the “Security Agreement”) dated as of March 31, 2013, but made effective as of April 30, 2013, is executed
by and among M LINE HOLDINGS, INC., a Nevada corporation (the “Issuing Borrower”), E.M. TOOL
CO., INC., a California corporation, and PRECISION AEROSPACE AND TECHNOLOGIES, INC., a Nevada corporation (each of the
foregoing, including the Issuing Borrower, hereinafter sometimes individually referred to as a “Debtor”
and all such entities sometimes hereinafter collectively referred to as “Debtors”), with their chief
executive offices located at 2672 Dow Avenue, Tustin, CA 92780, and TCA Global Credit Master Fund, LP (the “Secured
Party”).

 

RECITALS:

 

WHEREAS, Debtors desire
to borrow funds and obtain financial accommodations from Secured Party pursuant to that certain Credit Agreement of even date herewith
among Debtors and Secured Party (the “Credit Agreement”).

 

NOW, THEREFORE, in
consideration of the credit extended now and in the future by Secured Party to the Debtors and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Debtors and Secured Party hereby agree as follows:

 

AGREEMENTS:

 

		1	DEFINITIONS.

 

1.1           Defined
Terms. Capitalized terms used but not otherwise defined in this Security Agreement (including the Recitals) shall have the
meanings ascribed to them in the Credit Agreement. For the purposes of this Security Agreement, the following capitalized words
and phrases shall have the meanings set forth below.

 

(a)          “Capital
Securities” shall mean, with respect to any Person, all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the
date hereof, including common shares, preferred shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership interest.

 

(b)          “Collateral”
shall have the meaning set forth in Section 2.1 hereof.

 

(c)          “Obligor”
shall mean, collectively, each Debtor, or any other party liable with respect to the Obligations.

 

(d)          “Organizational
Identification Number” means, with respect to each Debtor, the organizational identification number assigned to such
Debtor by the applicable governmental unit or agency of the jurisdiction of organization of such Debtor, if any.

 

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(e)          “Taxes”
shall mean any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings, and
any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing.

 

(f)          “Unmatured
Event of Default” shall mean any event which, with the giving of notice, the passage of time or both, would constitute
an Event of Default.

 

1.2           Other
Terms Defined in UCC. All other capitalized words and phrases used herein and not otherwise specifically defined herein or
in the Credit Agreement shall have the respective meanings assigned to such terms in the UCC, to the extent the same are used or
defined therein.

 

1.3           Other
Interpretive Provisions.

 

(a)          The
meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa, and in
particular the word “Debtor” or “Debtors” shall be so construed.

 

(b)          Section
and Schedule references are to this Security Agreement unless otherwise specified. The words “hereof”, “herein”
and “hereunder” and words of similar import when used in this Security Agreement shall refer to this Security Agreement
as a whole and not to any particular provision of this Security Agreement

 

(c)          The
term “including” is not limiting, and means “including, without limitation”.

 

(d)          In
the computation of periods of time from a specified date to a later specified date, the word “from” means “from
and including”; the words “to” and “until” each mean “to but excluding”, and the word
“through” means “to and including”.

 

(e)          Unless
otherwise expressly provided herein: (i) references to agreements (including this Security Agreement and the other Loan Documents)
and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications
thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms
of any Loan Document; and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory
provisions amending, replacing, supplementing or interpreting such statute or regulation.

 

(f)          To
the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Security Agreement, the provisions
of this Security Agreement shall govern.

 

(g)          This
Security Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with
its terms.

 

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(h)          The
term “Debtor” or “Debtors” shall refer collectively to each Debtor individually, and to all Debtors, collectively,
and any Subsidiaries of any of them now or hereafter in existence, in each case as the context may so require, it being the intent
of the parties under this Agreement that all of the terms, conditions, provisions and representations hereof shall, to the greatest
extent possible, apply equally to each Debtor, and any Subsidiaries of any of them now or hereafter in existence, as if each term,
covenant, provision and representation was separately made herein by each Debtor.

 

		2	SECURITY FOR THE OBLIGATIONS.

 

2.1           Security
for Obligations. As security for the payment and performance of the Obligations, each Debtor does
hereby pledge, assign, transfer, deliver and grant to Secured Party, for its own benefit and as agent for its Affiliates, a continuing
and unconditional first priority security interest in and to any and all property of such Debtor, of any kind or description, tangible
or intangible, wheresoever located and whether now existing or hereafter arising or acquired, including the following (all of which
property for such Debtor, along with the products and proceeds therefrom, are individually and collectively referred to as the
“Collateral”):

 

(a)          all
property of, or for the account of, such Debtor now or hereafter coming into the possession, control or custody of, or in transit
to, Secured Party or any agent or bailee for Secured Party or any parent, affiliate or subsidiary of Secured Party or any participant
with Secured Party in the Obligations (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise),
including all cash, earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom,
including the proceeds of insurance thereon; and

 

(b)          the
additional property of such Debtor, whether now existing or hereafter arising or acquired, and wherever now or hereafter located,
together with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds
therefrom, and all of such Debtor’s books and records and recorded data relating thereto (regardless of the medium of recording
or storage), together with all of such Debtor's right, title and interest in and to all computer software required to utilize,
create, maintain and process any such records or data on electronic media, identified and set forth as follows:

 

(i)          All
Accounts and all goods whose sale, lease or other disposition by such Debtor has given rise to Accounts and have been returned
to, or repossessed or stopped in transit by, such Debtor, or rejected or refused by any Customer;

 

(ii)         All
Inventory, including raw materials, work-in-process and finished goods;

 

(iii)        All
goods (other than Inventory), including embedded software, Equipment, vehicles, furniture and Fixtures;

 

(iv)        All
Software and computer programs;

 

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(v)         All
Securities, Investment Property, Financial Assets and Deposit Accounts, specifically including the Lock Box Account, and all funds
at any time deposited therewith;

 

(vi)        All
Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance
Receivables, Supporting Obligations, notes secured by real estate, Commercial Tort Claims and General Intangibles, including Payment
Intangibles; and

 

(vii)       All
real estate property owned by Debtor and the interest of Debtor in fixtures related to such real property;

 

(viii)      All
Proceeds (whether Cash Proceeds or Non-cash Proceeds) of the foregoing property, including all insurance policies and proceeds
of insurance payable by reason of loss or damage to the foregoing property, including unearned premiums, and of eminent domain
or condemnation awards.

 

2.2           Possession
and Transfer of Collateral. Until an Event of Default has occurred, but subject to Secured Party’s rights under the Credit
Agreement (specifically with respect to Secured Party’s rights to use and apply money in the Lock Box Account) each Debtor
shall be entitled to possession and use of the Collateral (other than Instruments or Documents (including Tangible Chattel Paper
and Investment Property consisting of certificated securities) and other Collateral required to be delivered to Secured Party pursuant
to this Section 2). The cancellation or surrender of any promissory note evidencing an Obligation, upon payment or otherwise,
shall not affect the right of Secured Party to retain the Collateral for any other of the Obligations, except upon payment in full
of the Obligations. No Debtor shall sell, assign (by operation of law or otherwise), license, lease or otherwise dispose of, or
grant any option with respect to any of the Collateral, except as permitted pursuant to the Credit Agreement.

 

2.3           Financing
Statements. Each Debtor authorizes Secured Party to prepare and file such financing statements, amendments and other documents
and do such acts as Secured Party deems necessary in order to establish and maintain valid, attached and perfected, first priority
security interests in the Collateral in favor of Secured Party, for its own benefit and as agent for
its Affiliates, free and clear of all Liens and claims and rights of third parties whatsoever, except Permitted Liens. Each
Debtor hereby irrevocably authorizes Secured Party at any time, and from time to time, to file in any jurisdiction any initial
financing statements and amendments thereto that: (a) indicate the Collateral: (i) is comprised of all assets of such Debtor (or
words of similar effect), regardless of whether any particular asset comprising a part of the Collateral falls within the scope
of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed; or (ii) as being of an equal
or lesser scope or within greater detail as the grant of the security interest set forth herein; and (b) contain any other information
required by Section 5 of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed regarding
the sufficiency or filing office acceptance of any financing statement or amendment, including: (A) whether such Debtor is an organization,
the type of organization and any Organizational Identification Number issued to such Debtor; and (B) in the case of a financing
statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description
of the real property to which the Collateral relates. Each Debtor agrees to furnish any such information to Secured Party promptly
upon request. In addition, each Debtor shall make appropriate entries on its books and records disclosing the security interests
of Secured Party, for its own benefit and as agent for its Affiliates, in the Collateral. Each
Debtor hereby agrees that a photogenic or other reproduction of this Security Agreement is sufficient for filing as a financing
statement and each Debtor authorizes Secured Party to file this Security Agreement as a financing statement in any jurisdiction.

 

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2.4           Preservation of the Collateral. Secured Party may, but is not required to, take such actions from
time to time as Secured Party deems appropriate to maintain or protect the Collateral. Secured Party shall have exercised
reasonable care in the custody and preservation of the Collateral if Secured Party takes such action as any Debtor shall
reasonably request in writing which is not inconsistent with Secured Party’s status as a secured party, but the failure
of Secured Party to comply with any such request shall not be deemed a failure to exercise reasonable care; provided, however,
Secured Party’s responsibility for the safekeeping of the Collateral shall: (i) be deemed reasonable if such Collateral
is accorded treatment substantially equal to that which Secured Party accords its own property; and (ii) not extend to
matters beyond the control of Secured Party, including acts of God, war, insurrection, riot or governmental actions. In
addition, any failure of Secured Party to preserve or protect any rights with respect to the Collateral against prior or
third parties, or to do any act with respect to preservation of the Collateral, not so requested by a Debtor, shall not be
deemed a failure to exercise reasonable care in the custody or preservation of the Collateral. Each Debtor shall have the
sole responsibility for taking such action as may be necessary, from time to time, to preserve all rights of such Debtor and
Secured Party in the applicable Collateral against prior or third parties. Without limiting the generality of the
foregoing, where Collateral consists, in whole or in part, of Capital Securities, each Debtor represents to, and covenants
with, Secured Party that such Debtor has made arrangements for keeping informed of changes or potential changes affecting the
Capital Securities (including rights to convert or subscribe, payment of dividends, reorganization or other exchanges, tender
offers and voting rights), and each Debtor agrees that Secured Party shall have no responsibility or liability for informing
such Debtor of any such or other changes or potential changes or for taking any action or omitting to take any action with
respect thereto.

 

2.5           Other
Actions as to any and all Collateral. Each Debtor further agrees to take any other action reasonably requested by Secured Party
to ensure the attachment, perfection and first priority of, and the ability of Secured Party to enforce, the security interest
of Secured Party, for its own benefit and as agent for its Affiliates, in any and all of the
Collateral, including: (i) causing Secured Party’s name to be noted as secured party on any certificate of title for a titled
good if such notation is a condition to attachment, perfection or priority of, or ability of the bank to enforce, the security
interest of Secured Party, for its own benefit and as agent for its Affiliates, in such Collateral;
(ii) complying with any provision of any statute, regulation or treaty of the United States as to any material portion of the Collateral
as soon as possible but not more than forty-five (45) days after such request if compliance with such provision is a condition
to attachment, perfection or priority of, or ability of Secured Party to enforce, the security interest of Secured Party,
for its own benefit and as agent for its Affiliates, in such Collateral; (iii) obtaining governmental and other third party
consents and approvals, including, without limitation, any consent of any licensor, lessor or other Person with authority or control
over or an interest in any material portion of the Collateral as soon as possible but not more than forty-five (45) days after
such request; (iv) obtaining waivers from mortgagees and landlords in form and substance reasonably satisfactory to Secured Party
which affect any material portion of the Collateral as soon as possible but not more than forty-five (45) days after such request;
and (v) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction,
or by other law as applicable in any foreign jurisdiction. Each Debtor further agrees to indemnify and hold Secured Party harmless
against claims of any Persons not a party to this Security Agreement concerning disputes arising over the Collateral, except to
the extent resulting from the gross negligence or willful misconduct of Secured Party or its Affiliates.

 

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2.6           Collateral
in the Possession of a Warehouseman or Bailee. If any material portion of the Collateral at any time is in the possession of
a warehouseman or bailee, each Debtor shall promptly notify Secured Party thereof, and, as soon as possible, but not more than
forty-five (45) days later, shall obtain a Collateral Access Agreement in form and substance reasonably satisfactory to Secured
Party from such warehouseman or bailee.

 

2.7           Letter-of-Credit
Rights. If any Debtor at any time is a beneficiary under a letter of credit now or hereafter issued in favor of such Debtor,
such Debtor shall promptly notify Secured Party thereof and, at the request and option of Secured Party, such Debtor shall, pursuant
to an agreement in form and substance reasonably satisfactory to Secured Party, either: (i) arrange for the issuer and any confirmer
of such letter of credit to consent to an assignment to Secured Party, for its own benefit and as agent
for its Affiliates, of the proceeds of any drawing under the letter of credit; or (ii) arrange for Secured Party,
for its own benefit and as agent for its Affiliates, to become the transferee beneficiary of the letter of credit, with
Secured Party agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided
in the Credit Agreement.

 

2.8           Commercial
Tort Claims. If any Debtor shall at any time hold or acquire a Commercial Tort Claim, such Debtor shall promptly notify Secured
Party in writing signed by such Debtor of the details thereof and grant to Secured Party, for its own
benefit and as agent for its Affiliates, in such written notice or other written instrument, a security interest therein
and in the proceeds thereof, all upon the terms of this Security Agreement, in each case in form and substance reasonably satisfactory
to Secured Party, and shall execute any amendments hereto deemed reasonably necessary by Secured Party to perfect the security
interest of Secured Party, for its own benefit and as agent for its Affiliates, in such Commercial
Tort Claim.

 

2.9           Electronic
Chattel Paper and Transferable Records. If any Debtor at any time holds or acquires an interest in any electronic chattel paper
or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global
and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
such Debtor shall promptly notify Secured Party thereof and, at the request of Secured Party, shall take such action as Secured
Party may reasonably request to vest in Secured Party control under Section 9-105 of the UCC of such electronic chattel paper or
control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. Secured Party
agrees with each Debtor that Secured Party will arrange, pursuant to procedures reasonably satisfactory to Secured Party and so
long as such procedures will not result in Secured Party’s loss of control, for such Debtor to make alterations to the electronic
chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act, for a party
in control to make without loss of control.

 

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2.10         Additional
Requirements on Collateral. Each Debtor shall fully cooperate with Secured Party to obtain and keep in effect one or more control
agreements in Deposit Accounts, Electronic Chattel Paper, Investment Property and Letter-of-Credit Rights Collateral. Such control
agreements shall only be required if, in the reasonable discretion of the Secured Party, the nature of the Collateral requires
any such control agreements in order for the Secured Party to perfect its security interests in any Collateral as granted hereunder,
and in such event, each Debtor shall promptly provide any such control agreements upon request from the Secured Party. In addition,
each Debtor, at the Debtor’s expense, shall promptly: (A) execute all notices of security interest for each relevant
type of Software and other General Intangibles in forms suitable for filing with any United States or foreign office handling the
registration or filing of patents, trademarks, copyrights and other intellectual property and any successor office or agency thereto;
and (B) take all commercially reasonable steps in any hearing, suit, action, or other proceeding before any such office or
any similar office or agency in any other country or any political subdivision thereof, to diligently prosecute or maintain, as
applicable, each application and registration of any Software, General Intangibles or any other intellectual property rights and
assets that are part of the Collateral, including filing of renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings.

 

		3	REPRESENTATIONS AND WARRANTIES.

 

Each Debtor makes the
following representations and warranties to Secured Party:

 

3.1           Debtor
Organization and Name. Each Debtor is a corporation or other legally recognized form of entity, as applicable, duly organized,
existing and in good standing under the laws of its State or country of organization, with full and adequate power to carry on
and conduct its business as presently conducted. Each Debtor is duly licensed or qualified in all foreign jurisdictions wherein
the nature of its activities requires such qualification or licensing. Each Debtor’s Organizational Identification Number
is set forth in the Credit Agreement. The exact legal name of each Debtor is as set forth in the first paragraph of this Security
Agreement, and no Debtor currently conducts, nor has it during the last five (5) years conducted, business under any other name
or trade name.

 

3.2           Authorization.
Each Debtor has full right, power and authority to enter into this Security Agreement and to perform all of its duties and obligations
under this Security Agreement. The execution and delivery of this Security Agreement and the other Loan Documents will not, nor
will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision
of law or of the articles of incorporation, by-laws, operating agreement or other governing documents, as applicable, of
each Debtor. All necessary and appropriate action has been taken on the part of each Debtor to authorize the execution and delivery
of this Security Agreement.

 

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3.3           Validity
and Binding Nature. This Security Agreement is the legal, valid and binding obligation of each Debtor, enforceable against
each Debtor in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors'
rights generally and to general principles of equity.

 

3.4           Consent;
Absence of Breach. The execution, delivery and performance of this Security Agreement and any other documents or instruments
to be executed and delivered by each Debtor in connection herewith, do not and will not: (a) require any consent, approval, authorization,
or filings with, notice to or other act by or in respect of, any governmental authority or any other Person (other than filings
or notices pursuant to federal or state securities laws or other than any consent or approval which has been obtained and is in
full force and effect); (b) conflict with: (i) any provision of law or any applicable regulation, order, writ, injunction or decree
of any court or governmental authority; (ii) the articles of incorporation, bylaws, operating agreement, or other organic or governance
document applicable to each Debtor; or (iii) any agreement, indenture, instrument or other document, or any judgment, order or
decree, which is binding upon each applicable Debtor or any of its properties or assets; or (c) require, or result in, the creation
or imposition of any Lien on any asset of any Debtor, other than Liens in favor of Secured Party created pursuant to this Security
Agreement and Permitted Liens.

 

3.5           Ownership
of Collateral; Liens. Each Debtor is the sole owner of all the Collateral applicable to such Debtor, free and clear of all
Liens, charges and claims (including infringement claims with respect to patents, trademarks, service marks, copyrights and other
intellectual property rights), other than Permitted Liens.

 

3.6           Adverse
Circumstances. No condition, circumstance, event, agreement, document, instrument, restriction, litigation or proceeding (or
threatened litigation or proceeding or basis therefor) exists which: (i) would have a Material Adverse Effect upon any Debtor;
or (ii) would constitute an Event of Default or an Unmatured Event of Default.

 

3.7           Security
Interest. This Security Agreement creates a valid security interest in favor of Secured Party in the Collateral and, when properly
perfected by filing in the appropriate jurisdictions, or by possession or control of such Collateral by Secured Party or delivery
of such Collateral to Secured Party, shall constitute a valid, perfected, first-priority security interest in such Collateral.

 

3.8           Place
of Business. The principal place of business and books and records of each Debtor is set forth in the preamble to this Security
Agreement, and the location of all Collateral, if other than at such principal place of business, is as set forth on Schedule
3.8 attached hereto and made a part hereof, and each Debtor shall promptly notify Secured Party of any change in such locations.
No Debtor will remove or permit the Collateral to be removed from such locations without the prior written consent of Secured Party,
except as permitted pursuant to the Credit Agreement.

 

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3.9           Complete
Information. This Security Agreement and all financial statements, schedules, certificates, confirmations, agreements, contracts,
and other materials and information heretofore or contemporaneously herewith furnished in writing by any Debtor to Secured Party
for purposes of, or in connection with, this Security Agreement and the transactions contemplated hereby is, and all written information
hereafter furnished by or on behalf of any Debtor to Secured Party pursuant hereto or in connection herewith will be, true and
accurate in every material respect on the date as of which such information is dated or certified, and none of such information
is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the
circumstances under which made (it being recognized by Secured Party that any projections and forecasts provided by any Debtor
are based on good faith estimates and assumptions believed by such Debtor to be reasonable as of the date of the applicable projections
or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from
projected or forecasted results).

 

		4	REMEDIES.

 

Upon the occurrence
of any default in the payment or performance of any of the covenants, conditions and agreements contained in this Security Agreement
or any other Event of Default, Secured Party shall have all rights, powers and remedies set forth in this Security Agreement or
the other Loan Documents or in any other written agreement or instrument relating to any of the Obligations or any security therefor,
as a secured party under the UCC or as otherwise provided at law or in equity. Without limiting the generality of the foregoing,
Secured Party may, at its option upon the occurrence of an Event of Default, declare its commitments to Debtors to be terminated
and all Obligations to be immediately due and payable, or, if provided in the Loan Documents, all commitments of Secured Party
to Debtors shall immediately terminate and all Obligations shall be automatically due and payable, all without demand, notice or
further action of any kind required on the part of Secured Party. Each Debtor hereby waives any and all presentment, demand, notice
of dishonor, protest, and all other notices and demands in connection with the enforcement of Secured Party’s rights under
the Loan Documents, and hereby consents to, and waives notice of release, with or without consideration, of any Collateral, notwithstanding
anything contained herein or in the Loan Documents to the contrary. In addition to the foregoing:

 

4.1           Possession
and Assembly of Collateral. Secured Party may, without notice, demand or the initiation of legal process of any kind, take
possession of any or all of the Collateral (in addition to Collateral of which Secured Party already has possession), wherever
it may be found, and for that purpose may pursue the same wherever it may be found, and may at any time enter into any of Debtors’
premises where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any
of the Collateral until the same shall be sold or otherwise disposed of and Secured Party shall have the right to store and conduct
a sale of the same in any of Debtors’ premises without cost to Secured Party. At Secured Party’s request, each Debtor
will, at such Debtor’s sole expense, assemble the Collateral and make it available to Secured Party at a place or places
to be designated by Secured Party which is reasonably convenient to Secured Party and Debtors.

 

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4.2           Sale
of Collateral. Secured Party may sell any or all of the Collateral at public or private sale, upon such terms and conditions
as Secured Party may deem proper, and Secured Party may purchase any or all of the Collateral at any such sale. Each Debtor acknowledges
that Secured Party may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or
practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one
or more private sales to a restricted group of offerees and purchasers. Each Debtor consents to any such private sale so made even
though at places and upon terms less favorable than if the Collateral were sold at public sale. Secured Party shall have no obligation
to clean-up or otherwise prepare the Collateral for sale. Secured Party may apply the net proceeds, after deducting all costs,
expenses, attorneys’ and paralegals’ fees incurred or paid at any time in the collection, protection and sale of the
Collateral and the Obligations, to the payment of the Obligations, returning the excess proceeds, if any, to Debtors. Each Debtor
shall remain liable for any amount remaining unpaid after such application, with interest at the Default Rate. Any notification
of intended disposition of the Collateral required by law shall be conclusively deemed reasonably and properly given if given by
Secured Party at least ten (10) calendar days before the date of such disposition. Each Debtor hereby confirms, approves and ratifies
all acts and deeds of Secured Party relating to the foregoing, and each part thereof, and expressly waives any and all claims of
any nature, kind or description which it has or may hereafter have against Secured Party or its representatives, by reason of taking,
selling or collecting any portion of the Collateral. Each Debtor consents to releases of the Collateral at any time (including
prior to default) and to sales of the Collateral in groups, parcels or portions, or as an entirety, as Secured Party shall deem
appropriate. Each Debtor expressly absolves Secured Party from any loss or decline in market value of any Collateral by reason
of delay in the enforcement or assertion or non-enforcement of any rights or remedies under this Security Agreement.

 

4.3           Standards
for Exercising Remedies. To the extent that applicable law imposes duties on Secured Party to exercise remedies in a
commercially reasonable manner, each Debtor acknowledges and agrees that it is not commercially unreasonable for Secured Party:
(i) to incur expenses deemed necessary by Secured Party to prepare Collateral for disposition or otherwise to complete raw material
or work-in-process into finished goods or other finished products for disposition; (ii) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected or disposed of; (iii) to fail to exercise collection
remedies against Customers or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral; (iv) to exercise collection remedies against Customers and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists; (v) to advertise dispositions of Collateral through publications
or media of general circulation, whether or not the Collateral is of a specialized nature; (vi) to contact other Persons, whether
or not in the same business as Debtors, for expressions of interest in acquiring all or any portion of the Collateral; (vii) to
hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized
nature; (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included
in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets; (ix) to dispose
of assets in wholesale rather than retail markets; (x) to disclaim disposition warranties, including any warranties of title; (xi)
to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition of Collateral
or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral; or (xii) to the extent deemed
appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other professionals
to assist Secured Party in the collection or disposition of any of the Collateral. Each Debtor acknowledges that the purpose of
this section is to provide non-exhaustive indications of what actions or omissions by Secured Party would not be commercially unreasonable
in Secured Party’s exercise of remedies against the Collateral and that other actions or omissions by Secured Party shall
not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation upon the foregoing,
nothing contained in this Section shall be construed to grant any rights to Debtors or to impose any duties on Secured Party that
would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section.

 

    	10

    	 

    

 

4.4           UCC
and Offset Rights. Secured Party may exercise, from time to time, any and all rights and remedies available to it under the
UCC or under any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Security
Agreement or in any other agreements between any Obligor and Secured Party, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or unmatured, including costs of collection and attorneys’
and paralegals’ fees and costs, and in such order of application as Secured Party may, from time to time, elect, any indebtedness
of Secured Party to any Obligor, however created or arising, including balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to Secured Party. Each Debtor, on behalf of itself and any Obligor,
hereby waives the benefit of any law that would otherwise restrict or limit Secured Party in the exercise of its right, which is
hereby acknowledged, to appropriate at any time hereafter any such indebtedness owing from Secured Party to any Obligor.

 

4.5           Additional
Remedies. Upon the occurrence of an Event of Default, Secured Party shall have the right and power to:

 

(a)          instruct
any Debtor, at its own expense, to notify any parties obligated on any of the Collateral, including any Customers, to make payment
directly to Secured Party of any amounts due or to become due thereunder, or Secured Party may directly notify such obligors of
the security interest of Secured Party, and/or of the assignment to Secured Party of the Collateral and direct such obligors to
make payment to Secured Party of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts
due on the Collateral directly from such Persons obligated thereon;

 

(b)          enforce
collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect
to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period
(whether or not longer than the original period) any indebtedness thereunder;

 

(c)          take
possession or control of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon;

 

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(d)          extend,
renew or modify for one or more periods (whether or not longer than the original period) the Obligations or any obligation of any
nature of any other obligor with respect to the Obligations;

 

(e)          grant
releases, compromises or indulgences with respect to the Obligations, any extension or renewal of any of the Obligations, any security
therefor, or to any other obligor with respect to the Obligations;

 

(f)          transfer
the whole or any part of Capital Securities which may constitute Collateral into the name of Secured Party or Secured Party’s
nominee without disclosing, if Secured Party so desires, that such Capital Securities so transferred are subject to the security
interest of Secured Party, and any corporation, association, or any of the managers or trustees of any trust issuing any of such
Capital Securities, or any transfer agent, shall not be bound to inquire, in the event that Secured Party or such nominee makes
any further transfer of such Capital Securities, or any portion thereof, as to whether Secured Party or such nominee has the right
to make such further transfer, and shall not be liable for transferring the same;

 

(g)          vote
the Collateral;

 

(h)          make
an election with respect to the Collateral under Section 1111 of the Bankruptcy Code or take action under Section 364 or any other
section of Bankruptcy Code; provided, however, that any such action of Secured Party as set forth herein shall not,
in any manner whatsoever, impair or affect the liability of Debtors hereunder, nor prejudice, waive, nor be construed to impair,
affect, prejudice or waive Secured Party’s rights and remedies at law, in equity or by statute, nor release, discharge, nor
be construed to release or discharge, Debtors, any guarantor or other Person liable to Secured Party for the Obligations; and

 

(i)          at
any time, and from time to time, accept additions to, releases, reductions, exchanges or substitution of the Collateral, without
in any way altering, impairing, diminishing or affecting the provisions of this Security Agreement, the Loan Documents, or any
of the other Obligations, or Secured Party’s rights hereunder, under the Obligations.

 

Each Debtor hereby
ratifies and confirms whatever Secured Party may do with respect to the Collateral and agrees that Secured Party shall not be liable
for any error of judgment or mistakes of fact or law with respect to actions taken in connection with the Collateral.

 

4.6           Attorney-in-Fact.
Each Debtor hereby irrevocably makes, constitutes and appoints Secured Party (and any officer of Secured Party or any Person designated
by Secured Party for that purpose) as such Debtor’s true and lawful proxy and attorney-in-fact (and agent-in-fact) in Debtor’s
name, place and stead, with full power of substitution, to: (i) take such actions as are permitted in this Security Agreement;
(ii) execute such financing statements and other documents and to do such other acts as Secured Party may require to perfect and
preserve Secured Party’s security interest in, and to enforce such interests in the Collateral; and (iii) upon the occurrence
of an Event of Default, carry out any remedy provided for in this Security Agreement, the Credit Agreement or through law or equity,
including endorsing such Debtor’s name to checks, drafts, instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States Post Office serving the address of such Debtor, changing
the address of such Debtor to that of Secured Party, opening all envelopes addressed to such Debtor and applying any payments contained
therein to the Obligations, and changing any merchant accounts or instructions to Payment Processing Companies regarding any credit/debit
card payments from Customers. Each Debtor hereby acknowledges that the constitution and appointment of such proxy and attorney-in-fact
are coupled with an interest and are irrevocable. Each Debtor hereby ratifies and confirms all that such attorney-in-fact may do
or cause to be done by virtue of any provision of this Security Agreement.

 

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4.7           No
Marshaling. Secured Party shall not be required to marshal any present or future collateral security (including this Security
Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order. To the extent that it lawfully may, each Debtor hereby agrees
that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of
Secured Party’s rights under this Security Agreement or under any other instrument creating or evidencing any of the Obligations
or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, each Debtor hereby irrevocably waives the benefits of all such laws.

 

4.8           No
Waiver. No Event of Default shall be waived by Secured Party except in writing. No failure or delay on the part of Secured
Party in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right
at any other time; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There shall be no obligation on the part of Secured Party
to exercise any remedy available to Secured Party in any order. The remedies provided for herein are cumulative and not exclusive
of any remedies provided at law or in equity. Each Debtor agrees that in the event that such Debtor fails to perform, observe or
discharge any of its Obligations or liabilities under this Security Agreement or any other agreements with Secured Party, no remedy
of law will provide adequate relief to Secured Party, and further agrees that Secured Party shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving actual damages.

 

4.9           Application
of Proceeds. Secured Party will, within three (3) Business Days after receipt of cash or solvent credits from collection of
items of payment, proceeds of Collateral or any other source, apply the whole or any part thereof against the Obligations secured
hereby. Secured Party shall further have the exclusive right to determine how, when and what application of such payments and
such credits shall be made on the Obligations, and such determination shall be conclusive upon Debtors. Any proceeds of any disposition
by Secured Party of all or any part of the Collateral may be first applied by Secured Party to the payment of expenses incurred
by Secured Party in connection with the Collateral, including reasonable attorneys’ fees and legal expenses and costs as
provided for in Section 5.13 hereof.

 

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		5	MISCELLANEOUS.

 

5.1           Entire
Agreement. This Security Agreement and the other Loan Documents: (i) are valid, binding and enforceable against Debtors and
Secured Party in accordance with their respective provisions and no conditions exist as to their legal effectiveness; (ii) constitute
the entire agreement between the parties with respect to the subject matter hereof and thereof; and (iii) are the final expression
of the intentions of Debtors and Secured Party. No promises, either expressed or implied, exist between any Debtor and Secured
Party, unless contained herein or therein. This Security Agreement, together with the other Loan Documents, supersedes all negotiations,
representations, warranties, commitments, term sheets, discussions, negotiations, offers or contracts (of any kind or nature, whether
oral or written) prior to or contemporaneous with the execution hereof with respect to any matter, directly or indirectly related
to the terms of this Security Agreement and the other Loan Documents. This Security Agreement and the other Loan Documents are
the result of negotiations between Secured Party and Debtors and have been reviewed (or have had the opportunity to be reviewed)
by counsel to all such parties, and are the products of all parties. Accordingly, this Security Agreement and the other Loan Documents
shall not be construed more strictly against Secured Party merely because of Secured Party's involvement in their preparation.

 

5.2           Amendments;
Waivers. No delay on the part of Secured Party in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by Secured Party of any right, power or remedy preclude other or further exercise thereof,
or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision
of this Security Agreement or the other Loan Documents shall in any event be effective unless the same shall be in writing and
acknowledged by Secured Party, and then any such amendment, modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

5.3           WAIVER
OF DEFENSES. EACH DEBTOR WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH SUCH DEBTOR
MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY SECURED PARTY IN ENFORCING THIS SECURITY AGREEMENT. PROVIDED SECURED PARTY
ACTS IN GOOD FAITH, EACH DEBTOR RATIFIES AND CONFIRMS WHATEVER SECURED PARTY MAY DO PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY GRANTING ANY FINANCIAL ACCOMMODATION TO DEBTORS.

 

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5.4           MANDATORY
FORUM SELECTION.  TO INDUCE SECURED PARTY TO MAKE CERTAIN FINANCIAL ACCOMODATIONS TO DEBTORS, EACH DEBTOR IRREVOCABLY
AGREES THAT ANY DISPUTE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT OR RELATED TO
ANY MATTER WHICH IS THE SUBJECT OF OR INCIDENTAL TO THIS AGREEMENT ANY OTHER LOAN DOCUMENT, OR THE COLLATERAL (WHETHER OR NOT SUCH
CLAIM IS BASED UPON BREACH OF CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE STATE AND/OR FEDERAL
COURTS LOCATED IN BROWARD COUNTY, FLORIDA.  THIS PROVISION  IS INTENDED TO BE A “MANDATORY” FORUM SELECTION
CLAUSE AND GOVERNED BY AND INTERPRETED CONSISTENT WITH FLORIDA LAW. EACH DEBTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND
VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS IN SAID COUNTY, AND EACH WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS.
EACH DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO A DEBTOR, AS APPLICABLE, AS SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE,
LAW, RULE OF COURT OR OTHERWISE.

 

5.5           WAIVER
OF JURY TRIAL. EACH DEBTOR AND SECURED PARTY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL,
OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR
COURSE OF DEALING IN WHICH SECURED PARTY AND ANY DEBTOR ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY GRANTING ANY FINANCIAL
ACCOMMODATION TO DEBTORS.

 

5.6           Assignability.
Secured Party, prior to the occurrence of an Event of Default and with the consent of Debtors, which consent will not be unreasonably
withheld, and after the occurrence of an Event of Default without consent from or notice to anyone, may at any time assign Secured
Party’s rights in this Security Agreement, the other Loan Documents, the Obligations, or any part thereof and transfer Secured
Party’s rights in any or all of the Collateral, and Secured Party thereafter shall be relieved from all liability with respect
to such Collateral. This Security Agreement shall be binding upon Secured Party and Debtors and their respective legal representatives
and successors. All references herein to any Debtor shall be deemed to include any successors, whether immediate or remote. In
the case of a joint venture or partnership, the term “Debtor” or “Debtors” shall be deemed to include all
joint venturers or partners thereof, who shall be jointly and severally liable hereunder.

 

5.7           Binding
Effect. This Security Agreement shall become effective upon execution by Debtors and Secured Party.

 

5.8           Governing
Law. Except in the case of the Mandatory Forum Selection Clause in Section 5.4 above, which clause shall be governed and interpreted
in accordance with Florida law, this Agreement shall be delivered and accepted in and shall be deemed to be a contract made under
and governed by the internal laws of the State of Nevada, and for all purposes shall be construed in accordance with the laws of
such State, without giving effect to the choice of law provisions of such State.

 

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5.9           Enforceability.
Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction,
such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction.

 

5.10         Time
of Essence. Time is of the essence in making payments of all amounts due Secured Party under the Loan Documents and in the
performance and observance by Debtors of each covenant, agreement, provision and term of this Security Agreement and the other
Loan Documents.

 

5.11         Counterparts;
Facsimile Signatures. This Security Agreement may be executed in any number of counterparts and by the different parties hereto
on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Security Agreement. Receipt of an executed signature page to this Security Agreement by facsimile
or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained
by Secured Party shall be deemed to be originals thereof.

 

5.12         Notices.
Except as otherwise provided herein, each Debtor waives all notices and demands in connection with the enforcement of Secured Party’s
rights hereunder. All notices, requests, demands and other communications provided for hereunder shall be made in accordance with
the terms of the Credit Agreement.

 

5.13         Costs,
Fees and Expenses. Debtors shall pay or reimburse Secured Party for all reasonable costs, fees and expenses incurred by Secured
Party or for which Secured Party becomes obligated in connection with the enforcement of this Security Agreement, including search
fees, costs and expenses and attorneys’ fees, costs and time charges of counsel to Secured Party and all taxes payable in
connection with this Security Agreement. In furtherance of the foregoing, Debtors shall pay any and all stamp and other taxes,
UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Security Agreement
and the other Loan Documents to be delivered hereunder, and agrees to save and hold Secured Party harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses. That portion
of the Obligations consisting of costs, expenses or advances to be reimbursed by Debtors to Secured Party pursuant to this Security
Agreement or the other Loan Documents which are not paid on or prior to the date hereof shall be payable by Debtors to Secured
Party on demand. If at any time or times hereafter Secured Party: (a) employs counsel for advice or other representation:
(i) with respect to this Security Agreement or the other Loan Documents; (ii) to represent Secured Party in any litigation,
contest, dispute, suit or proceeding or to commence, defend, or intervene or to take any other action in or with respect to any
litigation, contest, dispute, suit, or proceeding (whether instituted by Secured Party, any Debtor, or any other Person) in any
way or respect relating to this Security Agreement; or (iii) to enforce any rights of Secured Party against any Debtor or
any other Person under of this Security Agreement; (b) takes any action to protect, collect, sell, liquidate, or otherwise
dispose of any of the Collateral; and/or (c) attempts to or enforces any of Secured Party’s rights or remedies under
this Security Agreement, the costs and expenses incurred by Secured Party in any manner or way with respect to the foregoing, shall
be part of the Obligations, payable by Debtors to Secured Party on demand.

 

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5.14         Termination.
This Security Agreement and the Liens and security interests granted hereunder shall not terminate until the termination of the
Credit Agreement and the commitments to make Loans thereunder and the full and complete performance and satisfaction and payment
in full of all the Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has
been asserted). Upon termination of this Security Agreement, Secured Party shall also deliver to Debtors (at the sole expense of
Debtors) such UCC termination statements, certificates for terminating the liens on the Motor Vehicles (if any) and such other
documentation, without recourse, warranty or representation whatsoever, as shall be reasonably requested by Debtors to effect the
termination and release of the Liens and security interests in favor of Secured Party affecting the Collateral, provided, however,
to the extent any such terminations or releases require Secured Party to expend any sums in terminating or releasing any such Liens,
Secured Party may refrain from terminating or releasing such Liens unless and until Debtors pay to Secured Party the estimated
cost, as reasonably determined by Secured Party, of effectuating such terminations or releases.

 

5.15         Reinstatement. 
This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against
any Debtor for liquidation or reorganization, should any Debtor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any significant part of any Debtor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise,
all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

5.16         Joint
and Several Liability. The liability of all Debtors hereunder for the Obligations, or for the performance of any other term,
condition, covenant or agreement of any Debtor hereunder, shall be joint and several as between all Debtors.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF,
Debtors and Secured Party have executed this Security Agreement as of the date first above written.

 

Debtors:

 

M LINE
HOLDINGS, INC.,

 

a Nevada
corporation

 

	By: 	/s/Tony Anish	 
	Name: 	Tony Anish	 
	Title: 	Secretary	 

 

	E.M. TOOL COMPANY, INC.,	 	PRECISION AEROSPACE AND
	a California corporation	 	TECHNOLOGIES, INC.,
	 	 	a Nevada corporation

 

	By: 	/s/Jitu Banker	 	By:	/s/Jitu Banker
	Name:  	Jitu Banker	 	Name: 	Jitu Banker
	Title: 	Chief Financial Officer	 	Title:	Chief Financial Officer

 

	 	Agreed and accepted:
	 	 	 
	 	Secured Party:
	 	 	 
	 	TCA GLOBAL CREDIT MASTER FUND, LP
	 	 	 
	 	   By: 	TCA Global Credit Fund GP, Ltd.
	 	   Its: 	General Partner
	 	 	 
	 	   By: 	        /s/Robert Press
	 	 	Robert Press, Director

 

    	18

    	 

    

 

Schedule 3.8

 

Collateral Locations/Places of Business

 

2672 Dow Avenue, Tustin, CA 92780CLEARSIGN COMBUSTION CORPORATION

 

2013 CONSULTANT STOCK PLAN

 

ClearSign Combustion Corporation, a corporation
organized under the laws of the State of Washington, hereby adopts this 2013 Consultant Stock Plan.

 

PURPOSE OF PLAN

 

WHEREAS, the purpose of this 2013
Consultant Stock Plan is to advance the interests of the ClearSign Combustion Corporation by helping the Company obtain and retain
the services of persons providing consulting services upon whose judgment, initiative, efforts and/or services the Company is substantially
dependent, by offering to or providing those persons with incentives or inducements affording such persons an opportunity to become
owners of capital stock of ClearSign Combustion Corporation.

 

TERMS AND CONDITIONS OF PLAN

 

1.DEFINITIONS.

 

Set forth below are definitions
of capitalized terms which are generally used throughout this Plan, or references to provisions containing such definitions:

 

(a)Affiliate - The term "Affiliate"
is defined as any person controlling the Company, controlled by the Company, or under common control with the Company.

 

(b)Award - The term "Award"
is defined as any Award Shares granted under this Plan.

 

(c)Award Shares - The term "Award
Shares" is defined as shares of Common Stock granted by the Plan Committee in accordance with Section 5 of this Plan.

 

(d)Board - The term "Board"
is defined as the Board of Directors of the Company, as such body may be reconstituted from time to time.

 

(e)Common Stock - The term "Common
Stock" is defined as the Company's common stock, par value $0.0001.

 

(f)Company - The term "Company"
is defined as ClearSign Combustion Corporation.

 

(g)Eligible Person - The term "Eligible
Person" means any Person who, at a particular time, is a consultant to the Company or an Affiliate who provides bona fide
consulting services to the Company or the Affiliate, including services rendered in connection with the raising of capital, investor
relations or stock promotional activities. No officer, director or employee of the Company is or can be an Eligible Person.

 

    	

    	 

    

(h)Fair Market Value - The term "Fair
Market Value" means the fair market value as of the applicable valuation date of the Award Shares or other shares of Common
Stock, as the case may be, to be valued (the "Subject Shares"), determined in accordance with the following
principles:

 

(i)If the Common Stock
is traded on a stock exchange on the date in question, then the Fair Market Value of the Subject Shares will be equal to the closing
sale price of Common Stock on the principal exchange on which the Common Stock is then trading, or, if Common Stock is not traded
on such date, then on the next preceding trading day during which a sale occurred;

 

(ii)If the Common Stock
is traded over-the-counter on the date in question, then the Fair Market Value of the Subject Shares will equal the last sales
price or the average of the closing bid and asked price (in all other cases) for the Common Stock on such date as reported by the
over-the-counter quotation system;

 

(iii)If the Common Stock
is not publicly traded on an exchange and is not quoted on the over-the-counter quotation system, then the Fair Market Value shall
be determined by the Board acting in good faith on such basis as it deems appropriate;

 

(iv)If the Subject Shares
are subject to conditions, risk of forfeiture, or repurchase rights or rights of first refusal which impair their value including,
without limitation, those conditions more particularly described in Section 6, then the Fair Market Value of the Subject
Shares shall be subject to such discount to reflect such impairments to value as the Plan Committee may, in its sole discretion
and without obligation to do so, determine to be appropriate; and

 

(v)Anything in Subsections
(i) through (iv) above to the contrary, in no circumstances shall the Fair Market Value of the Subject Shares be less than
its par value.

 

(i)Issued Shares - The term "Issued
Shares" is defined as shares of Common Stock issued pursuant to the terms of this Plan.

 

(j)Person - The term "Person"
is defined, in its broadest sense, as any individual, entity or fiduciary such as, by way of example and not limitation, individuals
or natural persons, corporations, partnerships (limited or general), joint-ventures, associations, limited liability companies/partnerships,
or fiduciary arrangements, such as trusts.

 

(k)Plan - The term "Plan" is defined
as this 2013 Consultant Stock Plan.

 

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(l)Plan Committee - The term "Plan
Committee" is defined in Section 3 of the Plan; provided, however, that the term Plan Committee
will refer to the Board during such times as no Plan Committee is appointed by the Board.

 

(m)Restricted Shares - The term "Restricted
Shares" is defined as Award Shares that are subject to restrictions as more particularly set forth in Section 6 of
this Plan.

 

(n)Recipient - The term "Recipient"
is defined as any Eligible Person who, at a particular time, receives the grant of an Award.

 

(o)Securities Act - The term "Securities
Act" is defined as the Securities Act of 1933, as amended.

 

2.TERM OF PLAN.

 

This Plan shall be effective as of such
time and date as this Plan is adopted by the Board and shall continue until the Plan is terminated in accordance with Section 10(a)
below; provided, however, that the provisions of this Plan shall remain in effect until the terms of all outstanding Awards have
been satisfied or terminated in accordance with this Plan and the terms of such Awards.

 

3.PLAN ADMINISTRATION.

 

The Plan shall be administered and interpreted
by the Compensation Committee of the Board (the "Plan Committee"), provided, however, if there is no Compensation Committee
of the Board, the Board itself will administer and interpret the Plan and take such other actions as the Plan Committee is authorized
to take hereunder. The Plan Committee shall have the full and final authority in its sole discretion, at any time and from time-to-time,
subject only to the express terms, conditions and other provisions of the Certificate of Incorporation of the Company and this
Plan, and the specific limitations on such discretion set forth herein, to:

 

(i)Designate the Eligible
Persons or classes of Eligible Persons eligible to receive Awards from among the Eligible Persons;

 

(ii)Grant Awards to such
selected Eligible Persons or classes of Eligible Persons in such form and amount (subject to the terms of the Plan) as the Plan
Committee shall determine;

 

(iii)Impose such limitations,
restrictions and conditions upon any Award as the Plan Committee shall deem appropriate and necessary including, without limitation,
any vesting conditions described in Section 6 placed upon grants of Award Shares;

 

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(iv)Interpret the Plan,
adopt, amend and rescind rules and regulations relating to the Plan, and make all other determinations and take all other action
necessary or advisable for the implementation and administration of the Plan; the interpretations and determinations of the Plan
Committee under the Plan (including without limitation determinations pertaining to the eligibility of Persons to receive Awards,
the form, amount and timing of Awards, the methods of payment for Awards, the restrictions and conditions placed upon Awards, and
the other terms and provisions of Awards and the certificates or agreements evidencing same) need not be uniform and may be made
by the Plan Committee selectively among Persons who receive, or are eligible to receive, Awards under the Plan, whether or not
such Persons are similarly situated; and

 

(v)Delegate all or a
portion of its authority under subsections (i) through (iii) of this Section 3 to one or more directors of the Company who
are executive officers of the Company, subject to such restrictions and limitations (such as the aggregate number of shares of
Common Stock that may be awarded) as the Plan Committee may decide to impose on such delegate directors.

 

In determining the recipient, form and amount
of Awards, the Plan Committee shall consider any factors deemed relevant, including the individual's functions, responsibilities,
value of services to the Company and past and potential contributions to the Company's profitability and sound growth.

 

All actions taken and all interpretations
and determinations made under this Plan in good faith by the Plan Committee shall be final and binding upon the Recipient, the
Company, and all other interested Persons. No member of the Plan Committee shall be personally liable for any action taken or decision
made in good faith relating to this Plan, and all members of the Plan Committee shall be fully protected and indemnified to the
fullest extent permitted under applicable law by the Company in respect to any such action, determination, or interpretation.

 

4.STOCK AVAILABLE FOR AWARDS.

 

(a)Number of Shares Available for Awards.
Shares of stock which may be issued or granted under the Plan shall be authorized and unissued or treasury shares of Common
Stock. The aggregate maximum number of shares of Common Stock which may be issued as grants of Award Shares shall not exceed 75,000
shares of Common Stock; provided, however, that such number shall be increased by any Restricted Shares which
are granted and are subsequently forfeited by the holders thereof.

 

(b)Increase in Number of Shares
Available. The maximum aggregate number of Shares that may be granted under the Plan will be increased effective the first
day of each of the Company’s fiscal quarters, beginning with the fiscal quarter commencing April 1, 2013, (the “Adjustment
Date”) by an amount equal to the lesser of:

 

    	4

    	 

    

(i)one percent (1%) of the difference between
the number of shares of Common Stock outstanding on the applicable Adjustment Date and the number of shares of Common Stock outstanding
at the beginning of the fiscal quarter immediately preceding the Adjustment Date; or

 

(ii)such lesser number of Shares as may be determined
by the Board.

 

5.AWARD SHARES.

 

(a)Grant. The Plan Committee may from
time to time, and subject to the provision of the Plan and such other terms and conditions as the Plan Committee may prescribe,
grant to any Eligible Person one or more shares of Common Stock ("Award Shares") allotted by the Plan Committee.
The grant of Award Shares or grant of the right to receive Award Shares shall be evidenced by either a written consulting agreement
or a separate written agreement confirming such grant, executed by the Company and the Recipient, stating the number of Award Shares
granted and stating all terms and conditions of such grant.

 

(b)Purchase Price and Manner of Payment.
The Plan Committee, in its sole discretion, may grant Award Shares in any of the following instances:

 

(vi)as a "bonus"
or "reward" for services previously rendered and compensated, in which case the recipient of the Award Shares shall not
be required to pay any consideration for such Award Shares, and the value of such Award Shares shall be the Fair Market Value of
such Award Shares on the date of grant; and

 

(vii)as "compensation"
for the previous performance or future performance of services or attainment of goals, in which case the recipient of the Award
Shares shall not be required to pay any consideration for such Award Shares (other than the performance of his services), and the
value of such Award Shares received (together with the value of such services or attainment of goals attained by the Recipient),
shall be the Fair Market Value of such Award Shares on the date of grant.

 

6.RESTRICTED SHARES.

 

(a)Vesting Conditions; Forfeiture of Unvested
Shares. The Plan Committee may subject or condition the grant of Issued Shares (hereinafter referred to as "Restricted
Shares") to such vesting conditions based upon continued provision of services or attainment of goals subsequent to
such grant of Restricted Shares as the Plan Committee, in its sole discretion, may deem appropriate. In the event the Recipient
does not satisfy such vesting conditions, the Company may require the Recipient to forfeit such unvested Restricted Shares. All
vesting conditions imposed on the grant of Restricted Shares shall be set forth in either a written consulting agreement or a separate
written restricted stock agreement, executed by the Company and the Recipient on or before the time of the grant of such Restricted
Shares, stating the number of said Restricted Shares subject to such conditions and further specifying the vesting conditions.
If no vesting conditions are expressly provided in the underlying consulting agreement or in a separate restricted stock agreement,
the Issued Shares shall not be deemed to be Restricted Shares, and will not be required to be forfeited. Any grant of Restricted
Shares shall be subject to the following limitations:

 

    	5

    	 

    

(i)In no case shall such
vesting conditions require continued provision of services or attainment of goals, as the case may be, subsequent to the grant
of Restricted Shares, for a period of time which exceeds 5 years from the date of grant, or on a cumulative incremental percentage
basis which is less than 20% per year; and

 

(ii)In no case shall
the Recipient be required to forfeit any vested Restricted Shares.

 

(b)Restrictive Legend. Until such time
as all conditions placed upon Restricted Shares lapse, the Plan Committee may place a restrictive legend on the share certificate
representing such Restricted Shares which evidences said restrictions in such form and subject to such stop instructions as the
Plan Committee shall deem appropriate. The conditions shall similarly apply to any new, additional or different securities the
Recipient may become entitled to receive with respect to such Restricted Shares by virtue of a stock split or stock dividend or
any other change in the corporate or capital structure of the Company. The Plan Committee shall also have the right, should it
elect to do so, to require the Recipient to deposit the share certificate for the Restricted Shares with the Company or its agent,
endorsed in blank or accompanied by a duly executed irrevocable stock power or other instrument of transfer, until such time as
the conditions lapse. The Company shall remove the legend with respect to any Restricted Shares which become vested.

 

(c)Stockholder Rights. The Recipient of
Restricted Shares shall have all rights or privileges of a stockholder of the Company with respect to the Restricted Shares notwithstanding
the terms of this Section 6 and, as such, shall be fully entitled to receive dividends (if any are declared and paid), to
vote and to exercise all other rights of a stockholder with respect to the Restricted Shares.

 

7.REGISTRATION
OF ISSUED SHARES.

 

(a)Registration or Exemption from Registration.
Unless expressly stipulated in the underlying consulting agreement or other separate agreement, in no event shall the Company be
required at any time to register the Issued Shares under the Securities Act or to register or qualify the Issued Shares under the
securities laws of any state or territory. In the event the Company is not required to register or qualify the Issued Shares, the
Issued Shares shall be issued in reliance upon such exemptions from registration or qualification under federal and state securities
laws, as the case may be, that the Company and its legal counsel, in their reasonable discretion, shall determine to be appropriate.

 

If requested by the Company, the Recipient
shall provide such further representations or documents as the Company or its legal counsel, in their reasonable discretion, deem
necessary or advisable in order to effect compliance with the conditions of the exemptions from federal or state registration or
qualification which it is relying upon, or with all applicable rules and regulations of any applicable securities exchanges.

 

    	6

    	 

    

In the event the Company is unable to obtain,
without undue burden or expense, such consents or approvals that may be required from any applicable regulatory authority (or may
be deemed reasonably necessary or advisable by legal counsel for the Company) with respect to the applicable exemptions from federal
or state registration or qualification which the Company is reasonably relying upon, the Company shall have no obligation under
this Agreement to issue or sell the Issued Shares until such time as such consents or approvals may be reasonably obtained without
undue burden or expense, and the Company shall be relieved of all liability with respect to its inability to issue or sell the
Issued Shares.

 

(b)Legend. In the event the Company delivers
unregistered shares, the Company reserves the right to place a restricted legend on the share certificate or certificates to comply
with the Securities Act and any state and territory securities laws or any exemption from registration or qualification thereunder
which is being relied upon by the Company.

 

8.ADJUSTMENTS.

 

(a)Subdivision or Stock Dividend. If outstanding
shares of Common Stock shall be subdivided into a greater number of shares by reason of recapitalization or reclassification, the
number of shares of Common Stock, if any, available for issuance under the Plan or subject to an Award shall, simultaneously with
the effectiveness of such subdivision or immediately after the record date of such dividend, be proportionately increased, and
conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares, the number of shares of
Common Stock, if any, available for issuance under the Plan or subject to an Award shall, simultaneously with the effectiveness
of such combination, be proportionately decreased.

 

(b)Adjustments Determined in Sole Discretion of Board.
To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made
by the Plan Committee, whose determination in that respect shall be final, binding and conclusive.

 

(c)No Other Rights to Recipient. Except
as expressly provided in this Section 8, (i) the Recipient shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares
of stock of any class, and (ii) the dissolution, liquidation, merger, consolidation or divisive reorganization or sale of assets
or stock to another corporation, or any issue by the Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares.
The grant of an Award pursuant to this Plan shall not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate,
or to sell or transfer all or any part of its business or assets.

 

    	7

    	 

    

9.PERFORMANCE ON BUSINESS DAY.

 

In the event the date on which a party to
this Plan is required to take any action under the terms of this Plan is not a business day, the action shall, unless otherwise
provided herein, be deemed to be required to be taken on the next succeeding business day.

 

10.AMENDMENT AND DISCONTINUATION
OF PLAN; MODIFICATION OF AWARDS.

 

(a)Amendment, Modification or Termination of Plan.
With the approval of the shareholders, the Board may amend the Plan. The Board may suspend or discontinue the Plan at any
time or from time-to-time; provided, however no such action may adversely alter or impair any Award previously
granted under this Plan without the consent of the Recipient affected thereby.

 

(b)Modification of Restricted Share Vesting Conditions.
Subject to the terms and conditions and within the limitations of this Plan, including vesting conditions, the Plan Committee
may modify the conditions placed upon the grant of any Restricted Shares, provided, however, no modification
of any conditions placed upon Restricted Shares may, without the consent of the Recipient thereof, adversely alter or impair such
Recipient's rights with respect to such Restricted Shares.

 

(c)Compliance with Laws. The Plan Committee
may at any time or from time-to-time, without receiving further consideration from any Person who may become entitled to receive
or who has received the grant of an Award hereunder, modify or amend Awards granted under this Plan as required to comport with
changes in securities, tax or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or
Awards thereunder or to comply with stock exchange rules or requirements, provided, however, that no
such modification may, without the consent of the holder thereof, adversely alter or impair his or her rights with respect to such
Award Shares.

    	8

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