<PAGE>


                                                                    Exhibit 10.2




                               SECURITY AGREEMENT


         This SECURITY AGREEMENT, dated as of May 12, 1999 (herein, as the same
from time to time may be amended, restated, supplemented, or otherwise modified
from time to time, called this "Agreement"), is by and among BROWNSTONE
HOLDINGS, INC., a Delaware corporation ("Brownstone"), ECOLOGY KIDS, INC., a
Delaware corporation ("Ecology Kids"), DIPLOMAT HOLDINGS, INC., a California
corporation ("Diplomat") and LEW MAGRAM LTD., a New York corporation ("Lew
Magram"; Brownstone, Ecology Kids, Diplomat and Lew Magram being sometimes
hereinafter referred to individually as a "Debtor" and collectively as
"Debtors"), and FIRST SOURCE FINANCIAL LLP, an Illinois registered limited
liability partnership (together with its successors and assigns, "Lender").


                                   BACKGROUND:

         1. Debtors and Lender are parties to a certain Secured Credit Agreement
of even date herewith (herein, as the same from time to time may be amended,
restated, supplemented or otherwise modified from time to time, called the
"Secured Credit Agreement"), pursuant to which Lender has agreed to make certain
Loans and other extensions of credit to Debtors.

         2. It is a condition precedent to the making of the initial Loans under
the Secured Credit Agreement that this Agreement be executed and delivered.

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:

         SECTION 1. Definitions. (a) When used herein, the following terms shall
have the following meanings:

         Account of any Person shall mean all "Accounts" (as such term is
defined in the Uniform Commercial Code), of such Person including, without
limitation, any right of such Debtor to payment for goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper of
any Person, whether or not it has been earned by performance.

         Account Debtor shall mean the Person who is obligated on or under any
Account, Chattel Paper or, if appropriate, any of the General Intangibles of any
Person.

         Agent Bank shall mean any bank serving in the capacity of agent for
Lender under the Bank Agency Agreement. This initial Agent Bank is LaSalle
National Bank.




<PAGE>



         Bank Agency Agreement shall mean that certain Bank Agency Agreement by
and among Agent Bank, each Debtor, Lender, First Source Financial, Inc. and The
Bank of New York, dated as of the date hereof, as the same may be amended,
restated, modified or supplemented from time to time, or any similar agreement
entered into among a bank serving in the capacity as agent for Lender, any
Debtor, First Source Financial, Inc. and The Bank of New York, as the same may
be amended, restated, supplemented or otherwise modified from time to time.

         Bank Agent Accounts shall have the meaning assigned to such term in the
Secured Credit Agreement.

         Benefits - see Section 16.

         Certificated Security shall have the meaning assigned to such term in
the Uniform Commercial Code.

         Chattel Paper shall have the meaning assigned to such term in the
Uniform Commercial Code.

         Collateral shall mean all property or rights in which a Security
Interest is granted hereunder.

         Commitment shall have the meaning assigned to such term in the Secured
Credit Agreement.

         Computer Hardware and Software Collateral of any Person shall mean (i)
all computer and other electronic data processing hardware, integrated computer
systems, central processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard and soft disk
drives, cables, electrical supply hardware, generators, power equalizers,
accessories and all peripheral devices and other related computer hardware of
such Person, whether now owned, licensed or leased or hereafter acquired by such
Person; (ii) all software programs (including source code and object code and
all related applications and data files) of such Person, whether now owned,
licensed or leased or hereafter acquired by such Person, designed for use on the
computers and electronic data processing hardware described in clause (i) above;
(iii) all firmware associated therewith, whether now owned, licensed or leased
or hereafter acquired by such Person; (iv) all documentation (including flow
charts, logic diagrams, manuals, guides and specifications) for such hardware,
software and firmware described in the preceding clauses (i), (ii) and (iii),
whether now owned, licensed or leased or hereafter acquired by such Person; and
(v) all rights with respect to all of the foregoing, including, without
limitation, any and all copyrights, licenses, options, warranties, service
contracts, program services, test rights, maintenance rights, support rights,
improvement rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.


                                       -2-

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         Copyright Collateral of any Person shall mean all copyrights and all
semiconductor chip product mask works of such Person, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world, including, without limitation, all of such Person's right, title and
interest in and to all copyrights and mask works registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights and mask works of such Person referred to in Item A
of Schedule III attached hereto, and all applications for registration thereof,
whether pending or in preparation, all copyright and mask work licenses of such
Person, including each copyright and mask work license referred to in Item B of
Schedule III attached hereto, the right to sue for past, present and future
infringements of any thereof, all rights corresponding thereto throughout the
world, all extensions and renewals of any thereof and all proceeds of the
foregoing, including, without limitation, licenses, royalties, income, payments,
claims, damages and proceeds of suit.

         Default shall mean any Unmatured Event of Default or any Event of
Default.

         Deposit Accounts shall have the meaning assigned to such term in the
Uniform Commercial Code.

         Depositary Accounts shall have the meaning assigned to such term in the
Secured Credit Agreement.

         Depository Bank shall have the meaning assigned to such term in the
Secured Credit Agreement.

         Document shall have the meaning assigned to such term in the Uniform
Commercial Code.

         Equipment shall have the meaning assigned to such term in the Uniform
Commercial Code.

         Fixture shall have the meaning assigned to such term in the Uniform
Commercial Code.

         General Intangibles shall have the meaning assigned to such term in the
Uniform Commercial Code and shall include, without limitation, goodwill.

         Goods shall have the meaning assigned to such term in the Uniform
Commercial Code.

         Instrument shall have the meaning assigned to such term in the Uniform
Commercial Code.


                                       -3-

<PAGE>



         Intangible Collateral of any Person shall mean all Collateral of such
Person other than Goods.

         Intellectual Property Collateral of any Person shall mean,
collectively, the Computer Hardware and Software Collateral, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral, in each case of such Person.

         Inventory of any Person shall mean all "Inventory" (as such term is
defined in the Uniform Commercial Code), of such Person including, without
limitation, all goods, merchandise and other personal property furnished under
any contract of service or intended for sale or lease, including, without
limitation, all raw materials, work in process, finished goods and materials and
supplies, of any kind, nature or description, that are used or consumed by such
Person's business, or are or might be used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
and other personal property, and all returned or repossessed goods now or at any
time or times hereafter in the possession or under the control of any such
Person or Lender.

         Investment Property shall have the meaning assigned to such term in the
Uniform Commercial Code.

         Landlord's Consent shall mean a declaration and agreement substantially
in the form of Exhibit A hereto (and in form and substance satisfactory to
Lender) executed and delivered by the appropriate Persons pursuant to Section
4(d).

         Master Accounts shall have the meaning assigned to such term in the
Secured Credit Agreement.

         Notes shall have the meaning assigned to such term in the Secured
Credit Agreement.

         Patent Collateral of any Person shall mean:

                  (a) all letters patent and applications for letters patent of
         such Person throughout the world, including all patent applications of
         such Person in preparation for filing anywhere in the world and
         including each patent and patent application of such Person referred to
         in Item A of Schedule II attached hereto;

                  (b) all patent licenses of such Person, including each patent
         license of such Person referred to in Item B of Schedule II attached
         hereto;

                  (c) all reissues, divisions, continuations,
         continuations-in-part, extensions, renewals and reexaminations of any
         of the items described in clauses (a) and (b);

                                       -4-

<PAGE>



         and

                  (d) all proceeds of, and rights associated with, the foregoing
         (including license royalties and proceeds of infringement suits), the
         right of such Person to sue third parties for past, present or future
         infringements of any patent or patent application, including any patent
         or patent application of such Person referred to in Item A of Schedule
         II attached hereto, and for breach or enforcement of any patent license
         of such Person, including any patent license referred to in Item B of
         Schedule II attached hereto, and all rights corresponding thereto
         throughout the world.

         Security shall have the meaning assigned to such term in the Uniform
Commercial Code.

         Security Interest shall mean any mortgage, lien, pledge, encumbrance,
charge or other security interest of any kind, whether arising under a security
agreement, mortgage, deed of trust, chattel mortgage, assignment, pledge,
financing or similar statement or notice or as a matter of law, judicial process
or otherwise. As used herein with respect to the rights granted by any Person to
Lender hereunder in such Collateral, "Security Interest" means a security
interest under the Uniform Commercial Code.

         Trademark Collateral of any Person shall mean:

                  (a) all trademarks, trade names, corporate names, company
         names, business names, fictitious business names, trade dress, service
         marks, certification marks, collective marks, logos, other sources of
         business identifiers, prints and labels on which any of the foregoing
         have appeared or appear, designs and general intangibles of a like
         nature of such Person (each of the foregoing items in this clause (a)
         being called a "Trademark" of such Person), now existing anywhere in
         the world or hereafter adopted or acquired, whether currently in use or
         not, all registrations and recordings thereof and all applications in
         connection therewith, whether pending or in preparation for filing,
         including registrations, recordings and applications in the United
         States Patent and Trademark Office or in any office or agency of the
         United States of America or any State thereof or any foreign country,
         including those referred to in Item A of Schedule I attached hereto;

                  (b) all Trademark licenses of such Person, including each
         Trademark license of such Person referred to in Item B of Schedule I
         attached hereto;

                  (c) all reissues, extensions or renewals of any of the items
         described in clauses (a) and (b);

                  (d) all of the goodwill of the business connected with the use
         of, and symbolized by the items described in, clauses (a) and (b); and

                                       -5-

<PAGE>




                  (e) all proceeds of, and rights associated with, the
         foregoing, including any claim by such Person against third parties for
         past, present or future infringement or dilution of any Trademark,
         Trademark registration or Trademark license, including any Trademark,
         Trademark registration or Trademark license of such Person referred to
         in Item A and Item B of Schedule I attached hereto, or for any injury
         to the goodwill associated with the use of any such Trademark or for
         breach or enforcement of any Trademark license.

         Trade Secrets Collateral of any Person shall mean common law and
statutory trade secrets and all other confidential and proprietary information
and all know-how obtained by or used in or contemplated at any time for use in
the business of such Person (each of the foregoing being called a "Trade Secret"
of such Person), whether or not such Trade Secret has been reduced to a writing
or other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses of such Person, including each Trade Secret license referred to in
Schedule IV attached hereto, and including the right to sue for and to enjoin
and to collect damages for the actual or threatened misappropriation of any
Trade Secret and for the breach or enforcement of any such Trade secret license.

         Uncertificated Security shall have the meaning assigned to such term in
the Uniform Commercial Code.

         Uniform Commercial Code shall mean the Uniform Commercial Code as in
effect in the State of Illinois on the date of this Agreement.

         Unmatured Event of Default shall mean any event or condition which if
it continues uncured will, with the passage of time or giving of notice, or
both, become an Event of Default.

         Unmatured Insolvency Default shall mean an Unmatured Event of Default
arising under section 13.1(e) of the Secured Credit Agreement.

         (b) Unless otherwise defined herein, capitalized terms used herein and
defined in the Secured Credit Agreement shall have the same meanings when used
herein. Terms not otherwise defined herein or in the Secured Credit Agreement
shall have the meanings, if any, ascribed to them under the Uniform Commercial
Code.

         SECTION 2. Grant of Security Interest. As collateral security for the
prompt and complete payment, performance and observance of all Liabilities, each
Debtor hereby mortgages, pledges and grants to Lender a continuing Security
Interest and lien under the Uniform Commercial Code and all other applicable
laws in and on, as the case may be, all of the following property of such Debtor
(the "Collateral") wherever located, whether now or hereafter existing, owned,
licensed, leased, consigned, arising or acquired:


                                       -6-

<PAGE>



           (i)     Accounts of such Debtor;

           (ii)    Goods (including, without limitation, all of such Debtor's
                   Equipment, Fixtures and Inventory);

           (iii)   General Intangibles, including, without limitation,

                   (A)     all tax refunds,

                   (B)     all Intellectual Property Collateral of such Debtor,

                   (C)     rights arising out of leases, licenses and contracts
                           which are not Accounts of such Debtor, and

                   (D)     all of such Debtor's goodwill;

           (iv)    Chattel Paper, Documents, Instruments, Investment Property,
                   Certificated Securities and Uncertificated Securities;

           (v)     money and property now or at any time in the possession or
                   under the control of, or in transit to, Lender, any
                   Depository Bank, or Agent Bank, any Debtor or any bailee,
                   agent or custodian of Lender, any Depository Bank, Agent Bank
                   or any Debtor;

           (vi)    right, title and interest (if any) in and to each Master
                   Account, each Depositary Account, each Bank Agent Account and
                   all other accounts of such Debtor maintained by Agent Bank,
                   and any Deposit Accounts and any other accounts maintained by
                   such Debtor, all funds on deposit therein, all investments
                   arising out of such funds, all claims thereunder or in
                   connection therewith, and all cash, securities, rights and
                   other property at any time and from time to time received,
                   receivable or otherwise distributed in respect of such
                   accounts, such funds or such investments;

           (vii)   insurance policies, including claims or rights to payment
                   thereunder; and

           (viii)  Liens, guaranties and other rights and privileges pertaining
                   to any of the Collateral of such Debtor;

together with: (ix) all books, ledgers, books of account, records, writings,
data bases, information and other property of such Debtor relating to, used or
useful in connection with, evidencing, embodying, incorporating or referring to,
any of the foregoing; and (x) all proceeds, products, rents, issues, profits and
returns of and from any of the foregoing.

         SECTION 3. Debtors to Remain Liable. Each Debtor hereby expressly
agrees that, anything herein to the contrary notwithstanding, such Debtor shall
remain liable under each

                                       -7-

<PAGE>



contract, agreement, interest or obligation assigned by such Debtor to Lender
hereunder to observe and perform all of the conditions and obligations to be
observed and performed by such Debtor thereunder, all in accordance with and
pursuant to the terms and provisions thereof. The exercise by Lender of any of
the rights assigned hereunder shall not release any Debtor from any of its
duties or obligations under any such contract, agreement, interest or
obligation. Lender shall not have any duty, responsibility, obligation or
liability under any such contract, agreement, interest or obligation by reason
of or arising out of the assignment thereof to Lender or the granting to Lender
of a Security Interest therein or the receipt by Lender of any payment relating
to any such contract, agreement, interest or obligation pursuant hereto, nor
shall Lender be required or obligated in any manner to perform or fulfill any of
the obligations of such Debtor thereunder or pursuant thereto, or to make any
payment, or to make any inquiry as to the nature or sufficiency of any payment
received by Lender or the sufficiency of any performance of any party under any
such contract, agreement, interest or obligation, or to present or file any
claim, or to take any action to collect or enforce any performance or the
payment of any amounts which may have been assigned to Lender, in which Lender
may have been granted a Security Interest or to which Lender may be entitled at
any time or times.

         SECTION 4. Representations and Warranties and Agreements. Each Debtor
represents and warrants to, and covenants and agree with, Lender that:

         (a) No Uniform Commercial Code financing statement (other than any
which may have been filed on behalf of Lender or in connection with a Permitted
Lien or which has been, or in connection with execution and delivery hereof is
being, terminated) covering any of the Collateral of any Debtor is on file in
any public office.

         (b) Such Debtor has and will have a valid leasehold interest in all
leased Collateral of such Debtor which is material to the operation of such or
any other Debtor's business, and, except as otherwise noted in Schedule 10.29 of
the Secured Credit Agreement, good and marketable title to all its other
Collateral, real and personal, of any nature whatsoever (which, with respect to
licenses, means that such Debtor is the lawful owner of its rights under
licenses, except as provided in Section 10.14 of the Secured Credit Agreement),
free of all Security Interests whatsoever, other than the Security Interest
created hereby and the Permitted Liens, with full power and authority to execute
this Agreement, to perform such Debtor's obligations hereunder, and to subject
the Collateral of such Debtor to the assignment and Security Interest created
hereby.

         (c) All of such Debtor's books and records are now located at the
premises shown on Schedule V hereto as the location of such Debtor's chief
executive office, and all of such Debtor's Equipment, Inventory and other Goods
are located at the location of such Debtor's chief executive office or at one or
more of the other premises shown on Schedule V hereto or at one or more of the
premises shown on Schedule VI hereto;

         (d) Such Debtor shall provide Lender with a Landlord's Consent executed
by the

                                       -8-

<PAGE>



landlord under all leases covering the premises shown on Schedule V hereto.

         (e) All information with respect to the Collateral of such Debtor and
the Account Debtors set forth in any schedule, certificate or other writing at
any time heretofore or hereafter furnished by or on behalf of any Debtor to
Lender, and all other information heretofore or hereafter furnished by or on
behalf of any Debtor to Lender, is and will be true, correct and complete in all
material respects as of the date furnished and does not and will not omit any
material fact necessary to make the statements not misleading.

         (f) Such Debtor will at all times maintain its chief executive office
as identified in Schedule V hereto in the contiguous continental United States
and such Debtor shall take such action from time to time as is required so that
a creditor of such Debtor would reasonably expect the chief executive office, as
identified on Schedule V or as relocated by such Debtor with notice to Lender as
provided in the Secured Credit Agreement, to be its chief executive office for
purposes of Article 9 of the Uniform Commercial Code.

         (g) With respect to any Intellectual Property Collateral of such Debtor
the loss, impairment or infringement of which simply or in the aggregate could
reasonably be expected to have a Material Adverse Effect:

                  (i) such Intellectual Property Collateral is subsisting and
         has not been adjudged invalid or unenforceable, in whole or in part,

                  (ii) such Intellectual Property Collateral is valid and
         enforceable,

                  (iii) such Debtor has made all filings and recordations
         necessary in the exercise of reasonable and prudent business judgment
         to protect its interest in such Intellectual Property Collateral,
         including, without limitation, recordations of all of its interest in
         such Patent Collateral and Trademark Collateral of such Debtor in the
         United States Patent and Trademark Office and in corresponding offices
         throughout the world and its claims to such Copyright Collateral of
         such Debtor in the United States Copyright Office and in corresponding
         offices throughout the world,

                  (iv) such Debtor is the owner of the entire and unencumbered
         right, title and interest in and to such Intellectual Property
         Collateral and no claim has been made that the use of such Intellectual
         Property Collateral does or may violate the asserted rights of any
         third party, and

                  (v) such Debtor has performed and will continue to perform all
         acts and has paid and will continue to pay all required fees and taxes
         to maintain each and every item of such Intellectual Property
         Collateral in full force and effect throughout the world, as
         applicable.

Such Debtor owns directly, or is entitled to use by license or otherwise, all
 Intellectual

                                       -9-

<PAGE>



Property Collateral of any Person used in, necessary for or material to the
conduct of such Debtor's businesses. No litigation is pending or, to the best
knowledge of any Debtor, threatened which contains allegations respecting the
validity, enforceability, infringement or ownership of any of the Intellectual
Property Collateral of such or any other Debtor.

         (h) None of the Collateral of such Debtor (other than Intangible
Collateral) has, within the four (4) months preceding the date of this
Agreement, been located at any place other than such Debtor's own premises at
the addresses shown with respect to such Debtor on the signature page hereto or
at one or more of the premises of such Debtor listed on Schedules V and VI
hereto.

         (i) Schedule VIII to the Secured Credit Agreement lists all trade names
by which such Debtor is now known or was previously known.

         SECTION 5. Processing, Sale, Collections, Etc.

         (a) Until notice to Debtors from Lender to the contrary, given at any
time after the occurrence and during continuance of any Event of Default or
Unmatured Insolvency Default, each Debtor (i) may, in the ordinary course of its
business, at its own expense, sell, lease or furnish under contracts of service
any of the Inventory normally held by such Debtor for such purpose, and use and
consume, in the ordinary course of its business, any raw materials, work in
process or materials normally held by such Debtor for such purpose (but no such
sale or use shall limit or impair Lender's Security Interest in any proceeds
thereof, including, without limitation, any Account of such Debtor), (ii) will,
at its own expense, endeavor to collect, as and when due, all amounts due with
respect to any of its Intangible Collateral, including the taking of such action
with respect to such collection as Lender may reasonably request or, in the
absence of such request, as such Debtor may deem advisable, and (iii) may grant,
subject to the next sentence hereof, to any Person obligated on any of
Intangible Collateral, any rebate, refund or allowance to which such Person may
be lawfully entitled, and may accept, in connection therewith, the return of
goods, the sale or lease of which shall have given rise to such Intangible
Collateral. Lender, however, may at any time after an Event of Default or an
Unmatured Event of Default, (1) notify any Person obligated on any of the
Intangible Collateral of any Debtor to make payment to Lender of any amounts due
or to become due thereunder; (2) enforce collection of any of any such Debtor's
Intangible Collateral by suit or otherwise; (3) surrender, release or exchange
all or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness thereunder or
evidenced thereby; and (4) notify any Debtor (and upon receipt of such notice
such Debtor agrees to notify, at its sole expense, any parties obligated on any
of its Collateral) to make payment to Lender of any amount due or to become due
under the Collateral of such Debtor.

         (b) Subject to the terms of the Secured Credit Agreement, each Debtor
will, forthwith upon receipt, transmit and deliver to Lender, a Depositary Bank
or Agent Bank, in the form received, all cash, checks, drafts and other
instruments or writings for the

                                      -10-

<PAGE>



payment of money (properly endorsed, where required, so that such items may be
collected by Lender, a Depository Bank or Agent Bank) which may be received by
such Debtor at any time in full or partial payment, or other proceeds of any
Collateral of such Debtor. Except as Lender may otherwise consent in writing,
any such items which may be so received by any Debtor will not be commingled by
such Debtor with any of its other funds or property, but, until delivery to
Lender, a Depository Bank or Agent Bank, will be held separate and apart from
such other funds and property and in trust for Lender or Agent Bank.

         (c) Lender, each Depository Bank and Agent Bank each is authorized to
endorse, in the name of any Debtor, any item, howsoever received by Lender, any
Depository Bank or Agent Bank representing any payment on or other proceeds of
any of such Debtor's Collateral.

         SECTION 6. Agreements of Debtors. Each Debtor shall:

         (a) Keep all its Inventory and other Goods, unless Lender shall
otherwise consent in writing, at one or more of its own premises (as shown on
Schedule V hereto) or at one or more of its premises listed on Schedule VI
hereto; provided, however, that (i) so long as no Event of Default or Unmatured
Insolvency Default shall have occurred and be continuing, and subject to Section
6(j), such Debtor may designate additional or replacement premises (such
premises shall be located in the contiguous continental United States) for
inclusion on Schedule V hereto upon delivery to Agent of (A) 30 days' prior
written notice and (B) all documents, and completion of all action, required by
Lender to maintain the Security Interest in favor of Lender in such Debtor's
Collateral, free and clear of any other Security Interest whatsoever except for
Permitted Liens and (ii) in the case of any public warehouse facility or
distribution center listed on Schedule VI hereto from time to time (A) such
Debtor's Inventory and other Goods shall be kept separate from Goods of those
Persons (other than such Debtor) using such premises and shall be clearly and
conspicuously designated as being such Debtor's sole property (for example, by
posting signs or by affixing such Debtor's name on its Inventory and other
Goods) and (B) such Debtor shall cause the owner of such premises to (1) sign
and deliver to Lender a Bailee Waiver in the form of Exhibit B hereto and (2)
place the following language prominently on the face of any bill of lading,
warehouse receipt or other document of title issued relating to Inventory and
other Goods of such Debtor: "THE PROPERTY DESCRIBED HEREIN IS SUBJECT TO THE
SECURITY INTEREST OF FIRST SOURCE FINANCIAL LLP."

         (b) Immediately notify Lender of (i) the occurrence of any event
causing loss in value of any of such Debtor's Goods in excess, in the aggregate
during any of Debtors' fiscal years, of $100,000 combined for all Debtors, and
(ii) the amount of such loss.

         (c) Furnish Lender such information concerning such Debtor, such
Debtor's Collateral and the Account Debtors as Lender may from time to time
reasonably request.


                                      -11-

<PAGE>



         (d) Defend such Debtor's title to its Collateral against all Persons
and against all claims and demands whatsoever.

         (e) Do all acts reasonably necessary to maintain, preserve and protect
all its Collateral, keep all its Collateral in good condition and repair
(ordinary wear and tear excepted), and prevent any waste or unusual or
unreasonable depreciation thereof.

         (f) Permit Lender and designees of Lender, from time to time, to
inspect its Collateral, and to inspect, audit and make copies of and extracts
from all records and all other papers in the possession of such Debtor and will,
upon request of Lender, deliver to Lender all of such records and papers which
pertain to its Collateral and Account Debtors.

         (g) Upon request of Lender, stamp on its records concerning its
Collateral (excluding its Inventory) (and/or enter into its computer records
concerning its Collateral including but not limited to its Inventory) a
notation, in form satisfactory to Lender, of the Security Interest created
hereby.

         (h) Except for the sale or lease of its Inventory in the ordinary
course of its business and except as otherwise permitted by the Secured Credit
Agreement, not sell, lease, assign, license, sublicense, abandon or otherwise
transfer, or create or permit to exist, any Security Interest (other than
Permitted Liens) on any of its Collateral to or in favor of any Person other
than Lender.

         (i) At all times keep all of its Inventory and Equipment insured
against loss, damage, theft and other risks in the manner required by Section
11.4 of the Secured Credit Agreement (whether or not the Secured Credit
Agreement shall be in effect) and, if Lender so requests, deposit with Lender
certified copies of the relevant policies and certificates of insurance.

         (j) Furnish or cause to be furnished to Lender, in accordance with
Section 9.10 of the Secured Credit Agreement, notice in writing as soon as
possible and in any event no later than 30 days prior to the occurrence from
time to time of (i) any change in the location of such Debtor's chief executive
office and (ii) any change in the name of such Debtor or the name under or by
which it conducts its business, and take all action required by Lender to
maintain and preserve the Security Interest in favor of Lender in such Debtor's
Collateral, free and clear of any other Security Interest whatsoever except for
Permitted Liens.

         (k) Reimburse Lender for all expenses, including reasonable attorneys'
fees and legal expenses and expenses of any repairs to realty or other property
(unless and to the extent that the damage giving rise to such repairs is caused
by the willful misconduct or gross negligence of the Lender) to which any of its
Collateral may be affixed or be a part, incurred by Lender in seeking to collect
or enforce any rights under or with respect to its Collateral, in seeking to
collect the Notes and all other Liabilities, and in enforcing its rights

                                      -12-

<PAGE>



hereunder, together with interest thereon from the date incurred until
reimbursed by such Debtor at the Default Rate.

         (l) Not sell, assign or license to any third party any of its right,
title or interest in any of its Intellectual Property Collateral and General
Intangibles other than in such Debtor's ordinary course of business.

         (m) Not, unless such Debtor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered to
Lender) that any of its Patent Collateral is of negligible economic value to
such Debtor, or (ii) have a valid business purpose to do otherwise, do any act,
or omit to do any act, whereby any of such Debtor's Patent Collateral may lapse
or become abandoned or dedicated to the public or unenforceable.

         (n) Not, and shall not permit any of its licensees to, unless such
Debtor shall either (i) reasonably and in good faith determine (and notice of
such determination shall have been delivered to Lender) that any of its
Trademark Collateral is of negligible economic value to such Debtor or (ii) have
a valid business purpose to do otherwise,

                  (A) fail to continue to use any of its Trademark Collateral in
         order to maintain all of its Trademark Collateral in full force free
         from any claim of abandonment for non-use,

                  (B) fail to maintain as in the past the quality of products
         and services offered under all of its respective Trademark Collateral,

                  (C) fail to employ all of its Trademark Collateral registered
         with any Federal or State or foreign authority with an appropriate
         notice of such registration,

                  (D) adopt or use any trademark which is confusingly similar or
         a colorable imitation of any of its Trademark Collateral except in
         compliance with applicable law,

                  (E) use any of its Trademark Collateral registered with any
         Federal or State or foreign authority except for the uses for which
         registration or application for registration of such Trademark
         Collateral has been made except in compliance with applicable law, or

                  (F) do or permit any act or knowingly omit to do any act
         whereby any of its Trademark Collateral may lapse or become invalid or
         unenforceable.

         (o) Not, unless such Debtor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered to
Lender) that any of its Copyright Collateral or any of its Trade Secrets
Collateral is of negligible economic value to such Debtor or (ii) have a valid
business purpose to do otherwise, do or permit any act or knowingly omit to do
any act whereby any of its Copyright Collateral or any of its

                                      -13-

<PAGE>



Trade Secrets Collateral may lapse or become invalid or unenforceable or placed
in the public domain except upon expiration of the end of an unrenewable term of
a registration thereof.

         (p) Notify Lender immediately if it knows, or has reason to know, that
any application or registration relating to any material item of its
Intellectual Property Collateral may become abandoned or dedicated to the public
or placed in the public domain or invalid or unenforceable, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any foreign counterpart
thereof or any court) regarding such Debtor's ownership of any of its
Intellectual Property Collateral, its right to register the same or to keep and
maintain and enforce the same.

         (q) Not, nor shall any of such Debtor's agents, employees, designees or
licensees, file an application for the registration of any of its Intellectual
Property Collateral with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, unless such Debtor promptly
informs Lender, and, upon request of Lender, executes and delivers any and all
agreements, instruments, documents and papers as Lender may request to evidence
Lender's Security Interest in such Intellectual Property Collateral and the
goodwill and general intangibles of such Debtor relating thereto or represented
thereby.

         (r) Take all necessary steps, including in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue any application (and to obtain the relevant
registration) filed with respect to, and to maintain any registration of, its
Intellectual Property Collateral, including the filing of applications for
renewal, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and taxes
(except to the extent that dedication, abandonment or invalidation is permitted
under the foregoing clause (m), (n) or (o)).

         (s) Contemporaneously herewith, execute and deliver to Lender an
Agreement (Patent), an Agreement (Trademark) and an Agreement (Copyright) in the
forms of Exhibits C, D and E hereto, respectively, and shall execute and deliver
to Lender any other document required to acknowledge or register or perfect
Lender's interest in any part of its Intellectual Property Collateral.

         (t) At its sole expense, (i) without any request by Lender, immediately
deliver or cause to be delivered to Lender, in due form for transfer (i.e.,
endorsed in blank or accompanied by duly executed undated blank stock or bond
powers), all Securities, Chattel Paper, Instruments, Investment Property and
Documents, if any, of such Debtor at any time representing all or any of its
Collateral, (ii) upon request of Lender cause Lender's Security Interest
hereunder and under the other Collateral Documents to be at all times

                                      -14-

<PAGE>



duly noted on any certificate of title issuable with respect to any of its
Collateral and forthwith deliver or cause to be delivered to Lender each such
certificate of title to the extent not covered by a Permitted Lien, and (iii)
execute and deliver, or cause to be executed and delivered, to Lender, in due
form for filing or recording (and pay the cost of filing or recording the same
in all public offices deemed necessary or advisable by Lender) such assignments
(including, without limitation, assignments of life insurance, if such Debtor
elects or is otherwise required to obtain such insurance), security agreements,
mortgages, deeds of trust, pledge agreements, consents, waivers, financing
statements, stock or bond powers and other documents, and do such other acts and
things, all as may from time to time be necessary or desirable, to the
satisfaction of Lender, to establish and maintain in favor of Lender, a valid
perfected lien on and Security Interest in all assets of such Debtor now or
hereafter existing or acquired (free of all other liens, claims and rights of
third parties whatsoever other than Permitted Liens) to secure prompt and
complete payment, performance and observance of the Liabilities.

         (u) At the request of Lender after the occurrence and during the
continuance of an Event of Default, transfer all or any part of its Collateral
(including, with respect to any of its Trademarks, the goodwill associated
therewith) into the name of Lender or its nominee, with or without disclosing
that such Collateral is subject to the Security Interest hereunder.

         (v) At all times comply with the requirements of all applicable laws
(including, without limitation, the provisions of the Fair Labor Standards Act),
rules, regulations and orders of every governmental authority, non-compliances
with which simply or in the aggregate could reasonably be expected to,
materially and adversely affect the value of such Debtor's Collateral or the
worth of such Debtor's Collateral as collateral security, taken as a whole.

         SECTION 7. Renewals, Amendments and Other Security; Partial Releases.

         (a) Lender may from time to time, whether before or after any of the
Liabilities shall become due and payable, without notice to any Debtor, take any
or all of the following actions (provided that actions taken under clause (v)
may be taken only after the occurrence and during the continuance of an Event of
Default): (i) retain or obtain a Security Interest in any property to secure
payment and performance of any of the Liabilities, (ii) retain or obtain the
primary or secondary liability of any Person, in addition to any Debtor, with
respect to any of the Liabilities, (iii) create, extend or renew for any period
(whether or not longer than the original period) or alter or exchange any of the
Liabilities or release or compromise any obligation of any nature of any Person
with respect thereto, (iv) release or fail to perfect its Security Interest in,
or surrender, release or permit any substitution or exchange for, all or any
part of any property securing any of the Liabilities, or create, extend or renew
for any period (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any Person with
respect to any such property, and (v) resort to the Collateral of any Debtor or
all Debtors for payment of any of the Liabilities whether or not Lender (1)
shall have

                                      -15-

<PAGE>



resorted to any other property securing payment and performance of the
Liabilities or (2) shall have proceeded against any other Person primarily or
secondarily liable on any of the Liabilities (all of the actions referred to in
preceding clauses (1) and (2) hereby being expressly waived by each Debtor).

         (b) No release from the Security Interest created by this Agreement of
any part of the Collateral of any Debtor by Lender shall in any way alter, vary
or diminish the force or effect of or Security Interest created by this
Agreement against the balance or remainder of such or any other Debtor's
Collateral.

         SECTION 8. Grant of License to Use Intangibles. In addition to Section
6(u) hereof and solely for the purpose of enabling Lender to exercise rights and
remedies hereunder, each Debtor hereby grants to Lender, after the occurrence
and during the continuance of an Event of Default, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Debtor) to use, assign, license or sublicense any General Intangibles consisting
of Intellectual Property Collateral only, now owned or hereafter acquired by
such Debtor, and wherever the same may be located, including in such license
reasonable access as 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.

         SECTION 9. Information. Lender and any of the officers, employees,
agents or auditors of Lender shall have the right at reasonable intervals after
the date hereof to make reasonable inquiries by mail, telephone, telegraph or
otherwise to any Person with respect to validity and amount or any other matter
(including, without limitation, the assertion by Account Debtors of claims,
offsets and counterclaims) concerning any of any such Debtor's Collateral.

         SECTION 10. Event of Default.

         (a) (i) Whenever an Event of Default or Unmatured Insolvency Default
shall exist or be occurring, Lender may exercise from time to time any rights
and remedies available to Lender hereunder, under the Secured Credit Agreement
and under the Uniform Commercial Code or otherwise available to Lender under
applicable law. Each Debtor hereby expressly waives, to the fullest extent
permitted by applicable law, any and all notices, advertisements, hearings, or
process of law in connection with the exercise by Lender of any of its rights
and remedies after an Event of Default or Unmatured Insolvency Default occurs.

         (ii) Each Debtor agrees, upon the occurrence of an Event of Default or
Unmatured Insolvency Default and upon the request of Lender, to assemble, at
such Debtor's expense, all of its Collateral at any location requested by
Lender.

         (iii) To the fullest extent permitted by applicable law, each Debtor
hereby waives

                                      -16-

<PAGE>



the right to object to the manner or sufficiency of advertising, refurbishing of
its Collateral, or solicitation of bids in connection with any sales or other
disposition of its Collateral. Any sale by Lender may be made at any broker's
board or public or private sale, with or without notice or advertisement, for
cash or credit, and for present or future delivery. At any such public or
private sale or other disposition of any Debtor's Collateral, Lender may, to the
fullest extent permissible under applicable law, purchase the whole or any part
of such Collateral sold, or may sell or dispose of such Collateral to any other
Person, free from any and all claims of any Debtor or of any other Person
claiming by, through, or under any Debtor. Each Debtor hereby expressly waives
and releases, to the fullest extent permitted by applicable law, any right of
redemption on the part of such Debtor. If any notification of intended
disposition of any Debtor's Collateral is required by law, such notification, if
mailed, shall be deemed reasonably and properly given if mailed at least five
(5) days before such disposition, postage prepaid, addressed to the Debtors at
the address of the Debtors set forth in the Secured Credit Agreement. Any
proceeds of any Debtor's Collateral, or of the disposition by Lender of any
Debtor's Collateral (including, without limitation, Benefits to the extent
provided in Section 16 hereof), may be applied by Lender to the payment of
expenses in connection with such Collateral, including reasonable attorneys'
fees and legal expenses, and any balance of such proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.

         (b) Without limiting any other provision of this Agreement, whenever an
Event of Default or Unmatured Insolvency Default shall be existing, Lender, with
or without process of law, may enter upon any premises where any Debtor's
Collateral or any part thereof may be, and take possession of all or any part
thereof; and Lender may, without Lender being responsible except as provided
under applicable law for loss or damage, hold, store, keep idle, lease, operate
or otherwise use or permit the use of such Collateral or any part thereof for
such time and upon such terms as Lender may deem to be reasonable, and may
demand, collect and retain all earnings and all other sums due and to become due
in respect of such Collateral from any Person whomsoever, accounting only for
net earnings, if any, arising from use or from the sale thereof after charging
against all receipts from use or from the sale thereof all reasonable costs and
expenses of, and damages or losses by reason of, such use or sale.

         (c) Each Debtor hereby agrees to pay any and all costs and expenses
incurred by Lender in retaking, holding, preparing for sale, selling and the
like with regard to the Collateral of such and any other Debtor, including,
without limitation, attorneys' fees incurred by Lender in connection therewith.

         (d) Each Debtor agrees that in any sale of any of its Collateral,
Lender is authorized to comply with any limitation or restriction in connection
with such sale as counsel may advise Lender is necessary in order to avoid any
violation of applicable law (including, without limitation, compliance with such
procedures as may restrict the number of prospective bidders or purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to

                                      -17-

<PAGE>



Persons who will represent and agree that they are purchasing for their own
account or investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental or regulatory authority or official, and each
Debtor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall Lender be liable or accountable to any Debtor for any discount allowed
by reason of the fact that such Collateral was sold in compliance with any such
limitation or restriction.

         (e) The proceeds of any sale of any Debtor's Collateral sold pursuant
to the terms of this Section 10 and any cash held as Collateral of any Debtor
hereunder shall be applied by Lender as follows:

                  First: to payment of all of the reasonable costs and expenses
         of Lender, including (i) the expenses of such sale, (ii) the
         out-of-pocket costs and expenses of Lender and the fees and
         out-of-pocket expenses of counsel employed by Lender, (iii) the payment
         of all advances made by Lender for the account of such Debtor and (iv)
         the payment of all costs and expenses incurred by Lender in connection
         with the administration and enforcement of this Agreement, to the
         extent that such advances, costs and expenses shall not have been
         reimbursed to Lender;

                  Second: to the payment in full of the Liabilities in such
         order as Lender may determine from time to time in its sole discretion;
         and

                  Third: the balance, if any, of such proceeds shall be paid to
         such Debtor, its successors and assigns, or as a court of competent
         jurisdiction may direct.

         (f) If sufficient sums are not realized upon any disposition of
Debtor's Collateral to pay all Liabilities and any expenses of such disposition,
including, without limitation, attorneys' fees, Debtors hereby jointly and
severally promise to pay immediately any resulting deficiency.

         (g) No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, but every such right or remedy shall be cumulative
and shall be in addition to every other right or remedy herein conferred, or
conferred upon Lender by any other agreement or instrument or security, or now
or hereafter existing at law or in equity or by statute.

         SECTION 11. Authority of Lender. (a) Lender shall have, and be entitled
to exercise, all such powers hereunder as are specifically delegated to Lender
by the terms hereof, together with such powers as are incidental thereto. Lender
may execute any of its duties hereunder by or through agents or employees and
shall be entitled to retain counsel and to act in reliance upon the advice of
such counsel concerning all matters pertaining to its duties hereunder. Neither
Lender, nor any director, officer or employee of Lender, shall be liable for any
action taken or omitted to be taken by Lender hereunder

                                      -18-

<PAGE>



or in connection herewith. Each Debtor agrees to reimburse Lender, on demand,
for all costs and expenses incurred by Lender in connection with the
administration and enforcement of this Agreement (including costs and expenses
incurred by any agent employed by Lender) and agrees to indemnify (which
indemnification shall survive any termination of this Agreement) and hold
harmless Lender (and any such agent) from and against any and all liability
incurred by Lender (or such agent) hereunder or in connection herewith except to
the extent of any gross negligence or wilful misconduct on the part of Lender.

         (b) Lender may from time to time, without notice to any Debtor, at its
option, perform any obligation to be performed by any Debtor hereunder, under
the Secured Credit Agreement or the Related Documents which shall not have been
performed and take any other action which, in its sole discretion, Lender deems
necessary or desirable for the maintenance or preservation of any Collateral of
any Debtor or all Debtors' or Lender's Security Interest in any of such
Collateral. All moneys advanced by Lender in connection with the foregoing
shall, whether or not there are then outstanding any Loans made under the
Secured Credit Agreement, bear interest at the Default Rate (or such lower
maximum rate as shall be legal under applicable law), and shall be jointly and
severally repayable together with such interest by such Debtor to Lender, upon
the demand of Lender, and shall be secured hereby prior to any other
indebtedness or obligation secured hereby, but the making of any such advance by
Lender shall not relieve such Debtor of any default hereunder or thereunder.

         SECTION 12. Termination. Subject to Section 15(n) hereof, this
Agreement shall terminate when the Commitments shall be terminated and all the
Liabilities have been indefeasibly fully paid and performed, at which time
Lender shall reassign and redeliver (or cause to be reassigned and redelivered)
to each Debtor, or to such Person or Persons as each Debtor shall designate,
against receipt, such of its Collateral (if any) as shall not have been sold or
otherwise applied by Lender pursuant to the terms hereof and still shall be held
by it hereunder, together with appropriate instruments of termination,
reassignment and release.

         SECTION 13. Protection of Intellectual Property Collateral. (a) Each
Debtor shall have the duty to protect, preserve and maintain all rights in each
of the items of its Intellectual Property Collateral, including, without
limitation, the duty to prosecute and/or defend against any and all suits
concerning validity, infringement, enforceability, ownership or dilution or
other aspects of such Intellectual Property Collateral, as well as the duty to
register all of its material Copyrights with the United States Copyright Office
and to make publications of all copyrighted materials with an appropriate
copyright notice. Any expenses incurred in protecting, preserving and
maintaining the Intellectual Property Collateral of any Debtor shall be borne by
such Debtor. To the maximum extent permitted by law, after the occurrence of and
during the continuance of an Event of Default, Lender shall have the right,
without taking title to any Debtor's Intellectual Property Collateral, to bring
suit, in Lender's name or in such Debtor's name or in both such names, as
determined by Lender, to enforce any or all of such Intellectual Property
Collateral or

                                      -19-

<PAGE>



Lender's Security Interest therein, in which event such Debtor shall, at the
request of Lender, do any and all lawful acts and execute any and all proper
documents required by Lender in aid of such enforcement. All costs, expenses and
other moneys advanced by Lender in connection with the foregoing shall be
treated as an advance under Section 11(b) hereof, but the making of any such
advance by Lender shall not relieve any such Debtor of any default hereunder.
All monetary recoveries from any such suits instituted by Lender shall be
retained by and owned solely by Lender. In addition, Debtors shall indemnify on
a joint and several basis, (which indemnification shall survive any termination
of this Agreement) and hold harmless Lender from any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (including attorneys' fees and legal expenses) of any
kind whatsoever which may be imposed on, incurred by or asserted against Lender
in connection with or in any way arising out of such suits, proceedings or other
actions. Notwithstanding the foregoing, Lender shall have no obligations or
liabilities regarding any Debtor's Intellectual Property Collateral by reason
of, or arising out of, this Agreement.

         (b) If any Event of Default or Unmatured Insolvency Event shall have
occurred and be continuing, upon the written demand of Lender, each Debtor shall
execute and deliver to Lender a collateral assignment or assignments of its
Intellectual Property Collateral and such other documents as are necessary or
appropriate to carry out the intent and purposes of this Agreement along with,
in the case of any of its Trademarks, goodwill and assets relating to the
products sold under such Trademark. Each Debtor agrees that such a collateral
assignment shall be applied to reduce the Liabilities then due only to the
extent that Lender receives cash proceeds in respect of the sale of, or other
realization upon, such Debtor's Intellectual Property Collateral or licenses;
such cash proceeds to be applied to the payment of expenses incurred in
connection with such Intellectual Property Collateral or licenses, including
attorneys' fees and legal expenses, and any balance of such proceeds shall be
applied by Lender as provided in Section 10(a)(iii). Without limiting any other
rights and remedies of Lender, each Debtor shall within five (5) Business Days
of written notice from the Lender make available to Lender such personnel in
such Debtor's employ on the date of the Event of Default or Unmatured Insolvency
Event as the Lender may reasonably designate, by name, title or job
responsibility, to permit Lender to continue, directly or indirectly, to
advertise and operate the business of such Debtor under any of such Debtor's
General Intangibles.

         SECTION 14. SUBMISSION TO JURISDICTION. LENDER MAY ENFORCE ANY CLAIM
ARISING OUT OF THIS AGREEMENT, ANY RELATED DOCUMENT, ANY COLLATERAL OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM OR RELATED TO ANY
CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT IN ANY STATE OR
FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO,
ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO
ANY SUCH CLAIM, EACH DEBTOR HEREBY IRREVOCABLY

                                      -20-

<PAGE>



SUBMITS TO THE JURISDICTION OF SUCH COURTS AND ALSO HAS IRREVOCABLY DESIGNATED
THE PERSON WHOSE NAME AND ADDRESS ARE SET FORTH IN THE SECURED CREDIT AGREEMENT
TO RECEIVE FOR AND ON BEHALF OF EACH DEBTOR SERVICE OF PROCESS IN ILLINOIS. EACH
DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS
BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO SUCH DEBTOR
AND AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) SHALL
BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH
SUIT, ACTION OR PROCEEDING AND (II) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL
SERVICE UPON AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT
THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
PRECLUDE LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY
OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. EACH DEBTOR
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN CHICAGO, ILLINOIS AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.

         SECTION 15.  Miscellaneous Provisions.

         (a) Lender and Agent Bank shall be deemed to have exercised reasonable
care in the custody and preservation of each Debtor's Collateral if they take
such action for that purpose as any such Debtor requests in writing, but failure
of Lender or Agent Bank to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure of Lender or Agent
Bank to preserve or protect any rights with respect to any of such Collateral
against prior or other parties, or to do any act with respect to the
preservation of any of such Collateral not so requested by any Debtor, shall be
deemed a failure to exercise reasonable care in the custody or preservation of
such Collateral.

         (b) Each Debtor hereby appoints Lender, with full power of
substitution, as such Debtor's attorney-in-fact for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument which Lender 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, each Debtor agrees that Lender
shall have the right and authority: (i) while any Event of Default or Unmatured
Insolvency Default shall exist, to assign, sell, license, sublicense or
otherwise dispose of all right, title and interest of such Debtor in and to its
Intellectual Property Collateral and any other of its General Intangibles
including, without limitation, assignments, recordings, registrations and
applications therefor in the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency of the United
States, any State thereof or any other country or political subdivision thereof,

                                      -21-

<PAGE>



and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose; and, (ii) subject to
Section 16 hereof, to make claim for, and receive and give acquittance for
payment on account of, loss under any insurance policy covering its Collateral,
or any part thereof, and to receive, endorse and collect all checks, drafts and
other orders for the payment of money representing the proceeds of such
insurance.

         (c) All notices or other communications hereunder shall be given (and
shall be deemed to have been received, in each case) in the manner specified
under Section 14.3 of the Secured Credit Agreement, whether or not then in
effect.

         (d) No delay on the part of Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Lender of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.

         (e) No amendment to, modification or waiver of, or consent with respect
to, any provision of this Agreement shall in any event be effective unless the
same shall be in writing and signed and delivered by Lender, and then any such
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

         (F) THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN DELIVERED AT CHICAGO,
ILLINOIS, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF
LAW. WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN
SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY
PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW,
SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT. ALL OBLIGATIONS OF EACH DEBTOR, ANY OF
SUCH DEBTOR'S SUBSIDIARIES OR ANY RELATED PERSON AND RIGHTS OF LENDER AND ANY
OTHER HOLDER OF A NOTE OR LIABILITY EXPRESSED IN THIS AGREEMENT SHALL BE IN
ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED UNDER APPLICABLE LAW OR IN
ANY OTHER WRITTEN INSTRUMENT OR AGREEMENT RELATING TO ANY OF THE LIABILITIES.

         (g) The rights and privileges of Lender hereunder shall inure to the
benefit of its successors and assigns. This Agreement shall be binding upon each
Debtor and its successors and assigns.


                                      -22-

<PAGE>



         (h) At the option of Lender, this Agreement, or a carbon, photographic
or other reproduction of this Agreement or of any Uniform Commercial Code
financing statement covering each Debtor's Collateral or any portion thereof,
shall be sufficient as a Uniform Commercial Code financing statement and may be
filed as such.

         (i) The section headings in this Agreement are inserted for convenience
of reference and shall not be considered a part of this Agreement or used in its
interpretation.

         (j) This Agreement may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
for all purposes be deemed an original, but all such counterparts shall together
constitute but one and the same Agreement. Each Debtor hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.

         (K) EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR
RELATED TO THIS AGREEMENT, ANY COLLATERAL OR ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
WITH THE FOREGOING OR ARISING FROM ANY CREDIT RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

         (l) Each Debtor hereby expressly waives to the fullest extent permitted
by law: (i) notice of the acceptance by Lender of this Agreement, (ii) notice of
the existence or creation or non-payment of all or any of the Liabilities, (iii)
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever except as required hereunder and under the Secured Credit Agreement,
and (iv) all diligence in collection or protection of or realization upon the
Liabilities or any thereof, any obligation hereunder, or any security for or
guaranty of any of the foregoing.

         (m) Subject to the provisions of the Secured Credit Agreement, Lender
may, from time to time, without notice to any Debtor, assign or transfer any or
all of the Liabilities or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Liabilities shall be and remain Liabilities for the purposes of this Agreement,
and each and every immediate and successive assignee or transferee of any
portion of the Liabilities or of any interest therein shall, to the extent of
the interest of such assignee or transferee in the Liabilities, be entitled to
the benefits of this Agreement to the same extent as if such assignee or
transferee were an original Lender; provided, however, that each Lender shall
have an unimpaired right, prior and superior to that of any such assignee or
transferee, to enforce this Agreement, as to those of the Liabilities which
Lender has not assigned or transferred.

         (n) Each Debtor agrees that, if at any time all or any part of any
payment

                                      -23-

<PAGE>



theretofore applied by Lender to any of the Liabilities is or must be rescinded
or returned by Lender for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of any Debtor or any of its
Affiliates), such Liabilities shall, for the purposes of this Agreement, to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application, except that no
interest shall be charged from the date of application of such payment to the
date of rescission or return of such payment, and the Security Interest granted
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such Liabilities, all as though such application had not been made.

         (o) Lender is the current holder of all Liabilities, but, subject to
the Secured Credit Agreement, may in the future transfer, assign or sell certain
Liabilities.

         (p) Each Debtor hereby acknowledges that there are no conditions to the
effectiveness of this Agreement.

         (q) If any item of Collateral hereunder also constitutes collateral
granted to Lender under any other mortgage, agreement or instrument, in the
event of any conflict between the provisions under this Agreement and those
under such other mortgage, agreement or instrument relating to such Collateral,
the provision or provisions selected by the Lender shall control with respect to
such Collateral.

         (r) In case of conflict between any provision of this Agreement and any
provision of the Secured Credit Agreement, the provisions of the Secured Credit
Agreement shall control.

         SECTION 16. Application of Insurance Proceeds. Any loss benefits
("Benefits") under any of the insurance policies maintained by any Debtor
pursuant to Section 6(i) hereof shall be applied in accordance with Section 7.6
of the Secured Credit Agreement

         SECTION 17. Lender May Purchase Insurance. Unless Debtors provide
Lender with evidence reasonably satisfactory to Lender of the insurance coverage
required by Section 6(i) of this Agreement, Lender may purchase insurance at
Debtors' expense to protect Lender's interest in the Collateral. This insurance
may, but need not, protect any Debtor's interest in the Collateral. The coverage
purchased by Lender may not pay any claim made by any Debtor or any claim made
against any Debtor in connection with the Collateral. Debtors may later cancel
any insurance purchased by Lender, but only after providing Lender with evidence
reasonably satisfactory to Lender that Debtors have obtained insurance as
required by Section 6(i) of this Agreement. If Lender purchases insurance for
the Collateral, Debtors will be responsible on a joint and several basis for the
costs of that insurance, including interest at the Default Rate (or such lower
maximum rate as shall be legal under applicable law) and any other charges
imposed by Lender in connection with the placement of insurance, until the
effective date of the cancellation or expiration of such insurance. The costs of
the insurance may, at Lender's discretion, be

                                      -24-

<PAGE>



added to the Liabilities, and in any event shall be secured by the Collateral
Documents. It is understood and agreed that the costs of insurance obtained by
Lender may be more than the costs of insurance any Debtor may be able to obtain
on its own.





                [remainder of this page intentionally left blank]

                                      -25-

<PAGE>



         IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.


DEBTORS:
                                         BROWNSTONE HOLDINGS, INC.


                                         By:_________________________________
                                         Name Printed:_______________________
                                         Its:________________________________


                                         ECOLOGY KIDS, INC.


                                         By:_________________________________
                                         Name Printed:_______________________
                                         Its:________________________________
                                         

                                         DIPLOMAT HOLDINGS, INC.


                                         By:_________________________________
                                         Name Printed:_______________________
                                         Its:________________________________
                                         

                                         LEW MAGRAM, LTD.


                                         By:_________________________________
                                         Name Printed:_______________________
                                         Its:________________________________
                                         
                                         Address for all Debtors:

                                         414 Alfred Avenue
                                         Teaneck, New Jersey 07666
                                         Facsimile: 201-833-1646
                                         Telephone: 201-833-4450


                                         with a

Security Agreement

<PAGE>



                                         copy to:

                                         Gerstein, Savage, Kaplowitz & 
                                           Fredericks, LLP
                                         101 East 52nd Street
                                         New York, New York 10022-6018
                                         Attention: James Smith
                                         Facsimile: (212) 980-5192
                                         Telephone: (212) 752-9700

LENDER:
                                         FIRST SOURCE FINANCIAL LLP
                                         By: First Source Financial, Inc.
                                         Its: Manager

                                         By:_________________________________
                                         Name Printed:_______________________
                                         Its:________________________________
                                         
                                         Address for Lender:
                                         2850 West Golf Road - Fifth Floor
                                         Rolling Meadows, IL 60008
                                         Attention: Contract Administration
                                         Facsimile: (847) 734-7910, 7911
                                         Telephone: (847) 734-2000

                                         with a
                                         copy to:         Katten Muchin & Zavis
                                                          525 West Monroe Street
                                                          Suite 1600
                                                          Chicago, IL 60625
                                         Attention:       Denise S. Burn, Esq.

                                         Facsimile: (312) 902-1061
                                         Telephone: (312) 902-5263




Security Agreement