Document:

Exhibit 10.4

      

CONVERTIBLE NOTE

 

UNLESS PERMITTED UNDER CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY IN OR TO A PERSON IN CANADA BEFORE SEPTEMBER 2, 2017.

 

THIS NOTE AND THE SECURITIES ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER
APPLICABLE SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS NOTE IS SUBJECT TO CERTAIN ADDITIONAL RESTRICTIONS
ON TRANSFER SET FORTH IN THE NOTE PURCHASE AGREEMENT.

 

ARKADOS GROUP, INC

10% SECURED CONVERTIBLE NOTE

NOTE NUMBER 2017-001

 

	Issue Date:  May 1, 2017	Principal Amount:  U.S. $[               ] 

 

For value received, Arkados Group, Inc. (the
"Issuer"), having a principal place of business at 211 Warren Street, Suite 320, Newark, New Jersey 07103, promises
to pay on or before May 1, 2018, to ______________. (together with its successors and assigns, the "Holder"),
or any other bona fide holder of this Note, the Principal Amount specified above plus the amount of interest specified in Section
1 below, payable in arrears on each Interest Payment Date (as defined below).

 

This Note is issued under a Note Purchase Agreement
dated as of May 1, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the "Note Purchase
Agreement"), between the Issuer, AIP Asset Management Inc., in its capacity as Security Agent (as defined therein), and
AIP Canadian Enhanced Income Class, AIP Global Macro Class, and AIP Global Macro Fund L.P., and any other parties that become Holders
from time to time, as holders (together with their successors and assigns, collectively, the "Holders"). Unless
otherwise defined, all capitalized terms used herein have the meanings specified in the Note Purchase Agreement. The Issuer’s
obligations under this Note are secured pursuant to that certain Security Agreement dated as of May 1, 2017, made by and among
Issuer, Arkados, Inc., Arkados Energy Solutions, LLC, and AIP Asset Management Inc., in its capacity as security agent for the
Holders.

 

The total consideration payable by Holder to
Issuer for this Note pursuant to the Note Purchase Agreement is U.S. $__________, payable by wire transfer of immediately available
funds. The Issuer acknowledges that the Principal Amount of this Note exceeds the total consideration payable pursuant to the Note
Purchase Agreement and that such $__________ excess is a 15 percent original issue discount and shall be fully earned and charged
to the Issuer upon the execution of this Note, and shall be paid to the Holder as part of the outstanding Principal Amount of this
Note.

 

    	 	 	 

     

    

 

1.           Interest. Interest shall accrue on the Principal Amount of
this Note from the date of transferring the funds to escrow until repayment in full. The interest shall accrue from day to day
at the applicable Interest Rate, both before and after default, demand, maturity and judgment, and shall be calculated on the basis
of the actual number of days elapsed and on the basis of a year of 365 or 366 days, as applicable.

 

The Notes shall bear interest
at rate per annum equal to 10% plus, if an Event of Default has occurred, 10% per annum, while such Event of Default continues
(the "Interest Rate"). Interest shall be calculated and payable monthly, in advance on the first day of each month
(each, an "Interest Payment Date") until the entire Principal Amount of this Note has been repaid in full, provided
that interest for the first month this Note is outstanding shall be payable by the Issuer to the Holder, in advance, on the date
of issuance of this Note out of the proceeds of the purchase price of this Note.

 

2.           Payments.
All payments made pursuant to this Note (in respect of principal, interest or otherwise) shall be made in full without set-off
or counterclaim, and free of and without deduction or withholding for any present or future Taxes, other than Excluded Taxes.

 

3.           Conversion.
This Note may be converted into the shares or Membership Interests of the Issuer in accordance with the terms of the Note Purchase
Agreement.

 

4.           Assignments
and Transfers. This Note may not be assigned or transferred by the Issuer except in accordance with the Note Purchase Agreement.

 

5.           Note
Register. The Holder, acting as the agent of the Issuer, shall maintain a register on which it enters the name and address
of any transferee of an interest in this Note (each, a "Transferee"), and the commitment, principal amount and
stated interest of each such Transferee's interest in the Note (the "Note Register"). The entries in the Note
Register shall be conclusive, and both the Holder and the Issuer shall treat each Person whose name is recorded in the Note Register
as the owner of the interest transferred to a Transferee for all purposes, notwithstanding any notice to the contrary. This Note
is intended to be treated as a registered obligation for United States federal income tax purposes. Any right or title in or to
the Note (including with respect to the principal amount and any interest thereon) may only be assigned or otherwise transferred
through the Note Register. This provision shall be construed so that the Note is at all times maintained in "registered form"
within the meaning of Sections 163(f), 165(g), 871(h)(2), and 881(c)(2) of the U.S. Internal Revenue Code and Section 5f.103-1(c)
of the U.S. Treasury Regulations.

 

6.           Severability.
In the event that one or more of the provisions of this Note is for any reason held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note
shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

7.           Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without the application
of any choice of laws provisions thereof.

 

    	 	 	 

     

    

 

	ARKADOS GROUP, INC.	 
	 	 	 
	/s/ Terrence DeFranco	 
	By:	Terrence DeFranco	 
	Title:	Chief Executive Officer	 
	 	 	 
	Sworn to before me this 1st day of May, 2017.	 
	 	 	 
	/s/ Lino M. Lopez	 
	Notary PublicExhibit
10.5

SECURITY
AGREEMENT

 

This Security Agreement,
dated as of May 1, 2017, as amended, amended and restated, supplemented, or otherwise modified from time to time in accordance
with the provisions hereof (“Agreement”), is made by and among (i) Arkados Group, Inc., a Delaware corporation
(the “Borrower”), as the borrower, (ii) Arkados, Inc., a Delaware corporation, as a guarantor, and Arkados
Energy Solutions, LLC, a Delaware limited liability company, as a guarantor, (each of Arkados, Inc. and Arkados Energy Solutions,
LLC is a “Guarantor”; and collectively they are the “Guarantors”), and (iii) AIP Asset
Management Inc., an Ontario, Canada corporation (the “Secured Party”), as the secured party, in its capacity
as security agent for the Holders. Each of the Borrower and the Guarantor shall be referred to herein as a “Grantor”
and collectively, the “Grantors.”

 

RECITALS

 

WHEREAS,
on the date hereof, the Borrower and the Secured Party entered into a note purchase agreement (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Note Purchase Agreement”) pursuant to which the
Secured Party agreed to advance loans in the aggregate principal amount of $2,500,000 to the Borrower; 

 

WHEREAS,
each Guarantor has agreed to unconditionally guarantee the Secured Obligations (as hereinafter defined) in connection with the
Note Purchase Agreement and the other Loan Documents (as such term is defined in the Note Purchase Agreement); and

 

WHEREAS,
each Grantor will receive substantial direct or indirect benefits from the execution, delivery and performance of its obligations
under the Note Purchase Agreement and the other Loan Documents (as such term is defined in the Note Purchase Agreement) and each
is, therefore, willing to enter into this 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 Secured Party hereby agree as follows:

 

Article
I

Definitions and interpretation

 

Section 1.01         Definitions.

 

(a)          Unless
otherwise defined herein or in the Note Purchase Agreement, capitalized terms used herein that are defined in the UCC shall have
the meanings assigned to them in the UCC; provided, however, that if a term is defined in Article 9 of the UCC differently
than in another Article of the UCC, the term has the meaning specified in Article 9.

 

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

 

    	Security Agreement	1	[ n ]

     

    

 

“Agreement” has
the meaning set forth in the Preamble hereof.

 

“Borrower” has
the meaning set forth in the Preamble hereof.

 

“Contracts” means,
collectively, with respect to each Grantor, the Intellectual Property Licenses, all sale, service, performance, equipment or property
lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or
third party or intercompany), between such Grantor and any third party, and all assignments, amendments, restatements, supplements,
extensions, renewals, replacements or modifications thereof.

 

“Control” means
(i) with respect to any Deposit Account, “control,” within the meaning of Section 9-104 of the UCC, (ii) with respect
to any Securities Account, Security Entitlement, Commodity Contract or Commodity Account, control within the meaning of Section
9-106 of the UCC, (iii) with respect to any Uncertificated Security, control within the meaning of Section 8-106(c) of the UCC,
(iv) with respect to any Certificated Security, control within the meaning of Section 8-106(a) or (b) of the UCC, (v) with respect
to any Electronic Chattel Paper, control within the meaning of Section 9-105 of the UCC, (vi) with respect to Letter-of-Credit
Rights, control within the meaning of Section 9-107 of the UCC and (vii) with respect to 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), control within the meaning of 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 the jurisdiction relevant to such transferable record.

 

“Copyrights” means,
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), including those listed in Schedule I, all tangible embodiments of the foregoing 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, together with any and all (i) rights and privileges arising under applicable law and international treaties and
conventions with respect to such Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and extensions
thereof and amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable
with respect thereto, including 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.

 

“Distributions” means,
collectively, with respect to each Grantor, all dividends, cash, options, warrants, rights, instruments, distributions, returns
of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds, including as a result
of a split, revision, reclassification or other like change of the Pledged Securities, 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 Pledged Debt.

 

    	Security Agreement	2	[ n ]

     

    

 

“Equity Interests”
mean common stock, preferred stock, limited liability company membership interests, partnership interests, and any other ownership
interests in any entity or whatever class that provides its holder voting rights, rights to dividends or distributions of earnings
of the entity, or rights to liquidating distributions upon termination of the entity. Equity Interests also include options, warrants,
and other securities or instruments convertible into such ownership interests.

 

“Excluded
Property” means, collectively:

 

(i)          any
asset or property that is subject to a Permitted Lien, but solely to the extent that a grant or perfection of a security interest
hereunder in favor of the Secured Party is prohibited by, results in a breach or termination of, or constitutes a default under,
any agreement governing such Permitted Lien;

 

(ii)         any
asset or property to the extent that the grant of a security interest hereunder in favor of the Secured Party is prohibited by
applicable law or requires a consent not obtained from any Governmental Authority pursuant to any applicable law (including any
license granted in the name of any Grantor by any Governmental Authority, including the Securities Exchange Commission), in each
case after giving effect to the applicable anti-assignment provisions of the UCC and other applicable law and other than Proceeds
and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other applicable law notwithstanding
such prohibition;

 

(iii)        any
United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant, attachment
or enforcement of a security interest therein would, under applicable federal law, impair the registrability of such applications
or the validity or enforceability of registrations issuing from such applications; and

 

(iv)        any
asset as to which the Secured Party shall reasonably determine, in writing, that the costs of obtaining a Lien thereon or perfection
thereof are excessive in relation to the benefit to the Secured Party of the security to be afforded thereby.

 

provided, however,
that “Excluded Property” shall not include any Proceeds, products, substitutions or replacements of any Excluded Property
(unless such Proceeds, products, substitutions or replacements would constitute Excluded Property).

 

“Grantor(s)” has
the meaning set forth in the Preamble hereof.

 

“Guarantor” has
the meaning set forth in the Preamble hereof.

 

“Intellectual
Property Collateral” means, collectively, the Patents, Trademarks (excluding only United States intent-to-use Trademark
applications to the extent that and solely during the period in which the grant of a security interest therein would impair, under
applicable federal law, the registrability of such applications or the validity or enforceability of registrations issuing from
such applications), Copyrights, Trade Secrets, Intellectual Property Licenses and all other industrial, intangible and intellectual
property of any type, including mask works and industrial designs.

 

    	Security Agreement	3	[ n ]

     

    

 

“Intellectual
Property Licenses” means, collectively, with respect to each Grantor, all license and distribution agreements with
any Person with respect to any Patent, Trademark, Copyright or Trade Secret, whether such Grantor is a licensor or licensee, distributor
or distributee under any such license or distribution agreement, including such agreements listed in Schedule I, 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 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, Copyrights or Trade Secrets.

 

“Note Purchase
Agreement” has the meaning set forth in the first Recital hereof.

 

“Organizational
Documents” means the certificate of incorporation and by-laws or any comparable organizational documents of any
corporate entity (including limited liability companies and partnerships).

 

“Patents” means,
collectively, with respect to each Grantor, all patents issued or assigned to, and all patent applications and registrations made
by, such Grantor including those listed in Schedule I, whether issued, established or registered or recorded in the United
States or any other country or any political subdivision thereof, and all tangible embodiments of the foregoing, together with
any and all (i) rights and privileges arising under applicable law and international treaties and conventions 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 and amendments thereto, (iv) income, fees, royalties, damages,
claims and payments now or hereafter due and/or payable thereunder and with respect thereto including 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 Collateral” has
the meaning set forth in Section 2.01.

 

“Pledged Debt” 
means, with respect to each Grantor, all Debt (including intercompany notes) from time to time owed to such Grantor by any obligor,
including the Debt described in Schedule II, and all interest, cash, instruments and other property, assets or proceeds
from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Debt and all
certificates, instruments or agreements evidencing such Debt, and all assignments, amendments, restatements, supplements, extensions,
renewals, replacements or modifications thereof.

 

    	Security Agreement	4	[ n ]

     

    

 

“Pledged Securities” means,
collectively, with respect to each Grantor, (i) all issued and outstanding Equity Interests that are owned by such Grantor and
all options, warrants, rights, agreements and additional Equity Interests of whatever class of any such issuer acquired by such
Grantor in any manner, together with all claims, rights, privileges, authority and powers of such Grantor relating to such Equity
Interests in each such issuer or under any Organizational Document of each such issuer, 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, including the Equity Interests listed in Schedule II, and (ii) all additional Equity
Interests of any issuer from time to time acquired by or issued to such Grantor and all options, warrants, rights, agreements and
additional Equity Interests of whatever class of any such issuer from time to time acquired by such Grantor in any manner, together
with all claims, rights, privileges, authority and powers of such Grantor relating to such Equity Interests or under any Organizational
Document of any such issuer, 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.

 

“Secured Obligations” means
(i) all obligations of the Borrower and the Guarantor arising under the Note Purchase Agreement and the other Loan Documents, including
with respect to the due and prompt payment of (A) the principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable
in such proceeding) on the Notes, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise and (B) all other monetary obligations, including fees, costs, attorneys’ fees and disbursements, reimbursement
obligations, contract causes of action, expenses and indemnities, whether primary, secondary, direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, fixed or otherwise (including monetary obligations incurred during the
pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of the Borrower and the Guarantor under or in respect of any Loan Document and (ii) the due and prompt performance
of all other covenants, duties, debts, obligations and liabilities of any kind of the Borrower and the Guarantor under or in respect
of the Note Purchase Agreement, this Agreement, the other Loan Documents or any other document made, delivered or given in connection
with any of the foregoing, in each case whether evidenced by a note or other writing, whether allowed in any bankruptcy, insolvency,
receivership or other similar proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, and whether primary, secondary, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, fixed or otherwise.

 

“Secured Party” has
the meaning set forth in the Preamble hereof.

 

“Securities
Collateral” means, collectively, the Pledged Securities, the Pledged Debt and the Distributions.

 

“Trade Secrets” means,
collectively, with respect to each Grantor, all know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, technical, marketing, financial and business data and databases, pricing and
cost information, business and marketing plans, customer and supplier lists and information, all other confidential and proprietary
information and all tangible embodiments of the foregoing, together with any and all (i) rights and privileges arising under applicable
law and international treaties and conventions with respect to such trade secrets, (ii) income, fees, royalties, damages, claims
and payments now or hereafter due and/or payable with respect thereto including damages and payments for past, present or future
misappropriations thereof, (iii) rights corresponding thereto throughout the world and (iv) rights to sue for past, present or
future misappropriations thereof.

 

    	Security Agreement	5	[ n ]

     

    

 

“Trademarks” means,
collectively, with respect to each Grantor, all trademarks (including service marks), slogans, logos, symbols, certification marks,
collective marks, trade dress, uniform resource locators (URL’s), domain names, corporate names and trade names, whether
statutory or common law, whether registered or unregistered and whether established or registered in the United States or any other
country or any political subdivision thereof, including those listed in Schedule I, that are owned by or assigned to such
Grantor, all registrations and applications for the foregoing and all tangible embodiments of the foregoing, together with, in
each case, the goodwill symbolized thereby and any and all (i) rights and privileges arising under applicable law and international
treaties and conventions with respect to such Grantor’s use of any trademarks, (ii) reissues, continuations, extensions and
renewals thereof and amendments thereto, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable
thereunder and with respect thereto, including 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.

 

“UCC” means
the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if by reason
of mandatory provisions of law, any or all of the perfection or priority of the Secured Party’s security interest in any
item or portion of the Pledged Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than
the State of New York, the term “UCC” means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating
to such provisions.

 

Section 1.02         Interpretation.
 The rules of interpretation specified in the Note Purchase Agreement shall be applicable to this Agreement. All references
in this Agreement to Sections are references to Sections of this Agreement unless otherwise specified. The word “including”
and words of similar import shall mean “including without limitation,” unless otherwise specified.

 

Section 1.03         Schedules.
The Secured Party and each Grantor agree that the Schedules hereof and all descriptions of Pledged Collateral contained in
the Schedules and all amendments and supplements thereto are and shall at all times remain a part of this Agreement.

 

Article
II

Grant of security interest

 

Section 2.01         Grant
of Security Interest. As collateral security for the payment and performance in full of all the Secured Obligations, each
Grantor hereby pledges and grants to the Secured Party a Lien on, and security interest in and to, all of the right, title and
interest of such Grantor in, to and under the following property, wherever located, and whether now existing or hereafter arising
or acquired from time to time (collectively, the “Pledged Collateral”):

 

(a) all Accounts;

 

    	Security Agreement	6	[ n ]

     

    

 

(b) all Equipment,
Goods, Inventory and Fixtures;

 

(c) all Documents,
Instruments and Chattel Paper;

 

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

 

(e) all Securities
Collateral;

 

(f) all Investment
Property;

 

(g) all Intellectual
Property Collateral;

 

(h) all General Intangibles;

 

(i) all Money and all
Deposit Accounts;

 

(j) all Supporting
Obligations;

 

(k) all books and records,
customer lists, credit files, computer files, programs, printouts and other computer materials and records relating to the Pledged
Collateral and any General Intangibles at any time evidencing or relating to any of the foregoing; and

 

(l) to the extent not
covered by clauses (a) through (k) of this sentence, all other assets, personal property and rights of such Grantor, whether tangible
or intangible, 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, and 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 (a) through (l) above, the security interest created by this Agreement shall not extend to,
and the term “Pledged Collateral” shall not include, any Excluded Property, provided that, if any Excluded Property
would have otherwise constituted Pledged Collateral, when such property shall cease to be Excluded Property (including as a result
of not being subject to any Permitted Liens), such property shall be deemed at all times from and after the date hereof to constitute
Pledged Collateral.

 

The Grantors shall
from time to time at the request of the Secured Party give written notice to the Secured Party identifying in reasonable detail
the Excluded Property (and stating in such notice that such Excluded Property constitutes “Excluded Property”) and
shall provide to the Secured Party such other information regarding the Excluded Property as the Secured Party may reasonably request.

 

    	Security Agreement	7	[ n ]

     

    

 

Section 2.02         Filings.

 

(a)          Each
Grantor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any relevant jurisdiction
any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9
of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Pledged Collateral,
including (i) whether such Grantor is an organization, the type of organization and any organizational identification number issued
to such Grantor, (ii) any financing or continuation statements or other documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the security interest granted by such Grantor hereunder, without the signature of such Grantor where permitted
by law, including the filing of a financing statement describing the Pledged Collateral as “all assets now owned or hereafter
acquired by the Grantor or in which the Grantor otherwise has rights” and (iii) in the case of a financing statement filed
as a fixture filing or covering Pledged Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient
description of the real property to which such Pledged Collateral relates. Each Grantor agrees to provide all information described
in the immediately preceding sentence to the Secured Party promptly upon request by the Secured Party.

 

(b)          Each
Grantor hereby further irrevocably authorizes the Secured Party to file with the United States Patent and Trademark Office and
the United States Copyright Office (and any successor office and any similar office in any United States state or other country)
this Agreement and other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security
interest granted by such Grantor hereunder, without the signature of such Grantor where permitted by law, and naming such Grantor
as debtor, and the Secured Party as secured party.

 

Article
III

Perfection and further assurances

 

Section 3.01         Perfection
of Certificated Securities Collateral.
Each Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing the Securities
Collateral in existence on the date hereof have been delivered to the Secured Party in suitable form for transfer by delivery
or accompanied by duly executed instruments of transfer or assignment in blank and that (assuming continuing possession by the
Secured Party of any such Securities Collateral) the Secured Party has a perfected first priority security interest therein, subject
only to the Permitted Liens. Each Grantor hereby agrees that all certificates, agreements or instruments representing or evidencing
the Securities Collateral acquired by such Grantor after the date hereof shall immediately upon receipt thereof by such Grantor
be held by or on behalf of and delivered to the Secured Party in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party. 

 

The
Secured Party shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of the Secured Party 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; provided, however, that after any such Event of Default has been waived in accordance with the provisions
of the Note Purchase Agreement and to the extent the Secured Party has exercised its rights under this sentence, the Secured Party
shall, promptly after the reasonable request of the applicable Grantor(s), cause such Securities Collateral to be transferred
to, or request that such Securities Collateral is registered in the name of, the applicable Grantor(s) to the extent it or its
nominees holds an interest in such Securities Collateral at such time. In addition, upon the occurrence and during the continuance
of an Event of Default, the Secured Party shall have the right to exchange certificates representing or evidencing Securities
Collateral for certificates of smaller or larger denominations.

 

    	Security Agreement	8	[ n ]

     

    

 

Section
3.02         Perfection of Uncertificated Securities Collateral. Each
Grantor represents and warrants that, subject only to the Permitted Liens, the Secured Party has a perfected first priority
security interest in all uncertificated Pledged Securities pledged by it hereunder that are in existence on the date hereof.
Each Grantor hereby agrees that if any of the Pledged Securities are at any time not evidenced by certificates of ownership,
such Grantor will cause the issuer thereof either (a) to register the Secured Party as the registered owner of such
securities or (b) to agree in an authenticated record with such Grantor and the Secured Party that such issuer will comply
with instructions with respect to such securities originated by the Secured Party without further consent of such Grantor,
(c) upon request by the Secured Party, provide to the Secured Party an opinion of counsel, in form and substance reasonably
satisfactory to the Secured Party, confirming such pledge and perfection thereof, (d) request the issuer of such Pledged
Securities to cause such Pledged Securities to become certificated and in the event such Pledged Securities become
certificated, to deliver such Pledged Securities to the Secured Party in accordance with the provisions of Section 3.01. Each
Grantor hereby agrees that if any of the Pledged Securities are evidenced by certificates of ownership, such certificates of
ownership will be (i) transferred to the Secured Party, endorsed in blank, and (ii) in the case of Pledged Securities
representing membership interests in a limited liability company, will be accompanied by written, irrevocable consent of the
limited liability company and , if required by the operating agreement, the members that any assignee of such Pledged
Securities shall be admitted as a member of such limited liability company immediately upon such Pledged Securities being
assigned to such assignee.

 

Section 3.03         Maintenance
of Perfected Security Interest. Each Grantor represents and warrants that on the date hereof all financing statements, agreements,
instruments and other documents necessary to perfect the security interest granted by it to the Secured Party in respect of the
Pledged Collateral have been delivered to the Secured Party in completed and, to the extent necessary, duly executed form for
filing in each governmental, municipal or other office. Each Grantor agrees that, at its sole cost and expense, such Grantor will
maintain the security interest created by this Agreement in the Pledged Collateral as a perfected first priority security interest,
subject only to the Permitted Liens.

 

Section 3.04         Further
Assurances.

 

(a)          Further
Assurances. Each Grantor shall take such further actions, and execute and/or deliver to the Secured Party such additional financing
statements, amendments, assignments, agreements, supplements, powers and instruments, as the Secured Party may in its reasonable
judgment deem necessary in order to create and/or maintain the validity, perfection or priority of and protect any security interest
granted or purported to be granted in the Pledged Collateral as provided herein and the rights and interests granted to the Secured
Party hereunder, and enable the Secured Party to exercise and enforce its rights, powers and remedies hereunder with respect to
any Pledged Collateral, including the filing of any financing statements, continuation statements and other documents under the
UCC (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby, all in form reasonably
satisfactory to the Secured Party and in such offices wherever required by law to perfect, continue and maintain the validity,
enforceability and priority of the security interest in the Pledged Collateral as provided herein and to preserve the other rights
and interests granted to the Secured Party hereunder, as against third parties, with respect to the Pledged Collateral. Without
limiting the generality of the foregoing, but subject to applicable law, each Grantor shall make, execute, endorse, acknowledge,
file or refile and/or deliver to the Secured Party from time to time upon request by the Secured Party such lists, schedules, descriptions
and designations of the Pledged Collateral, statements, copies 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 as the Secured Party shall
reasonably request. If an Event of Default has occurred and is continuing, the Secured Party may institute and maintain, in its
own name or in the name of any Grantor, such suits and proceedings as the Secured Party may deem necessary or expedient to prevent
any impairment of the security interest in or the perfection thereof in the Pledged Collateral. All of the foregoing shall be at
the sole cost and expense of the Grantors.

 

    	Security Agreement	9	[ n ]

     

    

 

Article
IV

Representations, warranties and covenants

 

Each Grantor represents,
warrants and covenants as follows:

  

Section 4.03         Representations.

 

(a)          Note
Purchase Agreement Representations. Each Grantor makes the representations and warranties set forth in Section 7.1 of the Note
Purchase Agreement as they relate to the Grantors or to the Loan Documents to which any Grantor is a party, each of which is hereby
incorporated herein by reference, and the Secured Party shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to the Borrower’s knowledge shall, for the
purposes of this Section 4.01, be deemed to be a reference to the Grantors’ knowledge.

 

(b)          Enforceability.
This Agreement constitutes when delivered hereunder will constitute, a legal, valid and binding obligation of each Grantor
thereto, enforceable against each such Grantor in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or creditor rights generally and by general equitable principles (whether enforcement
is sought by proceedings in equity or at law).

 

(c)          No
Contravention. The execution, delivery and performance of this Agreement will not violate any applicable law or any contractual
obligation of any Grantor and will not result in, or require, the creation or imposition of any Lien on any of their respective
properties or assets pursuant to any applicable law or any such contractual obligation (other than the Liens created by the Loan
Documents).

 

Section 4.04         Ownership
of Property; No Other Liens.

 

(a)          Each
Grantor has fee simple title to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold
interest in, all its Pledged Collateral, and none of such property is subject to any Lien, except for the security interest granted
to the Secured Party hereunder and the Permitted Liens. No Person other than the Secured Party has control or possession of all
or any part of the Pledged Collateral, except as permitted by the Note Purchase Agreement

 

    	Security Agreement	10	[ n ]

     

    

 

(b)          None
of the Pledged Collateral constitutes, or is the Proceeds of (i) farm products, (iii) manufactured momes, (iv) health-care-insurance
receivables, (v) timber to be cut, (vi) aircraft, aircraft engines, satellites, ships or railroad rolling stock.

 

Section 4.05         Perfected
Security Interest. This Agreement is effective to create in favor of the Secured Party a legal, valid and enforceable security
interest in the Pledged Collateral and the Proceeds thereof. In the case of the certificated Pledged Securities, when stock certificates
representing such Pledged Securities are delivered to the Secured Party and in the case of the other Pledged Collateral, when
financing statements and other filings specified on Schedule III in appropriate form are filed in the offices specified
on Schedule III and other actions described in Schedule III are taken, this Agreement shall constitute, and will
at all times constitute, a fully perfected first priority Lien on, and security interest in, all rights, title and interest of
the Grantors in such Pledged Collateral and the Proceeds thereof, as security for the Secured Obligations, subject only to the
Permitted Liens.

 

Section 4.06         No
Transfer of Pledged Collateral.  No Grantor shall sell, offer to sell, dispose of, convey, assign or otherwise transfer, or
grant any option with respect to, restrict, or grant, create, permit or suffer to exist any Lien on, any of the Pledged Collateral
pledged by it hereunder or any interest therein, except for any Permitted Lien.

 

Section 4.07         Claims
Against Pledged Collateral. Each Grantor shall, at its own cost and expense, defend title to the Pledged Collateral and the
security interest and Lien granted to the Secured Party with respect thereto against all claims and demands of all Persons at
any time claiming any interest therein materially adverse to the Secured Party other than Permitted Liens. Except as expressly
permitted by the Note Purchase Agreement or any other Loan Document, there is no agreement, order, judgment or decree, and no
Grantor shall enter into any agreement or take any other action, that could reasonably be expected to restrict the transferability
of any of the Pledged Collateral or otherwise impair or conflict with such Grantors’ obligations or the rights of the Secured
Party hereunder.

 

Section 4.08         Other
Financing Statements. Such Grantor has not executed, filed, nor authorized any third party to file any financing statement
or other instrument similar in effect covering all or any part of the Pledged Collateral or listing such Grantor as debtor in
any recording office, except for financing statements and other instruments that were filed in favor of the Secured Party pursuant
to this Agreement or in respect of any Permitted Lien. No Grantor shall execute, authorize or permit to be filed in any recording
office any financing statement or other instrument similar in effect covering all or any part of the Pledged Collateral or listing
such Grantor as debtor with respect to all or any part of the Pledged Collateral, except financing statements and other instruments
filed in respect of Permitted Liens.

 

    	Security Agreement	11	[ n ]

     

    

 

Section 4.09         Changes
in Name, Jurisdiction of Organization, Etc. On the date hereof, such Grantor’s type of organization, jurisdiction of
organization, legal name, Federal Taxpayer Identification Number and chief executive office or principal place of business are
indicated next to its name in Schedule IV. Schedule IV also lists all of such Grantor’s jurisdictions and
types or organization, legal names and locations of chief executive office or principal place of business at any time during the
four (4) months preceding the date hereof, if different from those referred to in the preceding sentence. Such Grantor shall not,
except upon not less than thirty (30) days’ prior written notice to the Secured Party, and delivery to the Secured Party
of all additional financing statements, information and other documents reasonably requested by the Secured Party to maintain
the validity, perfection and priority of the security interests provided for herein:

 

(a)          change
its legal name, identity, type of organization or corporate structure;

 

(b)          change
the location of its chief executive office or its principal place of business;

 

(c)          change
its Federal Taxpayer Identification Number; or

 

(d)          change
its jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, organizing, dissolving,
liquidating, reincorporating or incorporating in any other jurisdiction).

 

Such Grantor shall,
prior to any change described in the preceding sentence, take all actions reasonably requested by the Secured Party to maintain
the perfection and priority of the security interest of the Secured Party in the Pledged Collateral intended to be granted hereunder.

 

Each Grantor agrees
to promptly provide the Secured Party with certified Organizational Documents reflecting any of the changes described in this Section
4.09. Each Grantor also agrees to promptly notify the Secured Party of any change in the location of any office in which it maintains
books or records relating to Pledged Collateral owned by it or any office or facility at which Pledged Collateral is located (including
the establishment of any such new office or facility).

 

Section 4.10         Location
of Inventory and Equipment. On the date hereof, the material Inventory and the material Equipment (other than mobile goods
and goods in transit) of such Grantor are kept at locations listed in Schedule IV. Schedule IV also lists the locations
of such Grantor’s material Inventory and the material Equipment (other than mobile goods and goods in transit) for the four
(4) months preceding the date hereof, if different from those referred in the preceding sentence.

 

Such Grantor shall
not move any Equipment or Inventory to any location, other any location that is listed in Schedule IV except upon not less
than thirty (30) days’ prior written notice to the Secured Party, describing such new location and providing such other information
and documents to the Secured Party reasonably requested by the Secured Party to maintain the validity, perfection and priority
of the security interests provided for herein. Such Grantor shall, prior to any change described in the preceding sentence, take
all actions reasonably requested by the Secured Party to maintain the perfection and priority of the security interest of the Secured
Party in the Pledged Collateral.

 

    	Security Agreement	12	[ n ]

     

    

 

Section 4.11         Pledged
Securities and Pledged Debt. Schedule II sets forth a complete and accurate list of all Pledged Securities and Pledged
Debt held by such Grantor as of the date hereof. The Pledged Securities pledged by such Grantor hereunder constitute all of the
issued and outstanding Equity Interests of each issuer owned by such Grantor. All of the Pledged Securities existing on the date
hereof have been, and to the extent any Pledged Securities are hereafter issued, such Pledged Securities will be, upon such issuance,
duly authorized, validly issued, fully paid and non-assessable. There is no amount or other obligation owing by any Grantor to
any issuer of the Pledged Securities in exchange for or in connection with the issuance of the Pledged Securities or any Grantor’s
status as a partner or a member of any issuer of the Pledged Securities. No Grantor is in default or violation of any provisions
of any agreement to which such Grantor is a party relating to the Pledged Securities.

 

All of the Pledged
Debt described on Schedule II has been duly authorized, authenticated or issued, and delivered and is the legal, valid and
binding obligation of the issuers thereof, enforceable in accordance with their respective terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’
rights generally, general equitable principles (whether considered in a proceeding in equity or at law)) and is not in default.
The Pledged Debt constitutes all of the issued and outstanding intercompany indebtedness owing to such Grantor and if evidenced
by promissory notes, such notes have been delivered to the Secured Party.

 

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 there are no certificates, instruments, documents or other writings
(other than the Organizational Documents and certificates representing such Pledged Securities or Pledged Debt, if any, that have
been delivered to the Secured Party) which evidence any Pledged Securities or Pledged Debt of such Grantor.

 

In the case of a limited
liability company the membership interests of which are Pledged Securities, neither the certificate of formation nor the limited
liability company agreement (sometimes referred to as an operating agreement) precludes as assignee of such Pledged Securities
from immediately becoming a member of such limited liability company upon becoming an assignee of such Pledged Securities.

 

Each Grantor shall,
upon obtaining any Pledged Securities or Pledged Debt of any Person, accept the same in trust for the benefit of the Secured Party
and promptly (but in any event within five (5) Business Days after receipt thereof) deliver to the Secured Party an updated Schedule
II, and the certificates and other documents required under Section 3.01 and Section 3.02 hereof in respect of the additional
Pledged Securities or Pledged Debt which are to be pledged pursuant to this Agreement, and confirming the Lien hereby created on
such additional Pledged Securities or Pledged Debt.

 

Section 4.12         Approvals.
In the event that the Secured Party desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers
set forth in this 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 Secured Party, such Grantor agrees to assist the Secured Party
in obtaining as soon as reasonably practicable any necessary approvals or consents for the exercise of any such remedies, rights
and powers.

 

    	Security Agreement	13	[ n ]

     

    

 

Section 4.13         Pledged
Collateral Information. All information set forth herein, including the Schedules, and all information contained in any documents,
Schedules and lists heretofore delivered to the Secured Party in connection with this Agreement, in each case, relating to the
Pledged Collateral, is accurate and complete. The Pledged Collateral described on the Schedules constitutes all of the property
of such type of Pledged Collateral owned or held by the Grantors.

 

Section 4.14         Insurance.
In the event that the proceeds of any insurance claim are paid to any Grantor after the Secured Party has exercised its right
to foreclose on all or any part of the Pledged Collateral during the existence of an Event of Default, such Net Cash Proceeds
shall be held in trust for the benefit of the Secured Party and immediately after receipt thereof shall be paid to the Secured
Party for application in accordance with the Note Purchase Agreement.

 

Section 4.15         Intellectual
Property.  (a) Schedule I lists all Copyrights, Patents, Trademarks and Intellectual Property Licenses owned by such
Grantor; (b) all Intellectual Property Collateral is valid, subsisting, unexpired and enforceable and has not been abandoned;
(c) except as described on Schedule I, such Grantor is the exclusive owner of all right, title and interest in and to,
or has the right to use, all such Intellectual Property Collateral; (d) consummation and performance of this Agreement will not
result in the invalidity, unenforceability or impairment of any such Intellectual Property Collateral, or in default or termination
of any material Intellectual Property License; (e) except as described on Schedule I, there are no outstanding holdings,
decisions, consents, settlements, decrees, orders, injunctions, rulings or judgments that would limit, cancel or question the
validity or enforceability of any such Intellectual Property Collateral or such Grantor’s rights therein or use thereof;
(f) to such Grantor’s knowledge, except as described on Schedule I, the operation of such Grantor’s business
and such Grantor’s use of Intellectual Property Collateral in connection therewith, does not infringe or misappropriate
the intellectual property rights of any other Person; and (g) except as described in Schedule I, no action or proceeding
is pending or, to such Grantor’s knowledge, threatened (i) seeking to limit, cancel or question the validity of any Intellectual
Property Collateral or such Grantor’s ownership interest or rights therein, or (ii) alleging that any such Intellectual
Property Collateral, or such Grantor’s use thereof in the operation of its business, infringes or misappropriates the intellectual
property rights of any Person.

 

Section 4.16         Inspection
of Pledged Collateral. Each Grantor shall keep the Pledged Collateral in good order and repair and shall not use the same
in violation of law or any policy of insurance thereon. Each Grantor shall permit the Secured Party or any of its designees to
inspect the Pledged Collateral at any reasonable time, wherever located.

 

    	Security Agreement	14	[ n ]

     

    

 

Article
V

Remedies

 

Section 5.01         Remedies.

 

(a)          If
any Event of Default shall have occurred and be continuing, the Secured Party may exercise, without any other notice to or demand
upon any Grantor, in addition to the other rights and remedies provided for herein or in any other Loan Document or otherwise available
to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected
Pledged Collateral) and also may:

 

(i)          require
each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Secured Party immediately,
assemble the Pledged Collateral or any part thereof, as directed by the Secured Party and make it available to the Secured Party
at a place and time to be designated by the Secured Party;

 

(ii)         without
notice except as specified below, sell, resell, assign and deliver or grant a license to use or otherwise dispose of the Pledged
Collateral or any part thereof, in one or more parcels at public or private sale, at any of the Secured Party’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable;

 

(iii)        occupy
any premises owned or leased by any of the Grantors where the Pledged Collateral or any part thereof is assembled or located for
a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in
respect of such occupation; and

 

(iv)        exercise
any and all rights and remedies of any of the Grantors under or in connection with the Pledged Collateral.

 

(b)          Each
Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to such Grantor
of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.
To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Secured
Party arising out of the exercise by it of any rights hereunder. Each Grantor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the Pledged Collateral, whether before or after sale hereunder,
and all rights, if any, of marshalling the Pledged Collateral and any other security for the Secured Obligations or otherwise.
The Secured Party shall not be liable for failure to collect or realize upon any or all of the Pledged Collateral or for any delay
in so doing nor shall it be under any obligation to take any action with regard thereto. The Secured Party shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been given. The Secured Party 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. The Secured Party shall not be obligated to clean-up or otherwise prepare
the Pledged Collateral for sale.

 

(c)          If
any Event of Default shall have occurred and be continuing, all payments received by any Grantor in respect of the Pledged Collateral
shall be received in trust for the benefit of the Secured Party, shall be segregated from other funds of such Grantor and shall
be forthwith paid over the Secured Party in the same form as so received (with any necessary endorsement).

 

    	Security Agreement	15	[ n ]

     

    

 

(d)          If
any Event of Default shall have occurred and be continuing, the Secured Party may, without notice to any Grantor except as required
by law and at any time or from time to time, charge, set off and otherwise apply all or part of the Secured Obligations against
any funds deposited with it or held by it.

 

(e)          If
any Event of Default shall have occurred and be continuing, upon the written demand of the Secured Party, each Grantor shall execute
and deliver to the Secured Party an assignment or assignments of any or all of the Intellectual Property Collateral and such other
documents and take such other actions as are necessary to carry out the intent and purposes hereof. Within five (5) Business Days
of written notice thereafter from the Secured Party, each Grantor shall make available to the Secured Party, 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 Secured Party 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 Intellectual Property Collateral, and such persons shall be available
to perform their prior functions on the Secured Party’s behalf.

 

(f)          If
the Secured Party shall determine to exercise its right to sell all or any of the Securities Collateral of any Grantor pursuant
to this Section 5.01, each Grantor agrees that, upon request of the Secured Party, such Grantor will, at its own expense:

 

(i)          provide
the Secured Party with such information and projections as may be necessary
to enable the Secured Party to effect the sale of such Securities Collateral; and

 

(ii)         do
or cause to be done all such other acts and things as may be necessary to make such sale of such Securities Collateral or any part
thereof valid and binding and in compliance with applicable law.

 

(g)          The
Secured Party is authorized, in connection with any sale of the Securities Collateral pursuant to this Section 5.01, to deliver
or otherwise disclose to any prospective purchaser of the Securities Collateral any information in its possession relating to such
Securities Collateral.

 

Section 5.02         No
Waiver and Cumulative Remedies. No failure on the part of the Secured Party to exercise, no course of dealing with respect
to, and no delay on the part of the Secured Party 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, privilege or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, privilege or remedy; nor shall the Secured Party be required
to look first to, enforce or exhaust any other security, collateral or guaranties. All rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies provided by law.

 

Section 5.03         Application
of Proceeds.  Upon the exercise by the Secured Party of its remedies hereunder, any proceeds received by the Secured Party
in respect of any realization upon any Pledged Collateral shall be applied, together with any other sums then held by the Secured
Party pursuant to this Agreement, in accordance with the Note Purchase Agreement. Each Grantor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Pledged Collateral are insufficient to pay the Secured Obligations and
the fees and other charges of any attorneys employed by the Secured Party to collect such deficiency.

 

    	Security Agreement	16	[ n ]

     

    

 

Article
VI

MISCELLANEOUS

 

Section 6.01         Performance
By Secured Party. If any Grantor shall fail to perform any covenants contained in this Agreement after giving effect to all
applicable grace periods (including covenants to pay insurance, taxes and claims arising by operation of law in respect of the
Pledged Collateral and to pay or perform any Grantor obligations under any Pledged Collateral) or if any representation or warranty
on the part of any Grantor contained herein shall be breached, the Secured Party may (but shall not be obligated to) during the
existence of an Event of Default do the same or cause it to be done or remedy any such breach, and may make payments for such
purpose; provided, however, that the Secured Party 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 and which such Grantor
does not contest in accordance with the provisions of the Note Purchase Agreement. Any and all amounts so paid by the Secured
Party shall be reimbursed by the Grantors in accordance with the provisions of Section 6.07. Neither the provisions of this Section
6.01 nor any action taken by the Secured Party pursuant to the provisions of this Section 6.01 shall prevent any such failure
to observe any covenant contained in this Agreement nor any breach of representation or warranty from constituting an Event of
Default.

 

Section 6.02         Power
of Attorney. Each Grantor hereby appoints the Secured Party its attorney-in-fact, with full power and authority in the place
and stead of such Grantor and in the name of such Grantor, or otherwise, from time to time during the existence of an Event of
Default in the Secured Party’s discretion to take any action and to execute any instrument consistent with the terms of
the Note Purchase Agreement and the other Loan Documents which the Secured Party may deem necessary or advisable to accomplish
the purposes hereof (but the Secured Party shall not be obligated to and shall have no liability to such Grantor or any third
party for failure to so do or take action). 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.

 

Without limiting the
previous paragraph, each Grantor hereby appoints the Secured Party its attorney-in-fact, with full power and authority in the place
and stead of such Grantor and in the name of such Grantor, or otherwise, from time to time during the existence of an Event of
Default in the Secured Party’s discretion to take any action and to execute any instrument relating to Grantor’s voting
and other rights with respect to such Grantor’s membership interests in any limited liability company, the membership interests
in which are Pledged Securities, including, but not limited to, an instrument approving the admission of any assignee of such Pledge
Securities as a member in such limited liability company.

 

    	Security Agreement	17	[ n ]

     

    

 

Section 6.03         Continuing
Security Interest and Assignment

. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (a) be binding upon the Grantors, their respective successors
and assigns and (b) inure to the benefit of the Secured Party and its permitted successors, transferees and assigns and its officers,
directors, employees, affiliates, agents, advisors and controlling Persons; provided that, that no Grantor shall assign
or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the Secured Party
and any attempted assignment or transfer without such consent shall be null and void. Without limiting the generality of the foregoing
clause (b), the Secured Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other
Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Secured Party,
herein or otherwise, subject however, to the provisions of the Note Purchase Agreement.

 

Section 6.04         Termination.
At such time as the Notes and the other Secured Obligations shall have been paid in full (other than contingent indemnification
obligations in which no claim has been made or is reasonably foreseeable), the Pledged Collateral shall be released from the Liens
created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the
Secured Party and each Grantor hereunder shall terminate, all without delivery of any instrument or any further action by any
party, and all rights to the Pledged Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following
any such termination, the Secured Party shall deliver to such Grantor any Pledged Collateral held by the Secured Party hereunder,
and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

 

Section 6.05         Modification
in Writing. None of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived,
and no consent to any departure by any Grantor therefrom shall be effective, except by a written instrument signed by the Secured
Party in accordance with the terms of the Note Purchase Agreement. Any amendment, modification or supplement of 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
in each case shall be effective only in the specific instance and for the specific purpose for which made or given. This Agreement
shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, terminated
or waived with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other
Grantor hereunder.

 

Section 6.06         Notices.
Unless otherwise provided herein, any notice or other communication required or permitted to be given under this Agreement
shall be in writing and shall be given in the manner and become effective as set forth in the Note Purchase Agreement.

 

    	Security Agreement	18	[ n ]

     

    

 

Section 6.07         Indemnity
and Expenses.

 

(a)          Each
Grantor hereby agrees to indemnify and hold harmless the Secured Party and its Affiliates and the directors, officers, employees,
partners, agents, trustees, administrators, managers, advisors and representatives (each, an “Indemnitee”) from
any losses, damages, liabilities, claims and related expenses (including the fees and expenses of any counsel for any Indemnitee)
incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any Grantor) arising out of, in connection
with or resulting from this Agreement (including the enforcement of this Agreement) or any failure of any Secured Obligations to
be the legal, valid, and binding obligations of any Grantor enforceable against such Grantor in accordance with their terms, whether
brought by a third party or by such Grantor; provided, however, that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or related expenses (i) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee
or (ii) result from a claim brought by any Grantor against an Indemnitee for breach in bad faith of such Indemnitee’s obligations
hereunder or under any other Loan Document, if such Grantor has obtained a final and nonappealable judgment in its favor on such
claim as determined by a court of competent jurisdiction.

 

(b)          To
the fullest extent permitted by applicable law, each Grantor hereby agrees not to assert, and hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement or any other Loan Document.

 

(c)          Each
Grantor agrees to pay or reimburse the Secured Party for all of its reasonable costs and expenses incurred in collecting against
such Grantor its Secured Obligations or otherwise protecting, enforcing or preserving any rights or remedies under this Agreement
and the other Loan Documents to which such Grantor is a party, including the fees and other charges of counsel to the Secured Party.

 

(d)          All
amounts due under this Section 6.07 shall be payable not later than ten (10) days after demand therefor, shall constitute Secured
Obligations and shall bear interest until paid at a rate per annum equal to the highest rate per annum at which interest would
then be payable on any past due Notes under the Note Purchase Agreement.

 

(e)          Without
prejudice to the survival of any other agreement of any Grantor under this Agreement or any other Loan Documents, the agreements
and obligations of each Grantor contained in this Section shall survive termination of the Loan Documents and payment in full of
the Obligations and all other amounts payable under this Agreement.

 

Section 6.08         Governing
Law. This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based
upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed
in accordance with, the laws of the State of New York without regard principles of conflicts of laws.

 

Section 6.09         Severability
of Provisions. Any provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions
hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction.

 

    	Security Agreement	19	[ n ]

     

    

 

Section 6.10         Counterparts;
Entire Agreement.  This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts
(and by different parties hereto in different counterparts), each of which shall constitute an original, but all taken together
shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or
in electronic format shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement and the
other Loan Documents constitute the entire contract among the parties with respect to the subject matter hereof and supersede
all previous agreements and understandings, oral or written, with respect thereto.

 

Section 6.11         No
Release. Nothing set forth in this Agreement or any other Loan Document, nor the exercise by the Secured Party of any of the
rights or remedies hereunder, shall relieve any Grantor from the performance of any term, covenant, condition or agreement on
such Grantor’s part to be performed or observed in respect of any of the Pledged Collateral or from any liability to any
Person in respect of any of the Pledged Collateral or shall impose any obligation on the Secured 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 Secured 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 Agreement, the Note Purchase Agreement or the other Loan Documents,
or in respect of the Pledged Collateral or made in connection herewith or therewith. Anything herein to the contrary notwithstanding,
the Secured Party shall not have any obligation or liability under any contracts, agreements and other documents included in the
Pledged Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or
duties of any Grantor thereunder or to take any action to collect or enforce any such contract, agreement or other document included
in the Pledged Collateral.

 

[Signature page follows.]

 

    	Security Agreement	20	[ n ]

     

    

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto
duly authorized.

 

	 	 	BORROWER:
	 	 	 
	Sworn to before me this 24th day	 	ARKADOS GROUP, INC.
	of April, 2017	 	 	 
	 	 	 	 
	/s/ Lino M. Lopez	 	By:	/s/ Terrence DeFranco
	Notary Public	 	 	Name:  Terrence DeFranco
	 	 	 	Title: Chief Executive Officer 
	 	 	 	 
	 	 	GUARANTORS:
	 	 	 
	Sworn to before me this 24th day	 	ARKADOS, INC.
	of April, 2017	 	 	 
	 	 	 	 
	/s/ Lino M. Lopez	 	By:	/s/ Terrence DeFranco
	Notary Public	 	 	Name:  Terrence DeFranco
	 	 	 	Title: Chief Executive Officer 
	 	 	 	 
	Sworn to before me this 24th day	 	ARKADOS ENERGY SOLUTIONS, LLC
	of April, 2017	 	 	 
	 	 	 	 
	/s/ Lino M. Lopez	 	By:	/s/ Terrence DeFranco
	Notary Public	 	 	Name:  Terrence DeFranco
	 	 	 	Title: Manager 
	 	 	 	 
	 	 	SECURED PARTY:
	 	 	 
	Sworn to before me this 24th day	 	AIP ASSET MANAGEMENT INC.
	of April, 2017	 	 	 
	 	 	 	 
	/s/ Lino M. Lopez	 	By:	/s/ Jay Bala
	Notary Public	 	 	Name:  Jay Bala, CFA
	 	 	 	Title: President 

 

    	Security Agreement	21	[ n ]

     

    

 

SCHEDULE I

COPYRIGHTS, INTELLECTUAL PROPERTY LICENSES,
PATENTS AND TRADEMARKS

 

Trademarks

 

“Arkados”
mark (U.S. Trademark Reg. No. 3257994 registered on July 3, 2007).

 

Domain Names 

 

www.arkadosgroup.com

 

Logos

 

 

Tradenames

 

Arkados Group, Inc.

 

Arkados

 

Arkados, Inc.

 

Arkados Energy Solutions, LLC

 

AES

 

AKDS

 

License Agreements

 

None

 

The Company will be acquiring the following
Intellectual Property pursuant to that certain Asset Purchase Agreement by and between the Company and SolBright Renewable Energy,
LLC, a South Carolina limited liability company (“SolBright”), dated May 1, 2017 (“Asset
Purchase Agreement”):

 

    	Security Agreement	22	[ n ]

     

    

 

		·	Patents: None

		·	Trademarks: None

		·	Servicemarks: None

		·	Logos: 

 

 

		·	Slogans: “The most dependable EPC in the industry”

		·	Trade Names: SolBright; SolBright Renewable Energy

		·	Corporate Names: SolBright Renewable Energy LLC

		·	Website:
                                         www.solbrightre.com 

		·	Telephone Numbers: 843.535.8500

		·	Copyrights: None 

		·	Computer Software: None 

		·	SolBright has various technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and other documentation that it uses in its normal course of business,
which may or may not be specific to any given project.

 

SolBright Contracts

Walmart Phase I, WalMart Phase II, Dellalio,
Franklin/Cummington, Squirrel Island, CEPC Coastal Co-Op, Banks Solar Farm

 

    	Security Agreement	23	[ n ]

     

    

 

SCHEDULE II

PLEDGED SECURITIES AND PLEDGED DEBT

 

Arkados Group, Inc. owns the following Equity
Interests:

1.          100
shares of Common Stock of Arkados, Inc.

2.          100
units of Arkados Energy Solutions, LLC

 

    	Security Agreement	24	[ n ]

     

    

 

SCHEDULE III

REQUIRED FILINGS AND ACTIONS

 

FINANCING STATEMENTS

 

	
        Grantor
	 	
        Filing Jurisdiction(s)

	Arkados Group, Inc. 	 	Delaware – Secretary of State
	Arkados, Inc.	 	Delaware – Secretary of State
	Arkados Energy Solutions, LLC	 	Delaware – Secretary of State

 

    	Security Agreement	25	[ n ]

     

    

 

SCHEDULE IV

INFORMATION CONCERNING GRANTOR AND LOCATIONS
OF INVENTORY AND EQUIPMENT

 

	Legal Name 	 	Type of

Organization and

Jurisdiction	 	EIN	 	Chief

Executive

Officer 	 	Address 
	Arkados Group, Inc. 	 	Delaware Corporation 	 	22-3586087	 	Terrence DeFranco 	 	211 Warren Street, Suite 320, Newark, New Jersey
	Arkados, Inc.	 	Delaware Corporation 	 	04-3792860	 	Terrence DeFranco	 	211 Warren Street, Suite 320, Newark, New Jersey
	Arkados Energy Solutions, LLC	 	Delaware Limited Liability Corporation 	 	46-5569892	 	Terrence DeFranco	 	
        211 Warren Street, Suite 320, Newark, New Jersey

         

        America Safe and Sound Storage

        1800 Prime Pl, Hauppauge, NY 11788

 

Pursuant to the Asset Purchase Agreement, the Company will be
acquiring Equipment or Inventory located at SolBright’s principal place of business or projects sites.     

 

    	Security Agreement	26	[ n ]

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