Exhibit 10.14
 
SECURITY AGREEMENT
 
This SECURITY AGREEMENT (the “Agreement”) is made as of the 12th day of October,
2011 (the “Effective Date”), by and among Phototron Holdings, Inc., a Delaware
corporation (the “Borrower”), Growlife, Inc., a Delaware corporation
(“Growlife”), Phototron, Inc., a California corporation (“Phototron” and
together with Borrower and Growlife, the “Debtors”), the persons and entities
signatory hereto (individually, a “Secured Party” and collectively, the “Secured
Parties”), and W-net Fund I, LP, who will serve as the representative of the
Secured Parties and is referred to herein from time to time as the as the
“Secured Party Representative.”
 
RECITAL
 
WHEREAS, to induce the Secured Parties to make loans to the Borrower evidenced
by those certain Senior Secured Promissory Notes issued by the Borrower from
time to time in favor of the Secured Parties, substantially in the form attached
hereto as Exhibit A (the “Notes”), the Debtors have agreed to enter into this
Agreement and to grant to the Secured Parties the security interest in the
Collateral described below.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of loans made by the Secured Parties under the
Notes, the parties’ agreements herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

1.          Collateral Security.  As collateral security for the payment and
performance of the Borrower’s obligations under the Notes and the prompt and
punctual performance of all undertakings and covenants of the Borrower under or
pursuant to the Notes, whether now existing or hereafter incurred (hereinafter
collectively referred to as the “Obligations”), each Debtor hereby grants to the
Secured Parties a lien upon and security interest in all assets and property of
every kind, nature and description, wherever located and in whatever form,
whether real or personal, including, without limitation all accounts and
accounts receivable, inventory, machinery, equipment, fixtures, cash or cash
equivalents, general intangibles, intellectual property (including, without
limitation, trademarks, copyrights, patents), chattel paper (whether tangible or
electronic), instruments, letter of credit rights, securities and investment
property, financial assets, deposit accounts, documents, goods (including
without limitation, all accessions to any goods), causes of action and other
property rights to cash settlements, and all books and records pertaining to all
such property, in which such Debtor at any time has any right, title and
interest (the “Collateral”).
 
 
 

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2.             Appointment of Secured Party Representative.

a.           By virtue of the execution of this Agreement by each Secured Party,
each Secured Party shall be deemed to have agreed to appoint W-net Fund I, LP as
its agent and attorney-in-fact, as the Secured Party Representative for and on
behalf of the Secured Parties to give and receive notices and communications, to
agree to, negotiate, enter into settlements and compromises of, and comply with
orders of courts with respect to any claim by the Borrower against any Secured
Party or by any such Secured Party against the Borrower, in each case relating
to the Security Documents or the transactions contemplated thereby, and to take
all other actions that are either (i) necessary or appropriate in the judgment
of the Secured Party Representative for the accomplishment of the foregoing or
(ii) specifically mandated by the terms of the Security Documents (as defined
below).  Such agency may be changed by the Secured Parties from time to time
upon not less than thirty (30) days prior written notice to the Borrower;
provided, however, that the Secured Party Representative may not be removed
unless Secured Parties holding at least a majority of the outstanding
Obligations agree to such removal and to the identity of the substituted
agent.  A vacancy in the position of Secured Party Representative, whether due
to the resignation, removal or dissolution of the Secured Party Representative
or for any other reason, may be filled by Secured Parties holding at least a
majority of the outstanding Obligations.  No bond shall be required of the
Secured Party Representative, and the Secured Party Representative shall not
receive any compensation for its services.

b.           The Secured Party Representative shall not be liable for any act
done or omitted hereunder as Secured Party Representative while acting (i) in
good faith or (ii) with the consent of Secured Parties holding at least a
majority of the outstanding Obligations.  The Secured Parties shall indemnify
the Secured Party Representative and hold the Secured Party Representative
harmless against any loss, liability or expense incurred without willful
misconduct or bad faith on the part of the Secured Party Representative and
arising out of or in connection with the acceptance or administration of the
Secured Party Representative’s duties hereunder, including the reasonable fees
and expenses of any legal counsel, accountant or other professional advisor
retained by the Secured Party Representative.  The Secured Party Representative
will be entitled to the advancement and reimbursement by the Secured Parties of
costs and expenses incurred by or on behalf of the Secured Party Representative
in the performance of its duties hereunder, including the reasonable fees and
expenses of any legal counsel.  A decision, act, consent or instruction of the
Secured Party Representative shall constitute a decision of the Secured Parties
and shall be final, binding and conclusive upon the Secured Parties; and the
Borrower may rely upon any such decision, act, consent or instruction of the
Secured Party Representative as being the decision, act, consent or instruction
of the Purchasers.

3.             General Representations, Warranties and Covenants.  Each Debtor
agrees, and represents, warrants and covenants to the Secured Party, that:

a.           Such Debtor is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation.

b.           Such Debtor’s exact legal name, jurisdiction of incorporation and
chief executive office is set forth in the preamble above or Section 31 below,
as applicable.  Such Debtor shall give the Secured Parties prior written notice
of any change in such Debtor’s name, identity or corporate structure, or of any
reincorporation, reorganization or other action that may result in a change of
the jurisdiction or organization of such Debtor.
 
 
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c.           The execution, delivery and performance by such Debtor of this
Security Agreement and the Intellectual Property Security Agreement, and
financing statements delivered by such Debtor to the Secured Parties in
connection with this Security Agreement (this Security Agreement together with
the Intellectual Property Security Agreement and the financing statements are
hereinafter referred to individually as a “Security Document” and collectively
as the “Security Documents”), are within such Debtor’s powers, have been duly
authorized by all necessary action, and do not contravene (i) such Debtor’s
charter or bylaws or (ii) any law binding on or affecting such Debtor.

d.           No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by such Debtor of any Security
Document.

e.           Each Security Document constitutes the legal, valid and binding
obligation of such Debtor, enforceable against such Debtor in accordance with
its terms.

4.             Financing Statements.  Each Debtor authorizes the Secured Party
Representative to file any financing statement necessary to perfect the liens
and security interests granted under this Security Agreement, and any
continuation statement or amendment with respect thereto, in any appropriate
filing office without the signature of such Debtor where permitted by applicable
law.  At any time upon the request of the Secured Party Representative, each
Debtor shall execute or deliver to the Secured Party Representative any and all
financing statements, original financing statements in lieu of continuation
statements, security agreements, pledges, assignments by way of security,
endorsements of certificates of title, and all other similar documents, in form
and substance reasonably satisfactory to the Secured Party Representative
(collectively, the “Additional Documents”), and take any other actions, that the
Secured Party Representative may request in its reasonable discretion to create,
perfect and continue perfected or to better perfect the Secured Parties’ lien on
the Collateral, and in order to fully consummate all of the transactions
contemplated hereby.  To the maximum extent permitted by applicable law, each
Debtor authorizes the Secured Party Representative to execute any such
Additional Documents and take any such other actions in such Debtor’s name and
authorizes the Secured Party Representative to file such executed Additional
Documents in any appropriate filing office.  Each Debtor hereby irrevocably
makes, constitutes, and appoints the Secured Party Representative (and any of
the Secured Party Representative’s officers or designated agents) as such
Debtor’s true and lawful attorney, with power to (a) if such Debtor refuses to,
or fails timely to execute and deliver any of the Additional Documents, sign the
name of such Debtor on any of the Additional Documents, and (b) endorse such
Debtor’s name on any of its payment items (including all of its respective cash
collections) that may come into the Secured Party Representative’s
possession.  The appointment of the Secured Party Representative as such
Debtor’s attorney, and each and every one of its respective rights and powers,
being coupled with an interest, is irrevocable until all of the obligations
under this Security Agreement have been fully and finally repaid and performed.
 
 
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5.             Power of Attorney.  Each of the officers and designated agents of
the Secured Party Representative is hereby irrevocably made, constituted and
appointed the true and lawful attorney for each Debtor (without requiring any of
them to act as such) with full power of substitution to do the following (such
power to be deemed coupled with an interest): (a) after an Event of Default (as
defined below), endorse the name of such Debtor upon any and all checks, drafts,
money orders and other instruments for the payment of monies that are payable to
such Debtor and constitute collections on the Collateral, (b) at any time,
execute in the name of such Debtor and/or file any financing statements,
schedules, assignments, instruments, documents and statements that such Debtor
is obligated to give the Secured Party Representative hereunder or is necessary
to perfect the Secured Parties’ security interest in or lien upon the
Collateral, (c) at any time, to verify the validity, amount or any other matter
relating to the Collateral by mail, telephone, telecopy or otherwise, provided
that, if an Event of Default has not occurred, the Secured Party Representative
shall give prior notice thereof describing the manner in which such verification
shall be conducted, and (d) after an Event of Default, do such other and further
acts and deeds in the name of such Debtor that the Secured Party Representative
may reasonably deem necessary or desirable to enforce or protect the Secured
Parties’ interest in any Collateral.

6.             Control Collateral.  Each Debtor agrees that it will take any and
all reasonable steps that the Secured Party Representative requests in order for
Secured Party Representative to obtain control of any Collateral in accordance
with Sections 9-104, 9-105, 9-106, and 9-107 of the Uniform Commercial Code with
respect to any of such Debtor’s securities accounts and deposit accounts,
electronic chattel paper, investment property, and letter-of-credit rights.  No
arrangement contemplated hereby or by any control agreement in respect of any
deposit accounts or securities accounts or other investment property shall be
modified by such Debtor without the prior written consent of the Secured Party
Representative.  Upon the occurrence and during the continuance of an Event of
Default, the Secured Party Representative may notify any bank or securities
intermediary to liquidate the applicable deposit account or securities account
or any related investment property maintained or held thereby up to the amount
of the Obligations and remit the proceeds thereof to the Secured Parties to be
applied as payment of Obligations payable under this Security Agreement.

7.             Sale, Lease, or Disposition of Collateral.  Each Debtor will not,
other than in the ordinary course of business, sell, contract to sell, lease,
encumber (including, without limitation, granting a security interest in all or
any portion of the Collateral to any third party other than the Secured
Parties), or dispose of the Collateral or any interest in it without the written
consent of the Secured Party Representative until this Security Agreement and
all of the Obligations have been fully satisfied and indefeasibly paid in full.

8.             Dissolution or Liquidation. Each Debtor shall not commence a
dissolution or liquidation without the Secured Party Representative’s prior
consent.

9.             Reimbursement of Expenses.  At the option of the Secured Parties,
the Secured Party Representative may discharge taxes, liens, interests, or
perform or cause to be performed for and on behalf of each Debtor any actions
and conditions, obligations, or covenants that such Debtor has failed or refused
to perform.  In addition, the Secured Party Representative may pay for the
preservation of the Collateral.  All sums expended by the Secured Party
Representative under this paragraph, including but not limited to, attorneys’
fees, court costs, agent’s fees, or commissions, or any other cost or expenses,
shall be deemed and be included in the Obligations and will bear interest from
the date of payment at same rate as the Notes and will be payable at the time
and place designated in the Notes, and will be secured by this Security
Agreement.
 
 
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10.           Payment; Guaranty.

a.           The Borrower will pay the Notes secured by this Security Agreement
and any renewal or extensions thereof in accordance with the terms and
provisions of the Notes.  The Borrower also will repay immediately all sums
expended by the Secured Parties in accordance with the terms and provisions of
this Security Agreement.

b.           Growlife and Phototron hereby jointly and severally,
unconditionally guaranty (a) the due and punctual payment of the principal of,
premium on, if any, and interest, if any, on, the Notes, whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of interest
on overdue principal of, premium on, if any, and interest, if any, on, the
Notes, if any, if lawful, and the due and punctual performance of all other
obligations of the Borrower to the Secured Parties all in accordance with the
terms of the Notes and (b) in case of any extension of time of payment or
renewal of the Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.

11.           Change of Place of Business.  Each Debtor will promptly notify the
Secured Parties of any change of such Debtor’s chief place of business, the
location of the Collateral or the place where records concerning the Collateral
are kept.

12.           Leases.  Each Debtor shall deliver to the Secured Party
Representative, at such Debtor’s expense, copies of all leases for each leased
premises on which such Debtor operates.

13.           Insurance.  Each Debtor shall maintain or cause to be maintained
insurance on the Collateral against fire, flood, casualty and such other hazards
in such amounts, with such deductibles and with such insurers as are customarily
used by companies operating in the same industry as such Debtor.  If and when
the Secured Party Representative requests such in writing, each Debtor shall
furnish the Secured Party Representative with evidence of insurance as the
Secured Party Representative may reasonably require.  In the event a Debtor
fails to procure or cause to be procured any such insurance or to timely pay or
cause to be paid the premium(s) on any such insurance, the Secured Party
Representative may do so for such Debtor, but such Debtor shall continue to be
liable for the same.  The policies of all such casualty insurance shall contain
standard Loss Payable Clauses issued in favor of the Secured Parties under which
all losses thereunder shall be paid to the Secured Parties as the Secured
Parties’ interest may appear.  Such policies shall expressly provide that the
requisite insurance cannot be altered or canceled without thirty (30) days prior
written notice to the Secured Party Representative and shall insure the Secured
Parties notwithstanding the act or neglect of a Debtor.  Each Debtor hereby
appoints the Secured Party Representative as such Debtor’s attorney-in-fact,
exercisable at the Secured Party Representative’s option to endorse any check
which may be payable to such Debtor in order to collect the proceeds of such
insurance and any amount or amounts collected by the Secured Party
Representative pursuant to the provisions of this paragraph may be applied by
the Secured Party Representative to the Obligations.  Each Debtor also agrees to
notify the Secured Party Representative, promptly, upon such Debtor’s receipt of
a notice of termination, cancellation, or non-renewal from its insurance company
of any such policy.  Each Debtor shall maintain, and shall deliver to the
Secured Party Representative upon request evidence of public liability, products
liability and business interruption insurance in such amounts as are customary
for companies in the same or similar businesses located in the same or similar
area.
 
 
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14.           Financial Records.  Each Debtor shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with
GAAP.  Each Debtor shall deliver to the Secured Party Representative (all to be
in form and substance satisfactory to the Secured Party Representative) such
data, reports, statements and information, financial or otherwise, as the
Secured Party Representative may reasonably request.

15.           Existence and Rights.  Each Debtor shall do, or cause to be done,
all things necessary to preserve and keep in full force and affect its
existence, good standing and rights.

16.           Inspection.  Each Debtor will permit any of the Secured Party
Representative’s officers or other designated agents to visit and inspect any of
such Debtor’s facilities, or any other facility where any Collateral is kept,
during regular business hours, to examine and audit all of such Debtor’s books
of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers,
employees and independent certified public accountants and attorneys.  Each
Debtor shall pay to the Secured Party Representative all reasonable fees based
on standard rates for such inspections.

17.           Time of Performance and Waiver.  In performing any act under any
Security Document, time is of the essence.  The Secured Parties’ acceptance of
partial or delinquent payments, or the failure of the Secured Parties to
exercise any right or remedy, will not constitute a waiver of any obligation of
any Debtor or right of the Secured Parties and will not constitute a waiver of
any other similar default that occurs later.

18.           Material Adverse Developments.  Each Debtor agrees that
immediately upon becoming aware of any development or other information which
would reasonably be expected to materially and adversely affect its business,
financial condition or property, or its ability to perform under this Security
Agreement, it shall give to the Secured Parties telephonic or facsimile notice
specifying the nature of such development or information and such anticipated
effect.

19.           Default:  Each Debtor will be in default under this Security
Agreement on the occurrence of any of the following events or conditions (each,
an “Event of Default”):

a.           Default in the payment or performance of the Notes or any other
note with respect to any of the Obligations secured by this Security Agreement,
including, without limitation, the Borrower’s failure to pay any of the
Obligations including but not limited to charges, fees, expenses or other
monetary obligations owing to the Secured Parties arising out of or incurred in
connection with any of the Security Documents on the date when such payment is
due and payable, whether upon maturity, acceleration, demand or otherwise;
 
 
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b.           If any warranty, representation or other statement by or on behalf
of a Debtor contained in or pursuant to this Security Agreement, or in any
document, agreement or instrument furnished in compliance with, relating to, or
in reference to this Security Agreement, is false, erroneous, or misleading in
any material respect when made;

c.           Any material portion of a Debtor’s assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or (unless permitted
by the terms of this Security Agreement) comes into the possession of any third
person and the same is not lifted or discharged before the earlier of thirty
(30) days after the date it first arises or five (5) days prior to the date on
which such property or asset is subject to forfeiture by such Debtor;

d.           If a notice of lien, levy or attachment is filed or issued by the
United States or any department or instrumentality thereof or by any state,
county, municipality or other governmental agency against all or any portion of
the Collateral or a material portion of a Debtor’s property, which levy, lien or
attachment (i) would be entitled to priority over the Secured Parties’ lien on
the Collateral and (ii) is not lifted or discharged within the earlier of thirty
(30) days of issuance or five (5) days prior to the exercise of remedies with
respect to any such levy, assessment or attachment;

e.           If the obligations of a Debtor under this Security Agreement or
under any other Security Document is limited or terminated by operation of law
or by such Debtor;

f.           If this Security Agreement or any other Security Document that
purports to create a lien in favor of the Secured Party, shall, for any reason,
fail or cease to create a valid and perfected and, except to the extent
permitted by the terms hereof or thereof, first priority lien on the Collateral
covered hereby or thereby;

g.           If any provision of any Security Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by a Debtor or any other person, or a proceeding
shall be commenced by such Debtor or any other person, or by any governmental
authority having jurisdiction over such Debtor, seeking to establish the
invalidity or unenforceability thereof, or such Debtor shall deny that it has
any liability or obligation purported to be created under any Security Document;

h.           If any Debtor ceases its business operations; or

i.           Dissolution, termination of existence, insolvency, appointment of a
receiver for any part of the Collateral, assignment for the benefit of
creditors, or the commencement of any proceeding under any bankruptcy or
insolvency law by or against any Debtor.
 
 
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20.           Cure.  Nothing contained in this Security Agreement or any of the
other Security Documents shall be deemed to compel the Secured Parties to accept
a cure of any Event of Default hereunder, if such cure occurs after the Secured
Parties’ acceleration of the Obligations.

21.           Remedies.  On the occurrence of any Event of Default, and at any
later time, the Secured Parties may declare all Obligations due and payable
immediately and may proceed to enforce payment and exercise any and all of the
rights and remedies provided by the California Uniform Commercial Code as well
as other rights and remedies either at law or in equity possessed by the Secured
Parties.  The Secured Parties may require each Debtor to assemble the Collateral
and make it available to the Secured Party Representative at any place to be
designated by the Secured Party Representative that is reasonably convenient to
the Secured Party Representative and such Debtor.  Unless the Collateral is
perishable, threatens to decline speedily in value, or is of a type customarily
sold on a recognized market, the Secured Party Representative will give each
Debtor reasonable notice of the time and place of any public sale or of the time
after which any private sale or any other intended deposition of the Collateral
is to be made.  The requirements of reasonable notice will be met if the notice
is mailed, postage prepaid, to the address of the Debtor set forth below at
least ten (10) days before the time of the sale or disposition.  Expenses of
retaking, holding, preparing for sale, selling, or the like will include the
Secured Party Representative’s reasonable attorneys’ fees and legal expenses,
and all will be included as part of the Obligations and will be secured by this
Security Agreement.  All rights and remedies granted to the Secured Parties
hereunder and under the Security Documents, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and the Secured Parties may proceed with any number of remedies at the same time
until all Obligations are indefeasibly satisfied in full.  The exercise of any
one right or remedy shall not be deemed a waiver or release of any other right
or remedy, and Secured Parties, upon or at any time after the occurrence of an
Event of Default, may proceed against any Debtor, at any time, under any
agreement, with any available remedy and in any order.

22.           Intellectual Property.  In addition to, and without limiting in
any way the granting of the liens hereunder, upon the Event of Default, each
Debtor hereby assigns, transfers, and conveys to the Secured Parties a
nonexclusive license and right to use all trademarks, trade names, copyrights,
patents or technical processes owned or used by such Debtor that relate to the
Collateral, together with any goodwill associated therewith, all to the extent
necessary to enable the Secured Parties to realize on the Collateral and to
enjoy the benefits of the Collateral.  This right shall inure to the benefit of
all successors, transferees and assigns of the Secured Parties and their
successors, transferees and assigns, whether by voluntary conveyance, operation
of law, transfer, assignment, foreclosure, deed in lieu of foreclosure or
otherwise.  Such license and right shall be granted free of charge without the
requirement that any payment of any kind or nature whatsoever be made to the
Debtor.

23.           Termination of Security Interest.  The security interest granted
herein shall terminate, and all rights to the Collateral shall revert to the
applicable Debtor, upon the payment in full, or other satisfaction to which the
Secured Parties agree, of all Obligations.  Upon such termination each Secured
Party hereby authorizes each Debtor to file any UCC termination statements
necessary to effect such termination and each Secured Party shall, at such
Debtor’s expense, execute and deliver to such Debtor any additional documents or
instruments as such Debtor shall reasonably request to evidence such
termination.
 
 
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24.           Governing Law.  This Security Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, except as
required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and the effect of perfection or
non-perfection of the security interest created hereby, or remedies hereunder,
in respect of any particular collateral are governed by the law of a
jurisdiction other than the state of California.  Each Debtor hereby (i)
irrevocably submits to the jurisdiction of any state or federal court sitting in
Los Angeles County, California in any action or proceeding arising out of or
relating to this Security Agreement, (ii) waives any defense based on doctrines
of venue or forum non conveniens, or similar rules or doctrines, and (iii)
irrevocably agrees that all claims in respect of such an action or proceeding
may be heard and determined in state or federal courts located in Los Angeles
County, California.  Each Debtor and the Secured Parties mutually waive any
right to trial by jury in any action, proceeding or counterclaim arising out of
or relating to this Security Agreement.

25.           Parties Bound.  This Security Agreement will binding on and inure
to the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors, and assigns as permitted by
this Security Agreement.

26.           Validity and Construction.  If any one or more of the provisions
contained in this Security Agreement is for any reason held to be invalid,
illegal, or unenforceable, the invalidity, illegality, or unenforceability of
that provision will not affect any other provision of this Security Agreement,
and this Security Agreement will be construed as if the invalid, illegal, or
unenforceable provision had never been contained in it.

27.           Sole Agreement.  The Security Documents constitute the only
agreement of the parties with respect to securing the payment and performance of
the Obligations, and supersede any prior understandings or written or oral
agreements between the parties, respecting the subject matter thereof.

28.           Integrated Agreement.  The Security Documents shall be construed
as integrated and complementary of each other, and as augmenting and not
restricting the Secured Parties’ rights and remedies.  If, after applying the
foregoing, an inconsistency still exists, the provisions of this Security
Agreement shall constitute an amendment thereto and shall control.

29.           Commercial Code Definitions Applicable.  All terms used in this
Security Agreement that are defined in the California Uniform Commercial Code
will have the same meaning in this Security Agreement as in the California
Uniform Commercial Code.
 
 
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30.           Marshaling.  The Secured Parties 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 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 Debtor hereby agrees that it
will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of the Secured Parties’ rights and
remedies under this Security Agreement or under any other instrument creating or
evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, such Debtor hereby
irrevocably waives the benefits of all such laws.

31.           Notices.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex, electronic mail or
facsimile if sent during normal business hours of the recipient, and if not,
then on the next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  All
communications shall be sent

If to a Debtor, to:
20259 Ventura Boulevard

Woodland Hills, CA 91364
Attn: Chief Executive Officer
E-mail: doug@growlifeinc.com
Facsimile: (818) 992-0202
 
If to the Secured Parties, to:
W-net Fund I, LP

12400 Ventura Blvd. Suite 327
Studio City, California 91604

or at such other address, e-mail address or facsimile number as the Debtor or
the Secured Party Representative may designate by ten (10) days advance written
notice.

32.           Expenses.  In addition to the rights of the Secured Parties
hereunder, each Debtor hereby agrees to pay on demand all costs and expenses
(including, without limitation, fees, expenses, audit fees, search fees, filing
fees and other client charges of counsel to the Secured Party) incurred by the
Secured Parties in connection with the enforcement of the Secured Parties’
rights, and the collections of all amounts due, under any Security Document, all
of which will be included as part of the Obligations and will be secured by this
Security Agreement.
 
 
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33.           Indemnity.  Each Debtor releases and shall indemnify, defend and
hold harmless the Secured Parties and the Secured Party Representative, and
their officers and designated agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and
expenses (including, without limitation, reasonable legal fees) resulting from
(i) acts or conduct of such Debtor or under, pursuant or related to this
Security Agreement and the other Security Documents, (ii) such Debtor’s breach,
or alleged breach, or violation of any representation, warranty, covenant or
undertaking contained in this Security Agreement or the other Security
Documents, and (iii) such Debtor’s failure, or alleged failure, to comply with
any or all laws, statutes, ordinances, governmental rules, regulations or
standards, whether federal, state or local, or court or administrative orders or
decrees, and all costs, expenses, fines, penalties or other damages resulting
therefrom, unless resulting from acts or conduct of the Secured Parties
constituting willful misconduct or gross negligence.  NO INDEMNIFIED PERSON
SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY SECURITY DOCUMENT, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY SECURITY DOCUMENT OR AS
A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

34.           Additional Secured Parties.  Notwithstanding anything to the
contrary contained herein, if the Borrower issues additional Notes after the
date hereof, any purchaser of such Notes shall become a party to this Agreement
by executing and delivering a counterpart signature page hereto, agreeing to be
bound by and subject to the terms of this Agreement as a Secured Party.

35.           Headings. The headings of any paragraph or section of this
Security Agreement are for convenience only and shall not be used to interpret
any provision of this Security Agreement.

36.           Survival.  All warranties, representations, and covenants made by
each Debtor herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Security Agreement, shall be considered to have been relied upon by the
Secured Parties, regardless of any investigation made by the Secured Parties or
on their behalf.  All statements in any such certificate or other instrument
prepared and/or delivered for the benefit of the Secured Parties shall
constitute warranties and representations by each Debtor hereunder.  Except as
otherwise expressly provided herein, all representations, warranties and
covenants made by each Debtor hereunder or under any other agreement or
instrument shall be deemed continuing until all Obligations are satisfied in
full.

37.           Successors and Assigns.  This Security Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties.  No Debtor may transfer, assign or delegate any of its duties or
obligations hereunder.

38.           No Duty on the Part of the Secured Parties.  The powers conferred
on the Secured Parties hereunder are solely to protect their interest in the
Collateral and shall not impose any duty upon them to exercise any such
powers.  The Secured Parties shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers, and neither the
Secured Parties nor any of their officers or agents shall be responsible to any
Debtor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.

39.           Duplicate Originals, Counterparts.  Two or more duplicate
originals of this Security Agreement may be signed by the parties, each of which
shall be an original but all of which together shall constitute one and the same
instrument.  This Security Agreement may be executed in counterparts (including
via facsimile or digital image format), all of which counterparts taken together
shall constitute one completed fully executed document.
 
 
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40.           Modification; Action of Secured Parties.  No modification hereof
or any agreement referred to herein shall be binding or enforceable unless in
writing and signed by the Borrower and Secured Parties holding a majority of the
outstanding Obligations.  Whenever any action or consent of the Secured Parties
is required pursuant to this Agreement, except as otherwise expressly permitted
hereunder, the action or consent of Secured Parties holding a majority of the
outstanding Obligations shall constitute the action or consent of the Secured
Parties.

41.           Third Parties.  No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of any Debtor.  Nothing contained in
this Security Agreement shall be construed as a delegation to the Secured
Parties of a Debtor’s duty of performance, including, without limitation, such
Debtor’s duties under any account or contract with any other person or entity.

42.           Revival and Reinstatement of Obligations.  If the incurrence or
payment of the Obligations by the Borrower or the transfer to the Secured
Parties of any property should for any reason subsequently be declared to be
void or voidable under any state, federal or other law relating to creditors’
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a “Voidable Transfer”), and if the Secured
Parties are required to repay or restore, in whole or in part, any such Voidable
Transfer, or elect to do so upon the reasonable advice of counsel, then, as to
any such Voidable Transfer, or the amount thereof that the Secured Parties are
required or elect to repay or restore, and as to all reasonable costs, expenses,
and attorneys fees of the Secured Parties related thereto, the liability of each
Debtor automatically shall be revived, reinstated, and restored and shall exist
as though such Voidable Transfer had never been made.

43.           Parol Evidence.  This writing is intended by the parties as a
final expression of their agreement and, together with the other Security
Documents, is intended as a complete and exclusive statement of the terms of
their agreement, thereby superseding all oral negotiations and prior writing
with respect to the subject matter thereof.  No course of prior dealings between
the parties and no usage of the trade shall be relevant to supplement or explain
the terms or provisions of this Security Agreement.  Acceptance or acquiescence
in the course of performance rendered under this Security Agreement shall not be
relevant to determine the meaning of this Security Agreement even though the
accepting or acquiescing party has knowledge of the nature of the performance or
opportunity for objection.

 
[SIGNATURE PAGES FOLLOW]

 
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
 
 

Debtors: PHOTOTRON HOLDINGS, INC.                  
 
By:
/s/ Brian B. Sagheb      
Brian B. Sagheb
     
Chief Executive Officer
 

 
 

  GROWLIFE, INC.                
 
By:
 /s/ Brian B. Sagheb      
Brian B. Sagheb
     
Chief Executive Officer
 

  PHOTOTRON, INC.                  
 
By:
 /s/ Brian B. Sagheb      
Brian B. Sagheb
     
Chief Executive Officer
 

Secured Party Representative: W-NET FUND I, LP                  
 
By:
/s/ David Weiner      
David Weiner
     
Manager of the General Partner
 

Secured Party: W-NET FUND I, LP                  
 
By:
/s/ David Weiner      
David Weiner
     
Manager of the General Partner
 

SIGNATURE PAGE TO SECURITY AGREEMENT
 
 
 

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EXHIBIT A

FORM OF SENIOR SECURED PROMISSORY NOTE