Appendix A
SECURITY AGREEMENT 

TJ-IIS SECURITY AGREEMENT ("Security Agreement"), dated JanuaryJO, 201 J, is 

made by Universal Appliances, Kitchens, and Baths, Inc., a Califomia corporation ("Universal" 

or the "Grantor") in favor of the Federal Trade Commission (the "Secured Party" or "the 

Commission"). 

WITNESSETH: 

WHEREAS, the parties hereto are pm-ties to a certain action under 42 U.S.c. § 6294 et 

seq., and 16 C.F.R. Part 305, to be issued by the Federal Trade Commission; and 

WHEREAS, the parties hereto have agreed to the cntry of a Consent Order as settlement 

of that action; and 

WHEREAS, Universal has agreed to pay a $100,000 civil penalty in certain installments 

pursuant to Section LA of the Consent Order (the "Civil Penalty Payments"); and 

WHEREAS, Universal has agreed to provide the COlmnission security interests to secure 

the Civil Penalty Payments, and it is 111e purpose of this Security Agreement to provide such 

security interests to the Commission. 

NOW, THEREFORE, as security for the Civil Penalty Payments to be made by Universal 

pursuant to the Consent Order, and in order to induce the Commission to permit Universal to 

make installment payments of the civil penalty, the Grantor hereby agrecs with 111e Secured Party 

as follows: 

1. Defined Terms. 

As used in this Security Agreement, the following terms have the meanings specified 

below (such me,mings being equally applicable to both the singular and plural forms ofthe terms 

defined): 

a. "Collateral" has the meaning assigned to such term in Section 2 of this 

Agreement. 

b. "Default" means any event which with 11,e passing oftime or the giving of notice 

or both would become an Event of Default. 

c. "/l'vent of Default" means that one or more of the following events has occurred 

[md is continuing: (i) the Grantor shall fail to pay any principal of; or interest on, the Civil 

Penalty Payments, any fee, any other amount due herelmder when the same becomes duc and 

pay"ble; or (ii) any representation or warranty made or deemed made by the Grantor in this 

Security Agreement or any other document or instrument evidencing, securing or relating to the 

Civil Penalty Payments shall prove to have been incorrect in any material respect when made or 

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deemed made; or (iii) the Grantor shaIl fail to perform or observe any term, covcnant or 

agreement contained in any non-monetary covenant contained in this Security Agreement, the 

Consent Order, or any other document or instrument evidencing, securing or relating to the Civil 

Penalty Payments and if such failure under tbis clause shall remain unremedied for five days 

after the earlier of the date on which (A) an officer of the Grantor becomes aware of such failure 

or (B) the Secured Party gives written notice thereof to the Grantor; or (iv) there shall occur any 

default, or event which would be a default under any of the documents or instruments 

evidencing, securing or relating to the Civil Penalty Payments. 

d. "lnventotJl" means any "inventory," as such term is defined in Section 9-1 02(48) 

ofthe U.C.C., now owned or hereafter acquired by the Grantor, and wherever located, and, in 

any event, includes, without limitation, all inventory, merchandise, goods and other personal 

property now owned or hereafter acquired by the Grantor which are leased by a person as lessor; 

are held by a person for sale or lease or to be furnished under a contract of service; are thrnishcd 

by a person under a contract of service; consist of raw materials, work in process, or materials 

used or consumed in business; or the processing, packaging, delivery or shipping of the same, all 

finished goods, and including any inventory as is temporarily out of the Gral1tor' s custody or 

possession, including inventory on the premises of others and items in transit, and including any 

returns or repossessions upon any accounts, documents, instruments or chattel paper relating to 

or arising from the sale of inventory including the Grantor's rights as a seller of goods under 

Article 2 of the u.c.c. and all inventory subject to consignment. 

e. "Person" means an individual, partnership, corporation (including a business 

trust), joint stock company, trust, unincorporated association, joint venture or other cntity, or a 

governmental authority. 

f. "Proceeds" means "proceeds," as such term is defined in Section 9-102(64) of the 

U.C.C., and, in any event, shall include, without limitation, (i) any and all proceeds of any 

insurance, indemnity, warranty or guanmty payable to the Grantor from time to time with respcct 

to any oftbe Collateral, (ii) any and all payments (in any form whatsoever) made or due and 

payable to the Grantor from time to time in cOimection witb 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), and (iii) any and all other 

amounts from time to time paid or payable under or in cOlmection witb any of the Collateral. 

g. "Secured Obligations" means the Civil Penalty Payments, all advances, debts, 

liabilities, obligations and covenants and duties owed by the Grantor to the Secured Party of 

evelY type and description, present or fuhlre, whether or not evidenced by a note, guaranty or 

other instrument, ill'ising under this Agreement or any other document or instrument evidencing, 

securing or relating to the Civil Penalty Payments, whether absolute, contingent, due or to 

become dne. The term "Secured Obligations" includes, without limitation, all interest, charges, 

expenses, fees, attorneys' fees and disbursements and any other sum chargeable to the Grantor 

under this Security Agreement or any other document or instrument evidencing, securing or 

relating to the Civil Penalty Payments. 

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h. "u. C. c." means the Uniform Commercial Code as the same may, from time to 

time, be in effect in the State of California; provided, however, in the event that, by reason of 

mandatory provisions of law, any or all of the attachment, perfection or priority of the Secured 

Party's secmity interest in any Collateral is governed by the Uniform Commercial Code as in 

effect in a jurisdiction other than the State of California, the term "U.C.C." shall mean the 

Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions 

hereof relating to such attachment, perfection or priority and for purposes of definitions related 

to such provisions. 

2. Grant of Security Interest. 

As collateral security for the full and prompt payments to he made by Universal pursuant 

to the Consent Order, and the performance of all the Secured Obligations, the Grantor hereby 

assigns, conveys, mortgages, pledges, hypothecates and transfers to the Secured Party and 

hereby grants to the Secured Party a security interest in, all of the Grantor's right, title tU1d 

interest in, all hlVentory as listed in Appendix 1 (hereinafter called the "Collateral"). The 

Grantor affirms that the aggregate value of its Inventory is approximately $1,450,000. 

3. Rights of the Secured Party; Limitations on the Secured Party's Obligations. 

Upon reasonable prior notice to the Grantor (unless a Default or Event of Default has 

occurred and is continuing, in whieh case no notice is nccessary), the Secured Party shall havc 

the right to physically verify the Inventory in any manner and through any medium that it 

considers advisable, tU1d the Grantor agrees to furnish all such assistance and information as the 

Sccured Parly may require in connection therewith. 

4. Representations and Warranties. 

The Grantor hereby represents and warrants (0 the Secured Party as follows: 

a. The Grantor is a corporation duly incorporated, validly existing and in good 

standing under the laws of the State of California. 

b. The execution, delivery and perf0111lanCe by the Grantor of this Seenrity 

Agreement are within the Grantor's corporate powers, have been duly authorized by all 

necessary corporate action, do not contravene the Grantor's charter 01' by-laws, any law or any 

contractualrestrie(ion binding on 01' affecting thc Grantor, and do not result in or require the 

creation of any lien (other than pursnant to the Security Agreement) upon or with rcspect to any 

of its properties. 

c. No consent, authorization, approval or othcr action by, and no noticc to or filing 

with, any governmental authority is required for the due execution, delivery and pcrformance by 

the Grantor of this Security Agreement. 

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d. This Security Agreement has been duly executed and delivered by the Grantor 

and is the legal, valid and binding obligation of the Grantor, enforceable against the Grantor in 

accordance with its terms. 

e. There is no pending or threatened action or proceeding affecting the Grantor or 

any of its subsidiaries before any court, governmental agency or arbitrator, which would 

materially adversely affect the ability of the Grantor to perform its obligations under this 

Security Agreement or which may materially adversely affect the financial condition or 

operations of the Grantor. 

f. The Grantor is the sole owner of each item of the Collateral in which it purports 

to grant a security interest hereunder, having good and marketable title thereto, free and clear of 

any and all liens, except for the security interest granted purSU8l1t to this Security Agreemcnt. 

g. No effective security agreement, financing statement, equivalent security or lien 

instrumeLlt or continuation statement covering all or any part of the Collateral is on file or of 

record in any public office, except such as may have been filed by the Grantor in favor of the 

Secured Party purSU8l1t to this Security Agreement. 

h. Appropriate financing statements having been filed in the jurisdictions listed on 

Sehedu1.e I hereto, this Security Agreement is effective to create a valid and continuing first 

priority lien on the Collateral which is prior to all other liens. All action necessary or desirable 

to protect and perfect such security interest in each item of the Collateral has been duly taken. 

L. The Grantor's principal place of business and the place where its records 

concerning the Collateral are kept and the location of its Inventory aTe sct forth on Schedule Il 

hereto. 

5. Covenants. 

The Grantor covenants and agrees with the Secured Party that from 1Uld after the date of 

this Security Agreement and until the Secured Obligations are [·ully satisfied: 

a. Further Documentation. At any time and from time to time, upon the written 

request of the Secured Party, and at the sole expense of the Gr8l1tor, the Grantor will promptly 

and duly execute and deliver any and all such further instruments imd documents and take such 

further action as the Secured Party may reasonably deem desirable to obtain the full benefits of 

this Security Agreement and of the rights and powers herein granted, including, without 

limitation, the tiling of any financing or continuation statements under d,e U.C.c. with respect to 

the liens and security interests granted hereby, tr1Ulsferring Collateral to the Secured Party's 

possession (if a security interest in such Collateral can be perfected by possession). The Grantor 

also hereby authorizes tlle Secured Party to file any such ftmmeing or continuation statement 

without the signature of the Gr8l1tor to the extent permitted by applicable law. 

b. Maintenance of Records. The Grantor will keep imd maintain at its own cost and 

expense satisfactory and complete records of the Collateral, including, without limitation, a 

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record of all payments received and all credits grallted with respect to the Collateral and all other 

dealings with the Collateral. The Grantor will mark its books and records pertaining to the 

Collateral to evidence this Agreement and the lien and security interests granted hereby. For the 

Secured Party's further security, the Grantor agrees that the Secured Party shall have a special 

property interest in all of the Grantor's books and records pertaining to the Collateral and, upon 

the occurrence and during the continuance of my Event of Default, the Grantor shall deliver and 

turn over ~U1y such books and records to the Secured Party or to its representatives at any time on 

demand of the Secured Party. Prior to the occurrence of an Event of Default and upon 

reasonable notice from the Secured Party, the Grantor shall permit any representative of the 

Secured Party to inspect such books and records and will provide photocopies thereof to the 

Secured Party. 

c. Compliance with Laws, Etc. The Grantor 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 pmt thereof or to the operation of the Grantor's business; 

provided, however, that the Grantor may contest ally act, regulation, order, decree or direction in 

ally reasonable mallier which shall not, in the sole opinion of the Secured Party, adversely affect 

the Secured Party's rights hereunder or adversely affect the first priority of its lien on and 

security interest in the Collateral. 

d. Paymen.t of Obligations. The Grantor 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 and all claims of any kind (inclnding, without limitation, claims for 

labor, materials md supplies), except that no such charge need be paid if (i) such non-payment 

does not involve any danger of the sale, forfeiture or loss of any of the Collateral or any intercst 

therein, and (ii) such charge is adequately reserved against in accordance with and to the extent 

required by Generally Accepted Accounting Principles. 

e. Limitation on Liens on Collateral. The Grantor 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 on the Collateral and will defend the right, title and interest of the Secured Party in and 

to any of the Grantor's rights to tl,e Inventory against the claims and demands of all Persons 

whomsoever. 

f. Maintenance of insurance. The Grantor will maintain, with financially sound and 

reputable companies, insurance policies (i) insuring its Inventory against loss by fire, explosion, 

theft and such other casualties as are usually insured against by companies engaged in the same 

or similar businesses and (ii) insuring the Grantor and the Sccured Party against liability for 

personal injury and property damage relating to the Inventory, such policies to be in such 

amounts and against at least such risks as are usually insured against in the same general area by 

compallies engaged in the same or a similar business, naming the Secured Party as an additional 

insured with a lender loss payable clause in favor of the Secured Party. The Grantor shall, if so 

requested by the Secured Party, deliver to the Secured Party as oftcn as the Secured Party may 

reasonably request, a report of a reputable insurance hroker satisiilctory to the Secured Pmty 

with respect to the insurance on its Invcntory. All insurance with rcspect to the Inventory shall 

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(i) contain a clause which provides that the Secured Party's interest under the policy will not be 

invalidated by any act or omission of, or any breach of warranty by, the insured, or by any 

change in the title, ownership or possession of the insured property, or by the use of the property 

for purposes more hazardous than is permitted in the policy, and (ii) provide that no cancellation, 

reduction in amount or change in coverage thereof shall be effective until at least ten days after 

receipt by the Secured Party of written notice thereof. 

g. Maintenance of Aggregate Value of Collateral. The Grantor shall maintain the 

approximate value of its Inventory as listed in Appendix I and shall not let the aggregate value 

fall below 200% of the balance ofthe Civil Penalty Payments still owed pursuant to the Consent 

Order. 

h. Further Identification of Collateral. The Grantor will, if so requested by the 

Secured Party, furnish to the Secured Party, as often as the Secured Party reasonably requests, 

statements and schedules further identifying and describing the Collateral and such other reports 

in connection with the Collateral as the Secured Party may reasonably request, all in reasonable 

detail. 

i. Notices. The Grantor will advise the Secured Party promptly, in reasonable 

detail, (i) of any rnateriallien or claim made or asserted against any ofthe Collateral, (ii) of any 

material change in the composition of the Collateral, and (iii) of the occurrence of any other 

event which would have a material adverse effect on the aggregate value of the Collateral or in 

the security interests created hereunder. 

j. Right of Inspection. Upon reasonable notice to the Grantor (unless a Default or 

an Event of Default has occurred and is continuing, in which case no notice is necessary), the 

Secured Party shall at all times have full and free access during normal business hours to all the 

books and records and correspondence of the Grantor, and the Secured Party or its 

representatives may examine the same, take extracts therefrom and make photocopies thereof, 

and the Grantor agrees to render to the Secured Party, at the Grantor's cost and expense, such 

clerical and other assistance as may be reasonably requested with regard thereto. Upon 

reasonable notice to the Grantor (unless a Default or an Event of Default has occurred and is 

continuing, in which case no notice is necessary), the Secured Party and its representatives shall 

also have the right to enter into and upon any premises where any of the Inventory is located for 

the purpose of inspecting the same, observing its use or otherwise protecting its interests therein. 

k. Continuous Perfection. The Grantor will not change its name, identity or 

corporate structure in any manner which might malce any financing or continuation statement 

filed in connection herewith seriously misleading within the meaning of Section 9-503 of the 

U.C.C. (or any other then applicable provision of the u.e. C.) unless the Grantor shall have given 

the Secured Party at least thirty days' prior written notice thereof and shall have taken all action 

(or made arrangements to take such action substantially simultaneously with such change if it is 

impossible to take such action in advance) necessary or reasonably requested by the Secured 

Party to amend such financing statement or continuation statement so that it is not seriously 

misleading. The Grantor will not change its principal place of business or remove its records or 

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change the location of its Inventory, each as set forth on Schedule Il hereto, unless it has taken 

such action as is necessmy to cause the security interest of the Secured Pm·ty in tbe Collateral to 

continue to be perfected. 

6. The Secured Party's Appointment as Attol'l1ey-in-Fact. 

a. The Grantor hereby irrevocably constitutes and appoints the Secured Party and 

any officer or agent thereof, with full power of substitution, as .its true and lawful attorney-in-fact 

with full irrevocable power and authority in the place and stead of the Grantor and in the name 

of the Grmltor or in its own name, from time to time in the Secured Party's discretion, for the 

purpose of carrying out the terms of this Security Agreement, to take mly and all appropriate 

action and to execute and deliver any and all documents and insh1.11nents which the Secured 

Party may deem necessary or desirable to accomplish the purposes of this Agreement and, 

without limiting the generality of the foregoing, hereby gives the Secured Party the power and 

right, on behalf of the Grantor, without notice to or assent by the Grantor to do the following: 

i. to ask, demand, collect, receive and give acquittances and receipts for any 

and all moneys due and to become due under any Collateral mld, in the name of the Grantor or in 

its own name or otherwise, to take possession of and indorse and collect any checks, drafts, 

notes, or acceptances for the payment of moneys due under mly Collateral and to file any claim 

or to take any other action or proceeding in any court of law or equity or otherwise deemed 

appropriate by the Secured Party for the purpose of collecting any and all such moneys due 

under any Collateral whenever payable and to file any claim or to take any other action or 

proceeding in mly court of law or equity or otherwise deemed appropriate by the Secured Party 

for the pUl}Jose of collecting mly mK\ all such moneys due under any Collateral whenever 

payable; 

ii. to payor dischm'ge taxes, liens, security interests or other encumbrances 

levied or placed on or threatened against the Collateral, to effect any repairs or any insurance 

called for by the terms of this Security Agreement and to pay all or any part ofthe premiums 

therefor and the costs thereof; and 

111. (A) to direct any party liable for any payment under any orthc Collateral 

to make payment of any and all moneys due, and to become due thereunder, directly to the 

Secured Party or as the Secured Party shall direct; (B) to receive payment of and receipt for any 

and all moneys, claims and other amounts due, mld to become due at any time, in respect of or 

arising out of any Collateral; (C) to sign and indorse any invoices, freight or express bills, bills 

of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and 

notices in connection with accounts and other documents constituting or relating to the 

Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity 

in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce 

any other right in respect of any Collateral; (E) to defend mly suit, action or proceeding brought 

against the Grantor with respect to any Collateral; (F) to settle, compromise or adjust any suit, 

action or proceeding described above and, in c01ll1ection therewith, to give such discharges or 

releases as the Secured Party may deem appropriate; (G) to license or, to the extcnt permitted by 

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an applicable license, sublicense, whether general, special or otherwise, and whether 011 an 

exclusive or non-exclusive basis, any patent or h'ademark, throughout the world for such term or 

terms, on such conditions, and in such maimer, as the Secured Party shall in its sole discretion 

determine; and (lei) generaIJy to sell, transfer, pledge, make any agreement with respect to or 

otherwise deal with any of the Collateral as fully and completely as though the Secured Party 

were the absolute owner thereof for all purposes, and to do, at the Secured Party's option and the 

Grantor's expense, at any time, or from time to time, all acts and things which the Secured Party 

reasonably deems necessary to protect, preserve or realize upon the Collateral and the Secured 

Party's lien therein, in order to effect the intent of this Security Agreement, all as fully and 

effectively as the Grantor might do. 

b. The Secured Party agrees tbat, except upon Ille occurrence and during the 

continuance of any Default or Event of Default, it will forbear from exercising the power of 

attorney or any rights granted to the Secured PaI·ty pursuant to this Section 6. The Grantor 

hereby ratifies, to the extent permitted by law, all that any said attorney shall lawfully do or 

cause to be done by virtue hereof. The power of attorney granted pursuant to this Section 6, 

being coupled with an interest, shall be irrevocable until the Secured Obligations are 

indefeasibly paid in full. 

c. The powers conferred on the Secured Party hereunder are solely to protect the 

Secured Party's interests in the Collateral and shall not impose any duty upon it to exercise any 

such powers. The Secured Party shall be accountable only for amounts that it actually receives 

as a result of the exercise of such powers and neither it nor any of its officers, directors, 

employees or agents shan be responsible to the Grantor for any act or failure to act, except for its 

own gross negligence or willful misconduct. 

d. The Grantor also authorizes the Secured Party, at any time and from time to time 

upon the occurrence and during the continuance of a Default or Event of Default, (i) to 

communicate in its own name with any party to any Contract with regard to the assignment of 

the right, title and interest of the Grantor in and under the Contracts hereunder and other matters 

rclating thereto and (ii) to execute, in connection with the sale provided for in Section 8 hereof, 

any endorsements, assignments or other instmments of conveyance or transfer with respect to 

the Collateral. 

7. Performance by the Sccnred Party of the Grantor's Obligations. 

If the Grantor fails to pcrform or comply with ally of its agreements contained herein and 

the Secured Party, as provided for by the terms of this Security Agreement, shall itself perform 

or comply, or otherwise cause performance or compliance, with such agreement, the reasonable 

expenses of the Secured Party incurred in connection with such performance or compliance, 

together with interest thereon at the highest rate then in effect in respect to the Civil Penalty 

Payments, shall be payable by the Grantor to the Secured Party on demand and shall constitute 

Secured Obligations secured hereby. 

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8. Remedies, Rights Upon an Event of Default. 

a. If any Default or Event of Default shall occur and be continuing, the Secured 

Party may exercise in addition to all other rights and remedies granted to it in this Security 

Agreement and in any other instrument or agreement securing, evidencing or relating to the 

Secured Obligations, all rights and remedies of a secured party under the V.C.C. Without 

limiting the generality of the foregoing, the Grantor expressly agrees that in any such event the 

Secured Party, withollt demand of performance or other demand, advertisel:"'ent or notice of any 

kind (except the notice specified below oftime and place of public or private sale) to or upon the 

Grantor or any other Person (all and each of which demands, advertisements and/or notices are 

hereby expressly waived to the maximum extent permitted by the V.C.C. and other applicable 

law), may forthwith collect, receive, appropriate and realize upon the Collateral, or any part 

thereof, and/or may forthwith sell, lease, assign, give an option or options to purchase, or sell or 

otherwise dispose of mld deliver said Collateral (or contract to do so), or any part thereof, in onc 

or more parcels at public or private sale or sales, at any exchange or broker's board or any ofthe 

Secured Party's offices or elsewhere at such prices as it may deem best, for cash or on credit or 

for ['uture delivery without assumption of any credit risk. The Secured Party shall have the right 

upon any such public sale or sales, and, to the extent permitted by law, upon any such private 

sale or sales, to purchase the whole or any part of sa.id Collateral so sold, free of any right or 

equity of redemption, which equity of redemption the Grantor hereby releases. The Grantor 

further agrees, at the Secured Party's request to assemble the Collateral and make it available to 

the Secured Party at places which the Secured Pally shall reasonably select, whether at the 

Grantor's premises or elsewhere. The Secured Party shall apply the net proceeds of any such 

collection, recovery receipt, appropriation, realization or sale, as provided in Section 8( d) hereof, 

the Grantor remaining liable for any deficicncy remaining unpaid after such application, and 

only after so paying over such net proceeds and after the payment by the Secured Party of any 

other amount required by any provision of law, including Sections 9-603 and 9-615 of the 

U.C.C., need the Secmed Party accOlmt for the surplus, if tmy, to the Grantor. To the maximum 

extent permitted by applicable law, the Grantor waives all claims, damages, and demands against 

the Secured Party arising out ofth" repossession, retention or sale of the Collateral. The Grantor 

agrees that the Secured Party need not give more than ten days' notice ofthe time and place of 

any public sale or of the time aftcr which a private sale may take place and that such notice is 

reasonable notification of such matters. The Grantor shall remain liable for any deficiency if the 

proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which 

the Secured Party are entitled, the Grantor also being liable for the fees and expenses of any 

attorneys employed by the Secured Party to collect such deficiency. 

b. The Grantor also agrees to pay all costs of the Secured Party, including, without 

limitation, attorneys' fees, incurred in connection with the enforcement of tmy of its rights and 

remedies hereunder. 

c. The Grantor hereby waives presentment, demand, protest or any notice (to the 

maximum extent perm.itted by applicable law) of any kind in connection with this Agreement or 

any Collateral. 

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d. The Proceeds of any sale, disposition or other realization upon all or any part of 

the Collateral shall be distributed by the Secured Party in the following order of priorities: First, 

to the payment of the costs and expenses of such sale, including, without limitation, all expenses 

of the Secured Party and its agents including the fees and expenses of its counsel, and all 

expenses, liabilities and advances made or incurred by the Secured Party in connection therewith 

or pursmmt to Section 7 hereof; Next, to the Secured Party, for the payment in full of the 

Secured Obligations; and Finally, after payment in full of all the Secured Obligations, to the 

payment of the Grantor, or its successors or assigns, or to whomsoever may be lawfhlly entitled 

to receive the same as a court of competent jurisdiction may direct. 

9. Limitation on the Secured Party's Duty in Respect of Collateral. 

The Secured Party shall have no duty as to any Collateral in its possession or control or 

in the possession or control of any agent or nominee of it or illly income thereon or as to the 

preservation of rights against prior parties or any other rights pertaining thereto, except that the 

Secured Party shall use reasonable care with respect to the Collateral in its possession or under 

its control. Upon request of the Grantor, the Secured Party shall account for any moneys 

received by it in respect of any foreclosure on or disposition of the Collateral. 

10. N o!ices. 

All notices and other communications provided for hereunder shall be in writing 

(including telcgraphic, telex, telecopy, or cable communication) and mailed via overnight mail, 

telegraphed, telexcd, tclccopicd, cabled or delivered by hand, if to the Grantor, addressed to it at 

12050 Ventura Boulevard, Suite B-105, Studio City, CA 91604 and if to tbe Secured Party, 

addressed to it at 600 Pennsylvania Avenue, NW, M-8102B, Washington, D.C. 20580 and also 

via email at Dcbl'icf({i),f(c.gov or, as to each party, at such other address as shall be designated by 

sucb party in a written notice to each other party complying as to deLivery with the terms of this 

Section. All such notices and other communications shall, when mailed, telegraphed, telexed, 

telecopied, cabled or delivered, be effective when deposited in the mail, delivered to the 

telegrapb company, confirmed by telex tmswerback, telecopied with confirmation or receipt, 

delivered to the cable company, or delivered by hand to the addressee or its agent, respectively. 

11. Amcndments, Etc. 

No amendment or waiver of any provision of this Security Agreement nor consent to any 

departure by the Grantor therefrom shall in any event be effective unless the same shall be in 

writing, approved and signed by the Secured Party, and then any such waiver or consent shall 

only be effective in the specific instance and for the specific purpose for which given. 

12. No Waiver; Rcmcdics. 

a. No failure on the Pill"t of the Secured Party to exercise, ancl no dclay in exercising 

any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of 

any right hereunder preclude any other or further exercise thereof or the exercise of any other 

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right. The remedies herein provided are cumulative, may be exercised singly or concurrently, 

and are not exclusive of any remedies provided by law or any of tlle other documcnts 

evidencing, securing or relating to the Civil Penalty Payments. 

b. Failure by the Secured Party at any time or times hereafter to require strict 

performance by the Grantor or any other Person of any of the provisions, warranties, terms or 

conditions contained in this Security Agreement now or at any time or times hereafter executed 

by the Grantor or any such other Person and delivered to any of the Secured Party shall not 

waive, affect or diminish any right of any of the Secured Party at any time or times hereafter to 

demand strict performance thereof, and such right shall not be deemed to have been modified or 

waived by any course of conduct or knowledge of any of the Secured Party, or any agent, officer 

or employee of any Secured Party. 

13. Successors and Assigns. 

This Security Agreement and all obligations of the Grantor hereunder shall be binding 

upon the successors and assigns of the Grantor, and shall, together with the rights and remedies 

of the Secured Paliy, inure to the benefit of the Secured Party hereunder and its successors and 

assigns. 

14. Governing Law. 

This Security Agreement shall be governed by, and be constmed and interpreted in 

accordance with, the internal laws (as opposed to conflict oflaw provisions) of (he state of 

California. Wherever possible, each provision of this Security Agreement shall be interpreted in 

sllch manner as to be effective and valid under applicable law, but if any provision of this 

Security Agreement shall be prohibited by or invalid under applicable law, sllch provision shall 

be ineffective only to the extent of such prohibition or invalidity and without invalidating the 

remaining provisions of this Security Agreement. 

15. Waiver of .Jury Trial. 

The Grantor waives any right it may have to trial by jury in any action or proceeding to 

enforce or defend any rights or remedies hereunder, under any of the other Civil Penally 

Payments documents or any other document relating to any of the foregoing. 

16. Further Indemnification. 

The Grantor agrees to pay, and to save the Secured Party harmless from, any and all 

liabilities with respect to, or resulting from any delay in paying, any and all excise, s~lles or other 

similar taxes which may be payable or determined to be payable with respect to any ofthe 

Collateral or in connection with any of the transactions contemplated by this Security 

Agreement. 

Page 11 of 13 
17. Section Titles. 

The Section titles contained in this Security Agreement are and shall be without 

substantive meaning or content of any kind whatsoever and are not a part ofthis Security 

Agl'eement. 

18. Termination of Secnrity Agreement Upon Completion of Payments. 

The duties and obligations of Universal under this Security Agreement shall terminate 

when the payments to be made under Section LA of the Consent Order are completed. This 

grant of a security interest by Universal is made solely to secure the prompt and timely 

performance by Universal of all its obligations to the Commission and upon the full performance 

of all the obligations of Universal, all right, title and interest ofthe Secured Party under or 

pursuant to this Security Agreement shall automatically terminate ruld be of no fhrther force or 

effect, and the Commission thereafter shall have no further right, title or interest in the Collateral 

described herein. Unless and until Universal has defaulted in tbe performance of its obligations 

to tbe Commission, Universal shall be entitled to retain possession of the Collateral ruld to use 

sucb Collateral in tbe ordinary course of business, subject to the Limitations set fortb berein. 

IN WITNESS WHEREOF, each ofthe parties hereto has caused this Security Agreement to be 

executed and delivered by its duly authorized officer 011 the date first set forth above. 

Universal ~pp it), s,1~'chel1s, and Baths, Inc. 

B J,i. y: . 

Title: lest :& 

Federal Tra 

By: 

Title: 

Page 12 of 13 
SCHEDULE I TO SECURITY AGREEMENT 

FILINGS 

JURISDICTION FILING OFFICE 

SCHEDULE II TO SECURITY AGREEMENT 

LOCATION OF RECOlu)S AND CERTAIN COLLATERAL 

Principal Place of Business and Location of Records 

Location of Inventory 

Page 13 ofl3 
Appendix 1
Appendix 1: Appliance Inventory Report

[Redacted From Public Version of Decision and Order, But Incorporated By Reference]
Statement ofInventory of Universal Appliance, Kitchens, and Bath, Inc. 

I swear and affirm that the attached list accurately reflects the inventory held by 

Universal Appliance, Kitchens and Baths, Inc. as of this date and that, in my opinion 

based on the information available to me at this time, the approximate value of this 

inventory is $ 4 lfSO} 000 

.rDated: January ,.) , 2011 ,----~ /2&, 

By: Igor Royz, Pr 

Universal Appli 

Baths, Inc.