EX-10.2 Second Amended and Restated Security Agree



 





Exhibit 10.2




SECOND AMENDED AND RESTATED SECURITY AGREEMENT




     THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”) dated as of
December 28, 2007, among APPLICA INCORPORATED, a Florida corporation (“Applica”), SALTON,
INC., a Delaware corporation (“Parent”), APN HOLDING COMPANY, INC., a Delaware corporation
and successor-by-merger to SFP Merger Sub, Inc. (“APN”), APPLICA CONSUMER PRODUCTS, INC., a Florida
corporation (“ACP”), APPLICA AMERICAS, INC., a Delaware corporation (“Applica
Americas”), HP DELAWARE, INC., a Delaware corporation (“HP Delaware”), HPG LLC, a
Delaware limited liability company (“HPG”), APPLICA MEXICO HOLDINGS, INC., a Delaware
corporation (“Applica Mexico”), SONEX INTERNATIONAL CORPORATION, a Delaware corporation
(“Sonex”), HOME CREATIONS DIRECT LTD., a Delaware corporation (“HCD”), SALTON
HOLDINGS, INC., a Delaware corporation (“SHI”), ICEBOX, LLC, an Illinois limited liability
company (“Icebox”), TOASTMASTER INC., a Missouri corporation (“Toastmaster”),
FAMILY PRODUCTS INC., a Delaware corporation (“Family Products”), ONE:ONE COFFEE LLC, a
Delaware limited liability company (“One Coffee”), and SALTON TOASTMASTER LOGISTICS LLC, a
Delaware limited liability company (“STL”; Applica, Parent, APN, ACP, Applica Americas, HP
Delaware, HPG, Applica Mexico, Sonex, HCD, SHI, Icebox, Toastmaster, Family Products, One Coffee
and STL being sometimes referred to herein individually as a “Borrower” and collectively as
“Borrowers”), the Guarantors identified below (individually a “Guarantor” and
collectively the “Guarantors”; the Guarantors together with the Borrowers, individually an
“Loan Party” and collectively the “Loan Parties”); and BANK OF AMERICA, N.A., in
its capacity as the administrative and collateral agent for each of the Lenders the Letter of
Credit Issuers and the providers of Bank Products (in each case, as defined in the Credit Agreement
(as defined below) (the Agent, the Lenders, the Letter of Credit Issuers, and the providers of Bank
Products being referred to individually as a “Secured Party” and collectively as the
“Secured Parties”) (in such capacity, together with its successors in such capacity, the
“Agent”).



WITNESSETH:




     WHEREAS, pursuant to that Credit Agreement dated as of December 28, 2001, among Applica,
certain Affiliates and Subsidiaries of Applica, the Agent, and certain other parties (including all
annexes, exhibits and schedules thereto, as from time to time amended, restated, modified or
supplemented prior to November 17, 2004, the “Original Credit Agreement”), certain of the
financial institutions party thereto as “Lenders” made the loans and issued or participated in
letters of credit to or for the benefit of Applica upon the terms set forth therein;



     WHEREAS, the Original Credit Agreement was amended and restated pursuant to the terms of an
Amended and Restated Credit Agreement dated November 17, 2004 (including all annexes, exhibits and
schedules thereto, as from time to time amended, restated, modified or supplemented prior to
December 23, 2005, the “First Amended Credit Agreement”), pursuant to which certain of the
financial institutions party thereto as “Lenders” made loans and issued or participated in letters
of credit to or for the benefit of Applica upon the terms set forth therein;



     WHEREAS, the First Amended Credit Agreement was amended and restated pursuant to the terms of
a Second Amended and Restated Credit Agreement dated as of December 23, 2005 (including all
annexes, exhibits and schedules thereto, as from time to time amended, restated, modified or
supplemented prior to the date hereof, the “Second Amended Credit Agreement”), pursuant to
which certain of the financial institutions party thereto as “Lenders” made loans and issued
or participated in letters of credit to or for the benefit of Applica upon the terms set forth
therein;



 









 





     WHEREAS, Loan Parties, the Agent, the Lenders party thereto and certain other parties have
agreed to amend and restate the Second Amended Credit Agreement pursuant to a certain Third Amended
and Restated Credit Agreement dated as of the date hereof (together with all annexes, exhibits and
schedules thereto, as from time to time amended, restated, modified or supplemented the “Credit
Agreement”) and pursuant to the terms thereof the Lenders have agreed to make loans and issue
or participate in letters of credit to or for the benefit of Borrowers upon the terms and
conditions set forth therein;



     WHEREAS, certain of the Loan Parties and Agent entered into a certain Security Agreement dated
as of December 28, 2001 (as at any time amended, restated, modified or supplemented prior to
December 23, 2005, the “Original Security Agreement”), pursuant to which, among other
things, each such Loan Party granted to Agent, for its benefit and the ratable benefit of the
financial institutions party to the Original Credit Agreement as “Lenders,” a security interest in
and Lien upon all or substantially all of the property of each such Loan Party as described
therein;



     WHEREAS, the Original Security Agreement was amended and restated pursuant to the terms of an
Amended and Restated Security Agreement dated as of December 23, 2005 (as at any time amended,
modified or supplemented prior to the date hereof, the “Amended Security Agreement”),
pursuant to which, among other things, each Loan Party thereto granted to Agent, for its benefit
and the ratable benefit of the financial institutions party to the Second Amended Credit Agreement
as “Lenders,” a security interest in and Lien the property of each such Loan Party described
therein;



     WHEREAS, in order to induce Agent and Lenders to extend credit to Borrowers (which inure to
the direct and indirect benefit of Guarantors) under the Credit Agreement, Loan Parties are willing
to amend and restate the Amended Security Agreement so that, as so amended and restated, it shall
read as hereinafter set forth;



     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:



     1. DEFINITIONS; RULES OF CONSTRUCTION.



          (a) As used herein, the following terms shall have the following meanings given to them (terms
defined in the singular to have the same meaning when used in the plural and vice versa):




          “Account” shall have the meaning given to the term “account” in the UCC and shall
include any right to payment for the sale or lease of Goods or rendition of services, whether or
not they have been earned by performance.




          “Cash Equivalents” shall mean investments in (i) marketable direct obligations issued
or unconditionally guaranteed by the government of the United States or Canada and backed by the
full faith and credit of such government; (ii) marketable obligations issued by any state of the
United States or any local government or other political subdivision thereof; (iii) domestic
certificates of deposit and time deposits, bankers’ acceptances and overnight bank deposits, in
each case issued by any commercial bank organized under the laws of the United States or Canada,
any state of the United
States or the District of Columbia or any province or territory of Canada; (iv) repurchase
obligations for underlying securities of the types described in clauses (i), (ii) and (iii); (v)
commercial paper; and (vi) shares of any money market fund.




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          “Chattel Paper” means all of a Loan Party’s now owned or hereafter acquired “chattel
paper,” as defined in the UCC, including Electronic Chattel Paper.




          “Collateral” has the meaning ascribed thereto in Section 2 below.




          “Commercial Tort Claim” shall have the meaning given to the term “commercial tort
claim” in the UCC.




          “Deposit Account” shall have the meaning given to the term “deposit account” in the
UCC.




          “Deposit Accounts Collateral” shall mean Deposit Accounts (and any associated
lockboxes) maintained by any Loan Party for the purpose of depositing proceeds of Collateral
pursuant to the Loan Documents or disbursing the proceeds of Loans made by Lenders pursuant to the
Loan Documents. For the avoidance of doubt, all Dominion Accounts shall constitute Deposit
Accounts Collateral.




          “Document” shall have the meaning given to the term “document” in the UCC and shall
include, for each Loan Party, all of such Loan Party’s bills-of-lading, warehouse receipts or other
documents of title.




          “Dominion Account” shall mean each Blocked Account and any other special deposit
account established and maintained by a Loan Party at Bank or one of Bank’s Affiliates or another
bank selected by such Loan Party, but acceptable to Agent in its sole discretion, and over which
Agent shall have a perfected security interest in and exclusive access and control for withdrawal
purposes to the extent provided in Section 7.32 of the Credit Agreement.




          “Electronic Chattel Paper” shall have the meaning given to the term “electronic
chattel paper” in the UCC.




          “Equipment” shall have the meaning given to “equipment” in the UCC and shall include,
for each Loan Party, all machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory) of such Loan Party, including embedded software, motor
vehicles with respect to which a certificate of title has been issued, aircraft, dies, tools, jigs,
molds and office equipment, as all of such types of property leased by such Loan Party and all of
such Loan Party’s rights and interests with respect thereto under such leases (including options to
purchase); together with all present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to be used in connection therewith,
and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties
and rights with respect thereto; wherever any of the foregoing is located.




          “General Intangible” shall have the meaning given to the term “general intangible” in
the UCC and shall include, for each Loan Party, all of choses in action (other than as against
Agent, Bank or any Lender in connection with the Loan Documents) and causes of action and all other
intangible personal property of such Loan Party of every kind and nature (other than Accounts),



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including all contract rights, payment intangibles, Proprietary Rights, corporate or other
business records, inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, tax refund claims, any funds which may become due
to such Loan Party in connection with the termination of any employee benefit plan or any rights
thereto and any other amounts payable to such Loan Party from any employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business interruption insurance
and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such Loan Party is beneficiary,
rights to receive dividends, distributions, cash, Instruments and other property in respect of or
in exchange for pledged equity interests or Investment Property and any letter of credit,
guarantee, claim, security interest or other security held by or granted to such Loan Party.




          “Goods” shall have the meaning given to the term “goods” in the UCC. The term “goods”
shall include Inventory.




          “Instrument” shall have the meaning given to the term “instrument” in the UCC.




          “Inventory” shall have the meaning given to the term “inventory” in the UCC and shall
include, for each Loan Party, all inventory, goods and merchandise, wherever located, to be
furnished under any contract of service or held for sale or lease, all returned, rejected or
repossessed goods, all raw materials, work-in-process, finished goods (including embedded
Software), labels, samples and other materials and supplies of any kind, nature or description
which are used or consumed in such Loan Party’s business or used in connection with the packing,
shipping, advertising, promoting, selling or finishing of such goods or merchandise, and all
documents of title or other Documents representing such goods.




          “Investment Property” shall have the meaning given to the term “investment property”
in the UCC and shall include, for each Loan Party, all (a) securities, whether certificated or
uncertificated, (b) securities entitlements, (c) securities accounts, (d) commodity contracts, and
(e) commodity accounts of such Loan Party.




          “Letter-of-Credit Right” shall have the meaning given to the term “letter-of-credit
right” in the UCC and shall include, for each Loan Party, rights to payment or performance under a
letter of credit, whether or not such Loan Party, as beneficiary, has demanded or is entitled to
demand payment or performance (other than any Letter of Credit issued for the account of such Loan
Party pursuant to the Credit Agreement).




          “Payment Account” means each bank account established pursuant to this Agreement, to
which the proceeds of Accounts and other Collateral are deposited or credited, and which is
maintained in the name of the Agent or as Loan Party, as the Agent may determine, on terms
acceptable to the Agent.




          “Payment Intangible” shall have the meaning given to the term “payment intangible” in
the UCC.




          “Proprietary Rights” means, for each Loan Party, such Loan Party’s now owned and
hereafter arising or acquired licenses, franchises, permits, patents, patent rights, copyrights,
works which are the subject matter of copyrights, trademarks, service marks, trade names, trade
styles, patent, trademark and service mark applications, and all licenses and rights



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related to any of the foregoing, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the
foregoing, and all rights to sue for past, present and future infringement of any of the foregoing;
provided, however, the foregoing definition shall not include any “intent-to-use”
based trademark applications until such time as an amendment to allege use or a statement of use
has been filed with the United States Patent and Trademark Office.




          “Receivable Records” shall mean all records and documents evidencing or relating to
any of the Receivables, including invoices, purchase orders, delivery receipts, waybills, payment
records, receivable agings and other like documents, whether or not in written or electronic format
or in any other medium.




          “Receivables” shall mean (i) all Accounts (and related Supporting Obligations) and
(ii) all other rights to payment arising from services rendered or from the sale, lease, use or
other disposition of Inventory or Documents, whether such rights to payment constitute Payment
Intangibles, Letter-of-Credit Rights, Supporting Obligations or any other classification of
property, or are evidenced in whole or in part by Instruments, Chattel Paper or Documents.




          “Software” shall have the meaning given to the term “software” in the UCC, including
all computer programs and all supporting information provided in connection with a transaction
related to any program.




          “Supporting Obligation” shall have the meaning given to the term “supporting
obligation” in the UCC.




          “UCC” means the Uniform Commercial Code (or any successor statute), as adopted and in
force in the State of New York or, when the laws of any other state govern the method or manner of
the perfection or enforcement of any security interest in any of the Collateral, the Uniform
Commercial Code (or any successor statute) of such state.




          “Uniform Commercial Code Jurisdiction” means any jurisdiction that has adopted
“Revised Article 9” of the UCC on or after July 1, 2001.




     All other capitalized terms used but not otherwise defined in this Agreement (including the
Recitals hereto) have the meanings given to them in the Credit Agreement or in Annex A thereto. All
other undefined terms contained in this Agreement, unless the context indicates otherwise, have the
meanings provided for by the UCC to the extent the same are used or defined therein.



          (b) As used herein, the terms, “herein,” “hereof;” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. All references to statutes
shall include all related rules and implementing regulations and any amendments of same and any
successors statutes, rules and regulations; to any agreement, instrument or other document
(including any of the Loan Documents) shall include any and all modifications and supplements
thereto and any and all restatement, extensions or renewals thereof; and to “including” and
“include” shall be understood to mean “including, without limitation” (and, for purposes of this
Agreement, the parties agreed that the rule of ejusdem generis shall not be applicable to limit a
general statement, which is followed by or referable to an enumeration of specific matters to
matters similar to the matters specifically mentioned).




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     2. GRANT OF SECURITY INTERESTS.



          (a) To secure the payment and performance of all Obligations (as defined in the Credit
Agreement), including all Revolving Loans, all LC Obligations, all indemnification obligations
under the Loan Documents and all liabilities and obligations of each Guarantor under its Guaranty,
each Loan Party hereby grants and re-grants to the Agent, for the benefit of the Secured Parties, a
continuing security interest in, Lien on, assignment of and right of set-off against, all of such
Loan Party’s right, title or interest in or to all of the following types and items of property of
such Loan Party, whether now owned or existing or hereafter created, acquired or arising and
wherever located:





     (i) all Receivables, and all contracts out of which any Receivable has arisen
and all rights under each such contract;




     (ii) all Goods, including, without limitation, all Equipment and Inventory;




     (iii) all Chattel Paper;




     (iv) all Documents, including, without limitation, all contracts, documents of
title and other Documents that evidence ownership of or right to receive or possess,
or that otherwise relate to, any Inventory, including, without limitation, relating
to the acquisition or sale or other disposition of Inventory;




     (v) all rights of an unpaid vendor with respect to Inventory;




     (vi) all tax refunds and claims for tax refunds;




     (vii) all Instruments;




     (vii) all Supporting Obligations;




     (ix) all General Intangibles (including, without limitation, Payment
Intangibles and Software and warranties of title);




     (x) all Letter-of-Credit Rights;




     (xi) all Investment Property;




     (xii) all money, cash, Cash Equivalents, securities and other property of any
kind of any Loan Party held directly or indirectly by Agent or any other Secured
Party;




     (xiii) all Deposit Accounts and Deposit Account Collateral, credits, and
balances with the Agent or any other Secured Party or any of their Affiliates or any
other financial institution with which any Loan Party maintains deposits, including
any Payment Accounts;




     (xiv) all books, records and other property related to or referring to any of
the foregoing, including books, records, account ledgers, data processing records,
computer software and other property and General Intangibles at any time evidencing
or relating to any of the foregoing;



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     (xv) the Commercial Tort Claims in which a Loan Party is a plaintiff and which
are described in Schedule IV attached hereto; and




     (xvi) all accessions to, substitutions for and replacements, products and
proceeds of any of the foregoing, including, but not limited to, proceeds of any
insurance policies, claims against third parties, and condemnation or requisition
payments with respect to all or any of the foregoing.



          All of the foregoing, together with, all equity interests in Subsidiaries to the extent
pledged to Agent and all other property of any Loan Party in which Agent or any other Secured Party
may at any time be granted a Lien as security for the Obligations, are herein collectively referred
to as the “Collateral”; provided, however, that the Collateral shall not include
any rights or interests of a Loan Party in any contract or license if under the terms of such
contract, or any applicable law with respect to such contract or license, the valid grant of a
security interest therein to Agent is prohibited and such prohibition has not been or is not waived
or the consent of the other party to such contract or license has not been or is not otherwise
obtained or under applicable law such prohibition cannot be waived; provided,
further, that the foregoing exclusion shall in no way be interpreted (i) to apply if any
such prohibition is ineffective or unenforceable under the UCC (including Sections 9-406, 9-407,
9-408 or 9-409) or any other applicable law or (ii) so as to limit, impair or otherwise affect
Agent’s unconditional continuing security interest in and Lien upon any rights or interests of such
Loan Party in or to monies due or to become due under any such contract (including any Accounts).




          (b) For the avoidance of doubt, the security interests granted by Loan Parties in favor of
Agent, for the benefit of the Secured Parties, pursuant to this Agreement shall be in addition to,
and not in lieu of, any other security interest or Lien granted by any Loan Party in favor of any
Secured Party pursuant to any of the other Loan Documents.




          (c) All of the Obligations shall be secured by all of the Collateral.




     3. PERFECTION AND PROTECTION OF SECURITY INTEREST.



          (a) Loan Parties shall, at their expense, perform all steps requested by the Agent at any time
to perfect, maintain, protect, and enforce the Agent’s Liens, including: (i) filing and recording
financing or continuation statements, and amendments thereof, in form and substance reasonably
satisfactory to the Agent; (ii) delivering to the Agent warehouse receipts covering any portion of
the Collateral located in warehouses and for which warehouse receipts are issued, unless the Agent
shall have obtained a Collateral Access Agreement or Imported Inventory Agreement in form and
substance reasonably acceptable to the Agent from any applicable warehouseman, and certificates of
title covering any portion of the Collateral for which certificates of title have been issued;
(iii) upon the occurrence of an Event of Default, and if so requested by the Agent, transferring
Inventory to warehouses or other locations designated by the Agent; (iv) placing notations on each
Loan Party’s books of account to disclose the validity, perfection and priority of Agent’s security
interest; and (v) taking such other steps as are deemed reasonably necessary by the Agent to
maintain and protect the Agent’s Liens.




          (b) Promptly after the Agent’s request therefor, Loan Parties shall deliver to Agent all
Collateral consisting of negotiable Documents, certificated securities (accompanied by stock powers
executed in blank), Chattel Paper and Instruments.




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          (c) Loan Parties shall, in accordance with the terms of the Credit Agreement, obtain or use
their commercially reasonable efforts to obtain waivers or subordinations of Liens from landlords
and mortgagees.




          (d) If required by the terms of the Credit Agreement and not waived by Agent in writing (which
waiver may be revoked), Loan Parties shall obtain authenticated control agreements from each issuer
of uncertificated securities, securities intermediary, commodities intermediary or other Person
issuing or holding any Cash Equivalents constituting Collateral to or for any Loan Party.




          (e) If a Loan Party is or becomes the beneficiary of a letter of credit (other than those
issued for the account of a Loan Party pursuant to the Credit Agreement), such Loan Party shall
promptly notify Agent thereof and enter into a tri-party agreement with Agent and the issuer and/or
confirmation bank with respect to Letter-of-Credit Rights that constitute Collateral, assigning
such Letter-of-Credit Rights to Agent and directing all payments thereunder to the Payment Account,
all in form and substance reasonably satisfactory to Agent.




          (f) Loan Parties shall take all steps necessary to grant the Agent control of all Electronic
Chattel Paper in accordance with the UCC and all “transferable records” (as defined in the Uniform
Electronic Transactions Act) in each case to the extent constituting Collateral.




          (g) Each Loan Party hereby irrevocably authorizes Agent at any time and from time to time
during the term of the Credit Agreement to file in any filing office in any Uniform Commercial Code
Jurisdiction any initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of such Loan Party or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b)
contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i) whether such Loan
Party is an organization, the type of organization and any organization identification number
issued to such Loan Party, and (ii) in the case of a financing statement filed as a fixture filing
or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description
of real property to which the Collateral relates. Loan Parties agree to furnish any such
information to Agent promptly upon written request. Each Loan Party also ratifies its authorization
for Agent to have filed in any Uniform Commercial Code Jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.




          (h) Each Loan Party shall promptly notify Agent of any Commercial Tort Claim constituting
Collateral acquired by it and, unless otherwise consented in writing by Agent, such Loan Party
shall enter into a supplement to this Agreement, granting to Agent a security interest in such
Commercial Tort Claim.




          (i) From time to time, Loan Parties shall, upon Agent’s written request, execute and deliver
confirmatory written instruments pledging to Agent, for the benefit of Agent and the other Secured
Parties, the Collateral, but Loan Parties’ failure to do so shall not affect or limit any security
interest or any other Liens or rights of Agent or any other Secured Party in and to the Collateral.
So long as the Credit Agreement is in effect and until all Obligations have been fully satisfied
and the Commitments have been terminated, Agent’s security interests and other Liens, for the
benefit of the Secured Parties, shall continue in full force and effect in all Collateral (whether
or not deemed eligible for the purpose of calculating the Availability or as the basis for any
advance, loan, extension of credit, or other financial accommodation).




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          (j) Except as otherwise expressly permitted under the Credit Agreement, Loan Party shall
reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction
in which it is incorporated or organized as of the date hereof or change its type of entity as
identified on Schedule II without executing all necessary documents, instruments, financing
statements, amendments thereto, assignments and/or other writings as Agent may reasonably request
to protect or enforce Agent’s and the other Secured Parties’ security interest in the Collateral.




          (k) Each Loan Party acknowledges that it is not authorized to file any amendment or
termination statement with respect to any UCC-1 financing statement filed pursuant to the Loan
Documents without the prior written consent of Agent and agrees that it will not do so without the
prior written consent of Agent, subject to the rights of Loan Parties under Section 9-509(d)(2) of
the UCC. All UCC-1 financing statements heretofore filed with respect any of the Collateral under
the Original Security Agreement and the Amended Security Agreement shall continue in full force and
effect.




          (1) No Loan Party shall enter into any contract that restricts or prohibits the grant to Agent
of a security interest in Accounts, Chattel Paper, Instruments or Payment Intangibles or the
proceeds of the foregoing.




     4. LOCATION OF COLLATERAL.



          Each Loan Party represents and warrants to Agent and the other Secured Parties that: (A)
Schedule I is a correct and complete list, for each Loan Party, of the location of the
chief executive office, books and records, and Collateral (other than In-Transit Inventory) of such
Loan Party, and the locations of all of the other places of business of such Loan Party; and (B)
Schedule I correctly identifies any of such facilities and locations that are not owned by
a Loan Party and sets forth the names of the owners and lessors or sublessors of such facilities
and locations. Each Loan Party agrees that it will not (i) maintain any Collateral (other than
In-Transit Inventory) at any location other than those locations listed for such Loan Party on
Schedule I, (ii) otherwise change or add to any of such locations, or (iii) change the
location of its chief executive office from the location identified in Schedule I, unless
it gives the Agent at least thirty (30) days prior written notice thereof and executes any and all
financing statements and other documents that the Agent reasonably requests in connection
therewith.




     5. JURISDICTION OF ORGANIZATION.



          As to each Loan Party, Schedule II hereto identifies such Loan Party’s name as of the
Closing Date as it appears in official filings in the state of its incorporation or other
organization, the type of entity of such Loan Party (including corporation, partnership, limited
partnership or limited liability company), organizational identification number issued by such
Loan Party’s state of incorporation or organization or a statement that no such number has been
issued and the jurisdiction in which such Loan Party is incorporated or organized.




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     6. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL.



          Each Loan Party represents and warrants to the Agent and the other Secured Parties that each
Loan Party has rights in and the power to transfer all of the Collateral free and clear of all
Liens whatsoever, except for Permitted Liens and agrees that the Agent’s Liens in the Collateral
will not be subject to any prior Lien except for those Liens identified in clauses (a), (c),
(d), (g), (i) or (j) of the definition of Permitted Liens (and, in the case of clause
(i), to the extent such Liens were filed prior to December 28, 2001 for those Liens identified
in Schedule A-1 to the Credit Agreement, and, in the case of clause (j), to the
extent the priority of such Liens is consistent with that provided for in the Additional Debt
Intercreditor Agreement, to the extent then in effect; and (c) each Loan Party will use, store, and
maintain the Collateral, for the benefit of the Secured Parties, with all reasonable care and will
use such Collateral for lawful purposes only.




     7. APPRAISALS.



          At such reasonable times as Agent may request in writing, the Loan Parties shall, at their
expense, provide Agent with appraisals of Inventory or updates thereof (which, upon receipt, Agent
will promptly deliver to the Lenders) from an appraiser, and prepared on a basis, reasonably
satisfactory to Agent, such appraisals and updates to include, without limitation, information
required by applicable law and regulation; provided, however, that so long as no
Event of Default exists, the Loan Parties shall be responsible for the expense of no more than
three (3) such appraisals of Inventory within the United States and Canada in any calendar year;
provided, further, that if the Borrowers shall have maintained Availability of more
than $10,000,000 for any period of at least thirty (30) consecutive days, for so long thereafter
that Borrowers maintain such level of Availability, the Loan Parties shall not be responsible for
the Agent’s costs of more than two (2) such appraisals of Inventory within the United States and
Canada during any calendar year; provided, further, that, at any time an Event of
Default exists, the Agent may do any of the foregoing at the expense of the Loan Parties at any
time during normal business hours and without advance notice.




     8. [RESERVED]



     9. COLLATERAL REPORTING.



          The Loan Parties shall provide Agent with the following documents at the following times in
form satisfactory to Agent: (a) on each Business Day, for the preceding Business Day, a schedule of
each Loan Party’s Accounts created, credits given, cash collected and other adjustments to such
Accounts since the last such schedule; (b) on a monthly basis, by the twentieth (20th)
day of the following month, or more frequently upon the reasonable request of the Agent in writing,
(i) an aging of such Accounts, together with a reconciliation to the corresponding Borrowing Base
and to each Loan Party’s general ledger; (ii) a detailed calculation of Eligible Accounts and
Eligible Inventory (including In-Transit Inventory); and (iii) Inventory reports by location,
together with a reconciliation to the corresponding Borrowing Base and to the applicable general
ledgers; (c) upon Agent’s written request and within a reasonable time after such request, copies
of invoices in connection with such Accounts, customer statements, credit memos, remittance advices
and reports, deposit slips, shipping and delivery documents in connection with such Accounts and
for Inventory and Equipment acquired by a Loan Party, purchase orders and invoices; (d) such other
reports as to the Collateral of the Borrowers or another Loan Party as the Agent shall reasonably
request from time to time; and (e) with the delivery of each of the foregoing, a certificate of the
Loan Parties executed by a Responsible Officer certifying as to the accuracy and completeness of
the foregoing. If any Loan Party’s records or reports of the Collateral are prepared by an
accounting service or other agent, such Loan Party hereby authorizes such service or
agent to deliver such records, reports, and related documents to the Agent, for distribution
to the Lenders.




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     10. ACCOUNTS.



          (a) Each Loan Party hereby represents and warrants to the Agent and the other Secured Parties,
with respect to such Loan Party’s Accounts, that: (i) each existing Account represents, and each
future Account will represent, a bona fide sale or lease and delivery of Inventory
by such Loan Party, or rendition of services by such Loan Party, in the ordinary course of such
Loan Party’s business; (ii) each existing Account is, and each future Account will be, for a
liquidated amount payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset, deduction, defense,
or counterclaim except those known to such Loan Party and disclosed to the Agent and the other
Secured Parties pursuant to this Agreement; (iii) no credit, discount, or extension, or agreement
will be granted on any Account, except for those immaterial credits, discounts or extensions
granted by such Loan Party in the ordinary course of business or consistent with past practices or
except as reported to Agent and the other Secured Parties in accordance with Section 9 of
this Agreement; (iv) each copy of an invoice delivered to Agent by a Loan Party will be a genuine
copy of the original invoice sent to the Account Debtor named therein; and (v) all Inventory
described in any invoice representing a sale of goods will have been delivered to the Account
Debtor and all services of the Loan Party described in each invoice will have been performed.




          (b) Loan Parties shall not re-date any invoice or sale, make sales on extended dating or
extend or modify any Account beyond that customary in such Loan Party’s business. If a Loan Party
becomes aware of any matter adversely affecting the collectibility of any Account with a balance in
excess of $250,000, Loan Parties shall immediately notify Agent in writing of such matter in
reasonable detail. All collections received in any lock-box or Payment Account or directly by a
Loan Party or Agent, and all funds in any Payment Account or other account to which such
collections are deposited, shall be subject to the Agent’s control pursuant to the terms of any
applicable Blocked Account Agreement. Agent or Agent’s designee may, at any time after the
occurrence of an Event of Default, notify any or all Account Debtors in writing that the Accounts
have been assigned to Agent and of Agent’s security interest therein, and may collect them directly
and charge the reasonable collection costs and expenses to the Loan Account as a Revolving Loan.
Upon the occurrence and during the continuance of an Event of Default, Loan Parties, at Agent’s
written request, shall execute and deliver to Agent such documents as Agent shall require to grant
Agent access to any post-office box in which collections of Accounts are received.




          (c) If sales of Inventory are made or services are rendered for cash, each Loan Party shall
immediately deliver to the Agent or deposit into a Payment Account the cash which such Loan Party
receives.




          (d) All payments received by the Agent in a Payment Account or at any other bank account
designated by Agent in writing, will be the Agent’s sole property for its benefit and the benefit
of the Secured Parties and will be credited to the Loan Account in accordance with Section 3.7(a)
of the Credit Agreement.




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     12. INVENTORY; PERPETUAL INVENTORY.



          Each Loan Party represents and warrants to the Agent and the other Secured Parties and agrees
with the Agent and the other Secured Parties that all of the Inventory owned by Loan Parties is
and will be held for sale or lease, or is and will be furnished in connection with the
rendition of services, in the ordinary course of a Loan Party’s business, and is and will be fit
for such purposes. Each Loan Party agrees that all Inventory produced by it in the United States of
America will be produced in accordance with the Federal Fair Labor Standards Act of 1938 and all
rules, regulations, and orders thereunder. Loan Parties will conduct a physical count of the
Inventory at least once per Fiscal Year, which may be included in any appraisal to be performed in
accordance with Section 7 hereof, and after and during the continuation of an Event of
Default, at such other times as Agent requests in writing. Each Loan Party will maintain a
perpetual inventory reporting system at all times. No Loan Party will, without Agent’s written
consent, sell any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis.




     13. EQUIPMENT.



          Loan Parties shall promptly inform Agent of any material additions to or deletions from the
Equipment. Loan Parties shall not permit any Equipment to become a fixture with respect to real
property or to become an accession with respect to other personal property with respect to which
real or personal property Agent does not have a Lien. Loan Parties will not, without Agent’s prior
written consent (which consent shall not be unreasonably withheld), alter or remove any identifying
symbol or number on any of a Loan Party’s Equipment constituting Collateral.




     14. DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER.



          Each Loan Party represents and warrants to Agent and the other Secured Parties that (a) all
material Documents, Instruments, and Chattel Paper describing, evidencing, or constituting
Collateral, and all signatures and endorsements thereon, are and will be complete, valid, and
genuine, and (b) all Goods evidenced by such Documents, Instruments, Letter-of-Credit Rights and
Chattel Paper are and will be owned by a Loan Party, free and clear of all Liens other than
Permitted Liens.




     15. VOTING OF INVESTMENT PROPERTY.



     (a) Until Agent shall have delivered a notice contemplated by clause (b) below, each Loan
Party shall be entitled to vote or consent with respect to the Investment Property owned by it in
any manner not inconsistent with the terms of any Loan Document, and Agent will, if so requested,
execute appropriate revocable proxies therefor.



     (b) Upon the occurrence and during the continuance of an Event of Default, if and to the
extent that Agent shall so notify in writing the Loan Party pledging the Investment Property in
question, only Agent shall be entitled to vote or consent or take any other action with respect to
such Investment Property (and such Loan Party will, if so requested, execute appropriate proxies
therefor).



     16. POWER OF ATTORNEY.



          Each Loan Party hereby appoints the Agent and the Agent’s designee as such Loan Party’s
attorney, with power: (a) to endorse such Loan Party’s name on any checks, notes, acceptances,
money orders, or other forms of payment or security that come into the Agent’s or any other Secured
Party’s possession; (b) to sign such Loan Party’s name on any invoice, bill of lading, warehouse
receipt or other negotiable or non-negotiable Document constituting Collateral, on drafts against



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customers, on assignments of Accounts, on notices of assignment, financing statements and
other public records and to file any such financing statements by electronic means with or without
a signature as authorized or required by applicable law or filing procedure; (c) so long as any
Event of Default has occurred and is continuing, to notify the post office authorities to change
the address for delivery of such Loan Party’s mail to an address designated by the Agent and to
receive, open and dispose of all mail addressed to Loan Parties; (d) to send requests for
verification of Accounts to customers or Account Debtors; (e) upon the occurrence and during the
continuance of an Event of Default, to complete in such Loan Party’s name or the Agent’s name, any
order, sale or transaction, obtain the necessary Documents in connection therewith, and collect the
proceeds thereof; (f) to clear Inventory through customs in such Loan Party’s name, the Agent’s
name or the name of the Agent’s designee, and to sign and deliver to customs officials powers of
attorney in such Loan Party’s name for such purpose; (g) to the extent that a Loan Party’s
authorization given in Section 3(g) of this Agreement is not sufficient, to file such
financing statements with respect to this Agreement, with or without such Loan Party’s signature,
or to file a photocopy of this Agreement in substitution for a financing statement, as the Agent
may deem appropriate and to execute in such Loan Party’s name such financing statements and
amendments thereto and continuation statements which may require such Loan Party’s signature; and
(h) to do all things necessary to carry out the Credit Agreement and this Agreement. Each Loan
Party ratifies and approves all actions of such attorney taken in accordance with the terms hereof
and the Credit Agreement. None of the Secured Parties or the Agent nor their attorneys will be
liable for any acts or omissions or for any error of judgment or mistake of fact or law except for
their gross negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable until the Credit Agreement and Commitments thereunder have been terminated and the
Obligations have been paid finally and in full.




     17. THE AGENT’S AND SECURED PARTIES’ RIGHTS, DUTIES AND LIABILITIES.



          (a) Loan Parties assume all responsibility and liability arising from or relating to the use,
sale, license or other disposition of the Collateral. The Obligations shall not be affected by any
failure of the Agent or any other Secured Party to take any steps to perfect the Agent’s Liens or
to collect or realize upon the Collateral, nor shall loss of or damage to the Collateral release
the Borrowers or any other Loan Party from any of the Obligations. Following the occurrence and
during the continuation of an Event of Default, the Agent may (but shall not be required to), and
at the direction of the Required Lenders shall, without notice to or consent from Loan Parties, sue
upon or otherwise collect, extend the time for payment of, modify or amend the terms of, compromise
or settle for cash, credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any insurance applicable
thereto, or any Person liable directly or indirectly in connection with any of the foregoing,
without discharging or otherwise affecting the liability of any Loan Party for the Obligations or
under any Loan Document or any other agreement now or hereafter existing between the Agent and/or
any other Secured Party and the Borrowers and any other Loan Party, provided,
however, that any amounts received pursuant to any actions taken pursuant to this
Section 17(a) shall be credited, net of costs of collection, to the Obligations in
accordance with the terms of the Credit Agreement.




          (b) It is expressly agreed by Loan Parties that, anything herein to the contrary
notwithstanding, each Loan Party shall remain liable under each of its contracts and each of its
licenses (to the extent such contracts and licenses remain in effect) to observe and perform all
the



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conditions and obligations to be observed and performed by it thereunder. Neither Agent nor any
other Secured Party shall have any obligation or liability under any contract or license by reason
of or arising out of this Agreement or the granting herein of a Lien thereon or the receipt by
Agent or any other Secured Party of any payment relating to any contract or license pursuant
hereto, except where Agent has expressly agreed in writing otherwise. Neither Agent nor any other
Secured Party shall be required or obligated in any manner to perform or fulfill any of the
obligations of any Loan Party under or pursuant to any contract or license, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any contract or license, or to present or file
any claims, or to take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any time or times.




          (c) Agent may at any time after an Event of Default has occurred and be continuing (or if any
rights of set-off (other than set-offs against an Account arising under the contract giving rise to
the same Account) or contra accounts may be asserted with respect to the following), without prior
notice to Loan Parties, notify Account Debtors, and other Persons obligated on the Collateral that
Agent has a security interest therein, and that payments shall be made directly to Agent, for
itself and the benefit of Secured Parties. Upon the request of Agent, each Loan Party shall so
notify their respective Account Debtors and other Persons obligated on Collateral. Once any such
notice has been given to any Account Debtor or other Person obligated on the Collateral, Loan
Parties shall not give any contrary instructions to such Account Debtor or other Person without
Agent’s prior written consent.




          (d) Agent may at any time, in Agent’s own name or in the name of a Loan Party, communicate
with Account Debtors, parties to contracts and Loan Parties in respect of Instruments to verify
with such Persons, to Agent’s satisfaction, the existence, amount and terms of Accounts, Payment
Intangibles, Instruments or Chattel Paper. If a Default or Event of Default shall have occurred and
be continuing, Loan Parties, at their own expense, shall cause the independent certified public
accountants then engaged by such Loan Parties to prepare and deliver to Agent and each Lender at
any time and from time to time, promptly upon Agent’s request, the following reports with respect
to each Loan Party: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii)
trial balances; and (iv) a test verification of such Accounts as Agent may request. Loan Parties,
at their own expense, shall deliver to Agent the results of each physical verification, if any,
which any Loan Party may in its discretion have made, or caused any other Person to have made on
its behalf, of all or any portion of its Inventory.




     18. PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.



          (a) Loan Parties do not have any interest in, or title to, any issued patent, registered
trademark or copyright except as set forth in Schedule III hereto. This Agreement is
effective to create a valid and continuing Lien on and, upon filing of notifications of Agent’s
Liens with the United States Patent and Trademark Office, perfected Liens in favor of Agent with
respect to each Loan Party’s issued patents and registered trademarks and such perfected Liens are
enforceable as such as against any and all creditors of and purchasers from Loan Parties. Upon
filing of notifications of Agent’s Liens with the United States Patent and Trademark Office and the
filing of appropriate financing statements, all actions necessary or desirable to protect and
perfect Agent’s Lien on the issued patents or registered trademarks of each Loan Party shall have
been duly taken.





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          (b) The applicable Loan Party shall notify Agent immediately if it knows or has reason to know
that any application or registration relating to any patent or trademark (now or
hereafter existing) may become abandoned or dedicated, or subject to any adverse determination
(including such determination in the United States Patent and Trademark Office or any court)
regarding a Loan Party’s ownership of any material patent, trademark or copyright, its right to
register the same, or to keep and maintain the same.




          (c) Within forty-five (45) days after the last day of each Fiscal Quarter of Loan Parties,
Loan Parties shall deliver to the Agent a schedule setting forth all material applications for the
registration of any patent, trademark or copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency and, upon request of
Agent, Loan Parties shall execute and deliver any and all patent and trademark security agreements
and all copyright security agreements as Agent may request to evidence Agent’s Lien on such
patents, trademarks or copyrights, and the General Intangibles of any Loan Party relating thereto
or represented thereby.




          (d) Loan Parties shall take all actions reasonably necessary to maintain and pursue each
application, to obtain the relevant registration and to maintain the registration of each of the
patents, trademarks and copyrights material to the conduct of a Loan Party’s business or operations
(now or hereafter existing), including the filing of applications for renewal, affidavits of use,
affidavits of noncontestability and opposition and interference and cancellation proceedings,
unless the Loan Parties shall determine that such patent, trademark or copyright is not material to
the conduct of a Loan Party’s business.




          (e) In the event that any of the patent, trademark or copyright Collateral material to the
conduct of a Loan Party’s business or operations is infringed upon, or misappropriated or diluted
by a third party, Loan Parties shall notify Agent promptly after any Loan Party learns thereof.
Each Loan Party shall, unless it shall reasonably determine that such patent, trademark or
copyright Collateral is not material to the conduct of such Loan Party’s business or operations,
promptly attempt to negotiate with such infringing party or sue for infringement, misappropriation
or dilution and to recover any and all damages for such infringement, misappropriation or dilution,
and, upon the occurrence and during the continuance of an Event of Default, shall take such other
actions as Agent shall deem appropriate under the circumstances to protect such patent, trademark
or copyright Collateral.




     19. INDEMNIFICATION.



          In any suit, proceeding or action brought by Agent or any other Secured Party relating to any
Collateral for any sum owing with respect thereto or to enforce any rights or claims with respect
thereto, Loan Parties, jointly and severally, will save, indemnify and keep Agent and the other
Secured Parties harmless from and against all expense (including reasonable attorneys’ fees and
expenses), loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the Account Debtor or other Person obligated on the
Collateral, arising out of a breach by a Loan Party of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to, or in favor of, such Loan
Party or its successors from a Loan Party, except in the case of Agent or any other Secured Party,
to the extent such expense, loss, or damage is attributable solely to the gross negligence or
willful misconduct of Agent or such other Secured Party as finally determined by a court of
competent jurisdiction. All such obligations of Loan Parties shall be and remain enforceable
against and only against Loan Parties and shall not be enforceable against Agent or any other
Secured Party.





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     20. [RESERVED].



     21. NOTICE REGARDING COLLATERAL.



          Loan Parties will advise Agent promptly, in reasonable detail, (i) of any Lien (other than
Permitted Liens) or material claim made or asserted against any of the Collateral, and (ii) of the
occurrence of any other event which would have a Material Adverse Effect.




     22. REMEDIES; RIGHTS UPON DEFAULT.



          (a) In addition to all other rights and remedies granted to it under this Agreement, the
Credit Agreement, the other Loan Documents and under any other instrument or agreement securing,
evidencing or relating to any of the Obligations, if any Event of Default shall have occurred and
be continuing, Agent may exercise all rights and remedies of a secured party under the UCC. Without
limiting the generality of the foregoing, Loan Parties expressly agree that in any such event
Agent, without demand of performance or other demand, advertisement or notice of any kind (except
the notice specified below of time and place of public or private sale) to or upon a Loan Party or
any other Person (all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the UCC and other applicable law), may forthwith enter
upon the premises of any Loan Party where any Collateral is located through self-help, without
judicial process, without first obtaining a final judgment or giving a Loan Party or any other
Person notice and opportunity for a hearing on Agent’s claim or action and may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may
forthwith sell, lease, license, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more
parcels at a public or private sale or sales, at any exchange at such prices as it may deem
acceptable, for cash or on credit or for future delivery without assumption of any credit risk.
Agent or any other 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 for the benefit of
Agent and the other Secured Parties, the whole or any part of said Collateral so sold, free of any
right or equity of redemption, which equity of redemption each Loan Party hereby releases. Such
sales may be adjourned and continued from time to time with or without notice. Agent shall have the
right to conduct such sales on the premises of any Loan Party or elsewhere and shall have the right
to use any Loan Party’s premises without charge for such time or times as Agent deems necessary or
advisable.




          (b) Upon the occurrence and during the continuance of an Event of Default, each Loan Party
further agrees, at Agent’s request, to assemble the Collateral and make it available to Agent at a
place or places designated by Agent which are reasonably convenient to Agent and Loan Parties,
whether at a Loan Party’s premises or elsewhere. Until Agent is able to effect a sale, lease, or
other disposition of Collateral, Agent shall have the right to hold or use Collateral, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its
value or for any other purpose deemed appropriate by Agent. Agent shall have no obligation to any
Loan Party to maintain or preserve the rights of a Loan Party as against third parties with respect
to Collateral while Collateral is in the possession of Agent. Upon the occurrence and during the
continuance of an Event of Default, Agent may, if it so elects, seek the appointment of one or more
receivers or other custodians to take possession of any or all of the Collateral and to enforce any
of Agent’s remedies (for the benefit of Agent and the other Secured Parties) with respect to any
such appointment without prior notice or hearing as to any such appointment. Upon the occurrence
and during the continuance of an Event of Default, Agent shall apply the net proceeds of any such


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collection, recovery, receipt, appropriation, realization or sale to the Obligations as
provided in the Credit Agreement, and only after so paying over such net proceeds, and after the
payment by Agent of any other amount required by any provision of law, need Agent account for the
surplus, if any, to Loan Parties. Upon the occurrence and during the continuance of an Event of
Default, to the maximum extent permitted by applicable law, each Loan Party waives all claims,
damages, and demands against Agent or any other Secured Party arising out of the repossession,
retention or sale of the Collateral except such as arise solely out of the gross negligence or
willful misconduct of Agent or such other Secured Party as finally determined by a court of
competent jurisdiction. Each Loan Party agrees that ten (10) days prior notice by Agent of the time
and place of any public sale or of the time after which a private sale may take place is reasonable
notification of such matters. Loan Parties shall remain jointly and severally liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all
Obligations, including reasonable attorneys’ fees or other expenses incurred by Agent or any other
Secured Party to collect such deficiency.




          (c) Except as otherwise specifically provided herein, each Loan Party hereby waives
presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of
any kind in connection with this Agreement or any Collateral.




          (d) The net cash proceeds resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied first to the expenses (including all attorneys’
fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting,
liquidating and the like, and then to the satisfaction of all Obligations in accordance with the
terms of the Credit Agreement. Each Loan Party shall be liable to Agent and the other Secured
Parties and shall pay to Agent and the other Secured Parties, on demand, any deficiency which may
remain after such sale, disposition, collection or liquidation of the Collateral. Agent shall remit
to such Loan Parties or other Person entitled thereto any surplus remaining after this Agreement
has been terminated in accordance with Section 27(f) hereof.




          (e) If an Event of Default under the Credit Agreement has occurred and is continuing: (i)
Agent shall have for the benefit of the Secured Parties, in addition to all other rights of Agent
and the other Secured Parties, the rights and remedies of a secured party under the Loan Documents
and the UCC; and (ii) Agent may sell and deliver any Collateral at public or private sales, for
cash, upon credit or otherwise, at such prices and upon such terms as Agent deems advisable, in its
sole discretion, and may, if Agent deems it reasonable, postpone or adjourn any sale of the
Collateral by an announcement at the time and place of sale or of such postponed or adjourned sale
without giving a new notice of sale. Without in any way requiring notice to be given in the
following manner, each Loan Party agrees that any notice by Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC or otherwise,
shall constitute reasonable notice to each Loan Party if such notice is mailed by registered or
certified mail, return receipt requested, postage prepaid, or is delivered personally against
receipt, at least ten (10) days prior to such action to Applica’s address specified in or pursuant
to Section 14.8 of the Credit Agreement. If any Collateral is sold on terms other than payment in
full at the time of sale, no credit shall be given against the Obligations until Agent or the other
Secured Parties receive payment, and if the buyer defaults in payment, Agent may resell the
Collateral without further notice to the Loan Parties. Agent is hereby granted a license or other
right to use, without charge, each Loan Party’s labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar property, in completing production
of, advertising or selling any Collateral,
and each Loan Party’s rights under all licenses and all franchise agreements shall inure to
Agent’s benefit for such purpose.




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     23. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY.



          For the purpose of enabling the Agent to exercise rights and remedies under Section 22
hereof (including, without limiting the terms of Section 22 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for sale, sell or
otherwise dispose of Collateral), solely for such purpose and solely during such time as Agent
shall be lawfully entitled to exercise such rights and remedies, each Loan Party hereby grants to
Agent, for the benefit of Agent and the other Secured Parties, a nonexclusive license (which shall
be irrevocable for so long as any Obligations remain outstanding and which shall be exercisable
without payment of royalty or other compensation to Loan Parties or any other Person) to use,
license or sublicense any intellectual property now owned or hereafter acquired by a Loan Party,
and wherever the same may be located, and including in such license access to all media in which
any of the licensed items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof.




     24. LIMITATION ON AGENT’S AND SECURED PARTIES’ DUTY IN RESPECT OF COLLATERAL.



          The Agent and each other Secured Party shall use reasonable care with respect to the
Collateral in its possession or under its control. Neither the Agent nor any other Secured Party
shall have any other duty as to any Collateral in its possession or control or in the possession or
control of any agent or nominee of the Agent or such other Secured Party, or any income thereon or
as to the preservation of rights against prior parties or any other rights pertaining thereto.




     25. AMENDMENT AND RESTATEMENT



          This Agreement amends and restates the Amended Security Agreement and is not intended to
create or result in a novation or accord and satisfaction. The terms of the Amended Security
Agreement, together with all rights, duties, remedies and covenants thereunder and the grant of
each security interest thereunder, shall continue in full force and effect in this Agreement, which
shall constitute the entire understanding of the parties hereto with respect to the subject matter
hereof. This Agreement is intended to confirm and continue in favor of Agent and the other Secured
Parties the security interests granted pursuant to the Amended Security Agreement in the
“Collateral” described therein, all of which security interests shall continue in full force and
effect pursuant to this Agreement, and this Agreement is not intended to grant a new security
interest in any Collateral with respect to which a security interest was previously granted by Loan
Parties pursuant to the Amended Security Agreement. If and to the extent that any types or items
of property included within the definition of “Collateral” as defined in this Agreement is broader
or more expansive than the description of “Collateral” as defined in the Amended Security Agreement
or the Collateral as described herein includes property in which a Loan Party had not previously
granted a security interest to Agent under the Original Security Agreement, then this Agreement
shall grant a new security interest in such additional types or items of property.




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     26. DELIVERY OF COLLATERAL; ADDITIONAL DEBT INTERCREDITOR AGREEMENT.



          Notwithstanding anything to the contrary set forth herein, to the extent that Agent’s security
interest in any tangible Collateral consisting of negotiable Documents, certificated securities,
Chattel Paper and Instruments granted hereunder is perfected in favor of, or for the benefit of,
Agent by the delivery of any such Collateral to another Person pursuant to Section 10 of the
Additional Debt Intercreditor Agreement, then for so long as such perfection is maintained
thereunder, and such Additional Debt Intercreditor Agreement remains in effect, no separate
delivery to Agent of such Collateral shall be required hereunder. In addition to the foregoing,
all terms, conditions and provisions of the Agreement shall be subject to the Additional Debt
Intercreditor Agreement, so long as the Additional Debt Intercreditor Agreement remains in effect,
and in the event that any of the terms or provisions of this Agreement conflict with the terms or
provisions of the Additional Debt Intercreditor Agreement, and at such time the Additional Debt
Intercreditor Agreement remains in effect, then the terms and provisions of the Additional Debt
Intercreditor Agreement shall control pursuant to Section 21 of the Additional Debt Intercreditor
Agreement.




     27. MISCELLANEOUS.



          (a) Reinstatement. This Agreement shall remain in full force and effect and continue
to be effective should any petition be filed by or against a Borrower or any other Loan Party for
liquidation or reorganization, should a Borrower or any other Loan Party become insolvent or make
an assignment for the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of any Loan Party’s assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had
not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.




          (b) Notices. Except as otherwise provided herein, whenever it is provided herein that
any notice, demand, request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by any other party, or whenever any of the parties
desires to give and serve upon any other party any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other communication shall be
in writing and shall be given in the manner, and deemed received, as provided for in the Credit
Agreement and in Section 22(e) hereof.




          (c) Severability. Whenever possible, each provision of this Agreement shall be
interpreted in a manner as to be effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement. This Agreement is to be read,
construed and applied together with the Credit Agreement and the other Loan Documents which, taken
together, set forth the complete understanding and agreement of the Agent, the other Secured
Parties and Loan Parties with respect to the matters referred to herein and therein.




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          (d) No Waiver; Cumulative Remedies. Neither the Agent nor any other Secured Party
shall by any act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by the Agent and then
only to the extent therein set forth. A waiver by the Agent of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the Agent would otherwise
have had on any future occasion. No failure to exercise nor any delay in exercising on the part of
the Agent or any other Secured Party, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law. None of the terms
or provisions of this Agreement may be waived, altered, modified or amended except by an instrument
in writing, duly executed by the Agent and Loan Parties.




          (e) Limitation by Law. All rights, remedies and powers provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate any applicable provision
of law, and all the provisions of this Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling in accordance with Section 27(c) above.




          (f) Termination of this Agreement. Subject to Section 27(a) hereof, this
Agreement shall terminate upon the termination of all Commitments, the satisfactory cash
collateralization of all Letters of Credit and the payment in full of all other Obligations (other
than contingent Obligations for indemnification as to which no claim has been asserted and to the
extent necessary to satisfy the requirements of the last sentence of Section 22(d) hereof).
Notwithstanding any termination of this Agreement, such termination shall not operate to terminate
any indemnification obligation of any Loan Party under this Agreement or any of the other Loan
Documents, all of which indemnification obligations shall survive any such termination.




          (g) Successors and Assigns. This Agreement shall be binding upon Loan Parties and
their respective successors and assigns and shall inure to the benefit of the Agent and the other
Secured Parties (including each Person who hereafter becomes a Lender under the Credit Agreement)
and their respective successors and assigns. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or any instrument evidencing the
Obligations or any portion thereof or interest therein shall in any manner affect the security
interests and Liens granted hereunder to the Agent, for the benefit of the Agent and the other
Secured Parties. No Loan Party may assign, sell, hypothecate or otherwise transfer any interest in
or obligation under this Agreement.




          (h) Counterparts. This Agreement may be authenticated in any number of separate
counterparts, including facsimile copies, each of which shall collectively and separately
constitute one and the same agreement. This Agreement may be authenticated by manual signature,
facsimile or, if approved in writing by Agent, electronic means, all of which shall be equally
valid.




          (i) Release. At the request and sole expense of any Loan Party following any
termination of this Agreement as set forth in Section 27(f) of this Agreement, the Secured
Parties shall deliver to such Loan Party any Collateral held by the Secured Parties hereunder and
execute and deliver to such Loan Party such documents as such Loan Party shall reasonably request
to evidence such termination.





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          If any of the Collateral shall be sold, transferred or otherwise disposed of by any Loan Party
to a Person other than a Loan Party in a transaction expressly permitted by the Credit Agreement,
the Secured Parties, at the request and sole expense of such Loan Party, shall execute and deliver
to such Loan Party all releases or other documents reasonably necessary or desirable for the
release of the Liens created hereby on such Collateral; provided, that Loan Parties shall have
delivered to the Secured Parties at least five (5) Business Days prior to the date of the proposed
release, a written request for release identifying the relevant Collateral and the terms of the
sale or other disposition in reasonable detail, including the price thereof and any expenses in
connection therewith, together with a certification by Loan Parties stating that such transaction
has satisfied the conditions of, and is otherwise in compliance with, the Credit Agreement and the
other Loan Documents.




          Upon the written request and at the sole expense of a Loan Party, Agent shall release such
Loan Party from its obligations hereunder in the event that all of the capital stock of such Loan
Party has been sold, transferred or otherwise disposed of to a person other than another Loan Party
pursuant to a transaction permitted by the Credit Agreement. Notwithstanding any such release of a
Loan Party from this Agreement, unless otherwise agreed to by Agent in writing, all of the
indemnification provisions of this Agreement and the other Loan Documents shall survive and
continue in full force and effect with respect to such Loan Party.




          (j) Governing Law; Forum; Service of Process. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. EACH LOAN PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
STATES OF NEW YORK, FLORIDA OR GEORGIA SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN LOAN PARTIES, AGENT AND THE OTHER SECURED PARTIES PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, PROVIDED, THAT AGENT, THE OTHER SECURED PARTIES AND LOAN PARTIES ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE STATES OF
NEW YORK, FLORIDA OR GEORGIA AND, PROVIDED, FURTHER, NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR ANY OTHER SECURED PARTY. EACH LOAN
PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH LOAN PARTY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. EACH LOAN PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE



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MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO LOAN
PARTIES AT THE ADDRESS FOR BORROWER AGENT SET FORTH IN THE CREDIT AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID. EACH LOAN PARTY HEREBY IRREVOCABLY DESIGNATES AND APPOINTS BORROWER
AGENT AS SUCH LOAN PARTY’S AGENT FOR SERVICE OF PROCESS IN ANY ACTION, SUIT OR OTHER PROCEEDING
INITIATED BY AGENT OR ANY OTHER SECURED PARTY AGAINST SUCH LOAN PARTY.




          (j) Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT
PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, AMONG AGENT, THE OTHER SECURED PARTIES, AND LOAN PARTIES ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.




          (k) Section Titles. The Section titles contained in this Agreement are and shall be
without substantive meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.




          (1) No Strict Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.




          (m) Advice of Counsel. Each of the parties represents to each other party hereto that
it has discussed this Agreement, and specifically, the provisions of Section 27(i) and
Section 27(j) hereof, with its counsel.




          (n) Benefit of Secured Parties. All Liens granted or contemplated hereby shall be for
the benefit of Agent, Lenders and the other Secured Parties, and all proceeds or payments realized
from Collateral in accordance herewith shall be applied to the Obligations in accordance with the
terms of the Credit Agreement.




[Signatures commence on following page]




-22-









 








     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and
delivered by its duly authorized officer as of the date first set forth above.



	 	 	 	 	 
	 	BORROWERS:





APPLICA INCORPORATED, a Florida corporation

 	 
	 	By:  	/s/
Terry Polistina 	 
	 	 	Name:  	Terry Polistina 	 
	 	 	Title:  	CEO and President 	 
	 
	 	SALTON, INC., a Delaware corporation

 	 
	 	By:  	/s/
Terry Polistina 	 
	 	 	Name:  	Terry Polistina 	 
	 	 	Title:  	CEO and President 	 
	 
	 	APPLICA CONSUMER PRODUCTS, INC., a

Florida corporation

 	 
	 	By:  	/s/
Terry Polistina 	 
	 	 	Name:  	Terry Polistina 	 
	 	 	Title:  	CEO and President 	 
	 
	 	APN HOLDING COMPANY, INC.,

a Delaware corporation (and successor-by-merger to

SFP Merger Sub, Inc.)

 	 
	 	By:  	/s/
Terry Polistina 	 
	 	 	Name:  	Terry Polistina 	 
	 	 	Title:  	CEO and President 	 
	 
	 	APPLICA AMERICAS, INC., a Delaware corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 



(Signatures continue on following page)





-23-









 






	 	 	 	 	 



	 	 	 	 	 
	 	HP DELAWARE, INC., a Delaware corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	HPG LLC, a Delaware limited liability company

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	SONEX INTERNATIONAL CORPORATION, a
 Delaware corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	HOME CREATIONS DIRECT LTD., a Delaware corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	SALTON HOLDINGS, INC., a Delaware corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 



(Signatures continue on following page)





-24-









 






	 	 	 	 	 
	 	 



ICEBOX, LLC, an Illinois limited liability company

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	TOASTMASTER INC., a Missouri corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	FAMILY PRODUCTS INC., a Delaware corporation

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	ONE:ONE COFFEE LLC, a Delaware limited liability

company

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	SALTON TOASTMASTER LOGISTICS
LLC, a Delaware limited liability company

 	 
	 	By:  	/s/
Lisa R. Carstarphen 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 



(Signatures continue on following page)




-25-









 






	 	 	 	 	 
	 	 

AGENT:





BANK OF AMERICA, N.A., as Agent

 	 
	 	By:  	/s/
Robert Walker 	 
	 	 	Name:  	Robert Walker 	 
	 	 	Title:  	SVP