NEWCO SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (“Agreement”) is made and entered into as of the 16th
day of May, 2012 by and among BOLDFACE Licensing + Branding, a Nevada
corporation (the “Borrower”), and Gottbetter & Partners, LLP, in its capacity as
collateral agent (in such capacity, the “Collateral Agent”) for the Buyers (as
defined below) party to that certain Securities Purchase Agreement, dated as of
May 16, 2012 (the “Securities Purchase Agreement”).

 

WITNESSETH:

 

WHEREAS, Max Cash Media, Inc., a Nevada corporation (the “Company”), and each
party listed as a “Buyer” on the Schedule of Buyers attached to the Securities
Purchase Agreement (collectively, the “Buyers”) are parties to that Securities
Purchase Agreement, pursuant to which the Company shall sell, and the Buyers
shall purchase, the “Notes” (as defined therein);

 

WHEREAS, pursuant to that certain bridge loan agreement dated as of even date
herewith between the Company and the Borrower (the “Bridge Loan Agreement”), the
Company has agreed to lend the proceeds of the Notes to the Borrower (the
“Bridge Loan”); and

 

WHEREAS, pursuant to the Bridge Loan Agreement, the Borrower has agreed to grant
a security interest in and to the Collateral (as defined in this Agreement) to
the Buyers on the terms and conditions set forth in this Agreement;

 

NOW, THEREFORE, for and in consideration of the bridge loan and other premises
and intending to be legally bound, the parties covenant and agree as follows:

 

1.          Definitions. In addition to the words and terms defined elsewhere in
this Agreement, the following words and terms shall have the following meanings,
unless the context otherwise clearly requires:

 

“Accounts” shall have the meaning given to that term in the Code and shall
include without limitation all rights of the Borrower, whenever acquired, to
payment for goods sold or leased or for services rendered, whether or not earned
by performance.

 

“Chattel Paper” shall have the meaning given to that term in the Code and shall
include without limitation all writings owned by the Borrower, whenever
acquired, which evidence both a monetary obligation and a security interest in
or a lease of specific goods.

 

“Code” shall mean the Uniform Commercial Code as in effect on the date of this
Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the Collateral from time to
time.

 

 

 

 

“Collateral” shall mean (i) all tangible and intangible assets of the Borrower,
including, without limitation, collectively the Accounts, Chattel Paper, Deposit
Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments,
Intellectual Property, Inventory, Investment Property, and (ii) Proceeds of each
of them.

 

“Deposit Accounts” shall have the meaning given to that term in the Code and
shall include a demand, time, savings, passbook or similar account maintained
with a bank, savings bank, savings and loan association, credit union, trust
company or other organization that is engaged in the business of banking.

 

“Documents” shall have the meaning given to that term in the Code and shall
include without limitation all warehouse receipts (as defined by the Code) and
other documents of title (as defined by the Code) owned by the Borrower,
whenever acquired.

 

“Equipment” shall have the meaning given to that term in the Code and shall
include without limitation all goods owned by the Borrower, whenever acquired
and wherever located, used or brought for use primarily in the business or for
the benefit of the Borrower and not included in Inventory of the Borrower,
together with all attachments, accessories and parts used or intended to be used
with any of those goods or Fixtures, whether now or in the future installed
therein or thereon or affixed thereto, as well as all substitutes and
replacements thereof in whole or in part.

 

“Event of Default” shall mean (i) any of the Events of Default described in the
Notes or the Loan Documents, or (ii) any default by the Borrower in the
performance of its obligations under this Agreement.

 

“Fixtures” shall have the meaning given to that term in the Code, and shall
include without limitation leasehold improvements.

 

“General Intangibles” shall have the meaning given to that term in the Code and
shall include, without limitation, all leases under which the Borrower now or in
the future leases and or obtains a right to occupy or use real or personal
property, or both, all of the other contract rights of the Borrower, whenever
acquired, and customer lists, choses in action, claims (including claims for
indemnification), books, records, patents, copyrights, trademarks, blueprints,
drawings, designs and plans, trade secrets, methods, processes, contracts,
licenses, license agreements, formulae, tax and any other types of refunds,
returned and unearned insurance premiums, rights and claims under insurance
policies, and computer information, software, records and data, and oil, gas, or
other minerals before extraction now owned or acquired after the date of this
Agreement by the Borrower.

 

“Instruments” shall have the meaning given to that term in the Code and shall
include, without limitation, all negotiable instruments (as defined in the
Code), all certificated securities (as defined in the Code) and all other
writings which evidence a right to the payment of money now or after the date of
this Agreement owned by the Borrower.

 

2

 

 

“Inventory” shall have the meaning given to that term in the Code and shall
include without limitation all goods owned by the Borrower, whenever acquired
and wherever located, held for sale or lease or furnished or to be furnished
under contracts of service, and all raw materials, work in process and materials
owned by the Borrower and used or consumed in the Borrower’s business, whenever
acquired and wherever located.

 

“Investment Property,” “Securities Intermediary” and “Commodities Intermediary”
each shall have the meaning set forth in the Code.

 

“Loan Documents” shall mean collectively, this Agreement, the Notes, the
Securities Purchase Agreement and all other agreements, documents and
instruments executed and delivered in connection therewith, as each may be
amended, supplemented or modified from time to time.

 

“Permitted Liens” shall mean all (i) all existing liens on the assets of the
Borrower which have been disclosed to the Buyers by the Borrower on a Schedule
attached hereto or to the Bridge Loan Agreement, and (ii) all purchase money
security interests hereinafter incurred by the Borrower in the ordinary course
of business.

 

“Proceeds” shall have the meaning given to that term in the Code and shall
include without limitation whatever is received when Collateral or Proceeds are
sold, exchanged, collected or otherwise disposed of, whether cash or non-cash,
and includes without limitation proceeds of insurance payable by reason of loss
of or damage to Collateral.

 

Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Securities Purchase Agreement. Capitalized terms not
otherwise defined in this Agreement or the Securities Purchase Agreement shall
have the meanings attributed to such terms in the Code.

 

2.          Security Interest.

 

(a)        As security for the full and timely payment of the Notes in
accordance with the terms of the Securities Purchase Agreement and the
performance of the obligations of the Company under the Notes and the Bridge
Loan Agreement, the Borrower agrees that the Buyers shall have, and the Borrower
shall grant and convey to and create in favor of the Buyers, a security interest
under the Code in and to the Collateral, whether now owned or existing or
hereafter acquired or arising and regardless of where located. The security
interest granted to the Buyers in this Agreement shall be a first priority
security interest, prior and superior to the rights of all third parties
existing on or arising after the date of this Agreement, subject to the
Permitted Liens.

 

3

 

 

(b)        All of the Equipment, Inventory and Goods owned by the Borrower is
located in the states as specified on Schedule I attached hereto (except to the
extent any such Equipment, Inventory or Goods is in transit or located at the
Borrower’s job site in the ordinary course of business). Except as disclosed on
Schedule I, none of the Collateral is in the possession of any bailee,
warehousemen, processor or consignee. Schedule I discloses such Borrower name as
of the date hereof as it appears in official filings in the state or province,
as applicable, of its incorporation, formation or organization, the type of
entity of Borrower (including corporation, partnership, limited partnership or
limited liability company), the organizational identification number issued by
Borrower’s state of incorporation, formation or organization (or a statement
that no such number has been issued), and the chief place of business, chief
executive officer and the office where Borrower keeps its books and records. The
Borrower has only one state or province, as applicable, of incorporation,
formation or organization. The Borrower does not do business and has not done
business during the past five (5) years under any trade name or fictitious
business name except as disclosed on Schedule I attached hereto.

 

3.          Provisions Applicable to the Collateral. The parties agree that the
following provisions shall be applicable to the Collateral:

 

(a) The Borrower covenants and agrees that at all times during the term of this
Agreement it shall keep accurate and complete books and records concerning the
Collateral that is now owned by the Borrower.

 

(b) The Buyers or their representatives shall have the right, upon reasonable
prior written notice to the Borrower and during the regular business hours of
the Borrower, to examine and inspect the Collateral and to review the books and
records of the Borrower concerning the Collateral that is now owned or acquired
after the date of this Agreement by the Borrower and to copy the same and make
excerpts therefrom; provided, however, that from and after the occurrence of an
Event of Default, the rights of inspection and entry shall be subject to the
requirements of the Code.

 

(c) The Borrower shall at all times during the term of this Agreement keep the
Equipment, Inventory and Fixtures that are now owned by the Borrower in the
states set forth on Schedule I or, upon written notice to the Buyers, at such
other locations for which the Buyers have filed financing statements, and in no
other states without 20 days’ prior written notice to the Buyers, except that
the Borrower shall have the right until one or more Events of Default shall
occur to sell, move or otherwise dispose of Inventory and other Collateral in
the ordinary course of business.

 

(d) The Borrower shall not move the location of its principal executive offices
without prior written notification to the Buyers.

 

(e) Without the prior written consent of the Buyers, the Borrower shall not
sell, lease or otherwise dispose of any Equipment or Fixtures, except in the
ordinary course of their business.

 

(f) Promptly upon request of the Buyers from time to time, the Borrower shall
furnish the Buyers with such information and documents regarding the Collateral
and the Borrower’s financial condition, business, assets or liabilities, at such
times and in such form and detail as the Buyers may reasonably request.

 

(g) During the term of this Agreement after the occurrence and during the
continuance of an Event of Default, the Borrower shall deliver to the Buyers,
upon their reasonable, written request from time to time, without limitation,

 

4

 

 

(i) all invoices and customer statements rendered to account debtors, documents,
contracts, chattel paper, instruments and other writings pertaining to the
Borrower’s contracts or the performance of the Borrower’s contracts,

 

(ii) evidence of the Borrower’s accounts and statements showing the aging,
identification, reconciliation and collection thereof, and

 

(iii) reports as to the Borrower’s inventory and sales, shipment, damage or loss
thereof, all of the foregoing to be certified by authorized officers or other
employees of the Borrower, and Borrower shall take all necessary action during
the term of this Agreement to perfect any and all security interests in favor of
the Borrower and to assign to Buyers all such security interests in favor of the
Borrower.

 

(h) Notwithstanding the security interest in the Collateral granted to and
created in favor of the Buyers under this Agreement, the Borrower shall have the
right until one or more Events of Default shall occur and be continuing, at
their own cost and expense, to collect the Accounts and the Chattel Paper and to
enforce their contract rights.

 

(i) After the occurrence and during the continuance of an Event of Default, the
Collateral Agent shall have the right, in its sole discretion, to give notice of
the Buyers’ security interest to account debtors obligated to the Borrower and
to take over and direct collection of the Accounts and the Chattel Paper, to
notify such account debtors to make payment directly to the Buyers and to
enforce payment of the Accounts and the Chattel Paper and to enforce the
Borrower’s contract rights. It is understood and agreed by the Borrower that the
Collateral Agent shall have no liability whatsoever under this subsection (i)
except for their own gross negligence or willful misconduct.

 

(j) At all times during the term of this Agreement, the Borrower shall promptly
deliver to the Collateral Agent, upon its written request, all existing leases,
and all other leases entered into by the Borrower from time to time, covering
any Equipment or Inventory (“Leased Inventory”) which is leased to third
parties.

 

(k) The Borrower shall not change its name, entity status, federal taxpayer
identification number, or provincial organizational or registration number, or
the state under which it is organized without the prior written consent of the
Buyers, which consent shall not be unreasonably withheld.

 

(l) The Borrower shall not close any of its Deposit Accounts or open any new or
additional Deposit Accounts without first giving the Buyers at least fifteen
(15) days prior written notice thereof; however, Buyers grant Collateral Agent
the power to waive a portion of the notice period if such waiver does not harm
Buyers’ security position.

 

(m) The Borrower shall cooperate with the Buyers, at the Borrower’s reasonable
expense, in perfecting Buyers’ security interest in any of the Collateral.

 

5

 

 

(n) The Collateral Agent may file any necessary financing statements and other
documents the Collateral Agent deems reasonably necessary in order to perfect
Buyers’ security interest without the Borrower’s signature. The Borrower grants
to the Collateral Agent a power of attorney for the sole purpose of executing
any documents on behalf of the Borrower which the Collateral Agent deems
reasonably necessary to perfect Buyers’ security interest. Such power, coupled
with an interest, is irrevocable.

 

4.          Actions with Respect to Accounts. The Borrower irrevocably makes,
constitutes and appoints the Collateral Agent its true and lawful
attorney-in-fact with power to sign its name and to take any of the following
actions after the occurrence and prior to the cure of an Event of Default, at
any time without notice to the Borrower and at the Borrower’s reasonable
expense:

 

(a) Verify the validity and amount of, or any other matter relating to, the
Collateral by mail, telephone, telegraph or otherwise;

 

(b) Notify all account debtors that the Accounts have been assigned to the
Buyers and that the Buyers have a security interest in the Accounts;

 

(c) Direct all account debtors to make payment of all Accounts directly to the
Buyers;

 

(d) Take control in any reasonable manner of any cash or non-cash items of
payment or proceeds of Accounts;

 

(e) Take control in any manner of any rejected, returned, stopped in transit or
repossessed goods relating to Accounts;

 

(f) Enforce payment of and collect any Accounts, by legal proceedings or
otherwise, and for such purpose the Buyers may:

 

(1) Demand payment of any Accounts or direct any account debtors to make payment
of Accounts directly to the Buyers;

 

(2) Receive and collect all monies due or to become due to the Borrower pursuant
to the Accounts;

 

(3) Exercise all of the Borrower’s rights and remedies with respect to the
collection of Accounts;

 

(4) Settle, adjust, compromise, extend, renew, discharge or release Accounts in
a commercially reasonable manner;

 

(5) Sell or assign Accounts on such reasonable terms, for such reasonable
amounts and at such reasonable times as the Buyers reasonably deem advisable;

 

6

 

 

(6) Prepare, file and sign the Borrower’s name or names on any Proof of Claim or
similar documents in any proceeding filed under federal or state bankruptcy,
insolvency, reorganization or other similar law as to any account debtor;

 

(7) Prepare, file and sign the Borrower’s name or names on any notice of lien,
claim of mechanic’s lien, assignment or satisfaction of lien or mechanic’s lien
or similar document in connection with the Collateral;

 

(8) Endorse the name of the Borrower upon any chattel papers, documents,
instruments, invoices, freight bills, bills of lading or similar documents or
agreements relating to Accounts or goods pertaining to Accounts or upon any
checks or other media of payment or evidence of a security interest that may
come into the Buyers’ possession;

 

(9) Sign the name or names of the Borrower to verifications of Accounts and
notices of Accounts sent by account debtors to the Borrower; or

 

(10) Take all other actions that the Buyers reasonably deem to be necessary or
desirable to protect the Borrower’s interest in the Accounts.

 

(g) Negotiate and endorse any Document in favor of the Buyers or their
designees, covering Inventory which constitutes Collateral, and related
documents for the purpose of carrying out the provisions of this Agreement and
taking any action and executing in the name(s) of Borrower any instrument which
the Buyers may reasonably deem necessary or advisable to accomplish the purpose
hereof. Without limiting the generality of the foregoing, the Collateral Agent
shall have the right and power to receive, endorse and collect checks and other
orders for the payment of money made payable to the Borrower representing any
payment or reimbursement made under, pursuant to or with respect to, the
Collateral or any part thereof and to give full discharge to the same. This
power, being coupled with an interest, is irrevocable until the Notes are paid
in full or converted into equity interests in accordance with their terms (at
which time this power shall terminate in full) and the Borrower shall have
performed all of its obligations under this Agreement. The Borrower further
agrees to use its reasonable efforts to assist the Collateral Agent in the
collection and enforcement of the Accounts and will not hinder, delay or impede
the Buyers in any manner in its collection and enforcement of the Accounts.

 

7

 

 

5.          Preservation and Protection of Security Interest. The Borrower
represents and warrants that it has, and covenants and agrees that at all times
during the term of this Agreement, it will have, good and marketable title to
the Collateral now owned by it free and clear of all mortgages, pledges, liens,
security interests, charges or other encumbrances, except for the Permitted
Liens and those junior in right of payment and enforcement to that of the Buyers
or in favor of the Buyers, and shall defend the Collateral against the claims
and demands of all persons, firms and entities whomsoever. Assuming Buyers have
taken all required action to perfect a security interest in the Collateral as
provided by the Code, the Borrower represents and warrants that as of the date
of this Agreement the Buyers have, and that all times in the future the Buyers
will have, a first priority perfected security interest in the Collateral, prior
and superior to the rights of all third parties in the Collateral existing on
the date of this Agreement or arising after the date of this Agreement, subject
to the Permitted Liens. Except as permitted by this Agreement, the Borrower
covenants and agrees that it shall not, without the prior written consent of the
Buyers (i) borrow against the Collateral or any portion of the Collateral from
any other person, firm or entity, except for borrowings which are subordinate to
the rights of the Buyers, (ii) grant or create or permit to attach or exist any
mortgage, pledge, lien, charge or other encumbrance, or security interest on, of
or in any of the Collateral or any portion of the Collateral except those in
favor of the Buyers or the Permitted Liens, (iii) permit any levy or attachment
to be made against the Collateral or any portion of the Collateral, except those
subject to the Permitted Liens, or (iv) permit any financing statements to be on
file with respect to any of the Collateral, except financing statements in favor
of the Buyers or those with respect to the Permitted Liens. The Borrower shall
faithfully preserve and protect the Buyers’ security interest in the Collateral
and shall, at its own reasonable cost and expense, cause, or assist the Buyers
to cause that security interest to be perfected and continue perfected so long
as the Notes or any portion of the Notes are outstanding, unpaid or executory.
For purposes of the perfection of the Buyers’ security interest in the
Collateral in accordance with the requirements of this Agreement, the Borrower
shall from time to time at the request of the Buyers file or record, or cause to
be filed or recorded, such instruments, documents and notices, including
assignments, financing statements and continuation statements, as the Buyers may
reasonably deem necessary or advisable from time to time in order to perfect and
continue perfected such security interest. The Borrower shall do all such other
acts and things and shall execute and deliver all such other instruments and
documents, including further security agreements, pledges, endorsements,
assignments and notices, as the Buyers in their discretion may reasonably deem
necessary or advisable from time to time in order to perfect and preserve the
priority of such security interest as a first lien security interest in the
Collateral prior to the rights of all third persons, firms and entities, subject
to the Permitted Liens and except as may be otherwise provided in this
Agreement. The Borrower agrees that a carbon, photographic or other reproduction
of this Agreement or a financing statement is sufficient as a financing
statement and may be filed instead of the original.

 

6.          Insurance. Risk of loss of, damage to or destruction of the
Equipment, Inventory and Fixtures is on the Borrower. The Borrower shall insure
the Equipment, Inventory and Fixtures against such risks and casualties and in
such amounts and with such insurance companies as is ordinarily carried by
corporations or other entities engaged in the same or similar businesses and
similarly situated or as otherwise reasonably required by the Buyers in their
sole discretion. In the event of loss of, damage to or destruction of the
Equipment, Inventory or Fixtures during the term of this Agreement, the Borrower
shall promptly notify Buyers of such loss, damage or destruction. At the
reasonable request of the Buyers, the Borrower’s policies of insurance shall
contain loss payable clauses in favor of the Borrower and the Buyers as their
respective interests may appear and shall contain provision for notification of
the Buyers thirty (30) days prior to the termination of such policy. At the
request of the Buyers, copies of all such policies, or certificates evidencing
the same, shall be deposited with the Buyers. If the Borrower fails to effect
and keep in full force and effect such insurance or fail to pay the premiums
when due, the Buyers may (but shall not be obligated to), no sooner than five
(5) business days after delivering written notice to Borrower, do so for the
account of the Borrower and add the cost thereof to the Notes, upon five (5)
days written notice to Borrower. The Buyers are irrevocably appointed
attorney-in-fact of the Borrower to endorse any draft or check which may be
payable to the Borrower in order to collect the proceeds of such insurance.
Unless an Event of Default has occurred and is continuing, the Buyers will turn
over to the Borrower the proceeds of any such insurance collected by it on the
condition that the Borrower apply such proceeds either (i) to the repair of
damaged Equipment, Inventory or Fixtures; (ii) to the replacement of destroyed
Equipment, Inventory or Fixtures with Equipment, Inventory or Fixtures of the
same or similar type and function and of at least equivalent value (in the sole
judgment of the Buyers), provided such replacement Equipment, Fixtures or
Inventory is made subject to the security interest created by this Agreement and
constitutes a first lien security interest in the Equipment, Inventory and
Fixtures subject only to Permitted Liens and other security interests permitted
under this Agreement, and is perfected by the filing of financing statements in
the appropriate public offices and the taking of such other action as may be
necessary or desirable in order to perfect and continue perfected such security
interest; or (iii) to and for a purpose expressly agreed upon by Borrower and
Buyers. Any balance of insurance proceeds remaining in the possession of the
Buyers after payment in full of the Notes shall be paid over to the Borrower or
its order.

 

8

 

 

7.          Maintenance and Repair. The Borrower shall maintain the Equipment,
Inventory and Fixtures, and every portion thereof, in good condition, repair and
working order, reasonable wear and tear alone excepted, and shall pay and
discharge all taxes, levies and other impositions assessed or levied thereon as
well as the cost of repairs to or maintenance of the same. If the Borrower fails
to do so, the Buyers may (but shall not be obligated to), no sooner than five
(5) business days after delivering written notice to Borrower, pay the cost of
such repairs or maintenance and such taxes, levies or impositions for the
account of the Borrower and add the amount of such payments to the Notes, upon
five (5) day written notice to Borrower.

 

8.          Preservation of Rights Against Third Parties; Preservation of
Collateral in Buyers’s Possession. Until such time as the Buyers exercise their
right to effect direct collection of the Accounts and the Chattel Paper and to
effect the enforcement of the Borrower’s contract rights, the Borrower assumes
full responsibility for taking any and all commercially reasonable steps to
preserve rights in respect of the Accounts and the Chattel Paper and their
contracts against prior parties. The Buyers shall be deemed to have exercised
reasonable care in the custody and preservation of such of the Collateral as may
come into its possession from time to time if the Buyers take such action for
that purpose as the Borrower shall request in writing, provided that such
requested action shall not, in the judgment of the Buyers, impair the Buyers’
security interest in the Collateral or its right in, or the value of, the
Collateral, and provided further that the Buyers receive such written request in
sufficient time to permit the Buyers to take the requested action.

 

9.          Events of Default and Remedies.

 

(a) If any one or more of the Events of Default shall occur or shall exist, the
Collateral Agent may then or at any time thereafter, so long as such default
shall continue, foreclose the lien or security interest in the Collateral in any
way permitted by law, or upon thirty (30) days prior written notice to the
Borrower, sell any or all Collateral at private sale at any time or place in one
or more sales, at such price or prices and upon such terms, either for cash or
on credit, as the Collateral Agent, in its commercially reasonable sole
discretion, may elect, or sell any or all Collateral at public auction, either
for cash or on credit, as the Collateral Agent, in its commercially reasonable
sole discretion, may elect, provided, that any such sale shall comply with
applicable law, and at any such sale, the Collateral Agent may bid for and
become the purchaser of any or all such Collateral. Pending any such action the
Collateral Agent may liquidate the Collateral.

 

9

 

 

(b) If any one or more of the Events of Default shall occur or shall exist, the
Collateral Agents may then, or at any time thereafter, so long as such default
shall continue, grant extensions to, or adjust claims of, or make compromises or
settlements with, debtors, guarantors or any other parties with respect to
Collateral or any securities, guarantees or insurance applying thereon, without
notice to or the consent of the Borrower, without affecting the Borrower’s
liability under this Agreement or the Notes. The Borrower waives notice of
acceptance, of nonpayment, protest or notice of protest of any Accounts or
Chattel Paper, any of its contract rights or Collateral and any other notices to
which the Borrower may be entitled.

 

(c) If any one or more of the Events of Default shall occur or shall exist and
be continuing, then in any such event, the Collateral Agent shall have such
additional rights and remedies in respect of the Collateral or any portion
thereof as are provided by the Code and such other rights and remedies in
respect thereof which it may have at law or in equity or under this Agreement,
including without limitation the right to enter any premises where Equipment,
Inventory and/or Fixtures are located and take possession and control thereof
without demand or notice and without prior judicial hearing or legal
proceedings, which the Borrower expressly waives.

 

(d) The Collateral Agent shall apply the Proceeds of any sale or liquidation of
the Collateral, and, subject to Section 5, any Proceeds received by the
Collateral Agent from insurance, first to the payment of the reasonable costs
and expenses incurred by the Collateral Agent in connection with such sale or
collection, including without limitation reasonable attorneys’ fees and legal
expenses; second to the payment of the Notes, pro rata, whether on account of
principal or interest or otherwise as the Collateral Agent, in its sole
discretion, may elect, and then to pay the balance, if any, to the Borrower or
as otherwise required by law. If such Proceeds are insufficient to pay the
amounts required by law, the Borrower shall be liable for any deficiency.

 

(e) Upon the occurrence and during the continuance of any Event of Default, the
Borrower shall promptly upon written demand by the Collateral Agent assemble the
Equipment, Inventory and Fixtures and make them available to the Buyers at a
place or places to be designated by the Collateral Agent The rights of the
Collateral Agent under this paragraph to have the Equipment, Inventory and
Fixtures assembled and made available to it is of the essence of this Agreement
and the Collateral Agent may, at its election, seek to enforce such right by an
action in equity for injunctive relief or specific performance, without the
requirement of a bond.

 

10

 

 

10.         Defeasance. Notwithstanding anything to the contrary contained in
this Agreement upon payment and performance in full of the Notes or their
conversion into equity interests in accordance with their terms, this Agreement
shall terminate and be of no further force and effect and the Buyers shall
thereupon terminate their security interest in the Collateral, including
promptly filing a UCC-3 termination statement and taking such other actions
necessary to evidence such termination. Until such time, however, this Agreement
shall be binding upon and inure to the benefit of the parties, their successors
and assigns, provided that, without the prior written consent of the Buyers, the
Borrower may not assign this Agreement or any of its rights under this Agreement
or delegate any of its duties or obligations under this Agreement and any such
attempted assignment or delegation shall be null and void. This Agreement is not
intended and shall not be construed to obligate the Buyers to take any action
whatsoever with respect to the Collateral or to incur expenses or perform or
discharge any obligation, duty or disability of the Borrower.

 

11.         The Collateral Agent.

 

(a)          Delegation of Duties. The Collateral Agent may execute any of its
duties under this Agreement or any other Transaction Document by or through
agents, employees or attorneys in fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Collateral Agent
shall not be responsible for the negligence or misconduct of any agent or
attorney in fact that it selects with reasonable care.

 

(b)          Liability of Collateral Agent. None of the Collateral Agent Related
Persons (as defined below) shall (i) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement or any
other Transaction Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Buyers for any recital, statement, representation or
warranty made by any other party, or any officer thereof, contained in this
Agreement or in any other Transaction Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Collateral Agent under or in connection with, this Agreement or any other
Transaction Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Transaction
Document, or for any failure of any other party to this Agreement or any other
Transaction Document to perform its obligations hereunder or thereunder. No
Collateral Agent Related Person shall be under any obligation to any Buyer to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other
Transaction Document, or to inspect the properties, books or records of the
Company or any of the Company’s Subsidiaries or Affiliates. “Collateral Agent
Related Persons” means the Collateral Agent and any successor agent arising
hereunder, together with their respective affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such persons and
affiliates.

 

(c)          Reliance by Collateral Agent. The Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons, and upon advice and statements of
legal counsel (including counsel to the Company or the Borrower), independent
accountants and other experts selected by the Collateral Agent. The Collateral
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Transaction Document unless it shall first receive
such advice or concurrence of the Majority Buyers as it deems appropriate and,
if it so requests, it shall first be indemnified to its satisfaction by the
Buyers against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Collateral Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Transaction Document in accordance with a
request or consent of the Majority Buyers and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Buyers.
“Majority Buyers” means at any time a Buyer or Buyers then holding in excess of
50% of the then aggregate unpaid principal amount of the Notes.

 

11

 

 

(d)          Notice of Default. The Collateral Agent shall not be deemed to have
knowledge or notice of the occurrence of any default or Event of Default, except
with respect to defaults in the delivery of any documents or certificates
required to be delivered to the Collateral Agent hereunder for the benefit of
the Buyers, unless the Collateral Agent shall have received written notice from
a Buyer or the Company or the Borrower referring to this Agreement, describing
such default or Event of Default and stating that such notice is a “notice of
default”. The Collateral Agent will notify the Buyers of its receipt of any such
notice. The Collateral Agent shall take such action with respect to such Default
or Event of Default as may be requested by the Majority Buyers in accordance
with this Agreement; provided, however, that unless and until the Collateral
Agent has received any such request, the Collateral Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such default or Event of Default as it shall deem advisable or in the best
interest of the Buyers.

 

(e)          Indemnification of Collateral Agent. Whether or not the
transactions contemplated hereby and by the other Transaction Documents are
consummated, the Buyers shall indemnify upon demand the Collateral Agent Related
Persons (to the extent not reimbursed by or on behalf of the Company or the
Borrower and without limiting the obligation of the Company or the Borrower to
do so), pro rata, from and against any and all Indemnified Liabilities (as
defined below); provided, however, that no Buyer shall be liable for the payment
to the Collateral Agent Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person’s gross negligence or willful
misconduct. Without limitation of the foregoing, each Buyer shall reimburse the
Collateral Agent upon demand for its ratable share of any costs or out of pocket
expenses (including fees and disbursements of legal counsel) incurred by the
Collateral Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Transaction
Document, or any document contemplated by or referred to herein, to the extent
that the Collateral Agent is not reimbursed for such expenses by or on behalf of
the Company. Notwithstanding the foregoing, no Buyer shall be required to pay,
in total under this paragraph (e) and any similar provision in any other
Transaction Document, any amount in excess of the total gross purchase price of
the Notes purchased by such Buyer. The undertaking in this paragraph shall
survive the payment of all obligations hereunder and the resignation or
replacement of the Collateral Agent. “Indemnified Liabilities” means all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including fees and disbursements of
legal counsel) of any kind or nature whatsoever which may at any time (including
at any time following repayment of the Notes and the termination, resignation or
replacement of the Collateral Agent) be imposed on, incurred by or asserted
against any Collateral Agent Related Person in any way relating to or arising
out of this Agreement or any document contemplated by or referred to herein, or
the transactions contemplated hereby and thereby, or any action taken or omitted
by any such Collateral Agent Related Person under or in connection with any of
the foregoing, including with respect to any investigation, litigation or
proceeding (including any bankruptcy or insolvency proceeding or appellate
proceeding) related to or arising out of this Agreement or the Notes or the
other Transaction Documents or the use of the proceeds thereof, whether or not
any Collateral Agent Related Person is a party thereto.

 

12

 

 

(f)          Collateral Agent in Individual Capacity. Any Collateral Agent
Related Person may engage in transactions with, make loans to, acquire equity
interests in and generally engage in any kind of business with the Company or
the Borrower and their affiliates, including purchasing and holding Notes, as
though the Collateral Agent were not the Collateral Agent hereunder and without
notice to or consent of the Buyers. The Buyers acknowledge that, pursuant to
such activities, any Collateral Agent Related Person may receive information
regarding the Company or the Borrower and their affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or the Borrower and their affiliates) and acknowledge that the
Collateral Agent shall be under no obligation to provide such information to
them. With respect to any Notes it holds, a Collateral Agent Related Person
shall have the same rights and powers under this Agreement as any other Buyer
and may exercise the same as though the Collateral Agent were not the Collateral
Agent, and the terms “Buyer” and “Buyers” include any such Collateral Agent
Related Person in its individual capacity.

 

(g)          Successor Collateral Agent. The Collateral Agent may, and at the
request of the Majority Buyers shall, resign as Collateral Agent upon 30 days’
notice to the Buyers. If the Collateral Agent resigns under this Agreement, the
Majority Buyers shall appoint from among the Buyers a successor agent for the
Buyers, which successor agent shall be approved by the Company, such approval
not to be unreasonably withheld. If no successor agent is appointed prior to the
effective date of the resignation of the Collateral Agent, the Collateral Agent
may appoint, after consulting with the Buyers and the Company, a successor agent
from among the Buyers. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Collateral Agent and the term “Collateral Agent” shall
mean such successor agent and the retiring Collateral Agent’s appointment,
powers and duties as Collateral Agent shall be terminated. After any retiring
Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of
this Section 11 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent under this Agreement. If no
successor agent has accepted appointment as Collateral Agent by the date which
is 30 days following a retiring Collateral Agent’s notice of resignation, the
retiring Collateral Agent’s resignation shall nevertheless thereupon become
effective and the Buyers shall perform all of the duties of the Collateral Agent
hereunder until such time, if any, as the Majority Buyers appoint a successor
agent as provided for above.

 

12.         Miscellaneous.

 

(a) The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall for any reason be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or any other provision of this
Agreement in any jurisdiction.

 

13

 

 

(b) No failure or delay on the part of the Buyers in exercising any right,
remedy, power or privilege under this Agreement and the Notes shall operate as a
waiver thereof or of any other right, remedy, power or privilege of the Buyers
under this Agreement, the Notes or any of the other Loan Documents; nor shall
any single or partial exercise of any such right, remedy, power or privilege
preclude any other right, remedy, power or privilege or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges of the Buyers under this Agreement, the Notes
and the other Loan Documents are cumulative and not exclusive of any rights or
remedies which they may otherwise have.

 

(c) Unless otherwise provided herein, all demands, notices, consents, service of
process, requests and other communications hereunder shall be in writing and
shall be delivered in person or by overnight courier service, or mailed by
certified mail, return receipt requested, addressed:

 

If to Borrower:

 

BOLDFACE Licensing + Branding

1945 Euclid Street

Santa Monica, CA 90404

Attn: Nicole Ostoya, President

Facsimile: 310.581.4652

 

with a copy to:

 

Eisner, Kahan & Gorry,
a Professional Corporation

9601 Wilshire Blvd., Suite 700

Beverly Hills, CA 90210

Telephone: 310.855.3200

Attn: Joseph O’Hara, Esq.

Facsimile: 310.855.3201

 

If to Collateral Agent:

 

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY 10022

Attn: Adam S. Gottbetter, Esq.

Facsimile: (212) 400-6901

 

14

 

 

Any such notice shall be effective when delivered, if delivered by hand
delivery, overnight courier service, or U.S. Mail return receipt requested.

 

(d) The section headings contained in this Agreement are for reference purposes
only and shall not control or affect its construction or interpretation in any
respect.

 

(e) Unless the context otherwise requires, all terms used in this Agreement
which are defined by the Code shall have the meanings stated in the Code.

 

(f) The Code shall govern the settlement, perfection and the effect of
attachment and perfection of the Buyers’ security interest in the Collateral,
and the rights, duties and obligations of the Buyers and the Borrower with
respect to the Collateral. This Agreement shall be deemed to be a contract under
the laws of the State of New York and the execution and delivery of this
Agreement and, to the extent not inconsistent with the preceding sentence, the
terms and provisions of this Agreement shall be governed by and construed in
accordance with the laws of that State.

 

(g) This Agreement may be executed in several counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
instrument. All of such counterparts shall be read as though one, and they shall
have the same force and effect as though all the signers had signed a single
page.

 

[SIGNATURE PAGE FOLLOWS]

 

15

 

 

IN WITNESS WHEREOF, and intending to be legally bound, the parties have executed
and delivered this Security Agreement as of the day and year set forth at the
beginning of this Security Agreement.

 

  BORROWER:       BOLDFACE LICENSING + BRANDING       By: /s/ Nicole Ostoya  
Name:  Nicole Ostoya   Title:  President

 

ACCEPTED BY:

 

GOTTBETTER & PARTNERS, LLP

as Collateral Agent

 

By:       /s/ Adam S. Gottbetter     Name: Adam S. Gottbetter     Title:
Managing Partner  

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]