LIFD LFTD Partners Inc (QB)

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)

December 14, 2023

LFTD PARTNERS INC.

(Exact name of registrant as specified in its charter)

847-915-2446

(Registrant’s telephone number, including area code)

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):

Item 1.01.Entry into a Material Definitive Agreement. 

On December 14, 2023, LFTD Partners Inc. (“LIFD”) (OTCQB: LIFD), and its wholly owned subsidiary Lifted Liquids, Inc., dba Lifted Made (“Lifted Made”) (together the “Borrower”), jointly borrowed a total of $3,910,000 from Surety Bank, of DeLand, Florida (“Lender”).

The Lender made two five-year loans to the Borrower, as joint borrowers: (1) a working capital loan of $3,000,000 at 9.5% fixed annual interest, and (2) a $910,000 loan at 10% fixed annual interest, the net proceeds of which were used by Lifted Made to pay a portion of the $1,375,000 purchase price of Lifted Made’s main operations building located at 5511 95th Avenue in Kenosha, Wisconsin (“5511 Building”). The two loans are cross collateralized by a first lien mortgage on the 5511 Building, and by a first lien security interest in all of the other assets owned by LIFD and Lifted Made, in favor of Surety Bank.

The following descriptions are not complete and are qualified in their entirety by reference to the respective agreements, copies of which are filed herewith as Exhibits 10.80 through 10.88, respectively, and are incorporated herein by reference.

(a)$3,000,000 Working Capital Loan 

Credit Agreement

Pursuant to the Credit Agreement dated as of December 14, 2023 (the “Credit Agreement”), among the Borrower and the Lender, the Lender agreed to loan to the Borrower $3,000,000 (“Working Capital Loan”). The interest rate for the Working Capital Loan is a fixed annual interest rate of 9.5%. The Credit Agreement requires a Promissory Note and Security Agreement. The Credit Agreement requires a prepayment fee if the Working Capital Loan is repaid to the Lender in less than three years, in the amount of 3% of the Working Capital Loan if the loan is repaid in Year-1, 2% of the Working Capital Loan if the Working Capital Loan is repaid in Year-2, and 1% if the Working Capital Loan is repaid in Year-3.

The Credit Agreement is also subject to certain negative covenants in which the Borrower agreed (subject to certain exceptions) not to, among other things:

·Become subject to other liens or encumbrances;  

·Change ownership of Lifted Made without the consent of the Lender;  

·Enter into a merger, acquisition or divestiture; 

·Conduct stock buybacks; 

·Serve as a guarantor;  

·Wind up, liquidate or dissolve;  

·Enter into the purchase, sale, exchange or transfer of property;  

·Permit the outstanding principal balance of the Working Capital Loan to exceed 40% of the fair market value of the collateral securing the Working Capital Loan; or 

·Directly or indirectly issue, assume or create any additional indebtedness on the collateral. 

Promissory Note

Pursuant to the Promissory Note dated as of December 14, 2023 (the “WC Note”), among the Borrower and the Lender, the Lender agreed to loan to the Borrower the Working Capital Loan at a fixed annual interest rate of 9.5%. The WC Note also requires a 5% late fee on outstanding unpaid payments due under the WC Note where payments are not made within 10 days of the due date. The WC Note has cross-default cross-collateralized provisions with the $910,000 Business Loan described below.

Security Agreement

Pursuant to a Security Agreement dated as of December 14, 2023 (“Security Agreement”), the Borrower granted to the Lender a security interest in all the Borrower’s personal property relating to its business to secure the obligations of the Borrower under the Credit Agreement. The collateral that is secured by the

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Security Agreement includes all the Borrower’s accounts, general intangibles, inventory, equipment, goods, deposit accounts, contractual rights, fixtures, money, insurance and commercial tort claims.

If an event of default under the Credit Agreement occurs, then the Lender may exercise the Borrower’s rights in the collateral. In that event, the Lender will have all the rights of a secured party with respect to the collateral under the Uniform Commercial Code, including, among other things, the right to sell the collateral at public or private sale.

Collateral Assignment Agreement

Under the Collateral Assignment Agreement dated as of December 14, 2023, between the Borrower and the Lender, the Borrower assigned to the Lender, in connection with the terms of the Credit Agreement, all of Borrower’s “intellectual property”, including but not limited to, all patents, patent rights, trademarks and service marks, works, inventions, copyrights, trade names, software and computer programs, trade secrets, methods, processes, know how, drawings, and specifications. In the event of default under the Credit Agreement or WC Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing intellectual property collateral to the detriment of the Borrower.

Pledge Agreement

Under the Pledge Agreement dated as of December 14, 2023, between the Borrower and the Lender, the Borrower, in connection with the terms of the Credit Agreement, pledges all equity holdings in Lifted Made, Bendistillery, Inc., Bend Spirits, Inc., and Ablis Holding Company. In the event of default under the Credit Agreement or WC Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing equity collateral to the detriment of the Borrower.

(b)$910,000 Loan 

Business Loan Agreement

Pursuant to the Business Loan Agreement dated as of December 14, 2023 (the “Loan Agreement”), among the Borrower and the Lender, the Lender agreed to loan $910,000 (the “Business Loan”) to the Borrower. The Business Loan requires that Borrower shall maintain a minimum 1.50x Debt Service Coverage Ratio (DSCR) based on Borrower tax returns. The DSCR shall be tested annually, beginning with the 2023 return. The DSCR shall be calculated as EBIDA (earnings before interest, depreciation, and amortization) divided by contractual annual debt service payments. The Business Loan also requires Borrower to maintain its primary operating accounts with a $1,000,000.00 minimum deposit account balance with the Lender for the life of the Business Loan. The Business Loan also requires a Promissory Note, Mortgage and Assignment of Rents, Leases, and Security Deposits described below.

Promissory Note

Pursuant to the Promissory Note dated as of December 14, 2023 (the “BL Note”), among the Borrower and the Lender, the Lender agreed to loan to the Borrower the Business Loan at a fixed annual interest rate of 10% . The BL Note also requires a 5% late fee on outstanding unpaid payments due under the BL Note. The BL Note requires a mortgage on the 5511 Building, along with a first priority security interest on: all furniture, equipment, inventory, and general intangibles (including but not limited to all software and all payment intangibles); all fixtures; and all attachments, accessions, accessories, fittings, increases, tools, parts, repairs, supplies, and commingled goods.

Mortgage

Pursuant to the Mortgage dated as of December 14, 2023 (the “Mortgage”), among Lifted Made in favor of the Lender, in connection with the terms of the Loan Agreement and BL Note, Lifted Made agreed to a first priority mortgage on the 5511 Building (Parcel Number 08-222-32-410-104). In the event of default under the Loan Agreement or BL Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing equity collateral to the detriment of the Borrower.

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Assignment of Rents, Leases, and Security Deposits

Pursuant to the Assignment of Rents, Leases, and Security Deposits dated as of December 14, 2023 (the “Lease Assignment”), among Lifted Made in favor of the Lender, in connection with the terms of the Loan Agreement and BL Note, Lifted Made agreed to assign its rights to leases and income from the 5511 Building to Lender. In the event of default under the Loan Agreement or BL Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing equity collateral to the detriment of the Borrower.

Default under any of the agreements described above could have a highly detrimental, if not catastrophic impact on our company.

Item 2.01. Completion of Acquisition or Disposition of Assets

Toward the end of 2020, our Vice Chairman and Chief Operating Officer Nicholas S. Warrender (“NWarrender”), through his assigned entity 95th Holdings, LLC (“Holdings”), purchased the 5511 Building and then immediately leased it to Lifted Made to conduct our expanded operations. The 5511 Building includes office, laboratory and warehouse space. As part of the lease agreement with Holdings, the parties agreed that our wholly owned subsidiary Lifted Made would eventually purchase the 5511 Building. Pursuant to an agreement with NWarrender on December 30, 2021, the parties agreed to set the purchase price for the 5511 Building at $1,375,000. Pursuant to an Acceleration Agreement effective as of July 1, 2022, the deadline to purchase the 5511 Building was extended to December 31, 2023. We used a portion of the proceeds of the loans described above to purchase the 5511 Building. That transaction closed on December 14, 2023.

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

To the extent applicable, the contents of Item 1.01 above are incorporated into this Item 2.03 by this reference.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits. 

Exhibit 10.80Credit Agreement  

Exhibit 10.81Promissory Note ($3,000,000 Loan) 

Exhibit 10.82Security Agreement  

Exhibit 10.83Collateral Assignment Agreement  

Exhibit 10.84Pledge Agreement  

Exhibit 10.85Business Loan Agreement  

Exhibit 10.86Promissory Note ($910,000 Loan) 

Exhibit 10.87Mortgage 

Exhibit 10.88Assignment of Rents, Leases, and Security Deposits 

Exhibit 99.1 Press Release dated December 19, 2023 

SIGNATURES

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

Dated:  December 19, 2023

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”) is dated as of December 14, 2023 (the “Effective Date”), and is entered into by and between LFTD PARTNERS INC., a Nevada corporation (“LFTD”) and LIFTED LIQUIDS, INC., an Illinois corporation (“LLI” and together with LFTD, collectively and jointly and severally, the “Borrower”) and SURETY BANK (the “Lender”).

RECITALS:

A.Borrower has agreed to provide Lender with certain collateral in order to secure the repayment of the “Loan,” as hereinafter defined. 

B.Lender has agreed to make, and Borrower has agreed to accept, the Loan, subject to the terms, provisions and conditions hereinafter set forth. 

AGREEMENT:

Borrower and Lender agree as follows:

For and in consideration of the Loan, the covenants, agreements, representations and warranties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged.

ARTICLE 1

RECITALS, DEFINITIONS, RULES OF DEVELOPMENT AND EXHIBITS

1.1Recitals. The foregoing recitals are hereby ratified and confirmed by the Borrower and Lender as being true and correct, and are hereby incorporated into this Agreement. 

1.2Definitions.As used in this Agreement and the Exhibits attached hereto, the following terms shall have the recited meanings, unless the context otherwise requires: 

(a)Accounts: All of the "accounts" (as that term is defined in the Uniform Commercial Code as adopted in the State of Florida, as in effect from time to time) of Borrower, whether now existing or hereafter arising. 

(b)Account Debtor: Any individual, partnership, corporation, trust, limited liability company, limited liability partnership, unincorporated association or organization, joint venture or any other entity, obligated on any Account owing to Borrower. 

(c)Business Assets: All assets of the Borrower listed on Exhibit “A” attached hereto. 

(d)Business Day: A day other than a Saturday, Sunday or a day on which commercial banks in Orlando, Florida are authorized or required by law to close. 

(e)Collateral: The Lender shall have a first priority security interest in all of Borrower’s business assets as identified in Exhibit “B” and as identified in the Security Agreement and a pledge of the ownership interest identified in the Pledge Agreement made in favor of the Lender and dated on even date herewith. The fair value of the Collateral shall at all  

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times equal or exceed $7,500,000, in the sole discretion of the Lender.

(f)Debt Service Coverage Ratio: EBIDA divided by contractual annual debt service payments. 

(g)Default Rate: The highest rate allowable under the laws of the State of Florida. 

(h)Events of Default:  Those events described in Section 7.1 hereof. 

(i)EBIDA: Earnings before interest, depreciation, and amortization. 

(j)Fiscal Year: The period of twelve (12) consecutive calendar months for which financial statements of the Borrower have been examined by its independent certified public accountants currently for the Borrower, a year ending on December 31st. 

(k)Fiscal Quarter: One of four (4) three-month accounting periods that comprise the Fiscal Year. 

(l)Interest Rate: The interest rate on the Promissory Note shall be a fixed rate equal to a rate of nine and five tenths’ percent (9.50%). Interest on this loan is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this loan is computed using this method. 

(m)Loan: The loan in the original principal amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00). 

(n)Loan Documents: This Agreement and any other documents or instruments executed, submitted, or delivered by Borrower, to or in favor of Lender, in connection with the Loan, including, but not limited to, this Agreement the Promissory Note, and the Security Agreement (each document being a “Loan Document”). 

(o)Material Adverse Effect: The existence of events, conditions and/or contingencies that have had or are reasonably likely to have (a) a materially adverse effect on the business, operations, properties, assets or financial condition of the Borrower, (b) a material impairment of the ability of the Borrower to perform any of its material obligations under any Loan Documents to which it is or will be a party, or (c) an impairment of the validity or enforceability of any material provision of, or a material impairment of the material rights, remedies or benefits available to the Lender under any Loan Document. 

(p)Maturity Date: The date that is the earlier of (i) sixty (60) months from the Effective Date and (ii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). 

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(q)      Payment Date: means the 14^th of each month, commencing on January 14, 2024, and continuing until the Maturity Date.

(r)Promissory Note: That certain Promissory Note dated as of the Effective Date made by the Borrower to the order of the Lender and evidencing the Loan. 

(s)Security Agreement: That certain Security Agreement dated on even date herewith encumbering the Collateral as set forth therein and which is executed and delivered by Borrower to and in favor of Lender to secure the Promissory Note. 

1.3Rules of Definitions. Unless the context otherwise requires: 

(a)a defined term shall have the meaning assigned to it in Section 1.2 hereof; 

(b)an accounting term, not otherwise defined, shall have the meaning assigned to it in accordance with generally accepted accounting principles (“GAAP”); 

(c)words in the singular include the plural, and words in the plural include the singular; and 

(d)reasonableness is not implied in any requirement of consent, approval, or satisfaction unless expressly provided to the contrary. 

ARTICLE 2

THE LOAN AND COLLATERAL

2.1The Loan. Lender has made the Loan to the Borrower subject to all the terms and conditions herein, and Borrower hereby agrees to the terms of the Promissory Note, this Agreement, and the other Loan Documents. 

2.2Repayment of Loan. Monthly installments of principal and interest in the amount of $63,217.27 shall be due and paid to the Lender on each Payment Date. Payments shall be applied to accrued interest and any remaining amount will be applied to principal. All accrued and unpaid interest, all unpaid principal, and other charges due and owing under the Loan Documents shall be due and payable in full on the Maturity Date unless the same shall be extended or waived in a written instrument executed by the Lender. Borrower shall be responsible for the payment of all property taxes and insurance premiums to the corresponding agencies. 

2.3Prepayments of Loan. In the event of any prepayment of the Promissory Note, whether by voluntary prepayment, acceleration, or otherwise, the Borrower shall pay a fixed rate prepayment charge equal to the product of: (a) the principal amount prepaid and (b) the percentage set forth in the table below for any prepayment made during the indicated period. 

Loan Year 13.00% of the Original Loan Amount 

Loan Year 22.00% of the Original Loan Amount 

Loan Year 31.00% of the Original Loan Amount 

2.4Interest on the Loan. 

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(a)The Borrower shall pay interest on the Loan at the Interest Rate, in accordance with the Loan Documents. 

(b)Upon an Event of Default, including failure to pay upon final maturity, the Interest Rate on this loan shall be increased to the Default Rate. 

(c)Interest on the principal amount of the Loan shall accrue from and including the date the Loan is made. Interest on the Loan shall be payable monthly in arrears on each Payment Date. After the occurrence of an Event of Default, all interest and principal shall be payable on demand. 

2.5Costs of the Loan. In addition to any fees heretofore, simultaneously herewith, or hereafter paid to, for, on behalf or at the direction of Lender, Borrower shall pay all costs and expenses (including, but not limited to, attorneys’ fees, para-professional fees, administrative fees, UCC search fees, inspection fees, audit fees, permit or license fees, insurance premiums, title search fees, title insurance premiums and endorsements, recording fees, documentary stamp tax, intangible tax, lien and judgment search fees, environmental assessments, filing fees, document preparation fees, settlement fees, escrow fees, appraisal fees, tax service fees, flood determination fees, survey fees and any other disbursements, court costs, litigation and other expenses) incurred or paid by the Lender or its legal counsel or representatives in connection with making the Loan and/or enforcing its terms. These fees are due and payable by Borrower regardless of whether the Loan closes. Lender shall retain the exclusive right in its sole discretion to approve or disapprove of the persons, or entities providing such services, matters or items. Additionally, Borrower shall pay the following fees: lender’s counsel fees, one-half percent (0.50%) of the loan amount which is, $15,000.00, regardless of whether the transactions contemplated by this Credit Agreement are consummated. 

2.6Right of Set Off. If an Event of Default (after applicable notice and grace period) shall exist under the Promissory Note, the Security Agreement, this Agreement or the other Loan Documents, then Lender, without notice to Borrower, may apply, charge against and/or setoff against (or caused to be released to Lender), at its sole election and in such order and in such amount as Lender determines, the funds available under the Loan or any portion thereof, after deduction of any cost or expense incurred or sustained by Lender in connection with such application, charge, setoff or release, to the reduction of any amount outstanding under the Promissory Note or due to Lender under the other Loan Documents or apply (or cause to be released to Lender) the funds available under the Loan or any portion thereof to remedy any failure of Borrower to perform any agreement, condition or obligation on its part to be performed or observed hereunder or under the other Loan Documents. The application or release of the funds available under the Promissory Note in such manner shall not be deemed to be a cure of, or a waiver by Lender of, any such default. In addition, upon the occurrence of an Event of Default, Lender shall, in addition to the remedies set forth above, have all other rights and remedies available at law and in equity, including, without limitation, those, if any, set forth under the Uniform Commercial Code of any applicable jurisdiction. 

2.7Evidence of and Security for the Loan. The Loan is evidenced by the Promissory Note, which Promissory Note shall bear interest at the rate herein provided, and shall be secured and the liens perfected by the Security Agreement, one or more UCC-1 Financing Statements, and 

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such other security instruments and documents as may be required by Lender, each of which shall grant a security interest in the Collateral.

2.8Perfection of Liens. The Borrower shall take all action that may be necessary or desirable, or that Lender may request, so as at all times to maintain the validity, perfection, enforceability and priority of Lender’s security interest in the Collateral and to enable Lender to protect, exercise or enforce its rights hereunder and in the Collateral, including (i) immediately discharging all Liens (defined below) other than Permitted Encumbrances (as defined in Exhibit 

“A” attached hereto and incorporated herein by reference), (ii) obtaining landlords’ or mortgagees’ Lien waivers, (iii) delivering to Lender, endorsed or accompanied by such instruments of assignment as Lender may specify, and stamping or marking, in such manner as Lender may specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox and other custodial arrangements satisfactory to Lender, and (v) executing and delivering, or causing to be executed or delivered, lien perfection documents requested by Lender, in each case in form and substance satisfactory to Lender, relating to the creation, validity, perfection, maintenance or continuation of Lender’s security interest under the UCC or other applicable law. By its signature hereto, the Borrower hereby authorizes Lender to file against such Borrower, one or more financing, continuation or amendment statements pursuant to the UCC in form and substance satisfactory to Lender (which statements may have a description of collateral which is broader than that set forth herein). All charges, expenses and fees Lender may incur in doing any of the foregoing, and any local taxes or other expenses relating thereto, shall be charged to Borrower and reimbursed to Lender as an Advance under the Loan, or, at Lender’s option, shall be paid to Lender by Borrower immediately upon demand.

For purposes hereof the term “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), encumbrance, claim or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC or comparable law of any jurisdiction.

2.9Loan to Value. The Loan amount shall not exceed forty percent (40%) of the Collateral value. Should the Lender, at its sole discretion, reasonably suspect that the loan to value exceeds this percentage; a reappraisal of the Collateral at the Borrower’s expense will be required. This provision may not be exercised more than once in a calendar year. Should the resulting value exceed the above percentage, the Borrower shall be required to make a principal reduction to the Loan amount to bring the loan value to forty percent (40%). If the required principal reduction is not made within thirty (30) days of written notice being given to Borrower, then this will be considered a monetary default of the Loan Documents. The cost of said appraisal, its review and any subsequent reappraisals shall be the responsibility of Borrower. 

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ARTICLE 3

CONDITIONS PRECEDENT TO LENDER’S OBLIGATION

3.1Conditions for Funding. The obligation of the Lender to make the Loan, is subject to the Lender’s receipt of, in form and substance satisfactory to the Lender, the following: 

(a)satisfactory evidence, as reasonably determined by Lender and its counsel, that as of the date of funding the Loan, the Lender will have a first priority security interest in all of the Collateral, subject only to Permitted Encumbrances and that as of the date of funding, Borrower is current on all state and federal taxes; 

(b)such other additional documents, instruments, and certificates as the Lender may request in connection with the consummation of the transactions contemplated hereby; 

(c)confirmation that all financial covenants in Article 5 hereof are satisfied as of the date on which the Loan will be funded; 

(d)confirmation that any and all UCC financing statements filed against the Collateral, other than UCC financing statements filed by the Lender or otherwise permitted in connection with the Permitted Encumbrances, have been terminated; 

(e)payment of all additional costs, fees and expenses incurred by Lender and or owed by Borrower in connection with the Loan; and 

(f)Organizational documents of the Borrower and evidence that the Borrower is in good standing and authorized to operate in the state that it was formed and each state that it conducts business. 

3.2Conditions for the Loan. The making of the Loan is subject to the conditions listed and the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and its counsel): 

(a)This Agreement and each of the other Loan Documents shall be effective; 

(b)No event or condition shall have occurred or become known to Borrower, which has or could have a Material Adverse Effect on the business or operations of the Borrower; 

(c)No default or Event of Default exists or would exist hereunder or under the Loan Documents; 

(d)The Loan is within and complies with the terms and conditions of this Agreement; 

(e)There shall not have been, in the judgment of the Lender, any material loss or damage to, or diminution in value of the Business Assets or any organizational change of the Borrower that causes or could cause a Material Adverse Effect; 

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(f)No Lien (other than a Permitted Encumbrance incurred in the Borrower’s ordinary course of business) has been imposed on Borrower or its assets; 

(g)Each representation and warranty set forth in this Agreement and any other Loan Document in effect at such time (as amended or modified from time to time) is true and correct in all material respects on the date hereof and shall continue to be until the Maturity Date, except to the extent such representations and warranties are made only as of a specific earlier date; and 

(h)Borrower shall have delivered to Lender all such other documents, instruments, and certificates as Lender may request. 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to make the Loan, Borrower hereby represents, warrants and covenants to and with Lender as follows:

4.1Organization, Power and Authority. LFTD is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada and validly existing and in good standing under the laws of any state in which it does business, (ii) LLI is a corporation duly organized, validly existing and in good standing under the laws of the state of Illinois and validly existing and in good standing under the laws of any state in which it does business, (iii) have the power and authority to own the Collateral and to carry on its business in every jurisdiction in which the nature of their business or the Collateral make such qualification necessary, (iv) are in material compliance with all laws, regulations, ordinances and orders of public authorities applicable to it, and to the Collateral, (v) have full power and authority to consummate the transactions contemplated hereby, and (vi) are solvent. 

4.2Organizational Documents. A copy of Articles of Incorporation, the Bylaws of the Borrower, and such other organizational documents of the Borrower (the “Organizational Documents”) that have been delivered to Lender are true, correct and complete copies thereof, and have not been modified or amended; the Organizational Documents of Borrower shall not in any manner be changed, modified or altered without the prior written consent of Lender, which consent shall not be unreasonably withheld. 

4.3Validity of Loan Documents. The execution, delivery and performance by Borrower of this Agreement and all of the other Loan Documents, and the borrowing evidenced by the Promissory Note (i) have been duly authorized by all requisite action on the part of the Borrower, (ii) do not require the approval of any person, entity or governmental authority, which has not been duly and legally granted, other than approval by the board of directors of the Borrower, (iii) will not violate any governmental requirement and (iv) will not violate any contract, indenture, agreement, judgment, order or any other instrument to which Borrower is a party or by which it or any of its Collateral is bound or be in conflict with, result in a breach of or constitute (with due notice and/or lapse of time) a default under, such a contract, indenture, agreement, judgment, order, or other instrument, or result in the creation or imposition of any lien, charge, security interest in or encumbrance of any nature whatsoever upon any of its Collateral or assets, 

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except as contemplated by the provisions of this Agreement. The Promissory Note, the Security Agreement, this Agreement and each and all of the other Loan Documents constitute the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms.

4.4Financial Statements. All balance sheets, statements of profit and loss, and/or other financial data that have been given to Lender with respect to the Borrower (i) are complete and correct in all material respects, (ii) fairly present the financial condition of the Borrower as of the dates thereof, and the results of its or their operations, for the periods for which the same have been furnished and (iii) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby. All balance sheets (including the footnotes thereto) disclose or reserve against all known liabilities, direct and contingent, as of their respective dates. There has been no change in the condition of the Borrower, financial or otherwise, since the date of the most recent financial statements given to Lender with respect to the Borrower, other than changes in the ordinary course of business, none of which changes has been materially adverse. 

4.5Other Financing. The Borrower has not received and will not receive as long as the Loan is outstanding any other financing with regard to, or which requires or results in any lien or encumbrance of any kind on (except for Permitted Encumbrances), the Collateral, or any part of the Collateral or any interest in the Collateral. 

4.6Other Information. All other written information, reports, papers and data given to Lender by the Borrower is accurate, correct and complete in all material respects. 

4.7Other Agreements. The Borrower is not a party or subject to any contract, agreement, indenture, document or instrument, judgment or order adversely affecting its present or proposed business, properties or assets, operation or condition, financial or otherwise, and the Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions set forth in any contract, agreement, indenture, document or instrument, judgment or order to which it is a party or by which it is bound. 

4.8Taxes. The Borrower has filed all tax returns required to have been filed by it and has paid all taxes which have become due pursuant to such returns or pursuant to any assessment received by it, and the Borrower does not know of any basis for additional assessment in respect of such taxes. 

4.9No Event of Default. No Event of Default exists under this Agreement or any other Loan Document and no event has occurred and is continuing which, with notice and the expiration of the applicable grace or cure period, if any, would constitute an event of default under any other agreement to which the Borrower is a party, including without limitation, any loan agreement(s) between Borrower or any of Borrower’s affiliates. 

4.10Litigation. There is not now any suit, action, claim or legal, administrative, arbitration or other proceeding or governmental investigation pending or, to the best of Borrower’s knowledge, contemplated or threatened, against or affecting the Borrower or any of the Collateral nor, to the best of Borrower’s knowledge, is there any basis for any such matters, except for such matters disclosed on Schedule I attached hereto and incorporated herein. 

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4.11Priority of Lien on Personalty. Except for the Permitted Encumbrances, and as may be permitted by the Security Agreement and other Loan Documents, no lien, security interest or collateral assignment (except those granted and executed in favor of Lender) has been or will, at any time during the term of the Loan, be granted by Borrower in or with respect to any business asset of Borrower, any personal property (both tangible and intangible) now owned by Borrower or acquired hereafter at any time during the term of the Loan, wherever situated (including, but not limited to, furniture, furnishings, fixtures, equipment, contract rights, accounts and receivables, if any) and Borrower has not and shall not enter into any form of lease arrangement or agreement for any real or personal property owned by Borrower without Lender’s prior consent. 

4.12Disposition of Collateral. The Borrower will safeguard and protect all Collateral for Lender’s general account and make no disposition thereof whether by sale, lease or otherwise without the Lender’s prior written consent, except for bona fide sales of inventory in the ordinary course of business and dispositions of property which is obsolete and not used or useful in business. 

Borrower shall not permit any of the Collateral to be levied upon under legal process, permit anything to be done that may impair the value of any of the Collateral or the security intended to be afforded by this Agreement.

ARTICLE 5 AFFIRMATIVE COVENANTS

5.1Depository Relationship. Borrower shall establish and maintain its primary banking depository and disbursement relationships with Lender, including for the maintenance of operating, administrative, cash management, collection activity, and other deposit accounts for the conduct of the Borrower’s business. However, Borrower shall be allowed to maintain a business checking account at BMO Harris (“BMO Account”) to accommodate occasional cash deposits. The BMO Account balance shall not any time exceed $10,000. In the event Borrower fails to maintain its primary banking relationship with Lender, the interest rate provided in the note shall increase to a rate equal to one percent (1%) above the stated rate of interest. All Loan payments and fees shall be automatically debited from the Borrower’s account. If at any time this automatic debit is removed without Lender’s prior written consent; the Interest Rate will increase by one percent (1%) until the automatic payments are reactivated. 

5.2Indemnification. Borrower agrees to protect, indemnify, defend and save harmless, Lender and its directors, officers, agents, representatives, and employees from and against any and all claims, actions, causes of action, loss, damage, injury, liability, cost or expense of any kind or nature, including, without limitation, reasonable attorneys’ fees and expenses, and to reimburse the applicable indemnitee therefor, on account of any matter or thing or action or failure to act of Lender, whether in suit or not, whether occurring before, during or after trial, or upon any appellate and/or in mediation, arbitration, any administrative or quasi-judicial proceeding, or any proceeding in bankruptcy or insolvency, arising out of this Agreement or any other Loan Document, or in connection with the transaction which is the subject hereof, or relating to any environmental condition or problem, or arising from the operation of Borrower’s business, unless any such matter is directly caused by gross negligence or willful misconduct of the person or entity seeking to be indemnified. This indemnity is not intended to excuse Lender from performing its obligations hereunder. This obligation shall survive the closing of the Loan and the repayment thereof. 

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5.3Financial Reporting. Borrower shall deliver to Lender or cause to be delivered to the Lender the following periodic financial information: 

(a)annually, as soon as available, and in any event no later than one hundred fifty (150) days from the last day of Borrower’s Fiscal Year, tax returns of the Borrower and audited financial statements of the Borrower prepared by an independent certified public accountant satisfactory to Lender. If on extension; a copy of the extension is required, and the tax return shall be due no later than the 15th day of the month of which the return is due; 

(b)as soon as available, and in any event no later than fifteen (15) days of filing, SEC filings, including 10-K and 10-Q reporting; 

(c)Quarterly, as soon as available, and in any event no later than fifteen (15) business days after the filing of the corresponding Quarterly Report on Form 10-Q or Annual Report on Form 10-K, Borrower’s Inventory Workbook; 

(d)Borrower shall maintain a minimum Debt Service Coverage Ratio greater than or equal to 1.50x, tested annually, commencing with Fiscal Year end 2022 and continuing on each Fiscal Year end thereafter until the Maturity Date. The Debt Service Coverage Ratio shall be calculated utilizing the information derived from Borrower’s tax returns delivered pursuant to 5.3(a) above; and 

(e)In the event the aforementioned financial information is not provided to Lender within the timeframe required under the Loan Documents, the interest rate provided in the Promissory Note, may, at Lender’s option, increase to a rate equal to three percent (3.00%) above the then existing Interest Rate. In no such event, however, will the Interest Rate exceed the maximum rate permitted under Florida law. 

5.4 Costs and Attorneys’ Fees. All reasonable costs and expenses of any kind or nature whatsoever, including without exception reasonable attorneys’ fees and expenses, paid, suffered or incurred by the Lender in the enforcement or defense of this Agreement or any of the other Loan Documents, including proceedings in appellate courts, shall be paid by Borrower. In any litigation between Lender and Borrower involving the interpretation or enforcement of this Agreement or any of the other Loan Documents, Lender’s costs, expenses and attorneys’ fees as specified in the preceding sentence shall only be required to be paid by Borrower in the event that the Lender is the prevailing party in such litigation, and if Borrower is determined by the court to be the prevailing party in any such litigation between Lender and Borrower, Lender shall be required to pay Borrower’s costs, expenses and attorneys’ fees. Whenever used herein or in any of the other Loan Documents, “attorneys’ fees” shall include fees and expenses of attorneys or paralegals whether or not any suit, proceeding or action shall be commenced, whether incurred before during or after trial or upon any appellate level, or in mediation, arbitration, any administrative or quasi- judicial proceeding, or in any proceeding in bankruptcy or insolvency. 

5.5Maturity. The Loan hereunder shall mature and all indebtedness outstanding thereunder shall be paid in full on the applicable Maturity Date. 

5.6Duty to Inform. Borrower shall promptly notify Lender of (i) any material change in any fact or circumstance represented or warranted by Borrower in this Agreement or in any of 

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the other Loan Documents and (ii) any Event of Default or event which, with notice or lapse of time or both, could become an Event of Default under this Agreement or under any of the other Loan Documents specifying in each case the nature thereof and what action Borrower has taken, is taking and proposes to take with respect thereto.

5.7Inspection and Field Audits. At any time during Borrower’s normal business hours, with prior notice, Lender may enter upon property on which Borrower operates or that Borrower owns to inspect the Collateral and Borrower’s book and records, and Borrower shall cooperate with any reasonable request of Lender relating to such inspection. 

5.8Use of Proceeds and Conditions for Disbursement. Borrower will use all proceeds from Lender pursuant to this Agreement for working capital. 

5.9Insider/Member Debt. The repayment of all existing and future member/insider debt shall be subordinate to this Loan. 

5.10Disclosure of Litigation. Borrower shall promptly (but in no event later than ten 

(10) days after a responsible officer of the Borrower acquires knowledge of one of the following state of affairs), give written notice to the Lender of any suit, action, claim or legal, administrative, arbitration or other proceeding or governmental investigation pending or, to the best of Borrower’s knowledge, contemplated or threatened, against or affecting the Borrower or any of the Collateral, not otherwise disclosed herein.

ARTICLE 6 NEGATIVE COVENANTS

6.1No Other Liens or Encumbrances. During the term of the Loan, and thereafter so long as any indebtedness evidenced or secured by or arising under any of the Loan Documents shall not have been paid in full, except for Permitted Encumbrances, the Borrower shall not encumber or permit the encumbrance of the Collateral, or any part thereof, or any interest therein with or by any lien, security interest or other encumbrance of any kind or nature whatsoever, without the prior written consent of Lender in its sole discretion. 

6.2Change of Ownership. LLI shall not, without the prior written consent of the Lender, in its sole discretion, allow for any change in ownership of LLI. 

6.3Divestiture, Merger or Acquisitions. The Borrower shall not, without the prior written consent of the Lender allow any of the following events to occur: (a) a divestiture or acquisition of the Borrower (b) a change in the capital structure of the Borrower, (c) a merger or consolidation of Borrower with any entity, (d) an amendment or change to its Organizational Documents that has or could cause a Material Adverse Effect as determined by the Lender, or (e) the sale, lease, transfer or any other disposal of, or grant any person an option to acquire, or sell and leaseback, all or any portion of its assets, whether now owned or hereafter acquired, except for bona fide sales of inventory in the ordinary course of business and dispositions of property which is obsolete and not used or useful in business. 

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6.4Additional Negative Covenants. Until the Loan has been paid and satisfied in full and this Agreement has been terminated in accordance with the terms hereof, unless the Lender consents in writing in its sole discretion, the Borrower shall not: 

(a)serve as a guarantor or otherwise assume the debts or become liable for the debts of another person or entity; 

(b)wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution; 

(c)redeem, retire, purchase or otherwise acquire, directly or indirectly, for value or set apart any sum for the redemption, retirement, purchase or other acquisition of, any of the capital stock (or any options or warrants in respect thereof) of the Borrower or any subsidiary now or hereafter outstanding without the prior written consent of the Lender, which consent shall not be unreasonably withheld or delayed; 

(d)enter into any transaction, including, without limitation, the purchase, sale, exchange, or transfer of property or the rendering of any service, with any affiliate or subsidiary, or permit any subsidiary to enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any affiliate or any other subsidiary; 

(e)permit the outstanding principal balance of the Loan exceed forty percent (40%) of the fair market value (as determined by the Lender of all Collateral securing the Loan); nor 

(f)directly or indirectly issue, assume, create, incur or suffer to exist additional indebtedness on the Collateral. 

ARTICLE 7

EVENTS OF DEFAULT AND REMEDIES

7.1Events of Default. The existence or occurrence of each of the following events shall constitute an “Event of Default” pursuant to this Agreement: 

(a)Any regularly scheduled or recurring payment of principal, interest or other fee or charge on or under the Promissory Note, the Security Agreement, this Agreement or any other Loan Document is not made by Borrower after five (5) days’ prior written notice; 

(b)Any payment or reimbursement of any amount which is to be paid or reimbursed by Borrower to Lender under the Promissory Note, the Security Agreement, this Agreement, or any other Loan Document other than the amounts specified in subsection 7.1(a) above is not made within five (5) days of the date written notice of or demand for the payment of such amount is given by Lender to Borrower; 

(c)An event of default or default as defined in the Promissory Note the Security Agreement, or any other Loan Document shall occur and all applicable cure periods with regard thereto, if any, have expired; 

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(d)A claim of lien or any other lien or encumbrance or any kind or nature shall be filed against the Collateral, or any part thereof or interest therein, except for Permitted Encumbrances, without Lender’s prior written consent, and not released within thirty (30) days from the date of notification of filing, or Borrower shall fail to post a statutory bond or have obtained a discharge of such claim of lien from the Collateral, or any part thereof or interest therein, without Lender’s prior written consent, within thirty (30) days from notification of the date of filing; 

(e)Borrower shall fail to perform any covenant, obligation or term or condition of this Agreement as and when required hereby and which is not cured within fifteen (15) days after such failure to perform or any representation or warranty of Borrower herein or in any other Loan Documents executed concurrently herewith or made subsequent hereto, shall be found to be inaccurate, untrue or breached in any respect; 

(f)If Borrower shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition to answer seeking any reorganization, arrangement, composition, readjustment, liquidation, wage earner’s plan, assignment for the benefit of creditors, receivership, dissolution or similar relief under any present or future Federal Bankruptcy Act or any other present or future applicable federal, state or other statute or law, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Borrower or all or any part of the properties of Borrower or if within sixty (60) days after commencement of any proceeding against Borrower or any endorser of the Promissory Note, seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, debtor relief or similar relief under any present or future federal bankruptcy act or any other present or future federal, state or other statute or law, such proceeding shall not have been dismissed, or stayed on appeal; or if, within sixty (60) days after the appointment, without the consent of acquiescence of Borrower or of any endorser of the Promissory Note, of any trustee, receiver, or liquidator of Borrower or any endorser of the Promissory Note, such appointment shall not have been vacated or stayed on appeal or otherwise; or if within ten (10) days after the expiration of any such stay, such appointment shall not have been vacated; 

(g)A violation or breach by Borrower shall occur in any contract, agreement, covenant, indenture, restriction, or encumbrance affecting title to the Collateral which is not cured within fifteen (15) days after written notice thereof; 

(h)Except as otherwise permitted hereunder, a sale, transfer, conveyance, assignment, disposition, master lease, pledge or encumbrance of the Collateral, or any portion thereof or any interest therein, or the sale, transfer, conveyance, pledge or encumbrance of any ownership interest in or of the Borrower and/or any partnership or ownership interest in or of the Borrower, without the prior written consent of Lender in each instance; 

(i)Any substantial damage to or destruction of the Collateral, if (i) the applicable insurance proceeds shall not, in the reasonable opinion of the Lender, be sufficient to repair and restore the Collateral, or (ii) if the insurance proceeds shall not be paid within a reasonable time; 

(j)The holder of any lien or security interest on or in any portion of the Collateral (without implying Lender’s or Lender’s consent to the existence, placement, creation or 

permitting of any such lien or security interest) commences proceedings for foreclosure on any

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Collateral or for the enforcement of its other remedies thereunder;

(k)A judgment for the payment of money in excess of the lesser of (i) $50,000, or (ii) the available and unused commitment, and either (i) enforcement proceedings, including, without limitation, through attachment, levy or garnishment or repossession or seizure of property, shall have been commenced by any creditor upon such judgment or order, or (ii) there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; 

(l)Any suit, action, claim or legal, administrative, arbitration or other proceeding or governmental investigation pending, against or affecting the Borrower or any of the Collateral which, such suit, action, claim or legal, administrative, arbitration or other proceeding or governmental investigation pending may cause the value of the Loan to exceed forty percent (40%) of the value of the Collateral. 

(m)The Borrower is liquidated, dissolved, consolidated or merged; 

(n)The Borrower has made materially false or misleading representations to the Lender or has provided materially false or misleading information; 

(o)Borrower sells, transfers, assigns, or otherwise conveys the Collateral, any portion thereof, or any of Borrower’s interest therein, without the prior written consent of the Lender;  

(p)Lender fails to have an enforceable first lien on or security interest in any Collateral; 

(q)Lender determines that the value of the Collateral is less than $7,500,000, even if no other Event of Default has occurred or is occurring; or 

(r)Borrower’s rights under this commitment and the Loan shall be personal as the Lender has evaluated this Loan and has agreed to make this Loan based on the unique qualifications of Borrower, both financial and otherwise. Any sale, conveyance or transfer effecting a change in ownership or control of LLI and/or the collateral shall cause the Loan to become due and payable in full. 

7.2Remedies. 

(a)Upon the occurrence of an Event of Default (after the expiration of any applicable notice and cure periods), Lender may take any one or more of the following actions: 

(i)Cease making Loan Advances or Disbursements hereunder; Without prior notice (but with written notice being provided to Borrower by Lender within 48 hours after such set-off), set-off against, appropriate and apply all balances, credits and deposits in any account of Borrower with Lender, credits with and claims of Borrower against the Lender and any other property of Borrower, and the proceeds thereof, now or hereafter held or received by or in transit to the Lender from or for the account of the Borrower whether for safekeeping, custody, pledge, transmission, collection or otherwise; 

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(ii)Declare immediately due and payable, with interest, all monies advanced hereunder and accordingly accelerate payment of the Promissory Note and, at Lender’s option, take any other action permitted thereby, or by law, notwithstanding anything contrary in the terms of payment stated therein; 

(iii)Enter upon the property or wherever the Collateral may be situated, and take possession of all Collateral located thereon, as well as all books, records, files, correspondence and other material of Borrower related to the Collateral, and all materials, supplies, tools, equipment and appliances located thereon or stored off-site; 

(iv)Seek and obtain the appointment of a receiver to take possession of and operate and/or dispose of the business, assets and Collateral of Borrower and any costs and expenses incurred by Lender in connection with such receivership shall bear interest at the Default Rate, at Lender’s option, and shall be secured by the Collateral; or 

(v)Cause all outstanding indebtedness under the Loan to bear interest at the Default Rate from and after the occurrence of an Event of Default until the default is cured or a waiver granted by Lender in writing. 

(b)The remedies herein provided for shall be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Lender in law or equity or those additional remedies as specified in the Promissory Note, the Security Agreement, and any other Loan Documents, all of which rights and remedies shall be cumulative and which are specifically reserved by Lender, and the failure by Lender to exercise the remedies herein or therein provided shall not preclude the resort to any other remedy or remedies, nor shall the exercise of the remedies herein or therein provided prevent the subsequent or concurrent resort to any other remedy or remedies which by law or equity or provided hereunder or in any other Loan Document shall be vested in Lender for the recovery of damages or otherwise in the event of a breach of any of the undertakings or Borrower hereunder. No delay or omission by Lender in exercising any right or remedy accruing upon the happening of an Event of Default shall impair any such right or remedy or shall be construed as a waiver of any such default; and every right and remedy hereby conferred upon Lender may be exercised from time to time and as often as shall be deemed expedient by Lender. No waiver of any Event of Default shall extend to or affect any other Event of Default. 

7.3Cross-Collateral/Cross-Default. The parties hereto agree that the this Credit Agreement, the Promissory Note, the Security Agreement, and the other Loan Documents pertaining to the Promissory Note of even date herewith, including any and all extensions, renewals, replacements and/or modifications thereof, are cross defaulted with each other and with any and all other loans or agreements which any of the undersigned may have with Lender, now or in the future; and a default in any such other loan or agreement will be deemed a default of this Loan and vice-versa. At the option of Lender, without notice, a default under any such instruments will constitute a default of the other instruments hereby cross-defaulted; and are cross- collateralized by all collateral securing one another and by all collateral securing any other loans that Borrowers, now, or in the future, has with Lender and a default of any such other loans or agreements will be deemed a default of the Loan of even date. The terms of this cross-collateral provision apply to any collateral securing any loans or agreements which Borrower, now has with Lender or may have in the future with Lender. The parties hereby provide the Security Agreement 

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on all such collateral (real or personal) that secures such present or future loans to Borrowers, by lender without any further reference in the loan documents of such other loan(s). In addition, the Loan Documents will be cross-collateralized and cross-defaulted with the proposed Kenosha, WI commercial real estate purchase.

ARTICLE 8 MISCELLANEOUS

8.1Immunity. Lender’s commitment to make advances hereunder shall not at any time be subject or liable to attachment or levy at the suit of any creditor of Borrower or any agent, contractor, subcontractor or supplier of Borrower. 

8.2Lender Not A Partner of Borrower. Notwithstanding anything to the contrary herein contained or implied, Lender, by executing this Agreement or by any action pursuant hereto, shall not be deemed a partner of or a joint venturer with Borrower. 

8.3Notices. All notices required or allowed to be given hereunder shall be delivered by hand or sent by an overnight delivery service which gives a receipt upon delivery to the party to which such notice is to be given as set forth below. Alternatively, such notices may be sent by electronic mail and shall be deemed delivered when sent, provided that such electronic mail notices are also delivered in hard copy via an overnight delivery service with proof of receipt on the next business day following electronic mailing. 

If to Borrower:LFTD Partners Inc. 

14155 Pine Island Drive Jacksonville, Florida 32224 Attention: William C. Jacobs

Lifted Liquids, Inc. 5511 95th Ave.

Kenosha, Wisconsin 53144 Attention: William C. Jacobs

If to Lender:Surety Bank 

990 N. Woodland Blvd. Deland, Florida 32720

Attention: Ryan G. James, President

with a copy to:Watson Sloane PLLC 

201 E. Kennedy Blvd., Suite 1200

Tampa, Florida 33602

Attention: Brian A. Watson, Esq.

Provided, that additional or other addresses for the giving of notices may be hereafter designated by the giving of written notices thereof to the other party. Such notices shall be deemed given upon the earlier of actual receipt by the addressee or when delivery is attempted at the addresses specified herein during normal business hours and delivery is refused.

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8.4Entire Agreement. No change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. This Agreement, the Promissory Note, the Security Agreement, and the other Loan Documents contain the entire agreement between the parties hereto and there are no promises, agreements, conditions, undertakings, warranties and representations, whether written or oral, express or implied, between the parties hereto other than as set forth herein or entered into in writing between the parties concurrently herewith. It is expressly understood and agreed that the parties hereto intend this Agreement to be an integration of all prior promises, agreements, conditions, undertakings, warranties and representations between the parties hereto. 

8.5Controlling Document. To the extent that a Loan Document conflicts with or is in any way incompatible with this Agreement, the terms of this Agreement shall control as to matters related to this Loan, and if this Agreement does not address an issue, then the Loan Document that deals most specifically with such issue shall control. 

8.6Commitment Letter. All terms and conditions of that certain Commitment Letter, dated August 31, 2023, between the parties hereto, and any modifications or addendums thereto, if any, are hereby incorporated and made a part hereof. All terms and conditions thereof apply to this Credit Agreement. 

8.7Assignment. The rights and obligations of Lender or any part thereof under this Agreement, the Loan pursuant thereto, the Security Agreement, and all other Loan Documents may be assigned by Lender to another institutional lender, including, but not limited to, a related affiliate corporation of Lender. In such event, Borrower agrees to attorn to such assignee and to execute such modifications thereto or other documentation as may be required to facilitate such assignment, provided such modifications do not materially add to the obligations of the Borrower. 

8.8Time. Time is of the essence as to all matters provided for in this Agreement. In the event of any inconsistency between the applicable time periods or dates contained in this Agreement and those contained in any other Loan Document entered into between Borrower and Lender concurrently herewith, the time periods and dates set forth herein shall control. Borrower shall not assign any right or obligation hereunder without Lender’s prior written consent, and any purported assignment in violation of this provision will be null and void. 

8.9Lawful Rate of Interest. Nothing contained in this Agreement or elsewhere in the Promissory Note, the Security Agreement, or any other Loan Document is intended to or shall create an obligation for Borrower to pay interest or a charge in the nature of interest for the Loan or the use of any money advanced by Lender in excess of the maximum amount or rate permitted by applicable law and any such amount so paid shall be immediately credited in reduction of the outstanding principal balance of the Loan or if repaid in full, then repaid to Borrower by Lender. 

8.10Florida Law. The terms and conditions of this Agreement shall be governed by the laws of the State of Florida. 

8.11Form and Substance. All documents, certificates, insurance policies and/or other items required under this Agreement to be executed by or delivered to Lender, as well as evidence of the existence or non-existence of any circumstance or condition required herein or in the other Loan Documents, shall be in form and substance reasonably satisfactory to Lender. 

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8.12Third Party Beneficiary. This Agreement is for the sole benefit of Lender and Borrower and is not for the benefit of any third party. 

8.13Continuation of Duty. All covenants, agreements, representations and warranties made by Borrower in this Agreement, the Promissory Note and the other Loan Documents and in any certificates or other documents or instruments delivered pursuant to this Agreement or pursuant to any of the other Loan Documents and any advances consented to by the Lender pursuant to this Agreement or any of the other Loan Documents, shall continue in full force and effect until the Loan is paid in full. All such covenants, agreements, representations and warranties shall be binding upon any permitted successors and assigns of Borrower. 

8.14Severability. If any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. 

8.15Consent to Jurisdiction. Borrower and Lender each hereby irrevocably consent to the exclusive jurisdiction of the Courts of Orange County, Florida or the United States District Court for the Middle District of Florida in any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking. Borrower waives any objection which Borrower may have based upon lack of personal jurisdiction, improper venue or forum non conveniens. Borrower irrevocably agrees to service of process by certified mail, return receipt requested to the address of the appropriate party set forth herein. 

8.16Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 

8.17Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO ENTER INTO AND ACCEPT THIS AGREEMENT. EACH OF THE PARTIES AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY THIS AGREEMENT. 

(Signatures begin on next page)

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered the year and day first above written by their undersigned, duly authorized officer.

[BORROWER SIGNATURE PAGE TO CREDIT AGREEMENT]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered the year and day first above written by their undersigned, duly authorized officer.

[LENDER SIGNATURE PAGE TO CREDIT AGREEMENT]

Exhibit “A”

Permitted Encumbrances

Exhibit “B”

Business Assets Business Assets consist of:

a)All of Borrower’s Furniture, Fixtures, and Equipment (as hereinafter defined); 

b)All of the proceeds and products, as the case may be, of Borrower’s Furniture, Fixtures, and Equipment; 

g)All accessions to, substitutions for and all replacements, products, cash and non-cash proceeds of and income and profits arising from any of (a) through (b) above, including, without limitation, proceeds of and unearned premiums with respect to insurance policies insuring any of the Collateral; 

i)All books and records of Borrower pertaining to any of (a) through (b) above; 

j)All assets and properties of the foregoing types acquired by Borrower subsequent to the date of this Agreement; 

k)All of Borrower’s distribution rights, income rights, liquidation interests, accounts, contract rights, notes, instruments, drafts and documents relating to any of the above listed assets; 

As used herein, the following terms shall have the meanings set forth below:

“Furniture, Fixtures, and Equipment” shall mean all equipment and fixtures of whatever kind or nature now owned or hereafter acquired by Borrower, and wherever located, including, without limitation, all machinery, vehicles, tools, dies, trade fixtures, furnishings and equipment, patterns, cranes, furniture, furnishings, motor vehicles, tractors, trailers, rolling stock, office machines and equipment, material handling equipment, manufacturing equipment, conveyors, forklifts, machine systems, computers, and all other goods used in the operation of Borrower’s business, together with all accessories, parts and additions now or hereafter affixed thereto or used in connection therewith.

Schedule I

Disclosed Litigation

Lifted currently is involved in one pending lawsuit, as the plaintiff:

Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc. – The Company has filed an action seeking to recover approximately $98,000 in damages resulting from Defendants’ failure to pay for product they ordered. The matter has been filed in California and the Company intends to pursue the action and recover its damages.

On November 13, 2023, Lifted received a letter dated November 6, 2023 from the State of Wisconsin Department of Workforce Development (“Department”). The letter stated that the Department had dismissed the case Lifted Liquids, Inc. v. Brian Koff, ERD Case No.: CR202301774; EEOC Case No: 26G202301223. Previously, a disgruntled former Lifted employee had filed an action with the Wisconsin Department of Workforce Development claiming discrimination and retaliation.

On November 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe. The Company had filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow by the Law Offices of Saul Roffe. The Company also sought approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The Company has obtained a $30,000.00 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment. The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000.00 over time.

On October 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080. In October 2022, Lifted filed an action against Dev Distribution LLC (“Dev”), a vendor who failed to deliver certain products that Lifted has purchased for $263,938 for. Dev filed a counterclaim alleging breach of contract. In October 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for Dev paying $230,000.00 and providing certain equipment and product.

On May 25, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Martha, Edgar v. Lifted Liquids. Mr. Edgar Martha, who worked in Lifted’s production facility, had sued Lifted in regard to an alleged chemical burn. In May 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for $5,000 paid by Lifted to Mr. Martha.

PROMISSORY NOTE

Principal Amount: $3,000,000.00December 14, 2023 

FOR VALUE RECEIVED, LFTD PARTNERS INC., a Nevada corporation (“LFTD”) and LIFTED LIQUIDS, INC., an Illinois corporation (“LLI” and together with LFTD, collectively and jointly and severally, the “Borrower”), promises to pay to the order of SURETY BANK (the “Bank”), in lawful money of the United States of America in immediately available funds at its offices located at 990 N. Woodland Blvd., DeLand, Florida 32720 or at such other location as the Bank may designate from time to time, the principal amount of the Loan, together with all interest accrued thereon in accordance with the Loan Documents and this Note. All capitalized terms not defined herein have the meaning given to them in that certain Credit Agreement (the “Credit Agreement”) dated of even date herewith by and among the Borrower and the Bank.

1.Promissory Note. This Promissory Note (this “Note”) evidences the loan made by the Bank to the Borrower (the “Loan”) in the original principal amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00). The Borrower will use the proceeds of the Loan for working capital. 

2.Payment Terms. Monthly installments of principal and interest in the amount of 

$63,217.27 shall be due and paid to the Lender on each Payment Date. Payments shall be applied to accrued interest and any remaining amount will be applied to principal. All accrued and unpaid interest, all unpaid principal, and other charges due and owing under the Loan Documents shall be due and payable in full on the Maturity Date unless the same shall be extended or waived in a written instrument executed by the Lender. If any payment under this Note shall become due on a Saturday, Sunday, or any holiday on which the Bank is closed for business, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with such payment. The Borrower shall maintain a deposit account with Bank on terms that are commercially reasonable and hereby authorizes the Bank to charge the Borrower’s deposit account at the Bank for any payment when due hereunder. Payments received will be applied to charges, fees, and expenses (including reasonable attorneys’ fees), accrued interest and principal in any order the Bank may choose, in its sole discretion.

3.Interest Rate. The interest rate on this Note shall be a fixed rate equal to a rate of nine and five tenths’ percent (9.50%). Interest on this Note shall be computed on a 365/360 basis; that is, by applying the ratio of the Interest Rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. Interest on the principal amount of the Loan shall accrue from and including the date the Loan is made. Interest on the Loan shall be payable monthly in arrears on each Payment Date. After the occurrence of an Event of Default, all interest and principal shall be payable on demand. 

4.Late Payments; Default Rate. If the Borrower fails to make any payment of principal, interest or other amount coming due pursuant to the provisions of this Note within ten (10) days of the date due and payable, the Borrower also shall pay to the Bank a late charge equal to five percent (5%) of the amount of such payment (the “Late Charge”). Such ten (10) day period shall not be construed in any way to extend the due date of any such payment. Upon maturity, whether by acceleration, demand or otherwise, and at the Bank’s option upon the occurrence of any Event of Default (as hereinafter defined) and during the continuance thereof, amounts outstanding under this Note shall bear interest at a rate per annum (based on the actual number of days that principal is outstanding over a year of 360 days) equal to the maximum rate permissible under applicable law (the “Default Rate”). The Default Rate shall continue to apply whether or not judgment shall be entered on this Note. Both the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying the Bank’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under the other Loan Documents or under applicable law, and any reasonable fees and expenses of any agents or attorneys which the Bank may employ, it being agreed that the prevailing party in any proceeding arising under or relating to this Note shall be entitled to recover its attorneys’ fees or expenses from the other party. In addition, the Default Rate reflects the increased credit risk to the Bank of carrying a loan that is in default. The Borrower agrees that the Late Charge and Default Rate are reasonable forecasts of just compensation for anticipated and actual harm incurred by the Bank, and that the actual harm incurred by the Bank cannot be estimated with certainty and without difficulty. 

5.Usury. Regardless of any other provision of this Note or other Loan Documents, if for any reason the effective interest should exceed the maximum lawful interest, the effective interest shall be deemed reduced to, and shall be, such maximum lawful interest, and (i) the amount which would be excessive interest shall be deemed applied to the reduction of the principal balance of this Note and not to the payment of interest, and (ii) if the loan evidenced by this Note has been or is thereby paid in full, the excess shall be returned to the party paying same, such application to the principal balance of this Note or the refunding of excess to be a complete settlement and acquittance thereof. 

6.Other Loan Documents. This Note is issued in connection with the Credit Agreement, between the Borrower and the Bank, and the Security Agreement dated as of the date hereof, and certain of other agreements and documents executed and/or delivered in connection therewith or referred to therein, the terms of which are incorporated herein by reference (as amended, modified or renewed from time to time, collectively the “Loan Documents”), and is secured by the property (if any) described in the Loan Documents including, without limitation, the Security Agreement, and by such other collateral as previously may have been or may in the future be granted to the Bank to secure this Note. 

7.Events of Default. The occurrence of any of the following events will be deemed to be an “Event of Default” under this Note: 

(a)             Borrower’s failure to perform any covenant, obligation or term or condition of this Note as and when required hereby; or 

(b)The occurrence of any Event of Default under the Credit Agreement or any other Loan Document shall be an Event of Default under this Note and an Event of Default under this Note shall be an Event of Default under the Credit Agreement and the Loan Documents. 

Upon the occurrence of an Event of Default (after the expiration of any applicable notice and cure periods): (a) the Bank shall be under no further obligation to make advances hereunder; (b) if an Event of Default specified in 7.1 of the Credit Agreement shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder shall be immediately due and payable without demand or notice of any kind, and if any other Event of Default shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, at the Bank’s option and without demand or further notice of any kind, may be accelerated and become immediately due and payable; (c) at the Bank’s option, this Note will bear interest at the Default Rate from the date of the occurrence of the Event of Default; and (d) the Bank may exercise from time to time any of the rights and remedies available under the Loan Documents or under applicable law.

8.Miscellaneous. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder (“Notices”) must be in writing (except as may be agreed otherwise above with respect to borrowing requests) and will be effective upon receipt. Notices may be given in any manner to which the parties may separately agree, including electronic mail. Without limiting the foregoing, first-class mail, facsimile transmission, and commercial courier service are hereby agreed to as acceptable methods for giving Notices. Regardless of the manner provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this paragraph. 

Any notice given to the Bank hereunder shall also be given to:

Watson Sloane PLLC

201 E. Kennedy Blvd., Suite 1200

Tampa, Florida 33602

Attention: Brian A. Watson, Esq.

No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity. No modification, amendment, or waiver of, or consent to any departure by the Borrower from, any provision of this Note will be effective unless made in a writing signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. The Borrower agrees to pay on demand, to the extent permitted by law, all costs and expenses incurred by the Bank in the enforcement of its rights in this Note and in any security therefor, including without limitation reasonable fees and expenses of the Bank’s counsel. If any provision of this Note is found to be invalid, illegal, or unenforceable in any respect by a court, all the other provisions of this Note will remain in full force and effect. The Borrower and all other makers and endorsers of this Note hereby forever waive presentment, protest, notice of dishonor and notice of non-payment. The Borrower also

waives all defenses based on suretyship or impairment of collateral. If this Note is executed by more than one Borrower, the obligations of such persons or entities hereunder will be joint and several. This Note shall bind the Borrower and its heirs, executors, administrators, successors and assigns, and the benefits hereof shall inure to the benefit of the Bank and its successors and assigns; provided, however, that the Borrower may not assign this Note in whole or in part without the Bank’s written consent and the Bank at any time may assign this Note in whole or in part.

THIS NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE BORROWER DETERMINED IN ACCORDANCE WITH FLORIDA LAW, EXCLUDING ITS CONFLICT OF LAWS RULES. The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in Volusia County, Florida. The Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and the Borrower. The Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.

9.Commercial Purpose. The Borrower represents that the indebtedness evidenced by this Note is being incurred by the Borrower solely for the purpose of acquiring or carrying on a business, professional, religious, or commercial activity, and not for personal, family or household purposes. 

10.Cross-Default/Cross-Collateralized. The Borrower hereby agrees that this Note, the Credit Agreement, the Security Agreement, and the other Loan Documents pertaining to the Note, including any and all extensions, renewals, replacements and/or modifications thereof, are cross defaulted with each other and with any and all other loans or agreements which any of the undersigned may have with Lender, now or in the future, including but not limited to loan #80021157; and a default in any such other loan or agreement will be deemed a default of this Loan and vice-versa. At the option of Lender, without notice, a default under any such instruments will constitute a default of the other instruments hereby cross-defaulted; and are cross- collateralized by all collateral securing one another and by all collateral securing any other loans that Borrowers, now, or in the future, has with Lender and a default of any such other loans or agreements will be deemed a default of the Loan of even date. The terms of this cross-collateral provision apply to any collateral securing any loans or agreements which Borrower, now has with Lender or may have in the future with Lender. The parties hereby provide Security Agreements on all such collateral (real or personal) that secures such present or future loans to Borrowers, by lender without any further reference in the loan documents of such other loan(s). In addition, the Loan Documents will be cross-collateralized and cross-defaulted with the proposed Kenosha, WI commercial real estate purchase. 

11.Execution in Counterparts. This Note may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 

12.WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY. 

The Borrower acknowledges that it has read and understood all the provisions of this Note, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof, as of the date first written above, with the intent to be legally bound hereby.

[SIGNATURE PAGE TO PROMISSORY NOTE]

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (together with all attached schedules and exhibits, in each case, as amended, restated, supplemented, or otherwise modified from time to time, this “Agreement”) is executed as of December 14, 2023, by LFTD Partners Inc., a Nevada corporation (“LFTD”) and Lifted Liquids, Inc., an Illinois corporation (“LLI” and together with LFTD, collectively and jointly and severally, the “Borrower”), and each of the other Persons party hereto from time to time as “Grantors”, for the benefit of and Surety Bank (“Lender”).

RECITALS

A.Borrower, the other Grantors from time to time party thereto, and Lender have entered into that certain Credit Agreement dated as of December 14, 2023 (as amended, restated, supplemented,   or otherwise modified from time to time, the “Credit Agreement”). 

B.As a condition precedent to Lender’s agreement to extend credit under the Credit Agreement, Lender requires that each Grantor execute this Agreement to secure the prompt and complete payment and performance of the Secured Obligations (as defined below). 

AGREEMENTS

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

1.Certain Definitions. Each capitalized term used but not defined in this Agreement has the meaning given that term in the Credit Agreement. Terms defined in the UCC which are not otherwise defined in this Agreement are used herein as defined in the UCC. As used in this Agreement, the following terms have the meanings indicated: 

Applicable Law means, collectively, (a) all applicable international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any governmental authority charged with the enforcement, interpretation or administration thereof, (b) all applicable administrative orders, directed duties, requests, licenses, authorizations and agreements with, any Governmental Authority, in each case whether or not having the force of law, and(c) any binding interpretation or administration of any of the foregoing, by any governmental authority.

Collateral is defined in Section 2.

Debtor Relief Law means the bankruptcy code and any other Applicable Law governing bankruptcy, insolvency, assignments for the benefit of creditors, receiverships, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

Grantor means each Person (other than Lender) party to this Agreement (including any additional Person executing a joinder or supplement hereto as a “Grantor”) and includes such Grantor as a debtor-in- possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for such Grantor or all or substantially all of such Grantor’s assets pursuant to any Debtor Relief Law.

Lender is defined in the preamble to this Agreement.

Obligor(s) means the Borrower and the Grantors.

Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.

Secured Obligations means the obligations and all existing and future indebtedness and liabilities of every kind, nature, and character, direct or indirect, absolute, or contingent, liquidated, or unliquidated, voluntary or involuntary, of the Borrower and each other Obligor to Lender.

Security Interest means the security interest granted, and the pledges and collateral assignments made, by Grantors to Lender under Section 2 of this Agreement.

2.Security Interest. To secure the prompt, unconditional, and complete payment and performance of the Secured Obligations when due, each Grantor hereby pledges and collaterally assigns to Lender, and grants to Lender a continuing security interest in, all of such Grantor’s right, title and interest in, to, and under the following, in each case, whether now owned or hereafter acquired, created,  or existing and howsoever Grantor’s interest therein may arise or appear (collectively, the “Collateral”): 

(a)all accounts; 

(b)all general intangibles (including payment intangibles and intellectual property); 

(c)all inventory (now owned or hereafter required, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily of Borrower’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from a sale or disposition of any of the foregoing and any documents of title representing the above, and Borrower’s books relating to any of the foregoing; 

(d)all goods (including all equipment, now owned or hereafter required, including, without limitation, all laboratory equipment, computer equipment, office equipment, other equipment, machinery, fixtures, vehicles, and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located (whether or not subject to a certificate of title statute)) and any accessions thereto; 

(e)all instruments (including promissory notes); 

(f)all documents and all chattel paper (whether tangible or electronic); 

(g)all deposit accounts and securities accounts; 

(h)all letters of credit, all letter-of-credit rights, and all other supporting obligations; 

(i)all commercial tort claims described on Schedule 2; 

(j)Reserved; 

(k)all contracts and contract rights; 

(l)all fixtures and leasehold improvements; 

(m)all money and cash equivalents; 

(n)all insurance, including all claims and proceeds with respect thereto; 

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(o)all proceeds and products of the foregoing and all substitutions or replacements of any or all of the foregoing; and 

(p)all corporate and other business books, reports, memoranda, customer lists, credit files, data compilations, and computer software, in any form, including, without limitation, whether on tape, disk, card, strip, cartridge, or any other form, pertaining to any and all of the foregoing property. 

Without limiting the security interest granted hereby, each Grantor hereby grants to Lender an irrevocable license in Grantors’ trade names, trademarks, and service marks, together with each Grantor’s goodwill associated with such trade names, trademarks, and service marks, for purposes of allowing Lender to use the same in connection with any foreclosure sale, auction, or other disposition of any assets, whether pursuant to the UCC, this Agreement, or otherwise.

3.Collateral Security; No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Secured Obligations when due, and is given as security only. Lender does not assume, and shall not be liable for, any of Grantors’ liabilities, duties or obligations under, or in connection with, the Collateral. Lender’s acceptance of this Agreement, or its taking any action in carrying out this Agreement, does not constitute its approval of the Collateral or its assumption of any liability, duty, or obligation under, or in connection with, the Collateral. This Agreement does not affect or modify any Grantor’s obligations with respect to the Collateral. 

4.Fraudulent Conveyance. Notwithstanding anything contained in this Agreement to the contrary, each Grantor agrees that if, but for the application of this Section, the Secured Obligations or any Security Interest would constitute a preferential transfer under 11 U.S.C. § 547, a fraudulent conveyance under 11 U.S.C. § 548 (or any successor section) or a fraudulent or voidable conveyance or transfer under any state fraudulent or voidable conveyance or fraudulent or voidable transfer law or similar law in effect from time to time, then the Secured Obligations and each affected Security Interest will be enforceable against each Grantor to the maximum extent possible without causing the Secured Obligations or any Security Interest to be fraudulent or voidable. 

5.Representations and Warranties. Each Grantor represents and warrants to Lender that: 

(a)Binding Obligation. Such Grantor has good and valid title to and rights in, or the power to transfer, the Collateral with respect to which it has purported to pledge or grant a security interest hereunder, and the Security Interest in the Collateral created by this Agreement 

(i) is a valid and binding obligation of each Grantor in favor of Lender and is enforceable against each Grantor, except as enforceability may be limited by Applicable Laws and general principles of equity, (ii) will be duly perfected once the action required for perfection under Applicable Law has been taken, (iii) once perfected, will constitute a first priority Lien on the Collateral, subject only to Permitted Liens (if any), and (iv) does not require the consent of any third party.

(b)Place of Business; Location of Records. Schedule 1 sets out the following information: (i) the exact name of each Grantor, as such name appears in its Organizational Documents, the type of entity of such Grantor, its state of organization, the organizational number issued to it by its state of organization and its federal employer identification number; (ii) each other name each Grantor has used in the past five years, together with the date of the relevant change; (iii) each Grantor’s principal place of business; (iv) the locations where each Grantor maintains its inventory and equipment; (v) all real property owned by each Grantor; (vi) all real 

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property leased by each Grantor; and (vii) each deposit account of each Grantor. No inaccuracy on Schedule 1 will impair the Security Interest in any Collateral.

(c)Accounts. Such Grantor’s reports, invoices and other Collateral  records furnished to Lender from time to time will correctly state the names of the obligors, amounts owing, due dates and other information with respect to its accounts. As of the time when each account arises, such Grantor shall be deemed to have represented and warranted that such account and all records relating thereto, are genuine and in all respects what they purport to be. Except as specifically disclosed to Lender in writing, the amounts due each Grantor with respect to its accounts are not subject to any material setoff, counterclaim, defense, allowance or adjustment (other than discounts for prompt payment shown on the invoice), dispute, objection or complaint by any account debtor or other obligor. 

(d)Additional Collateral. The delivery at any time by any Grantor to Lender of Collateral or of additional specific descriptions of certain Collateral will constitute a representation and warranty by such Grantor to Lender under this Agreement that the representations and warranties of this Section are true and correct with respect to each item of such Collateral. 

6.Covenants. Each Grantor covenants and agrees with Lender that such Grantor shall: 

(a)Notice. Promptly notify Lender in writing of (i) any claim, action or proceeding challenging the Security Interest or affecting title to all or any material portion of the Collateral or the Security Interest and, at Lender’s request, appear in and defend any such action or proceeding at Grantors’ reasonable expense, and (ii) any default by any Grantor or any other party under or in connection with any material portion (individually or collectively) of the Collateral and immediately use commercially reasonable efforts to remedy the same or immediately demand that the same be remedied. 

(b)Hold Collateral In Trust. Hold in trust (and not commingle with its other assets) for Lender all Collateral that is chattel paper, instruments or documents at any time received by it and promptly deliver same to Lender unless Lender at its option gives Grantors written permission to retain such Collateral. 

(c)Maintain Collateral. (i) Perform all of its obligations under or in connection with the Collateral in accordance with customary business practices, (ii) not amend, alter or modify, or permit the amendment, alteration or modification of, any material portion (individually or collectively) of the Collateral, and (iii) not do or permit any act which would impair or adversely affect the value of any material portion of the Collateral. 

7.Authorization to File Financing Statements. Each Grantor hereby irrevocably authorizes Lender, at any time and from time to time, to file in any filing office in any UCC jurisdiction any financing statements and fixture filings, and amendments to any such statements or filings, that (a) identify the Collateral (i) as “all assets” of such 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) provide any other information required under UCC for the sufficiency or filing office acceptance of any financing statement or amendment. Each Grantor agrees to furnish any such information to Lender promptly upon Lender’s request, and each Grantor hereby ratifies any prior financing statements (and all amendments thereto and continuations thereof) filed prior to the date hereof by Lender or any of its predecessors in interest. 

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8.Further Assurances. To further the attachment, perfection and first priority of, and the ability of Lender to enforce, Lender’s Security Interest in the Collateral, and without limiting Grantors’ other obligations under this Agreement or any other Loan Document, each Grantor agrees, at its sole cost and expense, to take the following actions: 

(a)Collateral in the Possession of a Bailee. If any Collateral is at any time in the possession of a bailee, Grantors shall promptly notify Lender and, at Lender’s request and option, shall promptly obtain a Collateral Access Agreement executed by such bailee. 

(b)Deposit Accounts. For each deposit account that any Grantor currently has open or at any time opens or maintains (other than any such deposit accounts maintained with Lender), such Grantor shall, at Lender’s request, cause the depository bank to enter into a deposit account control agreement (or other similar agreement) in Acceptable Form. 

(c)Promissory Notes and Tangible Chattel Paper. If Grantors at any time hold or acquire any promissory notes or tangible chattel paper, Grantors shall promptly notify Lender thereof and, upon Lender’s request, endorse, assign, and deliver the same to Lender, accompanied by such instruments of transfer or assignment duly executed in blank and in Acceptable Form. 

(d)Investment Property. If Grantors at any time hold or acquire any certificated Equity Interests comprising part of the Collateral, Grantors shall promptly endorse, assign and deliver the same to Lender, accompanied by such instruments of transfer or assignment duly executed in blank as Lender may request. If any Equity Interests now or hereafter acquired by Grantors constitute uncertificated securities and are issued to Grantors or its nominee directly by the issuer thereof, Grantors shall promptly notify Lender thereof and, at Lender’s request and option, either deliver to Lender a control agreement with the issuer in Acceptable Form or take such actions as Lender may reasonably request to arrange for Lender to become the registered owner of the Equity Interests. If any Collateral is held with a securities intermediary (other than Lender) or commodity intermediary, then Grantors will promptly notify Lender thereof and, upon Lender’s request, will cause such securities intermediary or commodity intermediary to enter into a control agreement with the Lender, in Acceptable Form, giving Lender control thereof under the UCC. 

(e)Electronic Chattel Paper and Transferable Records. If Grantors at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, Grantors shall promptly notify Lender thereof and, at the request and option of Lender, shall take such action as Lender may reasonably request to vest in Lender control, under Section 9-105 of the UCC, of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. 

(f)Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit, Grantors shall promptly notify Lender thereof and, at the request and option of Lender, Grantors shall, pursuant to an agreement in Acceptable Form, take such actions as Lender may reasonably request to either (i) arrange for the issuer and any confirmer or other nominated Person of such letter of credit to consent to an assignment to Lender of the proceeds of the letter of credit, or (ii) arrange for Lender to become the transferee beneficiary of the letter of credit. 

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(g)Reserved. 

(h)Collections on Collateral. 

(i)Each Grantor hereby irrevocably authorizes Lender to notify each Person obligated with respect to any of the Collateral, whether as account debtor or other obligor on any account, or otherwise (each such Person a “Collateral Obligor”), to make payment directly to Lender and Lender may take control of the proceeds paid to Lender. Upon such notice from Lender, each Collateral Obligor is hereby authorized and directed by Grantor to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Lender, regardless of whether Grantor was previously making collections thereon. Until such notice is given, Grantor is authorized to retain and expend all payments made on Collateral to the extent such payments are permitted by the Loan Documents. Lender agrees with Grantors that Lender shall not elect to exercise these rights unless an Event of Default has occurred and is continuing. 

(ii)If any Collateral Obligor fails or refuses to make payment on any Collateral when due, Lender is authorized, in its sole discretion, either in its own name or in the name of Grantor, to take such action as Lender shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, Lender shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Grantor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Lender shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Grantor with respect to any of such matters (irrespective of whether Lender actually has, or may be deemed to have, knowledge thereof). 

(iii)The receipt of Lender to any Collateral Obligor shall be a full and complete release, discharge and acquittance to such Collateral Obligor, to the extent of any amount so paid to Lender. 

(i) Identification and  Assignment  of  Accounts.  Upon Lender’s request,  whether  before or after the occurrence of an Event of Default, each Grantor shall take such action and execute such additional documents and instruments as Lender may request, and each Grantor hereby authorizes Lender to provide a copy of this Agreement and any other Loan Document to any such account debtor or other obligor, for purposes of evidencing or demonstrating Lender’s rights and authority under this Agreement, to deliver such documents as Lender may reasonably request in order to identify, confirm, mark, segregate and assign accounts and to evidence Lender’s interest in same. Without limitation of the foregoing, each Grantor, upon request, agrees to assign accounts to Lender, identify and mark accounts as being subject to Lender’s Security Interest (or pledge or assignment as applicable), mark such Grantor’s books and records to reflect such assignments, and forthwith to transmit to Lender in the form as received by such Grantor any and all proceeds of collection of such accounts.

(j)Other Assurances and Rights. 

(i)Each Grantor further agrees, at the request and option of Lender, in each case to the extent applicable, to take any and all other actions, and execute and deliver such documents and instruments, as Lender may determine to be necessary or useful for 

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the attachment, perfection, and first-priority of, and the ability of Lender to enforce, Lender’s Security Interest in any and all of the Collateral, and cooperate with Lender in identifying all of such Grantor’s personal property assets and proper descriptions of such assets for the purpose of including such assets as part of the Collateral and perfecting the Security Interest therein, including (A) authenticating, executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC,

(B) causing Lender’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to the attachment, perfection or priority of, or ability of Lender to enforce, Lender’s security interest in such Collateral, (C) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral to the extent compliance with such provision is a condition to the attachment, perfection or priority of, or ability of Lender to enforce, Lender’s security interest in such Collateral, (D) obtaining governmental and other third party waivers, consents and approvals in form and substance satisfactory to Lender, including, without limitation, any consent of any licensor, lessor or other Person obligated on Collateral, (E) obtaining waivers from mortgagees and landlords in form and substance satisfactory to Lender, (F) taking all actions under the UCC or under any other Applicable Law, as reasonably determined by Lender to be applicable in any relevant UCC or other jurisdiction, including any foreign jurisdiction, (G) providing Lender promptly upon its request with proper legal descriptions of, and all other information and documents pertaining to, such Grantor’s interest in real property, deposit accounts, brokerage accounts, securities accounts, and all other personal property assets of such Grantor, and (H) providing such other information and documents, and executing such other appropriate documents or instruments, as Lender may reasonably request.

(ii)Each Grantor hereby irrevocably makes, constitutes, and appoints Lender (and all Persons designated by Lender for that purpose) as such Grantor’s true and lawful attorney and agent-in-fact to authenticate and file such financing statements, Loan Documents, and other documents and instruments, and do such other acts and things, as may be reasonably necessary to preserve, perfect, or protect Lender’s Security Interest in any Collateral, or to exercise, enforce, preserve, or protect any of Lender’s rights under this Agreement, any of the other Loan Documents, or with respect to any Collateral.  Such appointment of Lender as such Grantor’s attorney-in-fact is a power that is coupled with an interest, and is continuing and irrevocable. 

(iii)Lender shall have the right in its own name or in the name of Grantor to 

(A) compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Lender may determine, (B) demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral, (C) take control of cash and other proceeds of any Collateral, (D) endorse the name of Grantor on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Lender, (E) to send requests for verification of obligations to any Collateral Obligor; and (F) to do all other acts and things necessary to carry out the intent of this Agreement.

(k)Consents. Upon Lender’s request and at Grantors’ expense, file or cause to be filed such applications and take such other actions to obtain any consent or approval necessary or appropriate (as determined by Lender) to effectuate the grant of a Security Interest in (or collateral assignment of) any Collateral to Lender or to effectuate Lender’s rights hereunder, 

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including, without limitation, the right to assign or sell Collateral upon an Event of Default without additional consent or approval from any governmental authority or other Person.

9.Default; Remedies. Upon the occurrence and during the continuance of an Event of Default, subject to the terms and conditions of the Credit Agreement, Lender has the following cumulative rights and remedies under this Agreement: 

(a)Exercise Rights. Lender may exercise any and all rights available to a secured party under (i) the UCC, (ii) this Agreement and the other Loan Documents, (iii) at law, in equity, or otherwise, including (A) requiring Grantors to assemble all or part of the Collateral and make  it available to Lender at a place to be designated by Lender which is reasonably convenient to Grantors and Lender, (B) applying by appropriate judicial proceedings for appointment of a receiver for Grantors or any of them or all or part of the Collateral, (C) applying to the Secured Obligations any cash held by Lender, (D) reducing any claim to judgment, (E) exercising the rights of offset or banker’s lien against the interests of Grantors in and to every account and other property of Grantors in Lender’s possession to the extent of the full amount of the Secured Obligations, (F) foreclosing the Security Interest and any other Liens Lender may have or otherwise realize upon any and all of the rights Lender may have in and to the Collateral, or any part thereof, (G) bringing suit or other proceedings before any governmental authority either for specific performance of any covenant or condition contained in any of the Loan Documents or in aid of the exercise of any right granted to Lender in any of the Loan Documents, and (H) requiring that each contract, chattel paper, instrument or document so retained shall be marked to state that it is assigned to Lender and each instrument shall be endorsed to the order of Lender (but failure to so mark or endorse any such Collateral shall not impair Lender’s Security Interest). 

(b)Reserved. 

(c)Notice. To the extent required under the UCC or other Applicable Law, reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Grantors and to any other Person entitled to notice under the UCC; provided that, if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Lender may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than ten calendar days prior to the taking of the action to which the notice relates is reasonable notification and notice for the purposes of this subsection. It shall not be necessary that the Collateral be at the location of any sale. 

(d)Standards for Exercising Rights and Remedies. To the extent that Applicable Law imposes duties on Lender to exercise remedies in a commercially reasonable manner, Grantors acknowledge and agree that it is not commercially unreasonable for Lender (i) to fail to incur expenses reasonably deemed significant by Lender in order to prepare Collateral for disposition or otherwise to fail 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 Applicable 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 Obligors, directly or through the use of collection agencies and other collection specialists, (iv) to fail to remove Liens or any other encumbrances on, or any adverse claims against, any Collateral, (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, 

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whether or not in the same business as any Grantor, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Lender against risks of loss, collection or disposition of Collateral or to provide to Lender a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Lender, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Lender in the collection or disposition of any of the Collateral. Grantors acknowledge that the purpose of this subsection is to provide non-exhaustive indications of what actions or omissions by Lender would fulfill Lender’s duties under the UCC or other Applicable Law of any relevant jurisdiction in Lender’s exercise of remedies against the Collateral and that other actions or omissions by Lender shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this subsection. Without limiting the foregoing, nothing contained in this subsection shall be construed to grant any rights to Grantors or to impose any duties on Lender that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this subsection.

(e)Grantors’ Agent. Each Grantor hereby irrevocably appoint Lender as its agent and attorney-in-fact with all right and power to protect, preserve, and realize upon the Collateral and to enforce all of Grantor’s rights and remedies under or in connection with the Collateral. Each Grantor hereby acknowledges and agrees that this power is coupled with an interest and is continuing and irrevocable. All reasonable costs, expenses and liabilities incurred and all payments made by Lender as Grantors’ agent and attorney-in-fact, including, without limitation, reasonable attorney’s fees and expenses, shall be considered a loan by Lender to Grantors which shall be payable on demand, shall (unless otherwise agreed by Lender) accrue interest at the Default Rate, and shall constitute part of the Secured Obligations. 

(f)Partial, Incomplete, or Defective Sale. Lender’s sale of less than all of the Collateral shall not exhaust Lender’s rights under this Agreement and Lender is specifically empowered to make successive sales until all of the Collateral is sold. If the proceeds of a sale of less than all the Collateral shall be less than the Secured Obligations, this Agreement and the Security Interest shall remain in full force and effect as to the unsold portion of the Collateral just as though no sale had been made. In the event any sale under this Agreement is not completed or is, in Lender’s opinion, defective, such sale shall not exhaust Lender’s rights under this Agreement and Lender shall have the right to cause a subsequent sale or sales to be made at Grantors’ sole cost and expense. Any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale under this Agreement as to nonpayment of the Secured Obligations, or as to the occurrence or existence of any Event of Default, or as to Lender’s having declared all of such Secured Obligations to be due and payable, or as to notice of time, place and terms of sale and the properties to be sold having been duly given, or as to any other act or thing having been duly done by Lender, shall be taken as prima facie evidence of the truth of the facts so stated and recited, subject only to manifest error.  Lender may appoint or delegate any one or more Persons as agent to perform any act or acts necessary or incident to any sale held or to be held by Lender, including the sending of notices and the conduct of sale. 

(g)Existence of Default. Regarding the existence of any Event of Default for purposes of this Agreement, Grantors agree that the Obligors or account debtors on any Collateral 

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may rely upon written certification from Lender that such an Event of Default has occurred and is continuing and Grantors expressly agree that Lender shall not be liable to Grantors for any claims, damages, costs, expenses or causes of action of any nature whatsoever in connection with, arising out of, or related to Lender’s exercise of any rights, powers or remedies under any Loan Document, except for its own gross negligence or willful misconduct, as determined by a court of competent jurisdiction pursuant to a final and non-appealable judgment.

(h)Marshaling. Lender shall not be required to marshal any present or future collateral security (including, but not limited to, the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of Lender’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations are outstanding or by which any of the Secured Obligations are secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Grantors hereby irrevocably waive the benefits of all such laws. 

10.Other Rights of Lender. 

(a)Performance. In the event any Grantor fails to preserve the priority of the Security Interest in any of the Collateral or, upon the occurrence and during the continuance of an Event of Default, otherwise fails to perform any of its obligations under the Loan Documents with respect to the Collateral, then Lender may (but is not required to) prosecute or defend any suits in relation to the Collateral or take any other action which any Grantor is required to take under the Loan Documents, but has failed to take. Any sum which may be expended or paid by Lender under this Section (including, without limitation, court costs and reasonable attorneys’ fees and expenses) shall (unless otherwise agreed by Lender) accrue interest from the date of expenditure or payment at the Default Rate until paid and, together with such interest, shall be payable by Grantors to Lender upon demand and shall be part of the Secured Obligations. 

(b)Collateral in Lender’s Possession. If, after the occurrence and during the continuance of an Event of Default, any Collateral comes into Lender’s possession, Lender may use such Collateral for the purpose of preserving it or its value pursuant to the order of a court of appropriate jurisdiction or in accordance with any other rights of Lender with respect to such Collateral. Grantors covenant to promptly reimburse and pay to Lender, at Lender’s request, the amount of all expenses incurred by Lender in connection with its custody and preservation of such Collateral, and all such expenses, costs, Taxes and other charges shall (unless otherwise agreed by Lender) bear interest at the Default Rate until repaid and, together with such interest, shall be payable by Grantors to Lender upon demand and shall be part of the Secured Obligations. However, the risk of accidental loss or damage to, or diminution in value of, Collateral is on Grantors, except to the extent determined by a final non-appealable judgment of a court of competent jurisdiction to have been caused by Lender’s own gross negligence or willful misconduct. Lender shall have no liability for failure to obtain or maintain insurance, nor to determine whether any insurance is adequate as to amount, the risks insured, or any other matter. With respect to Collateral that is in the possession of Lender, Lender shall have no duty to fix or preserve rights against prior parties to such Collateral and shall never be liable for any failure to 

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use diligence to collect any amount payable in respect of such Collateral but shall be liable only to account to Grantors for what Lender actually collects or receives thereon.

(c)Subrogation. If any of the proceeds of the Secured Obligations are given in renewal or are an extension of, or are applied toward the payment of, any indebtedness secured by any Lien, Lender shall be, and is hereby, subrogated to all of the rights, titles, interests and Liens securing the indebtedness so renewed, extended or paid. 

(d)Reserved 

(e)No Impairment or Release. The Security Interest and Grantors’ obligations and Lender’s rights under this Agreement shall not be released, diminished, impaired or adversely affected by the occurrence of any one or more of the following events: (i) the taking or accepting of any other security or assurance for any or all of the Secured Obligations; (ii) any release, surrender, exchange, subordination or loss of any security or assurance at any time existing in connection with any or all of the Secured Obligations; (iii) the modification of, amendment to, or waiver of compliance with any terms of any of the other Loan Documents without Grantors’ consent, except as required therein; (iv) the insolvency, bankruptcy or lack of corporate or trust power of any Person at any time liable for the payment of any or all of the Secured Obligations, whether now existing or hereafter occurring; (v) any renewal, extension or rearrangement of the payment of any or all of the Secured Obligations, either with or without notice to or consent of Grantors, or any adjustment, indulgence, forbearance or compromise that may be granted or given by Lender to Obligors or Grantors, in each case, except as required by the Loan Documents; (vi) any neglect, delay, omission, failure or refusal of Lender to take or prosecute any action in connection with any other agreement, document, guaranty or instrument evidencing, securing or assuring the payment of all or any of the Secured Obligations; (vii) any failure of Lender to notify Grantors of any renewal, extension, or assignment of the Secured Obligations or any part thereof, the release of any security under any other Loan Document or any other document or instrument, any other action taken or refrained from being taken by Lender against Obligors or Grantors, or any new agreement between Lender and Obligors, it being understood that, except as expressly required by the Credit Agreement, Lender shall not be required to give Grantors any notice of any kind under any circumstances whatsoever with respect to or in connection with the Secured Obligations, including, without limitation, notice of acceptance of this Agreement or any Collateral ever delivered to or for the account of Lender under this Agreement; (viii) the illegality, invalidity or unenforceability of all or any part of the Secured Obligations against any third party obligated with respect thereto by reason of the fact that the Secured Obligations, or the interest paid or payable with respect thereto, exceeds the amount permitted by Applicable Law, the act of creating the Secured Obligations, or any part thereof, is ultra vires, or the officers, equity owners, or trustees creating same acted in excess of their authority, or for any other reason; or (ix) if any payment by any party obligated with respect thereto is held to constitute a preference under Applicable Laws or for any other reason Lender is required to refund such payment or pay the amount thereof to someone else. 

11.Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any Grantor become the subject of any Insolvency Proceeding, and shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Secured Obligations, or any part thereof (including a payment effected through exercise of a right of setoff), is, pursuant to Applicable Law, invalidated, declared to be fraudulent or preferential or voidable, set aside or required (including pursuant to any settlement entered into by Lender in its discretion) to be repaid to a trustee, receiver or any other party, in 

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connection with any such Insolvency Proceeding, all as if such payment or performance had not been made or such setoff had not occurred.

12.Miscellaneous. 

(a)GOVERNING LAW. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN ANY OTHER LOAN DOCUMENT, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY AND ALL CLAIMS, CONTROVERSIES, DISPUTES AND CAUSES OF ACTION BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES. 

(b)Consent to Forum. 

(i)FORUM. EACH GRANTOR CONSENTS TO THE  EXCLUSIVE JURISDICTION OF ANY STATE COURT SITTING IN ORANGE COUNTY, FLORIDA, OR THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA, IN ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (AND WHETHER FOUNDED ON CONTRACT, TORT OR OTHERWISE), AND AGREES THAT IT WILL NOT COMMENCE ANY SUCH DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING IN ANY OTHER FORUM. EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING ANY SUCH COURT’S PERSONAL JURISDICTION, TO VENUE THEREIN OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES UNDER THE CREDIT AGREEMENT. 

(ii)Nothing herein shall limit the right of Lender to bring proceedings or exercise rights against any Obligor or other Person or its assets (including, without limitation, Collateral) in any other court or other forum, nor limit the right of any party to serve process in any other manner permitted by Applicable Law. Initiating such action or proceeding or taking any other action in any other court or forum shall in no event constitute a waiver by Lender of any of the foregoing. 

(iii)Each Grantor hereby acknowledges that (i) the negotiation, execution, and delivery of the Loan Documents constitute the transaction of business within the State of Florida, (ii) any cause of action arising under any of said Loan Documents will be a cause of action arising from such transaction of business, and (iii) each Grantor understands, anticipates, and foresees that any action for enforcement of payment of the obligations or the Loan Documents may be brought against it in the State of Florida. 

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(c)WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, LITIGATION OR OTHER PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR THERETO WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE COLLATERAL OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HERETO HEREBY AGREES AND CONSENTS THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ASSERTED IN ANY SUCH PROCEEDING SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANOTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 

(d)Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable in any jurisdiction (a) it shall not affect the validity, legality and enforceability of the remaining provisions thereof, (b) the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction, and (c) the parties shall engage in good faith negotiations to replace the illegal, invalid or unenforceable provisions, with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

(e)Multiple Counterparts; Electronic Signatures. This Agreement may be executed in any number of counterparts with the same effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the same  instrument. Loan Documents may be signed and transmitted by facsimile, portable document format (PDF), or other electronic means, and shall have the same effect as manually signed originals and shall be binding on all Grantors and Lender. 

(f)Waivers. Except to the extent expressly otherwise provided in this Agreement or in any other Loan Documents, Grantors waive (i) any right to require Lender to proceed against any other Person, to exhaust its rights in Collateral, or to pursue any other right which Lender may have, (ii) demand, notice, protest, notice of acceptance, notice of loans made, Collateral received or delivered, notice of acceleration, notice of the intent to accelerate, all other demands and notices of any type or nature, and all other suretyship defenses; and (iii) all rights of marshaling in respect of any or all of the Collateral. 

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(g)Binding Effect and Assignment. This Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective successors and permitted assigns. No  Grantor may assign or transfer any of its rights, duties, or obligations under any of the Loan Documents. Lender may assign or transfer any of its rights, duties, or obligations under any of the Loan Documents. To the extent of such assignment, (a) the assignee shall be a party to this Agreement and shall have the rights and obligations of Lender under such Loan Documents, and 

(b) the assigning Lender shall be released from its obligations under the Loan Documents but shall continue to be entitled to the benefits of any provisions hereof that, pursuant to this Agreement, would survive the payment in full of the obligations.

(h)Notice. Any notice or communication required or permitted under this Agreement must be given as prescribed in the Credit Agreement. 

(i)Amendments. This Agreement may only be amended by a writing executed by Grantors and Lender. 

13.Additional Grantor. Each Person that is required after the Closing Date to become a  party to this Agreement as a Grantor shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Person of a joinder agreement or supplement in Acceptable Form. 

14.ENTIRETY. THIS AGREEMENT, THE CREDIT AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 

[Signatures appear on following pages.]

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EXECUTED as of the date set forth in the preamble.

Signature Page to Security Agreement

Signature Page to Security Agreement

SCHEDULE 1

Location of Books and Records and Chief Executive Office

(a)The exact name of Grantors, as such name appears in its organizational documents: LFTD Partners Inc. and Lifted Liquids, Inc. 

(b)Each other name Grantors has used in the past five years, together with the date of the relevant change: LFTD Partners Inc. f/k/a Acquired Sales Corp. and Lifted Liquids, Inc. d/b/a Lifted Made and Urb Finest Flowers. 

(c)Grantors’ principal place of business: 

Lifted Liquids, Inc. 5511 95th Avenue

Kenosha, WI 53144

LFTD Partners Inc. 14155 Pine Island Drive Jacksonville, FL 32224

(d)The locations where Grantors maintains its inventory: 

5511 95th Avenue, Kenosha, WI 53144;

8920 58th Place, Suite 850, Kenosha, WI 53144;

8910 58th Place, Suites 600 and 700, Kenosha, WI 53144;

9560 58th Place, Suites 350 and 360, Kenosha, WI 53144;

5732 95th Ave, Suites 100, 200 and 300, Kenosha, WI 53144; and

16178 US Hwy 550, Aztec, NM 87410.

(e)All real property owned by Grantors: None. 

(f)All real property leased by Grantors: 

5511 95th Avenue, Kenosha, WI 53144;

8920 58th Place, Suite 850, Kenosha, WI 53144;

8910 58th Place, Suites 600 and 700, Kenosha, WI 53144;

9560 58th Place, Suites 350 and 360, Kenosha, WI 53144;

5732 95th Ave, Suites 100, 200 and 300, Kenosha, WI 53144;

16178 US Hwy 550, Aztec, NM 87410; and

2701-09 West Fulton PH, Chicago, Illinois 60612.

Schedule 1 to Security Agreement

SCHEDULE 2

Commercial Tort Claims

Lifted currently is involved in one pending lawsuit, as the plaintiff:

Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc. – The Company has filed an action seeking to recover approximately $98,000 in damages resulting from Defendants’ failure to pay for product they ordered. The matter has been filed in California and the Company intends to pursue the action and recover its damages.

On November 13, 2023, Lifted received a letter dated November 6, 2023 from the State of Wisconsin Department of Workforce Development (“Department”). The letter stated that the Department had dismissed the case Lifted Liquids, Inc. v. Brian Koff, ERD Case No.: CR202301774; EEOC Case No: 26G202301223. Previously, a disgruntled former Lifted employee had filed an action with the Wisconsin Department of Workforce Development claiming discrimination and retaliation.

On November 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe. The Company had filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow by the Law Offices of Saul Roffe. The Company also sought approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The Company has obtained a $30,000.00 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment. The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000.00 over time.

On October 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080. In October 2022, Lifted filed an action against Dev Distribution LLC (“Dev”), a vendor who failed to deliver certain products that Lifted has purchased for $263,938 for. Dev filed a counterclaim alleging breach of contract. In October 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for Dev paying $230,000.00 and providing certain equipment and product.

On May 25, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Martha, Edgar v. Lifted Liquids. Mr. Edgar Martha, who worked in Lifted’s production facility, had sued Lifted in regard to an alleged chemical burn. In May 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for $5,000 paid by Lifted to Mr. Martha.

Schedule 2 to Security Agreement

COLLATERAL ASSIGNMENT AGREEMENT

This COLLATERAL ASSIGNMENT AGREEMENT ("Assignment"), dated as of December 14, 2023, is made by LFTD PARTNERS INC., a Nevada corporation (“LFTD”) and LIFTED LIQUIDS, INC., an Illinois corporation (“LLI” and together with LFTD, collectively and jointly and severally, the "Assignor") in favor of SURETY BANK (the "Assignee”). Capitalized terms used herein but not otherwise defined have the meaning given such term in the hereinafter defined Credit Agreement.

WHEREAS, under the terms of the Credit Agreement, Assignor has conveyed, transferred, and assigned to Assignee, among other assets, certain intellectual property of Assignor, and has agreed to execute and deliver this Assignment;

NOW THEREFORE, Assignor agrees as follows:

1.Assignment. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby irrevocably conveys, transfers, and assigns to Assignee, and Assignee hereby accepts, all of Assignor's right, title, and interest in and to the items are more particularly set forth in 

Exhibit “A” attached hereto (the "Assigned Collateral").

2.Recordation and Further Actions. From and after the date hereof, Assignor shall take such steps and actions, and provide such cooperation and assistance to Assignee and its successors, assigns, and legal representatives, including the execution and delivery of any affidavits, declarations, oaths, exhibits, assignments, powers of attorney, or other documents, as may be reasonably necessary to effect, evidence, or perfect the assignment of the Assigned Collateral to Assignee, or any assignee or successor thereto. 

3.Terms of the Credit Agreement. The parties hereto acknowledge and agree that this Assignment is entered into pursuant to the Credit Agreement, to which reference is made for a further statement of the rights and obligations of Assignor and Assignee with respect to the Assigned Collateral. The representations, warranties, covenants, agreements, and indemnities contained in the Credit Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms of the Credit Agreement and the terms hereof, the terms of the Credit Agreement shall govern. 

4.Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed one and the same agreement. A signed copy of this Assignment delivered by facsimile, e-mail, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Assignment. 

5.Successors and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 

6.Governing Law. This Assignment and any claim, controversy, dispute, or cause of action (whether in contract, tort, or otherwise) based upon, arising out of, or relating to this Assignment and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the United States and the State of Florida, without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction). 

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Assignor has duly executed and delivered this Assignment as of the date first above written.

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EXHIBIT “A”

THE ASSIGNED COLLATERAL

1.All patents, patent rights (and applications and registrations therefor), trademarks and service marks (and applications and registrations therefor), inventions, copyrights, mask works (and applications and registrations therefor), trade names, trade styles, software and computer programs, trade secrets, methods, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and records with respect to any research and development, goodwill, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer disks, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind and whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media; and 

2.All of Assignors’ websites including www.LFTDPartners.com and www.Urb.shop, and all customer lists associated therewith. 

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (together with all attached schedules and exhibits, in each case, as amended, restated, supplemented, or otherwise modified from time to time, this “Agreement”) is executed as of December 14, 2023 by and among LFTD Partners  Inc., a Nevada corporation (“LFTD”)  and Lifted Liquids, Inc., an Illinois corporation (“LLI” and together with LFTD, collectively and jointly and severally, the “Borrower”), and each of the other Persons party hereto from time to time as “Grantors”, for the benefit of and Surety Bank (“Lender”).

RECITALS

A.Borrower, the other Grantors from time to time party thereto, and Lender have entered into that certain Credit Agreement dated as of December 14, 2023 (as amended, restated, supplemented,   or otherwise modified from time to time, the “Credit Agreement”). 

B.As a condition precedent to Lender’s agreement to extend credit under the Credit Agreement, Lender requires that each Grantor execute this Agreement to secure the prompt and complete payment and performance of the Secured Obligations (as defined below). 

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

1.Certain Definitions. Each capitalized term used but not defined in this Agreement has the meaning given that term in the Credit Agreement. Terms defined in the UCC which are not otherwise defined in this Agreement are used herein as defined in the UCC. As used in this Agreement, the following terms have the meanings indicated: 

Collateral is defined in Section 2.

Debtor Relief Law means the bankruptcy code and any other applicable law governing bankruptcy, insolvency, assignments for the benefit of creditors, receiverships, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

Equity Interests means, with respect to any person, any and all shares, interests, participations or other equivalents (however designated) of corporate stock, membership interests in a limited liability company, partnership interests (general or limited), beneficial interests in a trust or other equity ownership interests in a person, or any warrants, options or other rights to acquire such interests or other ownership interests of such person.

Grantor means each person (other than Lender) party to this Agreement (including any additional Person executing a joinder or supplement hereto as a “Grantor”) and includes such Grantor as a debtor-in- possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for such Grantor or all or substantially all of such Grantor’s assets pursuant to any Debtor Relief Law.

Issuer means Lifted Liquids, Inc., an Illinois corporation, Bendistillery, Inc., an Oregon corporation, Bend Spirits, Inc., an Oregon corporation, and Ablis Holding Company, an Oregon corporation.

Lender is defined in the preamble to this Agreement.

Obligor(s) means the Borrower and the Grantors.

Pledged Interests means (a) the Equity Interests described in Schedule 1 and (b) all other Equity Interests of the Issuers at any time and from time to time acquired by Grantor, in each case whether or not evidenced or represented by any certificate, certificated security, or other instrument.

Secured Obligations means any and all existing and future indebtedness and liabilities of every kind, nature, and character, direct or indirect, absolute or contingent, liquidated or unliquidated, voluntary or involuntary, of Grantors, the Borrower, and each other Obligor to Lender, including, without limitation, the obligations.

Security Interest means the security interest granted, and the pledges and collateral assignments made, by Grantor to Lender under Section 2 of this Agreement.

2.Security Interest. To secure the prompt, unconditional, and complete payment and performance of the Secured Obligations when due, Grantor hereby pledges and collaterally assigns to Lender, and grants to Lender a continuing security interest in, all of Grantor’s right, title and interest in, to, and under the following, in each case, whether now owned or hereafter acquired, created, or existing and howsoever Grantor’s interest therein may arise or appear (collectively, the “Collateral”): 

(a)the Pledged Interests; 

(b)any certificates representing the Pledged Interests; 

(c)all options and other rights, contractual or otherwise, in respect of the Pledged Interests, and all dividends, distributions, revenue, cash, instruments, investment property, financial assets, Equity Interests, notes, debentures, bonds, promissory notes, and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Interests; 

(d)all security entitlements with respect to any and all of the foregoing; and 

(e)all proceeds (including proceeds of proceeds) of any and all of the foregoing. 

Without limiting the security interest granted hereby, each Grantor hereby grants to Lender an irrevocable license in Grantors’ trade names, trademarks, and service marks, together with each Grantor’s goodwill associated with such trade names, trademarks, and service marks, for purposes of allowing Lender to use the same in connection with any foreclosure sale, auction, or other disposition of any assets, whether pursuant to the UCC, this Agreement, or otherwise.

3.Collateral Security; No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Secured Obligations when due, and is given as security only. Lender does not assume, and shall not be liable for, any of Grantors’ liabilities, duties or obligations under, or in connection with, the Collateral. Lender’s acceptance of this Agreement, or its taking any action in carrying out this Agreement, does not constitute its approval of the Collateral or its assumption of any liability, duty, or obligation under, or in connection with, the Collateral. This Agreement does not affect or modify any Grantor’s obligations with respect to the Collateral. 

4.Fraudulent Conveyance. Notwithstanding anything contained in this Agreement to the contrary, each Grantor agrees that if, but for the application of this Section, the Secured Obligations or 

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any Security Interest would constitute a preferential transfer under 11 U.S.C. § 547, a fraudulent conveyance under 11 U.S.C. § 548 (or any successor section) or a fraudulent or voidable conveyance or transfer under any state fraudulent or voidable conveyance or fraudulent or voidable transfer law or similar law in effect from time to time, then the Secured Obligations and each affected Security Interest will be enforceable against each Grantor to the maximum extent possible without causing the Secured Obligations or any Security Interest to be fraudulent or voidable.

5.Representations and Warranties. Grantor hereby represents and warrants to Lender as follows: 

(a)The Pledged Interests are duly authorized, validly issued, fully paid and non- assessable, and the transfer thereof is not subject to any restrictions other than restrictions imposed by applicable securities and corporate laws. 

(b)Grantor owns the Collateral free and clear of all Liens except for the Lien created pursuant to this Agreement. 

(c)The information contained in Schedule 1 is accurate and sufficiently describes all of the Collateral. 

6.Covenants. Grantor shall: 

(a)not sell, assign or otherwise dispose of any Collateral, except as may be permitted under the Credit Agreement, 

(b)not create, incur or suffer to exist any other Lien upon any of the Collateral, except for the Lien created hereby, 

(c)at Lender’s reasonable request and at Grantor’s expense, file or cause to be filed such applications and take such other actions to obtain the consent or approval of any governmental authority to effectuate Lender’s rights hereunder, including, without limitation, the right to sell all the Collateral upon an Event of Default without additional consent or approval from such governmental authority (and, because Grantor agrees that Lender’s remedies at law for failure of Grantor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Grantor agrees that its covenants in this provision may be specifically enforced). 

(d)from time to time promptly execute and deliver to Lender all such other equity transfer powers (including any such transfer power in the form attached hereto as  Exhibit A), assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Lender may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 

7.Default; Remedies. Upon the occurrence and during the continuance of an Event of Default, subject to the terms and conditions of the Credit Agreement, Lender may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, including, without limitation, exercising any and all transfer powers (including any such transfer power in the form attached hereto as Exhibit A) or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Grantor hereby consents to any such appointment). 

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8.Notice. To the extent required under the UCC or other applicable law, commercially reasonable notification of the time and place of any public sale of the Collateral, or commercially reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Grantor and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Lender may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that any notice sent or given not less than ten calendar days prior to the taking of the action to which the notice relates is commercially reasonable for the purposes of this Agreement and applicable law. 

9.Sales of Equity Interests. Grantor recognizes that the Lender may deem it impracticable to effect a public sale of all or any part of the Pledged Interests or any other Equity Interests constituting Collateral. Lender is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Lender to render such sale exempt from the registration requirements of the Securities Act, and any applicable state securities laws, and no sale so made in good faith by Lender shall be deemed not to be “commercially reasonable” because so made. Lender may make one or more private sales of any such Equity Interests to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such Equity Interests for their own account, for investment and not with a view to the distribution or resale thereof. Grantor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that the Lender shall have no obligation to delay the sale of any such Equity Interests for the period of time necessary to permit the issuer of such Equity Interests to register such Equity Interests for public sale under the Securities Act. Grantor further acknowledges and agrees that any offer to sell such Equity Interests which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of Orange County, Florida (to the extent that such an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately in the manner described above to not less than fifteen bona fide offerees shall be deemed to involve a “public disposition” for the purposes of Section 9 610(c) of the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and that the Lender may, in such event, bid for the purchase of such Equity Interests. 

10.Application of Proceeds. Lender shall apply the proceeds of any sale or other disposition of the Collateral in accordance with the terms of the Credit Agreement. 

11.Other Rights of Lender. 

(a)Performance. In the event any Grantor fails to preserve the priority of the Security Interest in any of the Collateral or, upon the occurrence and during the continuance of an Event of Default, otherwise fails to perform any of its obligations under the Loan Documents with respect to the Collateral, then Lender may (but is not required to) prosecute or defend any suits in relation to the Collateral or take any other action which any Grantor is required to take under the Loan Documents, but has failed to take. Any sum which may be expended or paid by Lender under this Section (including, without limitation, court costs and reasonable attorneys’ fees and expenses) shall (unless otherwise agreed by Lender) accrue interest from the date of expenditure or payment at the Default Rate until paid and, together with such interest, shall be payable by Grantors to Lender upon demand and shall be part of the Secured Obligations. 

(b)Collections on Collateral. 

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(i)Each Grantor hereby irrevocably authorizes Lender to notify each Person obligated with respect to any of the Collateral as an issuer of Pledged Interests or otherwise (each such Person a “Collateral Obligor”), to make payment directly to Lender and Lender may take control of the proceeds paid to Lender. Upon such notice from Lender, each Collateral Obligor is hereby authorized and directed by Grantor to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Lender, regardless of whether Grantor was previously making collections thereon. Until such notice is given, Grantor is authorized to retain and expend all payments made on Collateral to the extent such payments are permitted by the Loan Documents. Lender agrees with Grantors that Lender shall not elect to exercise these rights unless an Event of Default has occurred and is continuing. 

(ii)If any Collateral Obligor fails or refuses to make payment on any Collateral when due, Lender is authorized, in its sole discretion, either in its own name or in the name of Grantor, to take such action as Lender shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, Lender shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Grantor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Lender shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Grantor with respect to any of such matters (irrespective of whether Lender actually has, or may be deemed to have, knowledge thereof). 

(iii)The receipt of Lender to any Collateral Obligor shall be a full and complete release, discharge and acquittance to such Collateral Obligor, to the extent of any amount so paid to Lender. 

(c)Record Ownership of Securities. Upon the occurrence and during  the continuance of an Event of Default, Lender at any time may have the Pledged Interests registered in its name, or in the name of its nominee or nominees, as pledgee; and Grantor shall execute and deliver to Lender all such proxies, powers of attorney, dividend coupons or orders and other documents as Lender may reasonably request for the purpose of enabling Lender to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the dividends and other payments which it is authorized to receive and retain hereunder. 

(d)Voting of Equity Interests. So long as no Event of Default has occurred and is continuing, Grantor shall be entitled to exercise all voting rights pertaining to the Pledged Interests. Upon notice from Lender to Grantor after the occurrence and during the continuance of an Event of Default, the right to vote the Pledged Interests shall be vested exclusively in Lender. To this end, Grantor irrevocably appoints Lender the proxy and attorney-in-fact of Grantor, with full power of substitution, to vote and to act with respect to the Pledged Interests, subject to the understanding that such proxy may not be exercised unless an Event of Default has occurred and is continuing. The proxy herein granted is coupled with an interest, and is continuing and irrevocable. 

(e)Certain Proceeds. Any and all stock dividends or Distributions of property made on or in respect of the Pledged Interests, any cash withdraws from any capital account relating to 

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any of the Pledged Interests, and any proceeds of the Pledged Interests, whether such dividends, Distributions, or proceeds result from a subdivision, combination or reclassification of any outstanding Equity Interests owned by Grantor or as a result of any merger, consolidation, acquisition or other exchange of assets to which Grantor may be a party, or otherwise, shall be part of the Pledged Interests hereunder, shall, if received by Grantor, be held in trust for the benefit of Lender, and shall forthwith be delivered to Lender (accompanied by proper instruments of assignment and/or transfer powers executed by the applicable Grantor in accordance with Lender’s instructions) to be held subject to the terms hereof. Prior to the occurrence and continuation of an Event of Default, any cash proceeds of Pledged Interests which come into the possession of Lender may, at Grantor’s option, be applied in whole or in part to the Secured Obligations, or be released in whole or in part to or on the written instructions of Grantor’s for any general or specific purpose not in violation of the Credit Agreement, or be retained in whole or in part by Lender as additional Pledged Interests. Upon the occurrence and continuation of an Event of Default, any cash proceeds of Pledged Interests shall be applied to the Secured Obligations.

(f)Authorization to File Financing Statements. Grantor hereby irrevocably authorizes Lender, at any time and from time to time, to file in any filing office in any UCC jurisdiction financing statements and fixture filings, and amendments to any such statements or filings, identifying the Collateral. 

12.Issuers. 

(a)Each of the Issuers hereby acknowledges, consents and agrees to the pledge and grant of the Security Interest in the Collateral by Grantor pursuant to this Agreement, together with all rights accompanying such pledge and Security Interest as provided by this Agreement and applicable laws, notwithstanding any anti-assignment provisions or other provisions in any Organizational Documents of any such Issuer that purport to prohibit or otherwise restrict the ability of any Person to pledge, encumber, or transfer any of the Equity Interests issued by any such Issuer. 

(b)Until notified otherwise in writing by Lender, Grantor hereby authorizes and directs each Issuer, and each Issuer hereby agrees, upon such Issuer’s receipt of written notice from Lender indicating that an Event of Default has occurred and is continuing, to deliver all dividends, distributions and other payments in respect of the Pledged Interests directly to Lender at the following address: 990 N. Woodland Boulevard, Deland, Florida 32720, Attn: Ryan G. James, President and Suzette A. Hill, Vice President of Lending. 

(c)Each Issuer further agrees that it will, without further consent of Grantor, (i) accept and comply solely with instructions originated by Lender with respect to any dividends, distributions, and other payments in respect of, or any transfers, exchanges, redemptions, or other dispositions of, all or any portion of the Pledged Interests, (ii) refuse to comply with instructions originated by Grantor, and (iii) not make any distribution or pay any dividend or other amount in respect of the Pledged Interests to Grantor or any other Person (other than Lender), in each case until such Issuer is notified in writing by Lender that the Security Interest on such Pledged Interests created hereby has been released. 

13.Miscellaneous. 

(a)GOVERNING LAW. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN ANY OTHER LOAN DOCUMENT, THIS AGREEMENT AND THE OTHER LOAN 

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DOCUMENTS AND ANY AND ALL CLAIMS, CONTROVERSIES, DISPUTES AND CAUSES OF ACTION BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO ANY CONFLICT  OF LAW PRINCIPLES.

(b)Consent to Forum. 

(i)       FORUM. EACH GRANTOR CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE COURT SITTING IN ORANGE COUNTY, FLORIDA, OR THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA, IN ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (AND WHETHER FOUNDED ON CONTRACT, TORT OR OTHERWISE), AND AGREES THAT IT WILL NOT COMMENCE ANY SUCH DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING IN ANY OTHER FORUM. EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING ANY SUCH COURT’S PERSONAL JURISDICTION, TO VENUE THEREIN OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES UNDER THE CREDIT AGREEMENT. 

BUSINESS LOAN AGREEMENT

PROMISSORY NOTE