SECURITY AGREEMENT

 

SECURITY AGREEMENT, dated as of July 31, 2013 between IM BRANDS, LLC, a Delaware
limited liability company (the “Borrower”) with its principal office located at
475 Tenth Avenue, New York, New York 10018, and Bank Hapoalim B.M., an Israeli
banking corporation licensed to do business in the State of New York (the
“Bank”) with its New York office located at 1177 Avenue of the Americas, New
York, NY 10036.

 

WHEREAS, the Borrower will enter into credit facilities with the Bank, evidenced
by the various loan documents (each, as amended and in effect from time to time,
a “Loan Document” and together, as amended and in effect from time to time, the
“Loan Documents”), including an additional separate and distinct credit facility
with the Bank dated as of this date (as evidenced by such documents dated as of
this date as may be amended and in effect from time to time, the “Credit
Agreements”, which shall also be deemed to be “Loan Documents”), with the Bank
pursuant to which the Bank, subject to the terms and conditions contained
therein, is to make loans or otherwise to extend credit to the Borrower; and

 

WHEREAS, it is a condition precedent to the Bank’s making credit available to
the Borrower under the Credit Agreements and to make any loans or otherwise
extend credit to the Borrower under the Loan Documents, that the Borrower
execute and deliver to the Bank a security agreement in substantially the form
hereof; and

 

WHEREAS, the Borrower wishes to grant security interests in favor of the Bank as
herein provided;

 

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

 

1.          Definitions. All capitalized terms used herein without definitions
shall have the respective meanings provided therefor in the Loan Documents. The
term “State”, as used herein, means the State of New York. All terms defined in
the Uniform Commercial Code of the State and used herein shall have the same
definitions herein as specified therein. However, if a term is defined in
Article 9 of the Uniform Commercial Code of the State differently than in
another Article of the Uniform Commercial Code of the State, the term has the
meaning specified in Article 9. The term “Obligations”, as used herein, means
all of the indebtedness, obligations and liabilities of the Borrower to the
Bank, individually or collectively, whether direct or indirect, joint or
several, absolute or contingent, due or to become due, now existing or hereafter
arising under or in respect of the Loan Documents, any promissory notes or other
instruments or agreements executed and delivered pursuant thereto or in
connection therewith, or this Agreement. The term “Loan Document(s)”, as used
herein, includes the Credit Agreements, promissory notes or other instruments,
letter of credit applications and agreements, this Agreement, and any other
agreement between the Borrower and the Bank, relating to a credit facility or
facilities extended by the Bank to the Borrower. The term “Event of Default”, as
used herein, means the failure of the Borrower to pay or to perform any of the
Obligations, or any of the other terms or conditions, as and when due to be paid
or performed under the terms of any Loan Document, or a default as set forth in
any Loan Document.

 

 

 

 

2.          Grant of Security Interest. The Borrower hereby grants to the Bank,
to secure the payment and performance in full of all of the Obligations, a
security interest in and so pledges and assigns to the Bank the following
properties, assets and rights of the Borrower, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof
(all of the same being hereinafter called the “Collateral”): all personal and
fixture property of every kind and nature including without limitation all goods
(including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including health-care
insurance receivables), chattel paper (whether tangible or electronic), deposit
accounts, letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing), commercial tort claims, securities and all other
investment property, supporting obligations, any other contract rights or rights
to the payment of money, insurance claims and proceeds, tort claims and all
general intangibles (including all payment intangibles). The Bank acknowledges
that the attachment of its security interest in any commercial tort claim as
original collateral is subject to the Borrower’s compliance with Section 4.7.

 

3.          Authorization to File Financing Statements. The Borrower hereby
irrevocably authorizes the Bank at any time and from time to time to file in any
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all assets of the
Borrower or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the State or such jurisdiction, or (ii) as being of an equal
or lesser scope or with greater detail, and (b) contain any other information
required by part 5 of Article 9 of the Uniform Commercial code of the State for
the sufficiency or filing office acceptance of any financing statement or
amendment, including whether the Borrower is an organization, the type of
organization and any organization identification number issued to the Borrower.
The Borrower agrees to furnish any such information to the Bank promptly upon
request. The Borrower also ratifies its authorization for the Bank to have filed
in any Uniform Commercial Code jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.

 

4.          Other Actions. Further to insure the attachment, perfection and
first priority of, and the ability of the Bank to enforce, the Bank’s security
interest in the Collateral, the Borrower agrees, in each case at the Borrower’s
own expense, to take the following actions with respect to the following
Collateral:

 

4.1          Promissory Notes and Tangible Chattel Paper. If the Borrower shall
at any time hold or acquire any promissory notes or tangible chattel paper, the
Borrower shall promptly notify the Bank thereof, and, upon the Bank’s request
and option, endorse, assign and deliver the same to the Bank, accompanied by
such instruments of transfer or assignment duly executed in blank as the Bank
may from time to time specify.

 

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4.2          Deposit Accounts. For each deposit account that the Borrower at any
time opens or maintains, the Borrower shall, at the Bank’s request and option,
pursuant to an agreement in form and substance satisfactory to the Bank, either
(a) cause the depository bank to agree to comply at any time with instructions
from the Bank to such depository bank directing the disposition of funds from
time to time credited to such deposit account, without further consent of the
Borrower, or (b) arrange for the Bank to become the customer of the depositary
bank with respect to the deposit account, with the Borrower being permitted,
only with the consent of the Bank, to exercise rights to withdraw funds from
such deposit account. The Bank agrees with the Borrower that the Bank shall not
give any such instructions or withhold any withdrawal rights from the Borrower
unless an Event of Default has occurred and is continuing or, after giving
effect to any withdrawal not otherwise permitted by the Loan Documents, would
occur. The provisions of this paragraph shall not apply to (i) deposit accounts
for which the Bank is the Depositary and (ii) deposit accounts specially and
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of the Borrower’s salaried employees.

 

4.3          Investment Property. If the Borrower shall at any time hold or
acquire any certificated securities, the Borrower shall forthwith endorse,
assign and deliver the same to the Bank, accompanied by such instruments of
transfer or assignment duly executed in blank as the Bank may from time to time
specify. If any securities now or hereafter acquired by the Borrower are
uncertificated and are issued to the Borrower or its nominee directly by the
issuer thereof, the Borrower shall immediately notify the Bank thereof and, at
the Bank’s request and option, pursuant to an agreement in form and substance
satisfactory to the Bank, either (a) cause the issuer to agree to comply with
instructions from the Bank as to such securities, without further consent of the
Borrower or such nominee, or (b) arrange for the Bank to become the registered
owner of the securities. If any securities, whether certificated or
uncertificated, or other investment property now or hereafter acquired by the
Borrower are held by the Borrower or its nominee through a securities
intermediary or commodity intermediary, the Borrower shall immediately notify
the Bank thereof and, at the Bank’s request and option, pursuant to an agreement
in form and substance satisfactory to the Bank, either (i) cause such securities
intermediary or (as the case may be) commodity intermediary to agree to comply
with entitlement orders or other instructions from the Bank to such securities
intermediary as to such securities or other investment property, or (as the case
may be) commodity intermediary to agree to comply with entitlement orders or
other instructions from the Bank to such securities intermediary as to such
securities or other investment property, or (as the case may be) to apply any
value distributed on account of any commodity contract as directed by the Bank
to such commodity intermediary, in each case without further consent of the
Borrower or such nominee, or (ii) in the case of financial assets or other
investment property held, with the Borrower being permitted, only with the
consent of the Bank, to exercise rights to withdraw or otherwise deal with such
investment property. The Bank agrees with the Borrower that the Bank shall not
give any such entitlement orders or instructions or directions to any such
issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by the
Borrower, unless an Event of Default has occurred and is continuing, or, after
giving effect to any such investment and withdrawal rights not otherwise
permitted by the Loan Documents, would occur. The provisions of this paragraph
shall not apply to any financial assets credited to a securities account for
which the Bank is the securities intermediary.

 

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4.4          Collateral in the Possession of a Bailee. If any Collateral having
a value of $100,000 is at any time in the possession of a bailee, the Borrower
shall promptly notify the Bank thereof and, if requested by the Bank, shall
promptly obtain an acknowledgment from the bailee, in form and substance
satisfactory to the Bank, that the bailee holds such Collateral for the benefit
of the Bank and shall act upon the instructions of the Bank, without the further
consent of the Borrower. The Bank agrees with the Borrower that the Bank shall
not give any such instructions unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by the Borrower
with respect to the bailee.

 

4.5          Electronic Chattel paper and Transferable Records. If the Borrower
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, the Borrower shall promptly notify the Bank thereof and, at the
request of the Bank, shall take such action as the Bank may reasonably request
to vest in the Bank control, under Section 9-105 of the Uniform Commercial Code,
of such electronic chattel paper or control under Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in
such jurisdiction, of such transferable record. The Bank agrees with the
Borrower that the Bank will arrange, pursuant to procedures satisfactory to the
Bank and so long as such procedures will not result in the Bank’s loss of
control, for the Borrower to make alterations to the electronic chattel paper or
transferable record permitted under UCC Section 9-105 or, as the case may be,
Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act or Section 16 of the Uniform Electronic Transactions Act for a party in
control to make without loss of control, unless an Event of Default has occurred
and is continuing or would occur after taking into account any action by the
Borrower with respect to such electronic chattel paper or transferable record.

 

4.6          Letter-of-credit Rights. If the Borrower is at any time a
beneficiary under a letter of credit now or hereafter issued in favor of the
Borrower, the Borrower shall promptly notify the Bank thereof and, at the
request and option of the Bank, the Borrower shall, pursuant to an agreement in
form and substance satisfactory to the Bank, either (i) arrange for the issuer
and any confirmer of such letter of credit to consent to an assignment to the
Bank of the proceeds of any drawing under the letter of credit, or (ii) arrange
for the Bank to become the transferee beneficiary of the letter of credit, with
the Bank agreeing, in each case, that the proceeds of the letter of credit are
to be applied as provided in the Loan Documents.

 

4.7          Commercial Tort Claims. If the Borrower shall at any time hold or
acquire a commercial tort claim, the Borrower shall immediately notify the Bank
in a writing signed by the Borrower of the brief details thereof and grant to
the Bank in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to the Bank.

 

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4.8          Other Actions as to any and all Collateral. The Borrower further
agrees to take any other action reasonably requested by the Bank to insure the
attachment, perfection and first priority of, and the ability of the Bank to
enforce, the Bank’s security interest in any and all of the Collateral
including, without limitation, (a) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that the Borrower’s signature thereon is
required therefor, (b) causing the Bank’s name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Bank to enforce, the
Bank’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 if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Bank to enforce, the Bank’s security interest in
such Collateral, (d) obtaining governmental and other third party consents and
approvals, 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 the Bank and (f) taking all
actions required by any earlier versions of the Uniform Commercial Code or by
other law, as applicable in any relevant Uniform Commercial Code jurisdiction,
or by other law as applicable in any foreign jurisdiction.

 

5.          [Reserved].

 

6.          Representations and Warranties Concerning Borrower’s Legal Status.
The Borrower has previously delivered to the Bank a certificate signed by the
Borrower entitled “Perfection Certificate” (the “Perfection Certificate”). The
Borrower represents and warrants to the Bank as follows: (a) the Borrower’s
exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof, (b) the Borrower is an organization of the type and
organized in the jurisdiction set forth in the Perfection Certificate, (c) the
Perfection Certificate accurately sets forth the Borrower’s organizational
identification number or accurately states that the Borrower has none, (d) the
Perfection Certificate accurately sets forth the Borrower’s place of business
or, if more than one, its chief executive office as well as the Borrower’s
mailing address if different and (e) all other information set forth on the
Perfection Certificate pertaining to the Borrower is accurate and complete.

 

7.          Covenants Concerning Borrower’s Legal Status. The Borrower covenants
with the Bank as follows: (a) without providing at least 30 days prior written
notice to the Bank, the Borrower will not change its name, its place of business
or, if more than one, chief executive office, or its mailing address or
organizational identification number if it has one, (b) if the Borrower does not
have an organizational identification number and later obtains one, the Borrower
shall forthwith notify the Bank of such organizational identification number,
and (c) the company will not change its type of organization, jurisdiction of
organization or other legal structure.

 

8.          Representations and Warranties Concerning Collateral, Etc. The
Borrower further represents and warrants to the Bank as follows: (a) the
Borrower is the owner of or has other rights in or power to transfer the
Collateral, free from any adverse lien, security interest or other encumbrance,
except for the security interest created by this Agreement, (b) none of the
Collateral constitutes, or is the proceeds of, “farm products” as defined in
Section 9-102(a)(34) of the Uniform Commercial Code of the State, (c) none of
the account debtors or other persons obligated on any of the Collateral is a
governmental authority subject to the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) the
Borrower holds no commercial tort claims, and (e) the Borrower has at all times
operated its business in compliance with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances and (f) all
other information set forth on the Perfection Certificate pertaining to the
Collateral is accurate and complete.

 

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9.          Covenants Concerning Collateral, Etc. The Borrower further covenants
with the Bank as follows: (a) the Collateral, to the extent not delivered to the
Bank pursuant to Section 4, will be kept at those locations listed on the
Perfection Certificate and the Borrower will not remove the Collateral from such
locations without providing at least 30 days prior written notice to the Bank,
(b) except for the security interest herein granted and liens permitted by a
Credit Agreement, the Borrower shall be the owner of or have other rights in the
Collateral free from any lien, security interest or other encumbrance, and the
Borrower shall defend the same against all interests therein adverse to the
Bank, (c) the Borrower shall not pledge, mortgage or create, or suffer to exist
a security interest in the Collateral in favor of any person other than the
Bank, (d) the Borrower will keep the Collateral in good order and repair and
will not use the same in violation of law or any policy of insurance thereon,
(e) the Borrower will permit the Bank, or its designee, to inspect the
Collateral at any reasonable time, wherever located, (f) the Borrower will pay
promptly when due all taxes, assessments, governmental charges and levies upon
the Collateral or incurred in connection with the use or operation of such
Collateral or incurred in connection with this Agreement, (g) the Borrower will
continue to operate, its business in compliance with all applicable provisions
of the federal Fair Labor Standards Act as amended, and with all applicable
provisions of federal, state and local statutes and ordinances dealing with the
control, shipment, storage or disposal of hazardous materials or substances, and
(h) the Borrower will not sell or otherwise dispose, or offer to sell or
otherwise dispose, of the Collateral or any interest therein except for the sale
of inventory in the ordinary course of business. In the event of any
inconsistency between the covenants made in the Intellectual Property Security
Agreement, dated as of the date hereof, between the Borrower and the Bank (as
amended, restated, supplemented or otherwise modified from time to time, the “IP
Security Agreement”), with respect to the Borrower’s Copyrights, Trademarks and
Licenses (as such terms are defined in the IP Security Agreement), and those
covenants made in this Security Agreement with respect to that portion of the
Collateral consisting of such Copyrights, Trademarks and Licenses, the covenants
set forth in the IP Security Agreement shall prevail with respect to such
inconsistency.

 

10.          Insurance.

 

10.1          Maintenance of Insurance. The Borrower will maintain, with
financially sound and reputable insurers, insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas. Such insurance shall be in such minimum amounts that
the Borrower will not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms to be in such forms and be for such periods as may be reasonably
satisfactory to the Bank. In addition, all such insurance shall be payable to
the Bank as lender’s loss payee under a “standard” or “New York” lender’s loss
payee clause. Without limiting the foregoing, the Borrower will (i) keep all of
its physical property insured with casualty or physical hazard insurance on an
“all risks” basis, with electronic data processing coverage, with a full
replacement cost endorsement and an “agreed amount” clause in an amount equal to
100% of the full replacement cost of such property, (ii) maintain all such
workers’ compensation or similar insurance as may be required by law and (iii)
maintain, in amounts and with deductibles equal to those generally maintained by
business engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of the Borrower; business
interruption insurance; and product liability insurance.

 

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10.2          Insurance Proceeds. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with a prior interest in the property covered
thereby, (i) so long as no Default or Event of Default has occurred and is
continuing and to the extent that the amount of such proceeds is less than
$25,000.00, be disbursed to the Borrower for direct application by the Borrower
solely to the repair or replacement of the Borrower’s property so damaged or
destroyed and (ii) in all other circumstances, be held by the Bank as cash
collateral, upon such terms and conditions as the Bank may reasonably prescribe,
for direct application by the Borrower solely to the repair or replacement of
the Borrower’s property so damaged or destroyed, or upon the Borrower’s prior
written consent, the Bank may apply all or any part of such proceeds to the
Obligations with the Commitment (if not then terminated) being reduced by the
amount so applied to the Obligations.

 

10.3          Notice of Cancellation, etc. All policies of insurance shall
provide for at least 30 days prior written cancellation notice to the Bank. In
the event of failure by the Borrower to provide and maintain insurance as herein
provided, the Bank may, at its option and upon prior written notice to the
Borrower, provide such insurance and charge the amount thereof to the Borrower.
The Borrower shall furnish the Bank with certificates of insurance and policies
evidencing compliance with the foregoing insurance provision.

 

11.          Collateral Protection Expenses; Preservation of Collateral.

 

11.1          Expenses Incurred by Bank. In its discretion and upon prior
written notice to the Borrower, the Bank may discharge taxes and other
encumbrances at any time levied or placed on any of the Collateral, make repairs
thereto and pay any necessary filing fees or, if the debtor fails to do so,
insurance premiums. The Borrower agrees to reimburse the Bank on demand for any
and all expenditures so made. The Bank shall have no obligation to the Borrower
to make any such expenditures, nor shall the making thereof relieve the Borrower
of any default.

 

11.2          Bank’s Obligations and Duties. Anything herein to the contrary
notwithstanding, the Borrower shall remain liable under each contract or
agreement comprised in the Collateral to be observed or performed by the
Borrower thereunder. The Bank shall not have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement or
the receipt by the Bank of any payment relating to any of the Collateral, nor
shall the Bank be obligated in any manner to perform any of the obligations of
the Borrower under or pursuant to any such contract or agreement, to make
inquiry as to the nature or sufficiency of any payment received by the Bank in
respect of the Collateral or as to the sufficiency of any performance by any
party under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Bank or to which the Bank may be
entitled at any time or times. The Bank’s sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Uniform Commercial Code of the State or otherwise,
shall be to deal with such Collateral in the same manner as the Bank deals with
similar property for its own account.

 

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12.          Securities and Deposits. The Bank may at any time following and
during the continuance of an Event of Default, at its option, transfer to itself
or any nominee any securities constituting Collateral, receive any income
thereon and hold such income as additional Collateral or apply it to the
Obligations. Whether or not any Obligations are due, the Bank may following and
during the continuance of an Event of Default demand, sue for, collect, or make
any settlement or compromise which it deems desirable with respect to the
Collateral. Regardless of the adequacy of Collateral or any other security for
the Obligations, any deposits or other sums at any time credited by or due from
the Bank to the Borrower may at any time be applied to or set off against any of
the Obligations.

 

13.          Notification to Account Debtors and Other Persons Obligated on
Collateral. If an Event of Default shall have occurred and be continuing, the
Borrower shall, at the request of the Bank, notify account debtors and other
persons obligated on any of the Collateral of the security interest of the Bank
in any account, chattel paper, general intangible, instrument or other
Collateral and that payment thereof is to be made directly to the Bank or to any
financial institution designated by the Bank as the Bank’s agent therefor, and
the Bank may itself, if an Event of Default shall have occurred and be
continuing, upon prior written notice to the Borrower, so notify account debtors
and other persons obligated on Collateral. After the making of such a request or
the giving of any such notification, the Borrower shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by the Borrower as trustee for the Bank without
commingling the same with other funds of the Borrower and shall turn the same
over to the Bank in the identical form received, together with any necessary
endorsements or assignments. The Bank shall apply the proceeds of collection of
accounts, chattel paper, general intangibles, instruments and other Collateral
received by the Bank to the Obligations, such proceeds to be immediately entered
after final payment in cash or other immediately available funds of the items
giving rise to them.

 

14.          Power of Attorney.

 

14.1          Appointment and Powers of Bank. The Borrower hereby irrevocably
constitutes and appoints the Bank and any officer or agent thereof, with full
power of substitution, as its true and lawful attorneys-in-fact with full
irrevocable power and authority in the place and stead of the Borrower or in the
Bank’s own name, for the purpose of carrying out the terms of this Agreement, to
take any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives said attorneys the power and right, on behalf of the Borrower, without
notice to or assent by the Borrower, to do the following: upon the occurrence
and during the continuance of an Event of Default, generally to sell, transfer,
pledge make any agreement with respect to or otherwise deal with any of the
Collateral in such manner as is consistent with the Uniform Commercial Code of
the State and as fully and completely as though the Bank were the absolute owner
thereof for all purposes, and to do at the Borrower’s expense, at any time, or
from time to time, all acts and things which the Bank deems necessary to
protect, preserve or realize upon the Collateral and the Bank’s security
interest therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Borrower might do, including, without limitation, (i) the
filing and prosecuting of registration and transfer applications with the
appropriate federal or local agencies or authorities with respect to trademarks,
copyrights and patentable inventions and processes, (ii) upon written notice to
the Borrower, the exercise of voting rights with respect to voting securities,
which rights may be exercised, if the Bank so elects, with a view to causing the
liquidation in a commercially reasonable manner of assets of the issuer of any
such securities and (iii) the execution, delivery and recording, in connection
with any sale or other disposition of any Collateral, of the endorsements,
assignments or other instruments of conveyance or transfer with respect to such
Collateral.

 

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14.2          Ratification by Borrower. To the extent permitted by law, the
Borrower hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.

 

14.3          No Duty on Bank. The power conferred on the Bank hereunder are
solely to protect its interests in the Collateral and shall not impose any duty
upon it to exercise any such powers. The Bank shall be accountable only for the
amounts that it actually receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or agents shall be
responsible to the Borrower for any act or failure to act, except for the Bank’s
own gross negligence or willful misconduct.

 

15.          Remedies. If an Event of Default shall have occurred and be
continuing, the Bank may, without notice to or demand upon the Borrower, declare
this Agreement to be in default, and the Bank shall thereafter have in any
jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial of the State or of any jurisdiction in which Collateral is
located, including, without limitation, the right to take possession of the
Collateral, and for that purpose the Bank may, so far as the Borrower can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. The Bank may in its discretion require
the Borrower to assemble all or any part of the Collateral at such location or
locations within the jurisdiction(s) of the Borrower’s principal office(s) or at
such other locations as the Bank may reasonably designate. Unless the Collateral
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, the Bank shall give to the Borrower at
least ten (10) Business Days prior written notice of the time and place of any
public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made. The Borrower hereby acknowledges that
ten (10) Business Days prior written notice of such sale or sales shall be
reasonable notice. In addition, the Borrower waives any and all rights that is
may have to a judicial hearing in advance of the enforcement of any of the
Bank’s rights hereunder, including without limitation, its right following an
Event of Default to take immediate possession of the Collateral and to exercise
its rights with respect thereto.

 

16.          [Reserved].

 

9

 

 

17.          No Waiver by Bank, etc. The Bank shall not be deemed to have waived
any of its rights upon or under the Obligations or the Collateral unless such
waiver shall be in writing and signed by the Bank. No delay or omission on the
part of the Bank in exercising any right shall operate as a waiver of such right
or any other right. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right on any future occasion. All rights and remedies of the
Bank with respect to the Obligations or the Collateral, whether evidenced hereby
or by any other instrument or papers, shall be cumulative and may be exercised
singularly, alternatively, successively or concurrently at such time or at such
times as the Bank deems expedient.

 

18.          Suretyship Waivers by Borrower. The Borrower waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. With respect to
both the Obligations and the Collateral, the Borrower assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Bank may deem advisable. The Bank shall have no duty
as to the collection or protection of the Collateral or any income thereon, nor
as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the safe custody thereof as
set forth in Section 11.2. The Borrower further waives any and all other
suretyship defenses.

 

19.          Marshalling. The Bank shall not be required to marshal any present
or future collateral security (including but not limited to this Agreement and
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 hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that it
lawfully may, the Borrower 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 the Bank’s rights under this 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,
the Borrower hereby irrevocably waives the benefits of all such laws.

 

20.          Proceeds of Dispositions; Expenses. The Borrower shall pay to the
Bank on demand any and all expenses, including reasonable attorneys’ fees and
disbursements, incurred or paid by the Bank in protecting, preserving or
enforcing the Bank’s rights under or in respect of any of the Obligations or any
of the Collateral. After deducing all of said expenses, the residue of any
proceeds of collection or sale of the Obligations or Collateral shall, to the
extent actually received in cash, be applied to the payment of the Obligations
in such order or preference as the Bank may determine, proper allowance and
provision being made for any Obligations not then due. Upon the final payment
and satisfaction in full of all of the Obligations and after making any payments
required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial
Code of the State, any excess shall be returned to the Borrower, and the
Borrower shall remain liable for any deficiency in the payment of the
Obligations.

 

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21.          Overdue Amounts. Until paid, all amounts due and payable by the
Borrower hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest for overdue
principal set forth in the Loan Documents.

 

22.          Governing Law; Consent to Jurisdiction. THIS AGREEMENT IS INTENDED
TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Borrower agrees that any
suit for the enforcement of this Agreement may be brought in the courts of the
State of New York sitting in New York County, or any federal court sitting
therein, and consents to the non-exclusive jurisdiction of such courts and to
service of process in any such suit being made upon the Borrower, by mail, at
the address specified in the initial paragraph of this Agreement, or at any
address specified for the Borrower in any Loan Document. The Borrower hereby
waives any objection that it may now or hereafter have to the venue of any such
suit or any such court or that such suit is brought in an inconvenient court.

 

23.          Waiver of Jury Trial. THE BORROWER WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
ANY SUCH RIGHTS OR OBLIGATIONS. The Borrower (i) certifies that neither the Bank
nor any representative, agent or attorney of the Bank has represented expressly
or otherwise, that the Bank would not, in the event of litigation, seek to
enforce the foregoing waiver and (ii) acknowledges that, in entering into the
Credit Agreement and the other Loan Documents to which the Bank is a party, the
Bank is relying upon, among other things, the waiver and certification contained
in this Section 23.

 

24.          Miscellaneous. The headings of each section of this Agreement are
for convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Borrower and its respective successors and assigns, and shall inure to the
benefit of the Bank and its successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and not be enforceable as if such invalid, illegal or
unenforceable terms had not been included herein. The Borrower acknowledges
receipt of a copy of this Agreement.

 

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11

 

 

IN WITNESS WHEREOF, intending to be legally bound, the Borrower has caused this
Agreement to be duly executed as of the date first above written.

 

  IM BRANDS, LLC

 

  By:  Xcel Brands, Inc., Its Manager       By: /s/ James F. Haran     Name:
James F. Haran     Title: Chief Financial Officer

 

  BANK HAPOALIM B.M.       By: /s/ Mitchell Barnett     Name:  Mitchell Barnett
    Title:  Senior Vice President       By: /s/ Lavea Eisenberg     Name:  Lavea
Eisenberg Barnett     Title:  First Vice President

 

SIGNATURE PAGE TO
SECURITY AGREEMENT

 

 

 

 

CERTIFICATE OF ACKNOWLEDGMENT

 

STATE OF _______________ )   ) ss. COUNTY OF _______________ )

 

Before me, the undersigned, a Notary Public in and for the county aforesaid on
this ___ day of _________, 2013, personally appeared ___________________ to me
known personally, and who, being by me duly sworn, deposes and says that (s)he
is the ________________ of Xcel Brands, Inc., the Manager of IM Brands, LLC, and
that said instrument was signed on behalf of said entity and acknowledged said
instrument to be the free act and deed of said limited liability company.

 

      Notary Public   My commission expires:

 

NOTARY PAGE TO

SECURITY AGREEMENT