EXHIBIT 10.13

SECURITY AGREEMENT

SECURITY AGREEMENT (this “Security Agreement”) dated as of March 20, 2009 by
PERF GO-GREEN HOLDINGS, INC., a Delaware corporation (the “Debtor”) in favor of
STAR FUNDING, INC., a New York corporation (the “Creditor”).

RECITALS:

A.           Concurrently herewith, Perf-Go Green, Inc., a Delaware corporation
that is 100% owned by Debtor (“Perf-Go”) is executing and delivering a Factoring
Agreement between Perf-Go and the Creditor (as it may be amended, restated,
modified or supplemented from time to time, the “Factoring Agreement”) and a
Supply Agreement between Perf-Go and the Creditor (as it may be amended,
restated, modified or supplemented from time to time, the “Supply Agreement”),
in each case dated as of the date hereof

B.           Concurrently herewith, Debtor is executing and delivering a
Guarantee of even date herewith in favor of the Creditor (as it may be amended,
restated, modified or supplemented from time to time, the “Guarantee”), pursuant
to which the Debtor is unconditionally and irrevocably guaranteeing all of the
obligations of Perf-Go to the Creditor, including without limitation all the
obligations of Perf-Go under the Factoring Agreement and Supply Agreement.

C.           The Creditor will not consider entering into the Factoring
Agreement and purchasing receivables thereunder, nor extending financial
accommodations to Perf-Go under the Supply Agreement, unless, among other
things, the Debtor execute and deliver this Security Agreement and grant to the
Creditor a security interest in the Collateral specified herein.

ACCORDINGLY, in consideration of the premises, and in order to induce the
Creditor to execute and deliver the Factoring Agreement and Supply Agreement,
and to extend credit, purchase accounts receivable and provide other financial
accommodations thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Debtor hereby
agrees with the Creditor as follows:

I.           Defined Terms. (a) Capitalized terms that are defined in the
Factoring Agreement or Supply Agreement and are not otherwise defined herein
have the respective meanings given to them in said documents and, in addition,
the following terms have the meanings set forth in this Section 1. Capitalized
terms used but not defined in this Agreement that are defined in Article 9 of
the UCC shall have the respective meanings given such terms in Article 9 of the
UCC as in effect as of the date hereof.

“Accounts” means all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to the Debtor (including
under any trade names, styles or divisions thereof), whether arising from (a)
the sale, lease, licensing, assignment or other disposition of goods by the
Debtor, (b) services rendered or to be rendered by the Debtor, (c) a policy of
insurance issued or to be issued by the Debtor, (d) a secondary obligation
incurred or to be incurred by the Debtor, or (e) any other transaction, whether
or not the same involves any of the foregoing and all of the Debtor’s rights in,
to and under all purchase orders now owned or hereafter received or acquired by
it for goods or services, and all of the Debtor’s rights to any goods
represented by any of the foregoing (including returned or repossessed goods and
unpaid seller’s rights) and all moneys due or to become due to the Debtor under
all contracts for the sale of goods and/or the performance of services by the
Debtor (whether or not yet earned by performance) or in connection with any
other transaction, now in existence or hereafter arising, including the right to
receive the proceeds of said purchase orders and contracts, and all collateral
security and guarantees of any kind given by any person or entity with respect
to any of the foregoing. The term “Accounts” shall in any event include, without
limitation, all “accounts” as such term is defined in the UCC, whether now
existing or hereafter created and whether now owned or hereafter acquired by the
Debtor.
 
 
 

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“Collateral” has the meaning specified in Section 2.

“Commodity Account” means any “commodity account”, as such term is defined in
the UCC, whether now existing or hereafter created and whether now owned or
hereafter acquired by the Debtor.

“Commodity Contract” means any “commodity contract”, as such term is defined in
the UCC, whether now existing or hereafter created and whether now owned or
hereafter acquired by the Debtor or to which the Debtor is now or at any time
hereafter a party.

“Contracts” means all contracts to which the Debtor is, or may at any time
hereafter become, a party or in which it now has or may at any time hereafter
acquire an interest, and all agreements and undertakings of any third parties in
favor or for the benefit of the Debtor.

“Contract Rights” means any right of the Debtor to payment under a Contract not
yet earned by performance and not evidenced by an Instrument or Chattel Paper,
now in existence or hereafter arising (including (a) all rights of the Debtor to
receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of the Debtor to damages arising out of, or for,
breach or default in respect thereof and (c) all rights of the Debtor to perform
and to exercise all remedies thereunder).

“Copyrights” means all of the following to the extent that the Debtor now has or
hereafter acquires any right, title or interest therein: (a) all copyrights in
all works, whether published or unpublished, now existing or hereafter created
or acquired, whether registered or unregistered, whether created by statute or
common law, (b) all registrations and recordings thereof, all applications in
connection therewith, including registrations, recordings and applications in
the United States Copyright Office, and all renewals of such registrations,
recordings or applications.

“Copyright Licenses” means any agreement, written or oral, naming the Debtor as
licensor or licensee, granting any right to use any Copyright, now in existence
or hereafter arising.

“Factoring Agreement” has the meaning specified in Recital A.

“Financial Asset” means any “financial asset”, as such term is defined in the
UCC, whether now existing or hereafter created and whether now owned or
hereafter acquired by the Debtor.

“Guarantee” has the meaning specified in Recital B.

“Intellectual Property” means, collectively, all Patents, Patent Licenses,
Trademarks, Trademark Licenses, Copyrights and Copyright Licenses.

“Leases” means all leasehold interests now or at any time hereafter held by the
Debtor.

“Licenses” and “Licensing Agreements” means the Patent Licenses, the Copyright
Licenses and the Trademark Licenses.

 
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“Lien” means any mortgage, pledge, hypothecation, assignment, security interest,
encumbrance, lien (statutory or otherwise), preference, priority, or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including conditional sale or other title retention agreement).

“Obligations” means all indebtedness and other liabilities and obligations of
the Debtor and Perf-Go to the Creditor, now existing or hereafter arising,
including without limitation all of its obligations to the Creditor under the
Factoring Agreement, the Supply Agreement, the Guarantee, and any related
documents or instruments.

“Patents” means (a) all patents and patent applications and the inventions and
improvements described and claimed therein, and all patentable inventions, now
owned or hereafter acquired or obtained by the Debtor, (b) all registrations and
recordings thereof, whether in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, or otherwise, (c) all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any of the foregoing, (d) all income, royalties,
damages or payments now and hereafter due and/or payable under or with respect
to any of the foregoing, including damages or payments for past or future
infringements of any of the foregoing, (e) the right to sue for past, present
and future infringements of any of the foregoing throughout the world, and (f)
all rights and obligations pursuant to any Patent License with respect thereto,
whether the Debtor is a licensor or licensee under any such Patent License, and,
subject to the terms of such licenses, the right to prepare for sale, sell and
advertise for sale, all Inventory now or hereafter owned by the Debtor and now
or hereafter covered by such licenses.

“Patent License” means any agreement, written or oral, providing for the grant
by or to the Debtor of any right to use any Patent, now in existence or
hereafter arising.

“Perf-Go” has the meaning specified in Recital A.

“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP; (ii) any statutory Lien
arising in the ordinary course of business by operation of law with respect to a
liability that is not yet due or delinquent; (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens,
arising in the ordinary course of business with respect to a liability that is
not yet due or delinquent or that are being contested in good faith by
appropriate proceedings; (iv) Liens in respect of security deposits provided in
the ordinary course of business and consistent with past practices; (v) Liens
(A) upon or in any equipment acquired or held by the Company or any of its
subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
equipment, or (B) existing on such equipment at the time of its acquisition,
provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment; (vi) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) and (v) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase; (vii) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payments of
custom duties in connection with the importation of goods; and (viii) the
security interests in favor of those certain third party lenders that are
subject to the Subordination Agreement.

 
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“Proceeds” means (a) all “proceeds”, as such term is defined in the UCC, and (b)
to the extent not included in such definition, (i) any and all proceeds of any
insurance, indemnity, warranty, guaranty or letter of credit payable to the
Debtor from time to time with respect to any of the Collateral, (ii) all
payments (in any form whatsoever) paid or payable to the Debtor from time to
time in connection with any taking of all or any part of the Collateral by any
governmental authority (or any Person acting under color of governmental
authority), (iii) all judgments in favor of the Debtor in respect of the
Collateral, (iv) any claim of the Debtor against third parties for past, present
or future infringement or dilution of any Patent or Patent License Trademark or
Trademark License, Copyright or Copyright License and (v) all other amounts from
time to time paid or payable or received or receivable under or in connection
with any of the Collateral.

“Securities Account” means any “securities account”, as such term is defined in
the UCC, whether now existing or hereafter created and whether now owned or
hereafter acquired by the Debtor.

“Securities Entitlement” means any “securities entitlement”, as such term is
defined in the UCC, whether now existing or hereafter created and whether now
owned or hereafter acquired by the Debtor.

“Subordination Agreement” means the Subordination Agreement of even date
herewith among the Debtor, the Creditor, Perf-Go and certain third party
lenders.

“Supply Agreement” has the meaning specified in Recital A.

“Trademarks” means (a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and the goodwill associated
therewith, now existing or hereafter adopted or acquired by the Debtor, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and (b) all renewals
thereof.

“Trademark Licenses” means any agreement, written or oral, providing for the
grant by or to the Debtor of any right to use any Trademark, now in existence or
hereafter arising.

“Transaction Document” means the Factoring Agreement, the Supply Agreement, the
Guarantee, this Security Agreement and each other instrument, document or
agreement executed or delivered in connection with any of the foregoing.

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York.

(b)    Unless otherwise expressly specified herein, defined terms denoting the
singular number shall, when in the plural form, denote the plural number of the
matter or item to which such defined terms refer, and vice-versa.

(c)    Words of the neuter gender mean and include correlative words of the
masculine and feminine gender.

(d)    The Section and Schedule headings used in this Security Agreement are for
convenience only and shall not affect the construction or meaning of any
provisions of this Security Agreement.
 
 
 
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(e)    Unless otherwise specified, the words “hereof”, “herein”, “hereunder” and
other similar words refer to this Security Agreement as a whole and not just to
the Section, subsection or clause in which they are used; and the words “this
Security Agreement” refer to this Security Agreement, as amended, restated,
modified or supplemented from time to time.

(f)    Whenever the words “included”, “includes” or “including” are used in this
Security Agreement, they shall be deemed to be followed by the words “without
limitation”.

(g)    Unless otherwise specified, references to Sections, Recitals and
Schedules are references to Sections of, and Recitals and Schedules to, this
Security Agreement.

2.    Security Interest.  (a)  As security for the due and punctual payment and
performance of the Obligations, the Debtor hereby pledges and assigns to the
Creditor, and hereby grants to the Creditor a lien upon and a continuing
security interest in, all personal property and fixtures of the Debtor, whether
now owned or hereafter acquired by the Debtor and wherever located and whether
now existing or hereafter arising or created (all such property and assets are
herein collectively called the “Collateral”), including without limitation the
following:

(i) 
all Accounts of the Debtor;

(ii) 
all Inventory of the Debtor;

(iii) 
all Equipment of the Debtor;

(iv) 
all Contracts and Contract Rights of the Debtor;

(v)
all Commercial Tort Claims of the Debtor, including without limitation those
Commercial Tort Claims in which the Debtor has any interest as specified on
Schedule I;

(vi)
all Documents of the Debtor;

(vii) 
all Instruments and Chattel Paper of the Debtor;

(viii)
all General Intangibles of the Debtor, including all Intellectual Property of
the Debtor, and all of its rights to tax or other refunds;

(ix)
all Investment Property and other Financial Assets of the Debtor, including
without limitation all lockbox accounts, deposit accounts and other accounts
maintained by the Debtor with any financial institution and all monies,
securities and other assets credited from time to time to such accounts;

(x)
all Leases of the Debtor;

(xi)
all Fixtures of the Debtor;

(xii) 
all Deposit Accounts of the Debtor;

 
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(xiii) 
all Letter of Credit Rights of the Debtor;

(xiv) 
all Securities Accounts and Securities Entitlements of the Debtor;

(xv) 
all Commodity Accounts and Commodity Contracts of the Debtor;

(xvi)
all Supporting Obligations that may now or at any time hereafter support the
payment or performance of any Account, General Intangible, Chattel Paper,
Document, Instrument or Investment Property of the Debtor;

(xvii)
all books and records (including computer programs, tapes and related electronic
data processing software) relating to the Debtor’s Accounts, Inventory,
Equipment, Contracts, Intellectual Property, Investment Property, Financial
Assets and other assets; and

(xviii)
to the extent not otherwise included, all cash and non-cash Proceeds and
products of any of the foregoing.

3.           Obligations Absolute.                                           (a)
The Debtor hereby agrees that this Security Agreement shall be binding upon the
Debtor, and the grant to the Creditor of a security interest in the Collateral
hereunder shall be irrevocable and unconditional, irrespective of the validity,
legality or enforceability of any Transaction Document or any of the
Obligations, the absence of any action to enforce the same, the waiver or
consent by the Creditor with respect to any provision thereof, the recovery of
any judgment against any other Person, or any action to enforce the same or any
other similar circumstances. The Debtor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of merger or
bankruptcy of the Debtor, any notice to require a proceeding first against any
other Person, protest or notice with respect to any promissory notes or
evidences of indebtedness secured hereby or the indebtedness evidenced thereby
and all demands whatsoever, and covenants that this Security Agreement will
remain in full force and effect so long as the Supply Agreement, the Factoring
Agreement, and/or the Guarantee are in effect or any Obligations remain unpaid.

(b)           The Debtor agrees that, without notice to or further assent by the
Debtor, the liability of any other Person for or upon any of the Obligations
may, from time to time, in whole or in part, be renewed, extended, modified,
accelerated, compromised or released by the Creditor, as the Creditor may deem
advisable, and that any other collateral or liens securing any of the
Obligations may, from time to time, in whole or in part (subject, in the case of
the Collateral, to the provisions of this Security Agreement), be exchanged,
sold or surrendered by the Creditor, as the Creditor may deem advisable, all
without impairing, abridging, affecting or diminishing this Security Agreement
or the rights of the Creditor hereunder or with respect to the Collateral.

4.           Representations and Warranties. The Debtor hereby makes the
following representations and warranties, which shall be deemed to be repeated
and confirmed upon the creation or acquisition by the Debtor of each item of
Collateral and upon the creation of any Obligation:

(a)           The Debtor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has full power and
authority to own its properties and to carry on its business as now being
conducted, is duly qualified to do business and is in good standing in each
jurisdiction in which the character of its properties, the transaction of its
business, the location of its Inventory or Equipment, the performance of its
obligations under its Contracts, or the collection of any of its Accounts make
such qualification necessary and where the failure to be so qualified would have
a material adverse effect on the business or financial condition of the Debtor,
and has full power and authority to execute, deliver and perform this Security
Agreement.
 
 
 
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(b)           Its execution, delivery and performance of this Security Agreement
and the granting of the security interest in the Collateral hereunder (i) have
all been duly authorized by all requisite action of the Debtor, (ii) do not
require the approval of its shareholders, and (iii) will not (I) violate any
provision of law or the Debtor’s organizational documents, (2) violate, be in
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any indenture, agreement or other instrument to
which it is a party or by which it or any of its properties is bound, (3)
violate any governmental or agency rule or regulation or any order of any court,
tribunal or governmental agency or (4) result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any of the
Collateral, except for the security interest created by this Security Agreement.
No authorizations, approvals and consents of, and no filing and registration
with, any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by the Debtor of this Security Agreement or
for the validity or enforceability hereof. No consent of any party to any
Contract or any account debtor in respect of any Account is required in
connection with the execution, delivery and performance of this Security
Agreement or the creation of a security interest in such Contract or Account
pursuant hereto, other than the consents obtained by Debtor and delivered to
Creditor pursuant to the Subordination Agreement.

(c)           This Security Agreement constitutes the legal, valid and binding
obligation of the Debtor, enforceable against the Debtor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting enforceability
of creditors’ rights generally and except as specific performance may be subject
to equitable principles of general applicability. This Security Agreement
creates in favor of the Creditor a valid first priority lien and first priority
security interest in the Collateral, enforceable against the Debtor and all
third parties, and superior in right to all other security interests, liens,
encumbrances, or charges, existing or future, other than as set forth in the
Subordination Agreement and certain Permitted Liens.

(d)           Except for the security interest of the Creditor therein the
Debtor is, and as to Collateral created or acquired from time to time after the
date hereof the Debtor will be, the owner of all the Collateral, having good and
marketable title thereto, free from any lien, security interest, encumbrance or
other right, title or interest of any Person, other than Permitted Liens.

(e)           Appropriate financing statements with respect to the security
interest created hereunder have been or will be duly filed in all appropriate
offices; no filing of any other financing statements or other instruments and no
recording, filing or indexing of this Security Agreement is necessary or
appropriate in order to preserve and protect the liens and security interests
created or intended to be created by this Security Agreement as legal, valid and
enforceable perfected liens on and security interests in the Collateral (other
than filings or appropriate assignments with the United States Patent and
Trademark Office or the United States Copyright Office with respect to
Intellectual Property of the Debtor, if any).

(f)           There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) now on file or
registered in any public office (other than in respect of Permitted Liens)
covering any interest of the Debtor in the Collateral, or intended so to be, and
so long as the Supply Agreement, Factoring Agreement and/or Guarantee are in
effect or any of the Obligations remain unpaid the Debtor will not execute, and
will not permit the filing or the continued existence on file of any financing
statement (or similar statement or instrument of registration under the law of
any jurisdiction) relating to the Collateral in any public office, except
financing statements filed or to be filed with respect to the security interest
granted hereunder to the Creditor or with respect to the Permitted Liens.
 
 
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(g)           The chief executive office and principal place of business of the
Debtor is located at the address set forth in Schedule I. The originals of all
documents (as well as all duplicates thereof) evidencing or relating to the
Accounts, Contracts, Leases, Intellectual Property, Investment Property and
other Financial Assets and the original books of account and records of the
Debtor relating thereto are kept at the office or offices specified in Schedule
I. All Inventory and Equipment is held on the date hereof at the locations
specified in Schedule I.

(h)           The name of the Debtor set forth in the preamble is correct. The
Debtor is not currently doing, and has not at any time during the five years
immediately preceding the date hereof done, business under any trade name or
other assumed name. Except as set forth on Schedule I, during the five years
immediately preceding the date hereof (w) the Debtor has not had any name other
than its present name, (x) the Debtor has not merged or consolidated with any
other entity during the five years immediately preceding the date hereof, (y)
the Debtor has not acquired all or substantially all of the assets of any other
Person and (z) the Debtor has not acquired any other Person, nor been acquired
by any other Person.

(i)           None of the Collateral constitutes farm products (as such term is
defined in the UCC) or Proceeds thereof.

(j) As of the date of this Agreement, none of the account debtors on any
Accounts, and none of the parties to any Contracts, is a governmental entity.

(k) Except as set forth on Schedule I, the Debtor has no ownership interest in
any Commercial Tort Claims.

(l)           To the Debtor’s knowledge, the information, schedules, exhibits
and reports furnished by the Debtor to the Creditor in connection with the
negotiation and preparation of this Security Agreement did not contain any
omissions or misstatements of fact which would make the statements contained
therein misleading or incomplete in any material respect.

5.           Covenants.                                (a) At all reasonable
times upon reasonable notice the Creditor shall have full access to, and the
right to audit, check, inspect and make abstracts and copies of, the Debtor’s
books, records, audits, correspondence and all other papers and computer tapes
and programs relating to the Collateral. The Creditor shall have the right to
confirm and verify the Accounts, General Intangibles, and other Collateral and
to do whatever the Creditor may deem necessary to protect its interests and the
Debtor shall furnish such assistance and information as the Creditor may require
in connection therewith. The Creditor may enter from time to time the premises
of the Debtor at any reasonable time during business hours for the purpose of
inspecting the Collateral and any and all records pertaining thereto.

(b)           The Debtor will keep the Collateral, at its own expense, in
customary good repair and condition, and will not misuse, abuse or waste the
Collateral or allow the Collateral to deteriorate (or permit any of the
foregoing), except for normal wear and tear, and will make the Collateral
available for inspection by the Creditor at all reasonable times upon reasonable
notice during business hours.

 
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(c)           The Debtor will comply in all material respects with all acts,
rules, regulations, orders, decrees and directions of any governmental authority
applicable to the Collateral or any part thereof or to the operation of its
business; provided, however, that the Debtor may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not in the
reasonable opinion of the Creditor adversely affect the Creditor’s rights or the
first priority of the Creditor’s security interest in the Collateral.

(d)           The Debtor will pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of its
income or profits therefrom, as well as all claims of any kind (including claims
for labor, materials and supplies), except that no such charge need be paid if
(i) the validity thereof is being contested by the Debtor in good faith by
appropriate proceedings, (ii) such proceedings do not involve, in the reasonable
opinion of the Creditor, any danger of the sale, forfeiture or loss of any of
the Collateral or any interest therein and (iii) such charge is adequately
reserved against in accordance with generally accepted accounting principles.

(e)           The Debtor will not create, permit or suffer to exist and will
defend the Collateral against, and take such other action as is necessary to
remove, any lien, security interest or encumbrance on the Collateral, other than
Permitted Liens, and the Debtor will defend the right, title and interest of the
Creditor in and to any of the Debtor’ rights to the Collateral against the
claims and demands of all Persons whomsoever claiming an interest therein
adverse to the Creditor, other than holders of Permitted Liens. Without limiting
the generality of the foregoing, the Debtor shall not permit the Collateral or
any portion thereof to become attached or affixed to any real estate or become a
Fixture (in each case, other than with respect to real estate on which Creditor
holds the Mortgage).

(f)           The Debtor will advise the Creditor promptly, in reasonable
detail, of (i) any security interest, lien or encumbrance, other than Permitted
Liens, placed on or asserted against any of the Collateral and (ii) the
occurrence of any other event which would have a material adverse effect on the
aggregate value of the Collateral or on the security interest created by the
Debtor hereunder.

(g)           The Debtor will not change the location specified in Section 4(g)
of its chief executive office, principal place of business or the office where
records concerning its Accounts, Contracts, Leases, Intellectual Property,
Investment Property or other Financial Assets are kept, will not keep Inventory
or Equipment at any location other than the location specified in Schedule I,
and will not change its name, identity or corporate structure or its
jurisdiction of organization, until, in each case, (i) the Debtor shall have
given to the Creditor not less than 30 days’ prior written notice of its
intention so to do, clearly describing such new location, name, identity,
corporate structure or jurisdiction and providing such other information in
connection therewith as the Creditor may reasonably request, and (ii) the Debtor
shall have taken such other actions satisfactory to the Creditor (including the
delivery of additional financing statements duly signed by the Debtor), as are
necessary to maintain the security interest of the Creditor in the Collateral at
all times senior and fully perfected and in full force and effect.

(h)           The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Creditor from time to time such lists,
descriptions, schedules, invoices, warehouse receipts, bills of confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurance or instruments and take such
further steps relating to the Collateral and other property or rights covered by
the security interest hereby granted by it, as the Creditor in its reasonable
judgment deems appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral and comply with the Assignment of Claims
Act.
 
 
 
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(i) The Debtor will advise the Creditor promptly, in reasonable detail, if
Debtor becomes a party to or obtains any rights with respect to any Commercial
Tort Claim. Such notification shall include information sufficient to describe
such Commercial Tort Claim, including, but not limited to, the parties to the
claim, the court in which the claim was commenced, the docket number assigned to
such claim, if any, and a detailed explanation of the events that gave rise to
the claim. Debtor shall execute and deliver to Creditor all documents and/or
agreements requested by Creditor to create, perfect and protect Creditor’s
security interest in such Commercial Tort Claim. Debtor authorizes Creditor to
file (without Debtor’s signature) initial financing statements or amendments, as
Creditor deems necessary to perfect its security interest in the Commercial Tort
Claim.

6.           Special Provisions Concerning Accounts.

(a)           As of the time when any Account arises, the Debtor shall be deemed
to have warranted as to such Account that such Account and all papers and
documents relating thereto are genuine and in all respects what they purport to
be, and that each such Account (i) will represent the genuine, legal, valid and
binding obligation of the account debtor thereon for the unpaid amount owed by
such account debtor for the sale and delivery by the Debtor of the goods, or the
performance by the Debtor of the services, listed therein, (ii) will be the only
original writings evidencing and embodying such obligation of the account debtor
named therein, (iii) will evidence true obligations, enforceable in accordance
with their respective terms and not subject to any stamp or other taxes, except
as shall be disclosed to the Creditor, and (iv) will be, to the best knowledge
of the Debtor, in compliance and will conform with all applicable federal, state
and local laws and applicable laws of any relevant foreign jurisdiction. The
Debtor shall take all reasonable steps necessary to preserve the liability of
each account debtor, guarantor, endorser, obligor, secondary party on or with
respect to the Accounts. The Debtor shall notify the Creditor in writing of any
defenses, set-offs or counterclaims affecting a material portion of the Debtor’s
Accounts, promptly after obtaining knowledge thereof.

(b)           The Debtor shall keep and maintain, at its own expense, accurate
and complete records of the Accounts, including records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and the Debtor shall make the same available to the
Creditor, at the Debtor’s expense, at any and all reasonable times upon demand
of the Creditor. At the request of the Creditor, the Debtor shall legend, in
form and manner satisfactory to the Creditor, its Accounts and its books,
records and documents evidencing or pertaining to its Accounts with an
appropriate reference to the fact that such Accounts have been pledged as
collateral to the Creditor and that the Creditor has a security interest
therein.

(c)           The Debtor shall not rescind or cancel any indebtedness under any
of the Accounts or modify any term thereof or make any adjustment with respect
thereto, or extend or renew the same, or compromise or settle any dispute,
claim, suit or legal proceeding relating thereto, or sell any of such Accounts
or interest therein, without the prior written consent of the Creditor, except
as permitted by Section 6(e).

(d)           The Debtor shall duly fulfill all obligations on its part to be
fulfilled under or in connection with the Accounts and will do nothing to impair
the rights of the Creditor in the Accounts.

(e)           The Debtor shall endeavor to collect or cause to be collected from
the account debtor on each of its Accounts (including Accounts which are
delinquent, such Accounts to be collected in accordance with generally accepted
lawful collection procedures), as and when due, any and all amounts owing under
or on account of such Accounts, except that prior to the occurrence of an Event
of Default the Debtor may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts (i) an extension or renewal of
the time or times of payment, or settlement for less than the total unpaid
balance, which the Debtor finds necessary in accordance with sound business and
credit judgment and (ii) a refund or credit due as a result of returned or
damaged Inventory or improper or faulty performance of services. The costs and
expenses (including attorney’s fees) of collection, whether incurred by the
Debtor or the Creditor, shall be borne by the Debtor.
 
 
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(f)           The Debtor shall, promptly upon learning thereof, report to the
Creditor all delays in performance, notices of default, claims made or disputes
asserted by any account debtor or other obligor on any Account and any other
matters, in each ease if they could reasonably be expected to have a material
adverse effect on the business or financial condition of the Debtor.

(g)           The Creditor is authorized and empowered in its sole discretion to
accept the return of goods, if any, represented by any Account or Contract
Rights, without notice to or consent by the Debtor, all without discharging or
in any way affecting the Debtor’s liability hereunder or on the Obligations.

(h)           The Creditor shall have the right, without further notice to or
assent by the Debtor, and without affecting the Obligations, in the name of the
Debtor or in the name of the Creditor or otherwise, to take any or all of the
following actions: (i) to notify any or all account debtors under any or all of
the Accounts that the Accounts have been assigned to the Creditor and that
payments thereon are to be made directly to the Creditor for the account of the
Debtor or the Creditor, and to require the Debtor to forthwith give similar
notice to the account debtors; (ii) to demand, collect, sue for, receive,
compound and give acquittance for any of the Accounts or any part thereof; (iii)
in good faith, to extend the time of payment of, compromise or settle for cash,
credit or otherwise, and upon any terms and conditions, any of the Accounts;
(iv) to endorse the name of the Debtor on any checks, drafts or other orders or
instruments for the payment of moneys payable to the Debtor which shall be
issued in respect of any Account; (v) to file any claims and commence, maintain
or discontinue any actions, suits or other proceedings deemed by the Creditor to
be necessary or advisable for the purpose of collecting or enforcing payment of
any Account; (vi) to execute any instrument and do any and all other things
necessary and proper to protect and preserve and realize upon the Accounts and
the other rights contemplated hereby; (vii) to require the Debtor to forthwith
account for and transmit to the Creditor in the same form as received, all
proceeds (other than physical property) of collection of Accounts received by
the Debtor and, until so transmitted, to hold the same in trust for the Creditor
and not commingle such proceeds with any other funds of the Debtor; (viii) to
require the Debtor to deliver, at the Debtor’s expense, any or all papers,
documents, correspondence, records and computer programs and tapes and other
electronic data processing software evidencing or relating to the Accounts to
the Creditor at a place designated by the Creditor; (ix) to notify the postal
authorities to change the address for delivery of mail addressed to the Debtor
to such address as the Creditor may designate; and (x) to do all other acts and
things necessary to carry out this Agreement. The Creditor shall not be
obligated to do any of the acts hereinabove authorized, but in the event that
the Creditor elects to do any such act, the Creditor shall not be responsible to
the Debtor except for its gross negligence or willful misconduct.

(i)           If any Account becomes evidenced by a promissory note or similar
instrument in the sum of more than $5,000, the Debtor shall promptly notify the
Creditor thereof, and upon request by the Creditor will promptly deliver such
instrument to the Creditor appropriately endorsed to the order of the Creditor
as further security for the payment in full of the Obligations.

7.           Special Provisions Concerning Inventory and Equipment. (a) The
Debtor will at all times keep all of the Inventory and Equipment insured at its
expense, to the Creditor’s satisfaction, against fire, theft, and all other
risks to which the Inventory and Equipment may be subject; all policies or
certificates with respect to such insurance shall be endorsed to the Creditor’s
satisfaction for the benefit of the Creditor, including by naming the Creditor
as loss payee or additional insured, and evidence of such insurance satisfactory
to the Creditor shall be deposited with Creditor. If the Debtor shall fail to
insure the Inventory and Equipment to the Creditor’s satisfaction, or if the
Debtor shall fail so to endorse and deposit all policies or certificates with
respect thereto in accordance herewith, the Creditor shall have the right (but
shall be under no obligation) to procure such insurance and the Debtor agrees to
reimburse the Creditor for all costs and expenses of procuring such insurance
that it failed to procure. The Creditor may apply any proceeds of such insurance
with respect to the Inventory and Equipment, when received by it, toward the
payment of any of the Obligations, whether or not the same shall then be due.
The Debtor shall give immediate written notice to the insurers and to the
Creditor of any loss or damage to the Collateral or any part thereof and shall
promptly file all necessary or appropriate proofs of loss with the insurers. The
Debtor hereby appoints the Creditor the attorney-in-fact for the Debtor in
obtaining, adjusting and canceling any such insurance and endorsing settlement
drafts.
 
 
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(b)           The Creditor shall have the right, upon the occurrence and during
the continuance of an Event of Default, without notice to (unless specifically
provided for herein), or assent by, the Debtor but without affecting the
Obligations, in the name of the Debtor or in the name of the Creditor or
otherwise:
(i) upon notice to such effect, to require the Debtor to deliver, at the
Debtor’s expense, any or all of the Inventory and Equipment to the Creditor at a
place designated by the Creditor (and after delivery thereof the Debtor shall
have no further claim to or interest in such Inventory and Equipment); (ii) to
take possession of any or all of the Inventory and Equipment and, for that
purpose, to enter, with the aid and assistance of any Person, any premises where
such Inventory and Equipment, or any part thereof, is, or may be, placed or
assembled, to remove any such Inventory or Equipment, and to dispose of or store
such Inventory or Equipment in such premises at the expense of the Debtor; and
(iii) to execute or endorse any instrument (including any invoice, bill of
lading, and storage or warehouse receipt) and do all the things necessary and
proper to protect and preserve and realize upon the Inventory and Equipment and
the other rights contemplated hereby. The Creditor shall not be obligated to do
any of the acts hereinabove authorized, but in the event that the Creditor
elects to do any such act, the Creditor shall not be responsible to the Debtor
except for the Creditor’s own willful misconduct.

(c)           Upon taking possession of any Inventory or Equipment pursuant
hereto following the occurrence of an Event of Default, the Creditor shall have
the right to hold, store and/or use, manage, control and sell such Inventory or
Equipment. Upon any such taking of possession of any Inventory or Equipment, the
Creditor may, from time to time at the expense of the Debtor, make all such
repairs, replacements, alterations, additions and improvements to and of such
Inventory or Equipment as the Creditor may deem proper. In any such case, the
Creditor shall have the right to manage and control such Inventory or Equipment
and to can-y on the business and exercise all rights and powers of the Debtor
respecting its Inventory and Equipment, all as the Creditor shall deem best; and
the Creditor shall be entitled to collect and receive all issues, profits, fees,
revenues and other income of the same and every part thereof Such issues,
profits, fees, revenues and other income shall be applied to pay the expenses
incurred by the Creditor or its agents in (i) holding such Inventory or
Equipment; (ii) performing all repairs, replacements, alterations, additions and
improvements which the Creditor may be required or may elect to make, if any;
and (iii) paying all taxes, assessments, insurance, warehouse fees and other
charges upon such Inventory or Equipment or any part thereof, and all other
payments, which the Creditor may be required or authorized or elect to make
(including legal costs and attorneys’ fees). Any remaining rents, issues,
profits, fees, revenues and other income shall be applied to the payment of the
Obligations in accordance with Section 11.

8.           Financing Statements: Documentary Stamp Taxes. (a) The Debtor
agrees to sign and deliver to the Creditor such financing statements (which
term, whenever used herein, shall include initial financing statements and
amendments), in form acceptable to the Creditor, as the Creditor may from time
to time reasonably request or as are necessary in the opinion of the Creditor to
establish and maintain a valid, enforceable and perfected security interest in
the Collateral and the other rights and security contemplated hereby which is
superior and prior to the rights of all third Persons. The Debtor will pay any
applicable filing fees and related expenses. The Debtor authorizes the Creditor
to file any such financing statements without the signature of the Debtor.
 
 
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(b)           The Debtor agrees to procure, pay for, affix to any and all
documents and cancel any documentary tax stamps or similar taxes required by,
and in accordance with, applicable law, and the Debtor will indemnify the
Creditor and hold the Creditor harmless against any liability (including
interest and penalties) in respect of such taxes.

9.           Additional Provisions Concerning Remedies and Sale of Collateral.
(a) In addition to any rights and remedies contained herein or now or hereafter
granted under applicable law and not by way of limitation of any such rights and
remedies, upon the occurrence and during the continuance of an Event of Default,
the Creditor shall have all of the rights and remedies of a secured party under
the Uniform Commercial Code as in effect from time to time, as enacted in any
applicable jurisdiction. The Creditor may take legal proceedings for the
appointment of a receiver or receivers (to which the Creditor shall be entitled
as a matter of right) to take possession of the Collateral pending the sale
thereof pursuant either to the powers of sale granted by this Security Agreement
or to a judgment, order or decree made in any judicial proceeding for the
foreclosure or involving the enforcement of this Security Agreement.

(b)           Upon the occurrence and during the continuance of any Event of
Default the Creditor shall have the right to seize and take possession of any
Collateral (or any paper, documents, correspondence, computer tapes and programs
and other electronic data processing software relating to the Collateral), and
may enter the premises where such Collateral (or such paper, documents,
correspondence, tapes, programs or software) is located for the purpose of
effecting such seizure. The Creditor shall not be liable to the Debtor for any
damage suffered by the Debtor by reason thereof and the Debtor shall indemnify
the Creditor for any liability which may accrue to any Person by reason of such
entry or seizure. At any time or from time to time after the occurrence and
during the continuance of an Event of Default the Creditor may hire and maintain
on any of the premises of the Debtor a custodian or independent contractor
selected by the Creditor who shall have full authority to do all lawful acts
necessary to protect the Creditor’s interests and to report to the Creditor
thereon. The Debtor hereby agrees to cooperate with any such Person and to do
whatever the Creditor may reasonably request to preserve the Collateral. All
expenses incurred by the Creditor by reason of the employment of any such Person
shall be payable by the Debtor and shall be secured hereby and shall be a part
of the Obligations.

(c)           Upon the occurrence and during the continuance of an Event of
Default the Creditor may, without obligation to resort to other security, at any
time and from time to time, sell, re-sell, assign and deliver all or any of the
Collateral, in one or more parcels at the same or different times, and all
right, title and interest, claim and demand therein and right of redemption
thereof, at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices and on such terms as the Creditor may
determine, with the amounts realized from any such sale to be applied in the
manner provided in Section
11. The Debtor hereby agrees that all of the foregoing may be effected without
demand, advertisement or notice (except as required by law or as expressly
provided herein), all of which (to the extent permitted by law) are hereby
expressly waived. Upon any sale of any of the Collateral, whether made under the
power of sale hereby given or under judgment, order or decree in any judicial
proceeding for the foreclosure involving the enforcement of this Security
Agreement, (i) the Creditor may bid for the property being sold, and upon
compliance with the terms of sale may hold, retain and possess and dispose of
such property in its own absolute right without further accountability, and may,
in paying the purchase money therefor, discharge a portion of the Obligations
owing to the Creditor in an amount equal to such purchase price; (ii) the
Creditor may make and deliver to the purchaser or purchasers a good and
sufficient deed, bill of sale and instrument of assignment and transfer of the
property sold; (iii) the Creditor may make all necessary deeds, bills of sale
and instruments of assignment and transfer of the property thus sold; but if so
requested by the Creditor or such purchaser, the Debtor shall ratify and confirm
any such sale or transfer by executing and delivering to the Creditor or such
purchaser all property, deeds, bills of sale, instruments of assignment and
transfer and releases as may be designated in any such request; (iv) all right,
title, interest, claim and demand whatsoever, either in law or in equity or
otherwise, of the Debtor of, in and to the property so sold shall be divested
and such sale shall be a perpetual bar both at law and in equity against the
Debtor, its successors and assigns, and against any and all Persons claiming or
who may claim the property sold or any part thereof from, through or under the
Debtor, its successors or assigns; and (v) the receipt of the Creditor or of the
officer thereof making such sale shall be a sufficient discharge to the
purchaser or purchasers at such sale for his or their purchase money, and such
purchaser or purchasers, and his, its or their assigns or personal
representatives, shall not, after paying such purchase money and receiving such
receipt of the Creditor or of such officers thereof, be obligated to see to the
application of such purchase money or be in any way answerable or responsible
for any loss, misapplication or non-application thereof
 
 
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(d)           To the extent that it may lawfully do so, the Debtor agrees that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any appraisement, valuation, stay,
extension or redemption laws, or any law permitting it to direct the order in
which the Collateral or any part thereof shall be sold, now or at any time
hereafter in force, which may delay, prevent or otherwise affect the performance
or enforcement of this Security Agreement or the Obligations, and the Debtor
hereby expressly waives all benefit or advantage of any such laws and covenants
that it will not hinder, delay or impede the execution of any power granted or
delegated to the Creditor in this Security Agreement, but will suffer and permit
the execution of every such power as though no such laws were in force. In the
event of any sale of Collateral pursuant to this Security Agreement by the
Creditor, the Creditor shall, at least 10 days before such sale, give the Debtor
written notice (which notice may be given by telefax) of its intention to sell,
except that, if the Creditor shall determine in its sole discretion that any of
the Collateral is perishable or threatens to decline speedily in value, any such
sale may be made upon one day’s written notice (which notice may be given by
telefax) to the Debtor.

(e)           The Debtor agrees that upon the occurrence of any Event of Default
and at any time during the continuance thereof, any of the monies, deposit
balances and other property of the Debtor held by, or coming into the possession
of, the Creditor may be applied (including by way of set-off) by the Creditor to
a reduction of the Obligations.

(f)           For the purpose of enabling the Creditor to exercise rights and
remedies hereunder, the Debtor hereby grants to the Creditor access upon the
occurrence and during the continuance of an Event of Default (after taking into
account any applicable grace or cure period) to all media in which any
Collateral may be recorded or stored and to all computer hardware and software
used for the compilation or printout thereof to the extent that the Debtor may
lawfully do so, and hereby authorizes any and all custodians thereof to release
such media to the Creditor or in accordance with the Creditor’s instructions
upon receipt of a letter executed by the Creditor stating that an Event of
Default has occurred and is continuing.

 
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(g)           For the purpose of enabling the Creditor to exercise its rights
and remedies under this Security Agreement at such time as the Creditor, without
regard to this Section, shall be lawfully entitled to exercise such rights and
remedies and for no other purpose, the Debtor hereby grants to the Creditor,
effective upon the occurrence of an Event of Default and notice by the Creditor
that it desires to exercise such rights and remedies, an irrevocable, exclusive
license, exercisable without payment of royalty or other compensation to any of
the Debtor, to use, assign, license or sublicense any of the Collateral
consisting of Intellectual Property, including in such license reasonable access
to all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.

10.           Creditor Appointed Attorney-in-Fact. The Debtor hereby appoints
the Creditor as the Debtor’s attorney-in-fact, with full power of substitution,
for the purpose of carrying out the provisions of this Security Agreement and
taking any action and executing any instrument that the Creditor may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Creditor shall have the right and power, in its own name or as
attorney-in-fact for the Debtor, (i) to take any of the actions specified in
Section 6(h), 7(b) or 7(c) and (ii) generally to do, at the Creditor’s option
and at the Debtor’s expense, at any time, or from time to time, all acts and
things that the Creditor deems necessary to protect, preserve and realize upon
the Collateral and the Creditor’s security interest therein; and the Debtor
hereby ratifies all that the Creditor, acting as attorney-in-fact for the
Debtor, shall lawfully do or cause to be done by virtue hereof; provided,
however, that such power of attorney shall not entitle the Creditor to take any
action that would otherwise be permitted hereunder only upon the occurrence and
during the continuance of an Event of Default in the absence of such occurrence
and continuance..

11.           Application of Moneys; Reassignment of Collateral. Except as
otherwise provided herein, all moneys which the Creditor shall receive pursuant
to this Security Agreement or with respect to the Collateral shall be applied in
the following manner: First, to the payment of all costs and expenses reasonably
incurred in connection with the administration and enforcement of, or the
preservation of any rights under, this Security Agreement and the realization on
such collateral (including the fees and disbursement of the Creditor’s counsel
and agents); and Second, to the payment of all other Obligations in such order
and manner as the Creditor shall determine. The balance, if any, of such moneys
shall be paid over to the Debtor or as otherwise required by law or as directed
by a court of competent jurisdiction. Upon the payment in full of the
Obligations, the termination of the Commitment, and the expiration or
termination of all Letters of Credit, all Collateral not sold or otherwise
disposed of pursuant hereto shall, at the request of the Debtor and at the sole
cost and expense of the Debtor, be reassigned by the Creditor to the Debtor (or
as otherwise directed by a court of competent jurisdiction), without recourse
and without any representations, warranties or agreements of any kind. The
Debtor shall remain liable to the Creditor for any deficiency remaining on the
Obligations after the aforesaid application of such monies to the Obligations.

12.           Exercise of Rights. The Creditor shall have the right in its sole
discretion to determine which rights, security, liens, guarantees, security
interests or remedies it shall retain, pursue, release, subordinate, modify or
take any other action with respect to, without in any way waiving, modifying or
affecting any of the other of them or any of the Creditor’s rights or remedies
hereunder or under any other Transaction Document.
 
13.            Waivers. Amendments, Required Notices. The Debtor hereby waives
notice of acceptance of this Security Agreement, notice of nonpayment of any
Obligations or of any instrument relating thereto, demand, presentment, protest
and notice thereof with respect to any and all instruments, notice of Collateral
received or delivered, or any other action taken in reliance hereon and all
other demands and notices of any description, except such as are expressly
provided for herein or which by applicable law may not be waived on the date
hereof No course of dealing between the Creditor and the Debtor or any other
Person, and no failure on the part of the Creditor to exercise, and no delay in
exercising, any right, power or remedy hereunder, shall operate as a waiver
thereof or as a waiver of any Event of Default, nor shall any single or partial
exercise by the Creditor of any right, power or remedy hereunder or with respect
to the Obligations preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No amendment or modification of
this Security Agreement nor any waiver of any provision of this Security
Agreement or consent to any departure by the Debtor therefrom shall in any event
be effective unless the same shall be in writing and signed by the Creditor, and
then any such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand on the Debtor in any
case shall, of itself; entitle the Debtor to any other or further notice or
demand in similar or other circumstances. If notice, whether before or after any
Event of Default has occurred, is required by law to be given by the Creditor to
the Debtor, the Debtor agrees that, unless otherwise specifically provided
herein, five (5) days’ notice given in the manner provided below shall be
reasonable notice.
 
 
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14.           Cumulative Rights and Remedies. This Security Agreement and the
liens and security interests granted hereunder are in addition to and not in
substitution for any other security interest or collateral now or hereafter held
by or on behalf of the Creditor to secure the Obligations and shall not operate
as a merger of any contract debt or suspend the fulfillment of or affect the
rights, remedies or powers of the Creditor in respect of the Obligations or any
other security interests held by the Creditor for the fulfillment thereof. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.

15.           Notices. All notices, requests, demands, instructions, directions
and other communications provided for hereunder shall be in writing (which term
shall include telecopied communications) and shall be transmitted to the
applicable party in the manner, and at the address or telefax number, as
applicable, of such party, specified in the Factoring Agreement.

16.           Costs and Expenses. (a) The Debtor agrees to pay, on demand,
whether or not any Event of Default shall have occurred and regardless of
whether or not any proceeding to enforce this Security Agreement or the
Obligations shall have been commenced, all of the reasonable costs and expenses
(including all reasonable fees and disbursements of legal counsel) incurred by
the Creditor in connection with (i) the preparation of this Security Agreement
and any related financing statements and other instruments and documents, (ii)
the enforcement of this Security Agreement and the security interests granted
hereunder, (iii) any filings or recordings with respect to the security
interests granted hereunder (including all filing and recording fees, stamp
taxes, recording taxes and intangible property taxes), (iv) the receipt of
proceeds of the Accounts, General Intangibles or Premium Financing Rights
hereunder, (v) the care and preservation of the Collateral, (vi) the sale or
other disposition of, or other realization upon, the Collateral, or (vii) the
preparation of any requested amendments to this Security Agreement or waivers or
consents in connection herewith. Any such costs and expenses so incurred by the
Creditor shall be secured hereby and be a part of the Obligations.

(b)           If any lien or tax shall be claimed with respect to the Collateral
which, in the opinion of the Creditor, may possibly create a valid obligation
having priority over the security interest granted to it herein, the Creditor
may in its sole discretion and without notice to the Debtor pay such taxes
and/or the amount secured by such lien and the amount of such payment shall be
charged to the Debtor’s account and added to the Obligations secured hereby:
provided, however, that the Creditor shall not make such payment with respect to
any lien or tax that is being contested in good faith by the Debtor by
appropriate proceedings if (i) such proceedings shall suspend the enforcement of
such lien or collection of such tax, (ii) no part of the Debtor’s rights in and
under the Collateral shall be subject to sale, forfeiture or diminution, and
(iii) the Debtor shall have furnished such security that is not part of the
Collateral as may be required in such proceedings or reasonably requested by the
Creditor.
 
 
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(c)           Upon any failure by the Debtor to perform any of its duties and
obligations hereunder, the Creditor may, but shall not be obligated to, perform
any or all of such duties, and the Debtor shall pay to the Creditor, forthwith
upon written demand therefor, an amount equal to the cash or out-of-pocket
expense reasonably incurred by the Creditor in so doing plus interest thereon,
from the date such expense is incurred until it is paid in full at a rate per
annum equal to the highest rate of interest payable by the Debtor from time to
time on the Obligations.

17.           Successors and Assigns. This Security Agreement shall be binding
upon the Debtor and its successors and assigns and shall inure to the benefit of
the Creditor and its successors, transferees and assigns. The Debtor may not
assign its rights or obligations hereunder or any portion thereof without the
prior written consent of the Creditor. Subject to the provisions of the Supply
Agreement and Factoring Agreement, the Creditor may assign its rights and powers
under this Security Agreement with all or any of the Obligations and, in the
event of such assignment, the assignee of such rights and powers, to the extent
of such assignment, shall have the same rights and remedies hereunder, and shall
be secured hereby to the same extent, as if originally named herein as the
Creditor.

18.           Severability. If any part of this Security Agreement is contrary
to, prohibited by or deemed invalid under the applicable laws or regulations of
any jurisdiction, such provision shall, as to such jurisdiction, be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible, and any such prohibition or invalidity in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

19.           No Assumption of Duties: Limitation on Liabilities: Preservation
of Collateral. (a) Nothing herein contained shall be construed to constitute the
Creditor as the Debtor’ agent for any purpose whatsoever except for the limited
purposes of receiving proceeds of the Collateral as provided above. The Creditor
does not, by anything contained herein or in any assignment or otherwise, assume
the Debtor’ obligations under any Collateral or any contract or agreement
relating thereto, and the Creditor shall not be responsible in any way for the
Debtor’s performance of any of the terms and conditions thereof.

(b)           Neither the Creditor nor any of its directors, officers, employees
or agents shall be liable to any Person for any action taken or omitted by the
Creditor or its officers, directors, employees or agents hereunder or with
respect to any transaction contemplated by this Security Agreement, except for
the Creditor’s or such officers’, directors’, employees’ or agents’ willful
misconduct. Without limiting the generality of the foregoing, the Creditor shall
not be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof unless due to the Creditor’s gross negligence or
willful misconduct. The Creditor shall not, under any circumstances or in any
event whatsoever, have any liability for any error or omission or delay of any
kind occurring in the settlement, collection or payment of any Account, any
General Intangible, any instrument received in payment thereof or any amount
owing from time to time under any import or distribution agreement, or for any
damage resulting therefrom.

 
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(c)           The Creditor’s sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under the UCC or
otherwise, shall be to deal with it in the same manner as the Creditor deals
with similar property for its own account. Neither the Creditor nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Debtor or otherwise.

20.           Indemnification. The Debtor agrees to pay, and to save the
Creditor harmless from, any and all liabilities, costs, expenses, losses or
damages (including reasonable legal fees and expenses) which may be imposed on,
incurred by or asserted against the Creditor (i) with respect to, or resulting
from, any delay in paying any and all excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, any delay in complying with any requirement
of law applicable to any of the Collateral or (iii) in connection with any of
the transactions contemplated by this Security Agreement or the enforcement of
any of the terms hereof, except any such liability, cost, expense, loss or
damage which results from the gross negligence or willful misconduct of the
Creditor. In any suit, proceeding or action brought by the Creditor under or
with respect to any Account, General Intangible, License or Contract for any sum
owing thereunder, or to enforce any provisions of any Account, General
Intangible, License or Contract, the Debtor will save, indemnify and keep the
Creditor harmless from and against any liabilities, costs, expense, loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Debtor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Debtor.
Notwithstanding the foregoing, the Debtor shall not be liable for any of the
foregoing to the extent that they arise from the gross negligence or willful
misconduct of the Creditor.

21.           Survival: Termination. (a) All covenants, agreements,
representations and warranties made herein by the Debtor shall survive the
execution and delivery of this Security Agreement and shall continue in full
force and effect so long as the Supply Agreement, Factoring Agreement, and/or
Guarantee are in effect or any of the Obligations remain outstanding.

(b)           This Security Agreement shall terminate when each of the Supply
Agreement, Factoring Agreement and Guarantee have terminated and all of the
Obligations have been paid in frill; provided, however, that this Security
Agreement shall be reinstated if any payment in respect of the Obligations is
rescinded, invalidated, declared to be fraudulent or preferential or otherwise
required to be restored or returned by the Creditor for any reason, including by
reason of the insolvency, bankruptcy or reorganization of the Debtor or any
other Person.

22.           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITII, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICT OF LAWS, OTHER THAN
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

23.           SUBMISSION TO JURISDICTION. (A) THE DEBTOR HEREBY EXPRESSLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE COURTS
SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK, IN CONNECTION WITH ANY
ACTION, SUIT OR PROCEEDING RELATING TO THIS AGREEMENT, ANY INSTRUMENT OR
DOCUMENT REFERRED TO HEREIN 0R RELATED HERETO, OR ANY ITEM OF COLLATERAL, AND IN
CONNECTION THEREWITH AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER
APPLICATION TO ANY OF SAID COURTS OR A JUDGE THEREOF MAY BE SERVED UPON THE
DEBTOR WITHIN OR WITHOUT SUCH COURT’S JURISDICTION BY REGISTERED OR CERTIFIED
MAIL, AT THE ADDRESS OF THE DEBTOR SPECIFIED IN SECTION 15 HEREOF (OR AT SUCH
OTHER ADDRESS AS THE DEBTOR SHALL SPECIFY BY A PRIOR NOTICE IN WRITING TO THE
CREDITOR), PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED.
 
 
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(B)           THE DEBTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY INSTRUMENT OR DOCUMENT
REFERRED TO HEREIN OR RELATED HERETO BROUGHT IN ANY FEDERAL OR STATE COURT
SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(C)           NOTWITHSTANDING THE FOREGOING, THE CREDITOR MAY SUE THE DEBTOR IN
ANY JURISDICTION WHERE THE DEBTOR OR ANY OF ITS ASSETS MAY BE FOUND AND MAY
SERVE LEGAL PROCESS UPON THE DEBTOR IN ANY OTHER MANNER PERMITTED BY LAW.

24.           WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS
AGREEMENT, ANY INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR RELATED HERETO, OR
ANY ITEM OF COLLATERAL, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A
JUDGE SITTING WITHOUT A JURY.

25.           Execution in Counterparts; Facsimile Signatures. This Security
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, all of which when taken together shall constitute but
one and the same agreement. Delivery of an executed signature page to this
Security Agreement by facsimile transmission shall be as effective as delivery
of a manually signed counterpart of this Security Agreement.

[signatures on following page]
 
 
 
 
 
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[Signature Page to Security Agreement]

IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be duly
executed and delivered by its duly authorized officer as of the date first above
written.

PERF GO-GREEN HOLDINGS, INC.,
a Delaware corporation
 
 
By:  /s/ Michael Caridi

--------------------------------------------------------------------------------

Name:  Michael Caridi
Title: COO

Acknowledged and accepted:

STAR FUNDING, INC.

By: 

--------------------------------------------------------------------------------

Name:  Martin Weingarten
Title:     Chief Executive Officer

 
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[Signature Page to Security Agreement]

IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be duly
executed and delivered by its duly authorized officer as of the date first above
written.

PERF GO-GREEN HOLDINGS, INC.,
a Delaware corporation
 
 
By:

--------------------------------------------------------------------------------

Name:
Title:

Acknowledged and accepted:

STAR FUNDING, INC.

By:  /s/ Martin Weingarten

--------------------------------------------------------------------------------

Name:  Martin Weingarten
Title:  Chief Executive Officer

 
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SCHEDULE I
 
INFORMATION SCHEDULE
 
1.
Address of Debtor’s chief executive office and principal place of business:

Chief Executive Office:
12 East 52nd Street, 4th floor
New York, New York 10022
 
Principal Place of Business:
12 East 52nd Street, 4th floor
New York, New York 10022

2.
Address of office where the original books of account and records of the Debtor
relating to the Accounts, General Intangibles, Contracts, Leases, Intellectual
Property, Investment Property and Financial Assets are kept:

12 East 52nd Street, 4th floor
New York, New York 10022

3. 
Inventory location(s):

12850 Midway Place
Cerritos, CA 90703
 
51 Executive Avenue
Edison, NJ 08817

4.
Equipment location(s):

12 East 52nd Street, 4th floor
New York, New York 10022

5.
Former Names:

Perf-Go Green, LLC

6.
Mergers, Acquisitions, or Consolidations:

That certain Reverse Acquisition with PERF Go-Green Holdings, Inc. dated as of
May 13, 2008

7.
Commercial Tort Claims:

None
 
 
 
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