Document:

EXHIBIT
10.13

    

    SECURITY
AGREEMENT

    

    

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

    

    RECITALS:

    

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

    

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

    

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

    

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

    

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

    

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

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    “Collateral” has the meaning
specified in Section 2.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    “Guarantee” has the meaning
specified in Recital B.

    

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

    

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

    

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

    

    
      
         

      

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

    

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

    

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

    

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

    

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

    

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

    

    

      
        
           

        

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    (d)    The Section
and Schedule headings used in this Security Agreement are for convenience
only and
shall not affect the construction or meaning of any provisions of this Security
Agreement.

     

     

    
      
         

      

      
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    (e)    Unless
otherwise specified, the words “hereof”, “herein”,
“hereunder” and other similar words refer to this Security Agreement as a
whole and not just to the Section, subsection or clause in which they are used;
and the words “this Security
Agreement” refer to this Security Agreement, as amended, restated,
modified or supplemented from time to time.

    

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

    

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

    

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

    

    
      	
            	
              (i) 

            	
              all
      Accounts of the Debtor;

            

    

    

    
      	
            	
              (ii) 

            	
              all
      Inventory of the Debtor;

            

    

    

    
      	
            	
              (iii) 

            	
              all
      Equipment of the Debtor;

            

    

    

    
      	
            	
              (iv) 

            	
              all
      Contracts and Contract Rights of the
Debtor;

            

    

    

    
      
        	
              	
                (v)

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

              

      

    

    

    
      
        	
              	
                (vi)

              	
                all
      Documents of the Debtor;

              

      

    

    

    
      	
            	
              (vii) 

            	
              all
      Instruments and Chattel Paper of the
Debtor;

            

    

    

    
      
        	
              	
                (viii)

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

              

      

    

    

    
      
        	
              	
                (ix)

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

              

      

    

    

    
      
        	
              	
                (x)

              	
                all
      Leases of the Debtor;

              

      

    

    

    
      
        	
              	
                (xi)

              	
                all
      Fixtures of the Debtor;

              

      

    

    

    
      	
            	
              (xii) 

            	
              all
      Deposit Accounts of the Debtor;

            

    

    

    
      
         

      

      
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              (xiii) 

            	
              all
      Letter of Credit Rights of the
Debtor;

            

    

    

    
      	
            	
              (xiv) 

            	
              all
      Securities Accounts and Securities Entitlements of the
    Debtor;

            

    

    

    
      	
            	
              (xv) 

            	
              all
      Commodity Accounts and Commodity Contracts of the
  Debtor;

            

    

    

    
      
        	
              	
                (xvi)

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

              

      

    

    

    
      
        	
              	
                (xvii)

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

              

      

    

    

    
      
        	
              	
                (xviii)

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

              

      

    

    

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

    

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

    

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

    

    (a)           The
Debtor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has full power and authority to own its
properties and to carry on its business as now being conducted, is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of its properties, the transaction of its business, the location
of its Inventory
or Equipment, the performance of its obligations under its Contracts, or the
collection of any of its Accounts make such qualification necessary and where
the failure to be so qualified would have a material adverse effect on the
business or financial condition of the Debtor, and has full power and authority
to execute, deliver and perform this Security Agreement.

     

     

    
      
         

      

      
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    (b)           Its
execution, delivery and performance of this Security Agreement and the granting
of the security interest in the Collateral hereunder (i) have all been duly
authorized by all requisite action of the Debtor, (ii) do not require the
approval of its shareholders, and (iii) will not (I) violate any provision of
law or the Debtor’s organizational documents, (2) violate, be in conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any indenture, agreement or other instrument to which it is a
party or by which it or any of its properties is bound, (3) violate any
governmental or agency rule or regulation or any order of any court, tribunal or
governmental agency or (4) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the Collateral,
except for the security interest created by this Security Agreement. No
authorizations, approvals and consents of, and no filing and registration with,
any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by the Debtor of this Security Agreement or
for the validity or enforceability hereof. No consent of any party to any
Contract or any account debtor in respect of any Account is required in
connection with the execution, delivery and performance of this Security
Agreement or the creation of a security interest in such Contract or Account
pursuant hereto, other than the consents obtained by Debtor and delivered to
Creditor pursuant to the Subordination Agreement.

    

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

    

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

    

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

    

    (f)           There
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) now on file or registered in any public
office (other than in respect of Permitted Liens) covering any interest of the
Debtor in the Collateral, or intended so to be, and so long as the Supply
Agreement, Factoring Agreement and/or Guarantee are in effect or any of the
Obligations remain
unpaid the Debtor will not execute, and will not permit the filing or the
continued existence on file of any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) relating to the
Collateral in any public office, except financing statements filed or to be
filed with respect to the security interest granted hereunder to the Creditor or
with respect to the Permitted Liens.

     

    
      
         

      

      
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    (g)           The
chief executive office and principal place of business of the Debtor is located
at the address set forth in Schedule I. The originals of all documents (as well
as all duplicates thereof) evidencing or relating to the Accounts, Contracts,
Leases, Intellectual Property, Investment Property and other Financial Assets
and the original books of account and records of the Debtor relating thereto are
kept at the office or offices specified in Schedule I. All Inventory and
Equipment is held on the date hereof at the locations specified in Schedule
I.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

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

    

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

    

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

    

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

    

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

    

    (h)           The
Debtor will, at its own expense, make, execute, endorse, acknowledge, file
and/or deliver to the Creditor from time to time such lists, descriptions,
schedules, invoices, warehouse receipts, bills of confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurance or instruments and take such further
steps relating to the Collateral and other property or rights covered by the
security interest hereby granted by it, as the Creditor in its reasonable
judgment deems appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral and comply with the Assignment of Claims
Act.

     

     

    
      
         

      

      
        - 9
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    (i) The
Debtor will advise the Creditor promptly, in reasonable detail, if Debtor
becomes a party to
or obtains any rights with respect to any Commercial Tort Claim. Such
notification shall include information sufficient to describe such Commercial
Tort Claim, including, but not limited to, the parties to the claim, the court
in which the claim was commenced, the docket number assigned to such claim, if
any, and a detailed explanation of the events that gave rise to the claim.
Debtor shall execute and deliver to Creditor all documents and/or agreements
requested by Creditor to create, perfect and protect Creditor’s security
interest in such Commercial Tort Claim. Debtor authorizes Creditor to file
(without Debtor’s signature) initial financing statements or amendments, as
Creditor deems necessary to perfect its security interest in the Commercial Tort
Claim.

    

    6.           Special Provisions
Concerning Accounts.

    

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

    

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

    

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

    

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

    

    (e)           The
Debtor shall endeavor to collect or cause to be collected from the account
debtor on each of its Accounts (including Accounts which are delinquent, such
Accounts to be collected in accordance with generally accepted lawful collection
procedures), as and when due, any and all amounts owing under or on account of
such Accounts, except that prior to the occurrence of an Event of Default the
Debtor may allow in the ordinary course of business as adjustments to amounts
owing under its Accounts
(i) an extension or renewal of the time or times of payment, or settlement for
less than the total unpaid balance, which the Debtor finds necessary in
accordance with sound business and credit judgment and (ii) a refund or credit
due as a result of returned or damaged Inventory or improper or faulty
performance of services. The costs and expenses (including attorney’s fees) of
collection, whether incurred by the Debtor or the Creditor, shall be borne by
the Debtor.

     

    
      
         

      

      
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    (f)           The
Debtor shall, promptly upon learning thereof, report to the Creditor all delays
in performance, notices of default, claims made or disputes asserted by any
account debtor or other obligor on any Account and any other matters, in each
ease if they could reasonably be expected to have a material adverse effect on
the business or financial condition of the Debtor.

    

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

    

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

    

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

    

    7.           Special Provisions
Concerning Inventory and Equipment. (a) The Debtor will at all times keep
all of the Inventory and Equipment insured at its expense, to the Creditor’s
satisfaction, against fire, theft, and all other risks to which the Inventory
and Equipment may be subject; all policies or certificates with
respect to such insurance shall be endorsed to the Creditor’s satisfaction for
the benefit of the Creditor, including by naming the Creditor as loss payee or
additional insured, and evidence of such insurance satisfactory to the Creditor
shall be deposited with Creditor. If the Debtor shall fail to insure the
Inventory and Equipment to the Creditor’s satisfaction, or if the Debtor shall
fail so to endorse and deposit all policies or certificates with respect thereto
in accordance herewith, the Creditor shall have the right (but shall be under no
obligation) to procure such insurance and the Debtor agrees to reimburse the
Creditor for all costs and expenses of procuring such insurance that it failed
to procure. The Creditor may apply any proceeds of such insurance with respect
to the Inventory and Equipment, when received by it, toward the payment of any
of the Obligations, whether or not the same shall then be due. The Debtor shall
give immediate written notice to the insurers and to the Creditor of any loss or
damage to the Collateral or any part thereof and shall promptly file all
necessary or appropriate proofs of loss with the insurers. The Debtor hereby
appoints the Creditor the attorney-in-fact for the Debtor in obtaining,
adjusting and canceling any such insurance and endorsing settlement
drafts.

     

    
      
         

      

      
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    (b)           The
Creditor shall have the right, upon the occurrence and during the continuance of
an Event of Default, without notice to (unless specifically provided for
herein), or assent by, the Debtor but without affecting the Obligations, in the
name of the Debtor or in the name of the Creditor or otherwise:

    (i) upon
notice to such effect, to require the Debtor to deliver, at the Debtor’s
expense, any or all of the Inventory and Equipment to the Creditor at a place
designated by the Creditor (and after delivery thereof the Debtor shall have no
further claim to or interest in such Inventory and Equipment); (ii) to take
possession of any or all of the Inventory and Equipment and, for that purpose,
to enter, with the aid and assistance of any Person, any premises where such
Inventory and Equipment, or any part thereof, is, or may be, placed or
assembled, to remove any such Inventory or Equipment, and to dispose of or store
such Inventory or Equipment in such premises at the expense of the Debtor; and
(iii) to execute or endorse any instrument (including any invoice, bill of
lading, and storage or warehouse receipt) and do all the things necessary and
proper to protect and preserve and realize upon the Inventory and Equipment and
the other rights contemplated hereby. The Creditor shall not be obligated to do
any of the acts hereinabove authorized, but in the event that the Creditor
elects to do any such act, the Creditor shall not be responsible to the Debtor
except for the Creditor’s own willful misconduct.

    

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

    

    8.           Financing Statements:
Documentary Stamp Taxes. (a) The Debtor agrees to sign and deliver
to the Creditor such financing statements (which term, whenever used herein,
shall include initial financing statements and amendments), in form acceptable
to the Creditor, as the Creditor may from time to time reasonably request or as
are necessary in the opinion of the Creditor to establish and maintain a valid,
enforceable and perfected security interest in the Collateral and the other
rights and security contemplated hereby which is superior and prior to the
rights of all third Persons. The Debtor will pay any applicable filing fees and
related expenses. The Debtor authorizes the Creditor to file any such financing
statements without the signature of the Debtor.

     

    
      
         

      

      
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    (b)           The
Debtor agrees to procure, pay for, affix to any and all documents and cancel any
documentary tax stamps or similar taxes required by, and in accordance with,
applicable law, and the Debtor will indemnify the Creditor and hold the Creditor
harmless against any liability (including interest and penalties) in respect of
such taxes.

    

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

    

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

    

    (c)           Upon
the occurrence and during the continuance of an Event of Default the Creditor
may, without obligation to resort to other security, at any time and from time
to time, sell, re-sell, assign and deliver all or any of the Collateral, in one
or more parcels at the same or different times, and all right, title and
interest, claim and demand therein and right of redemption thereof, at public or
private sale, for cash, upon credit or for future delivery, and at such price or
prices and on such terms as the Creditor may determine, with the amounts
realized from any such sale to be applied in the manner provided in
Section

    11. The
Debtor hereby agrees that all of the foregoing may be effected without demand,
advertisement or notice (except as required by law or as expressly provided
herein), all of which (to the extent permitted by law) are hereby expressly
waived. Upon any sale of any of the Collateral, whether made under the power of
sale hereby given or under judgment, order or decree in any judicial proceeding
for the foreclosure involving the enforcement of this Security Agreement, (i)
the Creditor may bid for the property being sold, and
upon compliance with the terms of sale may hold, retain and possess and dispose
of such property in its own absolute right without further accountability, and
may, in paying the purchase money therefor, discharge a portion of the
Obligations owing to the Creditor in an amount equal to such purchase price;
(ii) the Creditor may make and deliver to the purchaser or purchasers a good and
sufficient deed, bill of sale and instrument of assignment and transfer of the
property sold; (iii) the Creditor may make all necessary deeds, bills of sale
and instruments of assignment and transfer of the property thus sold; but if so
requested by the Creditor or such purchaser, the Debtor shall ratify and confirm
any such sale or transfer by executing and delivering to the Creditor or such
purchaser all property, deeds, bills of sale, instruments of assignment and
transfer and releases as may be designated in any such request; (iv) all right,
title, interest, claim and demand whatsoever, either in law or in equity or
otherwise, of the Debtor of, in and to the property so sold shall be divested
and such sale shall be a perpetual bar both at law and in equity against the
Debtor, its successors and assigns, and against any and all Persons claiming or
who may claim the property sold or any part thereof from, through or under the
Debtor, its successors or assigns; and (v) the receipt of the Creditor or of the
officer thereof making such sale shall be a sufficient discharge to the
purchaser or purchasers at such sale for his or their purchase money, and such
purchaser or purchasers, and his, its or their assigns or personal
representatives, shall not, after paying such purchase money and receiving such
receipt of the Creditor or of such officers thereof, be obligated to see to the
application of such purchase money or be in any way answerable or responsible
for any loss, misapplication or non-application thereof

     

    
      
         

      

      
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    (d)           To
the extent that it may lawfully do so, the Debtor agrees that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any appraisement, valuation, stay, extension or
redemption laws, or any law permitting it to direct the order in which the
Collateral or any part thereof shall be sold, now or at any time hereafter in
force, which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement or the Obligations, and the Debtor hereby
expressly waives all benefit or advantage of any such laws and covenants that it
will not hinder, delay or impede the execution of any power granted or delegated
to the Creditor in this Security Agreement, but will suffer and permit the
execution of every such power as though no such laws were in force. In the event
of any sale of Collateral pursuant to this Security Agreement by the Creditor,
the Creditor shall, at least 10 days before such sale, give the Debtor written
notice (which notice may be given by telefax) of its intention to sell, except
that, if the Creditor shall determine in its sole discretion that any of the
Collateral is perishable or threatens to decline speedily in value, any such
sale may be made upon one day’s written notice (which notice may be given by
telefax) to the Debtor.

    

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

    

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

    
      
         

      

      
        - 14
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    (g)           For
the purpose of enabling the Creditor to exercise its rights and remedies under
this Security Agreement at such time as the Creditor, without regard to this
Section, shall be lawfully entitled to exercise such rights and remedies and for
no other purpose, the Debtor hereby grants to the Creditor, effective upon the
occurrence of an Event of Default and notice by the Creditor that it desires to
exercise such rights and remedies, an irrevocable, exclusive license,
exercisable without payment of royalty or other compensation to any of the
Debtor, to use, assign, license or sublicense any of the Collateral consisting
of Intellectual Property, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof.

    

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

    

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

    

    12.           Exercise of Rights.
The Creditor shall have the right in its sole discretion to determine which
rights, security, liens, guarantees, security interests or remedies it shall
retain, pursue, release, subordinate, modify or take any other action with
respect to, without in any way waiving, modifying or affecting any of the other
of them or any of the Creditor’s rights or remedies hereunder or under any other
Transaction Document.

     

    13.            Waivers. Amendments,
Required Notices. The Debtor hereby waives notice of acceptance of this
Security Agreement, notice of nonpayment of any Obligations or of any instrument
relating thereto, demand, presentment, protest and notice thereof with respect
to any and all instruments, notice of
Collateral received or delivered, or any other action taken in reliance hereon
and all other demands and notices of any description, except such as are
expressly provided for herein or which by applicable law may not be waived on
the date hereof No course of dealing between the Creditor and the Debtor or any
other Person, and no failure on the part of the Creditor to exercise, and no
delay in exercising, any right, power or remedy hereunder, shall operate as a
waiver thereof or as a waiver of any Event of Default, nor shall any single or
partial exercise by the Creditor of any right, power or remedy hereunder or with
respect to the Obligations preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No amendment or modification of
this Security Agreement nor any waiver of any provision of this Security
Agreement or consent to any departure by the Debtor therefrom shall in any event
be effective unless the same shall be in writing and signed by the Creditor, and
then any such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand on the Debtor in any
case shall, of itself; entitle the Debtor to any other or further notice or
demand in similar or other circumstances. If notice, whether before or after any
Event of Default has occurred, is required by law to be given by the Creditor to
the Debtor, the Debtor agrees that, unless otherwise specifically provided
herein, five (5) days’
notice given in the manner provided below shall be reasonable
notice.

     

    
      
         

      

      
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    14.           Cumulative Rights and
Remedies. This Security Agreement and the liens and security interests
granted hereunder are in addition to and not in substitution for any other
security interest or collateral now or hereafter held by or on behalf of the
Creditor to secure the Obligations and shall not operate as a merger of any
contract debt or suspend the fulfillment of or affect the rights, remedies or
powers of the Creditor in respect of the Obligations or any other security
interests held by the Creditor for the fulfillment thereof. The remedies herein
provided are cumulative and not exclusive of any remedy provided by
law.

    

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

    

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

    

    (b)           If
any lien or tax shall be claimed with respect to the Collateral which, in the
opinion of the Creditor, may possibly create a valid obligation having priority
over the security interest granted to it herein, the Creditor may in its sole
discretion and without notice to the Debtor pay such taxes and/or the amount
secured by such lien and the amount of such payment shall be charged to the
Debtor’s account and added to the Obligations secured hereby: provided, however, that the
Creditor shall not make such payment
with respect to any lien or tax that is being contested in good faith by the
Debtor by appropriate proceedings if (i) such proceedings shall suspend the
enforcement of such lien or collection of such tax, (ii) no part of the Debtor’s
rights in and under the Collateral shall be subject to sale, forfeiture or
diminution, and (iii) the Debtor shall have furnished such security that is not
part of the Collateral as may be required in such proceedings or reasonably
requested by the Creditor.

     

    
      
         

      

      
        - 16
-

        
          

        

      

      
         

      

    

    

    (c)           Upon
any failure by the Debtor to perform any of its duties and obligations
hereunder, the Creditor may, but shall not be obligated to, perform any or all
of such duties, and the Debtor shall pay to the Creditor, forthwith upon written
demand therefor, an amount equal to the cash or out-of-pocket expense reasonably
incurred by the Creditor in so doing plus interest thereon, from the date such
expense is incurred until it is paid in full at a rate per annum equal to the
highest rate of interest payable by the Debtor from time to time on the
Obligations.

    

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

    

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

    

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

    

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

    

    

    
      
         

      

      
        - 17
-

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

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

     

    
      
         

      

      
        - 18
-

        
          

        

      

      
         

      

    

    

    (B)           THE DEBTOR HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR RELATED HERETO BROUGHT IN ANY
FEDERAL OR STATE COURT SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK AND
HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

    

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

    

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

    

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

    

    

    [signatures
on following page]

     

     

     

     

    
      
         

      

      
        - 19
-

        
          

        

      

      
         

      

    

     

    [Signature
Page to Security Agreement]

    

    

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

    

    

    PERF
GO-GREEN HOLDINGS, INC.,

    a
Delaware corporation

     

     

    By: 
/s/ Michael Caridi

      
        

      

    

    Name:  Michael
Caridi

    Title:
COO

    

    

    

    Acknowledged
and accepted:

    

    STAR
FUNDING, INC.

    

    

    By: 
      
      
        

      

    

    Name: 
Martin Weingarten

    Title:     Chief
Executive Officer

    
      
         

      

      
        - 20
-

        
          

        

      

      
         

      

    

     

    [Signature
Page to Security Agreement]

    

    

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

    

    PERF
GO-GREEN HOLDINGS, INC.,

    a
Delaware corporation

     

     

    By:

      
        

      

    

    Name:

    Title:

    

    

    Acknowledged
and accepted:

    

    STAR
FUNDING, INC.

    

    By: 
/s/ Martin Weingarten

      
        

      

    

    Name: 
Martin Weingarten

    Title: 
Chief Executive Officer

    
      
         

      

      
        - 21
-

        
          

        

      

      
         

      

    

     

    SCHEDULE
I

     

    INFORMATION
SCHEDULE

     

    
      	
              1.

            	
              Address of Debtor’s
      chief executive office and principal place of
    business:

            

    

    

    Chief Executive
Office:

    12 East
52nd
Street, 4th
floor

    New York,
New York 10022

     

    Principal Place of
Business:

    12 East
52nd
Street, 4th
floor

    New York,
New York 10022

    

    
      	
              2.

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

            

    

    

    12 East
52nd
Street, 4th
floor

    New York,
New York 10022

    

    
      	
              3. 

            	
              Inventory
      location(s):

            

    

    

    12850 Midway Place

    Cerritos,
CA 90703

     

    51 Executive Avenue

    Edison,
NJ 08817

    

    
      	
              4.

            	
              Equipment
      location(s):

            

    

    

    12 East
52nd Street, 4th
floor

    New York,
New York 10022

    

    
      	
              5.

            	
              Former
      Names:

            

    

    

    Perf-Go
Green, LLC

    

    
      	
              6.

            	
              Mergers, Acquisitions,
      or Consolidations:

            

    

    

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

    

    
      	
              7.

            	
              Commercial Tort
      Claims:

            

    

    

    None

     

     

     

    - 22
-EXHIBIT
10.14

    

    SECURITY
AGREEMENT

    

    

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

    

    RECITALS:

    

    A.           Concurrently
herewith, the Debtor is executing and delivering a Factoring Agreement between
Debtor and the Creditor (as it may be amended, restated, modified or
supplemented from time to time, the “Factoring Agreement”) and a
Supply Agreement between Debtor and the Creditor (as it may be amended,
restated, modified or supplemented from time to time, the “Supply Agreement”), in each
case dated as of the date hereof.

    

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

    

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

    

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

    

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

    

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

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    “Collateral” has the meaning
specified in Section 2.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    “Guarantee” has the meaning
specified in Recital B.

    

    “Guarantor” has the meaning
specified in Recital B.

    

    “Intellectual Property” means,
collectively, all Patents, Patent Licenses, Trademarks,

    Trademark
Licenses, Copyrights and Copyright Licenses.

    

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

    

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

     

     

    
      
         

      

      
        - 2
-

        
          

        

      

      
         

      

    

    

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

    

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

    

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

    

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

    

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

     

     

    
      
         

      

      
        - 3
-

        
          

        

      

      
         

      

    

     

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    (d)           The
Section and Schedule headings used in this Security Agreement are for
convenience only and
shall not affect the construction or meaning of any provisions of this Security
Agreement.

     

     

    
      
         

      

      
        - 4
-

        
          

        

      

      
         

      

    

    

    (e)           Unless
otherwise specified, the words “hereof’, “herein”,
“hereunder” and other similar words refer to this Security Agreement as a
whole and not just to the Section, subsection or clause in which they are used;
and the words “this Security
Agreement” refer to this Security Agreement, as amended, restated,
modified or supplemented from time to time.

    

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

    

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

    

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

     

    
      	
            	
              (i) 

            	
              all
      Accounts of the Debtor;

            

    

    

    
      
        	
              	
                (ii) 

              	
                all
      Inventory of the Debtor;

              

      

    

    

    
      
        	
              	
                (iii) 

              	
                all
      Equipment of the Debtor;

              

      

    

    

    
      	
            	
              (iv) 

            	
              all
      Contracts and Contract Rights of the
Debtor;

            

    

    

    
      
        	
              	
                (iv) 

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

              

      

    

    

    
      
        	
              	
                (v) 

              	
                all
      Documents of the Debtor;

              

      

    

    

    
      	
            	
              (vii) 

            	
              all
      instruments and Chattel Paper of the
Debtor;

            

    

    

    
      
        	
              	
                (viii)

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

              

      

    

    

    
      
        	
              	
                (ix)

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

              

      

    

    

    
      
        	
              	
                (x) 

              	
                all
      Leases of the Debtor;

              

      

    

    

    
      
        	
              	
                (xi) 

              	
                all
      Fixtures of the Debtor;

              

      

    

    

    
      	
            	
              (xii) 

            	
              all
      Deposit Accounts of the Debtor;

            

    

    

    

      
        
           

        

        
          - 5
-

          
            

          

        

        
           

        

      

    
      	
            	
              (xiii) 

            	
              all
      Letter of Credit Rights of the
Debtor;

            

    

    

    
      	
            	
              (xiv) 

            	
              all
      Securities Accounts and Securities Entitlements of the
    Debtor;

            

    

    

    
      	
            	
              (xv) 

            	
              all
      Commodity Accounts and Commodity Contracts of the
  Debtor;

            

    

     

    
      	
            	
              (xvi)

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

            

    

     

    
      	
            	
              (xvii)

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

            

    

     

    
      	
            	
              (xviii)

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

            

    

    

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

    

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

    

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

    

    (a)           The
Debtor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has full power and authority to own its
properties and to carry on its business as now being conducted, is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of its properties, the transaction of its business, the location
of its Inventory
or Equipment, the performance of its obligations under its Contracts, or the
collection of any of its Accounts make such qualification necessary and where
the failure to be so qualified would have a material adverse effect on the
business or financial condition of the Debtor, and has full power and authority
to execute, deliver and perform this Security Agreement.

     

    
      
         

      

      
        - 6
-

        
          

        

      

      
         

      

    

    

    (b)           Its
execution, delivery and performance of this Security Agreement and the granting
of the security interest in the Collateral hereunder (i) have all been duly
authorized by all requisite action of the Debtor, (ii) do not require the
approval of its shareholders, and (iii) will not (1) violate any provision of
law or the Debtor’s organizational documents, (2) violate, be in conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any indenture, agreement or other instrument to which it is a
party or by which it or any of its properties is bound, (3) violate any
governmental or agency rule or regulation or any order of any court, tribunal or
govermnental agency or (4) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the Collateral,
except for the security interest created by this Security Agreement. No
authorizations, approvals and consents of, and no filing and registration with,
any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by the Debtor of this Security Agreement or
for the validity or enforceability hereof. No consent of any party to any
Contract or any account debtor in respect of any Account is required in
connection with the execution, delivery and performance of this Security
Agreement or the creation of a security interest in such Contract or Account
pursuant hereto, other than the consents obtained by Debtor and delivered to
Creditor pursuant to the Subordination Agreement.

    

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

    

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

    

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

    

    (f)           There
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) now on file or registered in any public
office (other than in respect of Permitted Liens) covering any interest of the
Debtor in the Collateral, or intended so to be, and so long as the Supply
Agreement and/or Factoring Agreement are in effect or any of the Obligations
remain unpaid the
Debtor will not execute, and will not permit the filing or the continued
existence on file of any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) relating to the Collateral in
any public office, except financing statements filed or to be filed with respect
to the security interest granted hereunder to the Creditor or with respect to
the Permitted Liens.

     

    
      
         

      

      
        - 7
-

        
          

        

      

      
         

      

    

    

    (g)           The
chief executive office and principal place of business of the Debtor is located
at the address set forth in Schedule I. The originals of all documents (as well
as all duplicates thereof) evidencing or relating to the Accounts, Contracts,
Leases, Intellectual Property, Investment Property and other Financial Assets
and the original books of account and records of the Debtor relating thereto are
kept at the office or offices specified in Schedule I. All Inventory and
Equipment is held on the date hereof at the locations specified in Schedule
I.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

     

    
      
         

      

      
        - 8
-

        
          

        

      

      
         

      

    

    

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

    

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

    

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

    

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

    

    (h)           The
Debtor will, at its own expense, make, execute, endorse, acknowledge, file
and/or deliver to the Creditor from time to time such lists, descriptions,
schedules, invoices, warehouse receipts, bills of confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurance or instruments and take such further
steps relating to the Collateral and other property or rights covered by the
security interest hereby granted by it, as the Creditor in its reasonable
judgment deems appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral and comply with the Assignment of Claims
Act.

    

    (i)           The
Debtor will advise the Creditor promptly, in reasonable detail, if Debtor
becomes a party to
or obtains any rights with respect to any Commercial Tort Claim. Such
notification shall include information sufficient to describe such Commercial
Tort Claim, including, but not limited to, the parties to the claim, the court
in which the claim was commenced, the docket number assigned to such claim, if
any, and a detailed explanation of the events that gave rise to the claim.
Debtor shall execute and deliver to Creditor all documents and/or agreements
requested by Creditor to create, perfect and protect Creditor’s security
interest in such Commercial Tort Claim. Debtor authorizes Creditor to file
(without Debtor’s signature) initial financing statements or amendments, as
Creditor deems necessary to perfect its security interest in the Commercial Tort
Claim.

     

     

    
      
         

      

      
        - 9
-

        
          

        

      

      
         

      

    

    

    6.           Special Provisions
Concerning Accounts.

    

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

    

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

    

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

    

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

    

    (e)           The
Debtor shall endeavor to collect or cause to be collected from the account
debtor on each of its Accounts (including Accounts which are delinquent, such
Accounts to be collected in accordance with generally accepted lawful collection
procedures), as and when due, any and all amounts owing under or on account of
such Accounts, except that prior to the occurrence of an Event of Default the
Debtor may allow in the ordinary course of business as adjustments to amounts
owing under its Accounts
(i) an extension or renewal of the time or times of payment, or settlement for
less than the total unpaid balance, which the Debtor finds necessary in
accordance with sound business and credit judgment and (ii) a refund or credit
due as a result of returned or damaged Inventory or improper or faulty
performance of services. The costs and expenses (including attorney’s fees) of
collection, whether incurred by the Debtor or the Creditor, shall be borne by
the Debtor.

     

    
      
         

      

      
        - 10
-

        
          

        

      

      
         

      

    

    

    (f)           The
Debtor shall, promptly upon learning thereof, report to the Creditor all delays
in performance, notices of default, claims made or disputes asserted by any
account debtor or other obligor on any Account and any other matters, in each
ease if they could reasonably be expected to have a material adverse effect on
the business or financial condition of the Debtor.

    

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

    

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

    

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

    

    7.           Special Provisions
Concerning Inventory and Equipment. (a) The Debtor will at all times keep
all of the Inventory and Equipment insured at its expense, to the Creditor’s
satisfaction, against fire, theft, and all other risks to which the Inventory
and Equipment may be subject; all policies or certificates with
respect to such insurance shall be endorsed to the Creditor’s satisfaction for
the benefit of the Creditor, including by naming the Creditor as loss payee or
additional insured, and evidence of such insurance satisfactory to the Creditor
shall be deposited with Creditor. If the Debtor shall fail to insure the
Inventory and Equipment to the Creditor’s satisfaction, or if the Debtor shall
fail so to endorse and deposit all policies or certificates with respect thereto
in accordance herewith, the Creditor shall have the right (but shall be under no
obligation) to procure such insurance and the Debtor agrees to reimburse the
Creditor for all costs and expenses of procuring such insurance that it failed
to procure. The Creditor may apply any proceeds of such insurance with respect
to the Inventory and Equipment, when received by it, toward the payment of any
of the Obligations, whether or not the same shall then be due. The Debtor shall
give immediate written notice to the insurers and to the Creditor of any loss or
damage to the Collateral or any part thereof and shall promptly file all
necessary or appropriate proofs of loss with the insurers. The Debtor hereby
appoints the Creditor the attorney-in-fact for the Debtor in obtaining,
adjusting and canceling any such insurance and endorsing settlement
drafts.

     

    
      
         

      

      
        - 11
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    (b)           The
Creditor shall have the right, upon the occurrence and during the continuance of
an Event of Default, without notice to (unless specifically provided for
herein), or assent by, the Debtor but without affecting the Obligations, in the
name of the Debtor or in the name of the Creditor or otherwise: 
(i) upon
notice to such effect, to require the Debtor to deliver, at the Debtor’s
expense, any or all of the Inventory and Equipment to the Creditor at a place
designated by the Creditor (and after delivery thereof the Debtor shall have no
further claim to or interest in such Inventory and Equipment); (ii) to take
possession of any or all of the Inventory and Equipment and, for that purpose,
to enter, with the aid and assistance of any Person, any premises where such
Inventory and Equipment, or any part thereof, is, or may be, placed or
assembled, to remove any such Inventory or Equipment, and to dispose of or store
such Inventory or Equipment in such premises at the expense of the Debtor; and
(Hi) to execute or endorse any instrument (including any invoice, bill of
lading, and storage or warehouse receipt) and do all the things necessary and
proper to protect and preserve and realize upon the Inventory and Equipment and
the other rights contemplated hereby. The Creditor shall not be obligated to do
any of the acts hereinabove authorized, but in the event that the Creditor
elects to do any such act, the Creditor shall not be responsible to the Debtor
except for the Creditor’s own willful misconduct.

    

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

    

    8.           Financing Statements:
Documentary Stamp Taxes. (a) The Debtor agrees to sign and deliver
to the Creditor such financing statements (which term, whenever used herein,
shall include initial financing statements and amendments), in form acceptable
to the Creditor, as the Creditor may from time to time reasonably request or as
are necessary in the opinion of the Creditor to establish and maintain a valid,
enforceable and perfected security interest in the Collateral and the other
rights and security contemplated hereby which is superior and prior to the
rights of all third Persons. The Debtor will pay any applicable filing fees and
related expenses. The Debtor authorizes the Creditor to file any such financing
statements without the signature of the Debtor.

     

    
      
         

      

      
        - 12
-

        
          

        

      

      
         

      

    

    

    (b)           The
Debtor agrees to procure, pay for, affix to any and all documents and cancel any
documentary tax stamps or similar taxes required by, and in accordance with,
applicable law, and the Debtor will indemnify the Creditor and hold the Creditor
harmless against any liability (including interest and penalties) in respect of
such taxes.

    

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

    

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

    

    (c)           Upon
the occurrence and during the continuance of an Event of Default the Creditor
may, without obligation to resort to other security, at any time and from time
to time, sell, re-sell, assign and deliver all or any of the Collateral, in one
or more parcels at the same or different times, and all right, title and
interest, claim and demand therein and right of redemption thereof, at public or
private sale, for cash, upon credit or for future delivery, and at such price or
prices and on such terms as the Creditor may determine, with the amounts
realized from any such sale to be applied in the manner provided in Section 11.
The Debtor hereby agrees that all of the foregoing may be effected without
demand, advertisement or notice (except as required by law or as expressly
provided herein), all of which (to the extent permitted by law) are hereby
expressly waived. Upon any sale of any of the Collateral, whether made under the
power of sale hereby given or under judgment, order or decree in any judicial
proceeding for the foreclosure involving the enforcement of this Security
Agreement, (i) the Creditor may bid for the property being sold, and
upon compliance with the terms of sale may hold, retain and possess and dispose
of such property in its own absolute right without further accountability, and
may, in paying the purchase money therefor, discharge a portion of the
Obligations owing to the Creditor in an amount equal to such purchase price;
(ii) the Creditor may make and deliver to the purchaser or purchasers a good and
sufficient deed, bill of sale and instrument of assignment and transfer of the
property sold; (iii) the Creditor may make all necessary deeds, bills of sale
and instruments of assignment and transfer of the property thus sold; but if so
requested by the Creditor or such purchaser, the Debtor shall ratify and confirm
any such sale or transfer by executing and delivering to the Creditor or such
purchaser all property, deeds, bills of sale, instruments of assignment and
transfer and releases as may be designated in any such request; (iv) all right,
title, interest, claim and demand whatsoever, either in law or in equity or
otherwise, of the Debtor of, in and to the property so sold shall be divested
and such sale shall be a perpetual bar both at law and in equity against the
Debtor, its successors and assigns, and against any and all Persons claiming or
who may claim the property sold or any part thereof from, through or under the
Debtor, its successors or assigns; and (v) the receipt of the Creditor or of the
officer thereof making such sale shall be a sufficient discharge to the
purchaser or purchasers at such sale for his or their purchase money, and such
purchaser or purchasers, and his, its or their assigns or personal
representatives, shall not, after paying such purchase money and receiving such
receipt of the Creditor or of such officers thereof, be obligated to see to the
application of such purchase money or be in any way answerable or responsible
for any loss, misapplication or non-application thereof.

     

    
      
         

      

      
        - 13
-

        
          

        

      

      
         

      

    

    

    (d)           To
the extent that it may
lawfully do so, the Debtor agrees that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any appraisement, valuation, stay, extension or redemption laws, or any law
permitting it to direct the order in which the Collateral or any part thereof
shall be sold, now or at any time hereafter in force, which may delay, prevent
or otherwise affect the performance or enforcement of this Security Agreement or
the Obligations, and the Debtor hereby expressly waives all benefit or advantage
of any such laws and covenants that it will not hinder, delay or impede the
execution of any power granted or delegated to the Creditor in this Security
Agreement, but will suffer and permit the execution of every such power as
though no such laws were in force. In the event of any sale of Collateral
pursuant to this Security Agreement by the Creditor, the Creditor shall, at
least 10 days before such sale, give the Debtor written notice (which notice may
be given by telefax) of its intention to sell, except that, if the Creditor
shall determine in its sole discretion that any of the Collateral is perishable
or threatens to decline speedily in value, any such sale may be made upon one
day’s written notice (which notice may be given by telefax) to the
Debtor.

    

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

    

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

     

     

    
      
         

      

      
        - 14
-

        
          

        

      

      
         

      

    

     

     

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

    

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

    

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

    

    12.           Exercise of Rights.
The Creditor shall have the right in its sole discretion to determine which
rights, security, liens, guarantees, security interests or remedies it shall
retain, pursue, release, subordinate, modify or take any other action with
respect to, without in any way waiving, modifying or affecting any of the other
of them or any of the Creditor’s rights or remedies hereunder or under any other
Transaction Document.

    

    13.           Waivers. Amendments,
Required Notices. The Debtor hereby waives notice of acceptance of this
Security Agreement, notice of nonpayment of any Obligations or of any instrument
relating thereto, demand, presentment, protest and notice thereof with respect
to any and all instruments, notice of
Collateral received or delivered, or any other action taken in reliance hereon
and all other demands and notices of any description, except such as are
expressly provided for herein or which by applicable law may not be waived on
the date hereof No course of dealing between the Creditor and the Debtor or any
other Person, and no failure on the part of the Creditor to exercise, and no
delay in exercising, any right, power or remedy hereunder, shall operate as a
waiver thereof or as a waiver of any Event of Default, nor shall any single or
partial exercise by the Creditor of any right, power or remedy hereunder or with
respect to the Obligations preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No amendment or modification of
this Security Agreement nor any waiver of any provision of this Security
Agreement or consent to any departure by the Debtor therefrom shall in any event
be effective unless the same shall be in writing and signed by the Creditor, and
then any such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand on the Debtor in any
case shall, of itself, entitle the Debtor to any other or further notice or
demand in similar or other circumstances. If notice, whether before or after any
Event of Default has occurred, is required by law to be given by the Creditor to
the Debtor, the Debtor agrees that, unless otherwise specifically provided
herein, five (5) days’ notice given in the manner provided below shall be
reasonable notice.

     

    
      
         

      

      
        - 15
-

        
          

        

      

      
         

      

    

    

    14.           Cumulative Rights and
Remedies. This Security Agreement and the liens and security interests
granted hereunder are in addition to and not in substitution for any other
security interest or collateral now or hereafter held by or on behalf of the
Creditor to secure the Obligations and shall not operate as a merger of any
contract debt or suspend the fulfillment of or affect the rights, remedies or
powers of the Creditor in respect of the Obligations or any other security
interests held by the Creditor for the fulfillment thereof. The remedies herein
provided are cumulative and not exclusive of any remedy provided by
law.

    

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

    

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

    

    (b)           If
any lien or tax shall be claimed with respect to the Collateral which, in the
opinion of the Creditor, may possibly create a valid obligation having priority
over the security interest granted to it herein, the Creditor may in its sole
discretion and without notice to the Debtor pay such taxes and/or the amount
secured by such lien and the amount of such payment shall be charged to the
Debtor’s account and added to the Obligations secured hereby: provided, however, that the
Creditor shall not make such payment
with respect to any lien or tax that is being contested in good faith by the
Debtor by appropriate proceedings if (i) such proceedings shall suspend the
enforcement of such lien or collection of such tax, (ii) no part of the Debtor’s
rights in and under the Collateral shall be subject to sale, forfeiture or
diminution, and (iii) the Debtor shall have furnished such security that is not
part of the Collateral as may be required in such proceedings or reasonably
requested by the Creditor.

     

    
      
         

      

      
        - 16
-

        
          

        

      

      
         

      

    

    

    (c)           Upon
any failure by the Debtor to perform any of its duties and obligations
hereunder, the Creditor may, but shall not be obligated to, perform any or all
of such duties, and the Debtor shall pay to the Creditor, forthwith upon written
demand therefor, an amount equal to the cash or out-of-pocket expense reasonably
incurred by the Creditor in so doing plus interest thereon, from the date such
expense is incurred until it is paid in full at a rate per annum equal to the
highest rate of interest payable by the Debtor from time to time on the
Obligations.

    

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

    

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

    

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

    

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

     

    
      
         

      

      
        - 17
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    (c)           The
Creditor’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under the UCC or otherwise,
shall be to deal with it in the same manner as the Creditor deals with similar
property for its own account. Neither the Creditor nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Debtor or otherwise.

    

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

    

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

    

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

    

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

    

    23.           SUBMISSION
TO JURISDICTION. (A) THE
DEBTOR HEREBY EXPRESSLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL
AND STATE COURTS SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK, IN
CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING RELATING TO THIS AGREEMENT, ANY
INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR RELATED
HERETO, OR ANY ITEM OF COLLATERAL, AND IN CONNECTION THEREWITH AGREES TEAT ANY
PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO ANY OF SAID COURTS OR A
JUDGE THEREOF MAY BE SERVED UPON THE DEBTOR WITHIN OR WITHOUT SUCH COURT’S
JURISDICTION BY REGISTERED OR CERTIFIED MAIL, AT THE ADDRESS OF THE DEBTOR
SPECIFIED IN SECTION IS HEREOF (OR AT SUCH OTHER ADDRESS AS THE DEBTOR SHALL
SPECIFY BY A PRIOR NOTICE IN WRITING TO THE CREDITOR), PROVIDED A REASONABLE
TIME FOR APPEARANCE IS ALLOWED.

     

    
      
         

      

      
        - 18
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    (B)           THE
DEBTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR
RELATED HERETO BROUGHT IN ANY FEDERAL OR STATE COURT SITTING IN THE CITY OF NEW
YORK, STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

    

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

    

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

    

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

     

     

    [signatures
on following page]

     

     

    
      
         

      

      
        - 19
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    [Signature
Page to Security Agreement]

    

    

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

     

    PERF-GO
GREEN, INC.,

    a
Delaware corporation

     

     

    By: 
      
      
        

      

    

    Name:

    Title:

    

    

    Acknowledged
and accepted;

    

    STAR
FUNDING, INC.

    

    

    By: 
/s/ Martin Weingarten

      
        

      

    

    Name:
Martin Weingarten

    Title:   Chief
Executive Officer

     

     

    
      
         

      

      
        - 20
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    [Signature
Page to Security Agreement~

    

    

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

     

    PERF-GO
GREEN, INC.,

    a
Delaware corporation

     

     

    By: 
/s/ Michael Caridi

      
        

      

    

    Name: 
Michael Caridi

    Title: 
COO

    

    

    

    Acknowledged
and accepted:

    

    STAR
FUNDING, INC.

    

    

    By: 
      
      
        

      

    

    Name: 
Martin Weingarten

    Title: 
Chief Executive Officer

    
      
         

      

      
        - 21
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    SCHEDULE
I

     

    INFORMATION
SCHEDULE

     

    
      	
              1.

            	
              Address of Debtor’s
      chief executive office and principal place of
    business:

            

    

    

    Chief Executive
Office:

     

    12 East
52ud
Street, 4th
floor

    New York,
New York 10022

     

    Principal Place of
Business:

    12 East
52nd Street, 4th
floor

    New York,
New York 10022

    

    
      	
              2.

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

            

    

    

    12 East
52nd
Street, 4th
floor

    New York,
New York 10022

    

    
      	
              3.

            	
              Inventory
      location(s):

            

    

    

    12850
Midway Place

    Cerritos,
CA 90703

     

    51
Executive Avenue

    Edison,
NJ 08817

    

    
      	
              4.

            	
              Equipment
      location(s):

            

    

    

    12 East
52nd
Street, 4th
floor

    New York,
New York 10022

    

    
      	
              5.

            	
              Former
      Names:

            

    

    

    Perf-Go
Green, LLC

    

    
      	
              6.

            	
              Mergers, Acquisitions,
      or Consolidations:

            

    

    

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

    

    
      	
              7.

            	
              Commercial Tort
      Claims:

            

    

    

    None

     

     

     

    - 22 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}]]