Document:

SECURED CREDIT NOTE

 

	$326,000.00	Naperville, Illinois
	Issue Date: April 27, 2012	Maturity Date: On or before June 21, 2012

 

FOR VALUE RECEIVED,
Q LOTUS HOLDINGS, INC., a Nevada corporation (the “Borrower”), hereby promises to pay on or before JUNE
21, 2012 (the “Maturity Date”),
to the order of MW BUSINESS CREDIT, LLC, a Nevada limited liability company (together with its successors and assigns, the
“Holder”), at its office located at 710 East Ogden Avenue, Suite 500, Naperville, Illinois 60563, or at such
other location as the Holder may otherwise direct in writing from time to time, the principal amount of THREE HUNDRED AND TWENTY-SIX
THOUSAND DOLLARS ($326,000.00) in lawful money of the United States, payable in accordance with the provisions of this Secured
Credit Note (this “Note”).

 

Article
1.                
Security Agreement. This Note is the “Note” of the Borrower referred to in that certain Security
Agreement of even date herewith (the “Security Agreement”) by and between the Holder and the Borrower. This
Note is subject to the terms and conditions of the Security Agreement, and capitalized terms not expressly defined herein shall
have the respective meanings ascribed to such terms in the Security Agreement.

 

Article
2.                
Payments of Principal. Borrower covenants and agrees that it will duly and punctually pay the principal
sum of THREE HUNDRED AND TWENTY-SIX THOUSAND DOLLARS ($326,000.00), or such lesser principal balance as may be due and owing from
time to time under this Note, in accordance with the provisions hereof.

 

Article
3.                
Payments of Interest. No interest shall be payable on the principal sum of this Note.

 

Article
4.                
Monthly Payments. Subject to the remaining terms and conditions of this Note, no payments shall be due
on this Note until the Maturity Date.

 

Article
5.                
Loan Fee. Borrower acknowledges and agrees that a loan fee of SIXTEEN THOUSAND DOLLARS ($16,000.00) (the
"Loan Fee") has been included in the principal balance of this Note and that the Loan Fee shall be deemed fully
earned and non-refundable as of the date of this Note.

 

Article
6.                
Secured Obligations. This Note is secured by the Collateral. The Security Agreement grants the Holder
certain rights with respect to the Collateral upon the occurrence and continuance of an Event of Default.

 

Article
7.                
Events of Default. The occurrence of any of the events set out below as (a)-(b) or a default under
the Security Agreement (collectively “Events of Default”) shall, at the option of Holder, make the principal
balance of this Note as immediately due and payable, without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind.

 

    	 

    	 

    
 

(a) Payments. The
Borrower fails to make any installment of principal or other amounts due pursuant to this Note whether at stated maturity, upon
acceleration or otherwise.

 

(b)Insolvency. An
order for relief is entered against the Borrower by any United States Bankruptcy Court; the Borrower does not generally pay its
debts as they become due (within the meaning of 11 U.S.C. 303(h)); the Borrower makes an assignment for the benefit of creditors;
the Borrower applies for or consents to the appointment of a custodian, receiver, trustee or similar officer for it or for all
or any substantial part of its assets, or such a custodian, receiver, trustee or similar officer is appointed without the application
or consent of the Borrower; the Borrower institutes (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, moratorium, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under
the laws of any jurisdiction; any such proceeding is instituted (by petition, application or otherwise) against the Borrower; or
any judgment, writ, warrant of attachment, execution or similar process is issued or levied against a material portion of the assets
of the Borrower.

 

Article
8.                
Fees and Expenses. All fees and expenses incurred by the Holder (including, without limitation, attorneys’
fees and expenses) in collecting amounts due under this Note shall be paid by the Borrower to the Holder upon demand therefore.

 

Article
9.                
Waiver of Presentment, Demand and Dishonor.

 

(a)               
The Borrower hereby waives presentment for payment, protest, demand, notice of protest, notice of non-payment and
diligence with respect to this Note, and waives and renounces all rights to the benefit of any statute of limitations or any moratorium,
appraisement, exemption or homestead now provided or that hereafter may be provided by any federal or applicable state statute,
including, but not limited to, exemptions provided by or allowed under the U.S. Bankruptcy Code (or similar state laws affecting
creditors’ rights) and any successors thereto), both as to itself and as to all of its property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note and any and all extensions, renewals and modifications
hereof.

 

(b)              
No failure on the part of the Holder to exercise any right or remedy hereunder with respect to the Borrower, whether
before or after the happening of an Event of Default, shall constitute a waiver of any future Event of Default or of any other
Event of Default. No failure to demand the debt of the Borrower evidenced hereby by reason of an Event of Default or indulgence
granted from time to time shall be construed to be a waiver of the right to insist upon prompt payment thereafter; or shall be
deemed to be a novation of this Note or a reinstatement of such debt evidenced hereby or a waiver of such right of demand or any
other right, or be construed so as to preclude the exercise of any right the Holder may have, whether by the laws of the state
governing this Note, by agreement or otherwise; and the Borrower hereby expressly waives the benefit of any statute or rule of
law or equity that would produce a result contrary to or in conflict with the foregoing.

 

Article
10.             Governing
Law; Consent to Jurisdiction. This Note shall be governed by, and construed in accordance with, the internal laws of the State
of Illinois, without reference to the choice of law principles thereof. Any legal action, suit or proceeding arising out of or
relating to this Note shall only be instituted, heard and adjudicated (excluding appeals) in a state or federal court located in
Chicago, Illinois, and each party hereto knowingly, voluntarily and intentionally waives any objection which such party may now
or hereafter have to the laying of the venue of any such action, suit or proceeding, and irrevocably submits to the exclusive personal
jurisdiction of any such court in any such action, suit or proceeding. Service of process in connection with any such action, suit
or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices
under the Security Agreement. Notwithstanding the foregoing to the contrary, the Holder may institute
and prosecute any action, suit or proceeding in any court of competent jurisdiction it shall deem advisable in connection with
the enforcement of its rights hereunder. 

 

    	-2-

    	 

    
 

 

Article
11.             Amendment;
Waiver. No modification, alteration, waiver or change of any of the provisions hereof shall be effective unless in writing
and signed by the Borrower and the Holder and, then, only to the extent set forth in such writing.

 

Article
12.             No
Jury Trial. Borrower acknowledges and agrees that any controversy that may arise under this Note is likely to involve
complicated and difficult issues. Accordingly, BORROWER
hereby KNOWINGLY, VOLUNTARILY AND INTENTIONALLY irrevocably and unconditionally waives any right BORROWER may have to a trial by
jury in respect to any litigation directly or indirectly arising out of or relating to this NOTE.  Borrower certifies
and acknowledges that (i) the Holder has not represented, expressly or otherwise, that it would not, in the event of litigation,
seek to enforce the foregoing waiver, (ii) Borrower understands and has considered the implications of this waiver, and (iii) the
Holder has been induced to accept this Note by, among other things, the waivers and certifications in this Article.

 

Article
13.             Use
of Proceeds. Borrower acknowledges that this Note is executed as part of a commercial transaction and that the proceeds of
this Note will not be used for any personal or consumer purpose.

 

IN WITNESS WHEREOF,
the Borrower has executed and delivered this Secured Credit Note this 27th day of April, 2012.

 

	 	BORROWER:
	 	 	 
	 	Q LOTUS HOLDINGS, INC.
	 	 	 
	 	 	 
	:	By:	/s/ Gary Rosenberg
	 	 	Name: Gary Rosenberg
	 	 	Title: Chief Executive Officer

 

    	-3-SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT
(this "Agreement") is dated as of April 27, 2012 and is entered into by and between Q LOTUS HOLDINGS,
INC., a Nevada corporation with its principal place of business at 520 N. Kingsbury, Unit 1810, Chicago, IL 60654 (the "Grantor"),
and MW BUSINESS CREDIT, LLC, a Nevada limited liability company with an office at 710 East Ogden Avenue, Suite 500,
Naperville, Illinois 60563 (the "Secured Party").

 

RECITALS

 

WHEREAS, Grantor
is executing and delivering to Secured Party Grantor's Secured Credit Note dated even date herewith in the principal amount of
$326,000.00 (the “Note”).

 

WHEREAS, one
condition of Secured Party agreeing to make the loan evidenced by the Note (the “Loan”) is the execution and delivery
of this Security Agreement.

 

AGREEMENT

 

NOW, THEREFORE, the
parties hereby agree as follows (capitalized terms used herein but defined shall have the meanings given thereto in the Uniform
Commercial Code as in effect in the State of Oregon, as amended (the "UCC")):

 

1.    Grant
of Security Interest. Grantor hereby grants to Secured Party a security interest in the Collateral (as defined in Section
2 below).

 

2.     Security
for Obligations. The property serving as collateral and subject to the above security interest shall be that certain Bureau
of Land Management Claim Name: RAMEX 2 and Serial No.: ORMC 149 084, located in Jackson County, Oregon, along with the products
and proceeds therefrom (the "Collateral").

 

3.     The
Grantor's Obligations Secured Hereby. The security interest created hereby is given to secure the payment and performance
of all present and future obligations owing by Grantor to Secured Party whether or not for the payment of money, whether or not
evidenced by a promissory note or other instrument, whether direct or indirect, absolute or contingent, due or to become due,
joint or several, primary or secondary, liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether
arising before, during or after the commencement of any case with respect to Grantor under the United States Bankruptcy Code or
any similar statute, including, but not limited to, all amounts due and owing by Grantor to Secured Party and arising out of,
based upon or in connection with (i) the Note, (ii) any other loans made by Secured Party to Grantor after the date hereof, and
(iii) the performance by Grantor of any term, obligation, covenant or condition contained in any other agreement between Secured
Party and Grantor, or any of the foregoing (collectively the "Indebtedness" or the “Obligations”).

 

4.     The
Grantor's Representations and Warranties. The Grantor represents and warrants and, so long as this Agreement is in effect,
shall be deemed continuously to represent and warrant, that:

 

    	 

    	 

    

 

(a)The Grantor
owns the Collateral free and clear of any liens, security interests, pledges or encumbrances.

 

(b)There is no
effective financing statement or other instrument similar in effect covering all or any part of the Collateral on file in any state
or county recording office in the States of Nevada, Oregon or Illinois except as may have been filed in favor of the Secured Party.

 

(c)This Agreement
creates a valid security interest of the Secured Party in the Collateral securing payment of the Indebtedness. On the filing of
the financing statements and the other instruments similar in effect under Section 5(b), the Secured Party will have a valid first
perfected lien on and security interest in the Collateral.

 

(d)No consent,
authorization, approval or other action by, and no notice to or filing with, any governmental authority, regulatory body or other
person is required for the grant by the Secured Party of the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or for the perfection or exercise by the Secured Party of its rights and remedies
hereunder, except filings of financing documents.

 

(e)The execution
and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its
certificate of incorporation and bylaws do not prohibit any term or condition of this Agreement.

 

(f)To the extent
the Collateral consists of accounts, chattel paper or general intangibles, as defined by the UCC, the Collateral is enforceable
in accordance with its terms, is genuine, and fully complies with all applicable laws and regulations.

 

(g)Any and all
Collateral which is hereafter acquired shall, and without any further conveyance, assignment or act on the part of the Grantor
or the Secured Party, become and be subject to the security interest herein granted as fully and completely as though specifically
described herein.

 

(h)The
Grantor's principal place of business is as set forth in the preamble hereto.

 

 

5.     The Grantor's
Covenants. The Grantor agrees and covenants that:

 

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

 

    	2

    	 

    

 

(b)Grantor authorizes
Secured Party to file a financing statement, or alternatively, a copy of this Agreement to perfect Secured Party's security interest
in the Collateral. At Secured Party's request, Grantor will, at no cost to Secured Party, sign and deliver all other documents
that Secured Party reasonably considers necessary or desirable to perfect, protect and continue Secured Party's security interest
in the Collateral. Grantor will pay all filing fees, title transfer fees and other fees and costs involved and will not without
the prior written consent of the Secured Party, file or authorize or permit to be filed in any public office any financing statement
naming the Grantor as debtor and not naming the Secured Party as secured party. Grantor irrevocably appoints Secured Party as its
attorney in fact to execute financing statements and documents of title in Grantor's name and to execute all documents necessary
to transfer title if there is a default in any of the Indebtedness.

 

(c)The Grantor
will defend the Collateral against the claims and demands of all other parties, including, without limitation, defenses, setoffs,
claims and counterclaims asserted against the Grantor or Secured Party; will keep the Collateral free from all security interests
or other encumbrances; and will not sell, transfer, lease, assign, deliver or otherwise dispose of any Collateral or any interest
therein without the prior written consent of the Secured Party, except that the Grantor may sell assets which are not material
in the ordinary course.

 

(d)Upon request
of Secured Party, Grantor will deliver to Secured Party any and all of the documents evidencing or constituting the Collateral,
and Grantor will note Secured Party's interest upon any and all chattel paper if not delivered to Secured Party for possession
by Grantor.

 

(e)Grantor will
keep and maintain, and cause others to keep and maintain, the Collateral in good order, repair and condition at all times while
this Agreement remains in effect. Grantor will pay when due all claims for work done on, or services rendered or material furnished
in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral.

 

(f)Secured Party
and Secured Party's designated representatives and agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.

 

(g)Grantor will
pay when due all taxes, assessments and liens upon the Collateral and its use or operation. Grantor may withhold any such payment
or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to
pay and so long as Secured Party's interest in the Collateral is not jeopardized in Secured Party's sole opinion. If the Collateral
is subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Secured Party cash, a sufficient
corporate surety bond or other security satisfactory to Secured Party in an amount adequate to provide for the discharge of the
lien plus any interest, costs, attorneys' fees or other charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Secured Party and shall satisfy any final adverse judgment before enforcement against
the Collateral. Grantor shall name Secured Party as an additional obligee under any surety bond furnished in the contest proceedings.
Grantor further agrees to furnish Secured Party with evidence that such taxes, assessments and governmental and other charges have
been paid in full and in a timely manner.

 

(h)Grantor
shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter in effect,
applicable to the ownership, production, disposition or use of the Collateral. Grantor may contest in good faith any such law,
ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Secured Party's
interest in the Collateral, in Secured Party's opinion, is not jeopardized.

 

    	3

    	 

    

 

(i) Grantor shall
procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together with such other
insurance as Secured Party may require with respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable
to Secured Party and issued by a company or companies reasonably acceptable to Secured Party. Grantor upon request of Secured Party,
will deliver to Secured Party from time to time the policies or certificates of insurance in form satisfactory to Secured Party,
including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days' prior written notice
to Secured Party and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor of Secured Party will not be impaired in any way by any
act, omission or default of Grantor or any other person. In connection with all policies covering Collateral, Grantor will provide
Secured Party with such loss payable or other endorsements as Secured Party may require. If Grantor at any time fails to obtain
or maintain any insurance as required under this Agreement, Secured Party may (but shall not be obligated to) obtain such insurance
as Secured Party deems appropriate, including if Secured Party so chooses, single interest insurance, which will cover only Secured
Party s interest in the Collateral.

 

(j) Grantor shall
promptly notify Secured Party of any loss or damage to the Collateral. Secured Party may make proof of loss if Grantor fails to
do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon,
shall be held by Secured Party as part of the Collateral. If Secured Party consents to repair or replacement of the damaged or
destroyed Collateral, Secured Party shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for
the reasonable cost of repair or restoration. If Secured Party does not consent to repair or replacement of the Collateral, Secured
Party shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Indebtedness.

 

(k) Grantor, upon
request of Secured Party, shall furnish to Secured Party reports on each existing policy of insurance showing such information
as Secured Party may reasonably request including the following: (i) the name of the insurer; (ii) the risks insured; (iii) the
amount of the policy; (iv) the property insured; (v) the then current value on the basis of which insurance has been obtained and
the manner of determining that value; and (vi) the expiration date of the policy. In addition, Grantor shall upon request by Secured
Party (however not more often than annually) have an independent appraiser satisfactory to Secured Party determine, as applicable,
the cash value or replacement cost of the Collateral.

 

(1) Grantor will
notify the Secured Party promptly in writing of any change in the Grantor's address or in the address at which records concerning
the Collateral are kept and any change in the Grantor's name.

 

    	4

    	 

    

 

6.     Grantor's
Right to Possession and to Collect Accounts. Until an Event of Default as defined in Section 8 of this Agreement shall
exist and except as otherwise provided below with respect to accounts, Grantor may have possession of the property and beneficial
use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement, provided that Grantor's right
to possession and beneficial use shall not apply to any Collateral where possession of the Collateral by Secured Party is required
by law to perfect Secured Party's security interest in such Collateral. Until otherwise notified by Secured Party, Grantor may
collect any of the Collateral consisting of accounts. Upon Secured Party giving notice to Grantor of the existence of an Event
of Default as defined in Section 8 of this Agreement, which notice shall (a) identify the default or defaults on which such notice
is based and (b) be binding and conclusive upon Grantor for purposes of Secured Party's commencement of actions to collect the
Collateral consisting of accounts, then Secured Party shall have complete right and authority to take any and all actions deemed
necessary or desirable in its sole opinion to collect the accounts and to notify account debtors to make payments directly to Secured
Party for application to the Indebtedness. If Secured Party at any time has possession of any Collateral, whether before or after
an Event of Default, Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral
if Secured Party takes such action for that purpose as Grantor shall request or as Secured Party, in Secured Party's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be
a failure to exercise reasonable care. Secured Party shall not be required to take any steps necessary to preserve any rights in
the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness.

 

7.     Secured
Party's Expenditures. If any action or proceeding is commenced that would materially affect Secured Party's interest in
the Collateral or if Grantor fails to comply with any provision of this Agreement or the Note, including but not limited to Grantor's
failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Agreement, Secured Party on
Grantor's behalf may (but shall not be obligated to) take any action that Secured Party deems appropriate, including but not limited
to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the
Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid
by Secured Party for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by
Secured Party to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and will be payable
on demand or (b) be added to the principal balance of the Note. This Agreement and the security interest granted hereby also will
secure payment of these amounts. Such right shall be In addition to all other rights and remedies to which Secured Party may be
entitled upon an Event of Default.

 

8.     Events
of Default. Each of the following shall constitute an Event of Default under this Agreement:

 

(a)Grantor
fails to make any payment when due in accordance with the Indebtedness.

 

(b)Grantor
fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or the Note
or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between
Secured Party and Grantor.

 

    	5

    	 

    

 

(c)Should Grantor
default under any loan, extension of credit, security agreement, purchase or sales agreement or any other agreement, in favor of
any other creditor or person that may materially affect any of Grantor's property or Grantor's ability to repay the Indebtedness
or perform its obligations under this Agreement or the Note.

 

(d)Any warranty,
representation or statement made or furnished to Secured Party by Grantor or on Grantor's behalf under this Agreement or the Note
is false or misleading in any material respect at the time made or furnished.

 

(e)This Agreement
or any other agreement entered into in connection with the creation, perfection and continuity of the security interest granted
herein ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.

 

(f)The dissolution
or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Grantor.

 

(g)Commencement
of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor
of Grantor or by any governmental agency against any collateral securing the Indebtedness. However, this Event of Default shall
not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Secured Party written notice of the creditor or forfeiture proceeding and
deposits with Secured Party monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Secured
Party, in its sole discretion, as being an adequate reserve or bond for the dispute.

 

9.     Rights
and Remedies on Default. Upon the occurrence of any Event of Default, Secured Party shall have all the rights of a secured
party under the UCC. In addition and without limitation Secured Party may exercise any one or more of the following rights and
remedies:

 

(a)Secured Party
may declare the entire Indebtedness immediately due and payable, without notice of any kind to Grantor.

 

(b)Secured Party
may require Grantor to deliver to Secured Party all or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Secured Party may require Grantor to assemble the Collateral and make it available
to Secured Party at a place to be designated by Secured Party. Secured Party also shall have full power to enter upon the property
of Grantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement
at the time of repossession, Grantor agrees Secured Party may take such other goods, provided that Secured Party makes reasonable
efforts to return them to Grantor after repossession.

 

    	6

    	 

    

 

(c)Secured Party
shall have full power to sell, lease, transfer or otherwise deal with the Collateral or proceeds thereof in Secured Party's own
name or that of Grantor. Secured Party may sell the Collateral at public auction or private sale. Unless the Collateral threatens
to decline speedily in value or is of a type customarily sold on a recognized market, Secured Party will give Grantor, and other
persons as required by law, reasonable notice of the time and place of any public sale, or the time after which any private sale
or any other disposition of the Collateral is to be made. However, no notice need be provided to any person who, after an Event
of Default occurs, enters into and authenticates an agreement waiving that person's right to notification of sale. The requirements
of reasonable notice shall be met if such notice is given at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become part of the Indebtedness secured by this Agreement and shall be payable
on demand, with interest at the Note rate from date of expenditure until repaid.

 

(d)Secured Party
shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rent from the Collateral
and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond
if permitted by law. Secured Party's right to the appointment of a receiver shall exist whether or not the apparent value of the
Collateral exceeds the Indebtedness by a substantial amount. Employment by Secured Party shall not disqualify a person from serving
as a receiver.

 

(e)Secured Party,
either itself or through a receiver, may collect the payments, rents, income and revenues from the Collateral. Secured Party may
at any time in Secured Party's discretion transfer any Collateral into Secured Party's own name or that of Secured Party's nominee
and receive the payments, rents, income and revenues therefrom and hold the same as security for the Indebtedness or apply it to
payment of the Indebtedness in such order of preference as Secured Party may determine. Insofar as the Collateral consists of accounts,
general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Secured Party may demand,
collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize on the Collateral as Secured Party may determine,
whether or not Indebtedness or Collateral is then due. For these purposes, Secured Party may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment or storage of any
Collateral. To facilitate collection, Secured Party may notify account debtors and obligors on any Collateral to make payments
directly to Secured Party.

 

(f)If Secured
Party chooses to sell any or all of the Collateral, Secured Party may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Secured Party after application of all amounts received from the exercise of the rights provided in
this Agreement. Grantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts
or chattel paper.

 

(g)Secured Party
shall have all the rights and remedies of a secured creditor under the provisions of the UCC as it may be amended from time to
time. In addition, Secured Party shall have and may exercise any or all other rights and remedies it may have available at law,
in equity or otherwise.

 

    	7

    	 

    

 

(h) Except as may
be prohibited by applicable law, all of Secured Party's rights and remedies, whether evidenced by this Agreement or the Note, or
by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Secured Party to pursue
any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Secured Party's right to declare
a default and exercise its remedies.

 

10.  Miscellaneous Provisions.

 

(a)Amendments.
This Agreement constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement.
No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.

 

(b)Attorneys'
Fees; Expenses. Grantor agrees to pay upon demand all of Secured Party's costs and expenses, including Secured Party's
attorneys' fees and Secured Party's legal expenses, incurred in connection with the preparation of this Agreement, the Note and
the Loan and incurred in connection enforcement of this Agreement, including, but not limited to, in connection with any bankruptcy
or insolvency proceeding involving Grantor. Secured Party may hire or pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses include but are not limited to Secured Party's reasonable
attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals and any anticipated post-judgment
collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court.

 

(c)Caption
Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.

 

(d)No Waiver
by Secured Party. Secured Party shall not be deemed to have waived any rights under this Agreement unless such waiver is
given in writing and signed by Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Secured Party of a provision of this Agreement shall not prejudice or
constitute a waiver of Secured Party's right otherwise to demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Secured Party, nor any course of dealing between Secured Party and Grantor, shall constitute
a waiver of any of Secured Party's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent
of Secured Party is required under this Agreement, the granting of such consent by Secured Party in any instance shall not constitute
continuing consent to subsequent instances where such consent is required.

 

(e)Notices.
All notices, requests, demands and other communications hereunder shall be deemed to have been duly given if in writing and
either delivered personally, sent by facsimile transmission or by nationally recognized overnight delivery service, or mailed by
postage prepaid registered or certified U.S. mail, return receipt requested to the address of the intended recipient set forth
in the preamble or such other address as may be designated in writing by notice given hereunder, and shall be effective upon personal
delivery or facsimile transmission thereof or upon delivery by registered or certified U.S. mail or one (1) business day following
deposit with a nationally recognized overnight delivery service.

 

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(f)Power
of Attorney. Grantor hereby appoints Secured Party as Grantor's irrevocable attorney-in-fact for the purpose of executing
any documents necessary to perfect, amend, or to continue the security interest granted in this Agreement or to demand termination
of filings of other secured parties. Secured Party may at any time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement. Grantor will
reimburse Secured Party for all expenses for the perfection and the continuation of the perfection of Secured Party's security
interest in the Collateral.

 

(g)Severability.
If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid or unenforceable as, to any
circumstance, that finding shall not make the offending provision illegal, invalid or unenforceable as to any other circumstance.
If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending
provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.

 

(h)Successors
and Assigns. Subject to any limitations stated in this Agreement on transfer of Grantor's interest, this Agreement shall
be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested
in a person other than Grantor, Secured Party, without notice to Grantor, may deal with Grantor's successors with reference to
this Agreement and the Indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Agreement
or liability under the Indebtedness.

 

(i)Survival
of Representations and Warranties. All representations, warranties and agreements made by Grantor in this Agreement shall
survive the execution and delivery of this Agreement, shall be continuing in nature, and shall remain in full force and effect
until such time as Grantor's Indebtedness shall be paid in full.

 

(j) Time is of
the Essence. Time is of the essence in the performance of this Agreement.

 

(k) Counterparts/Further
Assurances. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. Each of the parties agrees to sign such other and further documents
as may be reasonably necessary to carry out the intentions expressed in this Agreement.

 

(1) Governing
Law. This Agreement and all amendments thereto shall be governed, construed and enforced in accordance with the laws of
the State of Illinois.

 

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(m)Jurisdiction
and Venue. Grantor acknowledges that this Agreement was negotiated in the State of Illinois and there are substantial contacts
between the parties and the transactions contemplated in the State of Illinois. For purposes of any action or proceeding arising
out of this Agreement, the parties hereto expressly submit to the jurisdiction of all courts located in Chicago, State of Illinois,
the laws of which shall be the applicable law. Grantor consents that it may be served with any process or paper by registered mail
or by personal service within or without the State of Illinois in accordance with applicable law. Furthermore, Grantor waives and
agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdiction of such courts,
that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper.
It is the intent of the parties hereto that all provisions of this Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois. To the extent that a court of competent jurisdiction finds Illinois law inapplicable with respect
to any provisions hereof, then, as to those provisions only, the laws of the jurisdiction where the Collateral is located shall
be deemed to apply. Nothing contained in this paragraph shall limit or restrict the right of Secured Party to commence any proceeding
in the courts located in the jurisdiction in which the Collateral is located to the extent Secured Party deems such proceeding
necessary or advisable to exercise remedies available under the Note. Notwithstanding the foregoing to the contrary, the Secured
Party may institute and prosecute any action, suit or proceeding in any court of competent jurisdiction it shall deem advisable
in connection with the enforcement of its rights hereunder.

 

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

 

	 	"GRANTOR"
	 	 
	 	Q LOTUS HOLDINGS, INC.
	 	 	 	 
	 	By:	/s/ Gary Rosenberg
	 	 	Name:	Gary Rosenberg
	 	 	Title:	Chief Executive Officer

 

	 	SECURED PARTY:
	 	 
	 	MW BUSINESS CREDIT, LLC
	 	 	 	 
	 	By:	/s/ Timothy Bellcourt
	 	 	Name: 	Timothy Bellcourt
	 	 	Title:	Manager

 

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