Exhibit 10.3
AMENDED AND RESTATED SECURITY AGREEMENT
     This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of September 27,
2005, is entered into among MATRIXX INITIATIVES, INC., a Delaware corporation
(“Matrixx”), and ZICAM, LLC, an Arizona limited liability company (“Zicam”)
(Matrixx and Zicam are sometimes individually referred to herein as a “Borrower”
and collectively referred to herein as “Borrowers”) and COMERICA BANK, a
Michigan banking corporation (“Secured Party”), with reference to the following
facts:
R E C I T A L S
          A. Borrowers and Secured Party have previously entered into that
certain Credit Agreement, dated as of May 29, 2002 (as amended to date, the
“Prior Agreement”).
          B. Borrowers and Secured Party are contemporaneously herewith entering
into the Loan Agreement (as hereinafter defined), which shall amend and restate
the Prior Agreement in its entirety.
          C. Borrowers have previously entered into those certain Security
Agreements dated as of May 29, 2002 and July 10, 2002 (as amended to date,
collectively, the “Prior Security Agreements”).
          D. Borrowers and Secured Party desire to amend and restate the Prior
Security Agreements in their entirety in accordance with the terms and
conditions of this Security Agreement.
          In order to induce Secured Party to enter into the Loan Agreement,
Borrower has agreed to enter into this Security Agreement in order to grant to
Secured Party a first priority security interest in the Collateral to secure
prompt payment and performance of the Secured Obligations.
A G R E E M E N T
     NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth, and for other
good and valuable consideration, the parties hereto agree as follows:
     1. Definitions. All initially capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Loan Agreement. In addition, as
used herein, the following terms shall have the following meanings:
          “Account Debtor” means any Person who is or who may become obligated
with respect to, or on account of, an Account, Chattel Paper or General
Intangible.
          “Accounts” means any and all of each Borrowers’ presently existing and
hereafter arising accounts (including health-care-insurance receivables,
contract rights, and all other forms of monetary obligations owing to any
Borrower, and all credit insurance, guaranties, or security therefor),
irrespective of whether earned by performance.

1

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

 

          “Borrower’s Books” means any and all presently existing and hereafter
acquired or created books and records of any Borrower, including all records
(including maintenance and warranty records), ledgers, computer programs, disc
or tape files, printouts, runs, and other computer prepared information
indicating, summarizing, or evidencing the Collateral.
          “Chattel Paper” means all of each Borrowers’ presently existing and
hereafter acquired or created chattel paper (including tangible chattel paper
and electronic chattel paper).
          “Code” means the Arizona Uniform Commercial Code, as amended or
supplemented from time to time. Any and all terms used in this Security
Agreement which are defined in the Code shall be construed and defined in
accordance with the meaning and definition ascribed to such terms under the
Code, unless otherwise defined herein.
          “Collateral” means the following, collectively: any and all of the
Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents,
Equipment, Instruments, Inventory, Investment Property, General Intangibles,
Letter of Credit Rights, Negotiable Collateral, Supporting Obligations, each
Borrower’s Books, in each case whether now existing or hereafter acquired or
created, any money or other assets of any Borrower that now or hereafter come
into the possession, custody, or control of Secured Party and any Proceeds or
products of any of the foregoing, or any portion thereof.
          “Collateral Access Agreement” means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Equipment or Inventory, in each case,
in form and substance satisfactory to Secured Party.
          “Commercial Tort Claims” means all of each Borrower’s presently
existing and hereafter acquired or arising commercial tort claims (as such term
is defined in the Code).
          “Deposit Account” means any demand, time, savings, passbook or similar
account now or hereafter maintained by or for the benefit of any Borrower with
an organization that is engaged in the business of banking including a bank,
savings bank, savings and loan association, credit union and trust companies,
and all funds and amounts therein, whether or not restricted or designated for a
particular purpose.
          “Documents” means any and all documents and documents of title,
including documents of title, bills of lading, dock warrants, dock receipts,
warehouse receipts and other documents of any Borrower, whether or not
negotiable, and including all other documents which purport to be issued by a
bailee or agent and purport to cover goods in any bailee’s or agent’s possession
which are either identified or are fungible portions of an identified mass,
including such documents of title made available to any Borrower for the purpose
of ultimate sale or exchange of goods or for the purpose of loading, unloading,
storing, shipping, transshipping, manufacturing, processing or otherwise dealing
with goods in a manner preliminary to their sale or exchange, in each case
whether now existing or hereafter acquired.
          “Equipment” means any and all of each Borrowers’ presently existing
and hereafter acquired equipment, wherever located, including machinery,
furniture, furnishings, fixtures, computer and other electronic data processing
equipment and other office equipment

2

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

 

and supplies, computer programs and related data processing software, spare
parts, tools, motors, automobiles, trucks, tractors and other motor vehicles,
rolling stock, jigs, and other goods (other than Inventory, farm products, and
consumer goods), including software embedded in such goods, together with any
and all parts, improvements, additions, attachments, replacements, accessories,
and substitutions thereto or therefor, and all other rights of any Borrower
relating thereto, whether in the possession and control of any Borrower, or in
the possession and control of a third party for the account of any Borrower.
          “Expenses” has the meaning of “Expenses” under the Loan Agreement and
shall also mean: any and all costs or expenses required to be paid by Borrowers
under this Security Agreement which are paid or advanced by Secured Party; all
costs and expenses of Secured Party, including its reasonable attorneys’ fees
and expenses (including reasonable attorneys’ fees incurred pursuant to
proceedings arising under the Bankruptcy Code to the extent permitted by law),
incurred or expended to correct any default or enforce any provision of this
Security Agreement, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, irrespective of whether a sale is consummated; and all
costs and expenses of suit incurred or expended by Secured Party, including its
reasonable attorneys’ fees and expenses (including reasonable attorneys’ fees
incurred pursuant to proceedings arising under the Bankruptcy Code) in enforcing
or defending this Security Agreement, irrespective of whether suit is brought.
          “FEIN” means Federal Employer Identification Number.
          “General Intangibles” means any and all of each Borrowers’ presently
existing and hereafter acquired or arising general intangibles and any other
intangible personal property of every kind and description, including:
               (a) contracts and contract rights, noncompetition covenants,
licensing and distribution agreements, indemnity agreements, guaranties,
insurance policies, franchise agreements and lease agreements;
               (b) uncertificated certificates of deposit, and interests in any
joint ventures, partnerships or limited liability companies;
               (c) choses in action and causes of action (whether legal or
equitable, whether in contract or tort or otherwise, and however arising);
               (d) licenses, approvals, permits or any other authorizations
issued by any Governmental Authority;
               (e) Intellectual Property Collateral;
               (f) computer software (including without limitation any computer
program that is embedded in goods that consist solely of the medium in which the
program is embedded), magnetic media, electronic data processing files, systems,
programs, and information contained on computer disks or tapes;

3

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

 

               (g) rights of stoppage in transit, replevin and reclamation,
rebates (including without limitation insurance premium rebates) or credits of
every kind and nature to which Borrowers may be entitled;
               (h) purchase orders, customer lists, subscriber lists and
goodwill;
               (i) monies due or recoverable from pension funds, refunds and
claims for tax or other refunds against any Governmental Authority;
               (j) payment intangibles; and
               (k) other contractual, equitable and legal rights of whatever
kind and nature.
          “Instruments” means any and all negotiable instruments, and every
other writing which evidences a right to the payment of a monetary obligation,
in each case whether now existing or hereafter acquired.
          “Intellectual Property Collateral” means the following Assets owned or
held by each Borrower or in which each Borrower otherwise have any interest, now
existing or hereafter acquired or arising:
               (a) all patents and patent applications, domestic or foreign, all
licenses relating to any of the foregoing and all income and royalties with
respect to any licenses, all rights to sue for past, present or future
infringement thereof, all rights arising therefrom and pertaining thereto and
all reissues, divisions, continuations, renewals, extensions and continuations
in-part thereof;
               (b) all copyrights and applications for copyright, domestic or
foreign, together with the underlying works of authorship (including titles),
whether or not the underlying works of authorship have been published and
whether said copyrights are statutory or arise under the common law, and all
other rights and works of authorship, all rights, claims and demands in any way
relating to any such copyrights or works, including royalties and rights to sue
for past, present or future infringement, and all rights of renewal and
extension of copyright;
               (c) all state (including common law), federal and foreign
trademarks, service marks and trade names, and applications for registration of
such trademarks, service marks and trade names, all licenses relating to any of
the foregoing and all income and royalties with respect to any licenses, whether
registered or unregistered and wherever registered, all rights to sue for past,
present or future infringement or unconsented use thereof, all rights arising
therefrom and pertaining thereto and all reissues, extensions and renewals
thereof;
               (d) all trade secrets, confidential information, customer lists,
license rights, advertising materials, operating manuals, methods, processes,
know-how, sales literature, sales and operating plans, drawings, diagrams,
schematics, specifications, blue prints, descriptions, inventions, name plates,
reports and catalogs;

4

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

 

               (e) the entire goodwill of or associated with the businesses now
or hereafter conducted by each Borrower connected with and symbolized by any of
the aforementioned properties and assets; and
               (f) Intellectual Property Collateral shall include, without
limitation, rights and interests pursuant to licensing or other contracts in
favor of each Borrower pertaining to patents, trademarks, copyrights and other
intellectual property presently or in the future owned or used by third Persons.
          “Inventory” means any and all of each Borrowers’ presently existing
and hereafter acquired goods (including software embedded in such goods) of
every kind and description (including goods in transit) which are held for sale
or lease, or to be furnished under a contract of service or which have been so
leased or furnished, or other disposition, wherever located, including those
held for display or demonstration or out on lease or consignment or are raw
materials, work in process, finished materials, or materials used or consumed,
or to be used or consumed, in each Borrowers’ business, and the resulting
product or mass, and all repossessed, returned, rejected, reclaimed and
replevied goods, together with all materials, parts, supplies, packing and
shipping materials used or usable in connection with the manufacture, packing,
shipping, advertising, selling or furnishing of such goods; and all other items
hereafter acquired by each Borrower by way of substitution, replacement, return,
repossession or otherwise, and all additions and accessions thereto, and any
Document representing or relating to any of the foregoing at any time.
          “Investment Property” means any and all of each Borrowers’ presently
existing and hereafter acquired investment property (including without
limitation securities and securities entitlements).
          “Letter of Credit Rights” means any and all of each Borrowers’
presently existing and hereafter acquired letter of credit rights.
          “Loan Agreement” means that certain Amended and Restated Credit
Agreement, dated as of even date herewith, among Borrowers and Secured Party, as
may be at any time hereafter supplemented, modified, amended or restated.
          “Negotiable Collateral” means any and all of each Borrowers’ presently
existing and hereafter acquired or arising letters of credit, letter of credit
rights, advises of credit, certificates of deposit, notes, drafts, money,
Instruments, Documents and tangible Chattel Paper.
          “Proceeds” means whatever is receivable or received from or upon the
sale, lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Collateral, including “proceeds” as defined in
the Code, any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to or for the account of Borrowers from time to time with respect to any
of the Collateral, any and all payments (in any form whatsoever) made or due and
payable to Borrowers from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under color of
Governmental Authority), any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral or

5

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

 

for or on account of any damage or injury to or conversion of any Collateral by
any Person, any and all other tangible or intangible property received upon the
sale or disposition of Collateral, and all proceeds of proceeds.
          “Rights to Payment” means all Accounts and any and all rights and
claims to the payment or receipt of money or other forms of consideration of any
kind in, to and under all electronic Chattel Paper, General Intangibles, Letter
of Credit Rights, Negotiable Collateral and Proceeds thereof.
          “Secured Obligations” shall have the meaning of “Obligations” under
the Loan Agreement and shall also mean any and all debts, liabilities,
obligations, or undertakings owing by any Borrower to Secured Party arising
under, advanced pursuant to, or evidenced by this Security Agreement, whether
direct or indirect, absolute or contingent, matured or unmatured, due or to
become due, voluntary or involuntary, whether now existing or hereafter arising,
and including all interest not paid when due and all Expenses which any Borrower
is required to pay or reimburse pursuant to this Security Agreement, the Loan
Agreement, the other Loan Documents or by law.
          “Security Agreement” means this Security Agreement, as amended or
restated from time to time.
          “Supporting Obligations” has the meaning given to such term in the
Code.
     2. Construction. Unless the context of this Security Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, references to any gender include any other gender,
the part includes the whole, the term including is not limiting, and the term or
has, except where otherwise indicated, the inclusive meaning represented by the
phrase and/or. References in this Security Agreement to determination by Secured
Party include good faith estimates by Secured Party (in the case of quantitative
determinations), and good faith beliefs by Secured Party (in the case of
qualitative determinations). The words hereof, herein, hereby, hereunder, and
similar terms in this Security Agreement refer to this Security Agreement as a
whole and not to any particular provision of this Agreement. Article, section,
subsection, clause, exhibit and schedule references are to this Security
Agreement, unless otherwise specified. Any reference in this Security Agreement
or any of the Loan Documents to this Security Agreement or any of the Loan
Documents includes any and all permitted alterations, amendments, changes,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable.
     3. Creation of Security Interest. Borrowers hereby grant to Secured Party a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure the prompt payment and performance of all
of the Secured Obligations. Borrowers acknowledge and affirm that such security
interest in the Collateral has attached to all Collateral without further act on
the part of Secured Party or Borrowers except as contemplated in Section 4.6.
     4. Further Assurances.

6

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

 

          4.1 Borrowers shall execute and deliver to Secured Party concurrently
with Borrowers’ execution of this Security Agreement, and from time to time at
the request of Secured Party, and Borrowers hereby authorize Secured Party to
file, all financing statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, assignments, and all other
documents that Secured Party may require, in form satisfactory to Secured Party,
to perfect and maintain perfected Secured Party’s security interests in the
Collateral, and in order to consummate fully all of the transactions
contemplated by this Security Agreement and the Loan Agreement. Borrowers hereby
irrevocably make, constitute, and appoint Secured Party (and Secured Party’s
officers, employees, or agents) as Borrowers’ true and lawful attorney with
power to sign the name of each Borrower on any of the above-described documents
or on any other similar documents which need to be executed, recorded, or filed,
and to do any and all things necessary in the name and on behalf of Borrowers in
order to perfect, or continue the perfection of, Secured Party’s security
interests in the Collateral. Borrowers agree that neither Secured Party, nor any
of its designees or attorneys-in-fact, will be liable for any act of commission
or omission, or for any error of judgment or mistake of fact or law with respect
to the exercise of the power of attorney granted under this Section 4.1, other
than as a result of its or their gross negligence or willful misconduct. THE
POWER OF ATTORNEY GRANTED UNDER THIS SECTION 4.1 IS COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE UNTIL ALL OF THE SECURED OBLIGATIONS HAVE BEEN INDEFEASIBLY
PAID IN FULL, THE LOAN AGREEMENT TERMINATED, AND ALL BORROWERS’ DUTIES HEREUNDER
AND THEREUNDER HAVE BEEN DISCHARGED IN FULL.
          4.2 Without limiting the generality of the foregoing Section 4.1 or
any of the provisions of the Loan Agreement, Borrowers shall: (i) at the request
of Secured Party, mark conspicuously each Borrower’s Books with a legend, in
form and substance satisfactory to Secured Party, indicating that the Collateral
is subject to the security interest granted hereby; (ii) immediately mark all
Chattel Paper with a conspicuous legend indicating Secured Party’s security
interest therein and otherwise in form and substance satisfactory to Secured
Party; and (iii) at the request of Secured Party, appear in and defend any
action or proceeding which may affect Borrowers’ title to, or the security
interest of Secured Party in, any of the Collateral.
          4.3 With respect to the Negotiable Collateral (other than checks and
drafts received in the ordinary course of business so long as no Event of
Default is continuing), Borrowers shall, immediately upon request by Secured
Party, endorse (where appropriate) and assign the Negotiable Collateral over to
Secured Party, and deliver to Secured Party actual physical possession of the
Negotiable Collateral together with any instruments of transfer or assignment,
all in form and substance satisfactory to Secured Party, in order to fully
perfect the security interest therein of Secured Party.
          4.4 In the event that any Collateral is in the possession of a third
party, Borrowers shall join with Secured Party in notifying such third party of
Secured Party’s security interest and obtaining an acknowledgement from such
third party that it is holding such Collateral for the benefit of Secured Party.
          4.5 Borrowers shall cooperate with Secured Party and use its
commercially reasonable efforts in obtaining a control agreement in form and
substance satisfactory to Secured

7

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

 

Party with respect to all Deposit Accounts, electronic Chattel Paper, Investment
Property, and Letter of Credit Rights.
          4.6 Borrowers shall promptly notify Secured Party of any Commercial
Tort Claims any of them may bring against any Person, including the name and
address of each defendant, a summary of the facts, an estimate of such
Borrower’s damages, copies of any complaint or demand letter submitted by
Borrowers, and such other information as Secured Party may request, and in
connection therewith, at Secured Party’s request, Borrowers and Secured Party
shall enter into an amendment to this Security Agreement granting a security
interest to Secured Party in each such Commercial Tort Claim to secured the
Secured Obligations.
     5. Representations and Warranties. In order to induce Secured Party to
enter into the Loan Agreement and to make Loans to Borrowers or issue any Letter
of Credit, in addition to the representations and warranties of Borrowers set
forth in the Loan Agreement which are incorporated herein by this reference,
each Borrower represents and warrants to Secured Party that on the Closing Date
and thereafter on the date of each and every Borrowing or issuance of a Letter
of Credit:
          5.1 Legal Name; State of Organization; Location of Chief Executive
Office and Collateral; FEIN. Each Borrower’s exact legal name, state of
incorporation and/or organization (as applicable), FEIN and charter or
organizational identification number is accurately set forth in Schedule 1. Each
Borrower’s chief executive office is located at the address set forth in
Schedule 1, and all other locations where Borrowers conduct business or
Collateral is kept is set forth in Schedule 1.
          5.2 Locations of Each Borrower’s Books. All locations where each
Borrower’s Books are kept, including all equipment necessary for accessing any
Borrower’s Books and the names and addresses of all service bureaus, computer or
data processing companies and other Persons keeping any Borrower’s Books or
collecting Rights to Payment for Borrower, are set forth in Schedule 1.
          5.3 Trade Names and Trade Styles. All trade names and trade styles
under which each Borrower presently conducts its business operations are set
forth in Schedule 1, and, except as set forth in Schedule 1, neither Borrower
has, at any time during the preceding five years: (i) been known as or used any
other corporate, trade or fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or consolidation; or
(iv) acquired through asset purchase or otherwise any business of any Person.
          5.4 Ownership of Collateral. Each Borrower has rights in and the power
to transfer the Collateral, and Borrowers’ title to the Collateral is free from
all Liens and restrictions other than Permitted Liens.
          5.5 Enforceability; Priority of Security Interest. (i) This Security
Agreement creates a security interest which is enforceable against the
Collateral in which Borrowers now have rights and will create a security
interest which is enforceable against the Collateral in which Borrowers
hereafter acquire rights at the time Borrowers acquire any such rights, and
(ii) Secured Party has a perfected security interest (to the fullest extent
perfection can be

8

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

 

obtained by filing, notification to third parties, possession or control) and a
first priority security interest in the Collateral in which Borrowers now have
rights (subject only to Permitted Liens), and will have a perfected and first
priority security interest (to the fullest extent perfection can be obtained by
filing, notification to third parties, possession or control) in the Collateral
in which Borrowers hereafter acquire rights at the time any Borrower acquires
any such rights (subject only to Permitted Liens), in each case securing the
payment and performance of the Secured Obligations.
          5.6 Other Financing Statements. Other than financing statements in
favor of Secured Party and financing statements filed in connection with
Permitted Liens, no effective financing statement naming any Borrower as debtor,
assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Collateral is on file in any filing or recording office in any
jurisdiction.
          5.7 Rights to Payment.
               (a) to the Knowledge of Borrowers, the Rights to Payment
represent valid, binding and enforceable obligations of the Account Debtors or
other Persons obligated thereon, representing undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in any documents
related thereto, and are and will be genuine, free from Liens, adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, retainages, holdbacks and
conditions precedent of any kind of character, except to the extent reflected by
each Borrowers’ reserves for uncollectible Rights to Payment;
               (b) to each Borrower’s Knowledge, all Account Debtors and other
obligors on the Rights to Payment are Solvent and generally paying their debts
as they come due;
               (c) all Rights to Payment comply with all applicable laws
concerning form, content and manner of preparation and execution, including
where applicable any federal and state consumer credit laws;
               (d) neither Borrower has assigned any of its rights under the
Rights to Payment other than to Secured Party pursuant to this Security
Agreement;
               (e) all statements made, all unpaid balances and all other
information in each Borrower’s Books and other documentation relating to the
Rights to Payment are true and correct in all material respects and in all
material respects what they purport to be; and
               (f) neither Borrower has Knowledge of any fact or circumstance
which would impair the validity or collectibility in any material respect of any
of the Rights to Payment.
          5.8 Inventory. Except as disclosed in Schedule 1 hereto, no Inventory
is stored with any bailee, warehouseman or similar Person or on any premises
leased to any Borrower, nor has any Inventory been consigned to any Borrower or
consigned by any Borrower to any Person or is held by any Borrower for any
Person under any “bill and hold” or other arrangement.

9

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

 

          5.9 Intellectual Property.
               (a) except as set forth in Schedule 1, each Borrower does not
own, possess or use under any licensing arrangement any patents, copyrights,
trademarks, service marks or trade names, nor is there currently pending before
any Governmental Authority any application for registration of any patent,
copyright, trademark, service mark or trade name;
               (b) all patents, copyrights, trademarks, service marks and trade
names are subsisting and have not been adjudged invalid or unenforceable in
whole or in part;
               (c) all maintenance fees required to be paid on account of any
patents have been timely paid for maintaining such patents in force, and, to the
best of each Borrower’s knowledge, each of the patents is valid and enforceable
and each Borrower has notified Secured Party in writing of all prior art
(including public uses and sales) of which it is aware;
               (d) to the best of each Borrower’s Knowledge after due inquiry,
no infringement or unauthorized use presently is being made of any Intellectual
Property Collateral by any Person;
               (e) each Borrower is the sole and exclusive owner of the
Intellectual Property Collateral and the past, present and contemplated future
use of such Intellectual Property Collateral by any Borrower has not, does not
and will not infringe or violate any right, privilege or license agreement of or
with any other Person; and
               (f) each Borrower owns, has material rights under, is a party to,
or an assignee of a party to all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade names and all other Intellectual Property Collateral necessary to continue
to conduct its business as heretofore conducted.
          5.10 Equipment.
               (a) none of the Equipment or other Collateral is affixed to real
property, except Collateral with respect to which any Borrower has supplied
Secured Party with all information and documentation necessary to make all
fixture filings required to perfect and protect the priority of Secured Party’s
security interest in all such Collateral which may be fixtures as against all
Persons having an interest in the premises to which such property may be
affixed; and
               (b) none of the Equipment is leased from or to any Person, except
as set forth in Schedule 1.
          5.11 Deposit Accounts. The names and addresses of all financial
institutions at which each Borrower maintains its Deposit Accounts, and the
account numbers and account names of such Deposit Accounts, are set forth in
Schedule 1.
          5.12 Investment Property. All Investment Property is set forth and
described in Schedule 1, and all financial institutions or financial
intermediaries holding or in possession of such Investment Property are set
forth in Schedule 1.

10

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

 

          5.13 Commercial Tort Claims. All of Debtor’s Commercial Tort Claims
that it has brought against any Person, including the name and address of each
defendant, a summary of the facts, and an estimate of Debtor’s damages, are set
forth in Schedule 1.
     6. Covenants. In addition to the covenants of Borrowers set forth in the
Loan Agreement which are incorporated herein by this reference, each Borrower
agrees that from the Closing Date and thereafter until the payment, performance
and satisfaction in full, in cash, of the Secured Obligations, and all of
Secured Party’s obligations under the Loan Agreement to Borrowers have been
terminated and no Letters of Credit are outstanding:
          6.1 Defense of Collateral. Each Borrower shall appear in and defend
any action, suit or proceeding which may affect its title to or right or
interest in, or Secured Party’s right or interest in, the Collateral.
          6.2 Preservation of Collateral. Each Borrower shall do and perform all
commercially reasonable acts that may be necessary and appropriate to maintain,
preserve and protect the Collateral.
          6.3 Compliance with Laws, Etc. Each Borrower shall comply with all
laws, regulations and ordinances, and all policies of insurance, relating to the
possession, operation, maintenance and control of the Collateral.
          6.4 Location of Each Borrower’s Books and Chief Executive Office. Each
Borrower shall: (i) keep all Borrower’s Books at the locations set forth in
Schedule 1; and (ii) maintain the location of each Borrower’s chief executive
office or principal place of business at the location set forth in Schedule 1;
provided, however, that any Borrower may amend Schedule 1 so long as (i) such
amendment occurs by written notice to Secured Party not less than 30 days prior
to the date on which the location of any Borrower’s Books or any Borrower’s
chief executive office or principal place of business is changed, and (ii) at
the time of such written notification, the applicable Borrower executes and
delivers any financing statement amendments or fixture filing amendments
necessary to perfect or continue perfected Secured Party’s security interests in
the Collateral and also obtains for Secured Party such duly executed Collateral
Access Agreement as Secured Party shall require with respect to such new
location.
          6.5 Location of Collateral. Each Borrower shall keep the Inventory and
Equipment only at the locations identified on Schedule 1; provided, however,
that any Borrower may amend Schedule 1 so long as (i) such amendment occurs by
written notice to Secured Party not less than 30 days prior to the date on which
the Inventory or Equipment is moved to such new location, (ii) such new location
is within the continental United States, and (iii) at the time of such written
notification, the applicable Borrower executes and delivers any financing
statements or fixture filings necessary to perfect and continue perfected
Secured Party’s security interests in such Assets and also obtains for Secured
Party such duly executed Collateral Access Agreement as Secured Party shall
require with respect to such new location.
          6.6 Change in Name, Trade Name, Trade Style or FEIN. Each Borrower
shall not change its legal name, trade names, trade styles or FEIN, or add any
new trade names or trade styles from those listed on Schedule 1; provided,
however, that any Borrower may amend

11

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

 

Schedule 1 so long as (i) such amendment occurs by written notice to Secured
Party not less than 30 days prior to the date on which such new name, trade
name, trade style or FEIN becomes effective, and (ii) at the time of such
written notification, the applicable Borrower executes and delivers any
financing statement amendments or fixture filing amendments necessary to
continue perfected Secured Party’s security interests in the Collateral.
          6.7 State of Incorporation or Formation. Each Borrower shall not
change the state of its incorporation or formation.
          6.8 Maintenance of Records. Each Borrower shall keep separate,
accurate and complete Borrower’s Books, disclosing Secured Party’s security
interest hereunder.
          6.9 Disposition of Collateral. Each Borrower shall not surrender or
lose possession of (other than to Secured Party), sell, lease, rent, license, or
otherwise dispose of or transfer any of the Collateral or any right or interest
therein other than the sale of Inventory in the ordinary course of business.
          6.10 Liens. Each Borrower shall keep the Collateral free of all Liens
except Permitted Liens.
          6.11 Leased Premises. At Secured Party’s request, each Borrower shall
use commercially reasonable efforts to obtain from each Person from whom any
Borrower leases any premises at which any Collateral is at any time present,
such Collateral Access Agreements as Secured Party may require.
          6.12 Rights to Payment. Each Borrower shall:
               (a) perform and observe, in all material respects, all terms and
provisions of the Rights to Payment and all material obligations to be performed
or observed by it in connection therewith and maintain the Rights to Payment in
full force and effect;
               (b) enforce all Rights to Payment strictly in accordance with
their terms, and take all such action to such end as may be from time to time
reasonably requested by Secured Party;
               (c) if, to the Knowledge of any Borrower, any dispute, setoff,
claim, counterclaim or defense shall exist or shall be asserted or threatened
with respect to a Right to Payment (whether with or against any Borrower or
otherwise), disclose such fact fully to Secured Party in any Borrower’s Books
relating to such Account or other Right to Payment and in connection with any
report furnished by any Borrower to Secured Party relating to such Right to
Payment;
               (d) furnish to Secured Party such information and reports
regarding the Rights to Payment as Secured Party may request, and upon request
of Secured Party make such demands and requests for information and reports as
any Borrower is entitled to make in respect of the Rights to Payment; and

12

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

 

               (e) upon the occurrence of any Event of Default, establish such
lockbox or similar arrangements for the payment of the Rights to Payment as
Secured Party shall require.
          6.13 Inventory. Each Borrower shall:
               (a) at such times as Secured Party shall request, prepare and
deliver to Secured Party periodic reports pertaining to the Inventory, in form
and substance satisfactory to Secured Party;
               (b) upon the request of Secured Party, take a physical listing of
the Inventory and promptly deliver a copy of such physical listing to Secured
Party; provided that unless an Event of Default exists, Secured Party shall not
request such a physical listing of the Inventory more frequently than once per
calendar year.
               (c) not store any Inventory with a bailee, warehouseman or
similar Person or on premises leased to any Borrower without obtaining for
Secured Party such Collateral Access Agreements as Secured Party shall require;
and
               (d) not dispose of any Inventory on a bill-and-hold, guaranteed
sale, sale and return, sale on approval, consignment or similar basis, nor
acquire any Inventory from any Person on any such basis, without in each case
giving Secured Party prior written notice thereof.
          6.14 Equipment. Each Borrower shall, upon Secured Party’s request,
deliver to Secured Party a report of each item of Equipment, in form and
substance satisfactory to Secured Party.
          6.15 Intellectual Property Collateral. Each Borrower shall:
               (a) not enter into any agreement (including any license or
royalty agreement) pertaining to any Intellectual Property Collateral without in
each case giving Secured Party prior notice thereof;
               (b) not allow or suffer any Intellectual Property Collateral to
become abandoned, nor any registration thereof to be terminated, forfeited,
expired or dedicated to the public;
               (c) promptly give Secured Party notice of any rights any Borrower
may obtain to any new patentable inventions, trademarks, servicemarks,
copyrightable works or other new Intellectual Property Collateral, prior to the
filing of any application for registration thereof; and
               (d) diligently prosecute all applications for patents, copyrights
and trademarks, and file and prosecute any and all continuations,
continuations-in-part, applications for reissue, applications for certificate of
correction and like matters as shall be reasonable and appropriate in accordance
with prudent business practice, and promptly and timely pay any and

13

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

 

all maintenance, license, registration and other fees, taxes and expenses
incurred in connection with any Intellectual Property Collateral.
     7. Collection of Rights to Payment. Secured Party shall have the right at
any time after an Event of Default has occurred and is continuing (i) to notify
the Account Debtors to make payments directly to Secured Party or a lockbox
account as set forth in clause (iii) of this Section 7, (ii) to enforce each
Borrowers’ rights against the Account Debtors, and (iii) to require that all
payments made by Account Debtors be deposited directly into a lockbox account as
Secured Party may specify, pursuant to a lockbox agreement in form and substance
satisfactory to Secured Party, with a lockbox servicing Secured Party acceptable
to Secured Party.
     8. Events of Default. The occurrence of any Event of Default under the Loan
Agreement shall constitute an event of default (“Event of Default”) hereunder.
     9. Rights and Remedies.
          9.1 During the continuance of an Event of Default, Secured Party,
without notice or demand, may do any one or more of the following, all of which
are authorized by Borrowers:
               (a) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Secured Party considers advisable, and
in such cases, Secured Party will credit the Secured Obligations with only the
net amounts received by Secured Party in payment of such disputed Accounts after
deducting all Expenses incurred or expended in connection therewith;
               (b) Cause any Borrower to hold all returned Inventory in trust
for Secured Party, segregate all returned Inventory from all other property of
any Borrower or in any Borrower’s possession and conspicuously label said
returned Inventory as the property of Secured Party;
               (c) Without notice to or demand upon any Borrower or any
guarantor, make such payments and do such acts as Secured Party considers
necessary or reasonable to protect its security interests in the Collateral.
Each Borrower agrees to assemble the Collateral if Secured Party so requires,
and to make the Collateral available to Secured Party as Secured Party may
designate. Each Borrower authorizes Secured Party to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or Lien that in Secured Party’s determination appears to conflict with
its security interests and to pay all expenses incurred in connection therewith.
With respect to any of each Borrowers’ owned or leased premises, each Borrower
hereby grants Secured Party a license to enter into possession of such premises
and to occupy the same, without charge, for up to 120 days in order to exercise
any of Secured Party’s rights or remedies provided herein, at law, in equity, or
otherwise;
               (d) Without notice to Borrowers (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation), set off and apply to the Secured Obligations any and all
(i) balances and Deposit Accounts of Borrowers

14

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

 

held by Secured Party, or (ii) indebtedness at any time owing to or for the
credit or the account of Borrowers held by Secured Party;
               (e) Hold, as cash collateral, any and all balances and Deposit
Accounts of Borrowers held by Secured Party, to secure the full and final
repayment of all of the Secured Obligations;
               (f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Secured Party is hereby granted a license or other right
to use, without charge, any Borrower’s labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and any Borrower’s rights under all licenses and all franchise
agreements shall inure to Secured Party’s benefit;
               (g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including any Borrower’s premises) as Secured
Party determines is commercially reasonable. Secured Party shall have no
obligation to clean-up or otherwise prepare the Collateral for sale. It is not
necessary that the Collateral be present at any such sale;
               (h) Secured Party shall give notice of the disposition of the
Collateral as follows:
               (i) Secured Party shall give each Borrower and each holder of a
security interest in the Collateral who has filed with Secured Party a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
                    (i) The notice shall be personally delivered or mailed,
postage prepaid, to the applicable Borrower as provided in Section 10.1 of the
Loan Agreement, at least ten (10) days before the date fixed for the sale, or at
least ten (10) days before the date on or after which the private sale or other
disposition is to be made; no notice needs to be given prior to the disposition
of any portion of the Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market.
Notice to Persons other than any Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to Secured Party;
                    (ii) If the sale is to be a public sale, Secured Party also
shall give notice of the time and place by publishing a notice one time at least
ten (10) days before the date of the sale in a newspaper of general circulation
in the county in which the sale is to be held;
                    (iii) Secured Party may credit bid and purchase at any
public sale; and
               (j) The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Secured Party first upon all
Secured Party

15

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

 

Expenses, the balance of the proceeds of the sale or other disposition shall be
applied in the payment of the Secured Obligations, first to interest, then to
principal, then to remaining Secured Obligations and the surplus, if any, shall
be paid over to Borrowers, without interest, or to such other person(s) as may
be entitled to it under applicable law. Borrowers shall remain liable for any
deficiency, which it shall pay to Secured Party immediately upon demand.
Borrowers agree that Agent shall be under no obligation to accept any noncash
proceeds in connection with any sale or disposition of Collateral unless failure
to do so would be commercially unreasonable. If Secured Party agrees in its sole
discretion to accept noncash proceeds (unless the failure to do so would be
commercially unreasonable), Secured Party may ascribe any commercially
reasonable value to such proceeds. Without limiting the foregoing, Secured Party
may apply any discount factor in determining the present value of proceeds to be
received in the future or may elect to apply proceeds to be received in the
future only as and when such proceeds are actually received in cash by Secured
Party; and
               (k) The following shall be the basis for any finder of fact’s
determination of the value of any Collateral which is the subject matter of a
disposition giving rise to a calculation of any surplus or deficiency under
Section 9615(f) of the Code: (i) the Collateral which is the subject matter of
the disposition shall be valued in an “as is” condition as of the date of the
disposition, without any assumption or expectation that such Collateral will be
repaired or improved in any manner; (ii) the valuation shall be based upon an
assumption that the transferee of such Collateral desires a resale of the
Collateral for cash promptly (but no later than 30 days) following the
disposition; (iii) all reasonable closing costs customarily borne by the seller
in commercial sales transactions relating to property similar to such Collateral
shall be deducted including, without limitation, brokerage commissions, tax
prorations, attorney’s fees, whether in-house or outside counsel is used, and
marketing costs; (iv) the value of the Collateral which is the subject matter of
the disposition shall be further discounted to account for any estimated holding
costs associated with maintaining such Collateral pending sale (to the extent
not accounted for in (iii) above), and other maintenance, operational and
ownership expenses; and (v) any expert opinion testimony given or considered in
connection with a determination of the value of such Collateral must be given by
persons having at least 5 years experience in appraising property similar to the
Collateral and who have conducted and prepared a complete written appraisal of
such Collateral taking into consideration the factors set forth above. The
“value” of any such Collateral shall be a factor in determining the amount of
proceeds which would have been realized in a disposition to a transferee other
than a secured party, a person related to a secured party or a secondary obligor
under Section 9615(f) of the Uniform Commercial Code.
          9.2 Secured Party shall have no obligation to attempt to satisfy the
Secured Obligations by collecting them from any third Person which may be liable
for them or any portion thereof, and Secured Party may release, modify or waive
any collateral provided by any other Person as security for the Secured
Obligations or any portion thereof, all without affecting Secured Party’s rights
against any Borrower. Each Borrower waives any right it may have to require
Secured Party to pursue any third Person for any of the Secured Obligations.
          9.3 Secured Party may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral, and Secured
Party’s compliance

16

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

 

therewith will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.
          9.4 Secured Party may sell the Collateral without giving any
warranties as to the Collateral. Secured Party may specifically disclaim any
warranties of title or the like. This procedure will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.
          9.5 If Secured Party sells any of the Collateral upon credit,
Borrowers will be credited only with payments actually made by the purchaser,
received by Secured Party and applied to the indebtedness of the purchaser. In
the event that the purchaser fails to pay for the Collateral, Secured Party may
resell the Collateral and Borrowers will be credited with the proceeds of such
sale.
          9.6 Secured Party shall be under no obligation to marshal any assets
in favor of Borrowers, or against or in payment of the Secured Obligations or
any other obligation owned to Secured Party by Borrowers or any other Person.
          9.7 Upon the exercise by Secured Party of any power, right, privilege,
or remedy pursuant to this Security Agreement which requires any consent,
approval, registration, qualification, or authorization of any Governmental
Authority, each Borrower agrees to execute and deliver, or will cause the
execution and delivery of, all applications, certificates, instruments,
assignments, and other documents and papers that Secured Party or any purchaser
of the Collateral may be required to obtain for such governmental consent,
approval, registration, qualification, or authorization.
          9.8 The rights and remedies of Secured Party under this Security
Agreement, the Loan Agreement, the other Loan Documents, and all other
agreements contemplated hereby and thereby shall be cumulative. Secured Party
shall have all other rights and remedies not inconsistent herewith as provided
under the Code, by law, or in equity. No exercise by Secured Party of any one
right or remedy shall be deemed an election of remedies, and no waiver by
Secured Party of any default on any Borrower’s part shall be deemed a continuing
waiver of any further defaults. No delay by Secured Party shall constitute a
waiver, election or acquiescence with respect to any right or remedy.
     10. Secured Party Not Liable. So long as Secured Party complies with the
obligations, if any, imposed by the Code, Secured Party shall not otherwise be
liable or responsible in any way or manner for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion or from any cause; (c) any diminution in the value thereof; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency, or other
person whomsoever. Borrowers bear the risk of loss or damage of the Collateral.
     11. Indefeasible Payment. The Secured Obligations shall not be considered
indefeasibly paid for purposes of this Security Agreement unless and until all
payments to Secured Party are no longer subject to any right on the part of any
Person, including any Borrower, any Borrower as a debtor in possession, or any
trustee (whether appointed under the

17

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

 

Bankruptcy Code or otherwise) of any Borrower or any Borrower’s Assets to
invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. In the event that, for any reason, any portion of such payments to
Secured Party is set aside or restored, whether voluntarily or involuntarily,
after the making thereof, then the obligation intended to be satisfied thereby
shall be revived and continued in full force and effect as if said payment or
payments had not been made.
     12. Notices. All notices or demands by any party hereto to the other party
and relating to this Security Agreement shall be made in the manner and to the
addresses set forth in Section 10.1 of the Loan Agreement.
     13. General Provisions.
          13.1 Successors and Assigns. This Security Agreement shall bind and
inure to the benefit of the respective successors and assigns of Borrowers and
Secured Party; provided, however, that Borrowers may not assign this Security
Agreement nor delegate any of its duties hereunder without Secured Party’s prior
written consent and any prohibited assignment or delegation shall be absolutely
void. No consent by Secured Party to an assignment by either Borrower shall
release any Borrower from the Secured Obligations. Secured Party reserves its
right to sell, assign, transfer, negotiate, or grant participations in all or
any part of, or any interest in, the rights and benefits hereunder pursuant to
and in accordance with the provisions of the Loan Agreement. In connection
therewith, Secured Party may disclose all documents and information which
Secured Party now or hereafter may have relating to any Borrower, any Borrower’s
business, or the Collateral to any such prospective or actual Transferee,
subject to the terms of Section 10.5(e) of the Loan Agreement.
          13.2 Exhibits and Schedules. All of the exhibits and schedules
attached hereto shall be deemed incorporated by reference.
          13.3 No Presumption Against Any Party. Neither this Security Agreement
nor any uncertainty or ambiguity herein shall be construed or resolved against
Secured Party or any Borrower, whether under any rule of construction or
otherwise. On the contrary, this Security Agreement has been reviewed by each of
the parties and their counsel and shall be construed and interpreted according
to the ordinary meaning of the words used so as to accomplish fairly the
purposes and intentions of all parties hereto.
          13.4 Amendments and Waivers. Any provision of this Security Agreement
or any of the Loan Documents to which any Borrower is a party may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the party asserted to be bound thereby, and then such amendment or waiver shall
be effective only in the specific instance and specific purpose for which given.
          13.5 Counterparts; Integration; Effectiveness. This Security Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Security Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.

18

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

 

This Security Agreement shall become effective when executed by each of the
parties hereto and delivered to Secured Party.
          13.6 Severability. The provisions of this Security Agreement are
severable. The invalidity, in whole or in part, of any provision of this
Security Agreement shall not affect the validity or enforceability of any other
of its provisions. If one or more provisions hereof shall be declared invalid or
unenforceable, the remaining provisions shall remain in full force and effect
and shall be construed in the broadest possible manner to effectuate the
purposes hereof.
          13.7 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
               (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF ARIZONA, WITHOUT REGARD FOR PRINCIPLES OF
CONFLICTS OF LAWS.
               (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
MARICOPA, STATE OF ARIZONA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT SECURED PARTY’S
OPTION, IN THE COURTS OF ANY JURISDICTION OR WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. EACH BORROWER AND SECURED PARTY WAIVE, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13.7.
               (c) EACH BORROWER AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH BORROWER AND
SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF

19

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

 

LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
          13.8 No Novation. Borrowers and Bank hereby agree that, effective upon
the satisfaction or waiver in writing by Bank of all conditions precedent set
forth in Section 4.1 of the Loan Agreement, this Security Agreement shall amend,
restate and supersede in its entirety the Prior Security Agreements. Nothing
herein contained shall be construed as a substitution or novation of the
obligations of Borrowers outstanding under the Prior Security Agreements, which
obligations shall remain in full force and effect, except to the extent that the
terms thereof are modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Security Agreement shall be
construed as a release or other discharge of any Borrower or any guarantor from
any of its obligations or liabilities under the Prior Security Agreement or any
of the other original Loan Documents except to the extent that the terms thereof
are modified hereby or by instruments executed concurrently herewith.
[remainder of this page intentionally left blank]

20

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

 

     IN WITNESS WHEREOF, the parties have executed this Security Agreement as of
the date first set forth above.

           
Borrowers:
  MATRIXX  INITIATIVES, INC., a Delaware corporation
 
         
 
  By:   /s/ William Hemelt  
 
         
 
  Name:   William Hemelt  
 
  Title:   Executive Vice President, CFO, Treasurer  
 
         
 
  ZICAM, LLC, an Arizona limited liability company
 
         
 
  By:   /s/ William Hemelt  
 
         
 
  Name:   William Hemelt  
 
  Title:   Manager  
 
         
Secured Party:
  COMERICA BANK  
 
         
 
  By:   /s/ William J. Kirschner  
 
         
 
  Name:   William J. Kirschner  
 
  Title:   Assistant Vice President  

S-1

Amended and Restated Security Agreement