Document:

Exhibit 10.4

 

EXECUTION VERSION

 

 

 

SECURITY AGREEMENT

 

by

 

THE WET SEAL, INC.,

as the Lead Borrower,
as a Debtor and as a Debtor-in-Possession

 

and

 

THE OTHER BORROWERS AND GUARANTORS PARTY
HERETO

FROM TIME TO TIME, as Debtors and Debtors-in-Possession

 

and

 

B.
Riley FINANCIAL, INC.,

as Lender,

 

Dated as of January 15, 2015

 

 

    	 

    	 

    

 

 

TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	PREAMBLE	 	1
	 	 	 
	RECITALS	 	1
	 	 	 
	AGREEMENT	 	2
	 	 	 
	ARTICLE I
	 
	DEFINITIONS AND INTERPRETATION
	 	 	 
	SECTION 1.1.	Definitions.	2
	SECTION 1.2.	Interpretation	5
	 	 	 
	ARTICLE II
	 
	GRANT OF SECURITY AND SECURED OBLIGATIONS
	 	 	 
	SECTION 2.1.	Pledge; Grant of Security Interest	6
	SECTION 2.2.	Secured Obligations	7
	SECTION 2.3.	Security Interest	7
	 	 	 
	ARTICLE III
	 
	PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;
	USE OF COLLATERAL
	 	 	 
	SECTION 3.1.	Delivery of Certificated Securities Collateral	8
	SECTION 3.2.	Perfection of Uncertificated Securities Collateral	8
	SECTION 3.3.	Maintenance of Perfected Security Interest	9
	SECTION 3.4.	Other Actions	9
	SECTION 3.5.	Supplements; Further Assurances	12
	 	 	 
	ARTICLE IV
	 
	REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	 
	SECTION 4.1.	Title	13
	SECTION 4.2.	Limitation on Liens; Defense of Claims; Transferability of Collateral	13
	SECTION 4.3.	Chief Executive Office; Change of Name; Jurisdiction of Organization	13

 

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	 	 	Page
	 	 	 
	SECTION 4.4.	Due Authorization and Issuance	13
	SECTION 4.5.	No Conflicts, Consents, etc	13
	SECTION 4.6.	Collateral	14
	SECTION 4.7.	Insurance	14
	SECTION 4.8.	Payment of Taxes; Compliance with Laws; Contested Liens; Claims	14
	 	 	 
	ARTICLE V
	 
	CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL
	 	 	 
	SECTION 5.1.	Pledge of Additional Securities Collateral	15
	SECTION 5.2.	Voting Rights; Distributions; etc.	15
	SECTION 5.3.	Organization Documents	16
	SECTION 5.4.	Defaults, Etc	16
	SECTION 5.5.	Certain Agreements of Grantors As Issuers and Holders of Equity Interests.	16
	 	 	 
	ARTICLE VI
	 
	CERTAIN PROVISIONS CONCERNING INTELLECTUAL
	PROPERTY COLLATERAL
	 	 	 
	SECTION 6.1.	Registrations	17
	SECTION 6.2.	No Violations or Proceedings	17
	SECTION 6.3.	Protection of Lender’s Security	17
	SECTION 6.4.	After-Acquired Property	18
	SECTION 6.5.	Modifications	18
	SECTION 6.6.	Litigation	18
	 	 	 
	ARTICLE VII
	 
	CERTAIN PROVISIONS CONCERNING
	 
	CREDIT CARD RECEIVABLES AND ACCOUNTS
	 	 	 
	SECTION 7.1.	Special Representations and Warranties	19
	SECTION 7.2.	Maintenance of Records	19
	SECTION 7.3.	Legend	20
	SECTION 7.4.	Modification of Terms, Etc	20
	SECTION 7.5.	Collection	20

 

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	 	 	Page
	 	 	 
	ARTICLE VIII
	 
	REMEDIES
	 	 	 
	SECTION 8.1.	Remedies	20
	SECTION 8.2.	Notice of Sale	23
	SECTION 8.3.	Waiver of Notice and Claims	23
	SECTION 8.4.	Certain Sales of Collateral	23
	SECTION 8.5.	No Waiver; Cumulative Remedies.	24
	SECTION 8.6.	Certain Additional Actions Regarding Intellectual Property	24
	SECTION 8.7.	Application of Proceeds	25
	SECTION 8.8.	Grant of License; Use of Assets	25
	 	 	 
	ARTICLE IX
	 
	MISCELLANEOUS
	 	 	 
	SECTION 9.1.	Concerning Lender.	25
	SECTION 9.2.	Lender May Perform; Lender Appointed Attorney-in-Fact	26
	SECTION 9.3.	Expenses	27
	SECTION 9.4.	Continuing Security Interest; Assignment	27
	SECTION 9.5.	Termination	27
	SECTION 9.6.	Modification in Writing	28
	SECTION 9.7.	Notices	28
	SECTION 9.8.	GOVERNING LAW	28
	SECTION 9.9.	CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.	28
	SECTION 9.10.	Severability of Provisions	29
	SECTION 9.11.	Execution in Counterparts; Effectiveness	30
	SECTION 9.12.	No Release	30
	SECTION 9.13.	Obligations Absolute	30
	SECTION 9.14.	Pre-Petition Cash Collateral Account.	31
	SECTION 9.15.	Conflicts between Security Agreement and DIP Orders.	31
	 	 	 
	SIGNATURES	 	S-1

 

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	EXHIBIT 1	Form of Securities Pledge Amendment
	SCHEDULE I	Intercompany Notes
	SCHEDULE II	Intellectual Property
	SCHEDULE III	Pledged Interests
	SCHEDULE IV	Commercial Tort Claims
	SCHEDULE V	Instruments and Chattel Paper
	SCHEDULE VI	Securities Accounts
	SCHEDULE VII	Organizational Information

 

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SECURITY AGREEMENT

 

SECURITY AGREEMENT dated
as of January 15, 2015 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions
hereof, this “Security Agreement”) made by (i) THE WET SEAL, INC., a Delaware corporation, as lead borrower
for itself and the other Borrowers, each as a debtor and debtor-in-possession (the “Lead Borrower”), (ii) THE
OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HERETO, each as a debtor and debtor-in-possession (together with the Lead Borrower,
the “Original Borrowers”) OR FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT, each as a debtor
and debtor-in-possession (the “Additional Borrowers,” and together with the Original Borrowers, the “Borrowers”),
and (iii) THE GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO, each as a debtor and debtor-in-possession (the “Original
Guarantors”) AND THE OTHER GUARANTORS FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT, as Debtors
and Debtors-in-Possession (the “Additional Guarantors,” and together with the Original Guarantor, the “Guarantors”),
as pledgors, assignors and debtors (the Borrowers, together with the Guarantors, in such capacities and together with any successors
in such capacities, the “Grantors,” and each, a “Grantor”), in favor of B. RILEY FINANCIAL,
INC., as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Lender”).

 

RECITALS:

 

A.           On
January 15, 2015, the Borrowers and the Guarantors commenced Case Nos. 15-10081, 15-10082,  15-10083, and 15-10084 (collectively,
the “Bankruptcy Case”) by filing  voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Borrowers and Guarantors
continue to operate their business and manage their properties as debtors and debtors-in-possession pursuant to Sections 1107(a)
and 1108 of the Bankruptcy Code.

 

B.           The
Borrowers, the Guarantors and the Lender, among others, have, in connection with the execution and delivery of this Security Agreement,
entered into that certain Senior Secured, Super-Priority Debtor-In-Possession Credit Agreement dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

C.           The
Borrowers and the Guarantors will receive substantial benefits from the execution, delivery and performance of the Obligations
and each is, therefore, willing to enter into this Security Agreement.

 

D.           This
Security Agreement is given by each Grantor in favor of the Lender for the benefit of the Credit Parties to secure the payment
and performance of all of the Secured Obligations (as hereinafter defined).

 

    	 

    	 

    

 

E.           It
is a condition to the obligations of the Lender to make loans under the Credit Agreement under the Credit Agreement that each Grantor
execute and deliver the applicable Loan Documents, including this Security Agreement.

 

AGREEMENT:

 

NOW THEREFORE, in consideration
of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
each Grantor and the Lender hereby agree as follows:

 

ARTICLE
I

 

DEFINITIONS
AND INTERPRETATION

 

SECTION 1.1.          Definitions.       
Unless otherwise defined herein or in the Credit Agreement, capitalized terms used herein that are defined in the UCC shall have
the meanings assigned to them in the UCC.

 

(b)          Capitalized
terms used but not otherwise defined herein that are defined in the Credit Agreement shall have the meanings given to them in the
Credit Agreement.

 

(c)          The
following terms shall have the following meanings:

 

“Additional
Guarantors” shall have the meaning assigned to such term in the Preamble hereof.

 

“Borrowers”
shall have the meaning assigned to such term in the Preamble hereof.

 

“Claims”
shall mean any and all property taxes and other taxes, assessments and special assessments, levies, fees and all governmental charges
imposed upon or assessed against, and all claims (including, without limitation, landlords’, carriers’, mechanics’,
workmen’s, repairmen’s, laborers’, materialmen’s, suppliers’ and warehousemen’s Liens and other
claims arising by operation of Law) against, all or any portion of the Collateral.

 

“Collateral”
shall have the meaning assigned to such term in SECTION 2.1 hereof.

 

“Control”
shall mean in the case of any security entitlement, “control,” as such term is defined in Section 8-106 of the UCC.

 

“Control Agreements”
shall mean, collectively, the Blocked Account Agreements and the Securities Account Control Agreements.

 

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“Copyrights”
shall mean, collectively, with respect to each Grantor, all copyrights (whether statutory or common Law, whether established or
registered in the United States or any other country or any political subdivision thereof whether registered or unregistered and
whether published or unpublished) and all copyright registrations and applications made by such Grantor, in each case, whether
now owned or hereafter created or acquired by or assigned to such Grantor, including, without limitation, the registrations and
applications listed on Schedule II hereto, together with any and all (i) rights and privileges arising under applicable
Law with respect to such Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof,
(iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including,
without limitation, damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present or future infringements thereof.

 

“Credit Agreement”
shall have the meaning assigned to such term in Recital B hereof.

 

“Distributions”
shall mean, collectively, with respect to each Grantor, all Restricted Payments from time to time received, receivable or otherwise
distributed to such Grantor in respect of or in exchange for any or all of the Pledged Securities or Intercompany Notes.

 

“Goodwill”
shall mean, collectively, with respect to each Grantor, the goodwill connected with such Grantor’s business including, without
limitation, (i) all goodwill connected with the use of and symbolized by any of the Intellectual Property Collateral in which
such Grantor has any interest, (ii) all know-how, trade secrets, customer and supplier lists, proprietary information, inventions,
methods, procedures, formulae, descriptions, compositions, technical data, drawings, specifications, name plates, catalogs, confidential
information and the right to limit the use or disclosure thereof by any Person, pricing and cost information, business and marketing
plans and proposals, consulting agreements, engineering contracts and such other assets which relate to such goodwill and (iii)
all product lines of such Grantor’s business.

 

“Grantor”
shall have the meaning assigned to such term in the Preamble hereof.

 

“Guaranteed
Obligations” shall have the meaning assigned to such term in the Guaranty.

 

“Guarantors”
shall have the meaning assigned to such term in the Preamble hereof.

 

“Guaranty”
shall have the meaning assigned to term “Facility Guaranty” in the Credit Agreement.

 

“Intellectual
Property Collateral” shall mean, collectively, the Patents, Trademarks, Copyrights, Licenses and Goodwill.

 

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“Intercompany
Notes” shall mean, with respect to each Grantor, all intercompany notes described on Schedule I hereto and each
intercompany note hereafter acquired by such Grantor and all certificates, instruments or agreements evidencing such intercompany
notes, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof
to the extent permitted pursuant to the terms hereof.

 

“Lead Borrower” shall have
the meaning assigned to such term in the Preamble hereof.

 

“Lender”
shall have the meaning assigned to such term in the Preamble hereof.

 

“Letters of
Credit” unless the context otherwise requires, shall have the meaning given to such term in the UCC.

 

“Licenses”
shall mean, collectively, with respect to each Grantor, all license and distribution agreements with any other Person with respect
to any Patent, Trademark or Copyright or any other patent, trademark or copyright, whether such Grantor is a licensor or licensee,
distributor or distributee under any such license or distribution agreement, together with any and all (i) renewals, extensions,
supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or
payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements
or violations thereof, (iii) rights to sue for past, present and future infringements or violations thereof and (iv) other
rights to use, exploit or practice any or all of the Patents, Trademarks or Copyrights or any other patent, trademark or copyright.

 

“Patents”
shall mean, collectively, with respect to each Grantor, all patents issued or assigned to and all patent applications made by such
Grantor (whether established or registered or recorded in the United States or any other country or any political subdivision thereof),
including, without limitation, those patents, patent applications listed on Schedule II hereto, together with any and all
(i) rights and privileges arising under applicable Law with respect to such Grantor’s use of any patents, (ii) inventions
and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect
thereto including, without limitation, damages and payments for past, present or future infringements thereof, (v) rights
corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.

 

“Pledged Interests”
shall mean, collectively, with respect to each Grantor, all Equity Interests in any issuer now existing or hereafter acquired or
formed, including, without limitation, all Equity Interests of such issuer described in Schedule III hereof and all Equity
Interests in any successor corporation or interests or certificates of any successor limited liability company, partnership or
other entity owned by such Grantor formed by or resulting from any consolidation, merger or amalgamation in which any Person listed
on Schedule VII hereof is not the surviving entity, together with all rights, privileges, authority and powers of such Grantor
relating to such Equity Interests issued by any such issuer or any such successor Person under the Organization Documents of any
such issuer or any such successor Person, and the certificates, instruments and agreements representing such Equity Interests and
any and all interest of such Grantor in the entries on the books of any financial intermediary pertaining to such Equity Interests,
from time to time acquired by such Grantor in any manner, and all other Investment Property owned by such Grantor.

 

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“Secured Obligations”
shall mean the Obligations (as defined in the Credit Agreement) and the Guaranteed Obligations.

 

“Securities
Account Control Agreement” means with respect to a Securities Account established by a Grantor, an agreement, in form
and substance satisfactory to the Lender, establishing Control of such Securities Account by the Lender and whereby the Securities
Intermediary maintaining such Securities Account agrees, upon notice received by such Securities Intermediary from the Lender,
to comply only with the instructions originated by the Lender without the further consent of any Grantor.

 

“Securities
Act” means the Securities Exchange Act of 1934 and the applicable regulations promulgated by the Securities and Exchange
Commission pursuant to such Act.

 

“Securities
Collateral” shall mean, collectively, the Pledged Interests, the Intercompany Notes and the Distributions.

 

“Security Agreement”
shall have the meaning assigned to such in the Preamble hereof.

 

“Trademarks”
shall mean, collectively, with respect to each Grantor, all trademarks (including service marks), slogans, logos, certification
marks, trade dress, uniform resource locations (URLs), domain names, corporate names and trade names, whether registered or unregistered,
owned by or assigned to such Grantor and all registrations and applications for the foregoing (whether statutory or common Law
and whether established or registered in the United States or any other country or any political subdivision thereof), including,
without limitation, the registrations and applications listed on Schedule II hereto, together with any and all (i) rights
and privileges arising under applicable Law with respect to such Grantor’s use of any trademarks, (ii) reissues, continuations,
extensions and renewals thereof, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable
thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present or future infringements
thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements
thereof.

 

SECTION 1.2.          Interpretation.
The rules of interpretation specified in Article I of the Credit Agreement shall be applicable to this Security Agreement.

 

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ARTICLE
II

 

GRANT OF SECURITY AND SECURED OBLIGATIONS

 

SECTION 2.1.          Pledge;
Grant of Security Interest. As collateral security for the payment and performance in full of all the Secured Obligations,
subject to the DIP Orders, each Grantor hereby pledges and grants to the Lender for its benefit and for the benefit of the other
Credit Parties a lien on and security interest in and to all of the right, title and interest of such Grantor in, to and under
all personal property and interests in such personal property, wherever located, and whether now existing or hereafter arising
or acquired from time to time (collectively, the “Collateral”), including, without limitation:

 

(i)          all
Accounts;

 

(ii)         all
Goods, including Equipment, Inventory and Fixtures;

 

(iii)        all
Documents, Instruments and Chattel Paper;

 

(iv)        all
Letters of Credit and Letter-of-Credit Rights;

 

(v)         all
Securities Collateral;

 

(vi)        all
Investment Property;

 

(vii)       all
Intellectual Property Collateral;

 

(viii)      all
Commercial Tort Claims, including, without limitation, those described on Schedule IV hereto;

 

(ix)         all
General Intangibles, including, without limitation, all Credit Card Receivables;

 

(x)          all
Deposit Accounts;

 

(xi)         all
Supporting Obligations;

 

(xii)        all
books and records relating to the Collateral;

 

(xiii)       Bankruptcy
Recoveries, but only: (A) the full amount of any such recovery or settlement thereof to the extent arising under
section 549 of the Bankruptcy Code, and (B) all amounts necessary to reimburse the Lender for the amount of the Professional Fee
Carve Out, if any, used to finance the pursuit of such recovery or settlement with respect to all Bankruptcy Recoveries ((A) and
(B) being hereinafter defined as the “Specified Bankruptcy Recoveries”);

 

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(xiv)      all
owned real estate of the Grantors, all proceeds from the disposition of real estate, and all proceeds from the disposition of real
estate leases (including, without limitation, all non-residential real property leases); provided that, with respect
to the Grantors’ non-residential real property Leases, and notwithstanding anything to the contrary in the DIP Orders or
any Loan Document, no Liens or encumbrances shall be granted on or extend to the Grantors’ real property Leases themselves,
but rather, any such Liens granted shall extend only to the proceeds realized upon the sale, assignment, termination, or other
disposition of such real property lease(s); and

 

(xv)       to
the extent not covered by the foregoing clauses (i) through (xiv), all other personal property of such Grantor, whether tangible
or intangible and all Proceeds and products of each of the foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of, each of the foregoing, any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to such Grantor from time to time with respect to any of the foregoing.

 

Notwithstanding anything
to the contrary contained in clauses (i) through (xv) above, the security interest created by this Security Agreement shall not
extend to, and the term “Collateral” shall not include, any Bankruptcy Recoveries other than Specified Bankruptcy Recoveries.

 

SECTION 2.2.          Secured
Obligations. This Security Agreement secures, and the Collateral is collateral security for, the payment and performance in
full when due of the Secured Obligations.

 

SECTION 2.3.          Security
Interest.

 

(a)  Each
Grantor hereby irrevocably authorizes the Lender at any time and from time to time to authenticate and file in any relevant jurisdiction
any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9
of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment relating
to the Collateral, including, without limitation, (i) whether such Grantor is an organization, the type of organization and any
organizational identification number issued to such Grantor, (ii) a description of the Collateral as “all assets of the Grantor,
wherever located, whether now owned or hereafter acquired” and (iii) in the case of a financing statement filed as a fixture
filing, a sufficient description of the real property to which such Collateral relates. Each Grantor agrees to provide all information
described in the immediately preceding sentence to the Lender promptly upon request.

 

(b)          Each
Grantor hereby ratifies its prior authorization for the Lender to file in any relevant jurisdiction any financing statements or
amendments thereto relating to the Collateral if filed prior to the date hereof.

 

(c)          Each
Grantor hereby further authorizes the Lender to file filings with the United States Patent and Trademark Office and United States
Copyright Office (or any successor office or any similar office in any other country) or other necessary documents for the purpose
of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such Grantor hereunder in any Intellectual
Property Collateral, without the signature of such Grantor, and naming such Grantor, as debtor, and the Lender, as secured party.

 

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ARTICLE
III

 

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

USE OF COLLATERAL

 

SECTION 3.1.          Delivery
of Certificated Securities Collateral. Each Grantor hereby agrees that all certificates, agreements or instruments representing
or evidencing Securities Collateral acquired by such Grantor on or prior to the date hereof, shall be delivered to and held by
or on behalf of the Lender pursuant hereto no later than the earlier of (i) thirty (30) days after the date hereof and (ii) the
entry of the Final Order. Each Grantor hereby agrees that all certificates, agreements or instruments representing or evidencing
Securities Collateral acquired by such Grantor after the date hereof, shall promptly (and in any event within seven (7) Business
Days) upon receipt thereof by such Grantor be delivered to and held by or on behalf of the Lender pursuant hereto. All certificated
Securities Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably satisfactory to the Lender. The Lender shall have the right,
at any time upon the occurrence and during the continuance of any Event of Default and subject to the DIP Orders, to endorse, assign
or otherwise transfer to or to register in the name of the Lender or any of its nominees or endorse for negotiation any or all
of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder.
In addition, the Lender shall have the right with written notice to exchange certificates representing or evidencing Securities
Collateral for certificates of smaller or larger denominations, accompanied by instruments of transfer or assignment and letters
of direction duly executed in blank.

 

SECTION 3.2.          Perfection
of Uncertificated Securities Collateral.  Each Grantor hereby agrees that if any of the Pledged Interests are at
any time not evidenced by certificates of ownership, then each applicable Grantor shall, to the extent permitted by applicable
Law and upon the request of the Lender, cause such pledge to be recorded on the equityholder register or the books of the issuer,
execute customary pledge forms or other documents necessary or reasonably requested to complete the pledge and give the Lender
the right to transfer such Pledged Interests under the terms hereof. Each Grantor hereby agrees that it will not permit any of
the Pledged Interests that do not constitute “securities” (as defined in the UCC) to at any time become “securities”
(as defined in the UCC) unless, concurrently with such conversion, such Grantor shall promptly notify the Lender thereof, cause
such Pledged Interests to become evidenced by certificates of ownership, and endorse, assign and deliver the same to the Lender,
accompanied by such instruments of transfer or assignment duly executed in blank, all in form and substance reasonably satisfactory
to the Lender.

 

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SECTION 3.3.          Maintenance
of Perfected Security Interest.  Each Grantor represents and warrants that, effective immediately upon the entry
of the Interim Borrowing Order, the Lender will have a priming first priority, continuing, valid, binding, enforceable, non-avoidable,
and automatically perfected post-petition security interest and Lien, senior and superior in priority to all other secured and
unsecured creditors of the Grantors’ estates (except with respect to the Professional Fee Carve Out and as may otherwise
be provided in the DIP Orders), in, upon and to all of the Collateral securing the payment and performance of the Secured Obligations.
Upon the entry of the Interim Borrowing Order, the Liens which secure the Secured Obligations shall constitute first priority Liens
pursuant to sections 361, 362, 364(c)(2), 364(c)(3), and 364(d) of the Bankruptcy Code, subject only to the Professional Fee Carve
Out. Each Grantor agrees that at the sole cost and expense of the Grantors, (i) such Grantor will maintain the security interest
created by this Security Agreement in the Collateral as a perfected security interest having the priority required by the Loan
Documents and shall defend such security interest against the claims and demands of all Persons (other than with respect to claims
and demands relating to the Professional Fee Carve Out), (ii) such Grantor shall furnish to the Lender from time to time statements
and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the
Lender may reasonably request, all in reasonable detail and (iii) at any time and from time to time, upon the written request
of the Lender, such Grantor shall promptly and duly execute and deliver, and file and have recorded, such further instruments and
documents and take such further action as the Lender may reasonably request, including the filing of any financing statements,
continuation statements and other documents and agreements (including this Security Agreement) under the UCC (or other applicable
Laws) in effect in any jurisdiction with respect to the security interest created hereby and the execution and delivery of Control
Agreements, all in form reasonably satisfactory to the Lender and in such offices (including, without limitation, the United States
Patent and Trademark Office and the United States Copyright Office) wherever required by applicable Law in each case to perfect,
continue and maintain a valid, enforceable security interest in the Collateral (which security interest shall have the priority
required by the Loan Documents) as provided herein and to preserve the other rights and interests granted to the Lender hereunder,
as against the Grantors and third parties (other than with respect to claims and demands relating to the Professional Fee Carve
Out), with respect to the Collateral.

 

SECTION 3.4.          Other
Actions.  In order to further evidence the attachment, perfection and priority of, and the ability of the Lender
to enforce, the Lender’s security interest in the Collateral, each Grantor represents, warrants and agrees, in each case
at such Grantor’s own expense, with respect to the following Collateral that:

 

(a)          Instruments
and Tangible Chattel Paper. As of the date hereof (i) no amount payable under or in connection with any of the Collateral
is evidenced by any Instrument or Tangible Chattel Paper other than such Instruments and Tangible Chattel Paper listed on Schedule
V hereto and (ii) each Instrument and each item of Tangible Chattel Paper listed on Schedule V hereto, to the extent
requested by the Lender, has been properly endorsed, assigned and delivered to the Lender, accompanied by instruments of transfer
or assignment and letters of direction duly executed in blank. If any amount payable under or in connection with any of the Collateral
shall be evidenced by any Instrument or Tangible Chattel Paper, the Grantor acquiring such Instrument or Tangible Chattel Paper
shall promptly endorse, assign and deliver the same to the Lender, accompanied by such instruments of transfer or assignment duly
executed in blank as the Lender may reasonably request from time to time.

 

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(b)          Investment
Property.

 

(i)          As
of the date hereof (a) it has no Securities Accounts other than those listed on Schedule VI hereto, and (b) it
does not hold, own or have any interest in any certificated securities or uncertificated securities other than those constituting
Pledged Interests with respect to which the Lender has a perfected security interest in such Pledged Interests (subject only to
the Professional Fee Carve Out) having the priority required by the Loan Documents.

 

(ii)         If
any Grantor shall at any time hold or acquire any certificated securities, such Grantor shall promptly (a) notify the Lender thereof,
and (b) upon request of the Lender and without derogating from the Lender’s rights in after-acquired Collateral pursuant
to the DIP Orders, either (i) endorse, assign and deliver such certificated securities to the Lender, accompanied by such instruments
of transfer or assignment duly executed in blank, all in form and substance reasonably satisfactory to the Lender or (ii) deliver
such securities into a Securities Account with respect to which a Securities Account Control Agreement is in effect in favor of
the Lender. If any securities now or hereafter acquired by any Grantor are uncertificated, such Grantor shall promptly (a) notify
the Lender thereof, and (b) upon request of the Lender and without derogating from the Lender’s rights in after-acquired
Collateral pursuant to the DIP Orders, either (i) grant Control to the Lender and cause the issuer to agree to comply with instructions
from the Lender as to such securities, without further consent of any Grantor or such nominee, (ii) cause a security entitlement
with respect to such uncertificated security to be held in a Securities Account with respect to which the Lender has Control or
(iii) arrange for the Lender to become the registered owner of the securities, in each case pursuant to an agreement in form and
substance reasonably satisfactory to the Lender. No Grantor shall hereafter establish and maintain any Securities Account with
any Securities Intermediary unless (1) the applicable Grantor shall have given the Lender ten (10) Business Days’ prior
written notice of its intention to establish such new Securities Account with such Securities Intermediary, (2) such Securities
Intermediary shall be reasonably acceptable to the Lender and (3) upon request of the Lender and without derogating from the Lender’s
rights in after-acquired Collateral pursuant to the DIP Orders, such Securities Intermediary and such Grantor shall have duly executed
and delivered a Control Agreement with respect to such Securities Account. Each Grantor shall accept any cash and Investment Property
which are proceeds of the Pledged Interests in trust for the benefit of the Lender and promptly upon receipt thereof, deposit any
cash received by it into an account in which the Lender has Control, or with respect to any Investment Properties or additional
securities, take such actions as required above with respect to such securities. No Grantor shall grant control over any Pledged
Interests to any Person other than the Lender.

 

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(iii)        As
between the Lender and the Grantors, the Grantors shall bear the investment risk with respect to the Investment Property and Pledged
Interests, and the risk of loss of, damage to, or the destruction of the Investment Property and Pledged Interests, whether in
the possession of, or maintained as a security entitlement or deposit by, or subject to the control of, the Lender, a Securities
Intermediary, any Grantor or any other Person; provided, however, that nothing contained in this SECTION 3.4(b) shall
release or relieve any Securities Intermediary of its duties and obligations to the Grantors or any other Person under any Control
Agreement or under applicable Law. Each Grantor shall promptly pay all Claims and fees of whatever kind or nature with respect
to the Pledged Interests pledged by it under this Security Agreement. In the event any Grantor shall fail to make such payment
contemplated in the immediately preceding sentence, the Lender may do so for the account of such Grantor and the Grantors shall
promptly reimburse and indemnify the Lender for all costs and expenses incurred by the Lender under this SECTION 3.4(b) and under
SECTION 9.3 hereof.

 

(c)          Electronic
Chattel Paper and Transferable Records. As of the date hereof no amount payable under or in connection with any of the Collateral
is evidenced by 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). If any amount payable under or in connection with any of the Collateral shall be
evidenced by any Electronic Chattel Paper or any transferable record, the Grantor acquiring such Electronic Chattel Paper or transferable
record shall promptly notify the Lender thereof and shall take such action as the Lender may reasonably request to vest in the
Lender control under UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act,
as so in effect in such jurisdiction, of such transferable record. The Lender agrees with such Grantor that the Lender will arrange,
pursuant to procedures reasonably satisfactory to the Lender and so long as such procedures will not result in the Lender’s
loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC
Section 9-105 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 allow without loss of control, unless an
Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect
to such Electronic Chattel Paper or transferable record.

 

(d)          Letter-of-Credit
Rights. If such Grantor is at any time a beneficiary under a Letter of Credit now or hereafter issued in favor of such Grantor,
(which, for the avoidance of doubt, shall not include any Letter of Credit issued pursuant to the Credit Agreement), such Grantor
shall promptly notify the Lender thereof and such Grantor shall, at the request of the Lender, pursuant to an agreement in form
and substance reasonably satisfactory to the Lender, either (i) arrange for the issuer and any confirmer of such Letter of Credit
to consent to an assignment to the Lender of, and to pay to the Lender, the proceeds of, any drawing under the Letter of Credit
or (ii) arrange for the Lender to become the beneficiary of such Letter of Credit, with the Lender agreeing, in each case, that
the proceeds of any drawing under the Letter of Credit are to be applied as provided in the Credit Agreement.

 

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(e)          Commercial
Tort Claims. As of the date hereof it holds no Commercial Tort Claims other than those listed on Schedule IV hereto. If any
Grantor shall at any time hold or acquire a Commercial Tort Claim, such Grantor shall immediately notify the Lender in writing
signed by such Grantor of the brief details thereof and grant to the Lender in such writing a security interest therein and in
the Proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance reasonably satisfactory
to the Lender.

 

SECTION 3.5.          Supplements;
Further Assurances.  Each Grantor shall take such further actions, and execute and deliver to the Lender such additional
assignments, agreements, supplements, powers and instruments, as the Lender may in its reasonable judgment deem necessary or appropriate,
wherever required by Law, in order to perfect, preserve and protect the security interest in the Collateral as provided herein
and the rights and interests granted to the Lender hereunder, to carry into effect the purposes hereof or better to assure and
confirm unto the Lender or permit the Lender to exercise and enforce its rights, powers and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, each Grantor shall make, execute, endorse, acknowledge, file
or refile and/or deliver to the Lender from time to time upon reasonable request such lists, descriptions and designations of the
Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers,
invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments. If an Event of Default has
occurred and is continuing, subject to the DIP Orders, the Lender may institute and maintain, in its own name or in the name of
any Grantor, such suits and proceedings as the Lender may be advised by counsel shall be necessary or expedient to prevent any
impairment of the security interest in or the perfection thereof in the Collateral. All of the foregoing shall be at the sole cost
and expense of the Grantors. The Grantors and the Lender acknowledge that this Security Agreement is intended to grant to the Lender
for the benefit of the Credit Parties a security interest in and Lien upon the Collateral and shall not constitute or create a
present assignment of any of the Collateral.

 

ARTICLE
IV

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

In addition to, and without
limitation of, each of the representations, warranties and covenants set forth in the Credit Agreement and the other Loan Documents,
each Grantor represents, warrants and covenants as follows:

 

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SECTION 4.1.          Title.
No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Lender pursuant to this Security Agreement or as are permitted by
the Credit Agreement. No Person other than the Lender has control or possession of all or any part of the Collateral, except as
permitted by the Credit Agreement.

 

SECTION 4.2.          Limitation
on Liens; Defense of Claims; Transferability of Collateral.  Each Grantor is as of the date hereof, and, as to Collateral
acquired by it from time to time after the date hereof, such Grantor will be, the sole direct and beneficial owner of all Collateral
pledged by it hereunder free from any Lien or other right, title or interest of any Person other than the Liens and security
interest created by this Security Agreement, Permitted Encumbrances and the Professional Fee Carve Out. Each Grantor shall, at
its own cost and expense, defend title to the Collateral pledged by it hereunder and the security interest therein and Lien thereon
granted to the Lender and the priority thereof against all claims and demands of all Persons, at its own cost and expense, at any
time claiming any interest therein adverse to the Lender or any other Credit Party other than (i) with respect to claims or demands
regarding priority of Liens and the Professional Fee Carve Out, and (ii) with respect to all other claims and demands, Permitted
Encumbrances. There is no agreement, and no Grantor shall enter into any agreement or take any other action, that would restrict
the transferability of any of the Collateral or otherwise impair or conflict with such Grantors’ obligations or the rights
of the Lender hereunder.

 

SECTION 4.3.          Chief
Executive Office; Change of Name; Jurisdiction of Organization.  The exact legal name, type of organization, jurisdiction
of organization, federal taxpayer identification number, organizational identification number and chief executive office of such
Grantor is indicated next to its name on Schedule VII hereto.

 

SECTION 4.4.          Due
Authorization and Issuance.  All of the Pledged Interests have been, and to the extent any Pledged Interests are
hereafter issued, such shares or other equity interests will be, upon such issuance, duly authorized, validly issued and, to the
extent applicable, fully paid and non-assessable. All of the Pledged Interests have been fully paid for, and there is no amount
or other obligation owing by any Grantor to any issuer of the Pledged Interests in exchange for or in connection with the issuance
of the Pledged Interests or any Grantor’s status as a partner or a member of any issuer of the Pledged Interests.

 

SECTION 4.5.          No
Conflicts, Consents, etc.  No consent of any party (including, without limitation, equity holders or creditors of
such Grantor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental
Authority or regulatory body or other Person is required (A) for the grant of the security interest by such Grantor of the
Collateral pledged by it pursuant to this Security Agreement or for the execution, delivery or performance hereof by such Grantor,
(B) for the exercise by the Lender of the voting or other rights provided for in this Security Agreement or (C) for the
exercise by the Lender of the remedies in respect of the Collateral pursuant to this Security Agreement except, in each case, (x)
for such consents which have been obtained prior to the date hereof and (y) the entry of the DIP Orders. Following the occurrence
and during the continuation of an Event of Default, subject to the DIP Orders, if the Lender desires to exercise any remedies,
voting or consensual rights or attorney-in-fact powers set forth in this Security Agreement and determines it necessary to obtain
any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the
Lender, such Grantor agrees to use commercially reasonable efforts to assist and aid the Lender to obtain as soon as commercially
practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers.

 

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SECTION 4.6.          Collateral.  All
information set forth herein, including the schedules annexed hereto, and all information contained in any documents, schedules
and lists heretofore delivered to any Credit Party in connection with this Security Agreement, in each case, relating to the Collateral,
is accurate and complete in all material respects. The Collateral described on the schedules annexed hereto constitutes all of
the property of such type of Collateral owned or held by the Grantors.

 

SECTION 4.7.          Insurance.  Such
Grantor shall maintain or shall cause to be maintained such insurance as is required pursuant to Section 6.06 of the Credit Agreement.
Each Grantor hereby irrevocably makes, constitutes and appoints the Lender (and all officers, employees or agents designated by
the Lender) as such Grantor’s true and lawful agent (and attorney-in-fact), exercisable only after the occurrence and during
the continuance of an Event of Default and subject to the DIP Orders, for the purpose of making, settling and adjusting claims
in respect of the Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect
thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required
hereby or to pay any premium in whole or in part relating thereto, the Lender may, without waiving or releasing any obligation
or liability of the Grantors hereunder or any Default or Event of Default, in its sole discretion but subject to the DIP Orders,
obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Lender
deems advisable. All sums disbursed by the Lender in connection with this SECTION 4.7, including reasonable attorneys’ fees,
court costs, reasonable and documented expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors
to the Lender and shall be additional Secured Obligations secured hereby.

 

SECTION 4.8.          Payment
of Taxes; Compliance with Laws; Contested Liens; Claims.  Each Grantor represents and warrants that all Claims imposed
upon or assessed against the Collateral have been paid and discharged except to the extent (i) such Claims constitute a Lien not
yet due and payable, a Permitted Encumbrance or the Professional Fee Carve Out, or (ii) the enforcement of which Claims has been
stayed by virtue of the filing of the Chapter 11 Case. Each Grantor shall comply with all applicable Law relating to the Collateral
the failure to comply with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Each Grantor may at its own expense contest the validity, amount or applicability of any Claims so long as the contest thereof
shall be conducted in accordance with, and permitted pursuant to the provisions of, the Credit Agreement. Notwithstanding the foregoing
provisions of this SECTION 4.8, no contest of any such obligation may be pursued by such Grantor if such contest would expose the
Lender or any other Credit Party to (i) any possible criminal liability or (ii) any additional civil liability for failure
to comply with such obligations unless such Grantor shall have furnished a bond or other security therefor satisfactory to the
Lender, or such other Credit Party, as the case may be.

 

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ARTICLE
V

 

CERTAIN PROVISIONS CONCERNING SECURITIES
COLLATERAL

 

SECTION 5.1.          Pledge
of Additional Securities Collateral.  Upon request of the Lender and without derogating from the Lender’s rights
in after-acquired Collateral pursuant to the DIP Orders, each Grantor shall, upon obtaining any Pledged Interests or Intercompany
Notes of any Person required to be pledged hereunder, accept the same in trust for the benefit of the Lender and forthwith deliver
to the Lender a pledge amendment, duly executed by such Grantor, in substantially the form of Exhibit 1 annexed hereto (each,
a “Pledge Amendment”), and the certificates and other documents required under SECTION 3.1 and SECTION 3.2 hereof
in respect of the additional Pledged Interests or Intercompany Notes which are to be pledged pursuant to this Security Agreement,
and confirming the attachment of the Lien created hereby and by the DIP Orders on and in respect of such additional Pledged Interests
or Intercompany Notes. Each Grantor hereby authorizes the Lender to attach each such Pledge Amendment to this Security Agreement
and agrees that all Pledged Interests or Intercompany Notes (whether or not listed on any Pledge Amendment delivered to the Lender)
shall for all purposes hereunder be considered Collateral.

 

SECTION 5.2.          Voting
Rights; Distributions; etc.  So long as no Event of Default shall have occurred and be continuing, each Grantor shall
be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof
for any purpose not inconsistent with the terms or purposes hereof, the Credit Agreement or any other Loan Document evidencing
the Secured Obligations (it being understood and agreed that no vote by any Grantor may cause action or inaction in violation of
any DIP Order or any other order entered in connection with the Chapter 11 Case or any successor case). The Lender shall be deemed
without further action or formality to have granted to each Grantor all necessary consents relating to voting rights and shall,
if necessary, upon written request of any Grantor and at the sole cost and expense of the Grantors, from time to time execute
and deliver (or cause to be executed and delivered) to such Grantor all such instruments as such Grantor may reasonably request
in order to permit such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to this SECTION
5.2(i).

 

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(ii)         Upon
the occurrence and during the continuance of any Event of Default, subject to the DIP Orders, all rights of each Grantor to exercise
the voting and other consensual rights it would otherwise be entitled to exercise pursuant to SECTION 5.2(i) hereof without any
action, other than, in the case of any Securities Collateral, or the giving of any notice shall immediately cease, and all such
rights shall thereupon become vested in the Lender, which shall thereupon have the sole right to exercise such voting and other
consensual rights; provided that the Lender shall have the right, in its sole discretion, from time to time following the
occurrence and continuance of an Event of Default to permit such Grantor to exercise such rights under SECTION 5.2(i). After such
Event of Default is no longer continuing, each Grantor shall have the right to exercise the voting, managerial and other consensual
rights and powers that it would otherwise be entitled to pursuant to SECTION 5.2(i) hereof.

 

(iii)        Subject
to the DIP Orders, the Lender shall have the sole right to receive and hold as Collateral any and all Distributions, and any Distributions
received by any Grantor contrary to the foregoing shall be held in trust for the benefit of the Lender and immediately be paid
over to the Lender in accordance with Section 6.11 of the Credit Agreement.

 

(iv)        Each
Grantor shall, at its sole cost and expense, from time to time execute and deliver to the Lender appropriate instruments as the
Lender may reasonably request in order to permit the Lender to exercise the voting and other rights which it may be entitled to
exercise pursuant to SECTION 5.2(ii) hereof and to receive all Distributions which it may be entitled to receive under SECTION
5.2(iii) hereof.

 

SECTION 5.3.          Organization
Documents. No Grantor will terminate or agree to terminate any Organization Documents or make any amendment or modification
to any Organization Documents, including electing to treat any Pledged Interests of such Grantor as a security under Section 8-103
of the UCC, except as permitted by the Credit Agreement.

 

SECTION 5.4.          Defaults,
Etc. No Securities Collateral pledged by such Grantor is subject to any defense, offset or counterclaim, nor have any of the
foregoing been asserted or alleged against such Grantor by any Person with respect thereto, and as of the date hereof, there are
no certificates, instruments, documents or other writings (other than the Organization Documents and certificates, if any, delivered
to the Lender) which evidence any Pledged Interests of such Grantor.

 

SECTION 5.5.          Certain
Agreements of Grantors As Issuers and Holders of Equity Interests.      In
the case of each Grantor which is an issuer of Securities Collateral, such Grantor agrees to be bound by the terms of this Security
Agreement relating to the Securities Collateral issued by it and will comply with such terms insofar as such terms are applicable
to it.

 

(ii)         In
the case of each Grantor which is a partner in a partnership, limited liability company or other entity, such Grantor hereby consents
to the extent required by the applicable Organization Documents to the pledge by each other Grantor, pursuant to the terms hereof,
of the Pledged Interests in such partnership, limited liability company or other entity and, upon the occurrence and during the
continuance of an Event of Default and subject to the DIP Orders, to the transfer of such Pledged Interests to the Lender or its
nominee and to the substitution of the Lender or its nominee as a substituted partner or member in such partnership, limited liability
company or other entity with all the rights, powers and duties of a general partner or a limited partner or member, as the case
may be.

 

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ARTICLE
VI

 

CERTAIN PROVISIONS CONCERNING INTELLECTUAL

PROPERTY COLLATERAL

 

SECTION 6.1.          Registrations.  Except
pursuant to licenses and other user agreements entered into by any Grantor in the ordinary course of business that are listed on
Schedule II hereto, on and as of the date hereof (i) each Grantor owns and possesses the right to use, and has done nothing
to authorize or enable any other Person to use, any material Copyright, Patent or Trademark listed on Schedule II hereto,
and (ii) all registrations listed on Schedule II hereto are valid and in full force and effect.

 

SECTION 6.2.          No
Violations or Proceedings.  To each Grantor’s knowledge, on and as of the date hereof, there is no violation
by others of any right of such Grantor with respect to any Copyright, Patent or Trademark listed on Schedule II hereto,
respectively, pledged by it under the name of such Grantor.

 

SECTION 6.3.          Protection
of Lender’s Security.  On a continuing basis, each Grantor shall, at its sole cost and expense, (i) promptly
following its becoming aware thereof, notify the Lender of (A) any adverse determination in any proceeding in the United States
Patent and Trademark Office or the United States Copyright Office with respect to any Patent, Trademark or Copyright necessary
for the conduct of business of such Grantor or (B) the institution of any proceeding or any adverse determination in any federal,
state or local court or administrative body regarding such Grantor’s claim of ownership in or right to use any of the Intellectual
Property Collateral material to the use and operation of the Collateral, its right to register such Intellectual Property Collateral
or its right to keep and maintain such registration in full force and effect, (ii) maintain and protect the Intellectual Property
Collateral necessary for the conduct of business of such Grantor, (iii) not permit to lapse or become abandoned any Intellectual
Property Collateral necessary for the conduct of business of such Grantor, and not settle or compromise any pending or future litigation
or administrative proceeding with respect to such Intellectual Property Collateral, in each case, except as shall be consistent
with commercially reasonable business judgment and, if any Event of Default has occurred and is continuing, with the prior approval
of the Lender (such approval not to be unreasonably withheld), (iv) upon such Grantor’s obtaining knowledge thereof,
promptly notify the Lender in writing of any event which may be reasonably expected to materially and adversely affect the value
or utility of the Intellectual Property Collateral or any portion thereof material to the use and operation of the Collateral,
the ability of such Grantor or the Lender to dispose of the Intellectual Property Collateral or any portion thereof or the rights
and remedies of the Lender in relation thereto including, without limitation, a levy or threat of levy or any legal process against
the Intellectual Property Collateral or any portion thereof, (v) not license the Intellectual Property Collateral other than
licenses entered into by such Grantor in, or incidental to, the ordinary course of business, or amend or permit the amendment of
any of the material licenses in a manner that materially and adversely affects the right to receive payments thereunder, or in
any manner that would materially impair the value of the Intellectual Property Collateral or the Lien on and security interest
in the Intellectual Property Collateral intended to be granted to the Lender for the benefit of the Credit Parties, without the
consent of the Lender, (vi) until the Lender exercises its rights to make collection, diligently keep adequate records respecting
the Intellectual Property Collateral and (vii) furnish to the Lender from time to time upon the Lender’s reasonable
request therefor detailed statements and amended schedules further identifying and describing the Intellectual Property Collateral
and such other materials evidencing or reports pertaining to the Intellectual Property Collateral as the Lender may from time to
time reasonably request. Notwithstanding the foregoing, nothing herein shall prevent any Grantor from selling, disposing of or
otherwise using any Intellectual Property Collateral as permitted under the Credit Agreement.

 

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SECTION 6.4.          After-Acquired
Property.  If any Grantor shall, at any time before this Security Agreement shall have been terminated in accordance
with SECTION 9.5, (i) obtain any rights to any additional Intellectual Property Collateral or (ii) become entitled to the
benefit of any additional Intellectual Property Collateral or any renewal or extension thereof, including any reissue, division,
continuation, or continuation-in-part of any Intellectual Property Collateral, or any improvement on any Intellectual Property
Collateral, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (i) or (ii) of this
SECTION 6.4 with respect to such Grantor shall automatically constitute Intellectual Property Collateral if such would have constituted
Intellectual Property Collateral at the time of execution hereof and be subject to the Lien and security interest created by this
Security Agreement without further action by any party. With respect to any federally registered Intellectual Property Collateral,
each Grantor shall promptly (a) provide to the Lender written notice of any of the foregoing and (b) upon request of
the Lender and without derogating from the Lender’s rights in after-acquired Collateral pursuant to the DIP Orders, confirm
the attachment of the Lien and security interest created by this Security Agreement to any rights described in clauses (i) and
(ii) of the immediately preceding sentence of this SECTION 6.4 by execution of an instrument in form reasonably acceptable to the
Lender.

 

SECTION 6.5.          Modifications.  Each
Grantor authorizes the Lender to modify this Security Agreement by amending Schedule II hereto to include any Intellectual
Property Collateral acquired or arising after the date hereof of such Grantor including, without limitation, any of the items listed
in SECTION 6.4 hereof.

 

SECTION 6.6.          Litigation.  Unless
there shall occur and be continuing any Event of Default, each Grantor shall have the right to commence and prosecute in its own
name, as the party in interest, for its own benefit and at the sole cost and expense of the Grantors, such applications for protection
of the Intellectual Property Collateral and suits, proceedings or other actions to prevent the infringement, counterfeiting, unfair
competition, dilution, diminution in value or other damage as are necessary to protect the Intellectual Property Collateral. Upon
the occurrence and during the continuance of any Event of Default and subject to the DIP Orders, the Lender shall have the right
but shall in no way be obligated to file applications for protection of the Intellectual Property Collateral and/or bring suit
in the name of any Grantor, the Lender or the other Credit Parties to enforce the Intellectual Property Collateral and any license
thereunder. In the event of such suit, each Grantor shall, at the reasonable request of the Lender, do any and all lawful acts
and execute any and all documents requested by the Lender in aid of such enforcement and the Grantors shall promptly reimburse
and indemnify the Lender, as the case may be, for all costs and expenses incurred by the Lender in the exercise of its rights under
this SECTION 6.6 in accordance with SECTION 9.3 hereof. In the event that the Lender shall elect not to bring suit to enforce the
Intellectual Property Collateral, each Grantor agrees, at the request of the Lender, to take all commercially reasonable actions
necessary, whether by suit, proceeding or other action, to prevent the infringement, counterfeiting, unfair competition, dilution,
diminution in value of or other damage to any of the Intellectual Property Collateral by others and for that purpose agrees to
diligently maintain any suit, proceeding or other action against any Person so infringing necessary to prevent such infringement.

 

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ARTICLE
VII

 

CERTAIN
PROVISIONS CONCERNING 

CREDIT
CARD RECEIVABLES AND ACCOUNTS

 

SECTION 7.1.          Special
Representations and Warranties.  As of the time when any of its Credit Card Receivables is included in the Borrowing
Base as an Eligible Credit Card Receivable, each Grantor shall be deemed to have represented and warranted that such Credit Card
Receivable and all records, papers and documents relating thereto (i) are genuine and correct and in all material respects
what they purport to be, (ii) represent the legal, valid and binding obligation of the account debtor, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or limiting creditors’ rights
generally or by equitable principles relating to enforceability, evidencing indebtedness unpaid and owed by such account debtor,
arising out of the performance of labor or services or the sale, lease, license, assignment or other disposition and delivery of
the goods or other property listed therein or out of an advance or a loan, (iii) are in all material respects in compliance
and conform with all applicable material federal, state and local Laws and applicable Laws of any relevant foreign jurisdiction,
and (iv) are not subject to any right of offset as a result of any rebates, allowances, or similar promotional credit.

 

SECTION 7.2.          Maintenance
of Records.  Each Grantor shall keep and maintain at its own cost and expense materially complete records of each
Credit Card Receivable and each Account, in a manner consistent with prudent business practice, including, without limitation,
records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto
and the amount of the Credit Card Holdback. Each Grantor shall, at such Grantor’s sole cost and expense, upon the Lender’s
demand made at any time after the occurrence and during the continuance of any Event of Default and subject to the DIP Orders,
deliver all tangible evidence of all Credit Card Receivables and Accounts, including, without limitation, all documents evidencing
such Credit Card Receivables and Accounts and any books and records relating thereto to the Lender or to its representatives (copies
of which evidence and books and records may be retained by such Grantor). Upon the occurrence and during the continuance of any
Event of Default and subject to the DIP Orders, the Lender may transfer a full and complete copy of any Grantor’s books,
records, credit information, reports, memoranda and all other writings relating to the Credit Card Receivables and Accounts to
and for the use by any Person that has acquired or is contemplating acquisition of an interest in the Credit Card Receivables and
Accounts or the Lender’s security interest therein in accordance with applicable Law without the consent of any Grantor.

 

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SECTION 7.3.          Legend.  Subject
to the DIP Orders, each Grantor shall legend, at the request of the Lender made at any time after the occurrence and during the
continuance of any Event of Default and in form and manner reasonably satisfactory to the Lender, the Credit Card Receivables and
Accounts and the other books, records and documents of such Grantor evidencing or pertaining to the Credit Card Receivables and
Accounts with an appropriate reference to the fact that the Credit Card Receivables have been collaterally assigned to the Lender
for the benefit of the Credit Parties and that the Lender has a security interest therein.

 

SECTION 7.4.          Modification
of Terms, Etc.  No Grantor shall rescind or cancel any indebtedness evidenced by any Credit Card Receivable or Account
or modify any term thereof or make any adjustment with respect thereto except in the ordinary course of business consistent with
prudent business practice, or extend or renew any such indebtedness except in the ordinary course of business consistent with prudent
business practice or compromise or settle any dispute, claim, suit or legal proceeding relating thereto or sell any Credit Card
Receivable, Account or interest in any of the foregoing except in the ordinary course of business consistent with prudent business
practice or in accordance with the Credit Agreement without the prior written consent of the Lender.

 

SECTION 7.5.          Collection.  Each
Grantor shall cause to be collected from the account debtor of each of the Credit Card Receivables and Accounts, as and when due
in the ordinary course of business consistent with prudent business practice (including, without limitation, Accounts that are
delinquent, such Accounts to be collected in accordance with generally accepted commercial collection procedures), any and all
amounts owing under or on account of such Credit Card Receivable or Account, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Credit Card Receivable or Account. The costs and reasonable expenses
(including, without limitation, attorneys’ fees) of collection, in any case, whether incurred by any Grantor, the Lender
or any other Credit Party, shall be paid by the Grantors.

 

ARTICLE
VIII

 

REMEDIES

 

SECTION 8.1.          Remedies.  Upon
the occurrence and during the continuance of any Event of Default and subject to the provisions of the DIP Orders, the Lender may,
from time to time in respect of the Collateral, in addition to the other rights and remedies provided for herein, under applicable
Law or otherwise available to it:

 

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(i)          Personally,
or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from any Grantor or any other Person
who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon any Grantor’s
premises where any of the Collateral is located, remove such Collateral, remain present at such premises to receive copies of all
communications and remittances relating to the Collateral and use in connection with such removal and possession any and all services,
supplies, aids and other facilities of any Grantor;

 

(ii)         Demand,
sue for, collect or receive any money or property at any time payable or receivable in respect of the Collateral including, without
limitation, instructing the obligor or obligors on any agreement, instrument or other obligation constituting part of the Collateral
to make any payment required by the terms of such agreement, instrument or other obligation directly to the Lender, and in connection
with any of the foregoing, compromise, settle, extend the time for payment and make other modifications with respect thereto; provided,
however, that in the event that any such payments are made directly to any Grantor, prior to receipt by any such obligor
of such instruction, such Grantor shall segregate all amounts received pursuant thereto in trust for the benefit of the Lender
and shall promptly pay such amounts to the Lender;

 

(iii)        Sell,
assign, grant a license to use or otherwise liquidate, or direct any Grantor to sell, assign, grant a license to use or otherwise
liquidate, any and all investments made in whole or in part with the Collateral or any part thereof, and take possession of the
proceeds of any such sale, assignment, license or liquidation;

 

(iv)        Take
possession of the Collateral or any part thereof, by directing any Grantor in writing to deliver the same to the Lender at any
place or places so designated by the Lender, in which event such Grantor shall at its own expense: (A) forthwith cause the
same to be moved to the place or places designated by the Lender and therewith delivered to the Lender, (B) store and keep any
Collateral so delivered to the Lender at such place or places pending further action by the Lender and (C) while the Collateral
shall be so stored and kept, provide such security and maintenance services as shall be necessary to protect the same and to preserve
and maintain them in good condition. Each Grantor’s obligation to deliver the Collateral as contemplated in this SECTION
8.1 is of the essence hereof. Upon application to a court of equity having jurisdiction, the Lender shall be entitled to a decree
requiring specific performance by any Grantor of such obligation;

 

(v)         Without
limiting any rights of the Lender pursuant to Section 6.11 of the Credit Agreement and subject to the provisions of the DIP Orders,
withdraw all moneys, instruments, securities and other property in any bank, financial securities, deposit or other account of
any Grantor constituting Collateral for application to the Secured Obligations as provided in Article VIII hereof;

 

(vi)        Without
limiting any rights of the Lender pursuant to Section 6.11 of the Credit Agreement, retain and apply the Distributions to the Secured
Obligations as provided in Article VIII hereof;

 

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(vii)       Exercise
any and all rights as beneficial and legal owner of the Collateral, including, without limitation, perfecting assignment of and
exercising any and all voting, consensual and other rights and powers with respect to any Collateral;

 

(viii)      Exercise
any rights and remedies provided by, or not contrary to, the DIP Orders; and

 

(ix)         Exercise
all the rights and remedies of a secured party under the UCC, and the Lender may also in its sole discretion, without notice except
as specified in SECTION 8.2 hereof, sell, assign or grant a license to use the Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker’s board or at any of the Lender’s offices or elsewhere, as part
of one or more going out of business sales in the Lender’s own right or by one or more agents and contractors, all as the
Lender, in its sole discretion, may deem advisable, for cash, on credit or for future delivery, and at such price or prices and
upon such other terms as the Lender may deem commercially reasonable. The Lender shall have the right to conduct such sales on
any Grantor’s premises and shall have the right to use any Grantor’s premises without charge for such sales for such
time or times as the Agent may see fit. The Lender or any other Credit Party or any of their respective Affiliates may be the purchaser,
licensee, assignee or recipient of any or all of the Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of the Collateral sold, assigned or licensed at such
sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Collateral
payable by such Person at such sale. Each purchaser, assignee, licensee or recipient at any such sale shall acquire the property
sold, assigned or licensed absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives,
to the fullest extent permitted by Law, all rights of redemption, stay and/or appraisal which it now has or may at any time in
the future have under any rule of Law now existing or hereafter enacted. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place
to which it was so adjourned. To the fullest extent permitted by Law, each Grantor hereby waives any claims against the Lender
arising by reason of the fact that the price at which any Collateral may have been sold, assigned or licensed at such a private
sale was less than the price which might have been obtained at a public sale, even if the Lender accepts the first offer received
and does not offer such Collateral to more than one offeree. In connection with any sale or other disposition of Inventory and
Goods, the Lender and any agent or contractor conducting any such sale may augment the Inventory with other goods (all of which
other goods shall remain the sole property of the Lender or such agent or contractor). Any amounts realized from the sale of such
goods which constitute augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in their disposition)
shall be the sole property of the Lender or such agent or contractor and neither any Grantor nor any Person claiming under or in
right of any Grantor shall have any interest therein.

 

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SECTION 8.2.          Notice
of Sale.  Subject to the DIP Orders, each Grantor acknowledges and agrees that, to the extent notice of sale or other
disposition of Collateral shall be required by applicable Law and unless the Collateral is perishable or threatens to decline speedily
in value, or is of a type customarily sold on a recognized market (in which event the Lender shall provide such Grantor such advance
notice as may be practicable under the circumstances), ten (10) days’ prior notice to such Grantor of the time and place
of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially
reasonable notification of such matters. Except as required by the DIP Orders, no notification need be given to any Grantor if
it has signed, after the occurrence and during the continuance of an Event of Default, a statement renouncing or modifying (as
permitted under Law) any right to notification of sale or other intended disposition.

 

SECTION 8.3.          Waiver
of Notice and Claims.  Subject to the DIP Orders, each Grantor hereby waives, to the fullest extent permitted by
applicable Law, notice or judicial hearing in connection with the Lender’s taking possession or the Lender’s disposition
of any of the Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies
and any such right which such Grantor would otherwise have under Law, and each Grantor hereby further waives, to the fullest extent
permitted by applicable Law: (i) all damages occasioned by such taking of possession, (ii) all other requirements as
to the time, place and terms of sale or other requirements with respect to the enforcement of the Lender’s rights hereunder
and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any
applicable Law. The Lender shall not be liable for any incorrect or improper payment made pursuant to this Article VIII
in the absence of gross negligence or willful misconduct. Any sale of, or the grant of options to purchase, or any other realization
upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the applicable
Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against such Grantor and against any and all
Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through or
under such Grantor.

 

SECTION 8.4.          Certain
Sales of Collateral.  Subject to the DIP Orders:

 

(i)          Each
Grantor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any Governmental Authority
(including, without limitation, the Securities Act, and applicable state securities Laws), the Lender may be compelled, with respect
to any sale of all or any part of the Collateral (including, without limitation, Securities Collateral and Investment Property),
to limit purchasers to those who meet the requirements of such Governmental Authority (which requirements may include, with respect
to Securities Collateral and/or Investment Property, that such purchasers shall agree, among other things, to acquire such Securities
Collateral or Investment Property for their own account, for investment and not with a view to the distribution or resale thereof).
Each Grantor acknowledges that any such sales may be at prices and on terms less favorable to the Lender than those obtainable
through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration
statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed
to have been made in a commercially reasonable manner and that, except as may be required by applicable Law, the Lender shall have
no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral or Investment Property
for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities Laws, even if such issuer would agree to do so.

 

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(ii)         If
the Lender determines to exercise its right to sell any or all of the Securities Collateral or Investment Property, upon written
request, the applicable Grantor shall from time to time furnish to the Lender all such information as the Lender may reasonably
request in order to determine the number of securities included in the Securities Collateral or Investment Property which may be
sold by the Lender as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder,
as the same are from time to time in effect.

 

(iii)        Each
Grantor further agrees that a breach of any of the covenants contained in this SECTION 8.4 will cause irreparable injury to the
Lender and the other Credit Parties, that the Lender and the other Credit Parties have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in this SECTION 8.4 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred and is continuing.

 

SECTION 8.5.          No
Waiver; Cumulative Remedies.      No failure on the part of the
Lender to exercise, no course of dealing with respect to, and no delay on the part of the Lender in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy; nor shall the Lender
be required to look first to, enforce or exhaust any other security, collateral or guaranties. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by Law.

 

(ii)         In
the event that the Lender shall have instituted any proceeding to enforce any right, power or remedy under this Security Agreement
by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Lender, then and in every such case, the Grantors, the Lender and each other Credit Party
shall be restored to their respective former positions and rights hereunder with respect to the Collateral, and all rights, remedies
and powers of the Lender and the other Credit Parties shall continue as if no such proceeding had been instituted.

 

SECTION 8.6.          Certain
Additional Actions Regarding Intellectual Property. If any Event of Default shall have occurred and be continuing, subject
to the DIP Orders, upon the written demand of the Lender, each Grantor shall execute and deliver to the Lender an assignment or
assignments of the registered Patents, Trademarks and/or Copyrights and such other documents as are necessary or appropriate to
carry out the intent and purposes hereof to the extent such assignment does not result in any loss of rights therein under applicable
Law. Within five (5) Business Days of written notice thereafter from the Lender, each Grantor shall make available to the Lender,
to the extent within such Grantor’s power and authority, such personnel in such Grantor’s employ on the date of the
Event of Default as the Lender may reasonably designate to permit such Grantor to continue, directly or indirectly, to produce,
advertise and sell the products and services sold by such Grantor under the registered Patents, Trademarks and/or Copyrights, and
such Persons shall be available to perform their prior functions on the Lender’s behalf.

 

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SECTION 8.7.          Application
of Proceeds.  Subject to the DIP Orders, the proceeds received by the Lender in respect of any sale of, collection
from or other realization upon all or any part of the Collateral pursuant to the exercise by the Lender of its remedies shall be
applied, together with any other sums then held by the Lender pursuant to this Security Agreement, in accordance with and as set
forth in Section 8.03 of the Credit Agreement. It is understood and agreed that the Grantors shall remain jointly and severally
liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Secured
Obligations.

 

SECTION 8.8.          Grant
of License; Use of Assets.  Without limiting the Lender’s rights as holder of a Lien in the Collateral, for
the purpose of enabling the Lender, during the continuance of an Event of Default, to exercise rights and remedies under this Article
VIII at such time as the Lender shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each
Grantor hereby grants to the Lender, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty, rent or other compensation to such Grantor) to use, assign, license or sublicense any assets of such Grantor (including,
without limitation, all Fixtures, Equipment and Intellectual Property now owned or hereafter acquired by such Grantor) and to occupy
any Real Property owned or leased by such Grantor, wherever the same may be located and whether or not constituting Collateral,
including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout hereof.

 

ARTICLE
IX

 

MISCELLANEOUS

 

SECTION 9.1.          Concerning
Lender.      The actions of the Lender hereunder are subject to
the provisions of the Credit Agreement. The Lender shall have the right hereunder to make demands, to give notices, to exercise
or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or
substitution of the Collateral), in accordance with this Security Agreement and the Credit Agreement, but subject to the DIP Orders.
The Lender may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct
of any such agents or attorneys-in-fact.

 

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(ii)         The
Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if
such Collateral is accorded treatment substantially equivalent to that which the Lender, in its individual capacity, accords its
own property consisting of similar instruments or interests, it being understood that neither the Lender nor any of the other Credit
Parties shall have responsibility for, without limitation (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Securities Collateral, whether or not the Lender or any other Credit
Party has or is deemed to have knowledge of such matters or (ii) taking any necessary steps to preserve rights against any Person
with respect to any Collateral. In no event shall the Lender’s or any other Credit Party’s responsibility for the custody
and preservation of the Collateral in its possession extend to matters beyond the control of such Person, including, without limitation,
acts of God, war, insurrection, riot, governmental actions or acts of any corporate or other depository.

 

(iii)        The
Lender shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made by the proper Person, and, with respect to all matters
pertaining to this Security Agreement and its duties hereunder, upon advice of counsel selected by it.

 

(iv)        If
any item of Collateral also constitutes collateral granted to Lender under any other security agreement, pledge or instrument of
any type, in the event of any conflict between the provisions hereof and the provisions of such other security agreement, pledge
or instrument of any type in respect of such collateral, Lender, in its sole discretion, shall select which provision or provisions
shall control.

 

SECTION 9.2.          Lender
May Perform; Lender Appointed Attorney-in-Fact. If any Grantor shall fail to perform any covenants contained in this Security
Agreement or in the Credit Agreement (including, without limitation, such Grantor’s covenants to (i) pay the premiums in
respect of all required insurance policies hereunder, (ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay or perform
any other obligations of such Grantor with respect to any Collateral) or if any warranty on the part of any Grantor contained herein
shall be breached, the Lender may (but shall not be obligated to), subject to the DIP Orders, do the same or cause it to be done
or remedy any such breach, and may expend funds for such purpose; provided, however, that Lender shall in no event
be bound to inquire into the validity of any tax, lien, imposition or other obligation which such Grantor fails to pay or perform
as and when required hereby. Any and all amounts so expended by the Lender shall be paid by the Grantors in accordance with the
provisions of SECTION 9.3 hereof. Neither the provisions of this SECTION 9.2 nor any action taken by the Lender pursuant to the
provisions of this SECTION 9.2 shall prevent any such failure to observe any covenant contained in this Security Agreement nor
any breach of warranty from constituting an Event of Default. Each Grantor hereby appoints the Lender its attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such Grantor, or otherwise, from time to time after the
occurrence and during the continuation of an Event of Default in the Lender’s discretion (but subject to the DIP Orders)
to take any action and to execute any instrument consistent with the terms of the Credit Agreement and the other Security Documents
which the Lender may deem necessary to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney
coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Grantor hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof.

 

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SECTION 9.3.          Expenses.
Each Grantor will upon demand pay to the Lender the amount of any and all amounts required to be paid pursuant to Section 9.04
of the Credit Agreement.

 

SECTION 9.4.          Continuing
Security Interest; Assignment. Upon entry of the Interim Borrowing Order, this Security Agreement shall create a continuing
security interest in the Collateral and shall (i) be binding upon the Grantors and their respective successors and assigns, and
(ii) inure, together with the rights and remedies of the Lender hereunder, to the benefit of the Lender and the other Credit Parties
and each of their respective successors, transferees and permitted assigns. No other Persons (including, without limitation, any
other creditor of any Grantor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the
generality of the foregoing clause (ii), any Credit Party may assign or otherwise transfer any indebtedness held by it secured
by this Security Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Credit Party, herein or otherwise, subject, however, to the provisions of the Credit Agreement.

 

SECTION 9.5.          Termination.
This Security Agreement, the Lien in favor of the Lender (for the benefit of itself and the other Credit Parties) and all other
security interests granted hereby shall terminate with respect to all Secured Obligations when (i) the Commitment shall have expired
or been terminated and the L/C Issuer has no further obligation to issue Letters of Credit under the Credit Agreement, (ii) the
principal of and interest on each Loan and all fees and other Secured Obligations (other than contingent indemnification claims
for which a claim has not been asserted) shall have been indefeasibly paid in full in cash, (iii) all Letters of Credit (as defined
in the Credit Agreement) shall have (A) expired or terminated and have been reduced to zero, (B) been Cash Collateralized to the
extent required by the Credit Agreement, or (C) been supported by another letter of credit in a manner reasonably satisfactory
to the Lender, and (iv) all Unreimbursed Amounts shall have been indefeasibly paid in full in cash; provided, however, that
(A) this Security Agreement, the Lien in favor of the Lender (for the benefit of itself and the other Credit Parties) and all other
security interests granted hereby shall be reinstated if at any time payment, or any part thereof, of any Secured Obligation is
rescinded or must otherwise be restored by any Credit Party or any Grantor upon the bankruptcy or reorganization of any Grantor
or otherwise, and (B) in connection with the termination of this Security Agreement, the Lender may require such indemnities and
collateral security as it shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account
of credits previously applied to the Secured Obligations that may subsequently be reversed or revoked, (y) any obligations that
may thereafter arise with respect to the Other Liabilities, and (z) any Secured Obligations that may thereafter arise under Section
9.04 of the Credit Agreement.

 

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SECTION 9.6.          Modification
in Writing. No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any
departure by any Grantor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit
Agreement and the DIP Orders and unless in writing and signed by the Lender and the Grantors. Any amendment, modification or supplement
of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by any Grantor from the terms
of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Security Agreement or any other document evidencing the Secured Obligations,
no notice to or demand on any Grantor in any case shall entitle any Grantor to any other or further notice or demand in similar
or other circumstances.

 

SECTION 9.7.          Notices.
Unless otherwise provided herein, in the Credit Agreement or in the DIP Orders, any notice or other communication herein required
or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, as to any Grantor,
addressed to it at the address of the Lead Borrower set forth in the Credit Agreement and as to the Lender, addressed to it at
the address set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a
written notice to the other parties hereto complying as to delivery with the terms of this SECTION 9.7.

 

SECTION 9.8.          GOVERNING
LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE BANKRUPTCY CODE AND THE LAWS OF THE
STATE OF NEW YORK.

 

SECTION
9.9.          CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF
JURY TRIAL. (a)          EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE, THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES
DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH BANKRUPTCY COURT, SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS SECURITY AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT
AGAINST ANY GRANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

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(b)          EACH
GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY
OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION. EACH GRANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.

 

(c)          EACH
GRANTOR AGREES THAT ANY ACTION COMMENCED BY ANY GRANTOR ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN THE BANKRUPTCY COURT, A COURT OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE LENDER MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS
TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

(d)          EACH
PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.7. NOTHING IN THIS SECURITY
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)          EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH
PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO
THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.10.         Severability
of Provisions. Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting
the validity or enforceability of such provision in any other jurisdiction.

 

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SECTION 9.11.         Execution
in Counterparts; Effectiveness. This Security Agreement may be executed in any number of counterparts (and by different parties
hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute
a single contract. Delivery of an executed counterpart of a signature page of this Security Agreement by telecopy, pdf or other
electronic transmission shall be as effective as delivery of a manually executed counterpart of this Security Agreement.

 

SECTION 9.12.         No
Release. Nothing set forth in this Security Agreement shall relieve any Grantor from the performance of any term, covenant,
condition or agreement on such Grantor’s part to be performed or observed under or in respect of any of the Collateral or
from any liability to any Person under or in respect of any of the Collateral or shall impose any obligation on the Lender or any
other Credit Party to perform or observe any such term, covenant, condition or agreement on such Grantor’s part to be so
performed or observed or shall impose any liability on the Lender or any other Credit Party for any act or omission on the part
of such Grantor relating thereto or for any breach of any representation or warranty on the part of such Grantor contained in this
Security Agreement, the Credit Agreement or the other Loan Documents, or under or in respect of the Collateral or made in connection
herewith or therewith. The obligations of each Grantor contained in this SECTION 9.12 shall survive the termination hereof and
the discharge of such Grantor’s other obligations under this Security Agreement, the Credit Agreement and the other Loan
Documents.

 

SECTION 9.13.         Obligations
Absolute. All obligations of each Grantor hereunder shall be absolute and unconditional irrespective of:

 

(i)          any
lack of validity or enforceability of the Credit Agreement or any other Loan Document, or any other agreement or instrument relating
thereto;

 

(ii)         any
change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit Agreement or any other Loan Document or any other agreement
or instrument relating thereto;

 

(iii)        any
pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;

 

(iv)        any
exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Credit Agreement or any
other Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of SECTION 9.6 hereof; or

 

(v)         any
other circumstances which might otherwise constitute a defense available to, or a discharge of, any Grantor (other than the termination
of this Security Agreement in accordance with SECTION 9.5 hereof).

 

    	30

    	 

    

 

SECTION 9.14.         Pre-Petition
Cash Collateral Account.

 

Notwithstanding anything
to the contrary contained herein, the Lender’s Lien in and to the cash collateral maintained in the Pre-Petition Cash Collateral
Account (as defined in the Interim Borrowing Order) shall be subordinate to the Lien in favor of the Administrative Agent under
the Pre-Petition Loan Documents as security for the Pre-Petition Liabilities in respect of Letters of Credit issued by the L/C
Issuer under the Pre-Petition Credit Agreement.

 

SECTION 9.15.         Conflicts
between Security Agreement and DIP Orders.

 

In the event of any conflict
between the terms and conditions of this Security Agreement and the terms and conditions of the DIP Orders, the terms and conditions
of the DIP Orders shall prevail.

 

[REMAINDER OF THIS PAGE INTENTIONALLY
LEFT BLANK]

 

    	31

    	 

    

 

IN WITNESS WHEREOF,
the Grantors and the Lender have caused this Security Agreement to be duly executed and delivered by their duly authorized officers
as of the date first above written.

 

	 	THE WET SEAL, INC., as a Grantor, Lead Borrower, a Borrower, a Debtor and a Debtor-in-Possession
	 	 	 
	 	By:	/s/: Edmond Thomas
	 	Name:	Edmond Thomas
	 	Title: 	Chief Executive Officer
	 	 
	 	THE WET SEAL RETAIL, INC., as a Grantor, a Borrower, a Debtor and a Debtor-in-Possession
	 	 	 
	 	By:	/s/: Edmond Thomas
	 	Name:	Edmond Thomas
	 	Title:	Chief Executive Officer
	 	 
	 	WET SEAL CATALOG, INC., as a Grantor, a Borrower, a Debtor and a Debtor-in-Possession
	 	 	 
	 	By:	/s/: Edmond Thomas
	 	Name:	Edmond Thomas
	 	Title:	Chief Executive Officer
	 	 
	 	WET SEAL GC, LLC, as a Grantor, a Guarantor, a Debtor and a Debtor -in-Possession
	 	 	 
	 	By:	/s/: Edmond Thomas
	 	Name:	Edmond Thomas
	 	Title:	Chief Executive Officer

 

Signature Page to Security Agreement

 

    	 

    	 

    

 

	 	B. Riley FINANCIAL, INC., as Lender
	 	 	 
	 	By:	/s/: Phillip J. Ahn
	 	Name:	Phillip J. Ahn 
	 	Title:	CFO & COO

 

Signature Page to Security AgreementExhibit 10.5

 

SUBORDINATED
UNSECURED PROMISSORY NOTE

 

	$ 4,500,000.00	Los Angeles, California

 

March 10, 2015

 

FOR VALUE
RECEIVED, B. RILEY FINANCIAL, INC. (“Maker”) promises to pay to RILEY INVESTMENT PARTNERS, L.P. (“Payee"),
the principal sum of Four Million Five Hundred Thousand Dollars ($4,500,000.00)
(the “Principal Sum”), together with (a) interest from the date of this Note on the unpaid principal
balance at a rate equal to ten percent (10%) per annum (“Interest”), and (b) the Success Fee (defined
below), the Interest and the Success Fee being subject to the Interest/Success Fee Cap (defined below), as more specifically set
forth below. Hereinafter, the term “Note” shall mean this Subordinated Unsecured Promissory Note. 

 

1.          The
Principal Sum, together with the accrued and unpaid Interest and the Success Fee, shall be payable on March 9, 2016 (the “Maturity
Date”).

 

2.          To
the fullest extent permitted by applicable law, any of the Principal Sum and/or Interest not paid when due shall bear interest
(commencing on the date such Principal Sum and/or Interest became so due) at the Default Rate (defined below) until paid in full.
For purposes of this Note, the term “Default Rate” shall mean the lesser of fifteen percent (15%) per
annum or the maximum rate permitted by applicable law.

 

3.          Notwithstanding
anything to the contrary set forth in this Note, in addition to Maker’s obligation to pay to Payee the Principal Sum and
the Interest, Maker shall pay to Payee twenty percent (20%) of the net profit earned by Maker in connection with a designated liquidation
transaction (the “Success Fee”). Further, notwithstanding anything to the contrary set forth in this
Note and separate and apart from Maker’s obligation to pay to Payee the Principal Sum, under no circumstances shall Maker
be obligated to pay to Payee any portion of the combined amount for Interest and the Success Fee which exceeds twelve percent (12%)
of the Principal Sum (the “Interest/Success Fee Cap”). To the extent there is no net profit earned by
Maker in connection with such designated liquidation transaction, Maker shall not be obligated to pay to Payee the Success Fee
but shall remain obligated to pay to Payee the Interest due and payable under this Note.

 

4.          Subject
to the WF Subordination Provisions (defined below) and the Third Party Subordination Provisions (defined below), this Note may
be prepaid in whole or in part at any time prior to the Maturity Date by Maker without penalty. Any and all such prepayments shall
be applied first to any unpaid fees, costs and expenses under this Note, then to accrued Interest to the date of the prepayment
on the amount prepaid, then to the Success Fee and then to the unpaid Principal Sum.

 

5.          Time
is of the'essence of this Note. 

 

6.          To
the fullest extent permitted by applicable law, Maker, for itself and its legal representatives, successors and assigns, expressly
waives demand, presentment, protest notice of dishonor, notice of non-payment, notice of maturity, notice of protest, presentment
for the purpose of accelerating maturity, diligence in collection, and the benefit of any exemption or insolvency laws.

 

    	Page 1 of 6

    	 

    

 

7.          No
provision of this Note and no right or benefit of Payee under this Note may be waived, nor may Maker be released from any obligation
or liability under this Note, except by a writing duly executed by an authorized representative of Payee. Payee’s waiver
of any provision of this Note shall not be deemed, nor shall it constitute, a continuing waiver of the same provision or a waiver
of any other provisions of this Note, whether or not similar. 

 

8.          If
any payment under this Note shall be specified to be made upon a day which is not a Business Day (defined below), it shall be made
on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest
in connection with such payment. For purposes of this Note, the term “Business Day” shall mean
any day which is not a Saturday, Sunday or a federally-recognized public holiday in the United States.

 

9.          Notwithstanding
anything to the contrary in the foregoing, (a) if Maker has received a written demand for payment from Wells Fargo Bank, National
Association, successor by merger to Wells Fargo Retail Finance, LLC (“Wells Fargo”) under that certain
Third Amended and Restated Guaranty  dated July 15, 2013, as may be amended from time to time, by and among Wells Fargo, Maker
(formerly known as Great American Group, Inc.), and Great American Group, LLC (“GAGLLC”), whereby Maker
and GAGLLC each jointly and severally guaranteed unconditional to Wells Fargo the payment and/or performance of certain obligations
of Great American Group WF, LLC (“GAGWF”) and certain other affiliates of GAGWF, including GA Retail,
Inc. (“GAR”) (GAGWF, GAR and such other affiliates collectively, “Borrower”),
which are parties to and under that certain Second Amended and Restated Credit Agreement dated July 15, 2013, as amended and as
may be further amended from time to time (the “Credit Agreement”), so long as such written demand for
payment has not been withdrawn by Wells Fargo, or (b) if a bankruptcy proceeding or assignment for the benefit of creditors is
commenced with respect to Maker, GAGLLC, or Borrower, or any other action or proceeding is commenced by or against Maker, GAGLLC,
or Borrower for any relief under any bankruptcy or insolvency law or laws relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions or extensions (each, an “Insolvency Proceeding”), so long as such Insolvency
Proceeding continues to be maintained with respect to Maker, GAGLLC, or Borrower, as applicable (such period, the “Blockage
Period”), Maker shall not be entitled to make, and Payee shall not be entitled to accept and retain, payments
in respect of the indebtedness evidenced by this Note, until the time when all indebtedness of Borrower to Wells Fargo evidenced
by the Credit Agreement, whether for principal, interest (including, without limitation, interest that but for the filing of a
case in bankruptcy with respect to Borrower would accrue on such indebtedness), fees, expenses or otherwise, whether now existing
or hereafter incurred or created between Borrower and Wells Fargo, and whether incurred by Borrower as principal, acceptor, surety,
indorser, guarantor, accommodation party or otherwise (all such indebtedness and other obligations, the “Senior Obligations”)
shall have been paid in full (excluding any and all continuing indemnification and tax obligations) in immediately available funds
to Wells Fargo, all letters of credit issued by Wells Fargo (or an affiliate thereof) for the account of Borrower under the Credit
Agreement shall have been terminated or cash collateralized in form and substance satisfactory to Wells Fargo, and the Credit Agreement
(other than the provisions thereof which expressly by their terms survive termination) shall have been terminated (the “Senior
Obligations Termination Date”).

 

10.         So
long as a Blockage Period has been commenced and is continuing, Payee will not ask, demand or sue for, any portion of the indebtedness
evidenced by this Note, until the earliest to occur of (a) the acceleration of the Senior Obligations, (b) the commencement of
an Insolvency Proceeding, and (c) the Senior Obligations Termination Date.

 

    	Page 2 of 6

    	 

    

 

11.         Payee
shall hold any money and/or other property received by Payee from Maker during any Blockage Period in trust for Wells Fargo and
promptly after receipt, deliver such money and other property to Wells Fargo according to Wells Fargo's instructions until the
Senior Obligations Termination Date. If any such money or other property is received by Payee for application to this Note during
the Blockage Period and held in trust for Wells Fargo, such money or other property shall first be used to satisfy the Senior Obligations
until paid in full, and second, ratably, to satisfy the obligations under this Note and the notes issued by Maker to Other Payees
as of the date hereof. All such money or other property that is so delivered to Wells Fargo during a Blockage Period for application
to the Senior Obligations shall be deemed to have been paid directly to Wells Fargo and shall not constitute a payment in respect
of the indebtedness evidenced by this Note.

 

12.         In
the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets or securities of Maker or the proceeds thereof, to creditors of Maker, in connection with an Insolvency
Proceeding with respect to Maker or Borrower, then and in any such event any payment or distribution of any kind or character either
in cash, securities or other property, which shall be payable or deliverable upon or with respect to this Note shall be paid or
delivered directly to Wells Fargo for application to payment of the Senior Obligations in such order as Wells Fargo may elect,
until the Senior Obligations Termination Date has occurred.

 

13.         No
payment or distribution by Payee to Wells Fargo pursuant to the WF Subordination Provisions shall entitle Payee to exercise any
right of subrogation in respect thereof until the Senior Obligations Termination Date.

 

14.         The
WF Subordination Provisions shall remain in full force and effect irrespective of: (a) any lack of validity or enforceability of
any agreement or instrument evidencing or relating to the Senior Obligations; (b) any change in the time, manner or place of payment
of, the security for, or in any other term of, all or any of the Senior Obligations, or any other extension, renewal, amendment,
waiver, refinancing or restructuring of, or any consent to any departure from, any of the Senior Obligations or any agreement or
instrument evidencing or relating to the Senior Obligations; (c) any sale, release, exchange or non-perfection of any or all of
the Senior Obligations or any security therefor; and (d) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, Maker, GAGLLC or Borrower. The WF Subordination Provisions shall remain in full force and effect until the
earlier of the occurrence of the Senior Obligations Termination or the repayment in full of the indebtedness evidenced by this
Note. The WF Subordination Provisions shall continue to be effective or be reinstated, as the case may be, if at any time any payment
of any Senior Obligations is rescinded or must otherwise be returned in whole or in part by Wells Fargo upon the insolvency, bankruptcy
or reorganization or other similar proceeding instituted by or against Maker, GAGLLC or Borrower and the indebtedness evidenced
by this Note remain outstanding, all as though such payment had not been made.

 

15.         For
purposes of this Note, the term “WF Subordination Provisions” shall mean Section 9, Section
10, Section 11, Section 12, Section 13 and Section 14 of this Note.

 

    	Page 3 of 6

    	 

    

 

16.         To
the extent Maker is indebted to any other Person (defined below) other than Wells Fargo, and as and to the extent required by the
documents which govern the repayment of such indebtedness, Maker shall not be entitled to make, and Payee shall not be entitled
to accept and retain, payments in respect of such indebtedness to such other Person until the time when all indebtedness of Maker
to such other Person, whether for principal, interest, fees, expenses or otherwise, whether now existing or hereafter incurred,
shall have been paid in full (such indebtedness to such other Persons, the “Third Party Senior Obligations”).
For purposes of this Note, the term “Person” shall mean an individual, trust, estate, association, corporation,
limited liability company or other entity, whether domestic or foreign. The subordination provisions set forth in this Section
shall be referred to herein as the “Third Party Subordination Provisions”.

 

17.         This
Note shall be governed by and construed in accordance with the internal laws of the State of California without giving effect to
the principles of conflicts of laws.

18.         The
courts of the United States and the State of California located in the County of Los Angeles in the State of California shall have
exclusive jurisdiction over any suit, action or proceeding arising directly or indirectly from or otherwise related to this Note.
Maker hereby irrevocably consents to such jurisdiction.

 

19.         In
the event of any litigation with respect to the obligations evidenced by this Note, Maker waives the right to a trial by
jury, all rights of setoff and rights to interpose permissive counterclaims and cross claims.

 

20.         Payee,
at any time and without the consent of Maker, may grant participations in or sell, transfer, assign and convey all or any portion
of its right, title and interest in and to this Note. Payee shall notify Maker after the completion of a sale, transfer or assignment
of One Hundred Percent (100%) of Payee’s right, title and interest in and to this Note. Maker shall not have the right to
assign or otherwise transfer this Note or any of its obligations or liabilities under this Note without the prior written consent
of Payee, which consent Payee may withhold in its sole and absolute discretion. Any permitted transferee
of this Note shall be bound by the terms and conditions of this Note, including the WF Subordination Provisions and the Third Party
Subordination Provisions, to the same extent as the transferring party.

 

21.         The
WF Subordination Provisions and the Third Party Subordination Provisions are for the purpose of defining the relative rights of
the holders of the Senior Obligations and the Third Party Senior Obligations (as the case may be), on the one hand, and Payee,
on the other hand, and, subject only to the WF Subordination Provisions and the Third Party Subordination Provisions, nothing herein
shall impair, as between Maker and Payee, the obligation of Maker under this Note, which is unconditional and absolute, to pay
to Payee the principal hereof, interest thereon and all other indebtedness evidenced by this Note in accordance with the terms
hereof, nor shall anything herein prevent Payee from exercising any remedies otherwise permitted by applicable law or upon default
hereunder.

 

22.         This
Note may not be changed, modified or terminated orally, but only by an agreement in writing signed by Maker and Payee.

 

23.         This
Note shall be binding upon Maker and the successors and assigns of Maker and inure to the benefit of the Payee and the Payee's
successors and assigns.

 

24.         If
any term of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall
in no way be affected thereby.

 

    	Page 4 of 6

    	 

    

 

25.         Wells
Fargo is an express third party beneficiary of the WF Subordination Provisions, and shall have the right to enforce such WF Subordination
Provisions in accordance with the terms thereof.

 

26.         This
Note contains the entire understanding between Maker and Payee concerning the subject matter of this Note and supersedes and replaces
all prior understandings and agreements, whether oral or written, express or implied, between them respecting the subject matter
of the Note.

 

[SIGNATURE PAGE TO SUBORDINATED UNSECURED
PROMISSORY NOTE FOLLOWS]

 

    	Page 5 of 6

    	 

    

 

IN WITNESS WHEREOF,
the undersigned Maker has executed this Note as of the date first written above.

 

“MAKER”

 

B. RILEY FINANCIAL, INC.

a Delaware corporation

 

	 /s/
    Phillip J. Ahn	 
	(Authorized Signature)	 
	 	 
	 Phillip
    J. Ahn	 
	(Name)	 
	 	 
	 CFO
    & COO	 
	(Title)	 

 

[SIGNATURE PAGE TO SUBORDINATED
UNSECURED PROMISSORY NOTE]

 

    	Page 6 of 6

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