8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 27, 2019

LONG BLOCKCHAIN CORP.

(Exact Name of Registrant as Specified in Charter)

Delaware	001-37808	47-2624098
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)

12-1 Dubon Court, Farmingdale, NY 11735

(Address of Principal Executive Offices) (Zip Code)

(855) 542-2832

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]

Item 1.02 Termination of a Material Definitive Agreement.

The information set forth under Item 2.03 is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On March 27, 2019, Long Island Brand Beverages LLC (“LIBB”), a wholly owned subsidiary of Long Blockchain Corp. (the “Company”), obtained an advance of CA$200,000 (or approximately $150,000) from ECC Ventures 2 Corp. (“ECC2”) and an advance of CA$250,000 (or approximately $187,500) from Long Island Beverages Corp. (“LIBC,” and together with ECC2, the “Lenders”). ECC2 previously had advanced CA$50,000 (or approximately $37,5000) to LIBB (together with the other advances, the “Loans”).

The Loans by ECC2 were made pursuant to a loan agreement (the “Loan Agreement”) by and among LIBB, the Company and ECC Ventures 2 Corp. (“ECC2”) and a general security agreement (the “Security Agreement”), by and between LIBB and ECC2, each dated as of January 31, 2019. The Loan by LIBC was made on terms substantially similar to those contained in the Loan Agreement and Security Agreement. As previously disclosed, the Company, ECC2 and LIBC are party to that certain letter of intent (the “LOI”), dated January 16, 2019, relating to the sale of LIBB to ECC2 for a combination of cash and shares of ECC2 (the “Transaction”).

The Loans incur interest at a rate of 10% per annum and mature on July 31, 2019. Accrued and unpaid interest is payable in cash on July 1, 2019 and on the first day of each calendar month thereafter. The guaranty terminates upon consummation of a sale of all or substantially all of the equity or assets of LIBB to the Lender or its affiliates. The Loans are secured by all of the assets of LIBB and are guaranteed by the Company.

The Loan Agreement contains customary representations and warranties and affirmative and negative covenants of LIBB, including without limitation covenants that restrict LIBB from making investments, incurring liens and permitting a change of control to occur, subject to certain exceptions.

The Loan Agreement provides that the termination of the LOI or any definitive agreements executed with respect to the Transactions (the “Definitive Agreement”), the breach of the LOI or Definitive Agreements by the Company or LIBB, and certain other customary events constitute events of default. Upon the occurrence of an event of default, at the option of the Lender, all principal and interest under the Lender’s Loan will become immediately due and payable. Notwithstanding the foregoing, if the event of default relates to the termination of the LOI or Definitive Agreements by the Lender without the consent of LIBB, or the termination of such agreements by another party based on a breach by the Lender, LIBB will have 30 days after demand to repay the Lender’s Loan.

The Company used $235,000 of the Loans to satisfy in full its obligations under that certain agreement for the purchase and sale of future receipts (the “Radium Agreement”), dated November 27, 2017, with Radium2 Capital Inc. (“Radium”). Pursuant to the Radium Agreement, Radium was entitled to receive 15% of the proceeds from the Company’s future sales, up to a specified maximum amount. Upon payment of the $235,000, the Radium Agreement was terminated and the Company has no further obligation thereunder.

The foregoing descriptions of the Loan Agreement and the Security Agreement do not purport to be complete and are subject to and qualified in their entirety by reference to the full text of such agreements, which are filed as exhibits hereto and which are incorporated herein by reference.

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Item 3.02 Unregistered Sales of Equity Securities.

On April 1, 2019, the Company entered into a settlement agreement with Julian Davidson, the Company’s former Chairman of the Board, pursuant to which the Company and Mr. Davidson finally settled certain claims made by Mr. Davidson for severance. Pursuant to the settlement agreement, among other things, the Company agreed to issue 1,000,000 shares of common stock to Mr. Davidson and granted Mr. Davidson certain registration rights with respect to the shares. The shares are being issued to Mr. Davidson in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits.

(d) Exhibits:

Exhibit	Description
10.1	Form of Loan Agreement.
10.2	Form of General Security Agreement.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: April 2, 2019

LONG BLOCKCHAIN CORP.
By:	/s/ Andy Shape
Name:	Andy Shape
Title:	Chief Executive Officer

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EX-10.1

Exhibit 10.1

LOAN AGREEMENT

THIS LOAN AGREEMENT is made as of January ____, 2019,

BETWEEN:

ECC VENTURES 2 CORP., a corporation formed pursuant to the laws of the Province of British Columbia

(the “Lender”)

AND:

LONG ISLAND BRAND BEVERAGES LLC, a limited liability company formed pursuant to the laws of the State of New York

(the “Borrower”)

AND:

LONG BLOCKCHAIN CORP., a corporation formed pursuant to the laws of the State of Delaware

(the “Guarantor”)

WHEREAS:

A.	The Lender has agreed to advance $250,000.00 to the Borrower as a non-revolving secured loan facility on the terms and conditions as more particularly set out in herein;
B.	The Guarantor is the registered and beneficial owner of all of the issued and outstanding securities in the capital of the Borrower; and
C.	In connection with the Loan, the Borrower has agreed to grant a security interest in favour of the Lender to secure all of the Borrower’s obligations to the Lender, including the Borrower’s obligations hereunder, and the Guarantor has agreed to guarantee the same, each subject to the terms and conditions of this Agreement.

NOW THEREFORE in consideration of the premises and the conditions and provisions contained herein, the receipt and adequacy of which consideration are hereby duly acknowledged, the Parties agree as follows:

1.	DEFINITIONS AND INTERPRETATION
1.1	Definitions. In this Agreement the following words and phrases shall have the following meanings:

(a) “Advance” has the meaning ascribed to such term in Subsection 2.2(a);

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(b)	“Agreement” means this loan agreement, as may be amended, supplemented, or replaced from time to time;
(c)	“Borrower” has the meaning ascribed to such term on the first page of this Agreement;
(d)	“Business Day” means any day, other than a Saturday or Sunday, on which banks in Vancouver, British Columbia are open for commercial banking business during normal banking hours;
(e)	“Cavendish Agreements” means the Second Amended and Restated Loan and Option Agreement, dated as of January 18, 2019, by and between the Guarantor and Court Cavendish Ltd, and the Security Agreement, dated as of January 18, 2019, by and between the Guarantor and Court Cavendish Ltd;
(f)	“Change of Control” means the acquisition, directly or indirectly, of beneficial ownership of the issued and outstanding equity securities of a party to which voting rights are attached, which results in a third party (which may be comprised by one of more entities acting together), other than Court Cavendish Ltd, its permitted transferees and their respective affiliates, individually or together as a group, holding more than an aggregate of 50% of such voting rights;
(g)	“Event of Default” means any of the events of default described in Section 6.1;
(h)	“General Security Agreement” has the meaning ascribed to such term in Section 2.6;
(i)	“Governmental Licenses” has the meaning ascribed to such term in Subsection 4.1(j);
(j)	“Governmental Authority” means the government of any nation and any state, provincial, territorial, divisional, county, regional, city, and other political subdivision thereof, in each case in which any property of the Borrower or any of its subsidiaries is located or which exercises valid jurisdiction over any such property of the Borrower or any of their respective subsidiaries, or in which the Borrower or any of its subsidiaries conducts business or is otherwise present;
(k)	“Initial Advance” has the meaning ascribed to such term in Section 2.4;
(l)	“Lender” has the meaning ascribed to such term on the first page of this Agreement;
(m)	“Letter of Intent” has the meaning ascribed to such term in Subsection 5.1(h);
(n)	“LIBC” means Long Island Beverages Corp., a corporation formed pursuant to the laws of the Province of British Columbia;
(o)	“Lien” means any mortgage, pledge, charge, assignment, security interest, hypothec, lien, or other encumbrance, including, without limitation, any agreement to give any of the foregoing, or any conditional sale or other title retention agreement;

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(p)	“Loan” means the non-revolving loan facility in the principal amount of $250,000.00, and any interest accrued thereon, provided by the Lender to the Borrower in accordance with this Agreement;
(q)	“Loan Documents” means this Agreement, the Promissory Note, and the General Security Agreement;
(r)	“Material Adverse Effect” means any change, event, occurrence, effect, state of facts, or circumstance that, individually or in the aggregate with other such changes, events, occurrences, effects, state of facts, or circumstances is or would reasonably be expected to be material and adverse to the business, operations, results of operations, assets, properties, capitalization, condition (financial or otherwise), or liabilities (contingent or otherwise) of the Borrower and its subsidiaries, taken as a whole; provided, however, that none of the following alone or in combination shall be deemed, in and of itself, to constitute a Material Adverse Effect: (A) changes attributable to the public announcement or pendency of the transactions contemplated hereby, (B) any changes, events, or occurrences arising out of, resulting from or attributable to (1) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism, or (2) earthquakes, hurricanes, tornados or other natural disasters, except, in either case, to the extent the Company is affected in a materially disproportionate manner relative to other companies in the Company’s industry, (C) changes in GAAP or other applicable accounting rules or applicable legal requirements (including the accounting rules and regulations of the SEC), or, in any such case, changes in the interpretation thereof, or (D) any action required by this Agreement;
(s)	“Notice” means any notice, request, direction, or other document that a Party can or must make or give under this Loan Agreement;
(t)	“Parties” means, collectively, the Borrower, the Lender, and the Guarantor, and “Party” means each one of them as the context requires;
(u)	“Permitted Liens” means (a) any Liens on the Borrower’s property which have been perfected as of the date of this Agreement; (b) Liens for taxes, assessments, and other governmental charges not yet due and payable; (c) Liens incurred in the ordinary course of business that would not materially impair the value of the assets of the Borrower; and (d) the Prior Liens and the Liens set forth in Schedule 1.1(u);
(v)	“Principal” means the amount of principal advanced by the Lender to the Borrower in accordance with the terms and conditions of this Agreement;
(w)	“Principal Subsidiary” means each direct or indirect subsidiary of the Borrower (i) which, as at the date of the making of the determination of Principal Subsidiary, had consolidated assets which constituted more than 5% of the consolidated assets of the Borrower as at that date of determination; or (ii) which had consolidated revenue for any one of the three most recent fiscal years for which financial statements are available which constituted more than 5% of the consolidated revenue of the Borrower for such year, all such consolidated assets and consolidated revenues to be calculated in accordance with GAAP (generally accepted accounting principles); or (iii) to which is transferred, directly or indirectly, in one or a series of transactions, all or substantially all of the business, undertaking, and assets of a subsidiary of the Borrower which immediately prior to such transfer is a Principal Subsidiary of the Borrower;

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(x)	“Prior Liens” means the Liens on all of the Borrower’s property arising in connection with (i) the Radium2 Agreement; and (ii) the Cavendish Agreements;
(y)	“Promissory Note” has the meaning ascribed to such term in Section 2.4;
(z)	“Radium2 Agreement” means the Agreement for the Purchase and Sale of Future Receipts, dated November 27, 2017, by and between the Guarantor (at the time known as Long Island Iced Tea Corp.), the parent of the Borrower, and Radium2 Capital Inc.; and
(aa)	“Request for Advance” has the meaning ascribed to such term in Subsection 2.2(b).

2.	LOAN
2.1	Amount of Loan. In reliance upon the representations and warranties contained herein and subject to the terms and conditions of this Agreement, the Lender shall lend to the Borrower the principal sum of up to $250,000.00.
2.2	Advances.

(a)	Subject to the conditions precedent described in Section 3.2, as applicable, and subject to the terms described in this Section 2.2, the Borrower may draw down on the Loan, at such times and from time to time, and in such amounts, as determined by the Lender in its sole discretion (each, an “Advance”).
(b)	Prior to each Advance, the Borrower shall provide the Lender with a request for advance in substantially the form attached as Schedule 2.2 hereto, which request shall include a written plan and budget detailing the use of the Advance, and the identity of the party to which the Advance shall be delivered (the “Request for Advance”). The form and substance of the written plan and budget attached to each Request for Advance to be provided to the sole satisfaction of the Lender.
(c)	Following the receipt of a Request for Advance from the Borrower, the Lender may, in the Lender’s sole discretion and subject to any adjustments by the Lender, provide the Advance to the Borrower.
(d)	For each Advance provided to the Borrower for operating purposes, the Borrower shall provide the Lender with a written report detailing the use and application of the Advance on the first Business Day of each and every calendar month following the provision of such Advance to the Borrower until such time as the Advance all interest accrued thereon have been repaid to the Lender in full; such monthly written reports to be consistent with the Borrower’s statements as to the anticipated use of such Advance as provided in the respective Request for Advance, except as approved in writing by Lender and provided that such monthly reports shall be deemed to be consistent with the Borrower’s statements if no line item in such monthly report varies by more than 20% from the Borrower’s statements.

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2.3	Interest. The Principal, both before and after demand, default, or judgment and overdue interest on the Loan, shall bear interest computed on the outstanding daily principal balance of the Loan at the rate of 10% per annum, calculated and paid on July 1, 2019, and on the first day of each calendar month thereafter while any portion of the Loan remains outstanding, on the basis of a 365 day year (or in the case of a leap year, a 366 day year) and the actual number of days elapsed, on a nominal rate basis without allowance or deduction for deemed re-investment or otherwise, and any unpaid interest shall compound annually on January 1 of each year. Interest shall begin to accrue from the date of each Advance. For the avoidance of doubt, if the Loan becomes due and payable, on demand or otherwise, pursuant to Section 6.2 of this Agreement prior to July 1, 2019, the interest due and owing on the Loan shall be calculated and paid on the date of repayment.
2.4	Promissory Note. To evidence the amount of Principal, and accrued interest thereon, advanced to the Borrower and owing to the Lender hereunder, and to evidence the amount of payments made to the Lender by the Borrower, the Borrower shall issue to the Lender a grid promissory note in substantially the applicable form attached as Schedule 2.4 hereto (the “Promissory Note”) as of the date hereof (for greater certainty, the Promissory Note shall be issued as of the date of this Agreement notwithstanding that the initial Advance to be provided by the Lender to the Borrower (the “Initial Advance”) hereunder may be provided at a later date, and if applicable the grid attached to the Promissory Note shall reflect that no balance is owing under the Promissory Note until the date of the Initial Advance).
2.5	Repayment of the Loan. The Borrower may from time to time repay or prepay all or any part of the Loan without Notice, penalty, premium, or bonus provided that each such payment or prepayment will be made together with all accrued and unpaid interest on the Loan which then remains unpaid. The outstanding balance of the Loan, including all accrued and unpaid interest thereon and any other amounts owing to the Lender hereunder, shall be repaid by the Borrower to the Lender on July 31, 2019 (the “Maturity Date”), subject to any earlier repayment pursuant to Section 6 of this Agreement, and failing payment of the same following the Maturity Date, the Lender may then proceed to enforce payment thereof by exercising any right, power, or remedy permitted by this Agreement, or by law in such manner as the Lender may elect, without presentation, protest, or further demand, or Notice of any kind, all of which are hereby expressly waived.
2.6	General Security Agreement. As general and continuing security for the payment of the Loan and the performance under this Agreement, the Parties shall enter into a general security agreement (the “General Security Agreement”), in substantially the form attached hereto as Schedule 2.6, creating a interest in all of the Borrower’s present and after-acquired personal property, in favour of the Lender. The Lender hereby acknowledges that such interest shall, subject to the covenant of the Borrower set out in Subsection 5.1(j) of this Agreement, be junior in priority to the Prior Liens and may be junior to any other Permitted Lien, but shall be senior in priority to the interests of any other party. The Borrower hereby authorizes the Lender to register, file, or record, or cause to be registered, filed, or recorded, the General Security Agreement or notice thereof in all offices and jurisdictions where such registration, filing, or recording is necessary or, in the Lender’s determination, advisable or to the advantage of the Lender, to create, perfect, or preserve the rights granted under the General Security Agreement by each Lender, and further authorizes the Lender to renew and maintain such registrations, filings, and recordings from time to time, as and when required to keep them in the full force and effect, each to the satisfaction of the Lender. The Borrower shall from time to time promptly, upon the reasonable request of the Lender, take such action, and execute and deliver such further documents (including such opinions and other supporting documentation as the Lender may reasonably request), as may be reasonably necessary or appropriate to ensure that the Lender maintain a security interest junior only to the Prior Liens and any other Permitted Lien over all present and after-acquired personal property assets of the Borrower.

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2.7	Guarantee. The Guarantor hereby irrevocably and unconditionally guarantees to Lender the due and punctual payment in full of all obligations of the Borrower arising in connection with the Loan, this Agreement, and/or the Promissory Note (the “Guaranteed Obligations”), when the same shall become due, whether by required prepayment, declaration, acceleration, demand, or otherwise. The Guarantor hereby waives, for the benefit of the Lender: (a) any right to require the Lender, as a condition of payment or performance by the Guarantor, to (i) proceed against the Borrower, any other guarantor of the Guaranteed Obligations, (ii) proceed against or exhaust any security held from the Borrower or any other guarantor of the Guaranteed Obligations, or (iii) pursue any other remedy in the power of the Lender whatsoever; (b) any defense arising by reason of the incapacity, lack of authority, or any disability or other defense of Borrower including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Borrower from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon Lender’s errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (d) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of the Guarantor’s obligations hereunder; or (e) notices, demands, presentments, protests, or any agreement or instrument related thereto. Notwithstanding the foregoing, the Lender shall release the Guarantor from this obligation on the closing of the transactions contemplated by the Letter of Intent or the other sale of substantially all the equity or assets of Borrower to the Lender and/or its affiliates.
3.	CONDITIONS PRECEDENT
3.1	Conditions Precedent to the Agreement. This Agreement shall become effective upon the satisfaction (or waiver by the Lender in its sole discretion) of each of the following conditions precedent:

(a)	the delivery to each of the Parties of this Agreement, duly executed by each of the Parties;
(b)	the delivery to each of the Parties of the General Security Agreement, duly executed by each of the Parties;
(c)	the delivery of the Promissory Note to the Lender, duly executed by the Borrower;

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(d)	the delivery to the Lender of a certificate executed by a senior officer of the Borrower, in form and substance satisfactory to the Lender, acting reasonably, dated as of the date hereof, as to (i) the organizational documents of the Borrower; (ii) the resolutions of the board of directors of the Borrower authorizing the execution, delivery, and performance of this Agreement, and the transactions and documents contemplated hereby; and (iii) the name, position, and true signature of the Person authorized to sign this Agreement on behalf of the Borrower;
(e)	the delivery to the Lender by the Borrower of a Certificate of Status issued by the State of New York in respect of the Borrower, dated as of a date no more than five days immediately prior to the date hereof;
(f)	the delivery to the Borrower of a certificate executed by a senior officer of the Lender, dated as of the date hereof, as to the resolutions of the board of directors of the Lender authorizing the execution, delivery, and performance of this Agreement, and the transactions and documents contemplated hereby;
(g)	all material approvals, consents, and authorizations of Governmental Authorities or other persons required in connection with this Agreement and the other Loan documents shall have been obtained and remain in effect, including without limitation the approval of the TSX Venture Exchange with respect to the matters herein; and
(h)	the delivery of any other documents, instruments, or authorizations that the Lender may require, acting reasonably, in connection with the subject matter hereof.

3.2 Conditions Precedent to each Advance. Notwithstanding any other provision of this Agreement, the obligation of the Lender to advance any Advance to the Borrower in accordance with Section 2.2 is subject to and conditional upon each of the following terms and conditions being satisfied or waived:

(a)	all representations and warranties made by the Borrower herein, and in any other document delivered in connection herewith, shall be true and correct in all material respects;
(b)	all material approvals, consents, and authorizations of Governmental Authorities or other persons required in connection with this Agreement and the other Loan documents shall have been obtained and remain in effect, including without limitation the approval of the TSX Venture Exchange with respect to the matters herein;
(c)	except as set forth in Schedule 4.1(h), there shall not exist, nor shall there be any pending or threatened (in writing), action, proceeding, investigation, order, or claim (before any Governmental Authority or otherwise) against or affecting the Borrower or any of its subsidiaries, which has, or would reasonably be expected to have, a Material Adverse Effect;

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(d)	there shall have been no change, event or occurrence that has had, or would reasonably be expected to have, a Material Adverse Effect on the Borrower or any of its subsidiaries;
(e)	the Borrower shall have in all material respects performed and complied with all agreements, covenants, and conditions herein, and in the other documents to be delivered in connection with the Loan, required to be performed and complied with on or prior to the date of the proposed Advance, except those agreements and conditions waived by the Lender;
(f)	no Event of Default under this Agreement shall have occurred and be continuing on such date or after giving effect to the proposed Advance;
(g)	there shall not exist any material litigation or any investigation, bankruptcy, injunction, order, or claim affecting or relating to the Borrower or any of their respective subsidiaries which would reasonably be expected to affect the legality, validity, or enforceability of this Agreement or any other document delivered in connection herewith, that has not been settled, dismissed, vacated, discharged, or terminated;
(h)	the delivery to the Lender of a certificate executed by a senior officer of the Borrower, in form and substance satisfactory to the Lender, acting reasonably, dated as of the date hereof, as to each of the matters provided for in this Section 3.2; and
(i)	the Borrower shall have performed and complied with the provisions of Section 2.2.

4.	REPRESENTATIONS AND WARRANTIES
4.1	Representations and Warranties of the Borrower. The Borrower represents and warrants to the Lender as follows, with the intent that the Lender will rely thereon in entering into this Agreement and in concluding the transactions contemplated hereby:

(a)

the Borrower and each of its subsidiaries is a valid and subsisting limited liability company, corporation or other entity duly formed and, as applicable, in good standing under the laws of the jurisdiction in which it is incorporated, formed, continued, or amalgamated and has the company, corporate or other entity power and authority to own its property and to conduct its business as currently conducted;

(b)

the Borrower has the company power and capacity to enter into this Agreement, and this Agreement has been duly authorized, executed, and delivered by the Borrower and constitutes legal, valid, and binding obligations of the Borrower, enforceable against the Borrower by the Lender in accordance with their respective terms, subject to applicable laws relating to bankruptcy, insolvency, or similar laws affecting creditors’ rights generally and to the discretion of a court of competent jurisdiction regarding the availability of equitable remedies;

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(c)	neither the Borrower nor any of its subsidiaries has committed an act of bankruptcy, has proposed a compromise or arrangement to its creditors generally, has had a petition or a receiving order in bankruptcy filed against it, has made a voluntary assignment in bankruptcy, has taken any proceedings with respect to a compromise or arrangement, has taken any proceedings to have itself declared bankrupt or wound-up, has taken any proceedings to have a receiver appointed for any of its property, or has had any execution or distress become enforceable or become levied upon any of its property;
(d)	except as set forth in Schedule 4.1(d), neither the Borrower nor any of its subsidiaries is in default in any material respect (nor has any event occurred which, but for the lapse of time or the giving of Notice, or both, would constitute a default in any material respect) under any obligation or under any licence or permit to own and/or operate its properties or assets or to carry on its business;
(e)	the Borrower and each of its subsidiaries owns, possesses, and has good and marketable title to its property and assets free and clear of any and all Liens, except Permitted Liens;
(f)	except as set forth in Schedule 4.1(f), the Borrower is not Party to or bound by any agreement of guarantee, indemnification, assumption, endorsement, or any other like commitment of the obligations, liabilities (contingent or otherwise), or indebtedness of any other person;
(g)	the execution and delivery of this Agreement by the Borrower and the compliance by the Borrower with the terms thereof will not:

(i)	violate or conflict with any applicable laws, statute, ordinance, regulation, or rule, or any judgment, decree, order, or award of any court, governmental body, or arbitrator having jurisdiction over the Borrower or any of its subsidiaries;
(ii)	require any authorization, consent, approval, exemption, or other action by, or Notice to, any stock exchange, governmental agency, authority, regulatory body, or court;
(iii)	violate or conflict with, or constitute a default (or an event which, with Notice or lapse of time, or both, would constitute a default) under any contract to which the Borrower or any of its subsidiaries is a Party, or by which the Borrower or any of its subsidiaries or any of their assets or properties may be bound or affected;
(iv)	result in the termination of, any additional payment under, or the change in any terms of, or accelerate the performance of any obligation required by (or give rise to a right of any Party thereto, exercisable on Notice or otherwise, to terminate, to require that any additional payment be made under, to change any terms of, or to accelerate the performance of any obligation under) any contract to which the Borrower or any of its subsidiaries is a Party or by which the Borrower, any of its subsidiaries, or any of their assets or properties may be bound or affected;
(v)	result in the creation of any Lien upon any of its property or assets;

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(vi)	violate or conflict with any license held by it or which is necessary to the operation of its business; or
(vii)	violate or conflict with the provisions of the Borrower’s certificate of formation or operating agreement;

(h)	except as set forth in Schedule 4.1(h), neither the Borrower nor any of its subsidiaries is a Party to any actions, suits, or proceedings which could materially affect their business or financial condition, and to the best of the Borrower’s knowledge no such actions, suits, or proceedings have been threatened as at the date hereof;
(i)	the Borrower and each of its subsidiaries is, in all material respects, conducting its business in compliance with all applicable laws, rules, and regulations of each jurisdiction in which its business is carried on and is licensed, registered, or qualified in all jurisdictions in which it owns, leases, or operates its property or carries on business to the extent required to enable its business to be carried on as now conducted and its property and assets to be owned, leased, and operated, and all such licences, registrations, and qualifications are valid, subsisting, and in good standing and neither the Borrower nor any of its subsidiaries has received a Notice of non-compliance, nor knows of, any facts that could give rise to a Notice of noncompliance with any such laws, regulations, or permits which would have a Material Adverse Effect on the Borrower. Except for any violation or default which would not have a Material Adverse Effect on the Borrower, neither the Borrower nor any of its subsidiaries is (i) in violation of its certificate of formation, operating agreement, or similar organizational documents; (ii) in default, and no event has occurred that, with Notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, or condition contained in any indenture, mortgage, deed of trust, loan agreement, or other agreement or instrument to which it is a Party or by which it is bound or to which any of its properties or assets is subject; or (iii) in violation of any law or statute or any judgment, order, rule, or regulation of any court or arbitrator or governmental or regulatory authority;
(j)	the Borrower and each of its subsidiaries possesses all material certificates, licenses, approvals, permits, and authorizations (collectively, “Governmental Licenses”) and has made all declarations and filings with the appropriate federal, state, local, or foreign governmental or regulatory authorities that are necessary to own, lease, or license, as the case may be, and to conduct its business and is in compliance in all material respects with the terms and conditions of all such Governmental Licenses. Neither the Borrower nor any of its subsidiaries has received any Notice of proceedings relating to the revocation or modification of any such Governmental License;
(k)	the Borrower and its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which it engages, and the Borrower has no reason to believe that it or its subsidiaries will not be able to renew its existing insurance coverage as and when such coverage expires or obtain similar coverage from similar insurers as may be necessary to continue their respective business at a similar cost to that of its existing coverage; and

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(l)

the Borrower and each of its subsidiaries has filed in a timely manner all necessary tax returns and Notices and has paid all applicable taxes of whatsoever nature for all tax years prior to the date hereof to the extent that such taxes have become due or have been alleged to be due and the Borrower is not aware of any tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon where, in any of the above cases, it might reasonably be expected to result in any Material Adverse Effect on the Borrower; and

(m)

except as set forth in Schedule 4.1(m), all material contracts to which the Borrower and each of its subsidiaries is a Party or by which it is bound are legal, valid, binding, and in full force and effect and enforceable by the Borrower or its subsidiaries, as applicable, in accordance with their respective terms and are the product of arm’s length negotiations between the Parties thereto; and the Borrower and each of its subsidiaries has performed in all material respects all respective obligations required to be performed by it to date under the material contracts and is not, and is not to the knowledge of the Borrower alleged to be (with or without the lapse of time or the giving of Notice, or both), in breach or default in any material respect thereunder.

4.2 Representations and Warranties of the Lender. The Lender represents and warrants to the Borrower as follows, with the intent that the Borrower will rely thereon in entering into this Agreement and in concluding the transactions contemplated hereby:

(a)	the Lender is a company duly organized under the laws of the Province of British Columbia, and has the power, authority, and capacity to enter into this Agreement and to carry out its terms;
(b)	the Lender has the corporate power and authority to carry on the business now being conducted by it, execute and deliver this Agreement, and to perform all of the obligations of the Lender hereunder;
(c)	all necessary corporate actions and proceedings have been taken to authorize the execution and delivery by the Lender of this Agreement and the performance by the Lender of all of its obligations hereunder and, when delivered to the Borrower, will constitute legal, valid, and binding obligations of the Lender enforceable in accordance with its terms; and
(d)	the entering into of this Agreement and the performance by the Lender of its obligations hereunder do not and will not result in the violation of any of the terms of the constating documents of the Lender or any agreement to which the Lender is a Party or by which it or any of its properties or assets are bound.

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5.	COVENANTS
5.1	Covenants of the Borrower. So long as any portion of the Loan is outstanding, the Borrower hereby covenants and agrees with the Lender as follows:

(a)	to repay the Loan in accordance with the provisions of this Agreement;
(b)	to not commit any Event of Default and upon becoming aware of the occurrence of any Event of Default or the existence of any condition or any event which, but for the giving of Notice or lapse of time, or both, would constitute an Event of Default, to promptly notify the Lender thereof and promptly do everything reasonably possible to cause such Event of Default or condition or event to be eliminated as quickly as possible;
(c)	to maintain its corporate existence and all licences and authorizations from regulatory and governmental authorities or agencies required in order to permit it to carry on its business, diligently carry on and conduct its business only in the ordinary course and in a proper and business-like manner;
(d)	to, upon the request of the Lender, permit the Lender, for the purposes of this Agreement, by its agents, employees, and representatives, to examine during normal business hours and without unreasonable disruptions, all relevant books of account, records, reports, and other papers of the Borrower, and to make copies thereof and to take extracts therefrom, subject to execution by the Lender of a confidentiality agreement in a form reasonably satisfactory to the Borrower;
(e)	at all times comply in all material respects with all applicable laws, rules, governmental restrictions, regulations, guidelines, or directives, including all codes of conduct;
(f)	not to lend money to or invest money in any person, whether by loan, acquisition, of shares, acquisition of debt obligations, or in any other manner whatsoever or guarantee, endorse, or otherwise become surety for or upon the obligations of any other person except by endorsement of negotiable instruments for deposit or collection in the ordinary course of its business;
(g)	not to create, assume, or permit to exist any Lien on any of its assets other than in the ordinary course of business, other than Permitted Liens, unless otherwise permitted by the Lender in writing;
(h)	not to take any steps in furtherance of, or to permit or approve of the taking any steps in furtherance of, any Change of Control of the Borrower or any Principal Subsidiary, other than substantially in accordance with the Letter of Intent dated January 15, 2019, among the Lender, the Borrower, and LIBC, as may be amended from time to time (the “Letter of Intent”) or otherwise to Lender and/or its affiliates, unless otherwise permitted by the Lender in writing;
(i)	not to convey, sell, lease, transfer, or otherwise dispose of any of its assets unless otherwise agreed to in writing by the Lender, other than substantially in accordance with the Letter of Intent or otherwise to Lender and/or its affiliates, except for dispositions made in the ordinary course of business; and

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(j) subject to any written and executed acceptance by the Lender of a written plan and budget set out in a Request for Advance which specifies otherwise, to apply all Loan proceeds advanced to the Borrower to the repayment of the Borrower’s obligations arising in connection with the Radium2 Agreement, and following the repayment of such obligations, (i) to promptly arrange the discharge of all Liens against the Borrower arising in connection with the Radium2 Agreement; (ii) to provide confirmation of such discharge to the Lender, in the sole satisfaction of the Lender; and (iii) the Parties hereto agree that the obligations of the Borrower under the Radium2 Agreement shall no longer be deemed to be “Permitted Liens” for the purposes of this Agreement and of any other documents or instruments which incorporate such definition by reference.

5.2	Failure to Perform. If the Borrower fails to perform any covenant set out in this Agreement, the Lender may, following notice to the Borrower of such failure to perform and such Borrower’s failure to remedy such failure within a commercially reasonable time period, at its discretion, but need not, perform any such covenant capable of being performed by it and may, in the Lender’s discretion, but need not, make any payments or incur expenditures for such purpose, but no such performance of payment shall be deemed to relieve the Borrower from any default under this Agreement; if the Lender performs any such covenant or incurs any such expenditures, all costs incurred by the Lender in connection therewith shall be added to the Principal.
6.	DEFAULT
6.1	Events of Default. For the purposes of this Agreement, any one or more of the following events shall constitute Events of Default:

(a)	if the Letter of Intent is terminated in accordance with its terms or expires in accordance with its terms prior to the entering into of any Definitive Agreements (as such term is defined below), or any of the terms of the Letter of Intent are breached by the Borrower or the Guarantor;
(b)	if any definitive agreements have been executed by, among other parties, the Lender and the Borrower with respect to the transactions set out in the Letter of Intent (“Definitive Agreements”) and any such Definitive Agreement is terminated or expires in accordance with its terms, or any of the terms of any such Definitive Agreements are breached by the Borrower or the Guarantor;
(c)	if the Borrower shall make default in any material way in the observance or performance of something required to be done or some covenant or condition required to be observed or performed in this Agreement, the Letter of Intent, and/or one or more Definitive Agreements, and such default continues for a period of 30 days following the date upon which written Notice of default is given to the Borrower by the Lender;
(d)	if any representation or warranty herein given by the Borrower or any director or officer thereof is untrue in any material respect as of the date made;
(e)	if an order is made or a resolution is passed for the winding-up or dissolution of the Borrower or any Principal Subsidiary, or if a petition shall be filed for the winding-up or dissolution of the Borrower or any Principal Subsidiary thereof, or the Borrower or any Principal Subsidiary thereof shall otherwise cease to continue as a corporation;

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(f)	if the Borrower or any of its subsidiaries defaults (i) under the provisions of any instrument, security, indenture, or document, in each case, in respect of indebtedness for money borrowed from any person; or (ii) in the payment of any indebtedness of the Borrower or any of its subsidiaries for money borrowed from any person when due and payable to such person, or which for any reason has become due and payable prior to the express demand date, in any case in relation to any indebtedness in the aggregate principal amount then outstanding is in excess of $250,000.00;
(g)	if the Borrower or any Principal Subsidiary thereof shall commit any act of bankruptcy or shall make an assignment in bankruptcy, any other assignment for the benefit of creditors, any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable law, the seeking of relief under the Companies’ Creditors Arrangement Act (Canada), the United States Bankruptcy Code, the Winding-Up and Restructuring Act (Canada) or any other bankruptcy, insolvency, or analogous law, or if a bankruptcy petition shall be filed or presented against the Borrower or any Principal Subsidiary thereof and not dismissed, stayed or discharged within 60 days;
(h)	if a receiver, receiver-manager, trustee, custodian, liquidator, or similar agent is appointed for the Borrower or any Principal Subsidiary thereof or for all or substantially all of the property or the Borrower or any Principal Subsidiary thereof;
(i)	if any execution, sequestration, extent or any other process of any court shall become enforceable against the Borrower or any Principal Subsidiary thereof, or if a distress or analogous process shall be levied upon the property of the Borrower or any Principal Subsidiary thereof;
(j)	if a Change of Control of the Borrower or any Principal Subsidiary thereof occurs without prior written approval of the Lender;
(k)	if a resolution is passed or actions are taken by the Borrower for the sale of all or substantially all of the assets of the Borrower or any Principal Subsidiary thereof, other than substantially in accordance with the Letter of Intent, without prior written approval of the Lender;
(l)	if the Borrower shall cease or threaten to cease to carry on its business; or
(m)	if the Borrower makes default in observing or performing any of the agreements or covenants, which agreements or covenants are material, contained in any lease, licence, debenture, deed of trust, or agreement whereby any property or rights of the Borrower may become liable for forfeiture or where any such lease, licence, debenture, deed of trust, or agreement would be subject to termination and such default continues for 30 days after written Notice to the Borrower from the Lender.

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6.2 Remedies Upon Default.

(a) Upon the occurrence of an Event of Default which arises as a result of any of the following:

(i)	if the Lender terminates the Letter of Intent without the prior written consent of the Borrower;
(ii)	if the Lender terminates any Definitive Agreement without the prior written consent of the Borrower; or
(iii)	if any other party to the Letter of Intent or the Definitive Agreement terminates such agreement based on the Lender or any of its affiliates’ breach of any provision thereof;
the Lender may demand the repayment of the Loan within 30 days following such demand, together with all accrued and unpaid interest which then remains unpaid thereon, and the Borrower shall make such repayment to the Lender in full within such 30 day period.

(b)

Upon the occurrence of an Event of Default other than those specified in Subsection 6.2(a), the Lender may demand the immediate repayment of the Loan, together with all accrued and unpaid interest which then remains unpaid thereon, and the Borrower shall promptly make such repayment to the Lender in full.

(c)

With respect to any Events of Default, the Lender may enforce its remedies to the full extent permitted by applicable law, under this Agreement and for any of such purposes may commence such legal action or proceedings as, in its sole discretion, it may deem expedient all without any Notice, presentation, further demand, protest, Notice of protest, or any other action, Notice of all of which are hereby expressly waived by the Borrower except to the extent set forth herein.

7.	GENERAL PROVISIONS
7.1	Governing Law. This Agreement and all matters arising hereunder shall be governed by, construed and enforced in accordance with the laws in the Province of British Columbia and the federal laws of Canada applicable therein. The Parties irrevocably attorn to the jurisdiction of the Courts of British Columbia, which will have non-exclusive jurisdiction over any matter or dispute arising out of the Agreement.
7.2	Currency. All sums of money to be paid or calculated pursuant to this Agreement shall be paid or calculated in currency of Canadian dollars. All references to “$” are references to Canadian dollars.

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7.3 Notices. All Notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed postage prepaid addressed as follows:

To the Lender:

ECC Ventures 2 Corp.

2200 HSBC Building

885 W. Georgia St.

Vancouver, BC V6C 3E8

Attn: Scott Ackerman

To the Borrower:

Long Island Brand Beverages LLC

12-1 Dubon Court

Farmingdale, NY 11735

Attn: Andy Shape

	or to such other address as may be given in writing by the Parties and shall be deemed to have been received, if delivered by hand, on the date of delivery and if mailed as aforesaid to the addresses set out above then on the fifth business day following the posting thereof provided that if there shall be between the time of mailing and the actual receipt of the Notice a mail strike, slowdown or other labour dispute which might affect the delivery of the Notice by the mails, then the Notice shall only be effective if actually delivered.
7.4	Binding Effect. This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective successors and assigns.
7.5	Severability of Clauses. In the event that any provision of this Agreement or any part thereof is invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
7.6	Entire Agreement. This Agreement, the Promissory Notes, and the General Security Agreement constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous expectations, understandings, communications, representations and agreements whether verbal or written between the Parties with respect to the subject matter hereof. This Agreement does not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.
7.7	Further Assurances. Each of the Parties hereto hereby covenants and agrees to execute such further and other documents and instruments and do such further and other things as may be necessary or desirable to implement and carry out the intent of this Agreement.
7.8	Assignment. Without the prior written consent of the other Party, neither Party may assign or transfer their respective rights under this Agreement, nor may the Borrower transfer any portion of the Loan, except that the Lender may assign its rights under this Agreement upon the occurrence of an Event of Default.

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7.9	Waiver and Amendment. No indulgence or forbearance by the Lender hereunder shall be deemed to constitute a waiver of the Lender’s rights to insist on performance in a full and in a timely manner of all covenants of the Borrower hereunder and any such waiver, in order to be binding upon the Lender, must be express and in writing and signed by the Lender, and then such waiver shall be effective only in the specific instance and for the purpose for which it is given, and no waiver of any provision, condition, or covenant shall be deemed to be a waiver of the Lender’s right to require full and timely compliance with the same provision, condition, or covenant thereafter, or with any other provision, covenant or condition of this Agreement at any time. No amendment to this Agreement shall be valid unless it is evidenced by a written agreement executed by all of the Parties hereto.
7.10	Costs, Expenses. Each Party will bear its own costs and expenses in connection with the Loan or any Advances provided for herein, including, without limitation, the costs and expenses of all attorneys, accountants, and advisors of such Party.
7.11	Counterparts and Electronic Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. This Agreement will be considered fully executed when all Parties have executed an identical counterpart, notwithstanding that all signatures may not appear on the same counterpart. This Agreement may be executed and delivered by electronic signature and shall be binding on all Parties hereto as if executed by original signature and delivered personally.

[SIGNATURE PAGE TO IMMEDIATELY FOLLOW]

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the day and year first above written.

ECC VENTURES 2 CORP.

Name:

Title:

LONG ISLAND BRAND BEVERAGES LLC

Name:

Title:

LONG BLOCKCHAIN CORP.

Name:

Title:

EX-10.2

Exhibit 10.2

GENERAL SECURITY AGREEMENT

THIS GENERAL SECURITY AGREEMENT (the “Security Agreement”) is made as of January ____, 2019,

BETWEEN:

ECC VENTURES 2 CORP., a corporation formed pursuant to the laws of the Province of British Columbia

(the “Lender”)

AND:

LONG ISLAND BRAND BEVERAGES LLC, a limited liability company formed pursuant to the laws of the State of New York

(the “Borrower”)

WHEREAS:

A.	The Lender has agreed to advance $250,000.00 to the Borrower as a non-revolving secured loan facility (the “Loan”) on the terms and conditions as more particularly set out in a loan agreement dated as of the date hereof between the Lender and the Grantor (including all schedules thereto and as from time to time amended, restated, supplemented, or otherwise modified, the “Loan Agreement”); and
B.	In order to induce the Lender to enter into the Loan Agreement and other loan documents and to induce the Lender to make the Loan, the connection with the Loan Agreement, the Grantor has agreed to grant the security interest as set forth herein; and
C.	This Security Agreement is required by the terms of the Loan Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Defined Terms.

(a) All capitalized terms used but not otherwise defined herein have the meanings given to them in the Loan Agreement.

(b) All other terms contained in this Security Agreement, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein, including, without limitation, the following terms: “Accounts”, “Account Debtor”, “Buyer in Ordinary Course of Business”, “Chattel Paper”, “Commercial Tort Claim”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”, “Farm Products”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter of Credit”, “Letter-of-Credit Rights”, “Licensee in Ordinary Course of Business”, “Money”, “Payment Intangibles”, “Proceeds”, “Record”, “Software”, “Supporting Obligations”, and “Tangible Chattel Paper”.

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(c) “Contractual Obligations” means, as applied to any Person, any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

(d) “Copyright License” means any and all rights now held or hereafter acquired by any Grantor under any written agreement granting any right to the Grantor to use any Copyright owned by a third party.

(e) “Excluded Collateral” means, with respect to any Grantor, (i) equity interests in any joint ventures that are not Subsidiaries only to the extent and for so long as the terms of the agreements with other equity holders (other than Affiliates) pursuant to which such joint venture is organized validly prohibits the creation of a security interest in such equity interests in favor of the Lender (except to the extent any such term would be rendered ineffective under the UCC or other applicable law; provided, that the Grantor shall use commercially reasonable efforts to obtain any required consent from the applicable third party); (ii) other than Accounts, any lease or other agreement to which any Grantor is a party with a Person that is not an Affiliate, but only to the extent that a grant of a security interest to the Lender would, under the terms of such lease or other agreement, violate or invalidate such lease or agreement or to the extent any requirement of law prohibits the grant of a Lien thereon (except to the extent any such prohibition would be rendered ineffective under the UCC or other applicable law); (iii) equipment owned by any Grantor on the date hereof or hereafter acquired that is subject to Liens securing purchase money Indebtedness or Capital Leases, permitted to be incurred pursuant to clause (h) of the definition of Permitted Encumbrances to the extent and for so long as the documentation providing for such purchase money Indebtedness or Capital Lease prohibits the creation of a Lien on such assets (except to the extent that any such term or prohibition would be rendered ineffective pursuant to the UCC or other applicable law); (iv) those assets as to which the Lender determines, in its sole discretion, that the cost or other consequence of obtaining such a security interest or perfection thereof are excessive in relation to the value afforded thereby; (v) “intent-to-use” trademark applications prior to the filing of a statement of use; and (vi) any voting stock issued by any Foreign Subsidiary of US Borrower in excess of 65% of the total combined voting power of all classes of equity entitled to vote of such Foreign Subsidiary; provided, however, that (A) such property shall cease to be Excluded Collateral and each Loan Party shall automatically and immediately be deemed to have granted a security interest in any such property (and such property shall become subject to the security interest granted hereunder or under any other Loan Document, immediately and automatically) at such time as any such restriction, limitation or prohibition that prohibited or restricted the creation of a security interest with respect to such property lapses or has been waived, terminated, consented to, or otherwise rendered ineffective; (B) the foregoing exclusions shall be in no way be construed as to limit, impair, or otherwise affect the Lender’s unconditional continuing security interest in and to all rights, title and interest of Loan Parties in or to any payment obligation or other rights to receive monies due or to become due under any such assets and in any such monies and other proceeds of such assets; and (C) the foregoing exclusion in clause (vi) shall not apply for purposes of Canadian Obligations and the property, rights and other items referenced in such clause shall be considered collateral for the purposes of, and shall secure, the Canadian Obligations. In addition, notwithstanding anything to the contrary contained in this Security Agreement or in any other Loan Document, (1) no landlord, mortgagee, or bailee waivers shall be required in connection with the Excluded Locations and (2) no Deposit Account Control Agreement shall be required in connection with any Excluded Deposit Account.

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(f) “Excluded Locations” means, (x) the location identified as an “Excluded Location” in Schedule 4(b) and (y) any other location (other than the chief executive office of the Grantor) where the fair market value of all Inventory and Equipment at such location, has a fair market value that does not exceed $100,000 in the aggregate.

(g) “License” means any Copyright License, Patent License, Trademark License, or other license of rights or interests now held or hereafter acquired by any Grantor, granting the Grantor the right to use any Intellectual Property owned by a third party.

(h) “Patent License” means rights under any written agreement now held or hereafter acquired by any Grantor granting any right to the Grantor to use any Patent owned by a third party.

(i) “Proceeds” shall have the meaning assigned to it under Section 9-102 (64) of the UCC, and in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty, or guarantee payable to Grantor from time to time with respect to any of the Collateral; (ii) any and all payments (in any form whatsoever) made or due and payable to Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure, or forfeiture of all or any part of the Collateral by any Governmental Authority (or any person acting under color of governmental authority). and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

(j) “Trademark License” means rights under any written agreement now held or hereafter acquired by any Grantor granting any right to the Grantor to use any Trademark owned by a third party.

(k) “Uniform Commercial Code Jurisdiction” means any jurisdiction that has adopted all or substantially all of Article 9 as contained in the 2005 Official Text of the Uniform Commercial Code, as recommended by the National Conference of Commissioners on Uniform State Laws and the American Law Institute, together with any subsequent amendments or modifications to the Official Text.

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2. Grant of Lien.

(a) To secure the prompt payment, performance and observance of the obligations of the Grantor to pay Principal and interest under the Loan Agreement (the “Obligations”), including all renewals, extensions, restructuring, and refinancings of any or all of the Obligations, the Grantor hereby grants to the Lender a continuing security interest in, and lien and mortgage in and to, right of setoff against and collateral assignment of all of the Grantor’s personal and real property and all rights to such personal and real property, in each case, whether now owned or existing or hereafter acquired or arising and regardless of where located (all being collectively referred to as the “Collateral”) including, without limitation, all:

(i) Accounts;

(ii) Chattel Paper;

(iii) Commercial Tort Claims, including those specified on Schedule 2(a) hereto;

(iv) Deposit Accounts;

(v) Money and cash and other monies and property of the Grantor in the possession or under the control of the Lender, or any participant of the Lender with respect to the Loan Agreement and/or the Loan Documents;

(vi) Documents;

(vii) Equipment;

(viii) Fixtures;

(ix) General Intangibles (including the Patents, Trademarks, and Copyrights listed on Schedule 4(i) hereto, and all other Intellectual Property owned by or licensed to the Grantor);

(x) Licenses;

(xi) Goods;

(xii) Instruments;

(xiii) Inventory;

(xiv) Investment Property;

(xv) Letter-of-Credit Rights and Supporting Obligations;

(xvi) all money, cash or cash equivalents of the Grantor;

(xvii) other personal property whether or not subject to the UCC together with all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the property described above or are otherwise necessary or helpful in the collection thereof or realization thereon;

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(xviii) all real property of the Grantor; and

(xix) Proceeds and products of all or any of the property described above;

provided, however, that notwithstanding any of the other provisions set forth in this Section 2, this Security Agreement shall not constitute a grant of a security interest in, and the Collateral shall not include, any Excluded Collateral.

(b) In addition, to secure the prompt and complete payment, performance, and observance of the Obligations and in order to induce the Lender as aforesaid, the Grantor hereby grants to the Lender a right of setoff, following the occurrence and during the continuance of an Event of Default, against the property of the Grantor held by the Lender, consisting of property described above in Section 2(a) now or hereafter in the possession or custody of or in transit to the Lender, for any purpose, including safekeeping, collection, or pledge, for the account of the Grantor, or as to which the Grantor may have any right or power.

(c) Anything in this Security Agreement to the contrary notwithstanding, the rights and remedies of the Lender hereunder shall be subject to the terms of the Loan Agreement.

3. The Lender’s Rights; Limitations on the Lender’s Obligations.

(a) It is expressly agreed by the Grantor that, anything herein to the contrary notwithstanding, the Grantor shall remain liable under each of its Contractual Obligations and each of its Licenses to observe and perform all of the conditions and obligations to be observed and performed by it thereunder to the same extent as if this Security Agreement and the other Loan Documents had not been executed and the exercise by the Lender of any of the rights under this Security Agreement or the other Loan Documents shall not release any Grantor from any of their respective Contractual Obligations. The Lender shall not have any obligation or liability under any Contractual Obligations or License by reason of or arising out of this Security Agreement or the granting herein of a Lien thereon or the receipt by the Lender of any payment relating to any such Contractual Obligations or License pursuant hereto. The Lender shall not be required or obligated in any manner to perform or fulfill any of the obligations of any Grantor under or pursuant to any Contractual Obligations or License, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any Contractual Obligations or License, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(b) The Lender may at any time after an Event of Default has occurred and is continuing without prior notice to the Grantor, notify Account Debtors and other Persons obligated on the Collateral that the Lender has a security interest therein, and that payments in respect of such Collateral shall be made directly to the Lender. Upon the request of the Lender, following the occurrence and during the continuance of an Event of Default, the Grantor shall so notify Account Debtors and other Persons obligated on the Collateral. Once any such notice has been given to any Account Debtor or other Person obligated on the Collateral, the affected Grantor shall not give any contrary instructions to such Account Debtor or other Person without the Lender’s prior written consent.

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(c) Subject to Section 14 hereof, upon election of the Lender at any time while and so long as an Event of Default shall be continuing, the Lender may at any time in the Lender’s own name, in the name of a nominee of the Lender or in the name of any Grantor communicate (by mail, telephone, facsimile or otherwise) with Account Debtors, parties to Contractual Obligations and obligors in respect of Instruments to verify with such Persons, to the Lender’s satisfaction, the existence, amount, terms of, and any other matter relating to, Accounts, Instruments, Chattel Paper and/or Payment Intangibles.

4. Collateral Representations and Covenants. The Grantor represents and warrants that (as of the Closing Date and as of the date that any Loan is made) and covenants (at all times):

(a) Accounts Warranties and Covenants. Except as otherwise disclosed to the Lender in writing, as to the Grantor’s existing Accounts and each of its hereafter arising Accounts, that: (i) such Account and the papers and documents relating thereto are genuine and in all material respects what they purport to be, and (ii) such Account arises out of (A) a bona fide sale of goods sold and delivered by the Grantor (or in the process of being delivered) or (B) services theretofore actually rendered by the Grantor to, the account debtor named therein.

The Grantor shall not (i) grant any extension of the time of payment of any Account; (ii) compromise or settle any Account for less than the full amount thereof; (iii) release, wholly or partially, any Person liable for the payment of any Account; (iv) allow any discount, credit, rebate, or other reduction in the original amount owing on any Account; or (v) amend, supplement, or modify any Account in any manner that could materially adversely affect the value thereof; provided, that, prior to the occurrence and continuance of an Event of Default, the Grantor may take any of the actions set forth in clauses (i) through (iv) above in the ordinary course of business and as otherwise permitted under the Loan Agreement. After the occurrence of and during the continuance of an Event of Default, the Grantor will promptly notify the Lender in the event that any Account Debtor (or any other Person obligated on such Account) alleges any material dispute or claim with respect to such Account or of any other circumstances known to the Grantor that may impair the validity or collectability of any such Account. The Lender shall have the right, at any time or times after the occurrence of and during the continuance of an Event of Default, to verify the validity, amount or any other matter relating to any Account, by mail, telephone, or in person with the Account Debtor, and the Grantor shall furnish all such assistance and information as the Lender may reasonably require in connection therewith. After the occurrence and during the continuance of an Event of Default: (i) the Grantor shall not, without the prior written consent of the Lender, adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any Account Debtor (or any other Person obligated on such Account), or allow any credit or discount thereon; and (ii) the Lender shall have the right at any time (A) to exercise the rights of any Grantor, with respect to the obligation of the Account Debtor (or any other Person obligated on such Account) to make payment or otherwise render performance to the Grantor, and with respect to any property that secures the obligations of the Account Debtor or of any such other Person obligated on such Account; and (B) to adjust, settle or compromise the amount or payment of any such Account or release wholly or partly any Account Debtor or obligor thereunder or allow any credit or discount thereon.

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(b) Inventory Warranties and Covenants. All of the Grantor’s material Inventory is of good and merchantable quality, free from any material defects, and such Inventory is not subject to any licensing, patent, trademark, trade name or copyright agreement with any Person that restricts the Grantor’s ability to manufacture and/or sell such Inventory. None of the Grantor’s Inventory has been or will be produced in violation of the Fair Labor Standards Act and subject to the so-called “hot goods” provisions contained in Title 29 U.S.C. 215 or in violation of any other law. All inventory and products owned by Persons other than the Grantor and located on any premises owned, leased or controlled by the Grantor, shall be separately and conspicuously identified as such and shall be segregated from the Grantor’s own Inventory located at such premises. The Grantor shall not permit any Inventory to be kept at a location other than those listed on Schedule 4(b), except for (i) Inventory in transit; (ii) Inventory in the possession of employees in the ordinary course of business; and (iii) Inventory which, together with any other Collateral at such location, has a fair market value that does not exceed $100,000 in the aggregate.

(c) Equipment Warranties and Covenants. The Grantor has maintained and shall cause all of its material Equipment to be maintained in good repair and working order (except for damaged or defective goods arising in the ordinary course of the Grantor’s business and except for ordinary wear and tear in respect of the Equipment), and shall promptly make or cause to be made all necessary and proper repairs, replacements, and other improvements in connection therewith so that its business carried on in connection therewith may be properly conducted at all times. As of the Closing Date, none of the Grantor’s Equipment (other than motor vehicles not having a market value in excess of $100,000 in the aggregate) is covered by any certificate of title and, thereafter, the Grantor shall promptly notify the Lender to the extent the Grantor obtains any Equipment (other than motor vehicles not having a market value in excess of $100,000 in the aggregate) covered by any certificate of title. Upon request of the Lender, the Grantor shall promptly deliver to the Lender any and all certificates of title, applications for title, or similar evidence of ownership of all of its Equipment and shall cause the Lender to be named as lienholder on any such certificate of title or other evidence of ownership. The Grantor shall promptly inform the Lender of any material additions to or deletions from the Equipment and shall not permit any Equipment to become Fixtures to real estate other than real estate subject to mortgages or deeds of trust in favor of the Lender, for the benefit of itself and Lenders. The Grantor shall not permit any Equipment to be kept at a location other than those listed on Schedule 4(b), except for (i) Equipment in transit or temporarily out for repair in the ordinary course of business; (ii) Equipment in the possession of employees in the ordinary course of business; and (iii) Equipment which, together with any other Collateral at such location, has a fair market value that does not exceed $100,000 in the aggregate.

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(d) Chattel Paper Warranties and Covenants. As of the Closing Date, the Grantor does not hold any Chattel Paper other than those identified on Schedule 4(d). To the extent the Grantor holds or obtains any Chattel Paper with a fair market value in excess of $50,000, individually, or $100,000, in the aggregate, at any time, the Grantor will promptly (i) notify and deliver to the Lender all Tangible Chattel Paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Lender, and (ii) provide the Lender with Control of all Electronic Chattel Paper, by having the Lender identified as the assignee of the Record(s) pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of Control set forth in the UCC. The Grantor will also deliver to the Lender all security agreements securing any Chattel Paper and execute UCC financing statement amendments assigning to the Lender any UCC financing statements filed by the Grantor in connection with such security agreements. The Grantor will mark conspicuously all Chattel Paper with a legend, in form and substance satisfactory to the Lender, indicating that such Chattel Paper is subject to the Lien of the Lender.

(e) Instruments Warranties and Covenants. As of the Closing Date, the Grantor does not hold Instruments (other than cheques received and collected in the ordinary course of business) that have not been delivered to the Lender, having value in excess of $100,000 in the aggregate. Other than cheques received and collected in the ordinary course of business, the Grantor will promptly notify and deliver to the Lender all Instruments it holds or obtains having a fair market value in excess of $50,000, individually, or $100,000 in the aggregate, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Lender. The Grantor will also promptly deliver to the Lender all security agreements securing any Instruments and execute UCC financing statement amendments assigning to the Lender any UCC financing statements filed by the Grantor in connection with such security agreements.

(f) Investment Property Warranties and Covenants. As of the Closing Date, the Grantor does not hold Investment Property that are not under the Control of the Lender having value in excess of $50,000 in the aggregate. The Grantor will take any and all actions necessary (or reasonably required or requested by the Lender), from time to time, to (i) cause the Lender to obtain exclusive Control of any Investment Property having value in excess of $50,000 in the aggregate owned by the Grantor in a manner acceptable to the Lender, and (ii) obtain from any issuers of such Investment Property and such other Persons, for the benefit of the Lender, written confirmation of the Lender’s Control over such Investment Property upon terms and conditions acceptable to the Lender.

(g) Letters of Credit Warranties and Covenants. As of the Closing Date, the Grantor does not hold any Letters of Credit under which it is the beneficiary or is otherwise entitled to receive proceeds. The Grantor will promptly notify and deliver to the Lender all Letters of Credit under which it is the beneficiary or is otherwise entitled to receive proceeds having a face value in excess of $50,000, individually, or $100,000 in the aggregate, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Lender. The Grantor will also promptly deliver to the Lender all security agreements securing any such Letters of Credit and execute UCC financing statement amendments assigning to the Lender any UCC financing statements filed by the Grantor in connection with such security agreements. The Grantor will take any and all actions necessary (or reasonably required or requested by the Lender), from time to time, to cause the Lender to obtain exclusive Control of any Letter-of-Credit Rights owned by the Grantor having a value in excess of $50,000, individually, or $100,000 in the aggregate, in a manner acceptable to the Lender.

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(h) General Intangibles Warranties and Covenants. After the occurrence and during the continuance of an Event of Default, the Grantor shall use its best efforts to obtain any consents, waivers, or agreements necessary to enable the Lender to exercise remedies hereunder and under the other Loan Documents with respect to any of the Grantor’s rights under any General Intangibles, including any Grantor’s rights as a licensee of computer software.

(i) Intellectual Property Warranties and Covenants.

(i) The Grantor and each of its Subsidiaries owns, is licensed to use or otherwise has the right to use, all Intellectual Property necessary in the conduct of its business.

(ii) As of the Closing Date, Schedule 4(i)(ii) contains a complete and accurate listing of the following Intellectual Property owned by the Grantor: (A) registered Trademarks and pending applications for Trademark registration; (B) issued Patents and pending Patent applications; and (C) registered Copyrights. Except as could not be reasonably expected to result in a Material Adverse Effect, all Intellectual Property owned by the Grantor and its Subsidiaries is valid, subsisting, and enforceable and all filings necessary to maintain the effectiveness of such registrations have been made. Except as set forth on Schedule 4(i)(ii), there are no restrictions on the Grantor’s right to create a Lien in such Intellectual Property nor in the Lender’s right to perfect and enforce such Lien.

(iii) The Grantor shall concurrently herewith deliver to the Lender each Copyright Security Agreement, Patent Security Agreement, and Trademark Security Agreement, and all other documents, instruments, and other items as may be necessary for the Lender to file such agreements with the U.S. Copyright Office and the U.S. Patent and Trademark Office, as applicable. Except for the Excluded Collateral, the Copyrights, Patents, and Trademarks listed on the respective schedules to each of the Copyright Security Agreement, Patent Security Agreement, and Trademark Security Agreement constitute all of the issued U.S. Patents and pending U.S. Patent applications, registered U.S. Trademarks and pending applications for U.S. Trademark registration and government registered U.S. Copyrights owned by the Grantor as of the Closing Date; provided, however, that the Grantor will notify the Lender upon obtaining any additional issued U.S. Patents and pending U.S. Patent applications, registered U.S. Trademarks and pending applications for U.S. Trademark registration and government registered U.S. Copyrights after the date hereof and update such schedule(s) to reflect such addition(s). If, before Payment in Full of the Obligations, the Grantor acquires or becomes entitled to any new or additional applications or registrations for Patents or Copyrights, or rights thereto, the Grantor shall give to the Lender prompt written notice thereof, and shall amend the schedules to the respective security agreements or enter into new or additional security agreements to include any such new U.S. Patents, Trademarks, or Copyrights.

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(iv) The Grantor shall (a) prosecute diligently any Copyright, Patent, or Trademark application at any time pending as reasonably deemed appropriate by the Grantor and as are material to any Grantor’s business; (b) pursue applications for registration or issuance of all new Copyrights, Patents, and Trademarks as reasonably deemed appropriate by the Grantor and as are material to any Grantor’s business; (c) preserve and maintain all rights in the registered Intellectual Property included in the Collateral as reasonably deemed appropriate by the Grantor and as are material to any Grantor’s business; and (d) after the occurrence and during the continuance of an Event of Default, use its best efforts to obtain any consents, waivers, or agreements necessary to enable the Lender to exercise its remedies with respect to the Intellectual Property owned by the Grantor. The Grantor shall not abandon any material right to file a Copyright, Patent, or Trademark application material to the Grantor’s business nor shall the Grantor abandon any material registered Trademark, application for Trademark registration, issued Patent, Patent application, or registered Copyright without the prior written consent of the Lender.

(v) The execution, delivery, and performance of this Security Agreement by the Grantor will not violate or cause a default under any of the Intellectual Property included in the Collateral or any agreement in connection therewith.

(j) Commercial Tort Claims Warranties and Covenants. As of the Closing Date, no Grantor owns any Commercial Tort Claims other than those identified on Schedule 22(a). The Grantor shall advise the Lender promptly upon any Grantor becoming aware that it owns any Commercial Tort Claims having a value in excess of $50,000, individually, or $100,000 in the aggregate. With respect to any new Commercial Tort Claim, the Grantor will execute and deliver such documents as the Lender deems necessary to create, perfect ,and protect the Lender’s security interest in such Commercial Tort Claim.

(k) Deposit Accounts; Bank Accounts Warranties and Covenants. Schedule 4(k) sets forth the account numbers and locations of all Deposit Accounts or other bank accounts of the Grantor as of the Closing Date. The Grantor shall not establish or acquire any new Deposit Account without the Lender’s prior written consent.

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(l) Bailees. Except as disclosed on Schedule 4(l), as of the Closing Date none of the Collateral is in the possession of any consignee, bailee, warehouseman, agent, or processor. Other than the Excluded Locations, no Collateral shall at any time be in the possession or control of any warehouse, bailee, or any of the Grantor’s agents or processors without the Lender’s prior written consent and unless the Grantor promptly notifies the Lender thereof and, if the Lender has so reasonably requested, has received warehouse receipts or bailee lien waivers satisfactory to the Lender prior to the commencement of such possession or control. Other than with respect to the Excluded Locations, if any Collateral is at any time in the possession or control of any warehouse, bailee, or any of the Grantor’s agents or processors, the Grantor shall, upon the reasonable request of the Lender, promptly (i) notify such warehouse, bailee, agent, or processor of the Liens in favor of the Lender, for the benefit of the Lender and the Lenders, created hereby; (ii) instruct such Person to hold all such Collateral for the Lender’s account subject to the Lender’s instructions; and (iii) obtain such Person’s acknowledgement that it is holding the Collateral for the Lender’s benefit. After the occurrence and during the continuance of an Event of Default, the Lender shall have the right to give such instructions to such warehouseman, bailee, agent, or processor in possession of Collateral.

(m) Collateral Description; Use of Collateral. The Grantor will furnish to the Lender, from time to time upon the Lender’s reasonable request, statements and schedules further identifying, updating, and describing the Collateral and such other information, reports and evidence concerning the Collateral, as the Lender may reasonably request, all in detail satisfactory to the Lender. The Grantor will not use or permit any Collateral to be used unlawfully or in violation of any provision of applicable law or any policy of insurance covering any of the Collateral, except as could not reasonably be expected to have a Material Adverse Effect.

(n) Collateral Filing Requirements; Collateral Records. As of the Closing Date, none of the Collateral is of a type in which Liens may be registered, recorded, or filed under, or notice thereof given under, any federal statute or regulation except for Collateral described on the schedules to the Copyright Security Agreement, Patent Security Agreement, and Trademark Security Agreement. The Grantor shall promptly notify the Lender in writing upon acquiring any interest hereafter in Collateral that is of a type where a Lien may be registered, recorded, of filed under, or notice thereof given under, any federal statute or regulation. The Grantor shall keep full and accurate books and records relating to the Collateral and shall stamp or otherwise mark such books and records in such manner as the Lender may reasonably request to indicate the Lender’s Liens in the Collateral, for the benefit of the Lender and Lenders.

(o) Federal Claims. None of the Collateral constitutes a claim against the United States of America or Canada, or any State or municipal government or any department, instrumentality or agency thereof, the assignment of which claim is restricted by law. The Grantor shall promptly notify the Lender of any Collateral which constitutes a claim against the United States or Canada, any state, or any department, agency or instrumentality of any of them, the assignment of which claim is restricted by law. Upon the request of the Lender, the Grantor shall take such steps as may be necessary to comply with any applicable federal assignment of claims laws and other comparable laws.

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(p) Lender Authorized. The Grantor hereby authorizes and, until Payment in Full of the Obligations, shall continue to authorize the Lender to file one or more financing or continuation statements, and amendments thereto (or similar documents required by any laws of any applicable jurisdiction), relating to all or any part of the Collateral without the signature of the Grantor and hereby specifically ratifies all such actions previously taken by the Lender. The Grantor hereby authorizes the Lender to file in any jurisdiction and with any office one or more financing statements for the purpose of perfecting the security interests granted by the Grantor herein. Any such financing statement may indicate the collateral as “all assets of the debtor, whether now owned or existing or hereafter acquired or arising”, “all personal property of the debtor, whether now owned or existing or hereafter acquired or arising” or words of similar effect.

5. General Covenants. The Grantor covenants and agrees with the Lender, for the benefit of the Lender, that from and after the date of this Security Agreement and until Payment in Full of the Obligations:

(a) Further Assurances; Letters of Credit.

(i) Generally. At any time and from time to time, upon the reasonable request of the Lender and at the sole expense of the Grantor, the Grantor shall promptly and duly execute and deliver any and all such further instruments and documents and take such further actions as the Lender may reasonably request to obtain the full benefits of this Security Agreement and of the rights and powers herein granted, including (A) using its commercially reasonable efforts to secure all consents and approvals necessary for the assignment to or for the benefit of the Lender of any License or Contractual Obligations held by the Grantor and to enforce the security interests granted hereunder; and (B) authorizing the filing of any financing or continuation statements under the UCC with respect to the Liens granted hereunder or under any other Loan Document as to those relevant jurisdictions that are not Uniform Commercial Code Jurisdictions.

(ii) Organizational, Name or Location Changes. The Grantor will give the Lender (A) at least 20 days prior written notice (or such shorter period as acceptable to the Lender in its sole discretion) of any (1) change of name of the Grantor (including, without limitation, within the meaning of Section 9-503 of the UCC) or of any new trade name or fictitious business name of any Grantor; (2) changes in the Grantor’s state or other jurisdiction of organization or its organizational identification number; or (3) reincorporation or reorganization of a Grantor under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof; and (B) written notice within 20 days after the occurrence of any (1) change of principal place of business or chief executive office of the Grantor; and (2) change in the location of the Grantor’s books and records or Collateral, change in the location of the Grantor’s complete set of books and records or any new locations of the Grantor’s books and records or Collateral. In connection with and as a condition to taking any action described in clauses (A) and (B), the Grantor shall take all necessary action to maintain the continued perfection and priority of the Liens created hereunder in the Collateral, including any actions that may be reasonably requested by the Lender. Information delivered pursuant to this Section 5(a)(ii) shall be deemed to supplement Schedule 4(b).

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(iii) Financing Statements. The Grantor hereby authorizes and, until Payment in Full of the Obligations, shall continue to authorize the Lender in its secured credit party judgment at any time and from time to time prior to the Payment in Full of the Obligations to file in any filing office in any Uniform Commercial Code Jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of the Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of such jurisdiction; or (ii) as being of an equal or lesser scope or with greater detail; and (b) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Grantor is an organization, the type of organization, and any organization identification number issued to the Grantor; and (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates. The Grantor agrees to furnish any such information to the Lender promptly upon reasonable request therefrom. The Grantor also ratifies its authorization for the Lender to have filed in any Uniform Commercial Code Jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

(b) Maintenance of Records. The Grantor shall keep and maintain, at its own cost and expense, satisfactory and complete records in all material respects of the Collateral, including a record of any and all payments received and any and all credits granted with respect to the Collateral and all other dealings with the Collateral.

(c) Indemnification. In any suit, proceeding, or action brought by the Lender relating to any Collateral for any sum owing with respect thereto or to enforce any rights or claims with respect thereto, the Grantor will save, indemnify, and keep the Lender harmless from and against all expense (including reasonable attorneys’ fees and expenses), loss, or damage suffered by reason of any defense, setoff, counterclaim, recoupment, or reduction of liability whatsoever of the Account Debtor or other Person obligated on the Collateral, arising out of a breach by the Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from the Grantor, except to the extent such expense, loss, or damage is resulting from the gross negligence or willful misconduct of the Lender as determined by a final non-appealable judgment by a court of competent jurisdiction. All such obligations of the Grantor shall be and remain enforceable against and only against the Grantor and shall not be enforceable against the Lender.

(d) Limitation on Liens on Collateral. The Grantor will not create, permit, or suffer to exist, and will take commercially reasonable efforts to defend the Collateral against, and take such other action as is necessary to remove, any Lien on the Collateral, except Permitted Liens, and will defend the rights of the Lender and Lenders in and to any of the Grantor’s rights under the Collateral against the claims and demands of all Persons whomsoever.

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(e) Limitations on Disposition. The Grantor will not sell, license, lease, transfer, or otherwise dispose of any of the Collateral, except as permitted by the Loan Agreement.

(f) Terminations; Amendments Not Authorized. The Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Lender and agrees that it will not do so without the prior written consent of the Lender, subject to the Grantor’s rights under Section 9-509(d)(2) of the UCC.

6. The Lender’s Appointment as Attorney-in-Fact.

(a) The Grantor hereby irrevocably constitutes and appoints the Lender, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Grantor and in the name of the Grantor or in its own name, after the occurrence and during the continuance of an Event of Default, for the purpose of carrying out the terms of the Loan Documents, to take any appropriate action and to execute any document or instrument that may be necessary or desirable to accomplish the purposes of the Loan Documents, and, without limiting the generality of the foregoing, the Grantor hereby gives the Lender the power and right, on behalf of the Grantor, without notice to or assent by the Grantor, to do any of the following when an Event of Default shall be continuing:

(i) in the name of the Grantor, in its own name or otherwise, take possession of and indorse and collect any check, draft, note, acceptance, or other instrument for the payment of moneys due under any account or general intangible or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Lender for the purpose of collecting any such moneys due under any account or general intangible or with respect to any other Collateral whenever payable;

(ii) in the case of any Intellectual Property owned by or licensed to the Grantor, execute, deliver, and have recorded any document that the Lender may reasonably request to evidence, effect, publicize or record the Lender’s security interest in such Intellectual Property and the goodwill and general intangibles of the Grantor relating thereto or represented thereby;

(iii) pay or discharge taxes and Liens levied or placed on or threatened against any Collateral, effect any repair, or pay any insurance called for by the terms of the Loan Agreement (including all or any part of the premiums therefor and the costs thereof);

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(iv) execute, in connection with any sale provided for in Section 7, any document to effect or otherwise necessary or appropriate in relation to evidence the sale of any Collateral; or

(v) (A) direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly to the Lender or as the Lender shall direct; (B) ask or demand for, and collect and receive payment of and receipt for, any moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) sign and indorse any invoice, freight or express bill, bill of lading, storage or warehouse receipt, draft against debtors, assignment, verification, notice and other document in connection with any Collateral; (D) commence and prosecute any suit, action, or proceeding at law or in equity in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral; (E) defend any actions, suits, proceedings, audits, claims, demands, orders, or disputes brought against the Grantor with respect to any Collateral; (F) settle, compromise or adjust any such actions, suits, proceedings, audits, claims, demands, orders, or disputes and, in connection therewith, give such discharges or releases as the Lender may deem appropriate; (G) assign any Intellectual Property owned by the Grantor or any Intellectual Property licenses of the Grantor throughout the world on such terms and conditions and in such manner as the Lender shall in its sole discretion determine, including the execution and filing of any document necessary to effectuate or record such assignment; and (H) generally, sell, assign, convey, transfer, or grant a Lien on, make any Contractual Obligation with respect to and otherwise deal with, any Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes and do, at the Lender’s option, at any time or from time to time, all acts and things that the Lender deems necessary to protect, preserve or realize upon any Collateral and the Lender’s security interests therein and to effect the intent of the Loan Documents, all as fully and effectively as the Grantor might do.

(b) If any Grantor fails to perform or comply with any Contractual Obligation contained herein, after the occurrence and during the continuance of an Event of Default, the Lender, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such Contractual Obligation.

(c) The expenses of the Lender incurred in connection with actions undertaken as provided in this Section 6, together with interest thereon at a rate set forth in the Loan Agreement, from the date of payment by the Lender to the date reimbursed by the Grantor, shall be payable by the Grantor to the Lender on demand.

(d) The Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this Section 6. All powers, authorizations, and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Security Agreement is terminated and the security interests created hereby are released.

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7. Remedies; Rights Upon Default.

(a) In addition to all other rights and remedies granted to it under this Security Agreement, the Loan Agreement, the other Loan Documents and under any other instrument or agreement securing, evidencing, or relating to any of the Obligations (but subject to the terms of such instruments or agreements), if any Event of Default shall have occurred and be continuing, the Lender may exercise all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing, the Grantor expressly agrees that in any such event the Lender, without demand of performance or other demand, advertisement, or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon the Grantor or any other Person (all and each of which demands, advertisements, and notices are hereby expressly waived to the maximum extent permitted by the UCC and other applicable law), may forthwith enter upon the premises of the Grantor where any Collateral is located through self-help (provided there is no breach of the peace), without judicial process, without first obtaining a final judgment or giving the Grantor or any other Person notice and opportunity for a hearing on the Lender’s claim or action and may collect, receive, assemble, process, appropriate, and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, license, assign, give an option or options to purchase, or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at a public or private sale or sales, at any exchange at such prices as it may deem commercially reasonable, for cash or on credit or for future delivery without assumption of any credit risk. The Lender shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of the Lender, the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption the Grantor hereby releases (it being understood that such purchase shall terminate the obligations of the Guarantor pursuant to Section 2.7 of the Loan Agreement). Such sales may be adjourned and continued from time to time with or without notice. The Lender shall have the right to conduct such sales on the Grantor’s premises or elsewhere and shall have the right to use the Grantor’s premises without charge for such time or times as the Lender deems necessary or advisable.

If any Event of Default shall have occurred and be continuing, the Grantor further agrees, at the Lender’s request, to assemble the Collateral and make it available to the Lender at a place or places designated by the Lender which are reasonably convenient to the Lender and the Grantor, whether at the Grantor’s premises or elsewhere. Until the Lender is able to effect a sale, lease, or other disposition of Collateral, the Lender shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by the Lender. The Lender shall not have any obligation to the Grantor to maintain or preserve the rights of the Grantor as against third parties with respect to any Collateral while such Collateral is in the possession of the Lender. The Lender may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Lender’s remedies (for the benefit of the Lender and Lenders), with respect to such appointment without prior notice or hearing as to such appointment. The Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization, or sale to the Obligations as provided in the Loan Agreement, and only after so paying over such net proceeds, and after the payment by the Lender of any other amount required by any provision of law, need the Lender account for the surplus, if any, to the Grantor. To the maximum extent permitted by applicable law, the Grantor waives all claims, damages, and demands against the Lender arising out of the repossession, retention, or sale of the Collateral except to the extent that such arise out of the gross negligence or willful misconduct of the Lender as finally determined by a court of competent jurisdiction. The Grantor agrees that 10 days prior notice by the Lender of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. The Grantor shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any attorneys’ fees and other expenses incurred by the Lender to collect such deficiency.

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(b) Except as otherwise specifically provided herein, the Grantor hereby waives presentment, demand, protest, or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral.

(c) To the extent that applicable law imposes duties on the Lender to exercise remedies in a best manner, the Grantor acknowledges and agrees that it is not commercially unreasonable for the Lender (i) to fail to incur expenses reasonably deemed significant by the Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition; (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of; (iii) to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral; (iv) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists; (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature; (vi) to contact other Persons, whether or not in the same business as the Grantor, for expressions of interest in acquiring all or any portion of such Collateral; (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature; (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets; (ix) to dispose of assets in wholesale rather than retail markets; (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment; (xi) to purchase insurance or credit enhancements to insure the Lender against risks of loss, collection or disposition of Collateral or to provide to the Lender a guaranteed return from the collection or disposition of Collateral; or (xii) to the extent deemed appropriate by the Lender, to obtain the services of other brokers, investment bankers, consultants, and other professionals to assist the Lender in the collection or disposition of any of the Collateral. The Grantor acknowledges that the purpose of this Section 7(c) is to provide non-exhaustive indications of what actions or omissions by the Lender would not be commercially unreasonable in the Lender’s exercise of remedies against the Collateral and that other actions or omissions by the Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 7(c). Without limitation upon the foregoing, nothing contained in this Section 7(c) shall be construed to grant any rights to the Grantor or to impose any duties on the Lender that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section 7(c).

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(d) The Lender shall not be required to make any demand upon, or pursue or exhaust any of their rights or remedies against, any Grantor, any other obligor, guarantor, pledgor, or any other Person with respect to the payment of the Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof. The Lender shall not be required to marshal the Collateral or any guarantee of the Obligations or to resort to the Collateral or any such guarantee in any particular order, and all of its and their rights hereunder or under any other Loan Document shall be cumulative. To the extent it may lawfully do so, the Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Lender, any valuation, stay, appraisement, extension, redemption, or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order, or decree of any court, or privately under the power of sale conferred by this Security Agreement, or otherwise.

8. Grant of License to Use Intellectual Property. For the purpose of enabling the Lender to exercise its rights and remedies under Section 7 hereof (including, without limiting the terms of Section 7 hereof, in order to take possession of, hold, preserve, process, assemble, prepare for sale, market for sale, sell, monitor, collect or otherwise dispose of Collateral), the Grantor hereby assigns, transfers and conveys to the Lender, for the benefit of the Lender and Lenders, effective upon the occurrence of any Event of Default, the non-exclusive right and license to use all Intellectual Property owned or used by the Grantor together with any goodwill associated therewith, in any case to the extent that it is not prohibited from doing so under applicable law. This right and license shall inure to the benefit of all successors, assigns and transferees of the Lender and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is granted free of charge and does not require the consent of any other person.

9. Limitation on the Lender’s and Lenders’ Duty in Respect of Collateral. The Lender shall use reasonable care with respect to the Collateral in its possession or under its control. The Lender shall not have any other duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of the Lender, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Lender shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouse, carrier, forwarding agency, consignee, broker or other agent or bailee selected by any Grantor or selected by the Lender in good faith.

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

11. Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give and serve upon any other party any communication with respect to this Security Agreement, each such notice, demand, request, consent, approval, declaration, or other communication shall be in writing and shall be given in the manner, and deemed received, as provided for in the Loan Agreement.

12. Severability. Whenever possible, each provision of this Security Agreement shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Security Agreement. This Security Agreement is to be read, construed and applied together with the Loan Agreement and the other Loan Documents which, taken together, set forth the complete understanding and agreement of the Lender and the Grantor with respect to the matters referred to herein and therein.

13. No Waiver; Cumulative Remedies. No failure on the part of the Lender to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Security Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Lender of any right under this Security Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights in this Security Agreement and the other Loan Documents are cumulative and shall in no way limit any other remedies provided by law.

14. Limitation by Law. All rights, remedies and powers provided in this Security Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Security Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Security Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered, or filed under the provisions of any applicable law.

15. Termination of This Security Agreement. Subject to Section 10 hereof, this Security Agreement shall terminate upon Payment in Full of the Obligations. Upon such Payment in Full of the Obligations, any Collateral then in custody of the Lender or its nominee shall be re-delivered to Borrower Representative as soon as practicable.

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16. Successors and Assigns. This Security Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided, however, the Grantor may not assign its rights or obligations hereunder without the written consent of the Lender.

17. Counterparts; Effectiveness. This Security Agreement and any amendments, waivers, consents, or supplements may be executed via electronic (e.g., “pdf”) transmission in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute one and the same instrument. This Security Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. The Grantor and the Lender each acknowledge that it has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Security Agreement with its legal counsel.

18. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF BRITISH COLUMBIA AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

19. WAIVER OF JURY TRIAL. THE GRANTOR AND THE LENDER EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT. THE GRANTOR AND THE LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS SECURITY AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE GRANTOR AND THE LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

20. Section Titles. The Section titles contained in this Security Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

21. Currency. All references to currency in this Security Agreement refer to the lawful currency of the United States of America.

22. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Security Agreement. In the event an ambiguity or question of intent or interpretation arises, this Security Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Security Agreement.

23. Benefit of Lender. All Liens granted or contemplated hereby shall be for the benefit of the Lender.

24. Joint and Several Liability. Notwithstanding anything to the contrary in this Security Agreement or the other Loan Documents, all payment and performance obligations of the Grantor arising under this Security Agreement and the other Loan Documents shall be the joint and several obligations of the Grantor secured by all the Collateral. The Lender may apply any portion of the Collateral to satisfy any of the Obligations.

25. Joinder. In the event that any Person becomes required at any time to become a Grantor under this Security Agreement pursuant to the requirements of the Loan Documents, the relevant Person shall do so by delivering appropriately completed supplemental documentation as may be required by the Lender to satisfy the applicable requirements of the Loan Documents.

[Signature Page Follows]

IN WITNESS WHEREOF the Parties hereto have executed this Security Agreement as of the day and year first above written.

ECC VENTURES 2 CORP.

Name:

Title:

LONG ISLAND BRAND BEVERAGES LLC

Name:

Title: