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SECURITY AGREEMENT

 

 

          THIS SECURITY AGREEMENT, dated as of January 16, 2009 (the “Security
Agreement”), is executed by PANGLOBAL BRANDS INC, a company incorporated under
the laws of Delaware (“Debtor”), for the benefit of Providence Wealth Management
Ltd, a company incorporated under the laws of the British Virgin Islands
(“Secured Party”) with an address c/o Mr. Karim Khoury, Chabrier & Partners
(Reed Smith), 3 rue du Mont-Blanc P.O. Box 1363 CH - 1211 Geneva 1 Switzerland;.

          WHEREAS, Secured Party has agreed to provide to Debtor a loan in the
maximum principal amount of $1,000,000 (the “Loan”), as evidenced by that
certain Revolving Loan Agreement, dated as of even date herewith (the “Loan
Agreement”), made by Debtor, as borrower, in favor of Secured Party, as lender.

          WHEREAS, it is a condition precedent to the extension of the Loan that
Debtor enter into this Agreement to secure, among other things, the Indebtedness
(as defined below), and Debtor has agreed to enter into this Agreement in
furtherance of the same.

          NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, Debtor hereby agrees as follows:

                     For value received, Debtor grants to Secured Party a
continuing security interest in the Collateral (as defined below) to secure
payment when due, whether by stated maturity, demand, acceleration or otherwise,
of all existing and future indebtedness and obligations of Debtor
(“Indebtedness”), including but not limited to Indebtedness arising under the
Loan Agreement and all other agreements and instruments related thereto.
Indebtedness includes without limitation any and all obligations or liabilities
of Debtor to Secured Party, whether absolute or contingent, direct or indirect,
voluntary or involuntary, liquidated or unliquidated, joint or several, known or
unknown; any and all obligations or liabilities for which Debtor would otherwise
be liable to Secured Party were it not for the invalidity or unenforceability of
such obligations or liabilities by reason of any bankruptcy, insolvency or other
law, or for any other reason; any and all amendments, modifications, renewals
and/or extensions of any of the above; all costs incurred by Secured Party in
establishing, determining, continuing, or defending the validity or priority of
its security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Secured Party and Debtor or in
connection with any proceeding involving Secured Party as a result of any
financial accommodation to Debtor; and all other costs of collecting
indebtedness, including without limitation attorneys’ fees. Debtor agrees to pay
Secured Party all such costs incurred by Secured Party, immediately upon demand,
and until paid all costs shall bear interest at the highest per annum rate
applicable to any of the indebtedness, but not in excess of the maximum rate
permitted by law. Any reference in this Agreement to attorney fees shall be
deemed a reference to actual fees, costs, and expenses of both in-house and
outside counsel and paralegals, whether or not a suit or action is instituted,
and to court costs if a suit or action is instituted, and whether attorneys’
fees or court costs are incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding or otherwise.

                         1.        Collateral. Collateral shall mean all the
following property Debtor now or later owns or has an interest in, wherever
located:

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                                        1.1      All present and future
accounts, accounts receivable, agreements, contracts, leases, contract rights,
rights to payment, instruments, documents, chattel paper, security agreements,
guaranties, letters of credit, undertakings, surety bonds, insurance policies,
notes and drafts, and all forms of obligations owing to Debtor or in which
Debtor may have any interest, however created or arising and whether or not
earned by performance;

                                        1.2      All present and future general
intangibles, payment intangibles, all tax refunds of every kind and nature to
which Debtor now or hereafter may become entitled, however arising, all other
refunds, and all deposits, reserves, loans, royalties, cost savings, deferred
payments, goodwill, chooses in action, liquidated damages, rights to
indemnification, trade secrets, computer programs, software, customer and
supplier lists, trademarks, trade names, patents, licenses, permits, copyrights,
technology, processes, proprietary information and insurance proceeds of which
Debtor is a beneficiary;

                                        1.3      All present and future deposit
accounts of Debtor, including, without limitation, any demand, time, savings,
passbook or like account maintained by Debtor with Secured Party or any other
bank, savings and loan association, credit union or like organization, and all
money, cash and cash equivalents of Debtor, whether or not deposited in any such
deposit account;

                                        1.4      All present and future books
and records, including, without limitation, books of account and ledgers of
every kind and nature, all electronically recorded data relating to Debtor or
the business thereof, all receptacles and containers for such records, and all
files and correspondence;

                                        1.5      All present and future goods,
inventory, equipment and merchandise, including, without limitation, all present
and future goods held for sale or lease or to be furnished under a contract of
service, all raw materials, work in process and finished goods, all packing
materials, supplies and containers relating to or used in connection with any of
the foregoing, and all bills of lading, warehouse receipts or documents of title
relating to any of the foregoing;

                                        1.6      All present and future
investment collateral and all rights, preferences, privileges and distributions
with respect thereto;

                                        1.7      All present and future
accessions, appurtenances, components, repairs, repair parts, spare parts,
replacements, substitutions, additions, issue and/or improvements to or of or
with respect to any of the foregoing;

                                        1.8      All rights, remedies, powers
and/or privileges with respect to any of the foregoing, including the right to
make claims thereunder or with respect thereto;

                                        1.9      Any and all balances, credits,
deposits, accounts or moneys of or in its name arising from any of the foregoing
in the possession or control of, or in transit to, Secured Party or any other
financial institution and all sums on deposit therein from time to time and all
securities, instruments and accounts in which such sums are invested from time
to time;

                                        1.10      Any other collateral, rights
and properties described in each and every deed of trust, mortgage, security
agreement, pledge, assignment and other agreement which has been, or will at any
time(s) later be, executed by Debtor or its affiliates for the benefit of
Secured Party; and

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                                             1.11      All products, rents,
issues, profits, returns, income and proceeds of and from any and all of the
foregoing (including proceeds which constitute property of the types described
in the foregoing clauses (1.1) through (1.10), and any and all money, accounts,
general intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds, and any other tangible or intangible property
received upon the sale or disposition of any of the foregoing).

                              2.        Warranties, Covenants and Agreements.
Debtor warrants, covenants and agrees as follows:

                                             2.1      Debtor shall furnish to
Secured Party, in form and at intervals as Secured Party may request, any
information Secured Party may reasonably request and shall allow Secured Party
to examine, inspect, and copy any of Debtor’s books and records. Debtor shall,
at the request of Secured Party, mark its records and the Collateral to clearly
indicate the security interest of Secured Party under this Agreement.

                                             2.2      At the time any Collateral
becomes, or is represented to be, subject to a security interest in favor of
Secured Party, Debtor shall be deemed to have warranted that (a) Debtor is the
lawful owner of the Collateral and has the right and authority to subject it to
a security interest granted to Secured Party; (b) none of the Collateral is
subject to any security interest other than that in favor of Secured Party and
there are no financing statements on file, other than in favor of Secured Party;
and (c) Debtor acquired its rights in the Collateral in the ordinary course of
its business.

                                             2.3      Debtor confirms that the
Collateral is and will keep the Collateral free at all times from all claims,
liens, security interests and encumbrances other than those in favor of Secured
Party, and other than those agreed to by the Secured Party in writing. Debtor
will not, without the prior written consent of Secured Party, sell, transfer, or
lease, or permit to be sold, transferred or leased, any or all of the
Collateral, except (where inventory is pledged as Collateral) for inventory in
the ordinary course of its business and will not return any inventory to its
supplier. Secured Party or its representatives may at all reasonable times
inspect the Collateral and may enter upon all premises where the Collateral is
kept or might be located.

                                             2.4      Debtor will do all acts
and or cause to be executed all writings requested by Secured Party to
establish, maintain and continue a perfected and first security interest of
Secured Party in the Collateral. Debtor agrees that Secured Party has no
obligation to acquire or perfect any lien on or security interest in any
asset(s), whether realty or personalty, to secure payment of the Indebtedness,
and Debtor is not relying upon assets in which Secured Party may have a lien or
security interest for payment of the Indebtedness. Without limiting the
generality of the foregoing, Debtor hereby authorizes Secured Party to prepare,
execute and file all financing statements, continuation statements or other
documents or instruments as Secured Party shall determine are necessary or
desirable to perfect, evidence, continue or otherwise take action in connection
with the security interests granted hereunder.

                                             2.5      Debtor will pay within the
time that they can be paid without interest or penalty all taxes, assessments
and similar charges which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent contested in good faith
and bonded in a manner satisfactory to Secured Party. If Debtor fails to pay any
of these taxes, assessments, or other charges in the time provided above,
Secured Party has the option (but not the obligation) to do so, and Debtor
agrees to repay all amounts so expended by Secured Party immediately upon
demand, together with interest at the highest lawful default rate which could be
charged by Secured Party to Debtor on any indebtedness.

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                                             2.6      Debtor will keep the
Collateral in good condition and will protect it from loss, damage, or
deterioration from any cause. Debtor has and will maintain at all times (a) with
respect to the Collateral, insurance under an “all risk” policy against fire and
other risks customarily insured against; and (b) public liability insurance and
other insurance as may be required by law or reasonably required by Secured
Party; all of which insurance shall be in amount, form and content, and written
by companies as may be satisfactory to Secured Party, containing a lender’s loss
payable endorsement acceptable to Secured Party. Debtor will deliver to Secured
Party immediately upon demand evidence satisfactory to Secured Party that the
required insurance has been procured. If Debtor fails to maintain satisfactory
insurance, Secured Party has the option (but not the obligation) to do so and
Debtor agrees to repay all amounts so expended by Secured Party immediately upon
demand, together with interest at the highest lawful default rate which could be
charged by Secured Party to Debtor on any indebtedness.

                                             2.7      If Debtor’s accounts are
pledged as Collateral under this Agreement, then on each occasion on which
Debtor evidences to Secured Party the account balances on, and the nature and
extent of, the accounts, Debtor shall be deemed to have warranted that except as
otherwise indicated (a) each of those accounts is valid and enforceable without
performance by Debtor of any act; (b) each of those account balances are in fact
owing, (c) there are no setoffs, recoupments, credits, contra accounts,
counterclaims or defenses against any of those accounts, (d) as to any accounts
represented by a note, trade acceptance, draft or other instrument or by any
chattel paper or document, the same have been endorsed and/or delivered by
Debtor to Secured Party, (e) Debtor has not received with respect to any
account, any notice of the death of the related account debtor, nor the
dissolution, liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for, assignment for the benefit of creditors
by, or filing of a petition in bankruptcy by or against, the account debtor, and
(f) as to each account, the account debtor is not an affiliate of Debtor, the
United States of America or any department, agency or instrumentality of it, or
a citizen or resident of any jurisdiction outside of the United States. Debtor
will do all acts and will execute all writings requested by Secured Party to
perform, enforce performance of, and collect all accounts. Debtor shall neither
make nor permit any modification, compromise or substitution for any account
without the prior written consent of Secured Party. Debtor shall, at Secured
Party’s request arrange for verification of accounts directly with account
debtors or by other methods acceptable to Secured Party.

                                             2.8      Debtor at all times shall
be in strict compliance with all applicable laws, including without limitation
any laws, ordinances, directives, orders, statutes, or regulations an object of
which is to regulate or improve health, safety, or the environment
(“Environmental Laws”).

                                             2.9      If Secured Party, acting
in its sole discretion, redelivers Collateral to Debtor or Debtor’s designee for
the purpose of (a) the ultimate sale or exchange thereof; or (b) presentation,
collection, renewal, or registration of transfer thereof; or (c) loading,
unloading, storing, shipping, transshipping, manufacturing, processing or
otherwise dealing with it preliminary to sale or exchange; such redelivery shall
be in trust for the benefit of Secured Party and shall not constitute a release
of Secured Party’s security interest in it or in the proceeds or products of it
unless Secured Party specifically so agrees in writing. If Debtor requests any
such redelivery, Debtor will deliver with such request a duly executed financing
statement in form and substance satisfactory to Secured Party. Any proceeds of
Collateral coming into Debtor’s possession as a result of any such redelivery
shall be held in trust for Secured Party and immediately delivered to Secured
Party for application on the Indebtedness. Secured Party may (in its sole
discretion) deliver any or all of the Collateral to Debtor, and such delivery by
Secured Party shall discharge Secured Party from all liability or responsibility
for such Collateral. Secured Party, at its option, may require delivery of any
Collateral to Secured Party at any time with such endorsements or assignments of
the Collateral as Secured Party may request.

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                                             2.10      At any time and without
notice, Secured Party may as to Collateral other than equipment, fixtures or
inventory (a) cause any or all of such Collateral to be transferred to its name
or to the name of its nominees; (b) receive or collect by legal proceedings or
otherwise all dividends, interest, principal payments and other sums and all
other distributions at any time payable or receivable on account of such
Collateral, and hold the same as Collateral, or apply the same to the
Indebtedness, the manner and distribution of the application to be in the sole
discretion of Secured Party; (c) enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement or any other
agreement relating to or affecting such Collateral, and deposit or surrender
control of such Collateral, and accept other property in exchange for such
Collateral and hold or apply the property or money so received pursuant to this
Agreement.

                                             2.11      Secured Party may assign
any of the Indebtedness and deliver any or all the Collateral to its assignee,
who then shall have with respect to Collateral so delivered all the rights and
powers of Secured Party under this Agreement, and after that Secured Party shall
be fully discharged from all liability and responsibility with respect to
Collateral so delivered.

                                             2.12      Debtor shall defend,
indemnify and hold harmless Secured Party, its employees, agents, shareholders,
officers, and directors from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind, including without
limitation consultant fees, legal expenses, and actual attorneys’ fees, suffered
by any of them as a direct or indirect result of any actual or asserted
violation of any law, including, without limitation, Environmental Laws, or of
any remediation relating to any property required by any law, including without
limitation Environmental Laws.

                                   3.        Collection of Proceeds.

                                              3.1      Debtor agrees to collect
and enforce payment of all Collateral until Secured Party shall direct Debtor to
the contrary. Immediately upon notice to Debtor by Secured Party and at all
times after that, Debtor agrees to fully and promptly cooperate and assist
Secured Party in the collection and enforcement of all Collateral and to hold in
trust for Secured Party all payments received in connection with Collateral and
from the sale, lease or other disposition of any Collateral, all rights by way
of suretyship, guaranty or indemnity and all rights in the nature of a lien or
security interest which Debtor now or later has regarding Collateral.
Immediately upon and after such notice, Debtor agrees to (a) endorse to Secured
Party and immediately deliver to Secured Party all payments received on
Collateral or from the sale, lease or other disposition of any Collateral or
arising from any other rights or interests of Debtor in the Collateral, in the
form received by Debtor without commingling with any other funds, and (b)
immediately deliver to Secured Party all property in Debtor’s possession or
later coming into Debtor’s possession through enforcement of Debtor’s rights or
interests in the Collateral. Debtor irrevocably authorizes Secured Party or any
Secured Party employee or agent to endorse the name of Debtor upon any checks or
other items which are received in payment for any Collateral, and to do any and
all things necessary in order to reduce these items to money. Secured Party
shall have no duty as to the collection or protection of Collateral or the
proceeds of it, nor as to the preservation of any related rights, beyond the use
of reasonable care in the custody and preservation of Collateral in the
possession of Secured Party. Debtor agrees to take all steps necessary to
preserve rights against prior parties with respect to the Collateral. Nothing in
this Section 3.1 shall be deemed a consent by Secured Party to any sale, lease
or other disposition of any Collateral.

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                                   4.        Defaults, Enforcement and
Application of Proceeds.

                                             4.1      Upon the occurrence of any
of the following events (each an “Event of Default”), Debtor shall be in default
under this Agreement:

                                                       (a)      Any failure to
pay the Indebtedness or any other indebtedness when due, or such portion of it
as may be due, by acceleration or otherwise; or

                                                       (b)      Any failure or
neglect to comply with, or breach of, or default under, any term of this
Agreement, the Loan Agreement or any other agreement or commitment between
Debtor and Secured Party; or

                                                       (c)      Any warranty,
representation, financial statement, or other information made, given or
furnished to Secured Party by or on behalf of Debtor shall be, or shall prove to
have been, false or materially misleading when made, given, or furnished; or

                                                       (d)      Sale or other
disposition by Debtor of any substantial portion of its assets or assignment for
the benefit of creditors of or by Debtor; or commencement of any proceedings
under any state or federal bankruptcy or insolvency law or laws for the relief
of debtors by or against Debtor; or the appointment of a receiver, trustee,
court appointee, sequestrator or otherwise, for all or any part of the property
of Debtor.

                                             4.2      Upon the occurrence of any
Event of Default, Secured Party may at its discretion and without prior notice
to Debtor declare any or all of the Indebtedness to be immediately due and
payable, and shall have and may exercise any one or more of the following rights
and remedies:

                                                       (a)      exercise all the
rights and remedies upon default, in foreclosure and otherwise, available to
secured parties under the provisions of the Uniform Commercial Code and other
applicable law including without limitation such rights and remedies as are
available under the Deeds of Trust;

                                                       (b)      institute legal
proceedings to foreclose upon the lien and security interest granted by this
Agreement, to recover judgment for all amounts then due and owing as
Indebtedness, and to collect the same out of any Collateral or the proceeds of
any sale of it;

                                                       (c)      institute legal
proceedings for the sale, under the judgment or decree of any court of competent
jurisdiction, of any or all Collateral; and/or

                                                       (d)      personally or by
agents, attorneys, or appointment of a receiver, enter upon any premises where
Collateral may then be located, and take possession of all or any of it and/or
render it unusable; and without being responsible for loss or damage to such
Collateral, hold, operate, sell, lease, or dispose of all or any Collateral at
one or more public or private sales, leasings or other dispositions, at places
and times and on terms and conditions as Secured Party may deem fit, without any
previous demand or advertisement; and except as provided in this Agreement, all
notice of sale, lease or other disposition, and advertisement, and other notice
or demand, any right or equity of redemption, and any obligation of a
prospective purchaser or lessee to inquire as to the power and authority of
Secured Party to sell, lease, or otherwise dispose of the Collateral or as to
the application by Secured Party of the proceeds of sale or otherwise, which
would otherwise be required by, or available to Debtor under, applicable law are
expressly waived by Debtor to the fullest extent permitted.

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                                   At any sale pursuant to this Section 4.2,
whether under the power of sale, by virtue of judicial proceedings or otherwise,
it shall not be necessary for Secured Party or a public officer under order of a
court to have present physical or constructive possession of Collateral to be
sold. The recitals contained in any conveyances and receipts made and given by
Secured Party or the public officer to any purchase at any sale made pursuant to
this Agreement shall, to the extent permitted by applicable law, conclusively
establish the truth and accuracy of the matters stated (including, without
limitation, as to the amounts of the principal of and interest on the
Indebtedness, the accrual and nonpayment of it and advertisement and conduct of
the sale); and all prerequisites to the sale shall be presumed to have been
satisfied and performed. Upon any sale of any Collateral, the receipt of the
officer making the sale under judicial proceedings or of Secured Party shall be
sufficient discharge to the purchaser for the purchase money, and the purchaser
shall not be obligated to see to the application of the money. Any sale of any
Collateral under this Agreement shall be a perpetual bar against Debtor with
respect to that Collateral.

                                                  4.3      Secured Party may,
itself, upon the occurrence of any Event of Default notify and direct any
account debtor or obligor.

                                                  4.4      The proceeds of any
sale or other disposition of Collateral authorized by this Agreement shall be
applied by Secured Party first upon all expenses authorized by the Uniform
Commercial Code and all reasonable attorneys’ fees and legal expenses incurred
by Secured Party; the balance of the proceeds of the sale or other disposition
shall be applied in the payment of the Indebtedness, first to interest, then to
principal, then to remaining Indebtedness and the surplus, if any, shall be paid
over to Debtor or to such other person(s) as may be entitled to it under
applicable law. Debtor shall remain liable for any deficiency, which it shall
pay to Secured Party immediately upon demand.

                                                  4.5      Nothing in this
Agreement is intended, nor shall it be construed, to preclude Secured Party from
pursuing any other remedy provided by law for the collection of the Indebtedness
or for the recovery of any other sum to which Secured Party may be entitled for
the breach of this Agreement by Debtor. Nothing in this Agreement shall reduce
or release in any way any rights or security interests of Secured Party
contained in any existing agreement between Debtor and Secured Party.

                                                  4.6      No waiver of default
or consent to any act by Debtor shall be effective unless in writing and signed
by an authorized officer of Secured Party. No waiver of any default or
forbearance on the part of Secured Party in enforcing any of its rights under
this Agreement shall operate as a waiver of any other default or of the same
default on a future occasion or of any rights.

                                                  4.7      Debtor irrevocably
appoints Secured Party or any agent of Secured Party (which appointment is
coupled with an interest) the true and lawful attorney of Debtor (with full
power of substitution ) in the name, place and stead of, and at the expense of,
Debtor:

                                                            (a)      to demand,
receive, sue for, and give receipts or acquittances for any monies due or to
become due on any Collateral and to endorse any item representing any payment on
or proceeds of the Collateral;

                                                            (b)      to execute
and file in the name of and on behalf of Debtor all financing statements or
other filings deemed necessary or desirable by Secured Party to evidence,
perfect, or continue the security interests granted in this Agreement; and

                                                            (c)      to do and
perform any act on behalf of Debtor permitted or required under this Agreement.

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                                   Upon the occurrence of an Event of Default,
Debtor also agrees, upon request of Secured Party, to assemble the Collateral
and make it available to Secured Party at any place designated by Secured Party
which is reasonably convenient to Secured Party and Debtor.

                                   5.        Miscellaneous.

                                             5.1      Reserved.

                                             5.2      Until Secured Party is
advised in writing by Debtor to the contrary, all notices, requests and demands
required under this Agreement or by law shall be given to, or made upon , Debtor
at the address indicated in Section 5.15 below.

                                             5.3      Debtor will give Secured
Party not less than 90 days prior written notice of all contemplated changes in
Debtor’s name, chief executive office location, and/or location of any
Collateral, but the giving of this notice shall not cure any Event of Default
caused by this change.

                                             5.4      Secured Party assumes no
duty of performance or other responsibility under any contracts contained within
the Collateral.

                                             5.5      Secured Party has the
right to sell, assign, transfer, negotiate or grant participations or any
interest in, any or all of the Indebtedness and any related obligations,
including without limitation this Agreement. In connection with the above, but
without limiting its ability to make other disclosures to the full extent
allowable, Secured Party may disclose all documents and information which
Secured Party now or later has relating to Debtor, the Indebtedness or this
Agreement, however obtained. Debtor further agree(s) that Secured Party may
provide information relating to this Agreement or relating to Debtor to Secured
Party’s parent, affiliates, subsidiaries and service providers.

                                             5.6      In addition to Secured
Party’s other rights, any Indebtedness owing from Secured Party to Debtor can be
set off and applied by Secured Party on any Indebtedness at any time(s) either
before or after maturity or demand without notice to anyone.

                                             5.7      Debtor waives any right to
require Secured Party to: (a) proceed against any person or property; (b) give
notice of the terms, time and place of any public or private sale of personal
property security held from Debtor or any other person, or otherwise comply with
the provisions of Section 9607 of the California Commercial Code or other
applicable Uniform Commercial Code, or any similar provision; or (c) pursue any
other remedy in Secured Party’s power. Debtor waives notice of acceptance of
this Agreement and presentment, demand, protest, notice of protest, dishonor,
notice of dishonor, notice of default, notice of intent to accelerate or demand
payment of any Indebtedness, any and all other notices to which the undersigned
might otherwise be entitled, and diligence in collecting any Indebtedness, and
agree(s) that Secured Party may, once or any number or times, modify the terms
of any Indebtedness, compromise, extend, increase, accelerate, renew or forbear
to enforce payment of any or all Indebtedness, all without notice to Debtor and
without affecting in any manner the unconditional obligation of Debtor under
this Agreement. Debtor unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of
Debtor under this Agreement and acknowledges that such waiver is by this
reference incorporated into each security agreement, collateral assignment,
pledge and/or other document from Debtor now or later securing the Indebtedness,
and acknowledges that as of the date of this Agreement no such defense or setoff
exists.

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                                             5.8      Debtor waives any and all
rights (whether by subrogation, indemnity, reimbursement, or otherwise) to
recover from any person, including without limitation the Debtor, if different
that Debtor, any amounts paid or the value of any Collateral given by Debtor
pursuant to this Agreement.

                                             5.9      In the event that
applicable law shall obligate Secured Party to give prior notice to Debtor of
any action to be taken under this Agreement, Debtor agrees that a written notice
given to Debtor at least five (5) days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable notification of the
time and place of any public sale or of the time after which any private sale,
lease, or other disposition is to be made, unless a shorter notice period is
reasonable under the circumstances. A notice shall be deemed to be given under
this Agreement when delivered to Debtor or when placed in an envelope addressed
to Debtor and deposited, with postage prepaid, in a post office or official
depository under the exclusive care and custody of the United States Postal
Service or delivered to an overnight courier. The mailing shall be by overnight
courier, certified, or first class mail.

                                             5.10      Notwithstanding any prior
revocation, termination, surrender, or discharge of this Agreement in whole or
in part, the effectiveness of this Agreement shall automatically continue or be
reinstated in the event that any payment received or credit given by Secured
Party in respect of the Indebtedness is returned, disgorged, or rescinded under
any applicable law, including, without limitation, bankruptcy or insolvency
laws, in which case this Agreement, shall be enforceable against Debtor as if
the returned, disgorged, or rescinded payment or credit had not been received or
given by Secured Party, and whether or not Secured Party relied upon this
payment or credit or changed its position as a consequence of it. In the event
of continuation or reinstatement of this Agreement, Debtor agrees upon demand by
Secured Party to execute and deliver to Secured Party those documents which
Secured Party determines are appropriate to further evidence (in the public
records or otherwise) this continuation or reinstatement, although the failure
of Debtor to do so shall not affect in any way the reinstatement or
continuation.

                                             5.11      This Agreement and all
the rights and remedies of Secured Party under this Agreement shall inure to the
benefit of Secured Party’s successors and assigns and to any other holder who
derives from Secured Party title to or an interest in the Indebtedness or any
portion of it, and shall bind Debtor and the heirs, legal representatives,
successors, and assigns of Debtor. Nothing in this Section 5.10 is deemed a
consent by Secured Party to any assignment by Debtor.

                                             5.12      If there is more than one
Debtor, all undertakings, warranties and covenants made by Debtor and all
rights, powers and authorities given to or conferred upon Secured Party are made
or given jointly and severally.

                                             5.13      Except as otherwise
provided in this Agreement, all terms in this Agreement have the meanings
assigned to them in Division 9 (or, absent definition in Division 9, in any
other Division) of the Uniform Commercial Code, as of the date of this
Agreement. “Uniform Commercial Code” means the California Commercial Code, as
amended.

                                             5.14      No single or partial
exercise, or delay in the exercise, of any right or power under this Agreement,
shall preclude other or further exercise of the rights and powers under this
Agreement. The unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement. This Agreement
constitutes the entire agreement of Debtor and Secured Party with respect to the
subject matter of this Agreement. No amendment or modification of this Agreement
shall be effective unless the same shall be in writing and signed by Debtor and
an authorized officer of Secured Party. This Agreement shall in all respects be
governed by and construed in accordance with the internal laws of the State of
California without regard to conflict of laws principles.

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                                             5.15      To the extent that any of
the Indebtedness is payable upon demand, nothing contained in this Agreement
shall modify the terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Secured Party from making demand, without
notice and with or without reason, for immediate payment of any or all of that
Indebtedness at any time(s), whether or not an Event of Default has occurred.

                                             5.16      Debtor’s chief executive
office is located and shall be maintained at 2853 E. Pico Blvd, Los Angeles, CA
90023. Debtor is organized under the laws of Delaware and maintains all of its
assets in the state of California and shall not reorganize in any other
jurisdiction or move any part of its assets into any other jurisdiction without
the prior written consent of the Secured Party.

                                             5.17      A carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement under the Uniform Commercial Code and may be filed by Secured Party in
any filing office.

                                             5.18      This Agreement shall be
terminated only by the filing of a termination statement in accordance with the
applicable provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.12 of this Agreement shall survive termination.

                                   6.        Governing Law. This Agreement shall
be interpreted and the rights and liabilities of the parties hereto determined
in accordance with the internal laws and decisions of the State of California
without regard to conflict of law principles. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN LOS ANGELES COUNTY, CALIFORNIA WITH RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND HEREBY
WAIVES ANY OBJECTION TO SUCH FORUM BASED ON FORUM NON-CONVENIENS. IN ADDITION,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LENDER AND THE BORROWER HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR
INDIRECTLY TO THIS NOTE.

DEBTOR:

______________________

By: /s/ Stephen Soller                       
Name: Stephen Soller
Title: CEO

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