EX-10.1 Third Amended and Restated Credit Agreemen



 





THIRD AMENDED AND RESTATED CREDIT AGREEMENT




Dated as of December 28, 2007




Among




THE FINANCIAL INSTITUTIONS NAMED HEREIN




as the Lenders




and




BANK OF AMERICA, N.A.




as the Administrative and Collateral Agent




BANC OF AMERICA SECURITIES LLC




as Sole Lead Arranger and the Sole Book Manager




and




SALTON, INC.,




APPLICA INCORPORATED,




APPLICA CONSUMER PRODUCTS, INC.,




APPLICA AMERICAS, INC.,




APN HOLDING COMPANY, INC. (SUCCESSOR-BY-MERGER




TO SFP MERGER SUB, INC.)




HP DELAWARE, INC.,




HPG LLC,




APPLICA MEXICO HOLDINGS, INC.,




SONEX INTERNATIONAL CORPORATION,




HOME CREATIONS DIRECT LTD.,




SALTON HOLDINGS INC.,




ICEBOX LLC,




TOASTMASTER INC.,




FAMILY PRODUCTS INC.,




ONE:ONE COFFEE LLC and




SALTON TOASTMASTER LOGISTICS LLC




as the Borrowers




and




APPLICA ASIA LIMITED and




APPLICA CANADA CORPORATION




as Guarantors






 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	ARTICLE 1 LOANS AND LETTERS OF CREDIT	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.1	 	 	Total Facility
	 	 	2	 
	 

	 	 	1.2	 	 	Revolving Loans
	 	 	2	 
	 

	 	 	1.3	 	 	Letters of Credit
	 	 	6	 
	 

	 	 	1.4	 	 	Bank Products
	 	 	9	 
	 

	 	 	1.5	 	 	Increase of Maximum Revolver Amount
	 	 	9	 
	 

	 	 	1.6	 	 	Multi-Borrower Provisions
	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 2 INTEREST AND FEES	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	2.1	 	 	Interest
	 	 	13	 
	 

	 	 	2.2	 	 	Continuation and Conversion Elections
	 	 	13	 
	 

	 	 	2.3	 	 	Maximum Interest Rate
	 	 	14	 
	 

	 	 	2.4	 	 	Closing and Other Fees
	 	 	15	 
	 

	 	 	2.5	 	 	Unused Line Fee
	 	 	15	 
	 

	 	 	2.6	 	 	Letter of Credit Fee
	 	 	15	 
	 

	 	 	2.7	 	 	Reserved
	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 3 PAYMENTS AND PREPAYMENTS	 	 	16	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	3.1	 	 	Revolving Loans
	 	 	16	 
	 

	 	 	3.2	 	 	Borrowers’ Termination of Facility
	 	 	16	 
	 

	 	 	3.3	 	 	Optional Commitment Reductions
	 	 	16	 
	 

	 	 	3.4	 	 	Payments from Distributions or Loans from Subsidiaries
	 	 	17	 
	 

	 	 	3.5	 	 	Payments from Asset Dispositions
	 	 	17	 
	 

	 	 	3.6	 	 	LIBOR Loan Prepayments
	 	 	17	 
	 

	 	 	3.7	 	 	Payments by the Loan Parties
	 	 	17	 
	 

	 	 	3.8	 	 	Payments as Revolving Loans
	 	 	17	 
	 

	 	 	3.9	 	 	Apportionment, Application and Reversal of Payments
	 	 	18	 
	 

	 	 	3.10	 	 	Indemnity for Returned Payments
	 	 	18	 
	 

	 	 	3.11	 	 	Agent’s and Lenders’ Books and Records; Monthly Statements
	 	 	19	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY	 	 	19	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	4.1	 	 	Taxes
	 	 	19	 
	 

	 	 	4.2	 	 	Illegality
	 	 	20	 
	 

	 	 	4.3	 	 	Increased Costs and Reduction of Return
	 	 	21	 
	 

	 	 	4.4	 	 	Funding Losses
	 	 	22	 
	 

	 	 	4.5	 	 	Inability to Determine Rates
	 	 	22	 
	 

	 	 	4.6	 	 	Certificates of Agent
	 	 	22	 
	 

	 	 	4.7	 	 	Obligation to Mitigate
	 	 	22	 
	 

	 	 	4.8	 	 	Survival
	 	 	23	 






 









 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES	 	 	23	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	5.1	 	 	Books and Records
	 	 	23	 
	 

	 	 	5.2	 	 	Financial Information
	 	 	24	 
	 

	 	 	5.3	 	 	Notices to the Lenders
	 	 	26	 
	 

	 	 	5.4	 	 	Revisions or Updates to Schedules
	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	6.1	 	 	Authorization, Validity, and Enforceability of this Agreement and the Loan Documents
	 	 	29	 
	 

	 	 	6.2	 	 	Validity and Priority of Security Interest
	 	 	29	 
	 

	 	 	6.3	 	 	Organization and Qualification
	 	 	29	 
	 

	 	 	6.4	 	 	Reserved
	 	 	29	 
	 

	 	 	6.5	 	 	Subsidiaries
	 	 	29	 
	 

	 	 	6.6	 	 	Financial Statements and Projections
	 	 	30	 
	 

	 	 	6.7	 	 	Reserved
	 	 	30	 
	 

	 	 	6.8	 	 	Solvency
	 	 	31	 
	 

	 	 	6.9	 	 	Debt
	 	 	31	 
	 

	 	 	6.10	 	 	Distributions
	 	 	31	 
	 

	 	 	6.11	 	 	Real Estate; Leases
	 	 	31	 
	 

	 	 	6.12	 	 	Proprietary Rights
	 	 	31	 
	 

	 	 	6.13	 	 	Trade Names
	 	 	31	 
	 

	 	 	6.14	 	 	Litigation
	 	 	31	 
	 

	 	 	6.15	 	 	Labor Disputes
	 	 	32	 
	 

	 	 	6.16	 	 	Environmental Laws
	 	 	32	 
	 

	 	 	6.17	 	 	No Violation of Law
	 	 	33	 
	 

	 	 	6.18	 	 	No Default
	 	 	33	 
	 

	 	 	6.19	 	 	Plan Compliance
	 	 	33	 
	 

	 	 	6.20	 	 	Taxes
	 	 	34	 
	 

	 	 	6.21	 	 	Regulated Entities
	 	 	34	 
	 

	 	 	6.22	 	 	Margin Regulations
	 	 	34	 
	 

	 	 	6.23	 	 	Copyrights, Patents, Trademarks and Licenses, etc.
	 	 	34	 
	 

	 	 	6.24	 	 	Material Agreements
	 	 	34	 
	 

	 	 	6.25	 	 	Bank Accounts
	 	 	34	 
	 

	 	 	6.26	 	 	Governmental Authorization
	 	 	34	 
	 

	 	 	6.27	 	 	Investment Property
	 	 	35	 
	 

	 	 	6.28	 	 	No Material Adverse Change
	 	 	35	 
	 

	 	 	6.29	 	 	Full Disclosure
	 	 	35	 
	 

	 	 	6.30	 	 	Common Enterprise
	 	 	35	 
	 

	 	 	6.31	 	 	Anti-Terrorism Laws
	 	 	35	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS	 	 	36	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	7.1	 	 	Taxes and Other Obligations
	 	 	36	 
	 

	 	 	7.2	 	 	Legal Existence and Good Standing
	 	 	37	 
	 

	 	 	7.3	 	 	Compliance with Law and Agreements; Maintenance of Licenses
	 	 	37	 
	 

	 	 	7.4	 	 	Maintenance of Property; Inspection of Property
	 	 	37	 
	 

	 	 	7.5	 	 	Insurance
	 	 	37	 
	 

	 	 	7.6	 	 	Insurance and Condemnation Proceeds
	 	 	38	 
	 

	 	 	7.7	 	 	Environmental Laws
	 	 	38	 
	 

	 	 	7.8	 	 	Compliance with ERISA
	 	 	39	 
	 

	 	 	7.9	 	 	Asset Dispositions, Mergers, Dissolutions
	 	 	39	 






 









 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 

	 	 	7.10	 	 	Distributions; Capital Change; Restricted Investments
	 	 	40	 
	 

	 	 	7.11	 	 	Acquisitions
	 	 	40	 
	 

	 	 	7.12	 	 	Third Party Guaranties
	 	 	41	 
	 

	 	 	7.13	 	 	Debt
	 	 	41	 
	 

	 	 	7.14	 	 	Payments; Prepayments
	 	 	41	 
	 

	 	 	7.15	 	 	Transactions with Affiliates
	 	 	41	 
	 

	 	 	7.16	 	 	Borrowing Base Certificates
	 	 	42	 
	 

	 	 	7.17	 	 	Reserved
	 	 	42	 
	 

	 	 	7.18	 	 	Loan Party Guaranties
	 	 	42	 
	 

	 	 	7.19	 	 	Reserved
	 	 	42	 
	 

	 	 	7.20	 	 	Investment Banking and Finder’s Fees
	 	 	42	 
	 

	 	 	7.21	 	 	Business Conducted
	 	 	42	 
	 

	 	 	7.22	 	 	Liens
	 	 	42	 
	 

	 	 	7.23	 	 	Reserved
	 	 	42	 
	 

	 	 	7.24	 	 	New Subsidiaries
	 	 	42	 
	 

	 	 	7.25	 	 	Fiscal Year
	 	 	43	 
	 

	 	 	7.26	 	 	Reserved
	 	 	43	 
	 

	 	 	7.27	 	 	Minimum Fixed Charge Coverage Ratio
	 	 	43	 
	 

	 	 	7.28	 	 	Use of Proceeds
	 	 	45	 
	 

	 	 	7.29	 	 	Reserved
	 	 	45	 
	 

	 	 	7.30	 	 	Anti-Terrorism Laws
	 	 	45	 
	 

	 	 	7.31	 	 	Intercompany Security Interest
	 	 	45	 
	 

	 	 	7.32	 	 	Blocked Accounts
	 	 	45	 
	 

	 	 	7.33	 	 	Additional Debt Documents
	 	 	46	 
	 

	 	 	7.34	 	 	Applica Asia Covenants
	 	 	46	 
	 

	 	 	7.35	 	 	Post-Closing Covenants
	 	 	48	 
	 

	 	 	7.36	 	 	Further Assurances
	 	 	48	 
	 

	 	 	7.37	 	 	Proceeds from Surplus Cash Deposits
	 	 	48	 
	 

	 	 	7.38	 	 	Excess Collections, Investments,
Etc.
	 	 	48	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 8 CONDITIONS OF LENDING	 	 	49	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	8.1	 	 	Conditions Precedent to Making of Initial Loans
	 	 	49	 
	 

	 	 	8.2	 	 	Conditions Precedent to Each Loan
	 	 	54	 
	 

	 	 	8.3	 	 	Limited Waiver of Conditions Precedent
	 	 	54	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 9 DEFAULT; REMEDIES	 	 	55	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	9.1	 	 	Events of Default
	 	 	55	 
	 

	 	 	9.2	 	 	Remedies
	 	 	57	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 10 TERM AND TERMINATION	 	 	58	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	10.1	 	 	Term
	 	 	58	 
	 

	 	 	10.2	 	 	Termination by Agent
	 	 	58	 
	 

	 	 	10.3	 	 	Effect of Termination
	 	 	58	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 11 AMENDMENTS; WAIVERs; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS	 	 	59	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	11.1	 	 	Amendments and Waivers
	 	 	59	 
	 

	 	 	11.2	 	 	Assignments; Participations
	 	 	60	 






 









 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 12 THE AGENT	 	 	62	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	12.1	 	 	Appointment and Authorization
	 	 	62	 
	 

	 	 	12.2	 	 	Delegation of Duties
	 	 	62	 
	 

	 	 	12.3	 	 	Liability of Agent
	 	 	63	 
	 

	 	 	12.4	 	 	Reliance by Agent
	 	 	63	 
	 

	 	 	12.5	 	 	Notice of Default
	 	 	63	 
	 

	 	 	12.6	 	 	Credit Decision
	 	 	63	 
	 

	 	 	12.7	 	 	Indemnification
	 	 	64	 
	 

	 	 	12.8	 	 	Agent in Individual Capacity
	 	 	64	 
	 

	 	 	12.9	 	 	Successor Agent
	 	 	65	 
	 

	 	 	12.10	 	 	Withholding Tax
	 	 	65	 
	 

	 	 	12.11	 	 	Collateral Matters
	 	 	66	 
	 

	 	 	12.12	 	 	Restrictions on Actions by Lenders; Sharing of Payments
	 	 	67	 
	 

	 	 	12.13	 	 	Agency for Perfection
	 	 	68	 
	 

	 	 	12.14	 	 	Payments by Agent to Lenders
	 	 	68	 
	 

	 	 	12.15	 	 	Settlement
	 	 	68	 
	 

	 	 	12.16	 	 	Letters of Credit; Intra-Lender Issues
	 	 	71	 
	 

	 	 	12.17	 	 	Concerning the Collateral and the Related Loan Documents
	 	 	73	 
	 

	 	 	12.18	 	 	Field Audit and Examination Reports; Disclaimer by Lenders
	 	 	73	 
	 

	 	 	12.19	 	 	Notice of Bank Products
	 	 	74	 
	 

	 	 	12.20	 	 	Relation Among Lenders
	 	 	74	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 13 JUDGMENT CURRENCY; SERVICE OF PROCESS	 	 	74	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	13.1	 	 	Judgment Currency
	 	 	74	 
	 

	 	 	13.2	 	 	Agent for Service of Process
	 	 	75	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 14 MISCELLANEOUS	 	 	75	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	14.1	 	 	No Waivers; Cumulative Remedies
	 	 	75	 
	 

	 	 	14.2	 	 	Severability
	 	 	75	 
	 

	 	 	14.3	 	 	Governing Law; Choice of Forum; Service of Process
	 	 	75	 
	 

	 	 	14.4	 	 	WAIVER OF JURY TRIAL
	 	 	76	 
	 

	 	 	14.5	 	 	Survival of Representations and Warranties
	 	 	77	 
	 

	 	 	14.6	 	 	Other Security and Guaranties
	 	 	77	 
	 

	 	 	14.7	 	 	Fees and Expenses
	 	 	77	 
	 

	 	 	14.8	 	 	Notices
	 	 	78	 
	 

	 	 	14.9	 	 	Waiver of Notices
	 	 	79	 
	 

	 	 	14.10	 	 	Binding Effect
	 	 	79	 
	 

	 	 	14.11	 	 	Indemnity of the Agent and the Lenders by the Borrowers
	 	 	79	 
	 

	 	 	14.12	 	 	Amendment and Restatement of Second Amended Credit Agreement; Release
	 	 	80	 
	 

	 	 	14.13	 	 	Final Agreement
	 	 	80	 
	 

	 	 	14.14	 	 	Counterparts
	 	 	81	 
	 

	 	 	14.15	 	 	Captions
	 	 	81	 
	 

	 	 	14.16	 	 	Right of Setoff
	 	 	81	 
	 

	 	 	14.17	 	 	Confidentiality
	 	 	81	 
	 

	 	 	14.18	 	 	Conflicts with Other Loan Documents
	 	 	82	 
	 

	 	 	14.19	 	 	Agency of the Borrowers for Each Other Loan Party
	 	 	83	 
	 

	 	 	14.20	 	 	Express Waivers By Loan Parties In Respect of Cross Guaranties and Cross Collateralization
	 	 	83	 
	 

	 	 	14.21	 	 	USA PATRIOT Act Notice
	 	 	84	 
	 

	 	 	14.22	 	 	Intercreditor Agreement
	 	 	84	 







 









 








ANNEXES, EXHIBITS AND SCHEDULES




	 	 	 	 	 
	ANNEX A

	 	-
	 	DEFINED TERMS
	ANNEX B

	 	-
	 	COMMITMENTS
	 
	EXHIBIT A

	 	-
	 	BORROWING BASE CERTIFICATE
	EXHIBIT B

	 	-
	 	NOTICE OF BORROWING
	EXHIBIT C

	 	-
	 	NOTICE OF CONTINUATION/CONVERSION
	EXHIBIT D

	 	-
	 	ASSIGNMENT AND ACCEPTANCE AGREEMENT
	EXHIBIT E

	 	-
	 	COLLATERAL ACCESS AGREEMENT
	EXHIBIT F

	 	-
	 	VENDOR LETTER






SCHEDULE 6.3 — ORGANIZATION AND QUALIFICATIONS

SCHEDULE 6.5 — SUBSIDIARIES AND AFFILIATES

SCHEDULE 6.9 — DEBT

SCHEDULE 6.11 — REAL ESTATE; LEASES

SCHEDULE 6.12 — PROPRIETARY RIGHTS

SCHEDULE 6.13 — TRADE NAMES

SCHEDULE 6.14 — LITIGATION

SCHEDULE 6.15 — LABOR DISPUTES

SCHEDULE 6.16 — ENVIRONMENTAL LAW

SCHEDULE 6.19 — PLAN COMPLIANCE

SCHEDULE 6.24 — MATERIAL AGREEMENTS

SCHEDULE 6.25 — BANK ACCOUNTS

SCHEDULE 6.27 —  CAPITALIZATION

SCHEDULE A-1 —  PERMITTED LIENS

SCHEDULE A-2 —  RESTRICTED INVESTMENTS





 









 








THIRD AMENDED AND RESTATED CREDIT AGREEMENT




     THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (the “Agreement”) is made as of December 28,
2007, by and among SALTON, INC., a Delaware corporation (“Parent”), APPLICA INCORPORATED, a Florida
corporation (“Applica”), APN HOLDING COMPANY, INC. (successor-by-merger to SFP Merger Sub, Inc.), a
Delaware corporation (“APN”), APPLICA CONSUMER PRODUCTS, INC., a Florida corporation (“ACP”),
APPLICA AMERICAS, INC., a Delaware corporation (“AAI”), HP DELAWARE, INC., a Delaware corporation
(“HP”), 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”;
Parent, Applica, APN, ACP, AAI, HP, 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”), and APPLICA ASIA LIMITED, a Hong Kong company (“Applica Asia”),
and APPLICA CANADA CORPORATION, a Nova Scotia company (“Applica Canada”); the financial
institutions listed on the signature pages hereof and their respective successors and permitted
assigns which become “Lenders” as provided herein; and BANK OF AMERICA, N.A., a national banking
association with an office at 300 Galleria Parkway, Suite 800, Atlanta, Georgia 30339, in its
capacity as administrative agent and collateral agent for the Lenders pursuant to Section 12 hereof
(together with its successors in such capacity, “Agent”). Capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings ascribed thereto in Annex A, which
is attached hereto and incorporated herein. The rules of construction contained in Annex A
shall govern the interpretation of this Agreement, and all Annexes, Exhibits and Schedules attached
hereto are incorporated herein by reference.



Recitals:




     Applica, certain other Loan Parties, Agent, certain financial institutions (“Original
Lenders”), and the other parties named therein were parties to a certain Credit Agreement dated
December 28, 2001 (as at any time amended, modified, supplemented or restated, the “Original Credit
Agreement”), pursuant to which Original Lenders made revolving credit loans, letters of credit, and
other financial accommodations to Applica and its Subsidiaries.



     The parties to the Original Credit Agreement amended and restated the Original Credit
Agreement pursuant to the terms of a certain Amended and Restated Credit Agreement dated November
17, 2004 (as amended, the “First Amended Credit Agreement”).



     The parties to the First Amended Credit Agreement amended and restated the First Amended
Credit Agreement pursuant to the terms of a certain Second Amended and Restated Credit Agreement
dated as of December 23, 2005 (as amended, the “Second Amended Credit Agreement”).



     Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special
Situations Fund, L.P. (collectively, “Equity Investors”) have formed APN, which owns all of the
equity interests of Applica. SFP Merger Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of Parent (“SFP”), will be merged with and into APN, with APN being the surviving
corporation of such merger. After
giving effect to such merger, all of the issued and outstanding shares of common stock of APN
will be owned by Parent. As used in this Agreement, the foregoing series of transactions shall be
referred to as the “Merger.”



 









 





     In connection with the Merger, Applica and the other Loan Parties have requested that Lenders
provide a credit facility to Borrowers to finance their mutual and collective business enterprise
and have requested that the Second Amended Credit Agreement be amended and restated in its entirety
to become effective and binding on the Loan Parties pursuant to the terms hereof, and the Agent and
the Lenders (including the Original Lenders that are parties hereto) have agreed, subject to the
terms of this Agreement, to amend and restate the Second Amended Credit Agreement in its entirety
to read as set forth herein, and it has been agreed by the parties hereto that (a) the commitments
which the Original Lenders that are parties hereto extended to Applica under the Original Credit
Agreement, First Amended Credit Agreement and Second Amended Credit Agreement and the commitments
of new Lenders that become parties hereto shall be extended or advanced upon the amended and
restated terms and conditions contained in this Agreement and (b) the Loans and other Obligations
outstanding under the Second Amended Credit Agreement shall be governed by and deemed to be
outstanding under the amended and restated terms and conditions contained herein.



     All existing Obligations are and shall continue to be (and all Obligations incurred pursuant
hereto shall be) secured by, among other things, the Security Agreement, the Applica Canada
Security Agreement and the other Loan Documents and shall be guaranteed pursuant to the Applica
Asia Guaranty and the Applica Canada Guaranty. In addition, all existing Obligations (and all
Obligations incurred pursuant hereto) shall be secured by, among other things, Liens on a portion
of the assets of certain Persons that, prior to the effective date of the Merger, constituted
Consolidated Salton Parties, and



     NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Second Amended Credit
Agreement, and the Second Amended Credit Agreement is hereby amended and restated, in its entirety
as follows:



ARTICLE 1

LOANS AND LETTERS OF CREDIT




     1.1 Total Facility.



          Subject to all of the terms and conditions of this Agreement, the Lenders agree to make
available a total credit facility of up to the Maximum Revolver Amount (the “Total Facility”) to
the Borrowers from time to time during the term of this Agreement. The Total Facility shall be
composed of a revolving line of credit consisting of Revolving Loans and Letters of Credit and
Credit Support as described in Section 1.2 and Section 1.3.




     1.2 Revolving Loans.



          (a) Amounts. Subject to the satisfaction of the conditions precedent set forth in
Article 8, each Lender severally, but not jointly, agrees, upon the Borrower Agent’s
request from time to time on any Business Day during the period from and including the Closing
Date to the Termination Date, to make revolving loans (the “Revolving Loans”) to the Borrowers in
amounts not to exceed such Lender’s Pro Rata Share of Availability, except for Non-Ratable Loans
and Agent Advances. Subject to the provisions of Section 1.2(i), the Lenders, in their
unanimous discretion, may elect to make Revolving Loans or issue or arrange to have issued Letters
of Credit or Credit Support even though the Aggregate Revolver Outstandings exceed or would exceed
the Borrowing Base (an “Out-of-Formula


-2-









 







Condition”) on one or more occasions, but if they do so, neither the Agent nor the Lenders
shall be deemed thereby to have changed the limits of the Borrowing Base or to be obligated to
exceed such limits on any other occasion. If any requested Borrowing would exceed Availability
(after giving effect to Pending Revolving Loans), the Lenders may refuse to make or may otherwise
restrict the making of Revolving Loans as the Lenders determine until such excess has been
eliminated, subject to the Agent’s authority, in its sole discretion, to require Lenders to make
Out-of-Formula Loans pursuant to Section 1.2(i) and to make Agent Advances pursuant to the
terms of Section 1.2(j). In the event that other than pursuant to Section 1.2(i)
Lenders are willing in their sole discretion to make Out-of-Formula Loans, such Loans shall be due
and payable as provided in Section 3.1 and shall bear interest as provided for Revolving
Loans generally in Section 2.1.




          (b) Procedure for Borrowing.





          (1) Each Borrowing shall be made upon the Borrower Agent’s delivery to Agent
of an irrevocable Notice of Borrowing, which must be received by the Agent prior to (i)
11:00 a.m. (Atlanta, Georgia time) two Business Days prior to the requested Funding Date, in
the case of LIBOR Loans and (ii) noon (Atlanta, Georgia time) on the requested Funding Date,
in the case of Base Rate Loans, specifying:




          (A) the amount of the Borrowing, which in the case of a LIBOR Loan must equal
or exceed $2,500,000 (and increments of $500,000 in excess of such amount);




          (B) the requested Funding Date, which must be a Business Day;




          (C) whether the Revolving Loan requested is to be a Base Rate Loan or a LIBOR
Revolving Loan (and if not specified, it shall be deemed a request for a Base Rate
Loan); and




          (D) the duration of the Interest Period for a LIBOR Revolving Loan (and if not
specified, it shall be deemed a request for an Interest Period of one month);



provided, however, that with respect to the Borrowing to be made on the
Closing Date, such Borrowing will consist of a Base Rate Loan only.




          (2) In lieu of delivering a Notice of Borrowing, (I) a Responsible Officer
may give Agent telephonic notice of such request for advances to a Designated Account on or
before the deadline set forth in clause (1) above and the Agent at all times shall be
entitled to rely on such telephonic notice in making such Revolving Loans, regardless of
whether any written confirmation is received, (II) whenever a presentment for payment is
made against a Designated Account in an amount greater than the then available balance
therein, such presentment shall be deemed to be a request for a Base Rate Loan on the date
of such presentment in an amount equal to the excess of such check or other payment item
over the available balance therein, or (III) the Borrower shall be deemed irrevocably to
have requested a Revolving Loan (without any requirement for submission of a Notice of
Borrowing) as and to the extent provided in Section 3.8.




          (3) The Borrowers shall have no right to request a LIBOR Loan while a Default
or Event of Default has occurred and is continuing.



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          (c) Reliance upon Authority. Prior to the Closing Date, the Borrowers shall deliver
to the Agent a notice setting forth an account (“Designated Account”) to which the Agent is
authorized by the Borrowers to transfer the proceeds of the Revolving Loans requested hereunder.
The Borrowers may designate a replacement Designated Account from time to time by written notice
to Agent. All such Designated Accounts must be reasonably satisfactory to the Agent. The Agent
is entitled to rely conclusively on any individual’s request for Revolving Loans on behalf of the
Borrowers, so long as the proceeds thereof are to be transferred to a Designated Account. The
Agent has no duty to verify the identity of any individual representing himself or herself as a
person authorized by the Borrowers to make such requests on their behalf.




          (d) No Liability. The Agent shall not incur any liability to the Loan Parties as a
result of acting upon any notice referred to in Sections 1.2(b) and (c), which the
Agent believes in good faith to have been given by an officer or other person duly authorized by
the Borrowers to request Revolving Loans on its behalf. The crediting of Revolving Loans to a
Designated Account or to such Persons as the Borrowers may direct shall conclusively establish the
obligation of the Borrowers to repay such Revolving Loans as provided herein.




          (e) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in lieu
thereof) made pursuant to Section 1.2(b) shall be irrevocable and the Borrowers shall be
bound to borrow the funds requested therein in accordance therewith.




          (f) Agent’s Election. Promptly after receipt of a Notice of Borrowing (or telephonic
notice in lieu thereof) or a deemed request for a Revolving Loan pursuant to Section 3.8,
the Agent shall elect to have the terms of Section 1.2(g) or the terms of Section
1.2(h) apply to such requested (or deemed request for a) Borrowing. If the Bank declines in
its sole discretion to make a Non-Ratable Loan pursuant to Section 1.2(h), the terms of
Section 1.2(g) shall apply to the requested Borrowing.




          (g) Making of Revolving Loans. If Agent elects to have the terms of this Section
1.2(g) apply to a requested (or deemed request for a) Borrowing, then promptly after receipt
of a Notice of Borrowing (or telephonic notice in lieu thereof) or the becoming due of any amount
required to be paid with respect to any of the Obligations as permitted in Section 3.8,
the Agent shall notify the Lenders by telecopy, telephone or e-mail of the requested (or deemed
request for a) Borrowing. Each Lender shall transfer its Pro Rata Share of the requested (or
deemed request for a) Borrowing to the Agent in immediately available funds, to the account from
time to time designated by Agent, not later than 2:00 p.m. (Atlanta, Georgia time) on the
applicable Funding Date. After the Agent’s receipt of all proceeds of such Revolving Loans, the
Agent shall make the proceeds of such Revolving Loans available to the Borrowers on the applicable
Funding Date by transferring same day funds to the Designated Account; provided,
however, that, except as may otherwise be provided by this Agreement, the amount of
Revolving Loans so made on any date shall not exceed the Availability on such date.




          (h) Making of Non-Ratable Loans. If Agent elects, with the consent of the Bank, to
have the terms of this Section 1.2(h) apply to a requested (or deemed request for a)
Borrowing, the Bank shall make a Revolving Loan in the amount of such Borrowing available to the
Borrowers on the applicable Funding Date by transferring same day funds to the Designated Account
(or, in the case of a deemed request for a Borrowing, by direct payment of the relevant
Obligation). Each Revolving Loan made solely by the Bank pursuant to this Section is herein
referred to as a “Non-Ratable Loan,” and such Revolving Loans are collectively referred to as
“Non-Ratable Loans.” Each Non-Ratable Loan shall be subject to all the terms and conditions
applicable to other Revolving Loans except that all payments thereon shall be payable to the Bank
solely for its own account. The aggregate amount of Non-Ratable Loans outstanding at any time
shall not exceed $20,000,000. Subject to the provisions of Section 1.2(i),


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the Agent shall not request the Bank to make any Non-Ratable Loan if the Agent has received
written notice from the Required Lenders that one or more of the applicable conditions precedent
set forth in Article 8 will not be satisfied on the requested Funding Date and instructing
Agent to withhold such Revolving Loan. The Non-Ratable Loans shall be secured by the Agent’s
Liens in and to the Collateral.




          (i) Out-of-Formula Loans. Unless its authority has been revoked in writing by the
Required Lenders, the Agent may require the Lenders to honor requests for Out-of-Formula Loans
and to forbear from requiring the Borrower to cure an Out-of-Formula Condition, (a) when no Event
of Default is known to the Agent, as long as (i) the Out-of-Formula Condition does not continue
for more than 30 consecutive days (and no Out-of-Formula Condition may exist for at least 5
consecutive days thereafter before further Out-of-Formula Loans are required), and (ii) the
Out-of-Formula Condition is not known by the Agent to exceed $10,000,000; and (b) regardless of
whether an Event of Default exists, if the Agent discovers an Out-of-Formula Condition not
previously known by it to exist, as long as from the date of such discovery the Out-of-Formula
Condition (i) is not increased by more than $5,000,000 at any time during a Seasonal Period or
$10,000,000 at any time other than during a Seasonal Period and (ii) does not continue for more
than 30 consecutive days. In no event shall Out-of-Formula Loans be required that would cause the
outstanding Revolver Loans and LC Obligations to exceed the Maximum Revolver Amount. Any funding
of an Out-of-Formula Loan or sufferance of an Out-of-Formula Condition shall not constitute a
waiver by the Agent or the Lenders of any Event of Default that may then exist. In no event shall
the Borrowers or other Loan Party be deemed a beneficiary of this Section nor authorized to
enforce any of its terms.




          (j) Agent Advances. Subject to the limitations set forth below, the Agent is
authorized by the Borrowers and the Lenders, from time to time in the Agent’s sole discretion, (A)
after the occurrence of a Default or an Event of Default, or (B) at any time that any of the other
conditions precedent set forth in Article 8 have not been satisfied, to make Base Rate
Loans to the Borrowers on behalf of the Lenders in an aggregate amount outstanding at any time not
to exceed $15,000,000 (but not to exceed in the aggregate, together with all of the Revolving
Loans outstanding, the Maximum Revolver Amount or, together with all of the Out-of-Formula Loans
pursuant to Section 1.2(i) outstanding, $20,000,000) for a period not to exceed thirty
(30) continuous days, which Agent, in its reasonable business judgment, deems necessary or
desirable (1) to preserve or protect the Collateral, or any portion thereof, (2) to enhance the
likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (3) to
pay any other amount chargeable to the Borrowers pursuant to the terms of this Agreement,
including costs, fees and expenses as described in Section 14.7 (any of such advances are
herein referred to as “Agent Advances”); provided that the Required Lenders may at any
time revoke the Agent’s authorization to make Agent Advances. Any such revocation must be in
writing and shall become effective prospectively upon the Agent’s receipt thereof. The Agent
Advances shall be secured by the Agent’s Liens in and to the Collateral and shall constitute Base
Rate Loans and Obligations hereunder.




          (k) Notices. Each Loan Party authorizes Agent and Lenders to extend, convert or
continue Loans, effect selections of interest rates, and transfer funds to or on behalf of the
Loan Parties based on telephonic or electronic (including e-mail and internet or intranet
websites) instructions. If requested to do so by Agent, the Loan Parties shall confirm each such
request by prompt delivery to Agent of a Notice of Borrowing or Notice of Continuation/Conversion,
if applicable, but if it differs in any material respect from the action taken by Agent or
Lenders, the records of Agent and Lenders shall govern. Neither Agent nor any Lender shall have
any liability for any loss suffered by a Loan Party as a result of Agent or any Lender acting upon
its understanding of telephonic or e-mailed instructions from a person believed in good faith by
Agent or any Lender to be a person authorized to give such instructions on a Loan Party’s behalf.




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     1.3 Letters of Credit.



          (a) Agreement to Issue or Cause To Issue. Subject to the terms and conditions of
this Agreement, the Agent agrees, upon the request from time to time of the Borrower Agent, in
accordance with Section 1.3(d), for the issuance of a Letter of Credit for the account of
the Borrowers or for the joint account of Borrowers and another Loan Party, (i) to cause the
Letter of Credit Issuer to issue for the account of the Borrowers (or the joint account of
Borrowers and another Loan Party) one or more commercial/documentary and/or standby letters of
credit (each a “Letter of Credit”) and/or (ii) to provide credit support or other enhancement to a
Letter of Credit Issuer acceptable to the Letter of Credit Issuer which issues a Letter of Credit
for the account of the Borrowers or for the joint account of Borrowers and another Loan Party (any
such credit support or enhancement being herein referred to as a “Credit Support”) from time to
time during the term of this Agreement.




          (b) Amounts; Outside Expiration Date. The Agent shall not have any obligation to
issue or cause to be issued any Letter of Credit or to provide Credit Support for any Letter of
Credit at any time if: (i) the maximum face amount of the requested Letter of Credit is greater
than the Unused Letter of Credit Subfacility at such time; (ii) the maximum undrawn amount of the
requested Letter of Credit and all commissions, fees, and charges due from the Borrowers in
connection with the opening thereof would exceed Availability at such time; or (iii) such Letter
of Credit has an expiration date less than fifteen (15) days prior to the Stated Termination Date
or more than twelve (12) months from the date of issuance for standby letters of credit or more
than six (6) months from the date of issuance for documentary letters of credit. With respect to
any Letter of Credit which contains any “evergreen” or automatic renewal provision, each Lender
shall be deemed to have consented to any such extension or renewal unless such Lender shall have
provided to the Agent written notice that it declines to consent to such extension or renewal at
least thirty (30) days prior to the date on which the Letter of Credit Issuer is entitled to
decline to extend or renew the Letter of Credit. If all of the requirements of this Section
1.3 are met and no Default or Event of Default has occurred and is continuing, no Lender shall
decline to consent to any such extension or renewal.




          (c) Other Conditions. In addition to conditions precedent contained in Article
8, the obligation of the Agent to issue or to cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit is subject to the following conditions precedent
having been satisfied in a manner reasonably satisfactory to the Agent:





     (1) the Borrower Agent shall have delivered to the Letter of Credit
Issuer, at such times and in such manner as such Letter of Credit Issuer may
prescribe, an application in form and substance satisfactory to such Letter of
Credit Issuer and reasonably satisfactory to the Agent for the issuance of the
Letter of Credit and such other documents as may be required pursuant to the terms
thereof, and the form, terms and purpose of the proposed Letter of Credit shall be
reasonably satisfactory to the Agent and the Letter of Credit Issuer; and




     (2) as of the date of issuance, no order of any court, arbitrator or
Governmental Authority shall purport by its terms to enjoin or restrain money center
banks generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit, and no law, rule or regulation applicable to money center
banks generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks generally
shall
prohibit, or request that the proposed Letter of Credit Issuer refrain from,
the issuance of letters of credit generally or the issuance of such Letters of
Credit.



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          (d) Issuance of Letters of Credit.





     (1) Request for Issuance. The Borrower Agent shall notify
Agent by telephonic facsimile or electronic notice of a requested Letter of Credit
at least three (3) Business Days prior to the proposed issuance date. Such notice
shall be irrevocable and must specify the original face amount of the Letter of
Credit requested, the Business Day of issuance of such requested Letter of Credit,
whether such Letter of Credit may be drawn in a single or in partial draws, the
Business Day on which the requested Letter of Credit is to expire, the purpose for
which such Letter of Credit is to be issued, and the beneficiary of the requested
Letter of Credit. The Borrower Agent shall attach to such notice the proposed form
of the Letter of Credit.




     (2) Responsibilities of the Agent; Issuance. As of the
Business Day immediately preceding the requested issuance date of the Letter of
Credit, the Agent shall determine the amount of the applicable Unused Letter of
Credit Subfacility and Availability. If (i) the face amount of the requested Letter
of Credit is less than the Unused Letter of Credit Subfacility and (ii) the amount
of such requested Letter of Credit and all commissions, fees, and charges due from
the Borrowers in connection with the opening thereof would not exceed Availability,
the Agent shall cause the Letter of Credit Issuer to issue the requested Letter of
Credit on the requested issuance date so long as the other conditions hereof are
met.




     (3) No Extensions or Amendment. Other than in accordance
with the last two sentences of Section 1.3(b) hereof, Agent shall not be
obligated to cause the Letter of Credit Issuer to extend or amend any Letter of
Credit issued pursuant hereto unless the requirements of this Section 1.3
are met as though a new Letter of Credit were being requested and issued.



          (e) Payments Pursuant to Letters of Credit. The Borrowers agree to reimburse
immediately the Letter of Credit Issuer for any draw under any Letter of Credit and the Agent for
the account of the Lenders upon any payment pursuant to any Credit Support and to pay the Letter
of Credit Issuer the amount of all other charges, fees and other LC Obligations payable to the
Letter of Credit Issuer in connection with any Letter of Credit immediately when due, irrespective
of any claim, setoff, defense or other right which the Borrowers may have at any time against the
Letter of Credit Issuer or any other Person. Each drawing under any Letter of Credit shall
constitute a request by the Borrowers for a Borrowing of a Base Rate Loan in the amount of such
drawing and any other LC Obligations then due and payable. The Funding Date with respect to such
Borrowing shall be the date of such drawing.




          (f) Indemnification; Exoneration; Power of Attorney.





     (1) Indemnification. In addition to amounts payable as
elsewhere provided in this Section 1.3, each Loan Party agrees to protect,
indemnify, pay and save the Lenders and the Agent harmless from and against any and
all claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys’ fees) which any Lender or the Agent (other than a
Lender in its capacity as Letter of Credit Issuer) may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit or the
provision of any Credit Support or enhancement in connection
therewith. The Loan Parties’ obligations under this Section shall survive
payment of all other Obligations.



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     (2) Assumption of Risk by the Borrowers. As among the
Borrowers, the Lenders, and Agent (excluding any Lender in its capacity as a Letter
of Credit Issuer), the Borrowers assume all risks of the acts and omissions of, or
misuse of any of the Letters of Credit by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing, the
Lenders and the Agent (excluding any Lender in its capacity as a Letter of Credit
Issuer) shall not be responsible for: (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any Person in
connection with the application for and issuance of and presentation of drafts with
respect to any of the Letters of Credit, even if it should prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity
or sufficiency of any instrument transferring or assigning or purporting to transfer
or assign any Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any Letter of Credit to comply duly
with conditions required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions, or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E)
errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under
any Letter of Credit or of the proceeds thereof; (G) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter
of Credit; (H) any consequences arising from causes beyond the control of the
Lenders or the Agent, including any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto Governmental
Authority or (I) the Letter of Credit Issuer’s honor of a draw for which the draw or
any certificate fails to comply in any respect with the terms of the Letter of
Credit. None of the foregoing shall affect, impair or prevent the vesting of any
rights or powers of the Agent or any Lender under this Section 1.3(f).




     (3) Exoneration. Without limiting the foregoing, no action
or omission whatsoever by Agent or any Lender (excluding any Lender in its capacity
as a Letter of Credit Issuer) shall result in any liability of Agent or and Lender
to any Loan Party, or relieve such Loan Party of any of its obligations hereunder to
any such Person.




     (4) Rights Against Letter of Credit Issuer. Nothing
contained in this Agreement is intended to limit the Borrowers’ rights, if any, with
respect to the Letter of Credit Issuer which arise as a result of the letter of
credit application and related documents executed by and between the Borrowers and
the Letter of Credit Issuer regardless of whether the Letter of Credit Issuer is a
Lender.




     (5) Account Party. The Borrowers hereby authorize and direct
any Letter of Credit Issuer to name any Loan Party as the “Account Party” therein
and to deliver to the Agent all instruments, documents and other writings and
property received by the Letter of Credit Issuer pursuant to the Letter of Credit,
and to accept and rely upon the Agent’s instructions and agreements with respect to
all matters arising in connection with the Letter of Credit or the application
therefor.



          (g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding the provisions
of Section 1.3(b) and Section 10.1, any Letter of Credit or Credit Support is
outstanding upon the termination of this Agreement, then upon such termination the Borrowers shall
Cash Collateralize each


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Letter of Credit or Credit Support then outstanding or deposit with the Agent, for the
ratable benefit of the Agent and the Lenders, with respect to each Letter of Credit or Credit
Support then outstanding, a standby letter of credit (a “Supporting Letter of Credit”) in form and
substance reasonably satisfactory to Agent, issued by an issuer satisfactory to the Agent in an
amount equal to 103% of the greatest amount for which such Letter of Credit or such Credit Support
may be drawn plus any fees and expenses associated with such Letter of Credit or such Credit
Support, under which Supporting Letter of Credit the Agent is entitled to draw amounts necessary
to reimburse the Agent and the Lenders for payments to be made by the Agent and the Lenders under
such Letter of Credit or Credit Support and any fees and expenses associated with such Letter of
Credit or Credit Support. Such Supporting Letter of Credit shall be held by the Agent, for the
ratable benefit of the Agent and the Lenders, as security for, and to provide for the payment of,
the aggregate undrawn amount of such Letters of Credit or such Credit Support remaining
outstanding.




     1.4 Bank Products.



          The Loan Parties may request and the Agent may, in its sole and absolute discretion, arrange
for any Consolidated Member to obtain from the Bank or its Affiliates or branches or any Lender or
its Affiliates or branches Bank Products although the Loan Parties are not required to do so except
as otherwise expressly required by any of the Loan Documents. If Bank Products are provided by the
Bank or an Affiliate or branch of the Bank or a Lender or an Affiliate or branch of such Lender,
the Loan Parties agree to indemnify and hold the Agent and the Lenders harmless from any and all
costs and obligations now or hereafter incurred by the Agent or any of the Lenders which arise from
any indemnity given by the Agent to its Affiliates or branches or the branches or Affiliates of
such Lender related to such Bank Products; provided, however, nothing contained herein is
intended to limit a Consolidated Member’s rights, with respect to the Bank, a Lender or their
respective branches or Affiliates, if any, which arise as a result of the execution of documents by
and between a Consolidated Member and the Bank or such Lender or their branches or Affiliates that
relate to Bank Products. The agreement contained in this Section shall survive termination of this
Agreement. Each Loan Party acknowledges and agrees that the obtaining of Bank Products from the
Bank or its Affiliates or branches or a Lender or its branches or Affiliates (a) is in the sole and
absolute discretion of the Bank, such Lender or their branches or Affiliates, and (b) is subject to
all rules and regulations of the Bank, such Lender or their branches or Affiliates.




     1.5 Increase of Maximum Revolver Amount.




          (a) Subject to the terms and conditions hereof, at any time and from time to time after the
Closing Date and up to the Stated Termination Date, provided that no Default or Event of Default
has occurred and is continuing or would result therefrom, the Borrowers may request one or more
increases in the Commitments and the Maximum Revolver Amount (each such commitment increase, a
“Commitment Increase”) by notifying the Agent (and the Agent shall notify each Lender) of the
amount of the proposed Commitment Increase. Notwithstanding anything in this Agreement, no
Commitment Increase shall require the approval of any Lender other than any Lender (if any)
providing all or part of the Commitment Increase. No Lender shall be required to provide all or
part of any Commitment Increase. No Commitment Increase shall be in an amount less than
$25,000,000, and the aggregate amount of all Commitment Increases shall not exceed $75,000,000.




          (b) Any Commitment Increase shall be offered by the Borrowers to the Lenders pro rata in
accordance with the Pro Rata Shares of the Lenders on the date that the Commitment Increase is
requested. The Lenders shall have 10 Business Days to respond to any request for a Commitment
Increase (by notice to the Borrowers and the Agent) and may elect to accept all, a portion or none
of their respective Pro Rata Shares of the proposed Commitment Increase. Any Lender which fails to
respond to


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a request for a Commitment Increase by the end of such 10 Business Day period will be deemed
to have declined the request for its Pro Rata Share of the requested Commitment Increase. If any
portion of a requested Commitment Increase is not provided by the Lenders, then the Borrowers may
offer any such portion to the Lenders who have accepted such Commitment Increase and/or request
that one or more Eligible Assignees provide such Commitment Increase. In any such case, each
Person providing a portion of the requested Commitment Increase shall execute and deliver to the
Agent and the Borrowers all such documentation as may be reasonably required by the Agent to
evidence such Commitment Increase.




          (c) If any requested Commitment Increase is agreed to in accordance with this Section 1.5, the
Agent and the Borrowers shall determine the effective date of such Commitment Increase (the
“Commitment Increase Effective Date”). The Agent, with the consent and approval of the Borrowers,
shall promptly confirm in writing to the Lenders the final allocation of such Commitment Increase
and the Commitment Increase Effective Date. On the Commitment Increase Effective Date: (i) Annex
B shall be amended to reflect the reallocated Commitments; (ii) each Person added as a new Lender
pursuant to a Commitment Increase (a “New Lender”) shall become a Lender hereunder and under the
other Loan Documents with a Commitment as set forth on amended Annex B; (iii) the Commitment of
each existing Lender that increases its Commitment pursuant to a Commitment Increase (an
“Increasing Lender”) shall be increased as reflected on such amended Annex B; (iv) the Borrowers
shall pay (which may be funded with Loans made under the Commitment Increase) the principal amount
of, and accrued and unpaid interest on, Revolving Loans of the Lenders other than the New Lenders
in an amount sufficient (as determined by the Agent) to permit the New Lenders and the Increasing
Lenders to fund Revolving Loans in an amount equal to the New Lenders’ and the Increasing Lenders’
respective Pro Rata Shares of the then outstanding Revolving Loans, and in connection with such
payment shall also pay funding losses, if any, on such repayment in accordance with Section 4.4;
(v) each New Lender shall fund Revolving Loans in an amount equal to its Pro Rata Share of the then
outstanding Revolving Loans; and (vi) each Increasing Lender shall fund Revolving Loans in an
amount necessary such that, after giving effect to such funding, it shall have funded its Pro Rata
Share of the entire amount of the then outstanding Revolving Loans. Any New Lender shall be
required to have a Commitment of not less than $10,000,000. The increase of the Maximum Revolver
Amount in accordance with this Section 1.5 shall not require any further consent under Section 11.1
hereof, and the Agent, the Borrowers and the Lenders may execute any amendments to give effect to
the terms of this Section 1.5 if deemed necessary by the Agent.




          (d) As conditions precedent to the effectiveness of any such Commitment Increase, (i) the
Borrowers shall deliver to the Agent a certificate signed by a Responsible Officer, dated as of the
Commitment Increase Effective Date, certifying that as of the Commitment Increase Effective Date no
Default or Event of Default has occurred and is continuing, and (ii) such Commitment Increase shall
have been successfully syndicated to the Lenders or Eligible Assignees, or both. Agent shall have
no liability to Borrowers or any other Obligor or to Lenders if Agent is unable to successfully
syndicate the Commitment Increase.




     1.6 Multi-Borrower Provisions.



          (a) Each Borrower hereby designates ACP (“Borrower Agent”) as its representative and
agent for all purposes under the Loan Documents, including requests for Loans and Letters of
Credit, designation of interest rates, delivery or receipt of communications, preparation and
delivery of Borrowing Base and financial reports, receipt and payment of Obligations, requests for
waivers, amendments or other accommodations, actions under the Loan Documents (including in respect
of compliance with covenants), and all other dealings with Agent, Bank or any Lender. Borrower
Agent hereby accepts such appointment. Agent and Lenders shall be entitled to rely upon, and shall
be fully


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protected in relying upon, any notice or communication (including any notice of borrowing)
delivered by Borrower Agent on behalf of any Borrower. Agent and Lenders may give any notice or
communication with a Borrower hereunder to Borrower Agent on behalf of such Borrower. Each of
Agent, Issuing Bank and Lenders shall have the right, in its discretion, to deal exclusively with
Borrower Agent for any or all purposes under the Loan Documents. Each Borrower agrees that any
notice, election, communication, representation, agreement or undertaking made on its behalf by
Borrower Agent shall be binding upon and enforceable against it.




          (b) Each Borrower agrees that it is jointly and severally liable for, and absolutely and
unconditionally guarantees to Agent and Lenders the prompt payment and performance of, all
Obligations and all agreements under the Loan Documents. Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and performance and not of
collection, that such obligations shall not be discharged until full payment of the Obligations,
and that such obligations are absolute and unconditional, irrespective of (a) the genuineness,
validity, regularity, enforceability, subordination or any future modification of, or change in,
any Obligations or Loan Document, or any other document, instrument or agreement to which any
Obligor is or may become a party or liable; (b) the absence of any action to enforce this Agreement
(including this Section) or any other Loan Document, or any waiver, consent or indulgence of any
kind by Agent or any Lender with respect thereto; (c) the existence, value or condition of, or
failure to perfect a Lien or to preserve rights against, any security or guaranty for the
Obligations or any action, or the absence of any action, by Agent or any Lender in respect thereof
(including the release of any security or guaranty); (d) the insolvency of any Loan Party; (e) any
election by Agent or any Lender in an insolvency proceeding for the application of Section
1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (g) the disallowance of
any claims of Agent or any Lender against any Loan Party for the repayment of any Obligations under
Section 502 of the Bankruptcy Code or otherwise; or (h) any other action or circumstances that
might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor,
except full payment of all Obligations.




          (c) Each Borrower expressly waives all rights that it may have now or in the future under any
statute, at common law, in equity or otherwise, to compel Agent or Lenders to marshal assets or to
proceed against any Loan Party, other Person or security for the payment or performance of any
Obligations before, or as a condition to, proceeding against such Borrower. It is agreed among
each Borrower, Agent and Lenders that the provisions of this Section 1.6 are of the essence
of the transaction contemplated by the Loan Documents and that, but for such provisions, Agent and
Lenders would decline to make Loans and issue Letters of Credit or Credit Supports.
Notwithstanding anything to the contrary in any Loan Document, and except as set forth in this
Section 1.6, each Borrower expressly waives all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off, as well as all defenses
available to a surety, guarantor or accommodation co-obligor. Each Borrower acknowledges that its
guaranty pursuant to this Section is necessary to the conduct and promotion of its business, and
can be expected to benefit such business.




          (d) Agent and Lenders may, in their discretion, pursue such rights and remedies as they deem
appropriate, including realization upon Collateral by judicial foreclosure or non-judicial sale or
enforcement, without affecting any rights and remedies under this Section 1.6. If, in
taking any action in connection with the exercise of any rights or remedies, Agent or any Lender
shall forfeit any other rights or remedies, including the right to enter a deficiency judgment
against any Borrower or other Person, whether because of any Applicable Laws pertaining to
“election of remedies” or otherwise, each Borrower consents to such action and waives any claim
based upon it, even if the action may result in loss of any rights of subrogation that any Borrower
might otherwise have had. Any election of remedies that results in denial or impairment of the
right of Agent or any Lender to seek a deficiency judgment against


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any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the
Obligations. Each Borrower waives all rights and defenses arising out of an election of remedies,
such as nonjudicial foreclosure with respect to any security for the Obligations, even though that
election of remedies destroys such Borrower’s rights of subrogation against any other Person.
Agent may bid all or a portion of the Obligations at any foreclosure or trustee’s sale or at any
private sale, and the amount of such bid need not be paid by Agent but shall be credited against
the Obligations. The amount of the successful bid at any such sale, whether Agent or any other
Person is the successful bidder, shall be conclusively deemed to be the fair market value of the
Collateral, and the difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section
1.6, notwithstanding that any present or future law or court decision may have the effect of
reducing the amount of any deficiency claim to which Agent or any Lender might otherwise be
entitled but for such bidding at any such sale.




          (e) Notwithstanding anything herein to the contrary, each Borrower’s liability under this
Section 1.6 shall be limited to the greater of (i) all amounts for which such Borrower is
primarily liable, as described below, and (ii) such Borrower’s Allocable Amount. The
“Allocable Amount” for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this Section 1.6 without rendering such payment voidable
under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or
conveyance act, or similar statute or common law.




          (f) If any Borrower makes a payment under this Section 1.6 of any Obligations (other
than amounts for which such Borrower is primarily liable) (a “Co-Borrower Payment”) that,
taking into account all other Co-Borrower Payments previously or concurrently made by any other
Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid
the aggregate Obligations satisfied by such Co-Borrower Payments in the same proportion that such
Borrower’s Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such
Borrower shall be entitled to receive contribution and indemnification payments from, and to be
reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their
respective Allocable Amounts in effect immediately prior to such Co-Borrower Payment.




          (g) Nothing contained in this Section 1.6 shall limit the liability of any Borrower to pay
Loans made directly or indirectly to that Borrower (including Loans advanced to any other Borrower
and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), LC
Obligations relating to Letters of Credit or Credit Supports issued to support such Borrower’s
business, and all accrued interest, fees, expenses and other related Obligations with respect
thereto, for which such Borrower shall be primarily liable for all purposes hereunder.




          (h) Each Borrower has requested that Agent and Lenders make this credit facility available to
Borrowers on a combined basis, in order to finance Borrowers’ business most efficiently and
economically. Borrowers’ business is a mutual and collective enterprise, and Borrowers believe
that consolidation of their credit facility will enhance the borrowing power of each Borrower and
ease the administration of their relationship with Lenders, all to the mutual advantage of
Borrowers. Borrowers acknowledge and agree that Agent’s and Lenders’ willingness to extend credit
to Borrowers and to administer the Collateral on a combined basis, as set forth herein, is done
solely as an accommodation to Borrowers and at Borrowers’ request.




          (i) Each Borrower hereby subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have at any time against any other Loan Party, howsoever
arising, to the full payment of all Obligations.




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ARTICLE 2

INTEREST AND FEES




     2.1 Interest.



          (a) Interest Rates. Revolving Loans shall bear interest on the unpaid principal
amount thereof (including, to the extent permitted by law, on interest thereon not paid when due)
from the date made until paid in full in cash at a rate determined by reference to the Base Rate
or the LIBOR Rate plus the Applicable Margin, but not to exceed the Maximum Rate. Any of
the Loans may be converted into, or continued as LIBOR Loans, subject to and in the manner
provided in Section 2.2. If at any time Loans are outstanding with respect to which the
Borrowers have not delivered to the Agent a notice specifying the basis for determining the
interest rate applicable thereto, those Loans shall bear interest at a rate determined by
reference to the Base Rate until notice to the contrary has been given to the Agent in accordance
with this Agreement and such notice has become effective. Except as otherwise provided herein,
the outstanding Obligations shall bear interest as follows:





     (i) For all Base Rate Loans, at a fluctuating per annum rate equal to
the Base Rate plus the Applicable Margin; and




     (ii) For all LIBOR Revolving Loans, at a per annum rate equal to the LIBOR Rate
plus the Applicable Margin.


Each change in the Base Rate shall be reflected in the interest rate applicable to Base Rate Loans
as of the effective date of such change. All interest charges shall be computed on the basis of a
year of 360 days and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). The Borrowers shall pay to the Agent, for the ratable
benefit of Lenders, interest accrued on all Base Rate Loans in arrears on the first day of each
month hereafter and on the Termination Date. The Borrowers shall pay to the Agent, for the ratable
benefit of Lenders, interest on all LIBOR Loans in arrears on each LIBOR Interest Payment Date.
For the purposes of the Interest Act (Canada), (i) whenever any interest or fee under this
Agreement or any other Loan Document is calculated using a rate based on a year of 360 days, the
rate determined pursuant to each calculation, when expressed as an annual rate, is equivalent to
(x) the applicable rate, (y) multiplied by the actual number of days in the calendar year in which
the period for which such interest is payable (or compounded) ends, and (z) divided by 360, (ii)
the principle of deemed reinvestment of interest does not apply to any interest calculation under
this Agreement or any other Loan Document, and (iii) the rates of interest stipulated in this
Agreement or any other Loan Document are intended to be nominal rates and not effective rates or
yields.




          (b) Default Rate. If an Event of Default occurs and is continuing and the Agent or
the Required Lenders in their discretion so elect, then, while any such Event of Default is
continuing, all of the Obligations shall bear interest at the Default Rate applicable thereto.




     2.2 Continuation and Conversion Elections.



          (a) The Borrowers may:





     (i) elect, as of any Business Day, in the case of Base Rate Loans to
convert any Base Rate Loans (or any part thereof in an amount not less than
$2,500,000, or that is in an integral multiple of $500,000 in excess thereof) into
LIBOR Loans; or



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     (ii) elect, as of the last day of the applicable Interest Period, to
continue any LIBOR Loans having Interest Periods expiring on such day (or any part
thereof in an amount not less than $2,500,000, or that is in an integral multiple of
$500,000 in excess thereof);


provided, that if at any time the aggregate amount of LIBOR Loans in respect of any
Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than
$1,000,000, such LIBOR Loans shall automatically convert into Base Rate Loans; provided
further that if the notice shall fail to specify the duration of the Interest Period, such
Interest Period shall be one month.




          (b) The Borrower Agent shall deliver an irrevocable Notice of Continuation/Conversion to the
Agent not later than 11:00 a.m. (Atlanta, Georgia time) at least two (2) Business Days in advance
of the Continuation/Conversion Date, if the Loans are to be converted into or continued as LIBOR
Loans and specifying:





     (i) the proposed Continuation/Conversion Date;




     (ii) the aggregate amount of Loans to be converted or renewed;




     (iii) the type of Loans resulting from the proposed conversion or
continuation; and




     (iv) the duration of the requested Interest Period, provided,
however, the Borrowers may not select an Interest Period that ends after the
Stated Termination Date.



          (c) If upon the expiration of any Interest Period applicable to LIBOR Loans, the Borrowers
have failed to select timely a new Interest Period to be applicable to LIBOR Loans or if any
Default or Event of Default then exists, the Borrowers shall be deemed to have elected to convert
such LIBOR Loans into Base Rate Loans effective as of the expiration date of such Interest Period.




          (d) The Agent will promptly notify each Lender of its receipt of a Notice of
Continuation/Conversion. All conversions and continuations shall be made ratably according to the
respective outstanding principal amounts of the Loans with respect to which the notice was given
held by each Lender.




          (e) There may not be more than ten (10) different LIBOR Loans in effect hereunder at any
time.




     2.3 Maximum Interest Rate.



          In no event shall any interest rate provided for hereunder exceed the maximum rate legally
chargeable by any Lender under applicable law for such Lender (including any laws of the United
States, Canada, Hong Kong or Puerto Rico or any state, division, territory or province thereof)
with respect to loans of the type provided for hereunder (the “Maximum Rate”). If, in any month,
any interest rate, absent such limitation, would have exceeded the Maximum Rate, then the interest
rate for that month shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate
until such time as the amount of interest paid hereunder equals the amount of interest which would
have been paid if the same had not been limited by the Maximum Rate. In the event that, upon
payment in full of the Obligations, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for this Section
2.3, have been paid or accrued if the interest rate otherwise set


-14-









 







forth in this Agreement had at all times been in effect, then the Borrowers shall, to the
extent permitted by applicable law, pay the Agent, for the account of the Lenders, an amount equal
to the excess of (a) the lesser of (i) the amount of interest which would have been charged if the
Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have
accrued had the interest rate otherwise set forth in this Agreement, at all times, been in effect
over (b) the amount of interest actually paid or accrued under this Agreement. If a court of
competent jurisdiction determines that the Agent and/or any Lender has received interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on account
of, and shall automatically be applied to reduce, the Obligations other than interest, in the
inverse order of maturity, and if there are no Obligations outstanding, the Agent and/or such
Lender shall refund to the Borrowers such excess. Without limiting the generality of this
Section 2.3 if any provision of any of the Loan Documents would obligate Applica Canada,
Applica Asia or any other Foreign Subsidiary to make any payment of interest with respect to any
Obligations in an amount calculated at a rate that would be prohibited by applicable law or would
result in the receipt of interest with respect to any Obligations at a criminal rate (as such terms
are construed under the Criminal Code (Canada) or other applicable law), then such provision shall
be deemed to be adjusted solely with respect to Applica Canada, Applica Asia or such other Foreign
Subsidiary with retroactive effect to the maximum amount or rate of interest, as the case may be,
as would not be prohibited by applicable law with respect to Applica Canada, Applica Asia or such
other Foreign Subsidiary or result in any Lender’s receipt of interest with respect to any sums
paid by Applica Canada at a criminal rate.




     2.4 Closing and Other Fees.



          In addition to the fees described in this Agreement, the Borrowers agree to pay the fees set
forth in the Fee Letter.




     2.5 Unused Line Fee.



          On the first day of each month and on the Termination Date the Borrowers agree to pay to the
Agent for the account of the Lenders an unused line fee (“Unused Line Fee”) at a percentage rate
per annum equal to 0.25% times the amount by which the Maximum Revolver Amount exceeded the Average
Credit Facility Outstandings for the immediately preceding month. The Unused Line Fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.




     2.6 Letter of Credit Fee.



          The Borrowers agree to pay to the Agent, for the account of the Lenders, in accordance with
their respective Pro Rata Shares, for each Letter of Credit, a fee (the “Letter of Credit Fee”)
equal to the Applicable Margin per annum in effect for LIBOR Revolving Loans on any applicable date
on the undrawn face amount of each Letter of Credit and to Agent for the benefit of the Letter of
Credit Issuer a fronting fee of 0.125% per annum of the undrawn face amount of each Letter of
Credit, and to the Letter of Credit Issuer, all out-of-pocket costs, fees and expenses incurred by
the Letter of Credit Issuer in connection with the application for, processing of, issuance of, or
amendment to any Letter of Credit. The Letter of Credit Fee shall be payable monthly in arrears on
the first day of each month following any month in which a Letter of Credit is outstanding and on
the Termination Date. The Letter of Credit Fee shall be computed on the basis of a 360-day year
for the actual number of days elapsed.




     2.7 Reserved.



-15-









 





ARTICLE 3

PAYMENTS AND PREPAYMENTS




     3.1 Revolving Loans.



          The Borrowers shall repay the outstanding principal balance of the Revolving Loans, plus all
accrued but unpaid interest thereon, on the Termination Date. The Borrowers may prepay Revolving
Loans at any time, and reborrow subject to the terms of this Agreement. The Revolving Loans shall
also be due and payable, and shall be paid, (a) on each date that any proceeds of Accounts or
Inventory are received by any Loan Party during a Springing Period (other than Applica Canada prior
to the date on which Applica Canada is required hereunder or by the Applica Canada Security
Agreement or otherwise following an Event of Default to remit proceeds of its Accounts or Inventory
to the Agent or Applica Asia (with respect to proceeds of the Applica Asia Serviced Accounts)) or
the Agent, in an amount equal to such proceeds, and (b) on demand by the Agent, in the amount by
which the Aggregate Revolver Outstandings exceeds the lesser of the Borrowing Base or the Maximum
Revolver Amount (such Revolving Loans being referred to as “Out-of-Formula Loans”). All payments
required to be made hereunder or under any of the other Loan Documents shall be made in Dollars.




     3.2 Borrowers’ Termination of Facility.



          The Borrowers may terminate this Agreement (and the Commitments hereunder) upon at least three
(3) Business Days notice to the Agent and the Lenders, subject to the Borrowers’ causing the
following to occur on or before the effective date of such termination: (a) the payment in full of
all outstanding Revolving Loans, together with accrued interest thereon, and the cancellation and
return of all outstanding Letters of Credit and Credit Support or Cash Collateralization thereof or
provision of a Supporting Letter of Credit as provided in Section 1.3(g), (b) the payment
in full in cash of all reimbursable expenses and other Obligations, and (c) with respect to any
LIBOR Loans prepaid, payment of the amounts due under Section 4.4, if any. In addition,
on the effective date of termination of this Agreement (and the Commitments hereunder), the Bank
and any Lender may terminate its and its Affiliates’ and branches’ Bank Products (including, only
with the consent of Agent, any Cash Management Services). Any notice of termination provided by
the Borrowers shall be revocable by the Borrowers if the Borrowers deliver a notice of revocation
to the Agent and the Lenders prior to the effective date of such termination.




3.3 Optional Commitment Reductions.




          The Borrowers shall, by notice from a Responsible Officer, have the right from time to time
but not more frequently than once each calendar month, upon not less than three (3) Business Days
written notice to Agent, effective upon the second Business Day after receipt, to permanently
reduce the total Commitments but not below $125,000,000. Agent shall give each Lender, within one
(1) Business Day of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed
in writing), of such reduction. Each such reduction shall be in the aggregate amount of $25,000,000
or such greater amount which is an integral multiple of $1,000,000, or the remaining total
Commitments, and shall permanently reduce the total Commitments. Each reduction of the total
Commitments shall be accompanied by, and the effectiveness thereof conditioned upon, payment of the
Revolving Loans to the extent that the principal amount of Revolving Loans, including Non-Ratable
Loans, plus Letters of Credit exceeds the lesser of (i) the total Commitments or (ii) the
Borrowing Base, after giving effect to such reduction, together with accrued and unpaid interest on
the amounts prepaid. No such reduction shall result in the payment of any LIBOR Loans other than
on the last day of the Interest Period of such LIBOR Loan unless such prepayment is accompanied by
amounts due, if any, under Section 4.4 hereof.




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     3.4 Payments from Distributions or Loans from Subsidiaries.



          During a Springing Period, all proceeds or other cash payments received by the Borrowers
constituting proceeds of a Distribution, loan or other advance to the Borrowers from Subsidiaries
shall be paid to the Agent, promptly upon the receipt thereof by the Borrowers, for application to
the Revolving Loans.




     3.5 Payments from Asset Dispositions.



          Until Agent ceases to have a first priority Lien in all of the Collateral pursuant to the
Additional Debt Intercreditor Agreement, all Net Proceeds of any Asset Disposition with respect to
any Collateral by a Loan Party received by a Loan Party (other than Applica Canada, in which event
the Loan Parties shall transfer an amount equal to such Net Proceeds to Agent for application to
the Obligations to the extent required hereunder and after the date on which Applica Canada is
required hereunder or by the Applica Canada Security Agreement or otherwise following the
occurrence and during the continuance of an Event of Default, Applica Canada shall remit proceeds
of its Collateral to the Agent) shall be paid to the Agent, promptly upon the receipt thereof by
such Loan Party, for application to the Revolving Loans (with a reserve against Availability to be
established as and to the extent provided in clause (i) of the definition of Reserves in Annex
A hereto). No provision contained in this Section 3.5 shall constitute a consent to
any Asset Disposition that is not otherwise permitted by the express terms of this Agreement.




     3.6 LIBOR Loan Prepayments.



          Except as otherwise expressly provided in this Agreement, in connection with any prepayment,
if any LIBOR Loans are prepaid prior to the expiration date of the Interest Period applicable
thereto, the Borrowers shall pay to the Agent on behalf of Lenders the amounts described in
Section 4.4.




     3.7 Payments by the Loan Parties.



          (a) All payments to be made by the Loan Parties shall be made without set-off, recoupment or
counterclaim. Except as otherwise expressly provided herein, all payments by the Loan Parties
shall be made to the Agent for the account of the Lenders at the Payment Account or such other
account designated by the Agent in writing and shall be made in Dollars and in immediately
available funds, no later than 12:00 noon (Atlanta, Georgia time) on the date such payment is due
and shall be deemed to have been received (subject to final collection) on the Business Day that
Agent receives such items in immediately available funds for purposes of (i) determining
Availability, (ii) calculating the Unused Line Fee pursuant to Section 2.5 of this
Agreement, and (iii) calculating the amount of interest accrued thereon. Any payment received by
Agent after 12:00 noon (Atlanta, Georgia time) shall be deemed to have been received on the next
Business Day thereafter and any applicable interest and other charges shall continue to accrue for
such period.




          (b) Subject to the provisions set forth in the definition of “Interest Period,” whenever any
payment is due on a day other than a Business Day, such payment shall be due on the following
Business Day, and such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.




     3.8 Payments as Revolving Loans.



          At the election of Agent, all payments of principal, interest, reimbursement obligations in
connection with Letters of Credit and Credit Support for Letters of Credit, fees, premiums,
reimbursable expenses and other sums due and payable to the Agent or any Lender hereunder or under
any of the other


-17-









 







Loan Documents or to the Bank or any Affiliate of the Bank for Bank Products, may be paid from
the proceeds of Revolving Loans made hereunder and the becoming due of any such amounts shall be
deemed irrevocably to be a request by the Borrowers for a Revolving Loan (without any requirement
for the submission of a Notice of Borrowing) on the due date of, and in an aggregate amount
required to pay, any such amount and the proceeds of any such Revolving Loan may be disbursed by
way of direct payment of the relevant obligation.




     3.9 Apportionment, Application and Reversal of Payments.



          Principal and interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Loans to which such payments relate held by each Lender) and
payment of the fees shall, as applicable, be apportioned ratably among the Lenders, except for fees
payable solely to Agent and the Letter of Credit Issuer. All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific Loans, or not
constituting payment of specific fees, and all proceeds of Accounts or other Collateral received by
the Agent, shall be applied, ratably, subject to the provisions of this Agreement, first,
to pay any fees (including those payable under the Fee Letter), indemnities or expense
reimbursements then due to the Agent from the Borrowers; second, to pay any fees,
indemnities or expense reimbursements then due to the Lenders from the Borrowers; third, to
pay interest due in respect of all Loans, including Non-Ratable Loans and Agent Advances;
fourth, to pay or prepay principal of the Non-Ratable Loans and Agent Advances;
fifth, to pay or prepay principal of the Revolving Loans (other than Non-Ratable Loans, and
Agent Advances) and unpaid reimbursement obligations in respect of Letters of Credit;
sixth, to pay an amount to Agent equal to all outstanding LC Obligations to be held as cash
collateral for such Obligations; seventh, to the payment of any amounts relating to Bank
Products due to the Bank or its branches or Affiliates or any Lender or its branches or Affiliates
of which Agent shall have received timely notice pursuant to Section 12.19; and
eighth, to the payment of any other Obligations, including any Obligations related to Bank
Products owing to the Bank or its branches or Affiliates or a Lender or its branches or Affiliates
of which Agent has not received timely notice pursuant to Section 12.19. Notwithstanding
anything to the contrary contained in this Agreement, neither Agent nor any Lender shall apply any
payments which it receives to any LIBOR Loan, unless (a) so directed by the Borrowers, (b) an Event
of Default has occurred and is continuing or (c) such payments are applied on the expiration date
of the Interest Period applicable to any such LIBOR Loan. For so long as an Event of Default has
occurred and is continuing, the Agent and the Lenders shall have the continuing and exclusive right
to apply and reverse and reapply any and all such proceeds and payments to any portion of the
Obligations.




     3.10 Indemnity for Returned Payments.



          If after receipt of any payment which is applied to the payment of all or any part of the
Obligations, the Agent, any Lender, the Bank or any Affiliate of the Bank or a Lender is for any
reason compelled to surrender such payment or proceeds to any Person because such payment or
application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or
voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other
reason, then the Obligations or part thereof intended to be satisfied shall be revived and
continued and this Agreement shall continue in full force as if such payment or proceeds had not
been received by the Agent or such Lender and the Borrowers shall be liable to pay to the Agent and
the Lenders, and hereby do indemnify the Agent and the Lenders and hold the Agent and the Lenders
harmless for the amount of such payment or proceeds surrendered. The provisions of this
Section 3.10 shall be and remain effective notwithstanding any contrary action which may
have been taken by the Agent or any Lender in reliance upon such payment or application of
proceeds, and any such contrary action so taken shall be without prejudice to the Agent’s and the
Lenders’ rights under this Agreement and shall be deemed to have been conditioned upon such
payment or application of proceeds having become final and irrevocable. The provisions of
this Section 3.10 shall survive the termination of this Agreement.




-18-









 








     3.11 Agent’s and Lenders’ Books and Records; Monthly Statements.



          The Agent shall record the principal amount of the Loans owing to each Lender, the undrawn
face amount of all outstanding Letters of Credit and the aggregate amount of unpaid reimbursement
obligations outstanding with respect to the Letters of Credit from time to time on its books. In
addition, each Lender may note the date and amount of each payment or prepayment of principal of
such Lender’s Loans in its books and records. Failure by Agent or any Lender to make such notation
shall not affect the obligations of the Borrowers with respect to the Loans or the Letters of
Credit. The Loan Parties agree that the Agent’s and each Lender’s books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom, and shall constitute rebuttably
presumptive proof thereof, irrespective of whether any Obligation is also evidenced by a promissory
note or other instrument. The Agent will provide to the Borrowers a monthly statement of Loans,
payments, and other transactions pursuant to this Agreement. Such statement shall be deemed
correct, accurate, and binding on the Loan Parties and an account stated (except for reversals and
reapplications of payments made as provided in Section 3.8 and corrections of errors
discovered by the Agent), unless the Borrowers notify the Agent in writing to the contrary within
thirty (30) days after such statement is rendered. In the event a timely written notice of
objections is given by the Borrowers, only the items to which exception is expressly made will be
considered to be disputed.




ARTICLE 4

TAXES, YIELD PROTECTION AND ILLEGALITY




     4.1 Taxes.



          (a) Any and all payments by the Loan Parties to each Lender or the Agent under this Agreement
and any other Loan Document shall be made free and clear of, and without deduction or withholding
for any Indemnified Taxes. If the Loan Parties shall be required by law to deduct or withhold any
Indemnified Taxes from or in respect of any sum payable hereunder to any Lender or Agent, then:





     (i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such Lender
or Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;




     (ii) the Loan Parties shall make such deductions and withholdings;




     (iii) the Loan Parties shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with applicable
law or, if being contested in good faith, set up adequate reserves for such
Indemnified Taxes; and




     (iv) the Loan Parties shall also pay to each Lender or Agent for the
account of such Lender, at the time interest is paid, all additional amounts which
the respective Lender documents (in reasonable detail) as being necessary to
preserve the after-tax yield such Lender would have received if such Taxes had not
been imposed.



-19-









 





          (b) In addition, the Loan Parties shall pay all Other Taxes.




          (c) The Loan Parties agree to indemnify and hold harmless each Lender and the Agent for the
full amount of Indemnified Taxes and Other Taxes (including any Taxes imposed by any jurisdiction
on amounts payable under this Section) paid by any Lender or Agent and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto.
Payment under this indemnification shall be made within thirty (30) days after the date such
Lender or Agent makes written demand therefor.




          (d) Without limiting the generality of the foregoing provisions of this Section 4.1,
with respect to each payment under any of the Loan Documents by Applica Canada or Applica Asia to
any Lender that is not, in respect of such payment, a resident of Canada for the purposes of the
Tax imposed pursuant to Part XIII of the ITA, or a resident of Hong Kong for any similar
applicable law of Hong Kong, including any fees or charges payable pursuant to this Agreement,
such amount shall be increased as necessary so that after all required deductions or withholdings
of such Tax are made (including deductions or withholdings applicable to additional sums paid
under this Section), the Agent and such Lender receive an amount equal to the sum that it would
have received had no such Tax been required and Applica Canada or Applica Asia (as applicable)
shall forthwith on written demand by the Agent (to be accompanied by reasonable substantiation
thereof) or any Lender remit to the Agent or such Lender, as the case may be, the full amount of
the aforesaid increase.




          (e) At the Agent’s written request, within thirty (30) days after the date of any payment by
the Loan Parties of Taxes or Other Taxes, the Loan Parties shall furnish the Agent the original or
a certified copy of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to the Agent.




          (f) If the Loan Parties are required to pay additional amounts to any Lender or the Agent
pursuant to subsections (b) or (c) of this Section, then such Lender shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction
of its lending office so as to eliminate any such additional payment by the Loan Parties which may
thereafter accrue, if such change in the judgment of such Lender is not otherwise disadvantageous
to such Lender.




          (g) In respect of amounts paid or credited by a Loan Party that is resident in Canada for
purposes of the ITA to or for the benefit of a particular Lender that is an “authorized foreign
bank” for purposes of the ITA, the obligations under this Section 4.1 to pay an additional
amount shall apply where the particular Lender is liable for tax under Part XIII of the ITA in
respect of such payment, even if the Loan Party is not required under the ITA to deduct or withhold
an amount in respect of Taxes on such payment and this Section 4.1 hereof shall apply,
mutatis mutandis, as if the Loan Party was required to deduct or withhold an amount in respect of
such Taxes.




          (h) Without prejudice to the survival of any other agreement contained herein, the agreements
and obligations contained in this Section 4.1 shall survive the payment in full of
principal, interest, fees and any other amounts payable hereunder and the termination of this
Agreement and any other Loan Document.




     4.2 Illegality.



          (a) If any Lender determines, based upon advice from legal counsel, that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its applicable


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lending office to make LIBOR Loans, then, on notice thereof by that Lender to the Borrowers
through the Agent, any obligation of that Lender to make LIBOR Loans shall be suspended until that
Lender notifies the Agent and the Borrowers that the circumstances giving rise to such
determination no longer exist.




          (b) If a Lender determines that it is unlawful to maintain any LIBOR Loan, the Borrowers
shall, upon receipt of notice of such fact and demand from such Lender (with a copy to the Agent),
prepay in full such LIBOR Loans of that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 4.4, either on the last day of the Interest
Period thereof, if that Lender may lawfully continue to maintain such LIBOR Loans to such day, or
immediately, if that Lender may not lawfully continue to maintain such LIBOR Loans. In the event
such Lender shall have determined that it is no longer unlawful for it to maintain a LIBOR Loan,
it shall promptly give notice to the Borrowers and Agent. If the Borrowers are required to so
prepay any LIBOR Loans, then concurrently with such prepayment, the Borrowers shall borrow from
the affected Lender, in the amount of such repayment, a Base Rate Loan. Notwithstanding anything
to the contrary in this Agreement, the Borrowers shall not be liable for any losses, or be
required to reimburse an Lender as set forth in Section 4.4 to the extent a LIBOR Loan has
been prepaid in accordance with this Section 4.2.




     4.3 Increased Costs and Reduction of Return.



          (a) If any Lender determines, based upon advice from legal counsel, that due to either (i)
the introduction of or any change in the interpretation of any Requirement of Law or (ii) the
compliance by that Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be any increase in
the cost to such Lender of agreeing to make or making, funding or maintaining any LIBOR Loans,
then the Borrowers shall be liable for, and shall from time to time, upon demand (with a copy of
such demand to be sent to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs or, alternatively, in
the case where the affected Lender’s increased costs are material to the Borrowers or the
increased costs cause such LIBOR Loan to exceed the cost to the Borrowers of a Base Rate Loan, the
Borrowers may choose to prepay such LIBOR Loan and concurrently with such prepayment, the
Borrowers shall borrow from the affected Lender, a Base Rate Loan in the amount of such repayment;
provided, however, that no Lender shall be entitled to claim any additional amount
hereunder with respect to the period which is more than thirty (30) days prior to the date the
Lender actually became aware of such additional amounts; provided further, that
notwithstanding anything to the contrary in this Agreement, the Borrowers shall not be liable for
any losses, or be required to reimburse any Lender as set forth in Section 4.4 to the
extent a LIBOR Loan has been prepaid in accordance with this Section 4.3(a).




          (b) If any Lender shall have determined, based upon advice from legal counsel, that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance by such Lender or any corporation or other entity
controlling such Lender with any Capital Adequacy Regulation, affects or would affect the amount
of capital required or expected to be maintained by such Lender or any corporation or other entity
controlling such Lender and (taking into consideration such Lender’s or such corporation’s or
other entity’s policies with respect to capital adequacy and such Lender’s desired return on
capital) determines that the amount of such capital is increased as a consequence of its
Commitments, loans, credits or obligations under this Agreement, then, upon written demand of such
Lender to the Borrowers through the Agent and submission of reasonable substantiation thereof, the
Borrowers shall pay to such Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender for such non-material


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increase; provided, however, that no Lender shall be entitled to claim any such
additional amount with respect to the period which is more than thirty (30) days prior to the date
the Lender actually became aware of such additional amounts.




     4.4 Funding Losses.



          The Borrowers shall reimburse each Lender and hold each Lender harmless from any loss or
expense which such Lender may sustain or incur as a consequence of:




          (a) the failure of the Borrowers to make on a timely basis any payment of principal of any
LIBOR Loan;




          (b) the failure of the Borrowers to borrow, continue or convert a Loan after the Borrowers
have given (or is deemed to have given) a Notice of Borrowing or a Notice of
Continuation/Conversion; or




          (c) the prepayment or other payment (including after acceleration thereof) of any LIBOR Loans
on a day that is not the last day of the relevant Interest Period;



including any such loss of anticipated profit and any loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its LIBOR Loans or from fees payable to
terminate the deposits from which such funds were obtained. Borrowers shall also pay any customary
administrative fees charged by any Lender in connection with the foregoing.




     4.5 Inability to Determine Rates.



          If the Agent determines that for any reason adequate and reasonable means do not exist for
determining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Loan,
or that the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Loan does
not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Agent will
promptly so notify the Borrowers and each Lender. Thereafter, the obligation of the Lenders to
make or maintain LIBOR Loans hereunder shall be suspended until the Agent revokes such notice in
writing. Upon receipt of such notice, the Borrowers may revoke any Notice of Borrowing or Notice
of Continuation/Conversion then submitted by it. If the Borrowers do not revoke such Notice, the
Lenders shall make, convert or continue the Loans, as proposed by the Borrowers, in the amount
specified in the applicable notice submitted by the Borrowers, but such Loans shall be made,
converted or continued as Base Rate Loans instead of LIBOR Loans.




     4.6 Certificates of Agent.



          If any Lender claims reimbursement or compensation under this Article 4, Agent shall
deliver to the Borrowers (with a copy to the affected Lender) a certificate setting forth in
reasonable detail the amount payable to the affected Lender, and such certificate shall be
conclusive and binding on the Borrowers in the absence of manifest error.




     4.7 Obligation to Mitigate.



          (a) Subject to Section 4.7(b) below, each Lender, Letter of Credit Issuer, Agent and
Bank agrees that, as promptly as practicable after the officer of such Lender, Letter of Credit
Issuer, Agent or Bank responsible for administering the Loans or Letters of Credit of such Lender,
Letter of Credit Issuer, Agent or Bank, as the case may be, becomes aware of the occurrence of any
event or the


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existence of a condition that would cause such Lender, Letter of Credit Issuer or Bank to
receive increased payments from the Borrowers under Section 4.1, Section 4.2 or
Section 4.3, it will, to the extent not inconsistent with the formal internal policies of
such Lender, Letter of Credit Issuer, the Agent or the Bank and any applicable Requirement of Law,
use reasonable efforts (i) to make, issue, fund or maintain the Commitments of such Lender or the
affected Loans or Letters of Credit of such Lender, Letter of Credit Issuer, the Agent or the Bank
through another lending or letter of credit office of such Lender, Letter of Credit Issuer, the
Agent or the Bank, or (ii) take such other actions as Lender, Letter of Credit Issuer, the Agent
or the Bank may deem reasonable to cause the additional amounts that the Borrowers would be
required to pay the Lender, Letter of Credit Issuer, the Agent or the Bank under Section
4.1, Section 4.2 or Section 4.3 to be reduced.




          (b) The Borrowers may, in their sole discretion, on ten (10) Business Days prior written
notice to the Agent and the applicable Lender, cause a Lender who has (i) incurred increased costs
or is unable to make LIBOR Loans, or (ii) made any claim for taxes under Section 4.1
hereof, (and such Lender shall) to assign, pursuant to Section 11.2 hereof, all of its
rights and obligations under this Agreement to an Eligible Assignee designated by the Borrowers
and reasonably acceptable to the Agent which is willing to become a Lender for a purchase price
equal to the outstanding principal amount of the Revolving Loans payable to such Lender plus any
accrued but unpaid interest on such Revolving Loans, any accrued but unpaid fees with respect to
such Agreement; provided, however, that any expenses or other amounts which would be owing
to such Lender pursuant to any indemnification provision hereof (including, if applicable,
Section 4.4 hereof) shall be payable by the Borrowers as if the Borrowers had prepaid the
Revolving Loans of such Lender rather than such Lender having assigned its interest hereunder.
The Borrowers or such assignee shall pay the applicable processing fee under Section 11.2
hereof.




     4.8 Survival.



          The agreements and obligations of the Borrowers in this Article 4 shall survive the
payment of all other Obligations.




ARTICLE 5

BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES




     5.1 Books and Records.



          The Borrowers shall maintain, at all times, correct and complete books, records and accounts
in which complete, correct and timely entries are made of its transactions in accordance with GAAP
applied consistently with the audited Financial Statements required to be delivered pursuant to
Section 5.2(a). The Borrowers shall, by means of appropriate entries, reflect in such
accounts and in all Financial Statements proper liabilities and reserves for all taxes and proper
provision for depreciation and amortization of property and bad debts, all in accordance with GAAP.
The Loan Parties shall maintain at all times books and records pertaining to the Collateral in
such detail, form and scope as required under the Security Agreement as to the Borrowers party
thereto, as required under the Applica Canada Security Agreement as to Applica Canada, and as
required under the Applica Asia Security Agreement as to Applica Asia.





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     5.2 Financial Information.



          The Loan Parties shall promptly furnish to the Agent all such financial information regarding
any Loan Party’s or other Consolidated Member’s financial and business affairs as the Agent
shall reasonably request. Without limiting the foregoing, the Loan Parties will furnish to the
Agent, via electronic notice or otherwise, in sufficient copies for distribution by the Agent to
each Lender (and upon receipt, the Agent shall promptly distribute to the Lenders), in such
reasonable detail as the Agent or the Lenders shall request, the following:




          (a) As soon as available, and in any event within ninety (90) days after the close of each
Fiscal Year, audited consolidated balance sheets, income statements, cash flow statements and
changes in stockholders’ equity and unaudited consolidating balance sheets and income statements
for the Consolidated Members for such Fiscal Year, setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly presenting the financial
position and the results of operations of the Consolidated Members as at the date thereof and for
the Fiscal Year then ended, and prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards and be accompanied by a report
thereon that is not subject to an Impermissible Qualification by independent certified public
accountants selected by the Loan Parties and reasonably satisfactory to the Agent. Such
statements also shall be accompanied by a report regarding the Loan Parties prepared in accordance
with special procedures reasonably required by the Agent in connection with such audit. Each Loan
Party hereby authorizes the Agent to communicate, together with a representative of the Loan
Parties, directly with its certified public accountants and, by this provision, authorizes those
accountants to disclose to the Agent any and all financial statements and other supporting
financial documents and schedules relating to the Consolidated Members and to discuss directly
with the Agent and a representative of the Loan Parties the finances and affairs of the
Consolidated Members.




          (b) As soon as available, and in any event within forty-five (45) days after the end of each
Fiscal Quarter (other than the fourth Fiscal Quarter of each Fiscal Year), consolidated unaudited
balance sheets of the Consolidated Members as at the end of such Fiscal Quarter, and consolidated
unaudited income statements and cash flow statements for the Consolidated Members for such Fiscal
Quarter and for the period from the beginning of the Fiscal Year to the end of such quarter, all
in reasonable detail, fairly presenting the financial position and results of operations of the
Consolidated Members as at the date thereof and for such periods, and, in each case, in comparable
form, figures for the corresponding period in the prior Fiscal Year and prepared in accordance
with GAAP applied consistently with the audited Financial Statements required to be delivered
pursuant to Section 5.2(a). The Loan Parties shall certify by a certificate signed by
their chief financial officer that all such statements have been prepared in accordance with GAAP
and present fairly the financial position of the Consolidated Members as at the dates thereof and
its results of operations for the periods then ended.




          (c) As soon as available, and in any event within forty-five (45) days after the end of each
Fiscal Quarter other than the fourth Fiscal Quarter of each Fiscal Year (but within sixty (60)
days after the end of the Fiscal Quarter ending December 31, 2007), consolidated unaudited balance
sheets of the Reporting Loan Parties as at the end of such Fiscal Quarter and consolidated
unaudited income statements for the Reporting Loan Parties for such Fiscal Quarter and for the
period from the beginning of the Fiscal Year to the end of such quarter, all in reasonable detail,
fairly presenting the financial position and results of operations of the Reporting Loan Parties
as at the date thereof and for such periods, and, in each case, in comparable form, figures for
the corresponding period in the prior Fiscal Year and the Latest Projections for the then current
Fiscal Year, and prepared in accordance with GAAP applied consistently with the audited Financial
Statements required to be delivered pursuant to Section 5.2(a). The Reporting Loan
Parties shall certify by a certificate signed by their chief financial officer that all such
statements have been prepared in accordance with GAAP and present fairly the financial position of
the Reporting Loan Parties as at the dates thereof and its results of operations for the periods
then ended.




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          (d) As soon as available, and in any event within thirty (30) days after the end of each
month commencing with the month of January 2008, consolidated unaudited balance sheets of the
Reporting Loan Parties as at the end of such month, and consolidated unaudited income statements
for the Reporting Loan Parties for such month and for the period from the beginning of the Fiscal
Year to the end of such month, all in reasonable detail, fairly presenting the financial position
and results of operations of the Reporting Loan Parties as at the date thereof and for such
periods, including an itemization of depreciation, amortization and Unfinanced Capital
Expenditures, and, in each case, in comparable form, figures for the corresponding period in the
prior Fiscal Year and the Latest Projections for the then current Fiscal Year, and prepared in
accordance with GAAP applied consistently with the audited Financial Statements required to be
delivered pursuant to Section 5.2(a). The Reporting Loan Parties shall certify by a
certificate signed by their chief financial officer that all such statements have been prepared in
accordance with GAAP and present fairly the financial position of the Reporting Loan Parties as at
the dates thereof and its results of operations for the periods then ended, subject to normal
year-end adjustments and the absence of footnotes.




          (e) With each of the audited Financial Statements delivered pursuant to Section
5.2(a), a certificate of the independent certified public accountants that examined such
statement to the effect that they have reviewed and are familiar with this Agreement and that, in
examining such Financial Statements, they did not become aware of any fact or condition which then
constituted a Default or Event of Default with respect to a financial covenant, except for those,
if any, described in reasonable detail in such certificate.




          (f) Within thirty (30) days after the end of each month, a certificate of the chief financial
officer of the Loan Parties (i) setting forth in reasonable detail the calculations required to
establish that the Reporting Loan Parties were in compliance with the covenant set forth in
Section 7.27 during the period covered in such Financial Statements and as at the end
thereof irrespective of whether compliance with the covenant set forth in Section 7.27 was
required during such period, and (ii) stating that, except as explained in reasonable detail in
such certificate, (A) all of the representations and warranties of the Loan Parties contained in
this Agreement and the other Loan Documents are correct and complete in all material respects as
at the date of such certificate as if made at such time, except for those that speak as of a
particular date, (B) the Loan Parties are, at the date of such certificate, in compliance in all
material respects with all covenants and agreements in this Agreement and the other Loan
Documents, and (C) no Default or Event of Default then exists or existed during the period covered
by the Financial Statements for such month. If such certificate discloses that a representation
or warranty is not correct or complete, or that a covenant has not been complied with, or that a
Default or Event of Default existed or exists, such certificate shall set forth what action the
Borrowers have taken or propose to take with respect thereto.




          (g) As soon as available, and in any event within forty-five (45) days after the end of each
Fiscal Quarter, a certificate of the chief financial officer of the Loan Parties (i) describing
and analyzing in reasonable detail all material trends, changes, and developments in the business
of the Loan Parties and (ii) explaining the variances of the figures in the corresponding budgets
and prior Fiscal Year financial statements. The Loan Parties’ obligation to deliver to Agent a
certificate of the type contemplated by this Section 5.2(g) shall be satisfied by filings by the
Loan Parties with the Securities and Exchange Commission under the Exchange Act (including
sections of such filings entitled “Management’s Discussion and Analysis”) so that the Loan Parties
shall be obligated to deliver such a certificate to Agent only if they no longer are required to
file applicable financial information with the Securities and Exchange Commission under the
Exchange Act.




          (h) No later than forty-five (45) days after the Fiscal Year beginning July 1, 2008, and no
later than the beginning of each Fiscal Year thereafter, annual forecasts (to include forecasted
consolidated balance sheets, income statements and cash flow statements) for the Reporting
Loan Parties as at the end of and for each month of such Fiscal Year.




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          (i) Promptly after filing with the PBGC, the IRS or other applicable Governmental Authority,
a copy of each annual report or other filing filed with respect to each Plan of the Loan Party.




          (j) Promptly upon the filing thereof, copies of all reports, if any, to or other documents
filed by any Consolidated Member with the Securities and Exchange Commission under the Exchange
Act, and all material reports, notices, or statements sent by the Borrowers to holders of any
equity interests of Parent (other than routine non-material correspondence sent by the trustee
under any indenture under which the same is issued).




          (k) As soon as available, and in any event not later than fifteen (15) days after any Loan
Party’s receipt thereof, a copy of all management reports and final management letters prepared by
any independent certified public accountants of any Loan Party.




          (l) Promptly after their preparation, copies of any and all proxy statements, financial
statements, and reports which the Parent make available to its shareholders.




          (m) If requested by Agent in writing, promptly after filing with the IRS or other applicable
Governmental Authority, a copy of each tax return filed by any Loan Party.




          (n) As soon as available, and in any event within twenty (20) days after the end of the first
and second month of each Fiscal Quarter (in each case, for such month), and within thirty (30)
days after the end of the last month of each Fiscal Quarter (in each case, for such month), a
Borrowing Base Certificate as of the last day of such month, and a report showing the beginning
and ending balances of all intercompany loans, advances or investments (“Intercompany Accounts”)
for such month.




          (o) Such additional information as the Agent and/or any Lender may from time to time
reasonably request regarding the financial and business affairs of any Loan Party.




          (p) On the last Business Day of each month, duplicate original bank statements for the
preceding month in respect of the Applica Canada Blocked Agreement and the Applica Asia Blocked
Agreement.




     5.3 Notices to the Lenders.



          The Loan Parties shall notify the Agent and the Lenders in writing of the following matters at
the following times:




          (a) Immediately after becoming aware of any Default or Event of Default;




          (b) Immediately after becoming aware of the assertion by the holder of any Debt of any
Borrower or any Subsidiary in a face amount in excess of $1,000,000 that a default exists with
respect thereto or that any Loan Party is not in compliance with the terms thereof, or the threat
or commencement by such holder of any enforcement action because of such asserted default or
non-compliance;




          (c) Immediately after becoming aware of any event or circumstance which could reasonably be
expected to have a Material Adverse Effect;




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          (d) Immediately after becoming aware of any pending or threatened action, suit, or
proceeding, by any Person, or any pending or threatened investigation by a Governmental Authority,
which could reasonably be expected to have a Material Adverse Effect;




          (e) Immediately after becoming aware of any pending or threatened strike, work stoppage,
unfair labor practice claim, or other labor dispute affecting any Loan Party in a manner which
could reasonably be expected to have a Material Adverse Effect;




          (f) Immediately after becoming aware of any violation of any Requirement of Law affecting any
Loan Party which could reasonably be expected to have a Material Adverse Effect;




          (g) Immediately after receipt of any notice of any violation by any Loan Party of any
Environmental Law which could reasonably be expected to have a Material Adverse Effect or that any
Governmental Authority has asserted in writing that any Loan Party is not in compliance with any
Environmental Law or is investigating any Loan Party where such non-compliance could reasonably be
expected to have a Material Adverse Effect;




          (h) Immediately after receipt of any written notice that any Loan Party is or may be liable
to any Person as a result of the Release or threatened Release of any Contaminant or that any Loan
Party is subject to investigation by any Governmental Authority evaluating whether any remedial
action is needed to respond to the Release or threatened Release of any Contaminant which, in
either case, is reasonably likely to give rise to liability in excess of $1,000,000;




          (i) Immediately after receipt of any written notice of the imposition of any Environmental
Lien against any property of any Loan Party for an amount in excess of $1,000,000;




          (j) Any change in any Loan Party’s name as it appears in the state of its incorporation or
other organization, jurisdiction of incorporation or organization, type of entity, organizational
identification number, locations of Collateral other than those set forth in Section 4 of the
Security Agreement, or form of organization, trade names under which a Loan Party sells Inventory
or creates Accounts, or to which instruments in payment of Accounts may be made payable, in each
case at least ten (10) days prior thereto;




          (k) Within ten (10) Business Days after any Loan Party or any ERISA Affiliate knows that an
ERISA Event or a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code)
has occurred, which could reasonably be expected to have a Material Adverse Effect, and, when
known, any action threatened in writing or taken by the IRS, the CRA, the DOL, the PBGC, the FSCO
or any other Governmental Authority with respect thereto;




          (l) Upon Agent’s written request, or, in the event that such filing reflects a change with
respect to the matters covered thereby which could reasonably be expected to have a Material
Adverse Effect, within three (3) Business Days after the filing thereof with the PBGC, the DOL,
the IRS, the FSCO or any other applicable Governmental Authority as applicable, copies of the
following: (i) each annual report (form 5500 series), including Schedule B thereto, filed with
the PBGC, the FSCO, the DOL, the IRS or the CRA with respect to each Pension Plan and in the case
of any Pension Plan governed by the PBA, each report, valuation, request for amendment, whole or
partial withdrawal or termination or other variation, (ii) a copy of each funding waiver request
filed with the PBGC, the DOL, the IRS, the CRA, the FSCO or any other applicable Governmental
Authority with respect to any Pension Plan and all communications received by the Borrowers or any
ERISA Affiliate from the PBGC, the CRA, the DOL, the IRS, the FSCO or any other applicable
Governmental Authority with respect to such request, and (iii) a copy of each other filing or
notice filed with the PBGC, the DOL, the
FSCO, the IRS, the CRA or any other applicable Governmental Authority, with respect to each
Plan by either a Loan Party or any ERISA Affiliate;




-27-









 








          (m) Upon Agent’s written request, copies of each actuarial report for any Pension Plan or
Multi-employer Plan received by a Loan Party and annual report received for any Multi-employer
Plan; and within three (3) Business Days after receipt thereof by a Loan Party or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC, the FSCO or any other applicable
Governmental Authority’s intention to terminate a Pension Plan or to have a trustee appointed to
administer such Plan; (ii) any favorable or unfavorable determination letter from the IRS, the
FSCO or any other applicable Governmental Authority regarding the qualification of a Pension Plan
under Section 401(a) of the Code, the PBA or other applicable laws; or (iii) any notice from a
Multi-employer Plan regarding the imposition of withdrawal liability;




          (n) Within three (3) Business Days after the occurrence thereof: (i) any changes in the
benefits of any existing Pension Plan which increase a Loan Parties’ annual costs with respect
thereto by an amount in excess of $1,000,000, or the establishment of any new Pension Plan which
could reasonably be expected to have an annual aggregate cost of $1,000,000 or more, or the
commencement of contributions to any Pension Plan to which the Loan Parties or any ERISA Affiliate
was not previously contributing; or (ii) any material failure by a Loan Party or any ERISA
Affiliate to make a required installment or any other required payment under Section 412 of the
Code, the PBA or other applicable laws on or before the due date for such installment or payment;
or




          (o) Within three (3) Business Days after a Loan Party or any ERISA Affiliate knows or has
reason to know that any of the following events has or will occur: (i) a Multi-employer Plan has
been or will be terminated; (ii) the administrator or plan sponsor of a Multi-employer Plan
intends to terminate a Multi-employer Plan; or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan, or (iv) Reportable
Event or Termination Event in respect of any Pension Plan.



Each notice given under this Section shall describe the subject matter thereof in reasonable
detail, and shall set forth the action that the Loan Party or any ERISA Affiliate, as applicable,
has taken or proposes to take with respect thereto.




     5.4 Revisions or Updates to Schedules.



          Should any of the information or disclosures provided on any of the schedules originally
attached hereto become outdated or incorrect in any material respect, the Borrowers from time to
time shall deliver to the Agent and the Lenders, together with an officer’s certificate of the type
required pursuant to Section 5.2(f), such revisions or updates to such schedule(s)
whereupon such schedules shall be deemed to be amended by such revisions or updates, as may be
necessary or appropriate to update or correct such schedule(s), provided, however,
that, notwithstanding the foregoing, (a) no such revisions or updates to Schedules 6.5,
6.11-6.16, 6.19, 6.24, 6.25, or 6.27 shall be deemed to
have amended, modified, or superseded any such schedules as originally attached hereto, or to have
cured any breach of warranty or representation resulting from the inaccuracy or incompleteness of
any such schedules, unless and until the Agent shall have received and acknowledged to the Loan
Parties in writing such revisions or updates to any such schedules and (b) no such revisions or
updates to Schedule 6.9. shall be deemed to have amended, modified, or superseded such
schedule as originally attached hereto, or to have cured any breach of warranty or representation
resulting from the inaccuracy or incompleteness of such schedule, unless and until the Required
Lenders shall have received and acknowledged to the Loan Parties in writing such revisions or
updates to such schedule; provided further, however, that Agent’s receipt and
acknowledgment to Loan Parties of any revisions or updates to such schedules shall not affect the
application of, and obligations of the Loan Parties to comply with, any relevant provision of
Article 7 of this Agreement.




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ARTICLE 6

GENERAL WARRANTIES AND REPRESENTATIONS




          To induce Agent and the Lenders to enter into this Agreement and to make available the
Commitments, each Borrower warrants and represents to Agent and each Lender that:




     6.1 Authorization, Validity, and Enforceability of this Agreement and the Loan
Documents.



          Each Loan Party has the power and authority to execute, deliver and perform this Agreement and
the other Loan Documents to which it is a party, to incur the Obligations, and to grant to the
Agent Liens upon and security interests in the Collateral. Each Loan Party has taken all necessary
action (including obtaining approval of its stockholders if necessary) to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents to which it is a party.
This Agreement and the other Loan Documents to which it is a party have been duly executed and
delivered by each Loan Party, and, assuming this Agreement and the other Loan Documents constitute
the legal, valid and binding obligations of Agent, Bank and each of the Lenders hereto, constitute
the legal, valid and binding obligations of each Loan Party, enforceable against it in accordance
with their respective terms. Each Loan Party’s execution, delivery, and performance of this
Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or
constitute a violation or breach of, or result in the imposition of any Lien upon the property of
an Loan Party or any of its Subsidiaries, by reason of the terms of (a) any contract, mortgage,
lease, agreement, indenture, or instrument to which such Loan Party or any of its Subsidiaries is a
party or which is binding upon it, (b) any Requirement of Law applicable to the such Loan Party or
any of its Subsidiaries, or (c) the certificate or articles of incorporation or by-laws or the
limited liability company or limited partnership agreement of the Loan Parties or any of their
Subsidiaries.




     6.2 Validity and Priority of Security Interest.



          The provisions of this Agreement, and the other Loan Documents create legal and valid Liens on
all the Collateral in favor of the Agent, for the ratable benefit of the Agent and the Lenders, and
such Liens constitute perfected and continuing Liens on all the Collateral, having priority over
all other Liens on the Collateral, except to the extent provided in the Additional Debt
Intercreditor Agreement and except for those Liens identified in clauses (a), (c), (d), (e), (g),
(h) and (i) of the definition of Permitted Liens securing all the Obligations, and enforceable
against the Loan Parties and all third parties.




     6.3 Organization and Qualification.



          Each Loan Party (a) is duly organized or incorporated and validly existing in good standing
under the laws of the jurisdiction of its organization or incorporation, (b) is qualified to do
business and is in good standing in the jurisdictions set forth on Schedule 6.3 which are
the only jurisdictions in which qualification is necessary in order for it to own or lease its
property and conduct its business, except where the failure to so qualify would have a Material
Adverse Effect, and (c) has all requisite power and authority to conduct its business and to own
its property.




     6.4 Reserved.



     6.5 Subsidiaries.



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          Schedule 6.5 is a correct and complete list of the name and relationship to the
Borrowers of each and all of the Borrowers’ Subsidiaries (specifying whether such Subsidiaries are
Domestic Subsidiaries or Foreign Subsidiaries). Each Subsidiary is (a) duly incorporated or
organized and validly existing in good standing under the laws of its jurisdiction of incorporation
or organization set forth on Schedule 6.5, (b) qualified to do business and in good
standing in each jurisdiction in which the failure to so qualify or be in good standing could
reasonably be expected to have a Material Adverse Effect and (c) has all requisite power and
authority to conduct its business and own its property.




     6.6 Financial Statements and Projections.



          (a) The Borrowers have delivered to the Agent and the Lenders the audited balance sheet and
related statements of income, retained earnings, cash flows, and changes in stockholders equity
for the Consolidated Applica Parties as of June 30, 2007, and for the six months then ended,
accompanied by the report thereon of the Borrowers’ independent certified public accountants,
Grant Thornton LLP. The Borrowers have also delivered to the Agent and the Lenders the unaudited
balance sheet and related statements of income for the Consolidated Applica Parties as of October
31, 2007. All such Financial Statements have been prepared in accordance with GAAP and present
accurately and fairly in all material respects the financial position of the Consolidated Applica
Parties as at the dates thereof and their results of operations for the periods then ended.




          (b) The Borrowers have delivered to the Agent and the Lenders the audited balance sheet and
related statements of income, retained earnings, cash flows, and changes in stockholders equity
for the Consolidated Salton Parties as of June 30, 2007, and for the Fiscal Year then ended,
accompanied by the report thereon of the Borrowers’ independent certified public accountants,
Grant Thornton LLP. The Borrowers have also delivered to the Agent and the Lenders the unaudited
balance sheet and related statements of income for the Consolidated Salton Parties as of October
31, 2007. All such Financial Statements have been prepared in accordance with GAAP and present
accurately and fairly in all material respects the financial position of the Consolidated Salton
entities as at the dates thereof and their results of operations for the periods then ended.




          (c) The Latest Projections when submitted to the Agent as required herein represent the Loan
Parties’ good faith estimate of the future financial performance of the Loan Parties for the
periods set forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Loan Parties believe are fair and reasonable in light of
current and reasonably foreseeable business conditions at the time submitted to the Lenders;
provided, however, it being recognized by Agent and Lenders that such projections are not to be
viewed as facts and that actual results during the period or periods covered by any such
projections will likely differ from the projected results.




          (d) All Financial Statements hereafter delivered to Agent and Lenders pursuant to this
Agreement shall be prepared in accordance with GAAP and fairly present the financial positions and
results of operations of the Persons described therein at the dates and for the periods indicated.




     6.7 Reserved.



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     6.8 Solvency.



          Each Loan Party is Solvent prior to and after giving effect to the Borrowings to be made on
the Closing Date and the issuance of the Letters of Credit to be issued on the Closing Date and
shall remain Solvent during the term of this Agreement.




     6.9 Debt.



          After giving effect to the making of the Revolving Loans to be made on the Closing Date, the
Loan Parties have no material Debt, except (a) the Obligations, (b) Debt described on Schedule
6.9. and (c) other Debt as permitted under Section 7.13.




     6.10 Distributions.



          Except as set forth on Schedule 6.10, since June 30, 2007, no Distribution has been
declared, paid, or made upon or in respect of any Capital Stock of any Borrower or any Capital
Stock of any other Loan Party (unless and to the extent that such Distribution was made to another
Loan Party).




     6.11 Real Estate; Leases.



          Schedule 6.11 sets forth, as of the Closing Date, a correct and complete list of all
Real Estate, all leases and subleases of real property held by each Loan Party as lessee or
sublessee, and all leases and subleases of real property held by each Loan Party as lessor, or
sublessor under which a Loan Party is obligated for annual payments exceeding $100,000. To the
knowledge of each Loan Party, each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect, and no default by any party to any such
lease or sublease exists. To the knowledge of each Loan Party or party hereto, each Loan Party has
good and marketable title in fee simple to the Real Estate identified on Schedule 6.11 as
owned by such Loan Party, or valid leasehold interests in all Real Estate designated therein as
“leased” by such Loan Party, free of all Liens except Permitted Liens and those Liens that, when
taken as a whole, could not reasonably be expected to have a Material Adverse Effect.




     6.12 Proprietary Rights.



          Schedule 6.12 sets forth a correct and complete list of all of each Loan Party’s
material Proprietary Rights. None of the material Proprietary Rights is subject to any licensing
agreement or similar arrangement except as set forth on Schedule 6.12. To the knowledge of
each Loan Party, none of the Proprietary Rights infringes on or conflicts with any other Person’s
property, and no other Person’s property infringes on or conflicts with the Proprietary Rights.
The Proprietary Rights described on Schedule 6.12 constitute all of the property of such
type necessary to the current and anticipated future conduct of the Loan Parties’ business.




     6.13 Trade Names.



          All trade names or styles under which the Loan Parties currently or currently intend to sell
Inventory or create Accounts, or to which Instruments in payment of Accounts may be made payable,
are listed on Schedule 6.13.




     6.14 Litigation.



          Except as set forth on Schedule 6.14, there is no pending, or to the knowledge of any
Loan Party, threatened, action, suit, proceeding, or counterclaim by any Person, or to the
knowledge of
any Loan Party, investigation by any Governmental Authority, or any basis for any of the
foregoing, which could reasonably be expected to have a Material Adverse Effect.




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     6.15 Labor Disputes.



          Except as set forth on Schedule 6.15 or as required by the laws of a foreign
jurisdiction as a condition to do business in such jurisdiction, as of the Closing Date (a) there
is no collective bargaining agreement or other material labor contract covering employees of any
Loan Party, (b) no such collective bargaining agreement or other labor contract is scheduled to
expire during the term of this Agreement, (c) to the knowledge of any Loan Party, no union or other
labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of
employees of any Loan Party or for any similar purpose, and (d) there is no pending or, to the
knowledge of any Loan Party, threatened, strike, work stoppage, material unfair labor practice
claim, or other material labor dispute against or affecting any Loan Party or its employees which
could be reasonably expected to have a Material Adverse Effect.




     6.16 Environmental Laws.



          Except as otherwise disclosed on Schedule 6.16 or as could not reasonably be expected
to have a Material Adverse Effect:




          (a) The Loan Parties have complied in all respects with all Environmental Laws except as
could not reasonably be expected to have a Material Adverse Effect and no Loan Party nor any of
its presently owned real property or presently conducted operations or any property now or
previously in its charge, management or control (to the extent any Loan Party was the
non-complying party in connection with any property previously in its charge, management or
control), nor, to the knowledge of a Loan Party, its previously owned real property or prior
operations, is subject to any enforcement order from or liability agreement with any Governmental
Authority or private Person respecting (i) compliance with any Environmental Law or (ii) any
potential liabilities and costs or remedial action arising from the Release or threatened Release
of a Contaminant.




          (b) Each Loan Party has obtained all permits necessary for its current operations under
Environmental Laws, and all such permits are in good standing and each Loan Party is in compliance
with all material terms and conditions of such permits, except where the failure to obtain or
comply with such permits could not reasonably be expected to have a Material Adverse Effect.




          (c) No Loan Party, nor, to the knowledge of a Loan Party, any of its predecessors in
interest, has been or is in violation of any applicable law relating to the storage, treatment or
disposal of any hazardous waste.




          (d) No Loan Party has received any summons, complaint, order or similar written notice
indicating that it is not currently in compliance with, or that any Governmental Authority is
investigating its compliance with, any Environmental Laws or that it is or may be liable to any
other Person as a result of a Release or threatened Release of a Contaminant.




          (e) To the knowledge of the Loan Party, none of the present or past operations of the Loan
Parties is the subject of any investigation by any Governmental Authority evaluating whether any
remedial action is needed to respond to a Release or threatened Release of a Contaminant.




          (f) No Loan Party has filed, within the past five (5) years, any notice under any requirement
of Environmental Law reporting a spill or accidental and unpermitted Release or discharge of a
Contaminant into the environment.




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          (g) No Loan Party has entered into any negotiations or settlement agreements with any Person
(including the prior owner of its property and any Governmental Authority) imposing material
obligations or liabilities on any Loan Party with respect to any remedial action in response to
the Release of a Contaminant or environmentally related claim.




          (h) None of the products manufactured, distributed or sold by a Loan Party during the period
commencing on the date hereof and ending on the Stated Termination Date contain asbestos
containing material.




          (i) No Environmental Lien has attached to any of the Real Estate.




     6.17 No Violation of Law.



          No Loan Party is in violation of any law, statute, regulation, ordinance, judgment, order, or
decree applicable to it which violation could reasonably be expected to have a Material Adverse
Effect.




     6.18 No Default.



          No Loan Party is in default under any of the Additional Debt Documents or under any other
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to which a Loan Party is
a party or by which it is bound which default that could reasonably be expected to have a Material
Adverse Effect.




     6.19 Plan Compliance.



          Except as specifically disclosed in Schedule 6.19:




          (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code, the PBA and other federal, provincial, territorial or state law, except where the
lack of such compliance could not reasonably be expected to have a Material Adverse Effect. Each
Pension Plan which is intended to qualify under Section 401(a) of the Code has received a
favorable determination letter or opinion letter from the IRS and to the knowledge of the Loan
Parties, nothing has occurred which would cause the loss of such qualification except where the
lack or absence of such qualification could not reasonably be expected to have a Material Adverse
Effect. The Loan Parties and each ERISA Affiliate has made all required contributions to any Plan
when due other than any contributions that could not reasonably be expected to have a Material
Adverse Effect, and no application for a funding waiver or an extension of any amortization period
has been made with respect to any Pension Plan.




          (b) There are no pending or, to the knowledge of the Loan Parties, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted
or could reasonably be expected to result in a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan
which has resulted or could reasonably be expected to result in a Material Adverse Effect.




          (c) Except as could not reasonably be expected to have a Material Adverse Effect: (i) no
ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded
Pension Liability; (iii) neither the Loan Parties nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the
Loan Parties nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and no event
has occurred which, with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan; and (v)
neither the Loan Parties nor any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.




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     6.20 Taxes.



          Each Loan Party has filed all federal, provincial, state and other material Tax returns and
reports required to be filed, and has paid all federal, provincial, state and other material Taxes,
assessments, fees and other governmental charges levied or imposed upon them or their properties,
income, franchises or assets otherwise due and payable unless such unpaid Taxes and assessments
would constitute a Permitted Lien or are being Properly Contested.




     6.21 Regulated Entities.



          No Loan Party nor any Person controlling a Loan Party is an “Investment Company” within the
meaning of the Investment Company Act of 1940. No Loan Party is subject to regulation under the
Federal Power Act, the Interstate Commerce Act, any state public utilities code or law, or any
other federal or state statute or regulation limiting its ability to incur indebtedness.




     6.22 Margin Regulations.



          No Loan Party is engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.




     6.23 Copyrights, Patents, Trademarks and Licenses, etc.



          Each Loan Party owns or is licensed or otherwise has the right to use all of the material
patents, trademarks, service marks, trade names, copyrights, contractual franchises, licenses,
authorizations and other intellectual property rights that are reasonably necessary for the
operation of its businesses, without conflict with the rights of any other Person. To the
knowledge of the Loan Parties, no slogan or other advertising device, product, process, method,
substance, part or other material now employed by the Loan Parties infringes upon any rights held
by any other Person which infringement could reasonably be expected to have a Material Adverse
Effect. No claim or litigation regarding any of the foregoing is pending or, to the knowledge of
any Borrower, threatened, which, in either case, could reasonably be expected to have a Material
Adverse Effect.




     6.24 Material Agreements.



          Schedule 6.24 hereto sets forth all Material Contracts to which any Loan Party is a
party or is bound as of the Closing Date.




     6.25 Bank Accounts.




          Schedule 6.25 contains as of the Closing Date a complete and accurate list of all bank
accounts maintained by each Loan Party with any bank or other financial institution.




     6.26 Governmental Authorization.




          No approval, consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or other Person is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, a Loan Party of this Agreement
or any other Loan Document.




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     6.27 Capitalization.



          Schedule 6.27 sets forth, in each case as of the Closing Date (after giving effect to
all of the Transactions), the number of authorized shares of Capital Stock of each of the Loan
Parties and their first tier direct Foreign Subsidiaries, the number of such shares or other
interests that are outstanding and the names of the record and beneficial owners of all such shares
of Parent and each such Subsidiary. All such issued and outstanding shares or other interests are
validly issued, fully paid and non-assessable.




     6.28 No Material Adverse Change.



          No Material Adverse Effect has occurred since June 30, 2007, except as otherwise disclosed (a)
in the Borrowers’ filings with the Securities and Exchange Commission under the Exchange Act or (b)
to Agent and Lenders in writing prior to the Closing Date.




     6.29 Full Disclosure.



          None of the representations or warranties made by the Loan Party in the Loan Documents as of
the date such representations and warranties are made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of any Loan Party in connection
with the Loan Documents (including the offering and disclosure materials delivered by or on behalf
of the Loan Parties to the Lenders prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are made, not misleading as
of the time when made or delivered.




     6.30 Common Enterprise.




          The successful operation and condition of each of the Loan Parties is dependent on the
continued successful performance of the functions of the group of Loan Parties as a whole and the
successful operation of each Loan Party is dependent on the successful performance and operation of
each of the other Loan Parties. Each of the Loan Parties expects to derive benefit (and its board
of directors or other governing body has determined that it may reasonably be expected to derive
benefit), directly and indirectly, from successful operations of each of the other Loan Parties.
Each Loan Party expects to derive benefit (and the boards of directors or other governing body of
each such Loan Party have determined that it may reasonably be expected to derive benefit),
directly and indirectly, from the credit extended by the Lenders to the Loan Parties hereunder,
both in their separate capacities and as members of a group of companies. Each Loan Party has
determined that execution, delivery, and performance of this Agreement and any other Loan Documents
to be executed by such Loan Party is within its corporate purpose, will be of direct and indirect
benefit to such Loan Party, and is in its best interest.




     6.31 Anti-Terrorism Laws.




          (a) General. No Loan Party or any Consolidated Member is in violation of any
Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids,
or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in any Anti-Terrorism Law.




          (b) Executive Order No. 13224.




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     (i) No Loan Party or any Consolidated Member is any of the following (each a
“Blocked Person”):




          (1) a Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224;




          (2) a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
Executive Order No. 13224;




          (3) a Person or entity with which any bank or other financial institution is
prohibited from dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;




          (4) a Person or entity that commits, threatens or conspires to commit or
supports “terrorism” as defined in Executive Order No. 13224;




          (5) a Person or entity that is named as a “specially designated national” on
the most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list; or




          (6) a Person or entity who is affiliated with a Person or entity listed above.



          (c) No Loan Party or any Consolidated Member (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person
or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in
property blocked pursuant to Executive Order No. 13224.




ARTICLE 7

AFFIRMATIVE AND NEGATIVE COVENANTS




          Each Loan Party covenants to Agent and each Lender that so long as any of the Obligations
remain outstanding or this Agreement or any of the Commitments are in effect:




     7.1 Taxes and Other Obligations.



          Each Loan Party shall (a) file when due (after taking into account any applicable extensions)
all federal, state, provincial and other material Tax returns and other material reports which it
is required to file; (b) pay, or provide for the payment, when due, of all federal, state,
provincial and other material Taxes, fees, assessments and other material governmental charges
against it or upon its properties, income franchises or assets, make all required Tax withholdings
and other Tax remittances and deposits, and provide to Agent and the Lenders, upon request,
satisfactory evidence of its timely compliance with the foregoing; and (c) pay when due all Debt
owed by it and all valid claims of materialmen, mechanics, carriers, warehousemen, landlords,
contractors, subcontractors, processors and other like Persons, and all other indebtedness owed by
it and perform and discharge in a timely manner all other obligations undertaken by it;
provided, however, so long as a Loan Party has notified Agent in writing, no Loan Party
need pay any Tax, fee, assessment, or governmental charge that is being Properly Contested.




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     7.2 Legal Existence and Good Standing.



          Each Loan Party shall maintain its legal existence and its qualification and good standing in
all jurisdictions in which the failure to maintain such existence and qualification or good
standing could reasonably be expected to have a Material Adverse Effect.




     7.3 Compliance with Law and Agreements; Maintenance of Licenses.




          Each Loan Party shall comply in all respects with all Requirements of Law of any Governmental
Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards
Act and all Environmental Laws) except where the failure to comply could not reasonably be expected
to have a Material Adverse Effect. Each Loan Party shall obtain and maintain all licenses,
permits, franchises, and governmental authorizations necessary to own its property and to conduct
its business as conducted on the Closing Date. No Loan Party shall modify, amend or alter its
certificate or articles of incorporation, or its limited liability company operating agreement or
limited partnership agreement, as applicable, other than in a manner which does not adversely
affect the rights of the Lenders or the Agent.




     7.4 Maintenance of Property; Inspection of Property.



          (a) Each Loan Party shall maintain all of its property necessary and useful in the conduct of
its business, in good operating condition and repair in accordance with the standard of the
Borrowers’ industry and consistent with such Loan Party’s past conduct, ordinary wear and tear
excepted.




          (b) Each Loan Party shall permit representatives and independent contractors of the Agent or
a Lender (in the case of the Agent, at the expense of the Borrowers not to exceed three (3) times
per calendar year for field exams and appraisals of the Collateral within the United States and
Canada unless an Event of Default has occurred and is continuing, and in the case of any Lender,
at such Lender’s expense) to visit and inspect any of its properties, to appraise the Collateral,
to examine its corporate, financial and operating records, and make copies thereof or abstracts
therefrom and to discuss its affairs, finances and accounts with its directors, officers and
independent public accountants, at such reasonable times during normal business hours and as soon
as may be reasonably desired, upon reasonable advance notice to such Loan Party and such visits
and inspections shall not interfere materially with the business of any such Loan Party;
provided, 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 Borrowers shall not be responsible for the
Agent’s costs of more than two (2) such appraisals of the Collateral during any calendar year;
provided, further, that at any time an Event of Default exists, the Agent or any
Lender may do any of the foregoing at the expense of the Loan Parties at any time during normal
business hours and without advance notice.




     7.5 Insurance.



          (a) Each Loan Party shall maintain with financially sound and reputable insurers, and in the
manner customarily insured by similar businesses owning such properties, insurance against loss or
damage by fire with extended coverage; theft, burglary, pilferage and loss in transit; public
liability and third party property damage; larceny, embezzlement or other criminal liability;
business interruption; public liability and third party property damage; and such other hazards or
of such other types as is customary for Persons engaged in the same or similar business, as Agent,
in its discretion, or acting at the direction of the Required Lenders, shall reasonably specify,
in amounts, and under policies





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reasonably acceptable to Agent and the Required Lenders. Without limiting the foregoing, in
the event that any Inventory is located within an area that has been identified by the Director of
the Federal Emergency Management Agency as a Special Flood Hazard Area or similar designation by
another Governmental Authority (“SFHA”), the Loan Parties shall purchase and maintain flood
insurance on any such Inventory located in a SFHA.



          (b) Each of the Loan Parties shall cause Agent, for the benefit of Agent and the Lenders, to
be named as secured party and loss payee or additional insured on all insurance policies covering
Collateral, in a manner reasonably acceptable to Agent. Each policy of insurance shall contain a
clause or endorsement requiring the insurer to give not less than thirty (30) days prior written
notice to Agent in the event of cancellation of the policy for any reason whatsoever and a clause
or endorsement in respect of the insured property stating that the interest of Agent with respect
to the Collateral shall not be impaired or invalidated by any act or neglect of the insured Person
or the owner of any premises for purposes more hazardous than are permitted by such policy. All
premiums for such insurance shall be paid by the Borrowers when due, and certificates of insurance
and, if requested by Agent or any Lender, photocopies of the policies, shall be delivered to
Agent, in each case in sufficient quantity for distribution by the Agent to each of the Lenders.
If any Loan Party fails to procure such insurance or to pay the premiums therefor when due, the
Agent may, and at the direction of the Required Lenders shall, do so from the proceeds of
Revolving Loans.




     7.6 Insurance and Condemnation Proceeds.



          Each Loan Party shall promptly upon becoming aware, notify the Agent and the Lenders of any
material loss, damage, or destruction to the Collateral, whether or not covered by insurance.
Subject to the terms of the Additional Debt Intercreditor Agreement, Agent is hereby authorized to
collect all insurance and condemnation proceeds in respect of Collateral directly and, after
deducting from such proceeds the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds, ratably, to the reduction of
the Obligations in the order provided for in Section 3.9. With respect to any such
proceeds payable to Applica Canada, the Borrowers shall transfer an amount equal to such proceeds
to the Agent for application to the Obligations in accordance with Section 3.9.




     7.7 Environmental Laws.



          Each Loan Party shall conduct, and shall cause each Loan Party to conduct, its business in
compliance with all Environmental Laws applicable to it, including those relating to the
generation, handling, use, storage, and disposal of any Contaminant, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect. Each Loan Party shall
take, and shall cause each Loan Party to take, prompt and appropriate action to respond to any
non-compliance with Environmental Laws and shall regularly report to the Agent on such response.




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     7.8 Compliance with ERISA.



          Except as could not reasonably be expected to have a Material Adverse Effect, each Loan Party
shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code, the PBA and other federal,
provincial or state law; (b) cause each Pension Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) make all required contributions to any Pension Plan
subject to Section 412 of the Code; (d) not engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan; and (e) not engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.




     7.9 Asset Dispositions, Mergers, Dissolutions.



          (a) No Loan Party shall transfer, sell, assign, lease as lessor, or otherwise dispose of all
or any part of its property (including any Collateral), except, when no Default or Event of Default
exists and would not result therefrom, for (i) sales of Inventory in the ordinary course of its
business; (ii) a transfer of property (including Proprietary Rights) to a Loan Party by another
Loan Party, provided that, if the property so transferred constitutes Proprietary Rights, then the
Loan Parties shall provide written notice of such transfer to Agent and agree to cooperate with
Agent in connection with the execution, delivery and recordation of any and all documentation
necessary to reflect such transfer of record and to ensure the reflection of record of Agent’s Lien
in such Proprietary Rights, all at the Loan Parties’ sole cost and expense; (iii) a termination,
transfer or other disposition of a lease of Real Estate or personal property that is not necessary
to the conduct of such Loan Party’s business in the ordinary course, could not reasonably be
expected to have a Material Adverse Effect and does not result from such Loan Party’s default or
failure to perform under such lease; (iv) a disposition of property that does not constitute
Collateral; (v) a sale of Inventory (and Proprietary Rights related thereto) of a division or line
of business of a Loan Party other than in the ordinary course of business in connection with and as
part of the sale by such Loan Party of such division or line of business, provided that (A)
the Loan Parties shall provide to Agent, not less than 5 Business Days prior to the closing of such
sale, written notice of such sale (which notice shall describe in detail the division or line of
business to be sold, the Inventory (and Proprietary Rights related thereto) to be sold in
connection therewith and as part thereof and the economic and other material terms of such sale),
(B) the Net Proceeds from such sale are not less than the Availability attributable to the
Inventory to be sold in connection with and as part of such sale, (C) all Net Proceeds from such
sale received by a Loan Party (other than Applica Canada, in which event the Borrowers shall
transfer an amount equal to such Net Proceeds to Agent for application to the Obligations and after
the date on which Applica Canada is required hereunder or by the Applica Canada Security Agreement
or otherwise following the occurrence and during the continuance of an Event of Default, Applica
Canada shall remit proceeds of its Collateral to Agent) are promptly remitted to Agent for
application to the Obligations to the extent required hereunder, (D) Borrowers deliver to Agent an
updated Borrowing Base Certificate as of the date of, and which gives effect to, such sale and (E)
no Default or Event of Default exists at the time of or after giving effect to such sale; (vi)
sales to Persons that do not constitute Loan Parties of Proprietary Rights that, at the time of any
such sale are not utilized in connection with Inventory of the Loan Parties, having an aggregate
book value of not greater than $5,000,000; (vii) the conversion of Cash Equivalents to cash and the
use of such cash to pay any of the Obligations or in the ordinary course of business of a Loan
Party; (viii) a sale (including a sale of Proprietary Rights) that has been consented to in writing
by the Required Lenders, provided that, to the extent not otherwise provided hereinabove,
in each of the cases described above in this Section 7.9 all Net Proceeds (to the extent
constituting proceeds of Collateral) received by a Loan Party (other than Applica Canada, in which
event the Borrowers shall transfer an amount equal to such Net Proceeds to Agent for application to
the Obligations to the extent required hereunder and after the date on which Applica
 Canada is
required hereunder or by the Applica Canada Security Agreement or otherwise following the
occurrence and



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during the continuance of an Event of Default, Applica Canada shall remit proceeds of its
Collateral to the Agent) are promptly remitted to the Agent for application to the Obligations; or
(ix) dispositions of assets of the Consolidated Salton Parties (including Proprietary Rights
related thereto) having an aggregate book value of not greater than $10,000,000 and to which
Consolidated EBITDA attributable thereto for the trailing twelve-month period is not greater than
$1,000,000. The Loan Parties shall deliver a certificate executed by a Responsible Officer to
Agent in connection with any Asset Disposition permitted pursuant to clauses (vi) or (ix) in this
Section 7.9(a) setting forth the amount of Net Proceeds received from such disposition to
be applied to the Revolver Loan pursuant to Section 3.5.




          (b) No Loan Party shall enter into a transaction of merger, reorganization, consolidation or
amalgamation except: (i) on or about the Closing Date, (A) SFP may merge with and into APN, with
APN as the survivor of such merger, and (B) Applica may merge with and into ACP, with ACP as the
survivor of such merger; and (ii) at any time after the Closing Date, when no Default or Event of
Default exists and would not result therefrom, that (W)(1) Applica Mexico may merge with and into
HP, with HP as the survivor of such merger, and (2) each of One Coffee, Sonex, HCD, SHI, Icebox,
STL, Toastmaster, Family Products and APN may be merged with and into ACP, with ACP as the survivor
of such merger, (X) any Domestic Subsidiary may merge or amalgamate into a Borrower, with such
Borrower as the survivor of such merger; (Y) any Domestic Subsidiary may merge into any other
Domestic Subsidiary, provided that if a Borrower is a party to such merger it shall be the survivor
of such merger; and (Z) any Loan Party that is not a Borrower may merge or amalgamate into another
Person that is not a Subsidiary if the Loan Party is the surviving party to such merger or
amalgamation, provided that the requirements of the Security Agreement and all other Loan Documents
are at all times satisfied and such merger or amalgamation does not violate any other provision of
this Agreement.




          (c) As long as no Default or Event of Default exists or would result therefrom and provided
the Borrowers give the Agent and the Lenders at least five (5) Business Days prior written notice,
a Loan Party, other than a Borrower, may wind-up, dissolve, or liquidate if none of the Collateral
(except Collateral having a fair value of $1,000,000 or less, in aggregate) is sold or otherwise
disposed of except on terms acceptable to the Agent (acting at the direction or with the consent of
the Required Lenders or pursuant to this Section 7.9) or if such Collateral is sold or
otherwise disposed of to another Loan Party, any Net Proceeds of Collateral received by a Loan
Party (other than Applica Canada, in which event the Borrowers shall transfer an amount equal to
such Net Proceeds to Agent for application to the Obligations and after the date on which Applica
Canada is required hereunder or by the Applica Canada Security Agreement or otherwise following the
occurrence and during the continuance of an Event of Default, Applica Canada shall remit proceeds
of its Collateral to the Agent) in connection with any such winding-up, dissolution or liquidation
are, to the extent required hereunder, promptly remitted to the Agent for application to the
Obligations, and any remaining property not sold or otherwise disposed of is transferred to the
Borrowers or another Loan Party subject to the Agent’s Liens.




     7.10 Distributions; Capital Change; Restricted Investments.



          No Loan Party shall (i) directly or indirectly declare or make, or incur any liability to
make, any Distribution, except for Permitted Distributions, (ii) make any change in its capital
structure which could have a Material Adverse Effect or (iii) make or have any Restricted
Investment.




     7.11 Acquisitions.



          No Loan Party shall make any Acquisition other than a Permitted Acquisition.




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     7.12 Third Party Guaranties.



     No Loan Party shall make, issue, or become liable on any Guaranty, except (a) Guaranties of
the Obligations in favor of the Agent, (b) Guaranties in favor of the holders of the Additional
Debt, or (c) unsecured Guaranties of Debt incurred by a Foreign Subsidiary in an aggregate
principal amount at any time outstanding not to exceed $5,000,000.



     7.13 Debt.



          No Loan Party shall incur or maintain any Debt, other than: (a) the Obligations; (b) Debt
described on Schedule 6.9; (c) Capital Leases of Equipment and purchase money secured Debt
incurred to purchase Equipment provided that (i) Liens securing the same attach only to the
Equipment acquired by the incurrence of such Debt, and (ii) the aggregate amount of such Debt
(including Capital Leases) outstanding does not exceed $10,000,000 at any time; (d) Debt consisting
of Permitted Intercompany Advances to the extent consistent with Section 7.28; (e) Debt
evidencing a refinancing, refunding, renewal or extension of the Debt described on Schedule
6.9; provided that (i) the principal amount thereof is not increased, (ii) the Liens, if any,
securing such refunded, renewed or extended Debt do not attach to any assets in addition to those
assets, if any, securing the Debt to be refunded, renewed or extended, (iii) no Person that is not
an obligor or guarantor of such Debt as of the Closing Date shall become an obligor or guarantor
thereof, and (iv) the terms of such refinancing, refunding, renewal or extension are not
materially less favorable to such Loan Party, the Agent or the Lenders than the original Debt; (f)
Debt in respect of Hedge Agreements entered into for non-speculative purposes related to hedging
interest rates, currency values and commodities in connection with the Core Business; (g) the
endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; (h) Debt arising by reason of Guaranties by a Loan Party permitted
under Section 7.12(b); (i) the Additional Debt in an amount not to exceed $110,000,000
minus the aggregate amount of principal payments made from time to time after the Closing
Date on such Additional Debt; and (j) other unsecured Debt in an aggregate principal amount at any
time outstanding not to exceed $1,000,000.




     7.14 Payments; Prepayments.



          No Loan Party shall prepay voluntarily any Additional Debt or Subordinated Debt, except as
permitted by the terms of this Agreement or any other Loan Document. The Loan Parties may make a
voluntary prepayment of the Additional Debt if, at the time of and after giving pro forma effect to
any such voluntary prepayment of the Additional Debt, (a) Availability is not less than $25,000,000
and (b) no Default or Event of Default exists.




     7.15 Transactions with Affiliates.




          Except as permitted under Section 7.9, Section 7.10, Section 7.12,
Section 7.13(d), Section 7.13(h) and, for so long as an Affiliated Term Loan Party
holds the Additional Debt, Section 7.13(i), Section 7.28 and except as set forth
below, no Loan Party shall sell, transfer, distribute, or pay any money or property, including, but
not limited to, any fees or expenses of any nature (including, but not limited to, any fees or
expenses for management services) to any Affiliate that is not a Loan Party or lend or advance
money or property to any Affiliate that is not a Loan Party, or invest in (by capital contribution
or otherwise) or purchase or repurchase any Capital Stock or indebtedness, or any property, of any
Affiliate that is not a Loan Party, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate that is not a Loan Party. Notwithstanding the
foregoing, if no Default or Event of Default is in existence or would result therefrom, any Loan
Party may engage in transactions with an Affiliate in the ordinary course of such Loan Party’s
business consistent with past practices and
upon terms no less favorable to such Loan Party than would be obtained in a comparable
arm’s-length transaction with a third party who is not an Affiliate.




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     7.16 Borrowing Base Certificates.



          In addition to the requirements set forth in Section 5.2(n), the Borrowers shall
deliver to the Agent (and the Agent shall on request from a Lender, promptly deliver to such
Lender) a Borrowing Base Certificate on the second Business Day of each week (or as more frequently
requested by Agent during a Springing Period or if an Event of Default exists), prepared as of the
close of business of the last Business Day of the previous week (it being understood that such
Borrowing Base Certificates (a) shall reflect (i) Availability attributable to Accounts as of the
last day of the previous week and (ii) Reserves as of the last day of the month most recently ended
and (b) shall reflect Availability attributable to Inventory as of the last Business Day of the
previous week.




     7.17 Reserved.



     7.18 Reserved.



     7.19 Reserved.



     7.20 Investment Banking and Finder’s Fees.



          With the exception of the fees due to the Lead Arranger, no Loan Party shall pay or agree to
pay, or reimburse any other party with respect to, any investment banking or similar or related
fee, underwriter’s fee, finder’s fee, or broker’s fee to any Person in connection with this
Agreement. The Loan Parties shall defend and indemnify the Agent and the Lenders and their
Affiliates against and hold them harmless from all claims of any Person that a Loan Party is
obligated to pay for any such fees, and all costs and expenses (including attorneys’ fees) incurred
by the Agent and/or any Lender and their Affiliates in connection therewith.




     7.21 Business Conducted.



          The Loan Parties shall not and shall not permit any of their Subsidiaries to, engage directly
or indirectly, in any line of business other than the Core Business or those businesses that
reasonably and rationally develop from such Core Business from time to time.




     7.22 Liens.



          No Loan Party shall create, incur, assume, or permit to exist any Lien on any property now
owned or hereafter acquired by any of them, except (a) Permitted Liens, and (b) Liens securing
Capital Leases and purchase money Debt permitted in Section 7.13.




     7.23 Reserved.



     7.24 New Subsidiaries.



          The Loan Parties shall not, directly or indirectly, organize, create, acquire, or permit to
exist any Subsidiary except for non-first tier level Foreign Subsidiaries and as otherwise
permitted by this Section 7.24. The Loan Parties shall (a) in the event of the acquisition
or creation of any Subsidiary (a “New Subsidiary”) cause to be delivered to Agent, for the benefit
of itself and the Lenders; (b) in the event of the acquisition or creation of any Domestic
Subsidiary, cause to be delivered to the Agent, for the



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benefit of itself and the Lenders, each of the following, in each case to be duly executed
and delivered by such Subsidiary within thirty (30) Business Days of the acquisition or creation of
such Subsidiary (i) a Guaranty with respect to all of the Obligations, (ii) a security agreement in
substantially the form of the Security Agreement, and (iii) if such Subsidiary has any material
leased locations where Inventory is located, a Collateral Access Agreement with respect thereto;
and (c) in the event of the acquisition or creation of any Subsidiary subject to the provisions of
clauses (a) or (b) above, cause to be delivered to Agent for the benefit of the Lenders each of the
following within the time periods indicated therein: (i) an opinion of counsel to such Subsidiary
dated as of the date of the delivery of the other documents required to be delivered pursuant to
this Section 7.24 and addressed to the Agent and Lenders, in form and substance identical
to the opinion of counsel delivered pursuant to Section 8.1(a)(xviii) hereof on the Closing
Date with respect to any Guarantor; and (ii) current certified copies of the Organizational
Documents and Operating Documents of such Subsidiary, minutes of duly called and conducted meetings
(or duly effected consent actions) of the Board of Directors, or appropriate committees thereof
(and, if required by such Organizational Documents or Operating Documents or by applicable law, of
the shareholders), of such Subsidiary authorizing it to enter into the agreements required under
this Section 7.24 and evidence satisfactory to Agent (confirmation of the receipt of which
will be provided by Agent to the Lenders) that such Subsidiary is Solvent as of such date after
giving effect to such Guaranty and Security Agreement.




     7.25 Fiscal Year.



          Except as set forth on Schedule 7.25, the Borrowers shall not change, and shall not
permit any other Loan Party to change, their Fiscal Year.




     7.26 Reserved.



     7.27 Financial Covenants.



          (a) Minimum Fixed Charge Coverage Ratio.
On each Fixed Charge Measurement Date that occurs during a Springing Period, the Reporting
Loan Parties shall maintain a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0, calculated
as of such Fixed Charge Measurement Date.




          (b) Minimum Consolidated EBITDA. On each Minimum EBITDA Measurement Date, the Reporting Loan Parties shall achieve minimum
Consolidated EBITDA of not less than the amount set forth below for the period corresponding
thereto:




	 	 	 	 	 
	Period	 	Amount	 
	The month ending
	 	 	($3,800,000	)
	January 31, 2008
	 	 	 	 
	 
	The 2-month period ending
	 	 	($8,500,000	)
	February 28, 2008
	 	 	 	 
	 
	The 3-month period ending
	 	 	($12,300,000	)
	March 31, 2008
	 	 	 	 
	 
	The 4-month period ending
	 	 	($14,300,000	)
	April 30, 2008
	 	 	 	 
	 
	The 5-month period ending
	 	 	($15,200,000	)
	May 31, 2008
	 	 	 	 







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	Period	 	Amount	 
	The 6-month period ending
	 	 	($15,800,000	)
	June 30, 2008
	 	 	 	 
	 
	The 7-month period ending
	 	 	($12,100,000	)
	July 31, 2008
	 	 	 	 
	 
	The 8-month period ending
	 	 	($6,800,000	)
	August 31, 2008
	 	 	 	 
	 
	The 9-month period ending
	 	$	1,400,000	 
	September 30, 2008
	 	 	 	 
	 
	The 10-month period ending
	 	$	13,400,000	 
	October 31, 2008
	 	 	 	 
	 
	The 11-month period ending
	 	$	21,300,000	 
	November 30, 2008
	 	 	 	 
	 
	The 12-month period ending
	 	$	25,000,000	 
	December 31, 2008
	 	 	 	 






The use of parentheses for the required amount of Consolidated EBITDA for any period above
indicates that the amount is negative. If the minimum Consolidated EBITDA for any period is
expressed as a negative amount, then Consolidated EBITDA for such period shall not be less than the
negative amount required for such period.




          (c) Cure Right. To the extent that the Reporting Loan Parties fail to satisfy the Fixed Charge Coverage Ratio
or minimum Consolidated EBITDA requirement of this Section 7.27 as of any Financial
Covenant Measurement Date, such failure shall not constitute an Event of Default if, within five
(5) Business Days after the reporting date for the Fixed Charge Coverage Ratio or minimum
Consolidated EBITDA, as applicable, as of such Financial Covenant Measurement Date, Equity
Investors make an equity contribution (or provide subordinated Debt pursuant to a debt
subordination agreement reasonably acceptable to Agent) to the Reporting Loan Parties, in an amount
sufficient, when added to Consolidated EBITDA, to satisfy the Fixed Charge Coverage Ratio or
minimum Consolidated EBITDA requirement, and provide Agent with evidence thereof in form and
substance satisfactory to Agent.




          (d) General. The Fixed Charge Coverage Ratio or Consolidated EBITDA, as applicable, shall be calculated as
of each Financial Covenant Measurement Date and reported to the Agent in connection with the
delivery of the certificate required pursuant to Section 5.2(f), regardless of whether a
Springing Period is in effect.




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     7.28 Use of Proceeds.



          The Loan proceeds shall be used by the Borrowers solely for one or more of the following
purposes: (i) to pay any of the Obligations, (ii) to satisfy reimbursement Debt in respect of
Letters of Credit, (iii) to refinance existing Debt of the Borrowers (the “Refinancing”) and to
finance part of the Merger, (iv) to pay fees and expenses related to the Transaction, and (v) to
finance the ongoing working capital and other general corporate purposes of (a) the Loan Parties,
and (b) other Subsidiaries of the Loan Parties that do not constitute Loan Parties to the extent of
Permitted Intercompany Advances at any date. In no event shall any portion of the Loan proceeds be
used by a Loan Party or any Subsidiary, directly or indirectly, to purchase or carry Margin Stock,
to repay or otherwise refinance indebtedness of a Loan Party or others incurred to purchase or
carry Margin Stock, to extend credit for the purpose of purchasing or carrying any Margin Stock, or
to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act
or any other applicable laws, other than a Permitted Acquisition.




     7.29 Reserved.



     7.30 Anti-Terrorism Laws.



          No Loan Party shall conduct any business or engage in any transaction or dealing with any
Blocked Person (as defined in Section 6.31(b)), including the making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked Person; deal in, or
otherwise engage in any transaction relating to, any property or interests in property blocked
pursuant to Executive Order No. 13224; or engage in or conspire to engage in any transaction with
the intent to evade, avoid or violate, any of the prohibitions set forth in Executive Order No.
13224 or the USA PATRIOT Act. Loan Parties shall deliver to Agent and Lenders any certification or
other evidence reasonably requested from time to time by Agent or any Lender confirming Loan
Parties’ compliance with this Section 7.30.




     7.31 Reserved.



     7.32 Blocked Accounts.




          (a) The Borrowers and Applica Canada shall promptly establish and maintain Blocked Accounts,
pursuant to lockbox or other arrangements acceptable to the Agent, with such Blocked Accounts to be
maintained with Bank or such other banks as may be selected by the Borrowers and be reasonably
acceptable to Agent. The Borrowers and Applica Canada shall issue to such banks irrevocable
letters of instruction directing such banks to deposit all payments or other remittances received
in the lockboxes to the Blocked Accounts.




          (b) The Borrowers and Applica Canada shall enter into agreements, in form satisfactory to the
Agent, with the banks at which the Blocked Accounts are maintained. Pursuant to such agreements,
(a) prior to any such bank’s receipt of a Springing Dominion Notice from the Agent, such bank shall
remit all funds deposited into the Blocked Accounts pursuant to the instructions of the Borrowers
or Applica Canada, as applicable, and (b) after such bank’s receipt of a Springing Dominion Notice,
such bank shall immediately, and without further consent of or notice to Borrowers or any other
Loan Party, transfer to the Agent all monies deposited to such Borrower Blocked Accounts solely
pursuant to the instructions of the Agent until delivery of further notice by the Agent;
provided, that the Agent agrees not to deliver a Springing Dominion Notice until
the commencement of a Springing Period. If a Springing Period subsequently ends, then the Agent
will withdraw the Springing Dominion Notice until the commencement of a subsequent Springing
Period.




-45-









 








          (c) All funds deposited in the Blocked Accounts shall be subject to Liens of the Agent. The
Borrowers and Applica Canada shall obtain the agreements (in favor of and in form and content
satisfactory to the Agent) by the banks at which the Blocked Accounts are maintained to waive any
offset rights against the funds deposited into the Blocked Accounts, except offset rights for
customary administrative charges. No Agent or Lender assumes any responsibility to Borrowers or
any other Loan Party for any such lockbox arrangements or Blocked Accounts, including any claim of
accord and satisfaction or release with respect to deposits accepted by any bank thereunder.




          (d) The Borrowers and Applica Canada shall request in writing that all payments on Accounts or
otherwise relating to Collateral of Borrowers or Applica Canada are made directly to the Blocked
Accounts (or a lockbox relating to the Blocked Accounts). If Borrowers receive, or Applica Canada
receives, cash or payment items with respect to any Collateral, they shall hold the same in trust
for the Agent and promptly (not later than the second Business Day after receipt) deposit the same
into a Blocked Account.




          (e) At any time other than during a Springing Period, the Borrowers and Applica Canada may
retain all cash balances contained in the Blocked Accounts. During a Springing Period, the
Borrowers and Applica Canada shall not retain any such balances, and the Agent shall have the sole
and exclusive right to withdraw funds from time to time in the Blocked Accounts and all amounts so
collected by the Agent shall be remitted to the Payment Account in accordance with Section
3.7.




          (f) At any time other than during a Springing Period, Applica Americas may retain all cash
balances in the Applica Americas Blocked Account. At any time during a Springing Period, Applica
Americas shall not retain any such balances (other than any portion thereof attributable to
Argentine operations of Applica Americas), and the Agent shall have the sole and exclusive right to
withdraw funds (other than any portion thereof attributable to Argentine operations of Applica
Americas), from time to time in the Applica Americas Blocked Account and all amounts so collected
by the Agent shall be remitted to the Payment Account in accordance with Section 3.7.




     7.33 Additional Debt Documents.



          The Borrowers will not: (a) agree or consent to amend or modify any of the Additional Debt
Documents if as a result thereof the holders of the Additional Debt would be in breach of their
covenants in the Additional Debt Intercreditor Agreement; (b) agree to shorten the maturity date
for the payment of any of the Additional Debt; (c) fail to provide prompt written notice to Agent
of any amendment to or modification of any of the Additional Debt Documents, including any
amendment or modification that would have the effect of extending the maturity date for payment of
the Additional Debt; or (d) make any voluntary prepayments of the Additional Debt, except as
expressly permitted under the Additional Debt Intercreditor Agreement. The Borrowers covenant and
agree that they will furnish to the Agent prompt written notice of the occurrence of any Default or
Event of Default as defined in and occurring under the Additional Debt Documents.




     7.34 Applica Asia Covenants.



          (a) Applica Asia may from time to time be requested by Applica Consumer Products and Applica
Canada to collect, or otherwise be in possession of, payments in respect of Accounts of Applica
Consumer Products or Applica Canada owing by certain customers of Applica Consumer Products or
Applica Canada to which goods are sold and delivered from locations outside of the United States
and Canada to a customer in the United States or Canada (each such Account of Applica Consumer
Products or Applica Canada being referred to as an “Applica Asia Serviced Account”). The Borrowers
shall promptly notify the Agent in writing of each Account of Applica Consumer Products or Applica



-46-









 






Canada that is an Applica Asia Serviced Account, to the extent that any such Account is to be
included in the Borrowing Base, at the time that any such Account is included in the Borrowing
Base. Applica Asia shall promptly cause all payments received by it with respect to any Applica
Asia Serviced Accounts to be deposited into one or more depository accounts (with each such
depository account to be subject to the Applica Asia Blocked Account Agreements) and shall cause
each depository bank in which it may deposit any such payments or proceeds to be automatically wire
transferred to the Payment Account or such other bank account as may be designated by the Agent in
writing from time to time. Pending any such remittance to the Agent, Applica Asia shall hold all
such payments (and any other proceeds of Collateral in its possession from time to time) as the
bailee and agent, for Lien perfection purposes, of the Agent and Lenders and in trust for the
benefit of the Agent and Lenders. Applica Asia shall not commingle any other monies with any
payments received in respect of the Applica Asia Serviced Accounts, except other proceeds of
Collateral, and shall promptly remit all such payments and other Collateral proceeds to the Agent
for application to the Obligations in accordance with the terms of this Agreement. Each such
remittance by Applica Asia shall be without setoff, deduction or recoupment. In no event shall
Applica Asia permit any Lien or other encumbrance to exist with respect to any depository account
into which it may deposit such payments or Collateral proceeds. If payments are received by
Applica Asia from any customer of Applica Consumer Products or Applica Canada in a currency other
than Dollars, Applica Asia shall promptly remit to the Agent, in accordance with the foregoing
terms of this Section, the Dollar Equivalent of the currency received by Applica Asia.




          (b) Applica Asia, Applica Consumer Products and Applica Canada acknowledge, represent,
stipulate and agree that (i) all goods sold and delivered by Applica Consumer Products to any
Person, irrespective of the name under which any invoice is rendered for such sale or the identity
of the Loan Party that may collect any amount owing in connection with any such sale, shall be and
constitute Accounts owned solely by Applica Consumer Products and all such invoices shall in any
event indicate on their face that amounts due and payable in connection with such sale shall be due
and owing to Applica Consumer Products or Applica Asia on behalf of Applica Consumer Products,
whether or not amounts owing in connection therewith are to be remitted to or are collected by
Applica Asia; (ii) all goods sold and delivered by Applica Canada to any Person, irrespective of
the name under which any invoice is rendered for such sale or the identity of the Loan Party that
may collect any amount owing in connection with any such sale, shall be and constitute Accounts
owned solely by Applica Canada and all such invoices shall in any event indicate on their face that
amounts due and payable in connection with such sale shall be due and owing to Applica Canada or to
Applica Asia on behalf of Applica Canada, whether or not amounts owing in connection therewith are
to be remitted to or are collected by Applica Asia; and (iii) all invoices with respect to any
Applica Asia Serviced Account shall show the seller and payee on the face of the invoice as Applica
Canada or Applica Consumer Products, as appropriate, or Applica Asia “as agent” for either of them.




          (c) Applica Asia hereby subordinates any and all liabilities, claims or Debts at any time or
times owing by Applica Consumer Products or Applica Canada to Applica Asia, whether now owed or
hereafter incurred or arising, whether evidenced by any note, instrument or other agreement and
whether arising under the applicable Agency Agreement or otherwise, to the full and final payment
of the Obligations, provided that, prior to the occurrence of any Event of Default, Applica
Consumer Products and Applica Canada are authorized to make payments to Applica Asia pursuant to
the terms of the applicable Agency Agreement as in effect on the date hereof or as hereafter
amended with the consent of the Agent.





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     7.35 Post-Closing Covenants.



          After the Closing Date, the Loan Parties shall cooperate with the Agent and Lenders,
diligently and in good faith, to cause to be executed, delivered or otherwise procured for the
benefit of itself and Lenders, the following documents and agreements:




          (a) Not later than January 31, 2008, execute and deliver to Agent, in form and substance reasonably
acceptable to Agent, a deed of trust with respect to Real Estate owned by the Loan Parties located at (i) 1801 N.
Stadium Boulevard, Columbia, Missouri 65202, (ii) 1401 Morgan Street, Boonville, Missouri, (iii)
708 S. Missouri Street, Macon, Missouri, and (iv) 17160 Plant Road, Laurinburg, North Carolina
28352.




          (b) From and after the Closing Date, no Loan Parties shall pay to SHK a commission on goods
purchased by such Loan Party from SHK.




          (c) Not later than September 1, 2008, the Loan Parties shall cause the proceeds of and
payments on all Applica Asia Serviced Accounts to be deposited directly into a Borrower Blocked
Account maintained with Bank or such other banks located in the United States or Canada as may be
selected by the Borrowers and reasonably acceptable to the Agent, as and when such direct deposit
is required pursuant to Section 7.32.




          (d) Not later than July 31, 2008, Agent shall have received evidence satisfactory to it that
the financing arrangement between SHK and HSBC in Hong Kong shall have terminated.




          (e) Deliver to Agent the true, correct and complete copies of the certified articles of merger
(or equivalent documents) filed in connection with the mergers and other business combinations
permitted pursuant to Section 7.9(b) promptly after the filing thereof.




          (f) Not later than March 31, 2008, cause to be executed and delivered to Agent, in form and
substance reasonably acceptable to Agent, a Collateral Access Agreement with respect to (i)
premises leased by certain Loan Parties and located in Redlands, California, and (ii) a warehouse
arrangement among certain Loan Parties and Logistic Distribution Inc. concerning Inventory from
time to time located at a warehouse or warehouses in Ontario, Canada.




     7.36 Further Assurances.



          The Loan Parties shall execute and deliver, or cause to be executed and delivered, to the
Agent such documents and agreements, and shall take or cause to be taken such actions as the Agent
may, from time to time, reasonably request to carry out the terms and conditions of this Agreement
and the other Loan Documents.




     7.37 Proceeds from Surplus Cash Deposits.



          If at any time during a Springing Period, Applica Canada has on deposit in any bank accounts
for a period in excess of five (5) Business Days unapplied cash exceeding the Dollar Equivalent of
$6,000,000, Applica Canada shall transfer such unapplied cash to a Borrower by loan, Distribution
or other intercompany transfer.




     7.38 Excess Collections, Investments, Etc.




          At any time during a Springing Period, Applica Canada shall not have a sum exceeding the
Dollar Equivalent of $6,000,000 in the form of (i) a deposit of cash in any bank account, or (ii)
securities for a period in excess of five (5) Business Days.




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ARTICLE 8

CONDITIONS OF LENDING




     8.1 Conditions Precedent to Making of Initial Loans.




          The obligation of the Lenders to make the initial Loans hereunder, and the obligation of the
Agent to cause the Letter of Credit Issuer to issue the initial Letter of Credit or Credit Support
hereunder, are subject to the following conditions precedent having been satisfied in a manner
satisfactory to the Agent and each Lender:





     (a) The Agent shall have received each of the following documents, all of which shall
be satisfactory in form and substance to the Agent and the Lenders:




     (i) copies of the certificate of incorporation and organizational document of
each of the Loan Parties, with all amendments, if any, certified by the appropriate
Governmental Authority (provided that upon request by any Loan Party and
with the consent of the Agent, any such certificate, to the extent not provided on
the Closing Date, may be provided within thirty (30) days of the Closing Date, so
long as an uncertified copy thereof has been delivered to the Agent together with a
written statement by a Responsible Officer confirming that such copy is true,
correct, and complete), and the bylaws, regulations, operating agreement, or similar
governing document of each Loan Party, in each case certified by the corporate
secretary, general partner, or comparable authorized representative of such Loan
Party, as being true and correct and in effect on the Closing Date;




     (ii) certificates of incumbency and specimen signatures with respect to each
Person authorized to execute and deliver this Agreement and the other Loan Documents
on behalf of each Loan Party and each other Person executing any document,
certificate, or instrument to be delivered in connection with this Agreement and the
other Loan Documents and, in the case of the Borrowers, to request Borrowings and
the issuance of Letters of Credit or Credit Support;




     (iii) a certificate evidencing the existence of each Loan Party, and
certificates evidencing the good standing of each Loan Party in the jurisdiction of
its organization and in each other jurisdiction in which it is required to be
qualified as a foreign business entity to transact its business as presently
conducted, provided that upon request by any Loan Party and with the consent
of the Agent, certificates of good standing for any Loan Party from a Governmental
Authority other than the jurisdiction of its organization, legal domicile and chief
executive office, to the extent not provided on the Closing Date, may be provided
within thirty (30) days of the Closing Date;




     (iv) this Agreement and the other Loan Documents duly executed and delivered
by each Loan Party and each other Person that is a party thereto;




     (v) certified copies of all action taken by each Loan Party to authorize the
execution, delivery, and performance of this Agreement, the other Loan Documents,
and with respect to the Borrowers, the Borrowings and the issuance of Letters of
Credit and/or Credit Support;




     (vi) a certificate of each Loan Party signed by a Responsible Officer:



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     (A) stating that all of the representations and warranties made or
deemed to be made under this Agreement are true and correct as of the
Closing Date, after giving effect to the Loans to be made at such time and
the application of the proceeds thereof and the issuance of any Letter(s) of
Credit and/or Credit Support at such time,




     (B) stating that no Default or Event of Default exists,




     (C) specifying the account of the Borrowers which is a Designated
Account, and




     (D) certifying as to such other factual matters as may be reasonably
requested by the Agent;




     (vii) with respect to any Letter of Credit or Credit Support to be issued, all
documentation required by Section 1.3, duly executed and delivered by each
Loan Party, complying with the requirements of such Section;




     (viii) (A) UCC or PPSA financing statements and/or amendments to existing UCC
or PPSA financing statements with respect to all Collateral as may be requested by
the Agent (and in all events in each state of incorporation of an Loan Party), duly
executed by the respective Loan Parties, to the extent any such Liens may be
perfected under the UCC or PPSA, and (B) with respect to any Loan Party located in,
or organized under the laws of, Canada, all filings and recordations required by
Requirements of Law of Canada (including under the PPSA), as the case may be, in all
jurisdictions that the Agent may deem necessary or desirable in order to perfect the
Agent’s Lien in all the Collateral, including Accounts and Deposit Accounts of such
Loan Party;




     (ix) (A) duly executed UCC-3 termination statements or assignments with respect
to the UCC and such other releases or instruments, in each case in form and
substance satisfactory to the Agent, as in each case shall be necessary to terminate
and satisfy all Liens, except Permitted Liens, on the property of the Loan Parties,
to the extent the Agent’s Liens therein may be perfected under the UCC and (B)
releases, terminations or other instruments under the Requirements of Law of Canada
(including under the PPSA and other applicable law), and such other releases or
instruments, in each case in form and substance satisfactory to the Agent, in each
case as shall be necessary to terminate and satisfy all Liens, except Permitted
Liens, on all the Collateral, including the Accounts and Deposit Accounts of any
Loan Party;




     (x) the ratification and reaffirmation or amendment and restatement of each
Guaranty, including the Applica Canada Guaranty duly executed and delivered by each
Person required pursuant to Section 7.18;




     (xi) a Borrowing Base Certificate effective as of the Business Day preceding
the day initial Loans are to be funded or any Letter of Credit or Credit Support is
to be issued;




     (xii) as requested by the Agent in its discretion, a Collateral Access
Agreement, in form and substance reasonably acceptable to the Agent, duly executed
on behalf of each landlord or mortgagee, as the case may be, of Real Estate on which
any Collateral is located provided, that the Agent may, in its discretion,
establish a reserve in
an amount equal to three (3) months rent with respect to the Collateral located
on any Real Estate for which the Agent has not received an acceptable waiver and
consent agreement);



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     (xiii) Each Blocked Account Agreement (including each Applica Canada Blocked
Account Agreement) duly executed as required by the Security Agreement;




     (xiv) the ratification and reaffirmation or amendment and restatement of the
Applica Canada Security Agreement duly executed and delivered by Applica Canada;




     (xv) (A) the Agent shall have received satisfactory evidence that the Agent has
a valid, exclusive (other than Permitted Liens), perfected, and, subject to the
terms of the Additional Debt Intercreditor Agreement, first priority security
interest, lien, collateral assignment, and pledge as of such date in all Collateral
as security for all Obligations, to the extent any such Liens may be perfected under
the UCC, and (B) with respect to any Collateral located in Canada, the Agent shall
have received satisfactory evidence that the Agent has a valid, exclusive (other
than Permitted Liens), perfected, and, subject to the terms of the Additional Debt
Intercreditor Agreement, first priority Lien in all such Collateral, to the extent
any such Liens may be perfected under the Requirements of Law of Canada, including
under the PPSA and other applicable law, as the case may be, in each case in form
and substance satisfactory to the Agent; provided further, that upon
the Agent’s request, the Loan Parties shall provide any additional agreement,
document, instrument, certificate, or other item relating to any Collateral as may
be required for perfection under any Requirement of Law;




     (xvi) opinions of counsel for the Loan Parties, each such opinion to be in a
form, scope, and substance reasonably satisfactory to the Agent and its counsel;




     (xvii) the Additional Debt Intercreditor Agreement duly executed and delivered
by the holders of the Additional Debt;




     (xix) a certificate, signed by the chief financial officer of the Borrowers,
that, after giving pro forma effect to the Transaction, each Borrower and other Loan
Party is Solvent,; and




     (xviii) such other documents and instruments as the Agent or any Lender may
reasonably request.



     (b) After (i) taking into account all outstanding Loans on the Closing Date, the
initial Loans to be made hereunder (including those to finance payment or reimbursement for
fees, costs, and expenses then payable under or pursuant to this Agreement), all outstanding
Letters of Credit and Credit Support on the Closing Date and any Letter of Credit to be
issued at the time of the initial Loans hereunder, and (ii) giving effect to the
Transaction, Availability shall be not less than $35,000,000 and Global Availability shall
be not less than $60,000,000.




     (c) No Event of Default shall exist or would exist after giving effect to the
Transaction, including the Loans to be made and the Letters of Credit and Credit Support to
be issued.




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          (d) Subject to Section 14.7 hereof, the Loan Parties shall have paid all
accrued fees and reasonable expenses of Agent and Lead Arranger and the Attorney Costs
incurred in connection with any of the Loan Documents and the Transaction to the extent
invoiced.




          (e) Agent shall have received evidence, in form, scope, and substance, reasonably
satisfactory to the Agent, of all insurance coverage as required by this Agreement.




          (f) All proceedings taken in connection with the execution of this Agreement, the other
Loan Documents, and all documents and papers relating thereto shall be reasonably
satisfactory in form, scope, and substance to the Agent and the Lenders.




          (g) Agent shall have received, in form, scope and substance satisfactory to it, a legal
opinion from counsel to each Loan Party, favorably opining upon, among other things, the due
organization of each Loan Party, the authorization of each Loan Party to execute and deliver
and perform all of its obligations under the Loan Documents to which it is a party, the due
execution and delivery of each of the Loan Documents by such Loan Party, the validity and
legality of each of the Loan Documents, and the enforceability of each of the Loan Documents
against such Loan Party in accordance with its terms (with standard exceptions).




          (h) Without limiting the generality of the items described above, the Loan Parties and
each Person guaranteeing or securing payment of the Obligations shall have delivered or
caused to be delivered to the Agent (in form and substance reasonably satisfactory to the
Agent), the financial statements, instruments, resolutions, documents, agreements,
certificates, opinions and other items required by the Agent hereunder.




          (i) Agent shall have received such pro forma financial statements and annual forecasts
(to include forecasted consolidated balance sheets, income statements and cash flow
statements) as it may reasonably request, including, without limitation, annual forecasts
for the period commencing on July 1, 2008 and ending on June 30, 2012, for the Consolidated
Members and Loan Parties, with the 12-month period commencing on January 1, 2008 and ending
on December 31, 2008 to be provided on a month-by-month basis.




          (j) Agent shall have received satisfactory evidence that the Additional Debt facility
has been consummated on terms reasonably acceptable to Agent, and Agent shall have received
true, correct and complete copies of the Additional Debt Documents certified by a
Responsible Officer.




          (k) Agent shall have received satisfactory evidence that the Merger has been
consummated in accordance with the Merger Agreement and all applicable law and regulatory
approvals and otherwise on terms reasonably acceptable to Agent, and Agent shall have
received true, correct and complete copies of the Merger Agreement (including all schedules
and exhibits thereto) certified by a Responsible Officer.




          (l) The final material terms and conditions of each aspect of the Transaction,
including all tax aspects thereof, shall be consistent with the description thereof received
in writing from Borrowers prior to the Closing Date and otherwise reasonably satisfactory to
Agent and Lenders (including a determination of exposure, if any, of taxes owing by the
Consolidated Salton Parties to CRA or any other Governmental Authority in connection with
the Consolidated Salton Parties’ Canadian operations prior to the Closing Date), and Agent
shall have received all agreements, instruments and documents relating to the Transaction
certified by a Responsible Officer.




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          (m) Agent shall have received satisfactory evidence that the Borrowers shall have
received (i) the Equity Contribution, and (ii) gross cash proceeds of up to $110,000,000
from the issuance and sale by the Borrowers of the Additional Debt.




          (n) Agent shall have received satisfactory evidence that at least 92% of the ownership
interest in the Parent shall be owned, directly or indirectly, by Equity Investors, that
100% of the ownership interest in ACP shall be owned indirectly by Parent, that all Capital
Stock of the Loan Parties shall be owned directly or indirectly by Parent.




          (o) All notices to, or consents, authorizations or approvals of, all Governmental
Authorities and all other Persons (including, without limitation, Hart-Scott-Rodino
clearance) necessary in connection with the Transaction have been provided and received, and
all applicable waiting periods have expired without any action being taken by any
Governmental Authority that could restrain, prevent or impose any material adverse
conditions on the Loan Parties or such transactions or that could threaten any of the
foregoing, and no applicable law or regulation shall be applicable which in the reasonable
judgment of Agent could have such effect.




          (p) There shall be no pending or threatened action, suit, or proceeding, by any Person,
or any pending or threatened investigation by a Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect.




          (q) Agent and Lenders shall be reasonably satisfied with the amount, terms, conditions
and holders of all intercompany Debt between the Loan Parties and all Subsidiaries that are
not Loan Parties and all other Debt and material liabilities owing by Loan Parties to other
Persons outstanding on and after the Closing Date.




          (r) Agent and Lenders shall be reasonably satisfied that (i) the Loan Parties will be
able to meet their obligations under all Pension Plans, (ii) except for the employee benefit
plans of Toastmaster, the Pension Plans of the other Loan Parties and their ERISA Affiliates
are, in all material respects, funded in accordance with the minimum statutory requirements,
and (iii) no ERISA Event has occurred or is contemplated as to any such Pension Plan. Agent
and Lenders shall also be reasonably satisfied with the shortfall with respect to the
employee benefit plan of Parent and the impact of any required catch-up payments on the
Borrowers.




          (s) Agent and Lenders shall have satisfactory evidence that all Canadian assets and
operations of the Consolidated Salton Parties shall have been assigned, transferred or
otherwise conveyed to Applica Canada, including receipt by Agent and Lenders of (i) a true
and correct copy of a bill of sale and/or other agreement evidencing the conveyance of such
assets and operations by the Consolidated Salton Parties to Applica Canada, and (ii) a true
and correct copy of the assignment of the lease of Real Estate located in Canada under which
one or more of the Consolidated Salton Parties is the tenant and other material agreements
relating to the Consolidated Salton Parties’ Canadian operations and any requisite consent
to such assignment.



The acceptance by the Borrowers of any Loans made or Letters of Credit or Credit Support
issued on the Closing Date shall be deemed to be a representation and warranty made by the Loan
Parties to the effect that all of the conditions precedent to the making of such Loans or issuance
of such Letters of Credit or Credit Support have been satisfied, with the same effect as delivery
to the Agent and the Lenders of a certificate signed by a Responsible Officer of the Loan Parties,
dated the Closing Date, to such effect. Execution and delivery to the Agent by a Lender of a
counterpart of this Agreement shall be deemed confirmation by such Lender that (i) the decision of
such Lender to execute and deliver to the Agent an executed counterpart of this Agreement was made
by such Lender independently and without reliance on
the Agent or any other Lender as to the satisfaction of any condition precedent set forth in this
Section 8.1, and (ii) all documents sent to such Lender for approval, consent, or
satisfaction were acceptable to such Lender.




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     8.2 Conditions Precedent to Each Loan.



          The obligation of the Lenders to make each Loan, including the initial Loans on the Closing
Date, and the obligation of the Agent to cause the Letter of Credit Issuer to issue any Letter of
Credit or Credit Support shall be subject not only to the satisfaction of the conditions set forth
in Section 8.1 (to the extent not otherwise satisfied on the Closing Date), but also to the
further conditions precedent that on and as of the date of any such extension of credit the
following statements shall be true, and the acceptance by the Borrowers of any extension of credit
shall be deemed to be a statement to the effect set forth in clause (a), clause (b), and clause (c)
following with the same effect as the delivery to the Agent and the Lenders of a certificate signed
by a Responsible Officer of the Loan Parties, dated the date of such extension of credit, stating
that:




          (a) the representations and warranties contained in this Agreement and the other Loan
Documents are correct in all material respects on and as of the date of such extension of credit as
though made on and as of such date, other than any such representation or warranty which relates to
a specified prior date and except to the extent the Agent and the Lenders have been notified in
writing by the Loan Parties that any representation or warranty is not correct and the Required
Lenders have explicitly waived in writing compliance with such representation or warranty;




          (b) no Default or Event of Default has occurred and is continuing, or would result from such
proposed Borrowing;




          (c) the proposed Borrowing will not cause the aggregate principal amount of all outstanding
Revolving Loans plus the aggregate amount available for drawing under all outstanding
Letters of Credit and in respect of any Credit Support, to exceed the Borrowing Base or the Maximum
Revolver Amount; and




          (d) no event shall have occurred or circumstance exist that has or could reasonably be
expected to have a Material Adverse Effect.



Except as provided by Section 11.1(a), no Borrowing or issuance of any Letter of Credit or
Credit Support shall exceed the Availability, provided, however, that the foregoing
conditions precedent are not conditions to the requirement for each Lender participating in or
reimbursing the Bank or the Agent for such Lenders’ Pro Rata Share of any Non-Ratable Loan or Agent
Advance made in accordance with the provisions of Section 1.2(h) and Section
1.2(i).




     8.3 Limited Waiver of Conditions Precedent




          If Lenders shall make any Loan or otherwise extend credit to Borrowers at any time when any of
the conditions precedent set forth in Section 8.1 or Section 8.2 are not satisfied
(regardless of whether the failure of satisfaction of any such conditions precedent was known or
unknown to the Agent or any Lender), the funding of such Loan or other extension of credit shall
not operate as a waiver of the right of the Agent and Lenders to insist upon the satisfaction of
all conditions precedent with respect to each subsequent Borrowing requested by the Borrowers or a
waiver of any Default or Event of Default as a consequence of the failure of any such conditions to
be satisfied, unless the Agent, with the prior written consent or at the direction of the Required
Lenders, in writing waives the satisfaction of any conditions precedent, in which event such waiver
shall only be applicable for the specific instance given and only to
the extent and for the period of time expressly stated in such waiver.




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ARTICLE 9

DEFAULT; REMEDIES




     9.1 Events of Default.



          It shall constitute an event of default (“Event of Default”) if any one or more of the
following shall occur for any reason:




          (a) any failure by the Borrowers to pay the principal of or interest or premium on any of the
Obligations or any fee or other amount owing hereunder when due, whether upon demand or otherwise;




          (b) any representation or warranty made or deemed made by a Loan Party in this Agreement or
by a Loan Party in any of the other Loan Documents, any Financial Statement, or any certificate
furnished by any Loan Party at any time to the Agent or any Lender shall prove to be untrue in any
material respect as of the date on which made, deemed made, or furnished;




          (c) (i) any default shall occur in the observance or performance of any of the covenants and
agreements contained in Sections 5.2(m), 7.2, 7.5, 7.9-7.32 of this Agreement or
Section 11 of the Security Agreement, or any Loan Party shall fail to remit proceeds of
Accounts or Inventory of a Borrower to the Agent as required by this Agreement or any of the other
Loan Documents, (ii) any default shall occur in the observance or performance of any of the
covenants and agreements contained in Sections 5.2 (a)-(g), 5.3 (a)-(j), or
7.34 (other than a default of a kind described in clause (i) of this Section
9.1(c)) or any Loan Party shall fail to remit proceeds of Collateral (other than proceeds of
Accounts or Inventory of a Borrower) to the Agent as required by any of the Loan Documents; and
such default shall continue for five (5) days or more; or (iii) any default shall occur in the
observance or performance of any of the other covenants or agreements contained in any other
Section of this Agreement or any other Loan Document, any other Loan Documents, or any other
agreement entered into at any time to which any Loan Party and the Agent or any Lender are a party
(including in respect of any Bank Products) and such default shall continue for twenty (20) days
or more;




          (d) any default which has not been waived shall occur with respect to (i) Debt of the
Borrowers evidenced by or arising under the Additional Debt Documents, (ii) Debt of the Borrowers’
Affiliates under the UK Credit Facility, or (iii) any Debt (other than the Obligations and Debt
contemplated by clauses (i) or (ii) hereof) of any Loan Party in an outstanding principal amount
which exceeds $2,500,000, or under any agreement or instrument under or pursuant to which any such
Debt may have been issued, created, assumed, or guaranteed by any Loan Party, and such default
shall continue for more than the period of grace, if any, therein specified, if the effect thereof
(with or without the giving of notice or further lapse of time or both) is to accelerate, or to
permit the holders of any such Debt to accelerate, the maturity of any such Debt; or any such Debt
shall be declared due and payable or be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof;





          (e) any Loan Party shall (i) file a voluntary petition in bankruptcy or file a voluntary
petition or an answer or file any proposal or notice of intent to file a proposal or otherwise
commence any action or proceeding seeking reorganization, arrangement, consolidation or
readjustment of its debts or which seeks to stay or has the effect of staying any creditor or for
any other relief under the
Bankruptcy Code, as amended, or




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under any other bankruptcy, insolvency,
liquidation, winding up,
corporate or similar act or law, provincial, territorial state, federal or foreign (including
the BIA or the CCAA), now or hereafter existing, or consent to, approve of, or acquiesce in, any
such petition, proposal, action or proceeding; (ii) apply for or acquiesce in the appointment of a
receiver, interim receiver, assignee, liquidator, sequestrator, custodian, monitor, administrator,
trustee or similar officer for it or for all or any part of its property; (iii) make an assignment
for the benefit of creditors; or (iv) be unable generally to pay its debts as they become due;




          (f) an involuntary petition shall be filed or an action or proceeding otherwise commenced
seeking reorganization, arrangement, consolidation or readjustment of the debts of any Loan Party
or for any other relief under the Bankruptcy Code, as amended, or under any other bankruptcy,
insolvency, liquidation, winding up, corporate or similar act or law (including the BIA or the
CCAA), provincial, territorial state, federal or foreign, now or hereafter existing and either
such petition, proposal or proceeding shall not be dismissed within forty-five (45) days after the
filing or commencement thereof or an order of relief shall be entered with respect thereto;




          (g) a receiver, interim receiver, assignee, liquidator, sequestrator, custodian, monitor,
administrator, trustee or similar officer for any Loan Party or for all or any part of its
property shall be appointed or a warrant of attachment, execution, writ of seizure or seizure and
sale or similar process shall be issued against any part of the property of any Loan Party or any
distress or analogous process is levied upon all or any part of any Loan Party;




          (h) any Loan Party shall file a certificate of dissolution or like process under applicable
law or shall be liquidated, dissolved or wound-up or shall commence or have commenced against it
any action or proceeding for dissolution, winding-up or liquidation, or shall take any corporate
action in furtherance thereof, except as permitted under Section 7.9(c);




          (i) all or any material part of the Collateral shall be taken or impaired through
condemnation and Availability on the date of condemnation is less than $30,000,000; or all or any
material part of the property of any Loan Party shall be nationalized, expropriated or otherwise
appropriated, or custody or control of such property or of such Loan Party shall be assumed by any
Governmental Authority or any court of competent jurisdiction at the instance of any Governmental
Authority or any other Person, except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;




          (j) any Loan Document (including the Applica Canada Guaranty, the Applica Asia Guaranty or
any other Guaranty from a Loan Party) shall be terminated, rescinded, revoked or declared void or
invalid or unenforceable (or any Loan Party shall attempt or purport to terminate, rescind, revoke
or declare void, invalid or unenforceable any Loan Document) or any material Loan Document is
challenged by any Loan Party or any Affiliate;




          (k) one or more judgments, orders, decrees or arbitration awards is entered against any one
or more Loan Parties for $2,500,000 or more in excess of the amount of insurance coverage provided
by independent third party insurers which do not dispute coverage and (whether or not covered by
insurance), any such judgment, order, decree or arbitration award shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of thirty (30) days after the entry thereof;




          (l) payment by a Loan Party under an agreement of Guaranty issued by such Loan Party with
respect to any Debt of a Foreign Subsidiary, or entry of a judgment, order, decree or arbitration
award against a Loan Party with respect to any such agreement of Guaranty, in either case in an
aggregate amount in excess of $10,000,000 during the term of this Agreement;




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          (m) any loss, theft, damage or destruction of any item or items of Collateral or other
property of any Loan Party occurs which could reasonably be expected to cause a Material Adverse
Effect and is not adequately covered by insurance;




          (n) there is filed against any Loan Party any action, suit or proceeding under any federal,
state or foreign racketeering, money, laundering or proceeds of crime statute (including the
Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit or proceeding (i)
is not dismissed within one hundred twenty (120) days, and (ii) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the Collateral;




          (o) for any reason other than the failure of the Agent after the Closing Date to take any
action available to it to maintain perfection of the Agent’s Liens, pursuant to the Loan
Documents, any material Loan Document ceases to be in full force and effect or any Lien with
respect to any material portion of the Collateral intended to be secured thereby ceases to be, or
is not, valid, perfected and prior to all other Liens (other than Permitted Liens) or is
terminated, revoked or declared void;




          (p) (i) an ERISA Event shall occur with respect to a Pension Plan or Multi-employer Plan
which has resulted or could reasonably be expected to result in liability of the Loan Parties or
any ERISA Affiliate under applicable laws in an aggregate amount in excess of $2,500,000; (ii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans (excluding the Salton
Europe Pension and Life Assurance Scheme) at any time exceeds $5,000,000; (iii) the Loan Parties
or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal liability under Section 4201 of
ERISA under a Multi-employer Plan or any other required amounts, in an aggregate amount in excess
of $2,500,000; or (iv) any Lien (save for contribution amounts not yet due) arises in connection
with any Plan;




          (q) (i) a Change of Control shall occur or (ii) Applica Canada or Applica Asia ceases to be a
Wholly-Owned Subsidiary of Applica (whether directly or indirectly through one or more other
Wholly-Owned Subsidiaries); or




          (r) the Black & Decker License Agreement shall be terminated, revoked or declared void or
invalid or unenforceable for any reason.




     9.2 Remedies.



          (a) If a Default or an Event of Default has occurred and is continuing, the Agent may, in its
discretion, and shall, at the direction of the Required Lenders, do one or more of the following
at any time or times and in any order, without notice to or demand on the Borrowers: (i) reduce
the advance rates against Eligible Accounts and/or Eligible Inventory used in computing the
Borrowing Base, or reduce one or more of the other elements used in computing the Borrowing Base;
(ii) restrict the amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to
provide Letters of Credit or Credit Support. If an Event of Default has occurred and is
continuing, the Agent may, in its discretion, and shall, at the direction of the Required
Lenders, do one or more of the following, in addition to the actions described in the preceding
sentence, at any time or times and in any order, without notice to or demand on the Borrowers:
(A) reduce the Maximum Revolver Amount; (B) terminate the Commitments and this Agreement; (C)
declare any or all Obligations to be immediately due and payable; provided, however, that
upon the occurrence of any Event of Default described in Sections 9.1(e), 9.1(f),
9.1(g), or 9.1(h), the Commitments shall automatically and immediately expire and
all Obligations shall automatically become immediately due and payable without notice or demand of
any kind; (D) require the Loan Parties to Cash Collateralize all outstanding LC Obligations and,
if the Loan Parties fail to make such deposit promptly, the Lenders may (and shall upon the
direction of the Required Lenders) advance such amount as a Revolving Loan (whether or not such Loan would be
in excess of the Borrowing Base). Any such deposit or advance shall be held by the Agent as a
reserve to fund future payments on any LC Obligations; and (E) pursue its other rights and
remedies under the Loan Documents and applicable law.




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          (b) If an Event of Default has occurred and is continuing: the Agent shall have for the
benefit of the Lenders, in addition to all other rights of the Agent and the Lenders, the rights
and remedies of a secured party under the Loan Documents, the UCC, the PPSA, and other applicable
law.




ARTICLE 10

TERM AND TERMINATION




     10.1 Term.



          The term of this Agreement (and the Commitments hereunder) shall end on the Stated Termination
Date unless sooner terminated by the Borrowers pursuant to Section 3.2 or by the Agent
pursuant to Section 10.2.




     10.2 Termination by Agent.



          The Agent may (and, upon direction from the Required Lenders, shall) terminate this Agreement,
without notice, upon or after the occurrence and during the continuance of an Event of Default.
Upon the effective date of any such termination of this Agreement for any reason whatsoever, all
Obligations (including all unpaid principal, and accrued and unpaid interest) shall become
immediately due and payable and shall be paid forthwith by the Borrowers and the Loan Parties shall
immediately arrange for the cancellation and return of all Letters of Credit then outstanding (and,
pending such cancellation or return, the Borrowers shall Cash Collateralize all Letters of Credit
and any other contingent Obligations). As used herein, the term “Cash Collateralize” shall mean,
with respect to any LC Obligations or other contingent Obligations on such date, the deposit of
immediately available funds in an amount equal to 103% of the sum of the aggregate undrawn amount
of such Letters of Credit and other LC Obligations, and all contingent Obligations then
outstanding, in an account maintained at Bank under the sole and exclusive control of the Agent.




     10.3 Effect of Termination.



          Notwithstanding the termination of this Agreement (and the Commitments hereunder), until all
Obligations are indefeasibly paid and performed in full in cash (or Borrowers shall Cash
Collateralize such Obligations as described in Section 10.2), the Loan Parties shall remain
bound by the terms of this Agreement and shall not be relieved of any of their Obligations
hereunder or under any other Loan Document, and the Agent and the Lenders shall retain all their
rights and remedies hereunder (including the Agent’s Liens in and all rights and remedies with
respect to all then existing and after-arising Collateral). In no event shall any termination of
this Agreement (or the Commitments hereunder), whether such termination is made by the Borrowers or
the Agent, operate to terminate or otherwise affect any indemnification liability or obligation of
any Loan Party under this Agreement or any of the other Loan Documents, all of which
indemnification liabilities and obligations shall survive any such termination and continue in full
force and effect.




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ARTICLE 11

AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS




     11.1 Amendments and Waivers.



          (a) (i) Subject to clauses (ii) and (iii) of this Section 11.1(a), no
amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent
with respect to any departure by the Loan Parties therefrom, shall be effective unless the same
shall be in writing and signed by the Required Lenders (or by the Agent at the written request of
the Required Lenders) and the Loan Parties (except that no consent of the Loan Parties shall be
required in the case of amendments of Article 12 as long as such amendment does not impose
any additional, or change any, obligations on the Loan Parties) and then any such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given.





     (ii) Notwithstanding the foregoing, no such waiver, amendment, or consent shall, (A)
increase any of the percentages set forth in the definition of “Borrowing Base” or in
Section 1.2(i), (B) amend the definition of (1) “Borrowing Base” (other than to
reduce the advance rates set forth therein) or any of the definitions used therein that
otherwise have the effect of increasing Availability or (2) “In-Transit Inventory” or (C)
increase the Letter of Credit Subfacility or the maximum permitted amount of Non-Ratable
Loans, unless in each case it is consented to in writing by the Supermajority Lenders.




     (iii) Notwithstanding the foregoing, no such waiver, amendment, or consent shall,
unless consented to in writing by all Lenders (or the Agent with the consent of all
Lenders), do any of the following:




     (A) increase or extend the Commitment of any Lender (other than as contemplated
in Section 1.5);




     (B) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due to the
Lenders (or any of them) hereunder or under any other Loan Document;




     (C) reduce the principal of, or the rate of interest specified herein on any
Loan, or any fees or other amounts payable hereunder or under any other Loan
Document;




     (D) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Lenders or any of them to
take any action hereunder;




     (E) amend this Section or any provision of this Agreement providing for consent
or other action by all Lenders;




     (F) release any Loan Parties from their obligations under this Agreement or any
of the other Loan Documents, release any Guaranties of the Obligations,
contractually subordinate the priority of Agent’s Liens or release Collateral other
than as permitted by Section 12.11;




     (G) amend the definition of “Required Lenders” or “Pro Rata Share”; or



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     (H) increase the Maximum Revolver Amount (other than as contemplated in
Section 1.5),


provided, however, the Agent may, in its sole discretion and notwithstanding the
limitations contained above in this Section 11.1 and any other terms of this Agreement,
make Agent Advances in accordance with Section 1.2(i) and, provided
further, that no amendment, waiver or consent shall, unless in writing and signed by the
Agent, affect the rights or duties of the Agent under this Agreement or any other Loan Document and
provided further, that Annex B hereto (Commitments) may be amended from
time to time by Agent alone to reflect assignments of Commitments in accordance herewith.




          (b) If the Agent requests the consent of the Lenders to any proposed amendment, waiver or
consent (a “Proposed Change”) that requires the consent of the Required Lenders, the Supermajority
Lenders or all Lenders and Lenders holding forty percent (40%) or more of the Commitments provide
their consent to such Proposed Change, but the consent of one or more other Lenders is not
obtained (each such Lender whose consent is not obtained as described in this clause (b) being
referred to as a “Non-Consenting Lender”) within a period of five (5) Business Days after the date
of request for such consent by the Agent, then, so long as the Agent is not a Non-Consenting
Lender, at the Loan Parties’ request, the Agent or an Eligible Assignee (but no Non-Consenting
Lender or group of Non-Consenting Lenders) shall have the right (but not the obligation), with the
Agent’s approval, to purchase from any Non-Consenting Lender, and each Non-Consenting Lender
agrees that it shall sell, such Non-Consenting Lender’s Commitment for an amount equal to the
principal balance thereof and all accrued interest and fees (except any fees arising in connection
with such purchase that would otherwise arise under Section 4.4, for which the Loan
Parties shall not be liable) with respect thereto through the date of sale pursuant to an
Assignment and Acceptance Agreement, without premium or discount.




     11.2 Assignments; Participations.



          (a) Any Lender may, with the written consent of the Agent (which consent shall not be
unreasonably delayed or withheld) and, if no Event of Default exists, the Borrower Agent (which
consent shall not be unreasonably delayed or withheld), assign and delegate to one or more
Eligible Assignees (provided that no consent of the Agent or the Borrower Agent shall be required
in connection with any assignment and delegation by a Lender to another Lender or an Affiliate of,
or a fund managed by, such Lender) (each an “Assignee”) all, or any ratable part of all,
of the Loans, the Commitments and the other rights and obligations of such Lender hereunder, in a
minimum amount of $5,000,000 (provided that, unless an assignor Lender has assigned and delegated
all of its Loans and Commitments, no such assignment and/or delegation shall be permitted unless,
after giving effect thereto, such assignor Lender retains a Commitment in a minimum amount of
$5,000,000; provided, however, that the Loan Parties and the Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned to an Assignee
until (i) written notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the Loan Parties and
the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered
to the Loan Parties and the Agent an Assignment and Acceptance in the form of Exhibit D
(“Assignment and Acceptance”) together with any note or notes subject to such assignment, (iii)
except for an assignment to an Affiliate, the Assignee has paid to the Agent a processing and
recordation fee in the amount of $5,000 and (iv) Agent shall have received any forms required by
Section 12.10.




          (b) From and after the date that the Agent notifies the assignor Lender that it has received
an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and obligations,
including, but not limited to, the obligation to participate in Letters of Credit and Credit
Support have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of



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a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights to be
indemnified for Indemnified Taxes under Section 5.4.1(c)) and be released from its
obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).




          (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder
and the Assignee thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Document furnished pursuant hereto or the attachment, perfection, or priority of any
Lien granted by the Loan Parties to the Agent or any Lender in the Collateral; (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with respect to the
financial condition of the Loan Parties or any of them or the performance or observance by any
Loan Party of any of its obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (iii) such Assignee confirms that it has received a copy of this Agreement,
together with such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee
will, independently and without reliance upon the Agent, such assigning Lender or any other
Lender, and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under this Agreement; (v)
such Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are delegated to the
Agent by the terms hereof, together with such powers, including the discretionary rights and
incidental power, as are reasonably incidental thereto; and (vi) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms of this Agreement
are required to be performed by it as a Lender.




          (d) Immediately upon satisfaction of the requirements of Section 11.2(a), this
Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to
reflect the addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.




          (e) Any Lender may at any time sell to one or more commercial banks, financial institutions,
or other Persons not Affiliates of a Loan Party (a “Participant”) participating interests in any
Loans, the Commitment of that Lender and the other interests of that Lender (the “originating
Lender”) hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of such obligations, (iii) the Loan
Parties and the Agent shall continue to deal solely and directly with the originating Lender in
connection with the originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which
the Participant has rights to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document except the matters set forth in Section 11.1(a) (i),
(ii) and (iii), and all amounts payable by the Loan Parties hereunder shall be determined as
if such Lender had not sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent and subject to the
same limitation as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.




          (f) Notwithstanding any other provision in this Agreement, any Lender may at any time create
a security interest in, or pledge, all or any portion of its rights under and interest in this
Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge or
security interest in any manner permitted under applicable law.



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ARTICLE 12

THE AGENT




     12.1 Appointment and Authorization.



          Each Lender hereby designates and appoints Bank as its Agent under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of this Agreement or
any other Loan Document, together with such powers as are reasonably incidental thereto. Each
Lender authorizes the Agent to enter into each of the Loan Documents described herein to which the
Agent is to be a party on or after the Closing Date (including the Additional Debt Intercreditor
Agreement and any and all amendments or restatements contemplated thereby), and each Lender
acknowledges that prior to the Closing Date Agent entered into certain Loan Documents as described
herein or otherwise made available to Lenders, and, to the extent that any Lender is not otherwise
a party to any such Loan Documents, acknowledges and agrees that Agent may bind each Lender to the
terms thereof and to take or refrain from taking all actions authorized or permitted under all such
Loan Documents (including the Additional Debt Intercreditor Agreement and any and all amendments or
restatements contemplated thereby). The Agent agrees to act as such on the express conditions
contained in this Article 12. The provisions of this Article 12 are solely for the
benefit of the Agent and the Lenders and the Loan Parties shall have no rights as a third party
beneficiary of any of the provisions contained herein, nor shall anything contained in this
Article 12 limit any rights the Loan Parties have or may have as against Agent, Bank, any
Lender, any Letter of Credit Issuer or any other Agent-Related Person. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the
Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor
shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the Agent. Without
limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement
with reference to the Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such term is used merely
as a matter of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Except as expressly otherwise provided in
this Agreement, the Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from taking any actions
which the Agent is expressly entitled to take or assert under this Agreement and the other Loan
Documents, including (a) the determination of the applicability of ineligibility criteria with
respect to the calculation of the Borrowing Base, (b) the making of Agent Advances pursuant to
Section 1.2(i), and (c) the exercise of remedies pursuant to Section 9.2, and, with
respect to any such action so taken, if exercised in good faith, Agent shall have no liability to
the Lenders for any errors in judgment.




     12.2 Delegation of Duties.



          The Agent may execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection
was made without gross negligence or willful misconduct.




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     12.3 Liability of Agent.



          None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful misconduct), or
(ii) be responsible in any manner to any of the Lenders for any recital, statement, representation
or warranty made by any Loan Party or any other Consolidated Member, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any certificate, report, statement
or other document referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of
any Loan Party or any other Consolidated Member or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party or any other Consolidated Member.




     12.4 Reliance by Agent.



          The Agent shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to the Loan Parties), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it
shall first be indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of the Required
Lenders (or all Lenders if so required by Section 11.1) and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the Lenders.




     12.5 Notice of Default.



          The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, unless the Agent shall have received written notice from a Lender or any of the
Loan Parties referring to this Agreement, describing such Default or Event of Default and stating
that such notice is a “notice of default.” The Agent will notify the Lenders of its receipt of any
such notice. The Agent shall promptly take such action with respect to such Default or Event of
Default as may be requested by the Required Lenders in accordance with Section 9;
provided, however, that unless and until the Agent has received any such request, the Agent
may (but shall not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.




     12.6 Credit Decision.



          Each Lender acknowledges that none of the Agent-Related Persons has made any representation or
warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs
of the Loan Parties and their Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon any Agent-Related Person and based on such documents
and information as it has deemed appropriate, made its own appraisal of and investigation into the
business,



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prospects, operations, property, financial and other condition and creditworthiness of the
Loan Parties or the other Consolidated Members, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into this Agreement and to
extend credit to the Loan Parties. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and creditworthiness of the Borrowers. Except
for notices, reports and other documents expressly herein required to be furnished to the Lenders
by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations, property, financial and
other condition or creditworthiness of any Loan Party or any other Consolidated Member which may
come into the possession of any of the Agent-Related Persons.




     12.7 Indemnification.



          Whether or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of
the Loan Parties and without limiting the obligation of the Loan Parties to do so), in accordance
with their Pro Rata Shares, from and against any and all Indemnified Liabilities as such term is
defined in Section 14.11; provided, however, that no Lender shall be liable for the
payment to the Agent-Related Persons of any portion of such Indemnified Liabilities to the extent
determined in a final, non-appealable judgment by a court of competent jurisdiction to result from
such Person’s gross negligence or willful misconduct or from the breach of any representation,
warranty or covenant contained herein or in another Loan Document by such Indemnified Person.
Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its Pro
Rata Share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent
in connection with the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for
such expenses by or on behalf of the Loan Parties. The undertaking in this Section shall survive
the payment of all Obligations hereunder and the resignation or replacement of the Agent.




     12.8 Agent in Individual Capacity.



          The Bank and its branches and Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the Loan Parties and other
Consolidated Members and their Affiliates as though the Bank were not the Agent hereunder and
without notice to or consent of the Lenders. The Bank or its branches and Affiliates may receive
information regarding the Loan Parties and other Consolidated Members, their Affiliates and Account
Debtors (including information that may be subject to confidentiality obligations in favor of the
Loan Parties and other Consolidated Members) and acknowledge that except as required by the Loan
Documents and applicable law, the Agent and the Bank shall be under no obligation to provide such
information to them. With respect to its Loans, the Bank shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it were not the Agent,
and the terms “Lender” and “Lenders” include the Bank in its individual capacity.




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     12.9 Successor Agent.



          The Agent may resign as Agent upon at least thirty (30) days prior notice to the Lenders and
the Borrowers, such resignation to be effective upon the acceptance of a successor agent to its
appointment as Agent. In the event the Bank sells all of its Commitment and Revolving Loans as
part of a sale, transfer or other disposition by the Bank of substantially all of its loan
portfolio, the Bank shall resign as Agent and such purchaser or transferee shall become the
successor Agent hereunder. Subject to the foregoing, if the Agent resigns under this Agreement,
the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no
successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Lenders and the Loan Parties, a successor agent from among
the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent”
shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent
shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of
this Article 12 shall continue to inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement. Notwithstanding anything herein to the
contrary, the Borrowers shall have the right to consult with the Agent and the Lenders in the
choice of any such successor Agent so long as no Event of Default exists.




     12.10 Withholding Tax.



          (a) If any Lender is a “foreign corporation, partnership or trust” within the meaning of the
Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections
1441 or 1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver to the
Agent:





     (i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States of America tax treaty, properly completed IRS
Forms W-8BEN and W-8ECI before the payment of any interest in the first calendar
year and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;




     (ii) if such Lender claims that interest paid under this Agreement is
exempt from United States of America withholding tax because it is effectively
connected with a United States of America trade or business of such Lender, two
properly completed and executed copies of IRS Form W-8ECI before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this Agreement,
and IRS Form W-9; and




     (iii) such other form or forms as may be required under the Code or
other laws of the United States of America as a condition to exemption from, or
reduction of, United States of America withholding tax.



     Such Lender agrees to promptly notify the Agent of any change in circumstances which would
modify or render invalid any claimed exemption or reduction.



          (b) If any Lender claims exemption from, or reduction of, withholding tax under a United
States of America tax treaty by providing IRS Form FW-8BEN and such Lender sells, assigns, grants
a participation in, or otherwise transfers all or part of the Obligations owing to such Lender,
such Lender agrees to notify the Agent of the percentage amount in which it is no longer the
beneficial owner
of Obligations of the Loan Parties to such Lender. To the extent of such percentage amount,
the Agent will treat such Lender’s IRS Form W-8BEN as no longer valid.




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          (c) If any Lender claiming exemption from United States of America withholding tax by filing
IRS Form W-8ECI with the Agent sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations owing to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.




          (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may
withhold from any interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other documentation
required by subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.




          (e) If the IRS or any other Governmental Authority of the United States of America or other
jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly,
by the Agent as tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with
all costs and expenses (including Attorney Costs). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or replacement of the
Agent. For any period with respect to which a Lender has failed to provide a Loan Parties and
Agent with the appropriate form pursuant to this Section 12.10 hereof (unless such failure
is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be entitled to indemnification
under Section 4.1(a), 4.1(b) or 4.1(c) hereof with respect to Taxes
imposed by the United States; provided, however, that should a Lender, which is otherwise
exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of
its failure to deliver a form required hereunder, the Loan Parties shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes at such Lender’s
expense.




     12.11 Collateral Matters.



          (a) The Lenders hereby irrevocably authorize the Agent, at its option and in its sole
discretion, to release any Agent’s Liens upon any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full of all Loans and reimbursement obligations in
respect of Letters of Credit and Credit Support, and the termination of all outstanding Letters of
Credit (whether or not any of such obligations are due) and all other Obligations; (ii)
constituting property being sold or disposed of if the Loan Party certifies to the Agent that the
sale or disposition is made in compliance with Section 7.9 and Section 3.5 (and
the Agent may rely conclusively on any such certificate, without further inquiry); (iii)
constituting property in which no Loan Party owned an interest at the time the Lien was granted or
at any time thereafter; or (iv) constituting property leased to an Loan Party under a lease which
has expired or been terminated in a transaction permitted under this Agreement. Except as
provided above, the Agent will not release any of the Agent’s Liens without the prior written
authorization of the Lenders; provided that the Agent may, in its discretion, release the
Agent’s Liens on Collateral valued in the aggregate not in excess of $2,000,000 during each Fiscal
Year without the prior written authorization of the Lenders and the Agent may release the Agent’s
Liens on Collateral valued in
the aggregate not in excess of $4,000,000 during each Fiscal Year with the prior written
authorization of Required Lenders. Upon request by the Agent or the Loan Parties at any time, the
Lenders will confirm in writing the Agent’s authority to release any Agent’s Liens upon particular
types or items of Collateral pursuant to this Section 12.11.




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          (b) Upon receipt by the Agent of any authorization required pursuant to Section
12.11(a) from the Lenders of the Agent’s authority to release Agent’s Liens upon particular
types or items of Collateral, and upon at least five (5) Business Days prior written request by
the Loan Parties, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of the Agent’s Liens upon such
Collateral; provided, however, that (i) the Agent shall not be required to execute any
such document on terms which, in the Agent’s opinion, would expose the Agent to liability or
create any material obligation or entail any material consequence other than the release of such
Liens without recourse or warranty, and (ii) such release shall not in any manner discharge,
affect or impair the Obligations or any Liens (other than those expressly being released) upon (or
obligations of the Loan Parties in respect of) all interests retained by any Loan Party, including
the proceeds of any sale, all of which shall continue to constitute part of the Collateral.




          (c) The Agent shall have no obligation whatsoever to any of the Lenders to assure that the
Collateral exists or is owned by any Loan Party or is cared for, protected or insured or has been
encumbered, or that the Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or to exercise at all
or in any particular manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to the Agent pursuant
to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion given the Agent’s own interest in the Collateral in its
capacity as one of the Lenders and that the Agent shall have no other duty or liability whatsoever
to any Lender as to any of the foregoing.




     12.12 Restrictions on Actions by Lenders; Sharing of Payments.



          (a) Each of the Lenders agrees that it shall not, without the express consent of all Lenders,
and that it shall, to the extent it is lawfully entitled to do so, upon the request of all
Lenders, set off against the Obligations, any amounts owing by such Lender to an Loan Party or any
accounts of an Loan Party now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by the Agent, take or
cause to be taken any action to enforce its rights under this Agreement or against any Loan Party,
including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.




          (b) If at any time or times any Lender shall receive (i) by payment, foreclosure, setoff or
otherwise, any proceeds of Collateral or any payments with respect to the Obligations of any Loan
Party to such Lender arising under, or relating to, this Agreement or the other Loan Documents,
except for any such proceeds or payments received by such Lender from the Agent pursuant to the
terms of this Agreement, or (ii) payments from the Agent in excess of such Lender’s ratable
portion of all such distributions by the Agent, such Lender shall promptly (1) turn the same over
to the Agent, in kind, and with such endorsements as may be required to negotiate the same to the
Agent, or in same day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall be applied
ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however,
that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be rescinded in whole
or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be
returned to such purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess payment.




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     12.13 Agency for Perfection.



          Each Lender hereby appoints each other Lender as agent for the purpose of perfecting the
Lenders’ security interest in assets which, in accordance with Article 9 of the UCC or the
applicable provisions of the PPSA or other applicable law can be perfected only by possession.
Should any Lender (other than the Agent) obtain possession of any such Collateral, such Lender
shall notify the Agent thereof, and, promptly upon the Agent’s request therefor shall deliver such
Collateral to the Agent or in accordance with the Agent’s instructions.




     12.14 Payments by Agent to Lenders.



          All payments to be made by the Agent to the Lenders shall be made by bank wire transfer or
internal transfer of immediately available funds to each Lender pursuant to wire transfer
instructions delivered in writing to the Agent on or prior to the Closing Date (or if such Lender
is an Assignee, on the applicable Assignment and Acceptance), or pursuant to such other wire
transfer instructions as each party may designate for itself by written notice to the Agent.
Concurrently with each such payment, the Agent shall identify whether such payment (or any portion
thereof) represents principal, premium or interest on the Revolving Loans or otherwise. Unless the
Agent receives notice from the Loan Parties prior to the date on which any payment is due to the
Lenders that the Loan Parties will not make such payment in full as and when required, the Agent
may assume that the Loan Parties has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent the Loan Parties have not made such payment in full to the Agent, each
Lender shall repay to the Agent on demand such amount distributed to such Lender, together with
interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.




     12.15 Settlement.



          (a) (i) Each Lender’s funded portion of the Revolving Loans is intended by the Lenders to be
equal at all times to such Lender’s Pro Rata Share of the outstanding Revolving Loans.
Notwithstanding such agreement, the Agent, the Bank, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by the Loan Parties or any other Consolidated
Members) that in order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Revolving Loans, the Non-Ratable Loans and the Agent
Advances shall take place on a periodic basis in accordance with the following provisions:





     (ii) The Agent shall request settlement (“Settlement”) with the Lenders on at
least a weekly basis, or on a more frequent basis at Agent’s election, (A) on behalf
of the Bank, with respect to each outstanding Non-Ratable Loan, (B) for itself, with
respect to each Agent Advance, and (C) with respect to collections received, in each
case, by notifying the Lenders of such requested Settlement by telecopy, telephone
or other similar form of transmission, of such requested Settlement, no later than
1:00 p.m. (Atlanta, Georgia time) on the date of such requested Settlement (the
“Settlement Date”). Each Lender (other than the Bank, in the case of Non-Ratable
Loans and the Agent in the case of Agent Advances) shall transfer the amount of such
Lender’s Pro Rata Share of the



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outstanding principal amount of the Non-Ratable Loans and Agent Advances with
respect to each Settlement to the Agent, to Agent’s account, not later than 3:00
p.m. (Atlanta, Georgia time), on the Settlement Date applicable thereto.
Settlements may occur during the continuation of a Default or an Event of Default
and whether or not the applicable conditions precedent set forth in Article
8 have then been satisfied. Such amounts made available to the Agent shall be
applied against the amounts of the applicable Non-Ratable Loan or Agent Advance and,
together with the portion of such Non-Ratable Loan or Agent Advance representing the
Bank’s Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders. If
any such amount is not transferred to the Agent by any Lender on the Settlement Date
applicable thereto, the Agent shall be entitled to recover such amount on demand
from such Lender together with interest thereon at the Federal Funds Rate for the
first three (3) days from and after the Settlement Date and thereafter at the
Interest Rate then applicable to the Revolving Loans (A) on behalf of the Bank, with
respect to each outstanding Non-Ratable Loan, and (B) for itself, with respect to
each Agent Advance.




     (iii) Notwithstanding the foregoing, not more than one (1) Business Day after
demand is made by the Agent (whether before or after the occurrence of a Default or
an Event of Default and regardless of whether the Agent has requested a Settlement
with respect to a Non-Ratable Loan or Agent Advance), each other Lender (A) shall
irrevocably and unconditionally purchase and receive from the Bank or the Agent, as
applicable, without recourse or warranty, an undivided interest and participation in
such Non-Ratable Loan or Agent Advance equal to such Lender’s Pro Rata Share of such
Non-Ratable Loan or Agent Advance and (B) if Settlement has not previously occurred
with respect to such Non-Ratable Loans or Agent Advances, upon demand by Bank or
Agent, as applicable, shall pay to Bank or Agent, as applicable, as the purchase
price of such participation an amount equal to one-hundred percent (100%) of such
Lender’s Pro Rata Share of such Non-Ratable Loans or Agent Advances. If such amount
is not in fact made available to the Agent by any Lender, the Agent shall be
entitled to recover such amount on demand from such Lender together with interest
thereon at the Federal Funds Rate for the first three (3) days from and after such
demand and thereafter at the Interest Rate then applicable to Base Rate Loans.




     (iv) From and after the date, if any, on which any Lender purchases an
undivided interest and participation in any Non-Ratable Loan or Agent Advance
pursuant to clause (iii) above, the Agent shall promptly distribute to such Lender,
such Lender’s Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such Non-Ratable Loan or
Agent Advance.




     (v) Between Settlement Dates, the Agent, to the extent no Agent Advances are
outstanding, may pay over to the Bank any payments received by the Agent, which in
accordance with the terms of this Agreement would be applied to the reduction of the
Revolving Loans, for application to the Bank’s Revolving Loans including Non-Ratable
Loans. If, as of any Settlement Date, collections received since the then
immediately preceding Settlement Date have been applied to the Bank’s Revolving
Loans (other than to Non-Ratable Loans or Agent Advances in which such Lender has
not yet funded its purchase of a participation pursuant to clause (iii) above), as
provided for in the previous sentence, the Bank shall pay to the Agent for the
accounts of the Lenders, to be applied to the outstanding Revolving Loans of such
Lenders, an amount such that each Lender shall, upon receipt of such amount, have,
as of such Settlement Date, its Pro Rata Share of the Revolving Loans. During the
period between Settlement Dates, the Bank with respect to
Non-Ratable Loans, the Agent with respect to Agent Advances, and each Lender
with respect to the Revolving Loans other than Non-Ratable Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates payable under this
Agreement on the actual average daily amount of funds employed by the Bank, the
Agent and the other Lenders.



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          (b) Lenders’ Failure to Perform. All Revolving Loans (other than Non-Ratable Loans
and Agent Advances) shall be made by the Lenders simultaneously and in accordance with their Pro
Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make any Revolving Loans hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by any other Lender
to perform its obligation to make any Revolving Loans hereunder, (ii) no failure by any Lender to
perform its obligation to make any Revolving Loans hereunder shall excuse any other Lender from
its obligation to make any Revolving Loans hereunder, and (iii) the obligations of each Lender
hereunder shall be several, not joint and several.




          (c) Defaulting Lenders. Unless the Agent receives notice from a Lender on or prior
to the Closing Date or, with respect to any Borrowing after the Closing Date, at least three
Business Days prior to the date of such Borrowing, that such Lender will not make available as and
when required hereunder to the Agent that Lender’s Pro Rata Share of a Borrowing, the Agent may
assume that each Lender has made such amount available to the Agent in immediately available funds
on the Funding Date. Furthermore, the Agent may, in reliance upon such assumption, make available
to the Loan Parties on such date a corresponding amount. If any Lender has not transferred its
full Pro Rata Share to the Agent in immediately available funds and the Agent has transferred
corresponding amount to the Loan Parties on the Business Day following such Funding Date that
Lender shall make such amount available to the Agent, together with interest at the Federal Funds
Rate for that day. A notice by the Agent submitted to any Lender with respect to amounts owing
shall be conclusive, absent manifest error. If each Lender’s full Pro Rata Share is transferred
to the Agent as required, the amount transferred to the Agent shall constitute that Lender’s
Revolving Loan for all purposes of this Agreement. If that amount is not transferred to the Agent
on the Business Day following the Funding Date, the Agent will notify the Loan Parties of such
failure to fund and, upon demand by the Agent, the Loan Parties shall pay such amount to the Agent
for the Agent’s account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the Interest Rate applicable at the time to the
Revolving Loans comprising that particular Borrowing. The failure of any Lender to make any
Revolving Loan on any Funding Date (any such Lender, prior to the cure of such failure, being
hereinafter referred to as a “Defaulting Lender”) shall not relieve any other Lender of its
obligation hereunder to make a Revolving Loan on that Funding Date. No Lender shall be
responsible for any other Lender’s failure to advance such other Lenders’ Pro Rata Share of any
Borrowing.




          (d) Retention of Defaulting Lender’s Payments. The Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Loan Parties to the Agent for the Defaulting
Lender’s benefit; nor shall a Defaulting Lender be entitled to the sharing of any payments
hereunder. Amounts payable to a Defaulting Lender shall instead be paid to or retained by the
Agent. In its discretion, the Agent may loan the amount of all such payments received or retained
by it for the account of such Defaulting Lender. Any amounts so loaned to the Loan Parties shall
bear interest at the rate applicable to Base Rate Loans and for all other purposes of this
Agreement shall be treated as if they were Revolving Loans, provided, however, that for
purposes of voting or consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender”. Until a Defaulting
Lender cures its failure to fund its Pro Rata Share of any Borrowing (A) such Defaulting Lender
shall not be entitled to any portion of the Unused Line Fee and (B) the Unused Line Fee shall
accrue in favor of the Lenders which have funded their respective Pro



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Rata Shares of such requested Borrowing and shall be allocated among such performing Lenders
ratably based upon their relative Commitments. This Section shall remain effective with respect
to such Lender until such time as the Defaulting Lender shall no longer be in default of any of
its obligations under this Agreement. The terms of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by
the Loan Parties of their duties and obligations hereunder.




          (e) Removal of Defaulting Lender. At the Borrowers’ request, the Agent or an
Eligible Assignee reasonably acceptable to the Agent and the Borrowers shall have the right (but
not the obligation) to purchase from any Defaulting Lender, and each Defaulting Lender shall, upon
such request, sell and assign to the Agent or such Eligible Assignee, all of the Defaulting
Lender’s outstanding Commitments hereunder. Such sale shall be consummated promptly after Agent
has arranged for a purchase by Agent or an Eligible Assignee pursuant to an Assignment and
Acceptance, and at a price equal to the outstanding principal balance of the Defaulting Lender’s
Loans, plus accrued interest and fees (except any fees in connection with such sale that would
otherwise arise under Section 4.4 hereof, for which the Borrowers shall not be liable),
without premium or discount.




     12.16 Letters of Credit; Intra-Lender Issues.



          (a) Notice of Letter of Credit Balance. On each Settlement Date, the Agent shall
notify each Lender of the balance of all Letters of Credit outstanding.




          (b) Participations in Letters of Credit.





          (i) Purchase of Participations. Immediately upon issuance of any
Letter of Credit in accordance with Section 1.3(d), each Lender shall be deemed to
have irrevocably and unconditionally purchased and received without recourse or warranty, an
undivided interest and participation equal to such Lender’s Pro Rata Share of the face
amount of such Letter of Credit or the Credit Support provided through the Agent to the
Letter of Credit Issuer, if not the Bank, in connection with the issuance of such Letter of
Credit (including all obligations of the Borrowers with respect thereto, and any security
therefor or guaranty pertaining thereto).




          (ii) Sharing of Reimbursement Obligation Payments. Whenever the
Agent receives a payment from the Loan Parties on account of reimbursement obligations in
respect of a Letter of Credit or Credit Support as to which the Agent has previously
received for the account of the Letter of Credit Issuer thereof payment from a Lender, the
Agent shall promptly pay to such Lender such Lender’s Pro Rata Share of such payment from
the Borrowers. Each such payment shall be made by the Agent on the next Settlement Date.




          (iii) Documentation. Upon the request of any Lender, the Agent shall
furnish to such Lender copies of any Letter of Credit, Credit Support for any Letter of
Credit, reimbursement agreements executed in connection therewith, applications for any
Letter of Credit, and such other documentation as may reasonably be requested by such
Lender.




          (iv) Obligations Irrevocable. The obligations of each Lender to make
payments to the Agent with respect to any Letter of Credit or with respect to their
participation therein or with respect to any Credit Support for any Letter of Credit or with
respect to the Revolving Loans made as a result of a drawing under a Letter of Credit and
the obligations of the Loan Parties for whose account the Letter of Credit or Credit Support
was issued to make payments to the Agent, for the account of the Lenders, shall be
irrevocable and shall not be
subject to any qualification or exception whatsoever, including any of the following
circumstances:



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     (1) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;




     (2) the existence of any claim, setoff, defense or other right which
any Loan Party may have at any time against a beneficiary named in a Letter of
Credit or any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), any Lender, the Agent, the issuer of such Letter of
Credit, or any other Person, whether in connection with this Agreement, any Letter
of Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between the Borrowers or any other Person and
the beneficiary named in any Letter of Credit);




     (3) any draft, certificate or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;




     (4) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;




     (5) the occurrence of any Default or Event of Default; or




     (6) the failure of the Borrowers to satisfy the applicable conditions
precedent set forth in Article 8.



          (c) Recovery or Avoidance of Payments; Refund of Payments In Error. In the event any
payment by or on behalf of any Loan Party received by the Agent with respect to any Letter of
Credit or Credit Support provided for any Letter of Credit and distributed by the Agent to the
Lenders on account of their respective participations therein is thereafter set aside, avoided or
recovered from the Agent in connection with any receivership, liquidation, bankruptcy or other
insolvency or debt adjustment proceeding, the Lenders shall, upon demand by the Agent, pay to the
Agent their respective Pro Rata Shares of such amount set aside, avoided or recovered, together
with interest at the rate required to be paid by the Agent upon the amount required to be repaid
by it. Unless the Agent receives notice from the Borrowers prior to the date on which any payment
is due to the Lenders that the Borrowers will not make such payment in full as and when required,
the Agent may assume that the Borrowers have made such payment in full to the Agent on such date
in immediately available funds and the Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date an amount equal to the amount then due
such Lender. If and to the extent the Borrowers have not made such payment in full to the Agent,
each Lender shall repay to the Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such amount is
distributed to such Lender until the date repaid. The foregoing provisions shall survive payment
in full of the Obligations and termination of this Agreement (including the Commitments
hereunder).




          (d) Indemnification by Lenders. To the extent not reimbursed by the Loan Parties and
without limiting the obligations of the Loan Parties hereunder or under any other Loan Document,
the Lenders agree to indemnify the Letter of Credit Issuer ratably in accordance with their
respective Pro Rata Shares, for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys’ fees) or disbursements of any
kind and nature whatsoever that may



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be imposed on, incurred by or asserted against the Letter of Credit Issuer in any way
relating to or arising out of any Letter of Credit or the transactions contemplated thereby or any
action taken or omitted by the Letter of Credit Issuer under any Letter of Credit or any Loan
Document in connection therewith; provided that no Lender shall be liable for any of the
foregoing to the extent determined in a final, non-appealable judgment by a court of competent
jurisdiction to result from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Letter of
Credit Issuer promptly upon demand for its Pro Rata Share of any costs or expenses payable by any
Loan Party to the Letter of Credit Issuer, to the extent that the Letter of Credit Issuer is not
promptly reimbursed for such costs and expenses by the Loan Parties. The agreement contained in
this Section shall survive payment in full of the Obligations and termination of this Agreement
(including the Commitments hereunder).




     12.17 Concerning the Collateral and the Related Loan Documents.



          Each Lender authorizes and directs the Agent to enter into the other Loan Documents, for the
ratable benefit and obligation of the Agent and the Lenders. Each Lender agrees that any action
taken by the Agent or Required Lenders in accordance with the terms of this Agreement or the other
Loan Documents, and the exercise by the Agent or the Required Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders. The Lenders acknowledge that the
Revolving Loans, Agent Advances, Non-Ratable Loans, Hedge Agreements, Bank Products and all
interest, fees and expenses hereunder constitute one Debt, secured pari passu by all of the
Collateral.




     12.18 Field Audit and Examination Reports; Disclaimer by Lenders.



          By signing this Agreement, each Lender:




          (a) is deemed to have requested that the Agent furnish such Lender, promptly after it becomes
available, a copy of each field audit or examination report (each a “Report” and collectively,
“Reports”) prepared by or on behalf of the Agent;




          (b) expressly agrees and acknowledges that neither the Bank nor the Agent (i) makes any
representation or warranty as to the accuracy of any Report, or (ii) shall be liable for any
information contained in any Report;




          (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that the Agent or the Bank or other party performing any audit or examination will
inspect only specific information regarding the Loan Parties and will rely significantly upon the
Loan Parties’ books and records, as well as on representations of the Loan Parties’ personnel;




          (d) agrees to keep all Reports confidential and strictly for its internal use, and not to
distribute except to its participants, or use any Report in any other manner; and




          (e) without limiting the generality of any other indemnification provision contained in this
Agreement, agrees: (i) to hold the Agent and any such other Lender preparing a Report harmless
from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach
or draw from any Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to the Borrowers, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of the Borrowers; and
(ii) to pay and protect, and indemnify, defend and hold the Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs,
expenses and other amounts (including Attorney Costs) incurred by the Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might obtain all or part of any
Report through the indemnifying Lender.





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     12.19 Notice of Bank Products.



          Each Lender or its Affiliates (other than the Bank) providing Bank Products to a Loan Party
shall deliver to the Agent promptly following the end of each calendar month, notice setting forth
the aggregate amount of obligations of any Loan Party on account of such Bank Products (whether
matured or unmatured, absolute or contingent) as of the end of such month. The obligations due
with respect to Bank Products provided by any such Person who fails to timely furnish the Agent
with such notice, at the option of the Agent shall not be included in the Bank Product Reserve.




     12.20 Relation Among Lenders. The Lenders are not partners or co-venturers, and no
Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in
case of the Agent) authorized to act for, any other Lender.



     12.21 The Register. The Agent shall maintain a register (the “Register”), which shall include a master account and
a subsidiary account for each Lender and in which accounts (taken together) shall be recorded (i)
the date and amount of each Borrowing made hereunder, the type of each Loan comprising such
Borrowing and any Interest Period applicable thereto, (ii) the effective date and amount of each
Assignment and Acceptance delivered to and accepted by it and the parties thereto, (iii) the amount
of any principal or interest due and payable or to become due and payable from Borrowers to each
Lender hereunder or under the notes payable by the Borrowers to such Lender, and (iv) the amount of
any sum received by the Agent from Borrowers or any other Loan Party and each Lender’s Pro Rata
Share thereof. The Register shall be available for inspection by Borrowers or any Lender at the
offices of Agent at any reasonable time and from time to time upon reasonable prior notice. Any
failure of the Agent to record in the Register, or any error in doing so, shall not limit or
otherwise affect the obligation of Borrowers hereunder (or under any note) to pay any amount owing
with respect to the Loans or provide the basis for any claim against Agent. The Obligations and
Letters of Credit are registered obligations and the right, title and interest of any Lender and
their assignees in and to such Obligations and Letters of Credit as the case may be, shall be
transferable only upon notation of such transfer in the Register. Solely for purposes of this
Section 12.21 and for tax purposes only, the Agent shall be Borrowers’ agent for purposes
of maintaining the Register (but the Agent shall have no liability whatsoever to any Borrower or
any other Person on account of any inaccuracies contained in the Register). This Section
12.21 shall be construed so that the Obligations and Letters of Credit are at all times
maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of
the Internal Revenue Code and any related regulations (and any other relevant or successor
provisions of the Internal Revenue Code or such regulations).



ARTICLE 13

JUDGMENT CURRENCY; SERVICE OF PROCESS




     13.1 Judgment Currency.



          If for the purpose of obtaining judgment in any court it is necessary to convert an amount due
hereunder in the currency in which it is due (the “Original Currency”) into another currency (the
“Second Currency”), the rate of exchange applied shall be that at which, in accordance with normal
banking procedures, the Agent or any Lender could purchase in the New York foreign exchange market,
the Original Currency with the Second Currency on the date on which judgment is given, or the
preceding



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Business Day if such date is not a Business Day. Each Loan Party agrees that its obligation
in respect of any Original Currency due from it hereunder shall, notwithstanding any judgment or
payment in such other currency, be discharged only to the extent that, on the Business Day
following the date the Agent receives payment of any sum so adjudged to be due hereunder in the
Second Currency, the Agent may, in accordance with normal banking procedures, purchase, in the New
York foreign exchange market, the Original Currency with the amount of the Second Currency so paid;
and if the amount of the Original Currency so purchased or could have been so purchased is less
than the amount originally due in the Original Currency, each Loan Party agrees, as a separate
obligation and notwithstanding any such payment or judgment, to indemnify the Agent or any Lender
against such loss. The term “rate of exchange” in this Section 13.1 means the spot rate at
which Agent or any Lender, in accordance with normal practices, is able on the relevant date to
purchase the Original Currency with the Second Currency, and includes any premium and costs of
exchange payable in connection with such purchase.




     13.2 Agent for Service of Process.



          Applica Canada and Applica Asia each hereby irrevocably designates and appoints the Borrower
Agent, at the address for Borrower Agent shown herein, as the Agent of Applica Canada and Applica
Asia to receive service of process in legal actions arising out of or related to this Agreement or
any of the other Loan Documents and expressly agrees that service upon Borrower Agent shall
constitute service upon Applica Canada and Applica Asia.




ARTICLE 14

MISCELLANEOUS




     14.1 No Waivers; Cumulative Remedies.



          No failure by the Agent or any Lender to exercise any right, remedy, or option under this
Agreement or any present or future supplement thereto, or in any other agreement between or among
the Loan Parties and the Agent and/or any Lender, or delay by the Agent or any Lender in exercising
the same, will operate as a waiver thereof. No waiver by the Agent or any Lender will be effective
unless it is in writing, and then only to the extent specifically stated. No waiver by the Agent
or the Lenders on any occasion shall affect or diminish the Agent’s and each Lender’s rights
thereafter to require strict performance by the Loan Parties of any provision of this Agreement.
The Agent and the Lenders may proceed directly to collect the Obligations without any prior
recourse to the Collateral. The Agent’s and each Lender’s rights under this Agreement will be
cumulative and not exclusive of any other right or remedy which the Agent or any Lender may have.




     14.2 Severability.



          The illegality or unenforceability of any provision of this Agreement or any Loan Document or
any instrument or agreement required hereunder shall not in any way affect or impair the legality
or enforceability of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.




     14.3 Governing Law; Choice of Forum; Service of Process.



          (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS
PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT
TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE
OF NEW YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.




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          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS STATE OR FEDERAL COURTS LOCATED IN THE STATES OF NEW YORK, FLORIDA OR
GEORGIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE LOAN PARTIES, THE AGENT AND
THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION
OF THOSE COURTS. EACH OF THE LOAN PARTIES, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE
FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING
AGAINST THE LOAN PARTIES OR THEIR PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR
THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY
FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE
COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.




          (c) EACH OF THE LOAN PARTIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO THE ADDRESS SET FORTH IN SECTION 14.8 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED SEVEN (7) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS TO
SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.




     14.4 WAIVER OF JURY TRIAL. EACH OF THE LOAN PARTIES, EACH OF THE LENDERS AND THE AGENT IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED
TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE LOAN PARTIES, THE LENDERS AND THE AGENT EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.




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     14.5 Survival of Representations and Warranties.



          All of the Loan Parties’ representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Agent or the Lenders or their respective agents.




     14.6 Other Security and Guaranties.



          The Agent, may, without notice or demand and without affecting any Loan Party’s obligations
hereunder or under any other Loan Document, from time to time: (a) take from any Person and hold
collateral (other than the Collateral) for the payment of all or any part of the Obligations and
exchange, enforce or release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and release or substitute
any such endorser or guarantor, or any Person who has given any Lien in any other collateral as
security for the payment of all or any part of the Obligations, or any other Person in any way
obligated to pay all or any part of the Obligations.




     14.7 Fees and Expenses.



          Each Loan Party agrees to pay to the Agent, for its benefit, and Lead Arranger, on demand, all
costs and expenses that Agent or Lead Arranger pays or incurs in connection with the negotiation,
preparation, syndication, consummation, administration, enforcement, and termination of this
Agreement or any of the other Loan Documents, including: (a) Attorney Costs incurred by the Agent
or Lead Arranger in connection with the negotiation, preparation, syndication and consummation of
this Agreement or any of the other Loan Documents; (b) costs and expenses (including attorneys’ and
paralegals’ fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Loan Documents and the transactions contemplated thereby; (c) costs
and expenses of lien and title searches; (d) taxes, fees and other charges for filing financing
statements and continuations, and other actions to perfect, protect, and continue the Agent’s Liens
(including costs and expenses paid or incurred by the Agent in connection with the consummation of
Agreement); (e) sums paid or incurred to pay any amount or take any action required of any Loan
Party under the Loan Documents that such Loan Party fails to pay or take; (f) costs of appraisals,
inspections, and verifications of the Collateral, including reasonable travel, lodging, and meals
for inspections of the Collateral and the Loan Parties’ operations by the Agent plus the Agent’s
then customary charge for field examinations and audits and the preparation of reports thereof
(such charge is currently $850 per day (or portion thereof) for each Person retained or employed by
the Agent with respect to each field examination or audit), provided, that unless otherwise
agreed by the Borrowers and the Agent, the Borrowers shall not be obligated to the Agent for any
expenses set forth in this clause (f) for travel and visits to Loan Parties’ facilities located
outside of the United States or Canada; and (g) without duplication, costs and expenses of
forwarding loan proceeds, collecting checks and other items of payment, and establishing and
maintaining Payment Accounts and lock boxes, and costs and expenses of preserving and protecting
the Collateral. In addition, each Loan Party agrees to pay costs and expenses incurred by the
Agent (including Attorneys’ Costs) to the Agent, for its benefit, on demand, and to the other
Lenders for their benefit, on demand, and all reasonable fees, expenses and disbursements incurred
by such other Lenders, including reasonable attorneys’ fees and disbursements, in each case, paid
or incurred to obtain payment of the Obligations, enforce the Agent’s Liens, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Agent or any Lender arising out of the
transactions contemplated hereby (including preparations for and consultations
concerning any such matters). If, for any reason (including inaccurate reporting by the



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Borrowers on financial statements or otherwise), it is determined that a higher Applicable Margin
should have applied to a period than was actually applied, then the proper margin shall be applied
retroactively and the Borrowers shall pay to Agent, on written demand, for the Pro Rata benefit of
Lenders, an amount equal to the difference between the amount of interest and fees that would have
accrued using the proper margin and the amount actually paid. The foregoing shall not be construed
to limit any other provisions of the Loan Documents regarding costs, expenses or other amounts to
be paid by the Loan Parties. All of the foregoing costs, expenses and other amounts shall be
charged to the Loan Account as Revolving Loans as described in Section 3.8.




     14.8 Notices.




          (a) Except as otherwise expressly provided herein, all notices, demands and requests that any party is required or elects to give to any other shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including delivery by overnight mail and courier service, (b) four (4) days after it shall have been mailed by United States mail, first class, certified or registe
red, with postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted, in each case addressed to the party to be notified as follows:"




          If to the Agent or to the Bank:




Bank of America, N.A.

300 Galleria Parkway, N.W.

Suite 800

Atlanta, Georgia 30339

Attention: Applica Client Manager

Telecopy No.: (770) 857-2947




          If to a Loan Party:



Applica Consumer Products, Inc.

3633 Flamingo Road

Miramar, Florida 33027

Attention: Chief Executive Officer

Telecopy No.: (954) 883-1714

Email: terry.polistina@applicamail.com




          with a copy to:



Applica Consumer Products, Inc.

3633 Flamingo Road

Miramar, Florida 33027

Attention: General Counsel

Telecopy No.: (954) 883-1714

Email: lisa.carstarphen@applicamail.com



or to such other address as each party may designate for itself by like notice. Failure or delay
in delivering copies of any notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies shall not adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or other
communication.




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          (b) E-mail and internet or intranet websites may be used only for routine communications, such
as financial statements, Notices of Borrowing, Notices of Continuation/Conversion, Borrowing Base
Certificates and other information required by Section 5.2, administrative matters,
distribution of Loan Documents for execution, and matters permitted under Section 1.2(k).
Agent and Lenders make no assurances as to the privacy and security of electronic communications.
E-mail and voicemail may not be used as effective notice under the Loan Documents except as
expressly provided in Section 1.2(k) or hereinabove in this Section 14.8(b).




          (c) Agent and Lenders may rely upon any notices purportedly given by or on behalf of any Loan
Party even if such notices were not made in a manner specified herein, were incomplete or were not
confirmed, or if the terms thereof, as understood by the recipient, varied from a later
confirmation. Each Loan Party shall indemnify and hold harmless each Indemnified Person from any
liabilities, losses, costs and expenses arising from any telephonic communication purportedly
given by or on behalf of a Loan Party.




     14.9 Waiver of Notices.



          Unless otherwise expressly provided herein, the Loan Parties waive presentment, and notice of
demand or dishonor and protest as to any instrument, notice of intent to accelerate the Obligations
and notice of acceleration of the Obligations, as well as any and all other notices to which they
might otherwise be entitled. No notice to or demand on a Loan Party which the Agent or any Lender
may elect to give shall entitle the Loan Parties to any or further notice or demand in the same,
similar or other circumstances.




     14.10 Binding Effect.



          The provisions of this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors, and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by any Loan Party without prior written
consent of the Agent and each Lender. The rights and benefits of the Agent and the Lenders
hereunder shall, if such Persons so agree, inure to any party acquiring any interest in the
Obligations or any part thereof.




     14.11 Indemnity of the Agent and the Lenders by the Borrowers.



          (a) Each Loan Party agrees to defend, indemnify and hold the Agent-Related Persons, and each
Lender, its Affiliates, and each of their respective officers, directors, employees, counsel,
representatives, agents and attorneys-in-fact (each, an “Indemnified Person”) harmless
from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following repayment of the
Loans and the termination, resignation or replacement of the Agent or replacement of any Lender)
be imposed on, incurred by or asserted against any such Person in any way relating to or arising
out of this Agreement or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or proceeding
(including any Insolvency Proceeding or appellate proceeding) related to or arising out of this
Agreement, any other Loan Document, or the Loans or the use of the proceeds thereof, whether or
not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified
Liabilities”); provided that the Loan Parties shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities determined in a final, non-appealable
judgment by a court of competent jurisdiction to result solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section shall survive
termination of the Commitments and payment of all other Obligations.




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          (b) Each Loan Party agrees to indemnify, defend and hold harmless the Agent and the Lenders
and their Affiliates from any loss or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened release, discharge, disposal or
presence of a hazardous substance relating to a Loan Party’s or other Consolidated Member’s
operations, business or property. This indemnity will apply whether the hazardous substance is
on, under or about the Loan Party’s or other Consolidated Members’ property or operations or
property leased to a Loan Party or other Consolidated Member. The indemnity includes but is not
limited to Attorneys Costs. The indemnity extends to the Agent and the Lenders, their Affiliates,
and all of their directors, officers, employees, agents, successors, attorneys and assigns.
“Hazardous substances” means any substance, material or waste that is or becomes designated or
regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant” or a similar designation or
regulation under any federal, state or local law (whether under common law, statute, regulation or
otherwise) or judicial or administrative interpretation of such, including petroleum or natural
gas. This indemnity will survive repayment of all other Obligations.




     14.12 Amendment and Restatement of Second Amended Credit Agreement; Release.



          (a) This Agreement amends and restates, but does not discharge or satisfy any obligation of
any party under, the Second Amended Credit Agreement and nothing herein shall constitute a novation
or accord and satisfaction with respect to the Second Amended Credit Agreement or any of the
Obligations. All “Obligations” under the Second Amended Credit Agreement (to the extent not paid
on or prior to the date hereof), and all security interests, Liens, and collateral assignments
granted to the Agent under the Second Amended Credit Agreement or any of the other “Loan Documents”
defined therein (other than the Pledge Agreements and Intellectual Property Notices), hereby are
renewed and continued in full force and effect, and hereafter shall be governed by this Agreement
or, to the extent appropriate, such other Loan Documents as further amended, restated or modified
from time to time. All existing “Loan Documents” previously executed in connection with the Second
Amended Credit Agreement (other than the Pledge Agreements and Intellectual Property Notices),
shall continue in full force and effect, except to the extent such agreement is amended, restated
or replaced in connection with this Agreement. Each of the parties hereto ratifies and reaffirms
the Second Amended Credit Agreement, as amended and restated hereby, and agrees that this Agreement
embodies the entire understanding of the parties with respect to the subject matter hereof.




          (b) Each Loan Party hereby releases, acquits and forever discharges Agent and each Lender, and
their respective officers, directors, agents, consultants, legal counsel, successors and assigns,
from all claims, demands, suits, actions, causes of action, reckonings, and liabilities of any
nature, whether known or unknown, due or to become due, absolute or contingent, legal or equitable
or disputed or undisputed, that any Loan Party has or may claim to have against Agent or any Lender
and that arises out of or relates to any act, failure to act, transaction or occurrence under, in
connection with or related to the Original Credit Agreement, the First Amended Credit Agreement,
the Second Amended Credit Agreement or any of the other Loan Documents, provided that
nothing therein shall operate to release Agent or any Lender from performing any of their
agreements under this Agreement.




     14.13 Final Agreement.



          This Agreement, together with the other Loan Documents, is intended by the Loan Parties, the
Agent and the Lenders to be the final, complete, and exclusive expression of the agreement among
them. This Agreement and the other Loan Documents supersede any and all prior oral or written
agreements relating to the subject matter hereof, except for the Fee Letter. Nothing
contained herein shall be deemed to be or operate as a novation or an accord and satisfaction of
any of the Obligations. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be made, except by a written agreement
signed by the Loan Parties and a duly authorized officer of each of the Agent and the requisite
Lenders.




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     14.14 Counterparts.



          This Agreement may be executed in any number of counterparts, including facsimile copies
thereof, and by the Agent, each Lender and the Loan Parties in separate counterparts, each of which
shall be an original, but all of which shall together constitute one and the same agreement;
signature pages may be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same document.




     14.15 Captions.



          The captions contained in this Agreement are for convenience of reference only, are without
substantive meaning and should not be construed to modify, enlarge, or restrict any provision.




     14.16 Right of Setoff.



          In addition to any rights and remedies of the Lenders provided by law, if an Event of Default
exists or the Loans have been accelerated, each Lender is authorized (subject to the terms of
Section 12.12(b)) at any time and from time to time, without prior notice to the Loan
Parties, any such notice being waived by the Loan Parties to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing by, such Lender or any
Affiliate of such Lender to or for the credit or the account of the Loan Parties against any and
all Obligations owing to such Lender or its Affiliates, now or hereafter existing, irrespective of
whether or not the Agent or such Lender shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly
to notify the Loan Parties and the Agent after any such set-off and application made by such
Lender; provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE
ANY RIGHT OF SET-OFF, BANKER’S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF A LOAN
PARTY HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.




     14.17 Confidentiality.



          The Agent and each Lender (each, a “Lending Party”) agrees to keep Confidential any
information furnished or made available to it by any Loan Party (each, a “Disclosing Party”) that
is marked as confidential or, with respect to verbal information, explicitly identified as
confidential when furnished (“Confidential Information”).





     (a) For purposes of this Agreement, the term “Confidential Information” shall not
include information that (i) is in the Lending Party’s possession prior to it being provided
by or on behalf of the Disclosing Party, provided that such information is not known by the
Lending Party to be subject to another confidentiality agreement with, or other legal or
contractual obligation of confidentiality to, a Disclosing Party (ii) is or becomes publicly
available (other than through a breach of this Agreement by any Lending Party), or (iii)
becomes available to the Lending Party on a non-confidential basis, provided that the source
of such information was not known by the
Lending Party to be bound by a confidentiality agreement or other legal or contractual
obligation of confidentiality with respect to such information.



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     (b) Notwithstanding the foregoing, a Lending Party may disclose Confidential
Information to: (i) any governmental agency or regulatory body having or reasonably claiming
to have authority to regulate or oversee any aspect of the Lending Party’s business in
connection with the exercise of such authority or claimed authority; (ii) the extent
necessary or appropriate to effect or preserve the Lending Party’s security (if any)
hereunder or to enforce any right or remedy provided pursuant to this Agreement or in
connection with any claims asserted by or against the Lending Party or any Borrower or any
other person or entity involved herewith; (iii) its directors, officers, employees,
attorneys, accountants, and auditors (collectively, the “Representatives”) whom it
reasonably determines need to know such information; and the Lending Party agrees inform the
Representatives to whom it discloses Confidential Information of the confidential nature of
the Confidential Information; (iv) pursuant to subpoena or other court process; (v) when
required to do so in accordance with the provisions of any applicable Requirement of Law;
(vi) to the extent reasonably required in connection with any litigation or proceeding
(including, but not limited to, any bankruptcy proceeding) to which any Lending Party or
their respective Affiliates may be party; and (vii) any bank or financial institution or
other entity to which the Lending Party has sold or desires to sell an interest or
participation in the Commitment and the Loan Documents, provided that any such recipient of
such Confidential Information agrees in writing to keep such Confidential Information
confidential as specified in this Section 14.17; provided, however, in the
event a Lending Party is requested or required (by interrogatory, court order, subpoena,
administrative proceeding, civil investigatory demand, or any similar legal process) to
disclose any of the Confidential Information, the Lending Party, in the absence of a
protective order, may disclose such information without liability. The Lending Party,
however, shall, to the extent permitted by law and as promptly as practicable, make
reasonable efforts to notify the Disclosing Party and the Borrowers prior to such disclosure
by the Lending Party so that the Disclosing Party may seek at its sole expense a protective
order or other appropriate remedy.




     (c) Each Lending Party acknowledges that, under certain circumstances, the United
States securities laws may prohibit a person who has received material, non-public
information from an issuer from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which it is
reasonably foreseeable that such other person is likely to purchase or sell such securities.
Each Lending Party further acknowledges that certain Confidential Information could be
considered material non-public information and agrees that it will not, and it will use
reasonable efforts to ensure that its Representatives will not, trade in the securities of
the Parent on the basis of such information or communicate such information to any other
person under circumstances in which it is reasonably foreseeable that such other person is
likely to purchase or sell such securities.




     (d) This Section 14.17 shall survive the termination of this Agreement.



     14.18 Conflicts with Other Loan Documents.



          Unless otherwise expressly provided in this Agreement (or in another Loan Document by specific
reference to the applicable provision contained in this Agreement), if any provision contained in
this Agreement conflicts with any provision of any other Loan Document, the provision contained in
this Agreement shall govern and control.




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     14.19 Agency of the Borrowers for Each Other Loan Party.



          Each of the Loan Parties irrevocably appoints the Borrower Agent as its agent for all purposes
relevant to this Agreement, including the giving and receipt of notices and execution and delivery
of all documents, instruments, and certificates contemplated herein (including, without limitation,
execution and delivery to the Agent of Borrowing Base Certificates, Notices of Borrowing, and
Notices of Continuation/Conversion) and all modifications hereto. Any agreement, acknowledgment,
consent, direction, certification, or other action which might otherwise be valid or effective only
if given or taken by all or any of the Loan Parties or acting singly, shall be valid and effective
if given or taken only by the Borrower Agent, whether or not any of the other Loan Parties joins
therein, and the Agent and the Lenders shall have no duty or obligation to make further inquiry
with respect to the authority of the Borrower Agent under this Section 14.19, provided that
nothing in this Section 14.19 shall limit the effectiveness of, or the right of the Agent
and the Lenders to rely upon, any notice (including a Notice of Borrowing or a Notice of
Continuation/Conversion), document, instrument, certificate, acknowledgment, consent, direction,
certification, or other action delivered by a Borrower or other Loan Party pursuant to this
Agreement.




     14.20 Express Waivers By Loan Parties In Respect of Cross Guaranties and Cross
Collateralization.



          Each Loan Party agrees as follows:




          (a) Each Loan Party hereby waives: (i) notice of acceptance of this Agreement; (ii) notice of
the making of any Loans, the issuance of any Letter of Credit or Credit Support, or any other
financial accommodations made or extended under the Loan Documents or the creation or existence of
any Obligations; (iii) notice of the amount of the Obligations, subject, however, to such Loan
Party’s right to make inquiry of the Agent to ascertain the amount of the Obligations at any
reasonable time; (iv) notice of any adverse change in the financial condition of any other Loan
Party or of any other fact that might increase such Loan Party’s risk with respect to such other
Loan Party under the Loan Documents; (v) notice of presentment for payment, demand, protest, and
notice thereof as to any promissory notes or other instruments among the Loan Documents; and (vii)
all other notices (except if such notice is specifically required to be given to such Loan Party
hereunder or under any of the other Loan Documents to which such Loan Party is a party) and demands
to which such Loan Party might otherwise be entitled;




          (b) Each Loan Party hereby waives the right by statute or otherwise to require the Agent or
any Lender to institute suit against any other Loan Party or to exhaust any rights and remedies
which the Agent or any Lender has or may have against any other Loan Party. Each Loan Party further
waives any defense arising by reason of any disability or other defense of any other Loan Party
(other than the defense that the Obligations shall have been fully and finally performed and
indefeasibly paid) or by reason of the cessation from any cause whatsoever of the liability of any
such Loan Party in respect thereof.




          (c) Each Loan Party hereby waives and agrees not to assert against the Agent, any Lender, or
the Letter of Credit Issuer: (i) any defense (legal or equitable), setoff, counterclaim, or claim
which such Loan Party may now or at any time hereafter have against any other Loan Party; (ii) any
defense, setoff, counterclaim, or claim of any kind or nature available to any other Loan Party
against the Agent, any Lender, the Bank, or the Letter of Credit Issuer, arising directly or
indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability
of the Obligations or any security therefor; (iii) any right or defense arising by reason of any
claim or defense based upon an election of remedies by the Agent, any Lender, the Bank, or the
Letter of Credit Issuer under any applicable law; (iv) the benefit of any statute of limitations
affecting any other Loan Party’s liability hereunder;




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          (d) Each Loan Party consents and agrees that, without notice to or by such Loan Party and
without affecting or impairing the obligations of such Loan Party hereunder, the Agent may (subject
to any requirement for consent of any of the Lenders to the extent required by this Agreement), by
action or inaction: (i) compromise, settle, extend the duration or the time for the payment of, or
discharge the performance of, or may refuse to or otherwise not enforce the Loan Documents; (ii)
release all or any one or more parties to any one or more of the Loan Documents or grant other
indulgences to any other Loan Party in respect thereof, (iii) amend or modify in any manner and at
any time (or from time to time) any of the Loan Documents; or (iv) release or substitute any Person
liable for payment of the Obligations, or enforce, exchange, release, or waive any security for the
Obligations or any Guaranty of the Obligations;




          Each Loan Party represents and warrants to the Agent and the Lenders that such Loan Party is
currently informed of the financial condition of all other Loan Parties and all other circumstances
which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Loan Party further represents and warrants that such Loan Party has read and
understands the terms and conditions of the Loan Documents. Each Loan Party agrees that neither the
Agent, any Lender, the Bank, nor the Letter of Credit Issuer has any responsibility to inform any
Loan Party of the financial condition of any other Loan Party or of any other circumstances which
bear upon the risk of nonpayment or nonperformance of the Obligations.




     14.21 USA PATRIOT Act Notice.



          The Agent and Lenders each hereby notifies each Loan Party that, pursuant to the requirements
of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies
such Loan Party, which information includes the name and address of each Loan Party and other
information that will allow the Agent and each Lender to identify such Loan Party in accordance
with the USA PATRIOT Act.




     14.22 Intercreditor Agreement.



          Loan Parties, Agent and Lenders acknowledge that the exercise of certain of the Agent’s rights
and remedies hereunder may be subject to the provisions of the Additional Debt Intercreditor
Agreement. Each Lender and each other Person party hereto from time to time (other than the Loan
Parties) hereby (A) acknowledges that it has received a copy of the Additional Debt Intercreditor
Agreement, (B) consents to the provisions of the Additional Debt Intercreditor Agreement, (C)
agrees that it will be bound by and comply with the provisions of the Additional Debt Intercreditor
Agreement, including the purchase option provisions contained therein, and (D) authorizes and
instructs the Agent on its behalf to enter into the Additional Debt Intercreditor Agreement as
“Revolver Agent” thereunder.




[Signatures commence on following page]




-84-









 








     IN WITNESS WHEREOF, the parties have entered into this Agreement on the date first above
written.



	 	 	 	 	 
	 	“BORROWERS”







SALTON, INC., a Delaware corporation

 	 
	 	By:  	/s/
Terry Polistina 	 
	 	 	Name:  	Terry Polistina 	 
	 	 	Title:  	CEO and President 	 
	 
	 	APPLICA INCORPORATED, a Florida 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. (successor-by-merger to SFP
Merger Sub, Inc.), a Delaware corporation

 	 
	 	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 	 
	 
	 	HP DELAWARE, INC., a Delaware corporation

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



-85-









 






	 	 	 	 	 
	 	HPG LLC, a Delaware limited liability company

 	 
	 	By:  	/s/
Lisa R. Carstarphen
 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	APPLICA MEXICO HOLDINGS, INC.,

a Delaware corporation

 	 
	 	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 	 
	 
	 	ICEBOX LLC, an Illinois limited liability company

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



-86-









 






	 	 	 	 	 
	 	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 	 
	 
	 	“GUARANTORS”





APPLICA CANADA CORPORATION, a Nova Scotia company

 	 
	 	By:  	/s/
Lisa R. Carstarphen
 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Corporate Secretary 	 
	 
	 	APPLICA ASIA LIMITED, a Hong Kong company

 	 
	 	By:  	/s/
Lisa R. Carstarphen
 	 
	 	 	Name:  	Lisa R. Carstarphen 	 
	 	 	Title:  	Director 	 



-87-









 






	 	 	 	 	 
	 	“AGENT”





BANK OF AMERICA, N.A., as

Administrative Agent and Collateral Agent

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



-88-









 






	 	 	 	 	 
	 	“LENDERS”





BANK OF AMERICA, N.A., as a Lender

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




-89-









 








ANNEX A

to

Credit Agreement





     1. Definitions. Capitalized terms used in the Loan Documents shall have the following
meanings (unless otherwise defined therein), and all section references in the following
definitions shall refer to sections of the Agreement:



     “Account” has the meaning given to the term “account” in the UCC or PPSA, as
applicable, and includes any rights to payment for the sale or lease of goods or rendition of
services, whether or not they have been earned by performance.



     “Account Debtor” means each Person obligated in any way on or in connection with an
Account, Chattel Paper or General Intangibles (including a payment intangible).



     “ACH Transactions” means any cash management or related services, including the
automated clearing house transfer of funds by the Bank or any Lender for the account of any Loan
Party.



     “Acquisition” means the acquisition of (i) a controlling equity interest in another
Person (including the purchase of an option, warrant or convertible or similar type security to
acquire such a controlling interest at the time it becomes exercisable by the holder thereof),
whether by purchase of such equity interest or upon exercise of an option or warrant for, or
conversion of securities into, such equity interest, or (ii) assets of another Person which
constitute any material part of the assets of such Person or of a line or lines of business
conducted by such Person.



     “Additional Debt” means the Debt owing under the Additional Debt Documents.



     “Additional Debt Documents” means: (i) the Term Loan Agreement dated December 28,
2007, among certain Loan Parties and certain of their Affiliates and the holders of the Additional
Debt and the agent for such holders; (ii) the Security Agreement dated December 28, 2007, among
certain Loan Parties and certain of their Affiliates and the holders of the Additional Debt and the
agent for such holders; and (iii) all other agreements, instruments or documents executed or
delivered by any Loan Parties or Affiliates thereof in connection with the foregoing.



     “Additional Debt Intercreditor Agreement” means the Intercreditor Agreement dated on
or about the Closing Date among the holders of the Additional Debt, or the agent for such holders,
and the Agent.



     “Additional Debt Prepayments” means prepayments of the Additional Debt made by the
Loan Parties to holders of the Additional Debt, including voluntary prepayments, prepayments
arising under excess cash flow recapture provisions of the Additional Debt Documents and
prepayments demanded by holders of the Additional Debt (other than scheduled payments described in
the Additional Debt Documents, as in effect on the Closing Date).



     “Adjusted Net Earnings from Operations” means, with respect to any fiscal period of
the Reporting Loan Parties, the Reporting Loan Parties’ net income after provision for income
taxes, as determined in accordance with GAAP and reported on the Financial Statements for such
period, excluding any and all of the following included in such net income: (a) gain or loss
arising from the sale of any capital assets; (b) gain arising from any write-up in the book value
of any asset; (c) earnings of any Person (other than the Consolidated Salton Parties),
substantially all the assets of which have been acquired by a Reporting Loan Party in any manner,
to the extent realized by such other Person prior to the



A-1









 




date of acquisition; (d) earnings of any Person in which a Loan Party has an ownership
interest (including each Foreign Subsidiary) unless (and only to the extent) such earnings shall
actually have been received by such Reporting Loan Party in the form of cash Distributions; (e)
gains arising from any foreign currency translations or in connection with Hedge Agreements to the
extent not included as a component of the Reporting Loan Parties’ consolidated net income or
interest expense in the Financial Statements; (f) gain arising from the acquisition of debt or
equity securities of any other Reporting Loan Party or from cancellation or forgiveness of Debt;
and (h) gain arising from extraordinary items, as determined in accordance with GAAP.




     “Affiliate” means, as to any Person, including any Consolidated Member (the “subject
Person”), any other Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, the subject Person or which owns, directly or indirectly, ten percent
(10%) or more of the outstanding equity interest of the subject Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the other Person, whether through
the ownership of voting securities, by contract, or otherwise.



     “Affiliated Term Loan Party” has the meaning specified in the Additional Debt
Intercreditor Agreement, as in effect on the Closing Date.



     “Agency Agreement” means, when used with reference to Applica Consumer Products, the
Agency Agreement in effect between Applica Consumer Products and Applica Asia, pursuant to which
Applica Asia shall furnish to Applica Consumer Products various purchasing and handling services
with respect to the importation of various types of products from various countries as more fully
set forth therein; and, when used with reference to Applica Canada, the Agency Agreement in effect
between Applica Canada and Applica Asia, pursuant to which Applica Asia shall furnish to Applica
Canada various purchasing and handling services with respect to the importation of various types of
products from various countries as more fully set forth therein.



     “Agent” means the Bank, solely in its capacity as administrative and collateral agent
for the Lenders, and any successor administrative and collateral agent.



     “Agent Advances” has the meaning specified in Section 1.2(j).



     “Agent-Related Persons” means Agent, the Lead Arranger, together with their respective
Affiliates, and the officers, directors, employees, counsel, representatives, agents and
attorneys-in-fact of Agent and such Affiliates.



     “Agent’s Liens” means the Liens in the Collateral granted to the Agent, for the
benefit of the Lenders and the Agent, pursuant to the Agreement and the other Loan Documents.



     “Aggregate Revolver Outstandings” means, at any time, the sum of (a) the unpaid
balance of the Revolving Loans, (b) 100% of the undrawn face amount of Letters of Credit and Credit
Support, and (c) the aggregate amount of unpaid reimbursement obligations in respect of Letters of
Credit and Credit Support.



     “Agreement” means the Agreement to which this Annex A is attached, as from time to
time amended, modified or restated.



     “Allocable Amount” has the meaning specified in Section 1.6.



A-2









 





     “Anasazi Add-Back” means Net Proceeds in an amount not to exceed $2,000,000 that are
actually received in cash by a Loan Party from the escrow arrangement established in connection
with the sale by Anasazi Partners, L.P., a Massachusetts limited partnership, of its interest in
ZonePerfect Nutrition Company, upon satisfaction of the terms of such escrow



     “Anniversary Date” means each anniversary of the Closing Date.



     “Anti-Terrorism Laws” mean any laws relating to terrorism or money laundering,
including Executive Order No. 13224, the USA PATRIOT Act and the Proceeds of Crime Act.



     “Applica Americas” means Applica Americas, Inc., formerly known as HP Americas, Inc.,
a Delaware corporation.



     “Applica Americas Blocked Account” means each blocked account established and
regulated pursuant to the Applica Americas Blocked Account Agreement.



     “Applica Americas Blocked Account Agreement” means each Blocked Account Agreement to
be entered into between Applica Americas and its depository banks.



     “Applica Asia Blocked Account” means each blocked account established and regulated
pursuant to the Applica Asia Blocked Account Agreements.



     “Applica Asia Blocked Account Agreements” means the Blocked Account Agreements to be
entered into between Applica Asia and Bank as its depository bank.



     “Applica Asia Documents” means the Applica Asia Guaranty, Applica Asia Blocked Account
Agreements, a favorable opinion letter from Applica Asia’s legal counsel in form and scope
acceptable to the Agent, and such other instruments, agreements and other documents that may be
requested by the Agent to give effect to any of the foregoing documents or to perfect the Liens
granted pursuant to the terms thereof.



     “Applica Asia Guaranty” means the Debenture dated March 22, 2006, as amended and
restated by that certain Supplemental Deed dated on or about the Closing Date, among Applica Asia,
ACP, Applica Canada and Agent, pursuant to which Applica Asia guarantees payment of the
Obligations.



     “Applica Asia Serviced Account” shall have the meaning given to it in Section
7.34(a).



     “Applica Asia Serviced Account Sublimit” means, as of any date of determination, the
sum of $35,000,000.



     “Applica Canada Blocked Account” means the blocked account established and regulated
pursuant to the Applica Canada Blocked Account Agreement.



     “Applica Canada Blocked Account Agreement” means the Blocked Account Agreements
entered into between Applica Canada and HSBC Bank of Canada .



     “Applica Canada Guaranty” means the Second Amended and Restated Guarantee executed by
Applica Canada on the Closing Date pursuant to which Applica Canada guarantees the payment of the
Obligations.



A-3









 





     “Applica Canada Security Agreement” means the Second Amended and Restated General
Security Agreement, dated as of the Closing Date, executed and delivered by Applica Canada in favor
of Agent for the benefit of itself and the Lenders.



     “Applicable Margin” means, as of the Closing Date,



     (i) with respect to Base Rate Loans, 0.25%; and



     (ii) with respect to LIBOR Revolving Loans, 2.00%.



     The Applicable Margin shall be adjusted (up or down) each Fiscal Quarter, based upon Average
Quarterly Availability for each Fiscal Quarter, commencing with the Fiscal Quarter ending June 30,
2008. Adjustments in Applicable Margin shall be determined by reference to the following grid:



	 	 	 	 	 
	If Average Quarterly	 	Level of	 
	Availability is:	 	Applicable Margin is:	 
	Greater than $75,000,000
	 	Level I
	 
	 	 	 	 
	Greater than $50,000,000, but less
	 	Level II
	than or equal to $75,000,000
	 	 	 	 
	 
	 	 	 	 
	Greater than $25,000,000, but less
	 	Level III
	than or equal to $50,000,000
	 	 	 	 
	 
	 	 	 	 
	Less than or equal to $25,000,000
	 	Level IV







	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Applicable Margin	 
	 	 	Level I	 	 	Level II	 	 	Level III	 	 	Level IV	 
	Base Rate Loans
	 	 	0.00	%	 	 	0.00	%	 	 	0.25	%	 	 	0.50	%
	LIBOR Revolving Loans
	 	 	1.50	%	 	 	1.75	%	 	 	2.00	%	 	 	2.25	%






     Adjustments to the Applicable Margin based upon Average Quarterly Availability for the Fiscal
Quarter ending June 30, 2008, and for each Fiscal Quarter ending thereafter, shall be effective for
the ensuing Fiscal Quarter and shall be implemented five (5) Business Days after the immediately
preceding Fiscal Quarter. If a Default or Event of Default has occurred and is continuing at the
time any reduction in the Applicable Margin is to be implemented, no reduction may occur until the
first day of the first calendar month following the date on which such Default or Event of Default
is waived in writing by the Agent (with the consent of the Required Lenders) or cured.



     “Asset Disposition” means, with respect to any Person, the sale, lease or other
disposition of any asset of such Person other than the sale of Inventory or the use of cash in the
ordinary course of business.



     “Assignee” has the meaning specified in Section 11.2(a).



     “Assignment and Acceptance” has the meaning specified in Section 11.2(a).



A-4









 





     “Attorney Costs” means and includes all reasonable fees, expenses and disbursements of
any law firm or other counsel engaged by the Agent or Lead Arranger.



     “Availability” means, at any time, the lesser of (i) the Maximum Revolver Amount, or
(ii) the Borrowing Base minus the Aggregate Revolver Outstandings at such time.



     “Average Credit Facility Outstandings” means the average daily Aggregate Revolver
Outstandings for each month or shorter period if the foregoing is calculated for the first month
after the Closing Date or as of the Termination Date.



     “Average Monthly Excess Availability” means, for any calendar month, an amount
obtained by adding the actual amount of Availability on each day during such month (as determined
by Agent in accordance with the terms of the Agreement) and by dividing such sum by the number of
days in such month.



     “Average Quarterly Availability” means, for any Fiscal Quarter, an amount obtained by
adding the actual amount of Availability on each day during such Fiscal Quarter (as determined by
Agent in accordance with the terms of the Agreement) and by dividing such sum by the number of days
in such Fiscal Quarter.



     “Bank” means Bank of America, N.A., a national banking association, or any successor
entity thereto.



     “Bank Product Reserves” means all reserves which the Agent from time to time
establishes in its reasonable discretion for the Bank Products then provided by or outstanding from
the Bank or any Affiliate or branch of the Bank and, in the case of Bank Products provided by
Lenders or their Affiliates other than the Bank or any Affiliate or branch of the Bank, of which
the Agent shall have received timely notice pursuant to Section 12.19.



     “Bank Products” means any one or more of the following types of services or facilities
extended to a Loan Party by the Bank, any Lender, any Affiliate or branch of the Bank or a Lender,
and, solely in the case of an Affiliate or branch of the Bank or a Lender, in reliance on the
Bank’s or such Lender’s agreement to indemnify such Affiliate or branch in connection with: (i)
commercial credit card and merchant card services; (ii) ACH Transactions; (iii) Cash Management
Services; (iv) Hedge Agreements; and (v) leases and other banking products or services as may be
provided to any Borrower or Subsidiary, other than Letters of Credit.



     “Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. § 101 et
seq.).



     “Base Rate” means, for any day, the rate of interest in effect for such day as
publicly announced from time to time by the Bank in Charlotte, North Carolina as its “prime rate”
(the “prime rate” being a rate set by the Bank based upon various factors including the Bank’s
costs and desired return, general economic conditions and other factors, and is used as a reference
point for pricing some loans, which may be priced at, above, or below such announced rate). Any
change in the prime rate announced by the Bank shall take effect at the opening of business on the
day specified in the public announcement of such change. Each Interest Rate based upon the Base
Rate shall be adjusted simultaneously with any change in the Base Rate.



     “Base Rate Loan” means a Revolving Loan during any period in which it bears interest
based on the Base Rate.



A-5









 





     “BIA” means the Bankruptcy and Insolvency Act (Canada) and all regulations thereunder.



     “Black & Decker License Agreement” means the Trademark License Agreement, dated as of
June 26, 1998, between The Black & Decker Corporation and Parent, as assignee of Applica.



     “Blocked Account Agreement” means an agreement, including, inter alia, a collection
account agreement, among one or more of the Loan Parties, the Agent and a Clearing Bank, in form
and substance reasonably satisfactory to the Agent, concerning the collection of payments which
represent the proceeds of Accounts or of any other Collateral.



     “Blocked Accounts” means, collectively, the Applica Americas Blocked Account, the
Applica Asia Blocked Account, the Applica Canada Blocked Account and the Borrower Blocked Accounts.



     “Borrower Agent” has the meaning specified in Section 1.6.



     “Borrower Blocked Account” means each blocked account and lockbox established and
regulated pursuant to a Borrower Blocked Account Agreement, and over which Agent shall have
exclusive control and dominion during a Springing Period.



     “Borrower Blocked Account Agreement” means each agreement specified in Section
7.32(c).



     “Borrowing” means a borrowing hereunder consisting of Revolving Loans made on the same
day by the Lenders to the Borrowers or by Bank (in the case of a Borrowing funded by Non-Ratable
Loans) or by the Agent in the case of a Borrowing consisting of an Agent Advance, or the issuance
of Letters of Credit or Credit Support hereunder.



     “Borrowing Base” means, at any time, an amount equal to:




	 	(a)	 	the sum of:






	 	(i)	 	85% of the Net Amount of Eligible Accounts of
each Borrowing Base Party;






	 	plus	 	 






	 	(ii)	 	(A) at any time during a Seasonal Period, for
so long as the Loan Parties maintain a Fixed Charge Coverage Ratio of
1.0 to 1.0 or greater, 100% of the Net Orderly Liquidation Value of
Eligible Inventory of each Borrowing Base Party, or, if the Loan
Parties maintain a Fixed Charge Coverage Ratio of less than 1.0 to 1.0,
the lesser of (a) 85% of the Net Orderly Liquidation Value of Eligible
Inventory of each Borrowing Base Party, or (b) 70% of the Cost Value of
Eligible Inventory of each Borrowing Base Party; or






	 	(B)	 	at any time other than during a Seasonal Period, an amount equal to
the lesser of:






	 	(I)	 	70% of the Cost Value of Eligible Inventory of each
Borrowing Base Party, or




A-6









 






	 	(II)	 	85% of the Net Orderly Liquidation Value of Eligible
Inventory of each Borrowing Base Party;





          minus




     (b) without duplication, Reserves.



     Notwithstanding the foregoing, in no event shall the amount of the Borrowing Base on any date
(a) attributable to Eligible In-Transit Inventory exceed (i) $50,000,000 with respect to Eligible
In-Transit Inventory destined for a United States port of entry or (ii) $15,000,000 with respect to
Eligible In-Transit Inventory destined for a Canadian port of entry; (b) attributable to Eligible
Accounts that are Applica Asia Serviced Accounts exceed the Applica Asia Serviced Account Sublimit;
or (c) attributable to Eligible Accounts of Account Debtors having their principal assets, chief
executive office or principal place of business in Puerto Rico and Eligible Inventory of Applica
Americas that is located in Puerto Rico exceed, in aggregate, $5,000,000.



     For purposes of the calculation of the Borrowing Base, (a) the value of Eligible Accounts and
Eligible Inventory shall be calculated based on Dollar Equivalents as of the date of determination,
and (b) the value of Eligible In-Transit Inventory shall be net of all duty, freight, taxes, costs,
insurance and other charges and expenses which customarily pertain to such In-Transit Inventory.



     “Borrowing Base Certificate” means a certificate by a Responsible Officer of the
Borrowers, substantially in the form of Exhibit A (or in another form acceptable to the
Agent) setting forth the calculation of the Borrowing Base, including a calculation of each
component thereof, all in such detail as shall be reasonably satisfactory to the Agent. All
calculations of the Borrowing Base in connection with the preparation of any Borrowing Base
Certificate shall originally be made by the Borrowers and certified to the Agent; provided
that the Agent shall have the right to review and adjust, in the exercise of its reasonable credit
judgment, any such calculation (1) to reflect its reasonable estimate of declines in value of any
of the Accounts or Inventory described therein and (2) to the extent that such calculation is not
in accordance with the Agreement. Each Borrowing Base Certificate shall separately calculate that
portion of the Borrowing Base attributable to Eligible Accounts and Eligible Inventory of Applica
Canada in both Canadian dollars and Dollars, provided that in expressing such amount in Dollars,
the Dollar amount with reference to Canadian dollars shall be equal to the amount of Dollars that
could be purchased on such date, at the applicable Exchange Rate on the date immediately preceding
the date of the Borrowing Base Certificate, with Canadian dollars.



     “Borrowing Base Party” means each Borrower and Applica Canada, or any of them.



     “Business Day” means (a) any day that is not a Saturday, Sunday, or a day on which
banks in Atlanta, Georgia are required or permitted to be closed, and (b) with respect to all
notices, determinations, fundings and payments in connection with the LIBOR Rate or LIBOR Loans,
any day that is a Business Day pursuant to clause (a) above and that is also a day on which
trading in Dollars is carried on by and between banks in the London interbank market.



     “Capital Adequacy Regulation” means any guideline, request or directive of any central
bank or other Governmental Authority, or any other law, rule or regulation, whether or not having
the force of law, in each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.



     “Capital Expenditures” means all obligations incurred or expenditures made in respect
of any fixed asset or improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including costs arising in connection with the acquisition of such
asset by way of increased product or service charges or in connection with a Capital Lease, and
other items presented in accordance with GAAP.



A-7









 





     “Capital Lease” means any lease of property by a Loan Party which, in accordance with
GAAP, should be reflected as a capital lease on the consolidated balance sheet of the Borrowers.



     “Capital Stock” means, for any Person, any and all corporate stock, units, shares,
partnership interests, membership interests, equity interests, rights, securities, or other
equivalent evidences of ownership (however designated) issued to such Person.



     “Carrier” means, with respect to any In-Transit Inventory, the Person engaged to
transport such Inventory from a location outside the United States to a location within the United
States (other than a Person acting in its capacity as an NVOCC).



     “Cash Collateralize” has the meaning specified in Section 10.2.



     “Cash Collateralization” means the act of Cash Collateralizing Letters of Credit or
other LC Obligations.



     “Cash Management Services” means any services provided from time to time by the Bank,
any Lender or any Affiliates of the Bank or any Lender to any Consolidated Member in connection
with operating, collections, payroll, trust, or other depository or disbursement accounts,
including automated clearinghouse, controlled disbursement, depository, electronic funds transfer,
information reporting, lockbox, stop payment, overdraft and/or wire transfer services.



     “CCAA” means the Companies’ Creditors Arrangement Act (Canada) and the regulations
promulgated thereunder.



     “Change of Control” means (a) if any Person or group of Persons acting in concert,
other than Equity Investors and their Subsidiaries, shall own or control, directly or indirectly,
more than 51% of the outstanding securities of the Parent having voting rights in the election of
directors, determined on a fully diluted basis and taking into account any outstanding securities
or contract rights exercisable, exchangeable or convertible into equity interests, or (b) if Parent
ceases to own and control, directly or indirectly, all of the outstanding securities of APN having
voting rights in the election of directors, determined on a fully diluted basis and taking into
account any outstanding securities or contract rights exercisable, exchangeable or convertible into
equity interests, (c) if APN ceases to own and control, directly or indirectly, all of the
outstanding securities of Applica having voting rights in the election of directors, determined on
a fully diluted basis and taking into account any outstanding securities or contract rights
exercisable, exchangeable or convertible into equity interests, or (d) if Parent or Applica ceases
to own and control, directly or indirectly, all of the outstanding securities of any other Loan
Party having voting rights in the election of directors, determined on a fully diluted basis and
taking into account any outstanding securities or contract rights exercisable, exchangeable or
convertible into equity interests except as otherwise permitted by the Agreement.



     “Chattel Paper” shall have the meaning specified in the Security Agreement.



     “Clearing Bank” means the Bank or any other banking institution with whom a Payment
Account has been established pursuant to a Blocked Account Agreement.



     “Closing Date” means December 28, 2007.



A-8









 





     “Co-Borrower Payment” has the meaning specified in Section 1.6.



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Collateral” has the meaning specified in the Security Agreement.



     “Collateral Access Agreement” shall mean a Warehousemen’s Agreement or a Landlord
Agreement, among Agent, a Loan Party and/or a Loan Party’s Affiliate and certain third parties
named therein, as of the Closing Date and from time to time thereafter, in each case substantially
in the form attached hereto as Exhibit E.



     “Commitment” means, at any time with respect to a Lender, the principal amount set
forth beside such Lender’s name under the heading “Commitment” on Annex B attached
to the Agreement, or on the signature page of the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder in accordance with the provisions of Section 11.2, as such
Commitment may be adjusted from time to time in accordance with the provisions of Sections
1.5, 3.3, and 11.2, and “Commitments” means, collectively, the
aggregate amount of the Commitments of all of the Lenders.



     “Commitment Increase” has the meaning specified in Section 1.5(a).



     “Commitment Increase Effective Date” has the meaning specified in Section
1.5(a).



     “Confidential Information” has the meaning specified in Section 14.17.



     “Consolidated Applica Parties” means Applica and its Subsidiaries prior to the Closing
Date.



     “Consolidated EBITDA” means, with respect to any fiscal period of the Reporting Loan
Parties, the sum of (a) the Adjusted Net Earnings from Operations of the Reporting Loan Parties,
plus, (b) to the extent deducted in the determination of Adjusted Net Earnings from
Operations for that fiscal period, interest expenses, federal, state, local and foreign income
taxes, depreciation, and amortization, plus (c) the Anasazi Add-Back, to the extent such
cash is received in such fiscal period, in all cases as determined in accordance with GAAP.



     “Consolidated Members” means the Parent and its Subsidiaries and “Consolidated Member”
means any of the foregoing.



     “Consolidated Salton Parties” means Salton and its Subsidiaries prior to the Closing
Date.



     “Contaminant” means any waste, pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos in any
form or condition, polychlorinated biphenyls (“PCBs”), or any constituent of any such substance or
waste.



     “Continuation/Conversion Date” means the date on which a Loan is converted into or
continued as a LIBOR Loan.



     “Core Business” means, with respect to the Loan Parties, the business of
manufacturing, distributing and marketing household and outdoor appliances and small non-electric
products, personal care products, lighting products, table top products, pest products, pet
products, water filtration products and related items consistent with past practices.



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     “Cost of Acquisition” means, with respect to any Acquisition, as at the date of
consummation of any such Acquisition, the sum of the following (without duplication): (i) the
value of the capital stock, warrants or options to acquire capital stock of a Loan Party to be
transferred to a seller in connection therewith, (ii) any cash or other property and the unpaid
principal amount of any debt instrument given as consideration, (iii) any Debt assumed by a Loan
Party in connection with such Acquisition, and (iv) out of pocket transaction costs for the
services and expenses of attorneys, accountants and consultants incurred in effecting such a
transaction, and other similar transaction costs so incurred. For purposes of determining the Cost
of Acquisition for any transaction, (A) the capital stock of a Loan Party shall be valued (I) at
its market value as reported on the New York Stock Exchange with respect to shares that are freely
tradable, and (II) with respect to shares that are not freely tradable, as determined by the Board
of Directors of the Borrowers party to such Acquisition and, if requested by Agent, determined to
be a reasonable valuation by the independent public accountants referred to in Section 5.2
hereof, (B) the capital stock of any Subsidiary shall be valued as determined by the Board of
Directors of the Borrowers party to such Acquisition or such Subsidiary and, if requested by Agent,
determined to be a reasonable valuation by the independent public accountants referred to in
Section 5.2 hereof, and (C) with respect to any Acquisition accomplished pursuant to the
exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall
include both the cost of acquiring such option, warrant or convertible security as well as the cost
of exercise or conversion.



     “Cost Value” means, with reference to Eligible Inventory, the applicable Borrowing
Base Party’s cost of such Eligible Inventory calculated on a first-in, first-out basis determined
in accordance with GAAP.



     “CRA” means the Canada Revenue Agency.



     “Credit Support” has the meaning specified in Section 1.3(a).



     “Current Maturities of Long Term Debt” shall mean all payments in respect of Long Term
Debt (other than Obligations in respect of Revolving Loans) that are required to be made within one
year from the date of determination, whether or not the obligation to make such payments would
constitute a current liability of the obligor under GAAP.



     “Debt” means, without duplication, with respect any Person (the “subject Person”), all
liabilities, obligations and indebtedness of the subject Person to any other Person, of any kind or
nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, consisting
of indebtedness for borrowed money or the deferred purchase price of property, excluding purchases
of property, product, merchandise and services in the ordinary course of business, but including
(a) in the case of the Loan Parties, all Obligations; (b) all obligations and liabilities of any
Person secured by any Lien on the subject Person’s property, even though the subject Person shall
not have assumed or become liable for the payment thereof; (except unperfected Liens incurred in
the ordinary course of business and not in connection with the borrowing of money); provided,
however, that all such obligations and liabilities which are limited in recourse to such
property shall be included in Debt only to the extent of the book value of such property as would
be shown on a balance sheet of the subject Person prepared in accordance with GAAP; (c) all
obligations or liabilities created or arising under any Capital Lease or conditional sale or other
title retention agreement with respect to property used or acquired by the subject Person, even if
the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of
such property, provided that all such obligations and liabilities which are limited in
recourse to such property shall be included in Debt only to the extent of the book value of such
property as would be shown on a balance sheet of the subject Person prepared in accordance with
GAAP; (d) all obligations and liabilities under Guaranties; (e) the present value (discounted at
the Base Rate) of lease payments due under



A-10









 




synthetic leases; and (f) all obligations and liabilities under any asset securitization or
sale/leaseback transaction; provided, further, however, that in no event
shall the term Debt include the capital stock surplus, retained earnings, minority interests in the
common stock of Subsidiaries, lease obligations (other than pursuant to (c) or (e) above), reserves
for deferred income taxes and investment credits, other deferred credits or reserves.




     “Default” means any event or circumstance which, with the giving of notice, the lapse
of time, or both, would (if not cured, waived, or otherwise remedied during such time) constitute
an Event of Default.



     “Default Rate” means a fluctuating per annum interest rate at all times equal to the
sum of (a) the otherwise applicable Interest Rate plus (b) two percent (2%) per annum.
Each Default Rate shall be adjusted simultaneously with any change in the applicable Interest Rate.
In addition, the imposition of the Default Rate shall result in an increase in the Letter of
Credit Fee by two percent (2%) per annum.



     “Defaulting Lender” has the meaning specified in Section 12.15(c).



     “Deposit Accounts” shall have the meaning specified in the Security Agreement.



     “Designated Account” has the meaning specified in Section 1.2(c).



     “Direct Foreign Subsidiary” means any Foreign Subsidiary whose outstanding voting
Capital Stock is owned by a Loan Party or a Domestic Subsidiary.



     “Disclosing Party” has the meaning specified in Section 14.17.



     “Distribution” means, in respect of any Person (other than a natural Person): (a) the
payment or making of any dividend or other distribution of property in respect of such Person’s
Capital Stock (excluding any options or warrants for, or other rights with respect to, such stock),
other than distributions in such Person’s Capital Stock of the same class; or (b) the redemption or
other acquisition of any Capital Stock (or any options or warrants for such Capital Stock) of such
Person.



     “Documents” shall have the meaning specified in the Security Agreement, and include
bills of lading, warehouse receipts and other documents of title.



     “DOL” means the United States Department of Labor or any successor department or
agency.



     “Dollars” and “$” means dollars in the lawful currency of the United States.
Unless otherwise specified, all payments under the Agreements shall be made in Dollars.



     “Dollar(Cdn)” and “$(Cdn)” means dollars in the lawful currency of Canada.



     “Dollar Equivalent” means, on any date, with respect to any amount denominated in
Dollars, such amount in Dollars, and with respect to any stated amount in a currency other than
Dollars, the amount of Dollars that the Agent determines (which determination shall be conclusive
and binding absent manifest error) would be necessary to be sold on such date at the applicable
Exchange Rate to obtain the stated amount of the other currency.



A-11









 





     “Domestic Subsidiaries” means the Subsidiaries of the Borrowers organized or
incorporated under the laws of a state in the United States and denominated as a “Domestic
Subsidiary” in Schedule 6.5.



     “Eligible Accounts” means, with respect to each Borrowing Base Party, the Accounts of
such Borrowing Base Party which the Agent, in the exercise of its reasonable commercial discretion,
determines to be Eligible Accounts. Without limiting the discretion of the Agent to establish
additional criteria of ineligibility, Eligible Accounts shall not include any Account:



     (a) with respect to which more than 120 days have elapsed since the date of the original
invoice therefor or which is more than 60 days past due, whichever is sooner;



     (b) with respect to which any of the representations, warranties, covenants, and agreements
contained in the Security Agreement are incorrect or have been breached;



     (c) with respect to which, in whole or in part, a check, promissory note, draft, trade
acceptance or other instrument for the payment of money has been received, presented for payment
and returned uncollected by reason of insufficient funds;



     (d) which represents a progress billing (as hereinafter defined) or as to which such Borrowing
Base Party has materially extended the time for payment without the consent of the Agent; for the
purposes hereof, “progress billing” means any invoice for goods sold or leased or services rendered
under a contract or agreement pursuant to which the Account Debtor’s obligation to pay such invoice
is conditioned upon such Borrowing Base Party’s completion of any further performance under the
contract or agreement;



     (e) with respect to which any one or more of the following events has occurred to the Account
Debtor on such Account: the filing by or against the Account Debtor of a petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other
relief under the bankruptcy, insolvency, or similar laws of the United States or Canada, any state,
province or territory thereof, or any foreign jurisdiction, now or hereafter in effect; the making
of any general assignment by the Account Debtor for the benefit of creditors; the appointment of a
receiver, interim receiver, assignee, liquidator, sequestor, custodian, monitor, administrator,
trustee or similar officer for the Account Debtor or for any of the assets of the Account Debtor,
including the appointment of or taking possession by a “custodian,” as defined in the Bankruptcy
Code, or a “trustee” or “receiver,” as defined in the BIA: the institution by or against the
Account Debtor of any other type of insolvency proceeding (under the bankruptcy, insolvency or debt
adjustment laws of the United States, Canada (including the BIA and CCAA) or any other Governmental
Authority) or of any formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, the Account Debtor; the nonpayment
generally by the Account Debtor of its debts as they become due; or the cessation of the business
of the Account Debtor as a going concern; provided, however, that none of the foregoing
exclusions from Eligible Accounts shall include any Account to the extent there is any
post-petition receivable that has the status of an administrative claim and is entitled to be paid
in the ordinary course;



     (f) if 50% or more of the aggregate Dollar amount of outstanding Accounts owed at such time to
all Borrowing Base Parties by the Account Debtor thereon is classified as ineligible under
clause (a) above;



A-12









 





     (g) owed by an Account Debtor which (i) does not maintain its chief executive office,
principal place of business and principal assets in the United States of America, Canada or the
Commonwealth of Puerto Rico; (ii) is not organized under the laws of the United States of
America, Canada, the Commonwealth of Puerto Rico any state, province or territory thereof; or (iii)
is a Governmental Authority except to the extent that such Account is secured or payable by an
irrevocable letter of credit satisfactory to the Agent in its discretion;



     (h) owed by an Account Debtor which is an Affiliate or employee of any Loan Party;




     (i) except as provided in clause (k) below, with respect to which either the
perfection, enforceability, or validity of the Agent’s Liens in such Account, or the Agent’s right
or ability to obtain direct payment to the Agent of the proceeds of such Account, is governed by
any federal, state, or local statutory requirements other than those of the UCC;



     (j) owed by an Account Debtor to which such Borrowing Base Party or any of its Subsidiaries,
is indebted in any way, or which is subject to any right of setoff or recoupment by the Account
Debtor, unless the Account Debtor has entered into an agreement acceptable to the Agent to waive
setoff rights; or if the Account Debtor thereon has disputed liability or made any claim with
respect to any other Account due from such Account Debtor; but in each such case only to the extent
of such indebtedness, setoff, recoupment, dispute, or claim;



     (k) owed by the any Government Authority, unless in the case of the United States of America,
the Federal Assignment of Claims Act of 1940 (31 U.S.C. § 3727 et seq.) or in the
case of Canada, the Financial Administration Act (Canada) or any similar provincial or territorial
law, and any other steps necessary to perfect the Agent’s Liens therein, have been complied with to
the Agent’s satisfaction with respect to such Account;



     (l) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis;



     (m) which is evidenced by a promissory note or other Instrument or by Chattel Paper;




     (n) if the Agent believes, in the exercise of its reasonable judgment, that the prospect of
collection of such Account is impaired or that the Account may not be paid by reason of the Account
Debtor’s financial inability to pay;



     (o) with respect to which the Account Debtor is located in any state requiring the filing of a
Notice of Business Activities Report or similar report in order to permit such Borrowing Base Party
to seek judicial enforcement in such jurisdiction of payment of such Account, unless such Borrowing
Base Party has qualified to do business in such state or has filed a Notice of Business Activities
Report or equivalent report for the then current year;



     (p) which arises out of a sale not made in the ordinary course of such Borrowing Base Party’s
business;



     (q) with respect to which the goods giving rise to such Account have not been shipped and
delivered to and accepted by the Account Debtor or the services giving rise to such Account have
not been performed by such Borrowing Base Party, and, if applicable, accepted by the Account
Debtor, or the Account Debtor revokes its acceptance of such goods or services;



     (r) which is not subject to a first priority and perfected Lien in favor of the Agent for the
benefit of itself and the Lenders;



A-13









 





     (s) which is not payable in Dollars unless the Account is owned by Applica Canada and is
payable in Canadian dollars; or



     (t) which is an Applica Asia Serviced Account, unless Applica Asia and Applica Consumer
Products or Applica Asia and Applica Canada, as applicable, are in compliance with the provisions
of Section 7.34 and the Applica Asia Documents have been duly executed and delivered to the
Agent.



     There shall be deducted from the amount of Eligible Accounts owed (x) by an Account Debtor
(other than Wal-Mart or Target) and its Affiliates to any one or more Borrowing Base Parties the
amount (if any) by which the aggregate unpaid balance of all Accounts of such Account Debtor and
its Affiliates to the Borrowing Base Parties on any date exceeds 20% of the aggregate unpaid
balance of all Accounts owed to such Borrowing Base Parties on such date; (y) by Wal-Mart and its
Affiliates to any one or more Borrowing Base Parties the amount (if any) by which the aggregate
unpaid balance of all Accounts of Wal-Mart and its Affiliates to the Borrowing Base Parties on any
date exceeds 30% of the aggregate unpaid balance of all Accounts owed to such Borrowing Base
Parties on such date; and (z) by Target and its Affiliates to any one or more Borrowing Base
Parties the amount (if any) by which the aggregate unpaid balance of all Accounts of Target and its
Affiliates to the Borrowing Base Parties on any date exceeds 30% of the aggregate unpaid balance of
all Accounts owed to such Borrowing Base Parties on such date.



     If any Account at any time ceases to be an Eligible Account, then such Account shall promptly
be excluded from the calculation of Eligible Accounts until reinstated by the Agent as an Eligible
Account in the exercise of its reasonable credit judgment. Notwithstanding the foregoing, none of
the Accounts described in clauses (a) through (n) above shall be excluded from Eligible Accounts if
the payment of such Accounts is (i) fully covered and insured under credit insurance policies
issued by a credit insurance company reasonably acceptable to Agent and in form reasonably
acceptable to Agent naming the Agent as loss payee or (ii) secured or payable by an irrevocable
standby letter of credit, in each case as is satisfactory to Agent in its sole discretion.



     “Eligible Assignee” means (a) a commercial bank, commercial finance company, financial
institution or other asset based lender, having total assets in excess of $1,000,000,000; (b) any
Lender listed on the signature page of the Agreement; (c) any Affiliate of, or a fund managed by,
any Lender; and (d) if an Event of Default has occurred and is continuing, any Person reasonably
acceptable to the Agent. In no event shall the holders of the Additional Debt, any affiliate of
the holders of the Additional Debt, any Loan Party or any Affiliate of an Loan Party be an Eligible
Assignee except, in the case of the holders of the Additional Debt, if the holders of the
Additional Debt shall exercise their option to acquire the Obligations pursuant to the Additional
Debt Intercreditor Agreement.



     “Eligible In-Transit Inventory” means In-Transit Inventory that constitutes Eligible
Inventory.



     “Eligible Inventory” means, with respect to each Borrowing Base Party, Inventory of
such Borrowing Base Party which the Agent, in its reasonable discretion, determines to be Eligible
Inventory. Without limiting the discretion of the Agent to establish additional criteria of
ineligibility, Eligible Inventory shall not include any Inventory:



     (a) that is not owned by such Borrowing Base Party;




A-14









 








     (b) that is not subject to the Agent’s Liens, which are perfected as to such Inventory, or
that are subject to any other Lien whatsoever (other than the Liens described in clause (d)
of the definition of Permitted Liens provided that such Permitted Liens (i) are junior in priority to
the Agent’s Liens or subject to Reserves and (ii) do not impair directly or indirectly the ability
of the Agent to realize on or obtain the full benefit of such Inventory);



     (c) that does not consist of finished goods;




     (d) that consists of work-in-process, chemicals, samples, prototypes, supplies, or packing and
shipping materials;



     (e) that is not in good condition, is unmerchantable, or does not meet all standards imposed
by any Governmental Authority having regulatory authority over such goods, their use or sale;



     (f) that is not currently either usable or salable, at prices approximating at least cost, in
the normal course of such Borrowing Base Party’s business, or that is slow moving or stale;



     (g) that is obsolete or returned (to the extent the aggregate Cost Value of returned Inventory
exceeds $7,500,000 and such returned Inventory otherwise satisfies the criteria necessary to
constitute Eligible Inventory) or repossessed or used goods taken in trade;



     (h) that is located outside the United States of America, the Commonwealth of Puerto Rico or
Canada or that is in-transit from vendors or suppliers except to the extent such Inventory is
In-Transit Inventory;



     (i) that is located in a public warehouse or in possession of a bailee or in a facility leased
by such Borrowing Base Party, if the warehouseman, or the bailee, or the lessor has not delivered
to the Agent a Collateral Access Agreement in form and substance satisfactory to the Agent or if a
Reserve for rents or storage charges has not been established for Inventory at that location;



     (j) that contains or bears any Proprietary Rights licensed to such Borrowing Base Party by any
Person (including Procter & Gamble or The Black & Decker Corporation or any of their respective
Affiliates, successors or assigns), if the Agent is not satisfied that it may sell or otherwise
dispose of such Inventory in accordance with the terms of the Security Agreement and Section
9.2 without infringing the rights of the licensor of such Proprietary Rights or violating any
contract with such licensor (and without payment of any royalties other than any royalties due with
respect to the sale or disposition of such Inventory pursuant to the existing license agreement),
and as to which such Borrowing Base Party has not delivered to the Agent a consent or sublicense
agreement from such licensor in form and substance acceptable to the Agent if requested;



     (k) that is not reflected in the details of a current perpetual inventory report; or




     (l) that is Inventory placed on consignment.



     If any Inventory at any time ceases to be Eligible Inventory, such Inventory shall promptly be
excluded from the calculation of Eligible Inventory until reinstated by Agent in the exercise of
its reasonable credit judgment as Eligible Inventory.



     “Environmental Claims” means all claims, however asserted, by any Governmental
Authority or other Person alleging potential liability or responsibility for violation of any
Environmental Law, or for a Release or injury to the environment.



A-15









 





     “Environmental Laws” means all federal, state, provincial, territorial, local or
foreign laws, statutes, common law duties, rules, regulations, ordinances, orders-in-council and
codes, together with all administrative orders, directed duties, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case relating to
environmental, health, safety and land use matters.



     “Environmental Lien” means a Lien in favor of any Governmental Authority or any other
Person for (a) any liability under Environmental Laws, or (b) damages arising from, or costs
incurred by such Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.



     “Equipment” shall have the meaning specified in the Security Agreement.



     “Equity Contribution” means a net capital contribution to the Borrowers of at least
$100,000,000 in common or preferred equity from Equity Investors and certain other investors.



     “Equity Investors” shall have the meaning given to it in the Recitals hereto.



     “ERISA” means the Employee Retirement Income Security Act of 1974, and regulations
promulgated thereunder.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with a Loan Party within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the
Code). Notwithstanding the foregoing, the term “ERISA Affiliate” shall not include Salton Europe
Limited.



     “ERISA Event” means (a) a Reportable Event and or Termination Event with respect to a
Pension Plan, (b) a withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or
employer under the PBA or a cessation of operations which is treated as such a withdrawal, (c) a
complete or partial withdrawal by a Loan Party or any ERISA Affiliate from a Multi-employer Plan or
notification that a Multi-employer Plan or plan regulated or governed by the PBA is in
reorganization, (d) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination or the commencement of proceedings by the PBGC or other applicable
Governmental Authority to terminate a Pension Plan or Multi-employer Plan, (e) the occurrence of an
event or condition which might reasonably be expected to constitute grounds for the termination of,
or the appointment of a trustee to administer, any Pension Plan or Multi-employer Plan, (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA or PBA or other applicable law of any jurisdiction, upon a
Loan Party or any ERISA Affiliate; or (g) failure to make or remit any contribution when due in
respect of any Plan.



     “Event of Default” has the meaning specified in Section 9.1.



     “Exchange Act” means the Securities Exchange Act of 1934, and regulations promulgated
thereunder.



     “Exchange Rate” means on any date, (i) with respect to Canadian dollars or any other
foreign currency in relation to Dollars, the spot rate as quoted by Bank at its noon spot rate at
which Dollars are offered on such date for Canadian dollars or such other foreign currency, as
applicable, and (ii) with respect to Dollars in relation to Canadian dollars or any other foreign
currency, the spot rate as
quoted by Bank at its noon spot rate at which Canadian dollars or such other foreign currency,
as applicable, are offered on such date for Dollars.



A-16









 





     “Excluded Taxes” means taxes imposed on or measured by net income or net profits and
franchise taxes of each Lender and the Agent, imposed pursuant to the laws of the jurisdiction
under the laws of which the Lender or Agent is organized, in which such person is resident for tax
purposes or in which the principal office or applicable lending office of such Lender or Agent is
located or in which it is otherwise deemed to be engaged in a trade or business for Tax purposes or
any subdivision thereof or therein, and any branch profits taxes imposed by the United States of
America or any similar tax imposed by any jurisdiction on the Lender or Agent.



     “Executive Order No. 13224” means Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended,
amended or replaced.



     “FDIC” means the Federal Deposit Insurance Corporation, and any Governmental Authority
succeeding to any of its principal functions.



     “Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day, and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate
charged to the Bank on such day on such transactions as determined by the Agent.



     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System or
any successor thereto.



     “Fee Letter” means the letter from Agent and Lead Arranger to Applica and APN, dated
December 28, 2007, setting forth certain fees and other charges payable by the Loan Parties in
connection with the provision and syndication of the credit facility contemplated under the
Agreement.



     “Financial Covenant Measurement Date” means, as applicable, a Fixed Charge Measurement
Date or a Minimum EBITDA Measurement Date.



     “Financial Statements” means, according to the context in which it is used, the
financial statements referred to in Sections 5.2 and 6.6 or any other financial
statements required to be given to the Agent and the Lenders pursuant to the Agreement.



     “First Amended Credit Agreement” shall have the meaning ascribed to it in the Recitals
hereto.



     “Fiscal Quarter” means, with respect to the Loan Parties, a period ending on March 31,
June 30, September 30, or December 31 of each calendar year.



     “Fiscal Year” means, with respect to the Loan Parties, their fiscal year for financial
accounting purposes.



A-17









 





     “Fixed Charge Coverage Ratio” shall mean, on a Consolidated basis for the Reporting
Loan Parties, the ratio of (i) Consolidated EBITDA as of the last day of any month for the twelve
month period then ending, plus, the amount of equity contributions actually made by Equity
Investors pursuant to Section 7.27 in such period, minus, Unfinanced Capital
Expenditures incurred in such period, Taxes actually paid in such period, Additional Debt
Prepayments in such period, and cash Distributions to a Person other than a Reporting Loan Party
made in such period, to (ii) the sum of Interest Expense and Current Maturities of Long Term Debt
paid or payable during such period, in each case on a Consolidated basis for the Reporting Loan
Parties.



     “Fixed Charge Measurement Date” means the last day of each month, commencing on
January 31, 2009.



     “Foreign Security Document” means a Guaranty, pledge, mortgage, personal property
mortgage, security agreement, assignment, security instrument, hypothecation, charge or other
agreement or document by which any Foreign Subsidiary grants or otherwise conveys to the Agent or
any Affiliate of the Agent for the benefit of the Agent, or any agent or trustee for or on behalf
of the Agent or any such Affiliate, any Guaranty, pledge, lien, security interest, hypothec,
mortgage, charge, collateral assignment or similar interest in property of such Foreign Subsidiary
as security for the Obligations or any portion thereof, and any and all renewals, extensions,
modifications, amendments or restatements thereof.



     “Foreign Subsidiary” means any direct or indirect Subsidiary of the Borrowers other
than the Domestic Subsidiaries, which shall include Applica Canada, Applica Asia and such other
Foreign Subsidiaries as are designated in Schedule 6.5.



     “Freight/Customs Reserve” means, on any date, a reserve equal to four percent (4.0%)
of the Net Orderly Liquidation Value of Eligible In-Transit Inventory on such date.



     “FSCO” means the Financial Services Commission of Ontario and any Person succeeding to
the functions thereof and includes the Superintendent under such statute and any other Governmental
Authority (succeeding to the functions thereof) and established or appointed by the Financial
Services Commission of Ontario Act, 1997.



     “Funded Debt” of a Loan Party shall mean at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay
the deferred price of property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under Capitalized Leases, (v) all
obligations of such Person to reimburse any bank or other Person in respect of amounts payable
under a banker’s acceptance, and (vi) all obligations of such Person to reimburse any bank or other
Person in respect of amounts paid or to be paid under a letter of credit or similar instrument.



     “Funding Date” means the date on which a Borrowing occurs.



     “GAAP” means generally accepted accounting principles and practices set forth from
time to time in the opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable stature and authority
within the U.S. accounting profession), which are applicable to the circumstances as of the date of
the report. When the term GAAP is used in the Agreement and the other Loan Documents in respect of
Financial Statements other than annual audited Financial Statements of the Consolidated Members,
such Financial Statements shall be subject to year-end adjustments, shall not be required to
include footnotes, shall not include



A-18









 




changes in stockholders’ equity and shall not include certain other information required by
GAAP. However, all adjustments to such Financial Statements (consisting of normal recurring
accruals) that, in the opinion of management of the Loan Parties, are necessary for a fair
presentation of the financial statements shall be included. All such Financial Statements shall be
consistent with historical practices of the Consolidated Members or the Loan Parties, as
applicable, and shall present fairly the financial position of the Consolidated Members or the Loan
Parties, as applicable, subject to and in accordance with the foregoing.




     “General Intangible” shall have the meaning specified in the Security Agreement.



     “Global Availability” means, on any date, the sum of (i) Availability under the
Agreement on such date plus (ii) unused borrowing availability under the UK Credit Facility
on such date.



     “Goods” shall have the meaning specified in the Security Agreement.



     “Governmental Authority” means any nation or government; any state, county, province,
territory, municipality, region or other political subdivision thereof; any central bank (or
similar monetary or regulatory authority) thereof; any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to any government or court; any
corporation or other entity owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing and any department, agency, board, commission, tribunal, committee or
instrumentality of any of the foregoing.



     “Guarantor” means Applica Canada, Applica Asia, and any other Subsidiary or Affiliate
of a Borrower or other Person that hereafter executes and delivers to the Agent an agreement of
Guaranty in respect of all or any part of the Obligations.



     “Guaranty” means, with respect to any Person, all obligations of such Person which in
any manner directly or indirectly guarantee or assure, or in effect guarantee or assure, the
payment or performance of any indebtedness, dividend or other obligations of any other Person (the
“guaranteed obligations”), or assure or in effect assure the holder of the guaranteed obligations
against loss in respect thereof, including any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed obligations or any property constituting
security therefor; (b) to advance or supply funds for the purchase or payment of the guaranteed
obligations or to maintain a working capital or other balance sheet condition; or (c) to lease
property or to purchase any debt or equity securities or other property or services.



     “Harbinger Merger” means the merger between APN Mergersub, Inc. and Applica, with
Applica being the surviving corporation, which occurred on January 23, 2007.



     “Hedge Agreements” means any and all transactions, agreements or documents now
existing or hereafter entered into, which provides for an interest rate, credit, commodity or
equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross
currency rate swap, currency option, or any combination of, or option with respect to, these or
similar transactions, for the purpose of hedging a Person’s exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security or currency valuations or commodity prices.



     “HSBC” means The Hong Kong and Shanghai Banking Corporation Limited.



     “Impermissible Qualification” means any qualification or exception to the opinion or
certification of any independent public accountant as to any financial statement of the Loan
Parties which



A-19









 




(i) is of a “going concern” or similar nature, (ii) relates to the limited scope of
examination of matters relevant to such financial statements, or (iii) relates to the treatment or
classification of any item in such financial statement in which, a condition to its removal, would
require an adjustment to such item the effect of which would be to cause the occurrence of an Event
of Default.




     “Imported Inventory Agreement” means an agreement among the Agent, one or more
Borrowing Base Parties, and either a customs broker also serving as an NVOCC or a Carrier
providing for, among other things, the handling and disposition of imported goods to a Borrowing
Base Party and all Documents related to such goods and directing the disposition of such goods and
related Documents, all to be in form and substance satisfactory to the Agent.



     “Increasing Lender” has the meaning specified in Section 1.5(c).



     “Indemnified Liabilities” shall have the meaning given to it in Section
14.11(a) of the Agreement.



     “Indemnified Taxes” means all Taxes other than Excluded Taxes.



     “Instruments” shall have the meaning specified in the Security Agreement.



     “Intellectual Property Notices” means any Notice of Grant of Security Interest in
patents, trademarks or copyrights executed by a Loan Party in favor of the Agent prior to the
Closing Date.



     “Intercompany Accounts” has the meaning specified in Section 5.2(n).



     “Interest Expense” shall mean, for any period, interest expense (including capitalized
interest) in respect of Indebtedness of Borrowers and the other Loan Parties as determined in
accordance with GAAP.



     “Interest Period” means, as to any LIBOR Loan, the period commencing on the Funding
Date of such Loan or on the Continuation/Conversion Date on which the Loan is converted into or
continued as a LIBOR Loan, and ending on the date one, two, three or six months thereafter as
selected by the Borrowers in their Notice of Borrowing, in the form attached hereto as Exhibit
B, or Notice of Continuation/Conversion, in the form attached hereto as Exhibit C,
provided that:




     (a) if any Interest Period would otherwise end on a day that is not a Business Day,
that Interest Period shall be extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;




     (b) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and




     (c) no Interest Period shall extend beyond the Stated Termination Date.



     “Interest Rate” means each or any of the interest rates, including the Default Rate,
set forth in Section 2.1.



A-20









 





     “In-Transit Inventory” means Inventory of a Borrowing Base Party that is in transit to
a Borrowing Base Party, provided that: (i) such Inventory has been identified to the contract
between the Vendor and such Borrowing Base Party and, under the terms of sale of such Inventory,
title and risk of loss have passed with respect to such Inventory from the Vendor to such Borrowing
Base Party on or before such date; (ii) such Inventory is fully insured by marine cargo or other
insurance on terms and in an amount and subject to deductibles satisfactory to the Agent and with
respect to which the Agent has been named additional insured and loss payee pursuant to a policy
endorsement reasonably acceptable to it; (iii) such Borrowing Base Party is not in default of any
of its obligations to the Vendor of such Inventory, whether or not such default relates to the
Inventory in question; (iv) Agent has received from the Vendor of such Inventory a duly executed
letter agreement in substantially the form attached hereto as Exhibit F-1 or
Exhibit F-2, as applicable, that is in full force and effect on such date, has not
been revoked or terminated on such date, and such Vendor and the Borrowing Base Parties are in
compliance with the terms and provisions of such letter agreement, as Agent may determine in its
sole discretion; (v) (a) for Inventory for which a NVOCC that also serves as a customs broker has
been engaged to assist in the importation of such Inventory, (1) the NVOCC is a party to an
Imported Inventory Agreement with Agent that is in full force and effect on such date and has not
been revoked or terminated on such date, (2) such Inventory is in the possession of a Carrier,
which is not affiliated with the Vendor and which has issued a tangible negotiable bill of lading
to the order of such NVOCC (or, if otherwise required by Agent in its discretion, to the order of
Agent) that covers no goods other than In-Transit Inventory, (3) the NVOCC has issued a tangible
negotiable bill of lading to the order of a Borrowing Base Party (or, if otherwise required by
Agent in its discretion, to the order of Agent) that covers no goods other than In-Transit
Inventory and, for each bill of lading issued to the order of a Borrowing Base Party, Agent has
been named as a notify party and such bill of lading bears a notation on its face indicating
Agent’s security interest therein, and (4) all original counterparts of the bill of lading issued
by the NVOCC with respect to such Inventory are in the custody and control, in the United States,
of Agent or the NVOCC, and (b) for all other In-Transit Inventory, (1) such Inventory is in the
possession of a Carrier, which is not affiliated with the Vendor and which has issued a tangible
negotiable bill of lading to the order of a Borrowing Base Party (or, if otherwise required by
Agent in its discretion, to the order of Agent) that covers no goods other than In-Transit
Inventory and, for each bill of lading issued to the order of a Borrowing Base Party, Agent has
been named as a notify party and such bill of lading bears a notation on its face indicating
Agent’s security interest therein, (2) the Carrier is a party to an Imported Inventory Agreement
with Agent that is in full force and effect on such date and has not been revoked or terminated on
such date, (3) the Vendor shall have delivered all original counterparts of the bills of lading
issued by the Carrier to Agent at a location in the United States, and (4) all original
counterparts of such bills of lading with respect to such Inventory are in the custody and control,
in the United States, of Agent, unless Agent has released from its custody and control an original
counterpart of such bill of lading to a Borrowing Base Party for such Borrowing Base Party to
endorse and surrender to the Carrier for the offloading of such Inventory.



     “In-Transit Perfection Documents” mean all filings, agreements or other documents
requested and deemed necessary by Agent to perfect (or continue the perfection of) a first priority
Lien in favor of Agent upon Inventory in transit to a Borrowing Base Party (except for possessory
liens upon such goods in the possession of a freight carrier or shipping company securing only the
freight charges for the transportation of such goods to a Borrowing Base Party) so that such
Inventory can be considered Eligible In-Transit Inventory, including delivery to the Agent or a
bailee of the Agent of all original Documents issued with respect to such Inventory in the form
provided for in the definition of In-Transit Inventory and such agreements as may be requested by
Agent with each common carrier, shipper, NVOCC, customs agent, freight forwarder or other Person,
including all Imported Inventory Agreements, in form and substance reasonably satisfactory to
Agent.



     “Inventory” shall have the meaning specified in the Security Agreement.



A-21









 





     “Investment Property” shall have the meaning specified in the Security Agreement.



     “IRS” means the Internal Revenue Service and any Governmental Authority succeeding to
any of its principal functions under the Code.



     “ITA” means the Income Tax Act (Canada), as amended from time to time, and the
regulations made thereunder.



     “Latest Projections” means: (a) on the Closing Date and thereafter until the Agent
receives new projections pursuant to Section 5.2(h), the projections of the Reporting Loan
Parties’ balance sheets, income statements and cash flows, for the period commencing on December
31, 2007 and ending on June 30, 2012 and delivered to Agent prior to the Closing Date; and (b)
thereafter, the projections most recently received by Agent pursuant to Section 5.2(h).



     “LC Obligations” means, on any date, an amount equal to the sum of (without
duplication) (a) all amounts then due and payable by the Borrowers (together with any other Loan
Party) on such date by reason of any payment that is made under a Letter of Credit or Credit
Support that has not been repaid in accordance with the Agreement, plus (b) the aggregate
undrawn amount of all Letters of Credit and Credit Supports which are then outstanding or in
respect of which an application therefor has been delivered to the Agent or any Letter of Credit
Issuer, plus (c) all fees and other amounts due or to become due in respect of Letters of
Credit outstanding on such date.



     “Lead Arranger” means Banc of America Securities LLC, a Delaware limited liability
company.



     “Lender” and “Lenders” have the meanings specified in the introductory
paragraph hereof and shall include Agent to the extent of any Agent Advance outstanding and the
Bank to the extent of any Non-Ratable Loan outstanding; provided that no such Agent Advance
or Non-Ratable Loan shall be taken into account in determining any Lender’s Pro Rata Share.



     “Lending Party” has the meaning specified in Section 14.17.



     “Letter of Credit” has the meaning specified in Section 1.3(a).



     “Letter of Credit Fee” has the meaning specified in Section 2.6.



     “Letter of Credit Issuer” means the Bank, any Affiliate or branch of the Bank, a
Lender or any other financial institution that issues any Letter of Credit pursuant to the
Agreement.



     “Letter-of-Credit Rights” shall have the meaning specified in the Security Agreement.



     “Letter of Credit Subfacility” means $20,000,000.



     “LIBOR Interest Payment Date” means, with respect to a LIBOR Loan, the Termination
Date and the last day of each Interest Period applicable to such Loan or, with respect to each
Interest Period of greater than three months in duration, the last day of the third month of such
Interest Period and the last day of such Interest Period.



     “LIBOR Rate” means, for any Interest Period, with respect to LIBOR Loans, the rate of
interest per annum determined pursuant to the following formula:



A-22









 





	 	 	 	 	 
	LIBOR Rate

	 	=
	 	             Offshore Base Rate       
           
	 

	 	 	 	1.00 — Eurodollar Reserve Percentage






     Where,




     “Offshore Base Rate” means, for any Revolving Loan bearing interest at the
LIBOR Rate the rate per annum appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period for a term comparable
to such Interest Period. If for any reason such rate is not available, the Offshore Base
Rate shall be, for any Interest Period, the rate per annum appearing on Reuters Screen LIBO
Page as the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates. If for any reason none of the foregoing rates is available, the Offshore
Base Rate shall be, for any Interest Period, the rate per annum determined by Agent as the
rate of interest at which dollar deposits in the approximate amount of the LIBOR Loan
comprising part of such Borrowing would be offered by the Bank’s London Branch to major
banks in the offshore dollar market at their request at or about 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term comparable to
such Interest Period.




     “Eurodollar Reserve Percentage” means, for any day during any Interest Period,
the reserve percentage (expressed as a decimal, rounded upward, if necessary, to the next
1/100th of 1%) in effect on such day applicable to member banks under Regulation
D or any successor regulation issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) applicable with respect to Eurocurrency funding (currently
referred to as “Eurocurrency liabilities” under Regulation D). The Offshore Rate for each
outstanding LIBOR Loan shall be adjusted automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.



     “LIBOR Loans” means, the LIBOR Revolving Loans.



     “LIBOR Revolving Loan” means a Revolving Loan during any period in which it bears
interest based on the LIBOR Rate.



     “Lien” means (a) any interest in property securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is based on the common
law, statute, or contract, and including a security interest, security transfer, reservation of
title, hypothec, charge, claim, trust, deemed trust or lien arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for security purposes; and
(b) any contingent or other agreement to provide any of the foregoing.



     “Loan Account” means the loan account of the Borrowers, which account shall be
maintained by the Agent.



     “Loan Documents” means the Agreement, the Security Agreement, the Applica Asia
Documents, Applica Canada Guaranty, any other Guaranty in favor of the Agent, the Applica Canada
Security Agreement, the Fee Letter, the Collateral Access Agreements, the Additional Debt
Intercreditor Agreement, Blocked Account Agreements, each Imported Inventory Agreement and any
other agreements, instruments, and documents heretofore, now or hereafter evidencing, securing,
guaranteeing or otherwise relating to the Obligations, the Collateral, or any other aspect of the
transactions contemplated by the Agreement.



A-23









 





     “Loan Party” means each Borrower, each Guarantor, and each other Person that is at any
time from and after the Closing Date liable for the payment of the whole or any part of the
Obligations or that has granted in favor of the Agent a Lien upon any of any of such Person’s
assets to secure payment of any of the Obligations, and “Loan Parties” means any two or
more of the foregoing.



     “Loans” means, collectively, all loans and advances provided for in Article 1.



     “Long Term Debt” shall mean at any date all Funded Debt which matures (or the maturity
of which may at the option of any Borrower or any Loan Party be extended such that it matures) more
than one year after such date.



     “Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of
the Federal Reserve Board.



     “Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties or condition (financial or otherwise) or
prospects of the Loan Parties taken as a whole, or the Collateral; (b) a material impairment of the
ability of any Loan Party to perform under any Loan Document to which it is a party; or (c) a
material adverse effect upon the legality, validity, binding effect or enforceability against any
Loan Party of any material Loan Document to which it is a party.



     “Material Contracts” means an agreement to which a Loan Party is a party (other than a
Loan Document) (i) which would be deemed to be a material contract as provided in Regulation S-K
promulgated by the SEC under the Securities Act of 1933 or (ii) for which breach, termination,
cancellation, non-performance or failure to renew could reasonably be expected to have a Material
Adverse Effect.



     “Maximum Rate” has the meaning specified in Section 2.3.



     “Maximum Revolver Amount” means $200,000,000, as the same may be increased from time
to time in accordance with Section 1.5 or reduced from time to time in accordance with
Section 3.3.



     “Merger” shall have the meaning given to it in the Recitals hereto.



     “Merger Agreement” means the Agreement and Plan of Merger dated as of October 1,
2007, among Parent, SFP Merger Sub, Inc. and APN.



     “Minimum EBITDA Measurement Date” means the last day of each month during the period
commencing on the Closing Date and ending on December 31, 2008.



     “Multi-employer Plan” means a “multi-employer plan” as defined in Section 4001(a)(3)
of ERISA which is or was at any time during the current year or the immediately preceding six (6)
years contributed to by any Borrower or any ERISA Affiliate.



     “Net Amount of Eligible Accounts” means, at any time, the gross amount of Eligible
Accounts less, unless already included as a Reserve, sales, excise or similar taxes, returns,
discounts, claims, credits, allowances, accrued rebates, offsets, deductions, counterclaims, disputes and
other defenses of any nature at any time issued, owing, granted, outstanding, available or claimed.



A-24









 





     “Net Inventory Proceeds” means, with regard to any sale or disposition of Inventory,
the gross cash proceeds received from such sale or disposition, net of the reasonable costs of such
sale (including attorneys fees, charges and commissions), and all transfer, sales and other taxes
paid or payable as a result of such sale.



     “Net Orderly Liquidation Value” shall mean at any date of determination the Net
Inventory Proceeds expected to be realized at an orderly, negotiated sale of Inventory located in
the United States, Puerto Rico or Canada as determined by the professional opinion of Gordon
Brothers Group, Hilco Appraisal Services, LLC or other appraisal company of similar qualifications
and standing reasonably acceptable to the Agent, with each such opinion assuming that such sale is
held within a reasonable period of time after the date of the opinion.



     “Net Proceeds” means, in respect of an Asset Disposition of by a Person, all proceeds
received by and/or payable to such Person in consideration thereof, net of (A) commissions and
other reasonable and customary transaction costs, fees and expenses properly attributable to such
transaction and payable by such Person in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (other than the
Agent’s Liens and to the extent such Liens constitute Permitted Liens), if any, and (D) an
appropriate reserve for income taxes in accordance with GAAP in connection therewith.



     “Net Worth” means with respect to any Person, such Person’s total shareholder’s equity
(including capital stock, additional paid-in capital and retained earnings, after deducting
treasury stock) which would appear as such on a balance sheet of such Person prepared in accordance
with GAAP.



     “New Lender” has the meaning specified in Section 1.5(c).



     “New Subsidiary” has the meaning specified in Section 7.24.



     “Non-Ratable Loan” and “Non-Ratable Loans” have the meanings specified in
Section 1.2(h).



     “Notice of Borrowing” means a “Notice of Borrowing” to be provided by Borrower Agent
to request a Borrowing, in form satisfactory to Agent.



     “Notice of Continuation/Conversion” means a “Notice of Continuation/Conversion” to be
provided by Borrower Agent to request a continuation or conversion of any Loan as or into a LIBOR
Loan, in form satisfactory to Agent.



     “NVOCC” means, with respect to any In-Transit Inventory, a non-vessel operating common
carrier engaged to assist in the importation of In-Transit Inventory from a location outside the
United States to a location within the United States.



     “Obligations” means the following, in each case whether now in existence or hereafter
incurred or arising and whether or not evidenced by any note or other document: (a) the principal
of, and interest (including interest accruing after the maturity of the Agreement and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Loan Party, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) and premium, if any, on the Revolving Loans; (b) all LC
Obligations and



A-25









 




other indebtedness and obligations of the Borrowers in connection with any Letter of Credit or
Credit Support; (c) all liabilities and obligations under any indemnity given by any Loan Party
under any of the Loan Documents, including all of the Indemnified Liabilities; (d) all debts,
liabilities or obligations now or hereafter arising from or in connection with Bank Products
provided by Bank or another Lender; and (e) all other advances, liabilities, obligations,
covenants, duties, and debts owing by the Borrowers or any of the other Loan Parties, or any of
them, to the Agent and/or any Lender, arising under or pursuant to the Agreement or any of the
other Loan Documents, whether arising from an extension of credit, opening of a letter of credit,
acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, as principal or guarantor, including all
principal, interest, charges, expenses, fees, attorneys’ fees, filing fees and any other sums
chargeable to the Borrowers or other Loan Parties hereunder or under any of the other Loan
Documents (including fees, expenses and other charges accruing after the maturity of the Agreement
and fees, expenses and other charges accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party,
whether or not a claim for post-filing or post-petition fees, expenses and other charges is allowed
in such proceeding).




     “Operating Documents” means with respect to any corporation, limited liability
company, partnership, limited partnership, limited liability partnership or other legally
authorized incorporated or unincorporated entity, the bylaws, operating agreement, partnership
agreement or limited agreement of such entity.



     “Organization Documents” means with respect to any corporation, limited liability
company, partnership, limited liability partnership or other legally authorized incorporated or
unincorporated entity, the articles of incorporation, certificate of incorporation, articles of
organization or certificate of limited partnership of such entity.



     “Original Credit Agreement” shall have the meaning ascribed to it in the Recitals
hereto.



     “Other Taxes” means any present or future transfer, mortgage, stamp or documentary
taxes or any other excise or property taxes, charges, financial institutions duties, debits, taxes
or similar levies imposed by the United States or any other jurisdiction that arise from any
payment under the Agreement or any other Loan Document or from the execution, delivery, enforcement
or registration of, or otherwise with respect to, the Agreement or any other Loan Document.



     “Out-of-Formula Condition” shall have the meaning given to it in Section
1.2(a) of the Agreement.



     “Out-of-Formula Loan” shall have the meaning given to it in Section 3.1 of the
Agreement.



     “Participant” means any Person who shall have been granted the right by any Lender to
participate in the financing provided by such Lender under the Agreement, and who shall have
entered into a participation agreement in form and substance satisfactory to such Lender.



     “Payment Account” has the meaning specified in the Security Agreement.



     “PBA” means the Pension Benefits Act of Ontario and all regulations thereunder as
amended from time to time, and any successor legislation or other applicable legislation governing
Canadian Plans.



A-26









 





     “PBGC” means the Pension Benefit Guaranty Corporation or any Governmental Authority
succeeding to the functions thereof.



     “Pending Revolving Loans” means, at any time, the aggregate principal amount of all
Revolving Loans requested in any Notice of Borrowing received by the Agent which have not yet been
advanced.



     “Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA or the
applicable laws of any other jurisdiction including the PBA) subject to Title IV of ERISA or the
applicable laws of any other jurisdiction including the PBA which any Loan Party or any ERISA
Affiliate sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or has made contributions at any time during the immediately preceding five (5) plan
years.



     “Permitted Acquisition” means an Acquisition effected with the consent and approval of
the board of directors or other applicable governing body of the Person being acquired (“Target”),
and with the duly obtained approval of such shareholders or other holders of equity interests as
such Target may be required to obtain, so long as (i) immediately prior to and after giving effect
to the consummation of such Acquisition, no Event of Default has or would exist; (ii) with respect
to an Acquisition where the Cost of Acquisition exceeds $2,500,000, substantially all of the sales
and operating profits generated by the Target (or its assets) so acquired or invested are derived
from a line or lines of business that are consistent with the Core Business; (iii) pro forma
historical financial statements as of the end of the most recent fiscal quarter for the trailing
twelve-month period giving effect to such Acquisition are delivered to Agent not less than ten (10)
Business Days prior to the consummation of such Acquisition, together with a certificate of an
Responsible Officer stating that no Default or Event of Default exists before or after giving
effect to such Acquisition and demonstrating that the Reporting Loan Parties shall have a Fixed
Charge Coverage Ratio of not less than 1.1 to 1.0 after giving effect to such Acquisition on a pro
forma basis; (iv) after giving pro forma effect to the cash expended with respect to such
Acquisition (including any Loans made hereunder to finance such Acquisition), Availability for each
of the 60 days immediately preceding the date of the consummation of such Acquisition is greater
than $30,000,000, provided that no assets of the Target shall be included in the
calculation of Availability for purposes of this clause (iv), or for purposes of
Section 7.27 or otherwise until the Agent has completed a satisfactory field examination
with respect to the Target and its assets; and (v) if the Target will become a Loan Party in
connection with such Acquisition, the Loan Parties shall cause the Target to become a Borrower
hereunder and grant to the Agent, for the benefit of the Agent and the Lenders, a perfected, first
priority Lien on substantially all of the assets of the Target of a type that would constitute
Collateral under the Loan Documents with respect to which Agent has a first priority Lien under the
Additional Debt Intercreditor Agreement, all pursuant to documentation in form and substance
acceptable to the Agent in its discretion.



     “Permitted Distribution” means (a) a Distribution by a Loan Party to another Loan
Party, (b) an Upstream Payment, (c) a purchase of Capital Stock of Parent by any of the Borrowers
at any time during the period commencing on the Closing Date and ending on June 30, 2008, with all
Distributions to facilitate such purchases not to exceed $3,000,000 in the aggregate, provided that
at the time of and after giving pro forma effect to any such Distribution pursuant to this clause
(c) (i) Availability is not less than $40,000,000 and (ii) each of the Permitted Distribution
Conditions is satisfied. For purposes of computing the Loan Parties compliance with the $3,000,000 cap in clause (c) of the
foregoing definition, there shall be no duplication of the amount of any Distribution made pursuant
to clauses (a) or (b) of the foregoing definition that is then used by the recipient of such
Distribution to effect a purchase of Capital Stock as permitted in clause (c) of the foregoing
definition.



A-27









 





     “Permitted Distribution Conditions” means (a) no Default or Event of Default exists,
(b) the Loan Party making any Distribution is Solvent, and (c) such Distribution does not violate
any Requirement of Law.



     “Permitted Intercompany Advance” means any loan or other advance of money whether in
the form of funds advanced or as a credit against or reduction of amounts owing by a Loan Party to
any Subsidiary of the Loan Parties that does not constitute a Loan Party, provided that (a) at the
time of and after giving pro forma effect to such loan or other advance, (i) no Default or Event of
Default has occurred and is continuing, (ii) Availability is not less than $15,000,000, and (iii)
the Aggregate Net Payable Balance is not less than $55,000,000, and (b) in no event shall the Loan
Parties make any loans or other advances in cash to any UK Subsidiary. Without limiting the
generality of the foregoing, in the case of any Account of a Loan Party owing by a UK Subsidiary,
such Account shall be a Permitted Intercompany Advance if at the time of and after giving pro forma
effect to such Account, (i) no Default or Event of Default has occurred and is continuing, (ii)
Availability is not less than $15,000,000, (iii) the Aggregate Net Payable Balance is not less than
$55,000,000, (iv) the sum of all such Accounts does not exceed $5,000,000, and (v) such Account
shall result from goods purchased or services rendered in the ordinary course of business at market
rates in arms-length transactions and shall not take the form of cash or Cash Equivalents. For
purposes of clauses (a)(iii) and (b)(iii) hereinabove, the term “Aggregate Net Payable Balance” at
any time means the amount due from all Loan Parties to Subsidiaries that are not Loan Parties at
such time, less the amount due to all Loan Parties from Subsidiaries that are not Loan
Parties at such time. For purposes hereof, the parties acknowledge that, as of the Closing Date
there exists a loan or other advance of cash from the Loan Parties to the UK Subsidiaries in an
amount not in excess of $8,798,960, and that, for so long as such loan or other advance of cash is
not increased, the same shall be deemed to constitute a Permitted Intercompany Advance (provided
that in all events such loan or other advance from the Loan Parties to the UK Subsidiaries shall be
included for purposes of the limit set forth in clauses (a)(iii) and (b)(iii) hereinabove).



     “Permitted Liens” means for any Loan Party:



     (a) Liens for Taxes, fees, assessments or other charges of a Governmental Authority (i) which
are not (A) delinquent, (B) statutory Liens for taxes, fees, assessments or other charges in an
amount not to exceed $500,000 or (ii) the payment of which is being Properly Contested;



     (b) the Agent’s Liens;



     (c) Liens incurred or deposits made in the ordinary course of business in connection with, or
to secure payment of, obligations under worker’s compensation, unemployment insurance, social
security and other similar laws, or to secure the performance of bids, tenders or contracts (other
than for the repayment of Debt) or to secure indemnity, performance or other similar bonds for the
performance of bids, tenders or contracts (other than for the repayment of Debt) or to secure
statutory obligations (other than Liens arising under ERISA or the PBA or Environmental Liens) or
other similar obligations or arising as a result of progress payments under government contracts or
surety or appeal bonds, or to secure indemnity, performance or other similar bonds;



     (d) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons, provided that if any such Lien arises from the nonpayment
of such claims or demands when due, such claims or demands do not exceed $200,000 in the aggregate
or are being Properly Contested;



A-28









 





     (e) Liens constituting encumbrances in the nature of reservations, exceptions, encroachments,
easements, rights of way, covenants running with the land, and other similar title
exceptions or encumbrances affecting any Real Estate; provided that they could not
reasonably be expected to have a Material Adverse Effect;



     (f) Liens arising from judgments and attachments in connection with court proceedings provided
that the attachment or enforcement of such Liens would not result in an Event of Default hereunder
and such Liens are being contested in good faith by appropriate proceedings, adequate reserves have
been set aside and no material Property is subject to a material risk of loss or forfeiture and the
claims in respect of such Liens are fully covered by insurance (subject to ordinary and customary
deductibles) and a stay of execution pending appeal or proceeding for review is in effect;



     (g) Liens in respect of purchase-money Debt permitted to be incurred pursuant to Section
7.13(c) hereof in connection with the acquisition of Equipment; provided that (a) the original
principal balance of the Debt secured by such Lien constitutes not more than 100% of the purchase
price of the Equipment acquired and (b) such Lien extends only to the Equipment acquired with the
proceeds of the Debt so secured;



     (h) Liens on real property securing Debt permitted under Section 7.13;



     (i) Liens, if any, which are described in Schedule A-1 on the Closing Date and Liens
resulting from the refinancing of the related Debt, provided that such refinancing is on the same
or substantially similar terms, the Debt secured thereby shall not be increased, and the Liens
shall not cover any additional property of the any Loan Party; and



     (j) Liens to secure the Additional Debt, to the extent permitted pursuant to Section
7.13(i), and in all events subject to the Additional Debt Intercreditor Agreement;
provided, however, that the foregoing shall not include Liens granted to the
holders of the Additional Debt by any Loan Party on any item or type of property if Liens in such
item or type of property are not likewise granted to Agent.



     “Person” means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association, corporation, Governmental
Authority, or any other entity.



     “Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA or the
applicable laws of any other jurisdiction) which any Borrower or any other Loan Party sponsors or
maintains or to which any Borrower or any other Loan Party makes, is making, or is obligated to
make contributions and includes any Pension Plan.



     “PPSA” means, collectively, the Personal Property Security Acts of the Provinces of
Ontario and Nova Scotia (or any other applicable Canadian province or territory), and all
regulations thereunder, as amended from time to time, and any successor legislation.



     “Proceeds of Crime Act” means the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act (Canada) and the regulations promulgated thereunder.



     “Properly Contested” means, with respect to any obligation of a Loan Party, (a) the
obligation is subject to a bona fide dispute regarding amount or the Loan Party’s liability to pay,
(b) the obligation is being properly contested in good faith by appropriate proceedings promptly
instituted and diligently pursued, (c) appropriate reserves have been established in accordance
with GAAP, (d) non-payment could not have a Material Adverse Effect, nor result in a material
forfeiture of any assets of the Loan Party, (e) no Lien (other than a Permitted Lien) is imposed on
assets of the Loan Party, unless bonded and stayed to the satisfaction of Agent, (f) if the
obligation results from entry of a judgment or



A-29









 




other order, such judgment or order is stayed pending appeal or other judicial review and (g)
if such contest is abandoned, settled or determined adversely (in whole or in part) to such Loan
Party, such Loan Party pays the obligation (and all penalties, interest and other amounts due in
connection therewith) within 30 days following such abandonment, settlement or adverse
determination.




     “Proposed Change” has the meaning specified in Section 11.1(c).



     “Proprietary Rights” means, for each Loan Party, such Loan Party’s now owned and
hereafter arising or acquired licenses, 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 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.



     “Pro Rata Share” means, with respect to a Lender, a fraction (expressed as a
percentage), the numerator of which is such Lender’s Commitment and the denominator of which is the
sum of all of the Lenders’ Commitments, or if no Commitments are outstanding, a fraction (expressed
as a percentage), the numerator of which is the amount of Obligations (exclusive of indebtedness in
respect of Bank Products) owed to such Lender and the denominator of which is the aggregate amount
of the Obligations (exclusive of indebtedness in respect of Bank Products) owed to the Lenders, in
each case after giving effect to a Lender’s participation in Non-Ratable Loans and Agent Advances.



     “Real Estate” means, with respect to any Person, all of such Person’s now or hereafter
owned or leased estates in real property, including, without limitation, all fees, leaseholds and
future interests, together with all of such Person’s now or hereafter owned or leased interests in
the improvements thereon, the fixtures attached thereto and the easements appurtenant thereto .



     “Refinancing” has the meaning specified in Section 7.28.



     “Register” has the meaning specified in Section 12.21.



     “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve
System (or any successor body) as the same may be amended or supplemented from time to time.



     “Release” means a release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor
environment or into or out of any Real Estate or other property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or Real Estate or other
property.



     “Reportable Event” means, any of the events set forth in Section 4043(b) of ERISA or
the regulations thereunder, other than any such event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the PBGC.



     “Reporting Loan Parties” means all of the Loan Parties other than Applica Americas and
Applica Asia.



     “Representatives” has the meaning specified in Section 14.16.



     “Required Lenders” means at any time Lenders whose Pro Rata Shares aggregate more than
50%.



A-30









 





     “Requirement of Law” means, as to any Person, any law (statutory or common), treaty,
rule or regulation or determination of an arbitrator declared final and binding by a Governmental
Authority or of a Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.



     “Reserves” means reserves that limit, without duplication, the availability of credit
hereunder, consisting of reserves against Availability, Eligible Accounts or Eligible Inventory,
established by Agent from time to time in Agent’s reasonable credit judgment. Without limiting the
generality of the foregoing or in duplication thereof, the following reserves shall be deemed to be
a reasonable exercise of Agent’s credit judgment: (a) Bank Product Reserves, (b) a reserve for
accrued, unpaid interest on the Obligations, (c) reserves for rent at leased locations subject to
statutory or contractual landlord liens, (d) a reserve for Inventory shrinkage consistent with the
Borrowers’ standard accounting practices, (e) the Freight/Customs Reserve, (f) a reserve for
dilution, (g) a reserve for warehousemen’s or bailees’ charges, (h) a reserve in an amount from
time to time reasonably estimated by Agent to represent claims, Liens or deemed trusts (in contrast
to Liens voluntarily granted) which, under applicable law, rank or are capable of ranking prior to
or pari passu with Agent’s Liens with respect to all or any part of the Collateral, (i) a reserve
equal to the aggregate amount of Net Proceeds in excess of the first $5,000,000 of such Net
Proceeds applied to the Revolving Loans pursuant to Section 3.5 of the Agreement during the
period commencing on the Closing Date and ending on the Stated Termination Date, and (j) a reserve
in an amount sufficient to enable the Loan Parties to redeem in cash the 121/4% Senior Subordinated
Notes due 2008 held by Persons other than the Equity Investors and their Affiliates identified on
Schedule 6.9.



     “Responsible Officer” means, with respect to any Loan Party, the chief executive
officer, the president, the chief financial officer, the secretary, the treasurer or assistant
treasurer, the controller or any senior vice president or any other officer having substantially
the same authority and responsibility; or, with respect to compliance with financial covenants and
the preparation of Borrowing Base Certificates, the chief financial officer or the treasurer of the
Borrower Agent, or any other officer having substantially the same authority and responsibility.



     “Restricted Investment” means, with respect to any Loan Party, any acquisition of
property by such Loan Party in exchange for cash or other property, whether in the form of an
acquisition of stock, debt, or other indebtedness or obligation, or the purchase or acquisition of
any other property, or a loan, advance, capital contribution, or subscription, except the
following: (a) acquisitions of Equipment to be used in the business of such Loan Party; (b)
acquisitions of Inventory in the ordinary course of business of such Loan Party; (c) acquisitions
of current assets acquired in the ordinary course of business of the Loan Parties; (d) direct
obligations of the United States of America, or any agency thereof, or obligations guaranteed by
the United States of America, provided that such obligations mature within one year from
the date of acquisition thereof; (e) acquisitions of certificates of deposit maturing within one
year from the date of acquisition, bankers’ acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued by, created by, or with a bank or trust company organized under
the laws of the United States of America or any state thereof having capital and surplus
aggregating at least $100,000,000; (f) acquisitions of commercial paper given a rating of “A2” or
better by Standard & Poor’s Corporation or “P2” or better by Moody’s Investors Service, Inc. and
maturing not more than 90 days from the date of creation thereof; (g) Hedge Agreements; (h)
investments, loans and advances existing as of the date hereof and as set forth in Schedule A
-2; (i) Accounts arising and trade credit granted in the ordinary course of business and any
securities received in satisfaction or partial satisfaction thereof in connection with accounts of
financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss;
(j) Permitted Intercompany Advances to the extent funded in a manner consistent with Section
7.29; (k) Permitted Acquisitions; (l) for so long as no Event of Default exists and the
Borrowers have Availability of not less than $15,000,000 after giving effect thereto, other loans,
advances and investments in an aggregate principal amount at any time outstanding not to exceed
$10,000,000;



A-31









 




(m) shares of mutual funds, the shares of which mutual funds are at all times rated “AAA” by
Standard & Poor’s; (n) cash or other cash equivalents owned by the Loan Parties and in the
possession or control of the Agent or an Affiliate of Agent and, except during a Springing Period,
invested in short term vehicles such as repurchase agreements, overnight bank deposits, bankers’
acceptances or other investments as may be mutually acceptable to the Borrowers and the Agent; and
(o) obligations of any corporation organized under the laws of any state of the United States of
America or under the laws of any other nation, payable in the United States of America, maturing
not later than 180 days following the date of issuance thereof and rated in an investment grade
category by Standard & Poor’s and Moody’s; provided, however, that with respect to clauses
(d) — (h) and clauses (m) — (o), such investments are not subject to rights of offset (other than
nominal amounts for brokerage fees and other, similar charges of financial intermediaries) in favor
of any Person other than the Agent or a Lender.




     “Revolving Loans” has the meaning specified in Section 1.2 and includes each
Agent Advance and Non-Ratable Loan.



     “Seasonal Period” means any period commencing on August 1 and ending on December 31 of
each year.



     “Second Amended Credit Agreement” shall have the meaning ascribed to it in the
Recitals hereto.



     “Security Agreement” means the Second Amended and Restated Security Agreement dated as
of the Closing Date among the Borrowers, certain of their Domestic Subsidiaries referenced therein,
and Agent, for the benefit of the Agent and the Lenders.



     “Settlement” and “Settlement Date” have the meanings specified in Section
12.15(a)(ii).



     “SHK” means Salton Hong Kong Limited, a Hong Kong company.



     “Solvent” means, when used with respect to any Person, that at the time of
determination:




     (a) the assets of such Person, at a fair valuation, are in excess of the total amount
of its debts (including contingent liabilities); and




     (b) the present fair saleable value of its assets is greater than its liability on its
existing debts as such debts become absolute and matured; and




     (c) it is then able and expects to be able to pay its debts (including contingent debts
and other commitments) as they mature; and




     (d) it has capital sufficient to carry on its business as conducted and as proposed to
be conducted.



     For purposes of determining whether a Person is Solvent, the amount of any contingent
liability shall be computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to become an actual or
matured liability.



     “Springing Dominion Notice” means a written notice from the Agent to any bank at which
a Borrower Blocked Account is maintained that a Springing Period is in effect and that such bank
shall act upon the instructions of Agent and not the Loan Parties.



A-32









 





     “Springing Period” means any period (a) commencing on the date on which Availability
is less than $30,000,000 and continuing until the 90th consecutive day on which Availability equals
or exceeds $40,000,000, or (b) during which an Event of Default has occurred and is continuing.



     “Stated Termination Date” means December 31, 2012.



     “Subordinated Debt” means Debt of a Loan Party that is expressly subordinate and
junior in right of payment to the full and final payment and performance of the Obligations on
terms (including maturity date, interest rate, fees, repayment, covenants and subordination)
satisfactory to Agent.



     “Subsidiary” of a Person, with respect to any Person (the “subject Person”), means any
corporation, association, partnership, limited liability company, joint venture or other business
entity of which more than fifty percent (50%) of the voting stock or other equity interests (in the
case of Persons other than corporations), is owned or controlled directly or indirectly by the
subject Person, or one or more of the Subsidiaries of the subject Person, or a combination thereof.
Unless the context otherwise clearly requires, references herein to a “Subsidiary” refer to a
Subsidiary of the Borrower.



     “Supermajority Lenders” means, at any time, Lenders whose Pro Rata Shares aggregate
more than 66-2/3%.



     “Supporting Obligations” shall have the meaning specified in the Security Agreement.



     “Tangible Net Worth” shall mean, as applied to any Person, the Net Worth of such
Person at the time in question, after deducting therefrom the amount of all intangible items
reflected therein, including all unamortized debt discount and expense, unamortized research and
development expense, unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, unamortized excess cost of investment in Subsidiaries over equity at dates
of acquisition, and all similar items which should properly be treated as intangibles in accordance
with GAAP.



     “Target” means Target Corporation, a Minnesota corporation, and any Affiliate of
Target Corporation.



     “Taxes” means any and all present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature and all liabilities with
respect thereto, including any present or future income, receipts, excise, property, sales, use,
transfer, goods and services, license, payroll, withholding, social security, franchise, stamp or
documentary taxes or similar levies imposed or levied at any time by any Governmental Authority,
but excluding, in the case of each Lender and the Agent, Excluded Taxes.



     “Termination Date” means the earliest to occur of (i) the Stated Termination Date,
(ii) the date the Total Facility is terminated either by the Borrowers pursuant to Section
3.2 or by the Required Lenders pursuant to Section 9.2, and (iii) the date the
Agreement is otherwise terminated for any reason whatsoever pursuant to the terms of the Agreement.



     “Termination Event” means (a) the whole or partial withdrawal of any Borrower or any
Subsidiary from a Pension Plan or Multi-employer Plan during a plan year; or (b) the filing of a
notice of intent to terminate in whole or in part a Pension Plan or Multi-employer Plan or the
treatment of a Pension Plan or Multi-employer Plan amendment as a termination or partial
termination; or (c) the institution of proceedings by any Governmental Authority to terminate in
whole or in part or have a trustee appointed to administer a Pension Plan or Multi-employer Plan;
or (d) any other event or condition which might constitute grounds for the termination of, winding up or partial termination or
winding up or the appointment of trustee to administer any Pension Plan or Multi-employer Plan.



A-33









 





     “Total Facility” has the meaning specified in Section 1.1.



     “Transaction” means the Merger, the Equity Contribution, the Refinancing, the entering
into and funding of the credit facility under the Agreement, the issuance and sale or provision of
the Additional Debt and all related transactions.



     “UCC” has the meaning specified in the Security Agreement.



     “UK Credit Facility” means the credit facility among Salton Europe Limited, Burdale
Financial Limited, as agent, and certain other lenders named therein.



     “UK Subsidiary” means a Subsidiary of a Loan Party that is at any time party to the UK
Credit Facility or a Subsidiary of such party.



     “Unfinanced Capital Expenditures” means Capital Expenditures net of purchase money
Debt incurred and Capital Leases entered into in connection therewith.



     “Unfunded Pension Liability” means the sum of (1) the amount by which a Pension Plan
(other than a Multi-employer Plan) fails to satisfy the minimum funding standard pursuant to
Section 412 of the Code for the applicable plan year, exclusive of any waived funding deficiency,
as that term is defined in Section 412(d)(3) of the Code, and (2) with respect to any Pension Plan
regulated or governed by the PBA or applicable laws of any jurisdiction, any unfunded liability or
solvency deficiency as determined under the PBA or other applicable laws.



     “United States” means the United States of America.



     “Unused Letter of Credit Subfacility” means an amount equal to $10,000,000
minus the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit
plus, without duplication, (b) the aggregate unpaid reimbursement obligations with respect
to all Letters of Credit.



     “Unused Line Fee” has the meaning specified in Section 2.5.



     “Upstream Payment” means a Distribution by a Subsidiary of a Loan Party that is not a
Loan Party to such Loan Party.



     “USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272
(2001), as the same has been, or shall hereafter be, renewed, extended, amended or replaced.



     “Vendor” means a Person that sells In-Transit Inventory to a Borrowing Base Party.



     “Wal-Mart” means Wal-Mart Stores, Inc. or any Affiliate of Wal-Mart Stores, Inc.



     “Wholly-Owned Subsidiary” when used to determine the relationship of a Subsidiary to a
Person, means a Subsidiary all of the issued and outstanding Capital Stock (other than directors’
qualifying shares) of which shall at the time be owned by such Person or one or more of such
Person’s Wholly-Owned Subsidiaries or by such Person and one or more of such Person’s Wholly-Owned
Subsidiaries.



A-34









 





     2. Accounting Terms. Any accounting term used in the Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and
all financial computations in the Agreement shall be computed, unless otherwise specifically
provided therein, in accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.



     3. Interpretive Provisions. (a) The meanings of defined terms are equally applicable
to the singular and plural forms of the defined terms.



     (b) The words “hereof,” “herein,” “hereunder” and similar words refer to the Agreement as a
whole and not to any particular provision of the Agreement; and Subsection, Section, Schedule and
Exhibit references are to the Agreement unless otherwise specified.



     (c) (i) The term “documents” includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced.




     (ii) The term “including” is not limiting and means “including without limitation.”




     (iii) In the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including,” the words “to” and “until” each mean “to
but excluding” and the word “through” means “to and including.”




     (iv) The word “or” is not exclusive.



     (d) Unless otherwise expressly provided herein, (i) references to agreements (including any of
the Loan Documents) and other contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto and restatements thereof, but only to the extent such
amendments, other modifications or restatements are not prohibited by the terms of any Loan
Document, and (ii) references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.



     (e) The captions and headings of the Agreement and other Loan Documents are for convenience of
reference only and shall not affect the interpretation of the Agreement.



     (f) The Agreement and other Loan Documents may use several different limitations, tests or
measurements to regulate the same or similar matters. All such limitations, tests and measurements
are cumulative and shall each be performed in accordance with their terms.



     (g) For purposes of Section 9.1, a breach of the financial covenant contained in
Section 7.27 shall be deemed to have occurred as of any date of determination thereof by
Agent or as of the last day of any specified measuring period, regardless of when the Financial
Statements reflecting such breach are delivered to Agent.



     (h) The Agreement and the other Loan Documents are the result of negotiations among and have
been reviewed by counsel to the Agent, the Borrowers and the other parties, and are the products of
all parties. Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent’s or Lenders’ involvement in their preparation.



     (i) As used in the Agreement, and the other Loan Documents, “knowledge” of the Borrowers shall
mean the actual knowledge (after due inquiry) of any Responsible Officer.




A-35









 








ANNEX B




COMMITMENTS




 




	 	 	 	 	 	 	 	 	 
	Lender	 	Commitment	 	Pro Rata Share
	 	 	 	 	 	 	(5 decimals)
	Bank of America, N.A.

	 	$	200,000,000	 	 	 	100.00000	%
	 

	 	 	 	 	 	 	 	 






B-1









 








EXHIBIT A


BORROWING BASE CERTIFICATE




	 	 	 	 	 	 	 	 	 
	U.S. Accounts Receivable Ending Balance

	 	 	 	 	 	$	               	 
	less: Ineligible U.S. A/R

	 	$	               	 	 	 	 	 
	Eligible U.S. Accounts Receivable
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	U.S. Account Receivable Availability @ 85%

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	U.S. Inventory On-Hand

	 	 	 	 	 	$	               	 
	less: Ineligible Inventory (See page #3)

	 	$	               	 	 	 	 	 
	Eligible U.S. Inventory
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	U.S. Inventory On-Hand Availability @ applicable advance rate

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	Eligible In-Transit U.S. Inventory

	 	 	 	 	 	$	               	 
	 

	 	 	 	 	 	 	 	 
	Eligible In-Transit U.S. Inventory Availability @ applicable advance rate

	 	 	 	 	 	$	               	 
	[Not to exceed $50,000,000]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total U.S. Inventory Availability

	 	 	 	 	 	$	               	 
	less: Landlord’s Waiver Reserve

	 	$	               	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Net U.S. Inventory Availability

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	TOTAL U.S. AVAILABILITY

	 	 	 	 	 	$	               	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Canadian Accounts Receivable

	 	 	 	 	 	$	               	 
	less: Ineligible Canadian A/R

	 	$	               	 	 	 	 	 
	Eligible Canadian Accounts Receivable
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Canadian Accounts Receivable Availability @ 85%

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	Canadian On-Hand Inventory

	 	 	 	 	 	$	               	 
	less: Ineligible Canadian On-Hand Inventory

	 	$	               	 	 	 	 	 
	Eligible Canadian On-Hand Inventory
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Canadian Inventory On-hand Availability @ applicable advance rate

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	Eligible In-Transit Canadian Inventory

	 	 	 	 	 	$	               	 
	 

	 	 	 	 	 	 	 	 
	Eligible In-Transit Canadian Inventory Availability @ applicable advance rate

	 	 	 	 	 	$	               	 
	[Not to exceed $15,000,000]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Canadian Inventory Availability

	 	 	 	 	 	$	               	 
	less: Landlord’s Waiver Reserve

	 	$	               	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Net Canadian Inventory Availability

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	TOTAL CANADIAN AVAILABILITY

	 	$	               	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Puerto Rico Accounts Receivable

	 	 	 	 	 	$	               	 
	Less: Ineligible Puerto Rican Receivables

	 	$	               	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Eligible Puerto Rico Accounts Receivable
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Puerto Rico Accounts Receivable Availability @85%

	 	 	 	 	 	$	               	 
















 






	 	 	 	 	 	 	 	 	 
	Puerto Rico On-hand Inventory

	 	 	 	 	 	$	               	 
	Less: Ineligible Puerto Rico On-hand Inventory

	 	$	               	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Eligible Puerto Rico On-hand Inventory

	 	 	 	 	 	$	               	 
	Puerto Rico On-hand Inventory Availability @ applicable advance rate

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	TOTAL PUERTO RICO AVAILABILITY

	 	 	 	 	 	$	               	 
	[Not to exceed $5,000,000]

	 	 	 	 	 	$	               	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Applica Asia Serviced Accounts Receivable

	 	 	 	 	 	$	               	 
	Less: Ineligible Asian Serviced Accounts Receivable

	 	$	               	 	 	 	 	 
	Eligible Applica Asia Serviced Accounts Receivable
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Applica Asia Serviced Accounts Receivable Availability

	 	 	 	 	 	$	               	 
	[Not to exceed $35,000,000]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	TOTAL AVAILABILITY

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	RESERVES
	 	 	 	 	 	 	 	 
	Availability Reserve
	 	 	 	 	 	 	 	 
	Dilution Reserves

	 	 	 	 	 	$	               	 
	IRP Reserves
	 	 	 	 	 	 	 	 
	Sally Reserve (Net)
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Freight/Customs Reserve
	 	 	 	 	 	 	 	 
	Other Reserves

	 	 	 	 	 	$	               	 
	 
	 	 	 	 	 	 	 	 
	AVAILABILITY MINUS RESERVES

	 	 	 	 	 	$	               	 
	[Not to exceed $200,000,000]
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	LOAN ACTIVITY
	 	 	 	 	 	 	 	 
	Beginning Balance (from last report)

	 	 	 	 	 	$	               	 
	Less: Cash Receipts
	 	 	 	 	 	 	 	 
	Plus: Advances
	 	 	 	 	 	 	 	 
	Adjustments +/-
	 	 	 	 	 	 	 	 
	ENDING LOAN BALANCE
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Standby Letters of Credit
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	NET BORROWING AVAILABILITY

	 	 	 	 	 	$	               	 
	 

	 	 	 	 	 	 	 	 






     The undersigned represents and warrants that the information set forth is
true and complete. The undersigned grants a security interest in the collateral
reflected above to Bank of America, N.A., as Agent, and reaffirms the
representations, warranties and covenants contained in the loan documents
between Agent and the undersigned.



	 	 	 	 	 
	 	APPLICA CONSUMER PRODUCTS, INC., as Borrower Agent

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 














 








EXHIBIT B


NOTICE OF BORROWING




Date: ______________, 200_





	To:  	 	Bank of America, N.A. as Agent for the Lenders who are parties to the Third Amended and
Restated Credit Agreement dated as of December 28, 2007 (as extended, renewed, amended or
restated from time to time, the “Credit Agreement”), among Salton, Inc., and certain
of its affiliates, certain Lenders which are signatories thereto, Bank of America, N.A., as
Agent for the Lenders and certain other entities





Ladies and Gentlemen:




     The undersigned, Applica Consumer Products, Inc. (the “Borrower Agent”), refers to the
Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives
you notice irrevocably of the Borrowing specified below:




	 	1.	 	The Business Day of the proposed Borrowing is
________________, 200__.
	 
	 	2.	 	The aggregate amount of the proposed Borrowing is $_______________.
	 
	 	3.	 	The Borrowing is to be comprised of $______________ of Base Rate and $_______________ of LIBOR Loans.
	 
	 	4.	 	The duration of the Interest Period for the LIBOR Loans, if
any, included in the Borrowing shall be ___ months.





     The undersigned hereby certifies that the following statements are true on the date hereof,
and will be true on the date of the proposed Borrowing, before and after giving effect thereto and
to the application of the proceeds therefrom:



     (a) the representations and warranties contained in this Agreement and the other Loan
Documents are correct in all material respects on and as of the date of such extension of credit as
though made on and as of such date, other than any such representation or warranty which relates to
a specified prior date and except to the extent the Agent and the Lenders have been notified in
writing by the Loan Parties that any representation or warranty is not correct and the Required
Lenders have explicitly waived in writing compliance with such representation or warranty;



     (b) No Default or Event of Default has occurred and is continuing, or would result from such
proposed Borrowing; and













 





     (c) The proposed Borrowing will not cause the aggregate principal amount of all outstanding
Revolving Loans [plus the aggregate amount available for drawing under all outstanding
Letters of Credit], to exceed the Borrowing Base or the combined Commitments of the Lenders.



	 	 	 	 	 
	 	APPLICA CONSUMER PRODUCTS,
INC., as Borrower Agent

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 




B-2









 








EXHIBIT C




NOTICE OF CONTINUATION/CONVERSION




Date: ________________, 200_





	To:  	 	Bank of America, N.A. as Agent for the Lenders to the Third Amended and Restated Credit
Agreement dated as of December 28, 2007 (as extended, renewed, amended or restated from time
to time, the “Credit Agreement”) among Salton, Inc. and certain of its affiliates,
certain Lenders which are signatories thereto, Bank of America, N.A., as Agent for the Lenders
and certain other entities





     Ladies and Gentlemen:



     The undersigned, Applica Consumer Products, Inc. (the “Borrower Agent”), refers to the
Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives
you notice irrevocably of the [conversion] [continuation] of the Loans specified herein, that:




	 	1.	 	The Continuation/Conversion Date is _______________, 200__.
	 
	 	2.	 	The aggregate amount of the Loans to be [converted] [continued]
is $_______________.
	 
	 	3.	 	The Loans are to be [converted into] [continued as] [LIBOR
Rate] [Base Rate] Loans.
	 
	 	4.	 	The duration of the Interest Period for the LIBOR Loans
included in the [conversion] [continuation] shall
be ______ months.





     The undersigned hereby certifies that the following statements are true on the date hereof,
and will be true on the proposed Continuation/Conversion Date, before and after giving effect
thereto and to the application of the proceeds therefrom:



     (a) the representations and warranties contained in this Agreement and the other Loan
Documents are correct in all material respects on and as of the date of such extension of credit as
though made on and as of such date, other than any such representation or warranty which relates to
a specified prior date and except to the extent the Agent and the Lenders have been notified in
writing by the Loan Parties that any representation or warranty is not correct and the Required
Lenders have explicitly waived in writing compliance with such representation or warranty;



     (b) No Default or Event of Default has occurred and is continuing, or would result from
such proposed [conversion] [continuation]; and













 





     (c) The proposed conversion-continuation will not cause the aggregate principal amount of all
outstanding Revolving Loans [plus the aggregate amount available for drawing under all
outstanding Letters of Credit] to exceed the Borrowing Base or the combined Commitments of the
Lenders.



	 	 	 	 	 
	 	APPLICA CONSUMER PRODUCTS,
INC., as Borrower Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




C-2









 








EXHIBIT D




[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT





     This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as
of _____________, 20___ is made between ____________ (the “Assignor”) and
______________ (the “Assignee”).



RECITALS




     WHEREAS, the Assignor is party to that certain Third Amended and Restated Credit Agreement
dated as of December 28, 2007 (as amended, amended and restated, modified, supplemented or renewed,
the “Credit Agreement”) among Salton, Inc., a Florida corporation, and certain of its
affiliates (the “Borrowers”), certain of its subsidiaries and affiliates, the several
financial institutions from time to time party thereto (including the Assignor, the
“Lenders”), and Bank of America, N. A., as agent for the Lenders (the “Agent”).
Any terms defined in the Credit Agreement and not defined in this Assignment and Acceptance are
used herein as defined in the Credit Agreement;



     WHEREAS, as provided under the Credit Agreement, the Assignor has committed to making Loans
(the “Committed Loans”) to the Borrowers in an
aggregate amount not to exceed $____________ (the “Commitment”);



     WHEREAS, the Assignor has made Committed Loans in the aggregate principal amount of
$______________ to the Borrowers.



     WHEREAS, [the Assignor has acquired a participation in its pro rata share of the Lenders’
liabilities under Letters of Credit in an aggregate principal amount of $_____________ (the “L/C
Obligations”)] [no Letters of Credit are outstanding under the Credit Agreement]; and



     WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and
obligations of the Assignor under the Credit Agreement in respect of its Commitment, together with
a corresponding portion of each of its outstanding Committed Loans and L/C Obligations, in an
amount equal to $_____________ (the “Assigned Amount”) on the terms and subject to the
conditions set forth herein and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such conditions;



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



     1. Assignment and Acceptance.



          (a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor
hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases,
assumes and undertakes from the Assignor, without recourse and without representation or warranty
(except as provided in this Assignment and Acceptance) ___% (the “Assignee’s Percentage
Share”) of (A) the Commitment, the Committed Loans and the L/C Obligations of the Assignor and
(B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Credit Agreement and the Loan Documents.




 









 








          (b) With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee
shall be a party to the Credit Agreement and succeed to all of the rights and be obligated to
perform all of the obligations of a Lender under the Credit Agreement, including the requirements
concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal
to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required to be performed by
it as a Lender. It is the intent of the parties hereto that the Commitment of the Assignor shall,
as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor
shall relinquish its rights and be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee; provided, however, the Assignor
shall not relinquish its rights under Sections _____________  and _____________ of the Credit Agreement to the extent such
rights relate to the time prior to the Effective Date.




          (c) After giving effect to the assignment and assumption set forth herein, on the Effective
Date the Assignee’s Commitment will be $_____________.




          (d) After giving effect to the assignment and assumption set forth herein, on the Effective
Date the Assignor’s Commitment will be $_____________.




     2. Payments.



          (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof,
the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an
amount equal to $_____________, representing the Assignee’s Pro Rata Share of the principal amount of
all Committed Loans.




          (b) The Assignee further agrees to pay to the Agent a processing fee in the amount specified
in Section 11.2(a) of the Credit Agreement.




     3. Reallocation of Payments.



          Any interest, fees and other payments accrued to the Effective Date with respect to the
Commitment, and Committed Loans and L/C Obligations shall be for the account of the Assignor. Any
interest, fees and other payments accrued on and after the Effective Date with respect to the
Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee
agrees that it will hold in trust for the other party any interest, fees and other amounts which it
may receive to which the other party is entitled pursuant to the preceding sentence and pay to the
other party any such amounts which it may receive promptly upon receipt.




     4. Independent Credit Decision.



          The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the
Schedules and Exhibits thereto, together with copies of the most recent financial statements of the
Borrowers, and such other documents and information as it has deemed appropriate to make its own
credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees
that it will, independently and without reliance upon the Assignor, the Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the time, continue to
make its own credit and legal decisions in taking or not taking action under the Credit Agreement.




D-2









 








     5. Effective Date; Notices.



          (a) As between the Assignor and the Assignee, the effective date for this Assignment and
Acceptance shall be _____________ , 200___ (the “Effective Date”); provided that the
following conditions precedent have been satisfied on or before the Effective Date:





     (i) this Assignment and Acceptance shall be executed and delivered by the Assignor and
the Assignee;




     [(ii) the consent of the Agent and the Borrower Agent required for an effective
assignment of the Assigned Amount by the Assignor to the Assignee shall have been duly
obtained and shall be in full force and effect as of the Effective Date;]




     (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this
Assignment and Acceptance;




     [(iv) the Assignee shall have complied with Section 11.2 of the Credit
Agreement (if applicable);]




     (v) the processing fee referred to in Section 2(b) hereof and in Section
11.2(a) of the Credit Agreement shall have been paid to the Agent; and



     (b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall
deliver to the Borrowers and the Agent for acknowledgment by the Agent, a Notice of Assignment in
the form attached hereto as Schedule 1.



     6. [Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]



          (a) The Assignee hereby appoints and authorizes the Assignor to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by
the Lenders pursuant to the terms of the Credit Agreement.




          (b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as
Agent under the Credit Agreement.]




     7. Withholding Tax.



          The Assignee (a) represents and warrants to the Lender, the Agent and the Borrowers that under
applicable law and treaties no tax will be required to be withheld by the Lender with respect to
any payments to be made to the Assignee hereunder, (b) agrees to furnish (if it is organized under
the laws of any jurisdiction other than the United States or any State thereof) to the Agent and
the Borrowers prior to the time that the Agent or the Borrowers are required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue
Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN (wherein the Assignee claims
entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide new Forms W-8ECI or
W-8BEN upon the expiration of any previously delivered form or comparable statements in accordance
with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the
Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to
such withholding tax exemption.




D-3









 








     8. Representations and Warranties.



          (a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear of any Lien or
other adverse claim; (ii) it is duly organized and existing and it has the full power and authority
to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance
and any other documents required or permitted to be executed or delivered by it in connection with
this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than any already given or
obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and
apart from any agreements or undertakings or filings required by the Credit Agreement, no further
action by, or notice to, or filing with, any Person is required of it for such execution, delivery
or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the
Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application relating to or
affecting creditors’ rights and to general equitable principles.




          (b) The Assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no responsibility with
respect to, the solvency, financial condition or statements of the Borrowers, or the performance or
observance by the Borrowers or any of the Loan Parties, of any of their respective obligations
under the Credit Agreement or any other instrument or document furnished in connection therewith.




          (c) The Assignee represents and warrants that (i) it is duly organized and existing and it has
full power and authority to take, and has taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or permitted to be executed or delivered
by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of, any Person are required (other
than any already given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the
Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; (iii) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors’ rights and to general equitable principles; [and
(iv) it is an Eligible Assignee.]




     9. Further Assurances.




          The Assignor and the Assignee each hereby agree to execute and deliver such other instruments,
and take such other action, as either party may reasonably request in connection with the
transactions contemplated by this Assignment and Acceptance, including the delivery of any notices
or other documents or instruments to the Borrowers or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.




D-4








 








     10. Miscellaneous.



          (a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in
writing and signed by the parties hereto. No failure or delay by either party hereto in exercising
any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights
with respect to any other or further breach thereof.




          (b) All payments made hereunder shall be made without any set-off or counterclaim.




          (c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this Assignment and
Acceptance.




          (d) This Assignment and Acceptance may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the same instrument.




          (e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK. The Assignor and the Assignee each irrevocably submits to the
non-exclusive jurisdiction of any State or Federal court sitting in New York over any suit, action
or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees
that all claims in respect of such action or proceeding may be heard and determined in such New
York State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.




          (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS
(WHETHER ORAL OR WRITTEN).




     IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance
to be executed and delivered by their duly authorized officers as of the date first above written.



	 	 	 	 	 
	 	[ASSIGNOR] 

 	 
	 	By:  	 	 
	 	 	Title:           	 
	 	 	Address: 	 
	 



	 	 	 	 	 
	 	[ASSIGNEE] 

 	 
	 	By:  	 	 
	 	 	Title:           	 
	 	 	Address: 	 
	 




D-5









 








SCHEDULE 1

to

ASSIGNMENT AND ACCEPTANCE




NOTICE OF ASSIGNMENT AND ACCEPTANCE




_______________, 200_




Bank of America, N.A., as Agent

300 Galleria Parkway

Suite 800

Atlanta, Georgia 30339

Attn: Applica Client Manager




Applica Consumer Products, Inc., as Borrower Agent

3633 Flamingo Road

Miramar, Florida 33027

Attention: Treasurer

Telecopy No.: 954-883-1694




Re: Salton, Inc., et al.




Ladies and Gentlemen:





     We refer to the Third Amended and Restated Credit Agreement dated as of December 28, 2007 (as
amended, restated, modified, supplemented or renewed from time to time the “Credit
Agreement”) among Salton, Inc. (the “Borrower Agent”) and certain of its affiliates
(collectively with the Borrower Agent, the “Loan Parties”), the Lenders referred to therein
and Bank of America, N. A., as agent for the Lenders (the “Agent”). Terms defined in the
Credit Agreement are used herein as therein defined.



     1. We hereby give you notice of, and request the consent of the Agent [and Borrower Agent] to,
the assignment by _____________ (the “Assignor”) to _____________ (the
“Assignee”) of____% of the right, title and interest of the Assignor in and to the Credit
Agreement (including the right, title and interest of the Assignor in and to the Commitments of the
Assignor, all outstanding Loans made by the Assignor and the Assignor’s participation in the
Letters of Credit pursuant to the Assignment and Acceptance Agreement attached hereto (the
“Assignment and Acceptance”). We understand and agree that the Assignor’s Commitment, as
of _____________, 200__, is $_____________, the aggregate amount of its
outstanding Loans is $_____________, and its participation in L/C Obligations is $_____________.



     2. The Assignee agrees that, upon receiving the consent of the Agent [and Borrower Agent] to
such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to
the same extent as if the Assignee were the Lender originally holding such interest in the Credit
Agreement.













 





     3. The following administrative details apply to the Assignee:




	 	(A)	 	Notice Address:




Assignee name:



Address:



 



Attention:



Telephone: (___)



Telecopier: (___)



Telex (Answerback):





	 	(B)	 	Payment Instructions:




Account No.:



         At:



 



Reference:



Attention:




     4. The Agent is entitled to rely upon the representations, warranties and covenants of each of
the Assignor and Assignee contained in the Assignment and Acceptance.



     IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and
Acceptance to be executed by their respective duly authorized officials, officers or agents as of
the date first above mentioned.



	 	 	 	 	 
	 	Very truly yours,





[NAME OF ASSIGNOR]

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	[NAME OF ASSIGNEE]

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 




2









 





	 	 	 	 	 
	ACKNOWLEDGED AND ASSIGNMENT

CONSENTED TO:





Bank of America, N. A.

as Agent

 	 
	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 



	 	 	 	 	 
	[Applica Consumer Products, Inc., as Borrower Agent

 	 
	By:  	
 	 
	 	 	Title: 	] 
	 	 	 	 
	 



3









 








EXHIBIT E




COLLATERAL ACCESS AGREEMENTS




LANDLORD AGREEMENT





     THIS
AGREEMENT, dated as of ____________________, 20__, by
____________________ (hereinafter
“Landlord”), in favor of BANK OF AMERICA, N.A., a national banking association, as collateral and
administrative agent (together with its successors in such capacity, “Agent”) for itself and other
various financial institutions (collectively, “Lenders” and individually, a “Lender”).



Recitals:




     Landlord is the landlord under a certain lease (as at any time amended, the “Lease”) dated
____________________, between Landlord and ____________________, a
____________________ corporation (“Company”),
covering certain business premises located at ____________________ (the “Leased Premises”).



     Agent and Lenders have been requested to extend loans and other accommodations to Company and
certain affiliates of Company (collectively, the “Obligors”), and, as a condition to extending such
loans and other financial accommodations, Agent and Lenders have required, among other things, that
Obligors grant to Agent, for the benefit of itself as Agent and the ratable benefit of Lenders, a
security interest in, among other things, all inventory, machinery, equipment, furniture and
fixtures of Obligors, whether now owned or hereafter acquired and all substitutions and
replacements thereof (“Collateral”), a portion of which Collateral is or may be located from time
to time on or about or affixed to the Leased Premises.



     NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid to Landlord and in order to induce Agent
and Lenders to extend financial accommodations to or for the benefit of Obligors in Agent’s and
Lenders’ sole discretion, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord hereby agrees with Agent as follows:



     1. Landlord consents to Agent’s security interest in all of the Collateral. Agent’s security
interests in the Collateral shall be superior, if applicable, to any interest which the Landlord
may at any time have therein. For so long as Agent has a security interest in any of the
Collateral, Landlord will not assert against any of the Collateral any statutory, common law,
contractual or possessory lien, including, without limitation, any right of levy or distraint for
rent, all of which Landlord hereby subordinates in favor of Agent.



     2. Landlord agrees that none of the Collateral shall be deemed a fixture or a part of the
Leased Premises, but shall at all times be considered personal property, and Landlord disclaims any
interest in the Collateral as fixtures.



     3. Landlord agrees that Agent and Lenders may enter upon the Leased Premises at any time or
times, during normal business hours upon prior notice, to inspect or remove any of the Collateral
therefrom, without charge. Agent and Lenders shall repair any physical damage directly caused to
the Leased Premises by such removal. Landlord will not hinder Agent’s actions in enforcing its
liens and remedies with respect to the Collateral. Landlord agrees that Agent and Lenders upon
prior notice may conduct public or private foreclosure sales of Collateral at the Leased Premises
and that interested parties
will be permitted access to the Leased Premises during normal business hours for the purpose
of inspecting the Collateral prior to any such sale.













 





     4. Landlord will notify Agent at 300 Galleria Parkway, NW Suite 800 Atlanta, Georgia 30339, or
at such other address as Agent shall hereafter specify in writing, in the event that Company
defaults in its obligations under the Lease, and Landlord shall allow Agent, at Agent’s option,
without obligation, a period of fifteen (15) days from Agent’s receipt of such notice in which to
cure or cause Company to cure any defaults. Landlord will permit the Collateral to remain on the
Leased Premises for a period of up to ninety (90) days following receipt by Agent of written notice
from Landlord that Landlord has terminated the Lease and directing removal of the Collateral,
subject, however, to the payment to Landlord by Agent of the regular installments of rent due under
the Lease for the period of time during which Agent shall elect to use or occupy the Leased
Premises or elect to keep the Collateral thereon without abandoning same, which rent shall be
pro-rated on a per diem basis determined on a 30-day month. Neither Agent nor any Lender shall be
deemed to have assumed nor shall it be liable for any unperformed or unpaid obligations of Company
under the Lease, other than for the payment of rent described in the preceding sentence.



     5. This Agreement shall remain in full force and effect until all obligations of Obligors to
Agent and Lenders have been paid and satisfied in full and Agent and Lenders have terminated their
financing agreements with Obligors.



     6. The provisions of this Agreement may not be modified or terminated orally, and shall be
binding upon the successors, assigns and representatives of the Landlord, and upon any successor
owner or transferee of the Leased Premises, and shall inure to the benefit of the Agent and Lenders
and their successors and assigns. Landlord hereby waives notice of acceptance of this Agreement by
Agent.



     7. The laws of the jurisdiction in which the Leased Premises are located shall govern the
validity, interpretation and enforcement of this Agreement.



E-2









 





     IN WITNESS WHEREOF, Landlord has executed this Agreement on the date first above written.




 


	 	 	 	 	 
	 	
(“Landlord”)

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 




E-3









 








WAREHOUSE NOTIFICATION AND




ACKNOWLEDGMENT OF SECURITY INTEREST




__________________, 20__




____________________________

____________________________

________________________, _____________ ________________




Attention: ____________






   Gentlemen:



     Please be advised that we have entered into financing arrangements with Bank of America, N.A.,
as agent (in such capacity, together with its successors and assigns, “Agent”), acting for and on
behalf of the financial institutions party from time to time to the Credit Agreement (as
hereinafter defined) as lenders (collectively, together with their respective successors and
assigns, “Lenders”), pursuant to which we have granted or will grant to Agent a security interest
in, among other collateral, all of our existing and future inventory, including, without
limitation, all goods which may at any time now or hereafter be located on or in real property or
buildings owned, leased or otherwise in your possession or control, and/or delivered to you for
distribution or storage, whether pursuant to any agreement or otherwise. Fur purposes of this
agreement, the term “Credit Agreement” means the Third Amended and Restated Credit Agreement by and
among Agent, Lenders, us and certain of our affiliates, as the same may be amended, modified,
supplemented, extended, renewed, restated or replaced.



     By your signature below, you acknowledge receipt of the above notice of Agent’s security
interest and agree to follow all instructions that Agent may from time to time hereafter give to
you with respect to all of our goods which are at any time located on or in real property or
buildings owned, leased or otherwise under your control and/or delivered by us to you for
distribution or storage. For the present, Agent consents to you continuing to release goods
pursuant to the instructions given you by us, or any of our authorized agents, but this consent may
be terminated or changed at any time by notice to you from Agent. Upon being so notified by Agent,
you are to abide solely by Agent’s instructions with respect to any of such goods and you are not
to release any of the goods to us or to anyone else except according to written instructions which
may be given to you from time to time by Agent.



     You agree and acknowledge that you do not have and in no event will you assert, as against
Agent or any Lender, any lien, right of distraint or levy, right of offset, claim, deduction,
counterclaim, security or other interest in any of our goods now or hereafter located on any of
your premises, including any of the foregoing which might otherwise arise or exist in your favor
pursuant to any agreement, common law, statute (including the U.S. Bankruptcy Code or any state or
foreign insolvency law (including the Bankruptcy and Insolvency Act (Canada) or the Companies’
Creditors Arrangement Act (Canada)) or otherwise if and to the extent you have been paid by us,
Agent or Lenders for storage, handling and other services pursuant to the terms of your warehouse
services contract with us. You certify that you do not know of any security interest or other
claim with respect to such goods, other than the security interest which is the subject of this
agreement. You agree and acknowledge that no negotiable or non-negotiable warehouse receipts,
documents of title or similar instruments have been or will be issued by you with respect to any of
our goods, except for non-negotiable receipts naming Agent or us as consignee. You shall not take
any action purporting to encumber or transfer any interest in such goods.



 









 





     You further agree to allow Agent, any Lender and their respective agents to enter upon your
premises during business hours for the purpose of examining, removing, taking possession of or
otherwise dealing with any of our goods at any time in your possession or copies of any records
related thereto.



     Agent and Lenders are relying upon this acknowledgement in connection with their financing
arrangements with us. This agreement may not be changed or terminated orally or by course of
conduct. Any change to the terms of this agreement must be in writing and signed by Agent. This
agreement shall be binding upon you and your successors and assigns and shall be enforceable by and
inure to the benefit of Agent, Lender and their respective successors and assigns.



     This agreement constitutes our acknowledgment that Agent or any Lender may assert any of the
rights set forth or referred to herein, without objection by us. We also agree to reimburse you
for all reasonable costs and expenses incurred by you as a direct result of compliance with the
instructions of Agent as to the disposition of any goods.



     Please acknowledge your agreement to the foregoing by signing in the space provided below.



	 	 	 	 	 
	 	Very truly yours,





[INSERT NAME OF LOAN PARTY]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	ACKNOWLEDGED AND AGREED:



 	 
	 	
By:  	 	 
	 	 	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	Date:  	 	 
	 














 








EXHIBIT F-1




FORM OF VENDOR LETTER




__________, 20__




Bank of America, N.A., as agent

300 Galleria Parkway, N.W., Suite 800

Atlanta, Georgia 30339

Attention: Applica Client Manager




          Re:      In-transit Inventory




Gentlemen:





     Reference is made to the Third Amended and Restated Credit Agreement (as at any time amended,
restated, supplemented or otherwise modified, the “Credit Agreement”) that has been or is to be
entered into among Applica Incorporated, Applica Consumer Products, Inc., Applica Americas, Inc.,
Applica Canada Corporation (individually, a “Loan Party” and collectively, “Loan Parties”),
certain other subsidiaries and affiliates of the foregoing, various financial institutions named
therein (“Lenders”) and Bank of America, N.A., as collateral and administrative agent for itself
and the Lenders (“Agent”), this letter agreement will confirm our mutual understanding and
agreement with regard to the matters set forth below. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Credit Agreement.



     To induce Agent and Lenders to make loans under the Credit Agreement to the Loan Parties upon
the security of Inventory in-transit to a Loan Party (“In-Transit Inventory”), the undersigned, as
a vendor of Inventory (the “Vendor”) to one or more of the Loan Parties, hereby affirms,
acknowledges and agrees with the Agent and the Loan Parties as follows:




     (a) that in connection with all sales of Inventory by the Vendor to a Loan Party, all
bills of lading or other documents of title shall be issued in negotiable form under Article
7 of the Uniform Commercial Code;




     (b) that all such sales shall be invoiced in a commercially reasonable manner
consistent with historic practices of the Vendor and shall, in each instance, include the
name and address of seller, date of issue of the invoice, name and address of the buyer, the
quantity and type of goods covered thereby, shipping marks and numbers, shipping details,
terms of delivery and confirmation that the sale is made on an open account basis as to such
buyer;




     (c) that, upon delivery of the subject Inventory to the port of loading, which shall
thereupon constitute a final sale to the applicable Loan Party of the subject Inventory, the
Vendor waives; (i) all rights to repudiate or rescind the contract; (ii) all rights to
divert or stop shipment in-transit or change shipping instructions, whether arising under
the Uniform Commercial Code or otherwise; and (iii) all other right, title or interest in
and to the subject Inventory; and




     (d) that with respect to the subject Inventory (i) the Vendor has obtained all
applicable export licenses and no tariff, quota restriction, embargo or other governmental
policy
restricts or limits the export of such Inventory, and (ii) the sale of such Inventory
to a Loan Party is free and clear of all liens, claims or encumbrances granted by or through
Vendor to any of its creditors.













 





			
	 	 	___________________________, 2007






     If the foregoing sets forth the terms and conditions of our mutual understanding and agreement
with respect to the matters set forth therein, please so indicate by executing this letter
agreement in the space provided below.



	 	 	 	 	 
	 	Very truly yours,





______________________________________(“Vendor”)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	Accepted and Agreed:





BANK OF AMERICA, N.A., as Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



(Signatures continue on following page)














 








			
	 	 	___________________________, 2007






	 	 	 	 	 
	 	APPLICA INCORPORATED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA CONSUMER PRODUCTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA AMERICAS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA CANADA CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 













 





			
	 	 	__________________________, 2007






EXHIBIT F-2




FORM OF VENDOR LETTER




__________, 200__




Bank of America, N.A., as agent

300 Galleria Parkway, N.W., Suite 800

Atlanta, Georgia 30339

Attention: Applica Client Manager




     Re:     In-Transit Inventory



Ladies/Gentlemen:




     Reference is made to the Third Amended and Restated Credit Agreement (as at any time amended,
restated supplemented or otherwise modified, the “Credit Agreement”) that has been or is to be
entered into among Salton, Inc., Toastmaster Inc., Applica Incorporated, Applica Consumer Products,
Inc., Applica Americas, Inc., Applica Canada Corporation, certain other direct and indirect
subsidiaries and affiliates of the foregoing (each of the foregoing entities and such other
subsidiaries and affiliates, together with any successors by merger thereof, being referred to
individually as a “Loan Party” and collectively as “Loan Parties”), various financial institutions
named therein (“Lenders”) and Bank of America, N.A., as collateral and administrative agent for
itself and the Lenders (“Agent”). This letter agreement will confirm our mutual understanding and
agreement with regard to the matters set forth below. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Credit Agreement.



     To induce Agent and Lenders to make loans under the Credit Agreement to certain of the Loan
Parties upon the security of Inventory in-transit to a Loan Party (“In-Transit Inventory”), the
undersigned, as a vendor of Inventory (the “Vendor”) to one or more of the Loan Parties, hereby
affirms, acknowledges and agrees with the Agent and the Loan Parties as follows:




     (a) that in connection with all sales of Inventory by the Vendor to a Loan Party, all
bills of lading or other documents of title shall be issued in tangible, negotiable form
under Article 7 of the Uniform Commercial Code;




     (b) that all such sales shall be invoiced in a commercially reasonable manner
consistent with historic practices of the Vendor and shall, in each instance, include the
name and address of seller, date of issue of the invoice, name and address of the buyer, the
quantity and type of goods covered thereby, shipping marks and numbers, shipping details,
terms of delivery and confirmation that the sale is made on an open account basis as to such
buyer;




     (c) that, upon delivery of the subject Inventory to the port of loading, which shall
thereupon constitute a final sale to the applicable Loan Party of the subject Inventory, the
Vendor waives; (i) all rights to repudiate or rescind the contract; (ii) all rights to
divert or stop shipment in-transit or change shipping instructions, whether arising under
the Uniform Commercial Code or otherwise; and (iii) all other right, title or interest in
and to the subject Inventory; and













 





			
	 	 	____________________________, 2007







     (d) that with respect to the subject Inventory (i) the Vendor has obtained all
applicable export licenses and no tariff, quota restriction, embargo or other governmental
policy restricts or limits the export of such Inventory, and (ii) the sale of such Inventory
to a Loan Party is free and clear of all liens, claims or encumbrances granted by or through
Vendor to any of its creditors.



     The provisions of this agreement are solely for the benefit of the parties hereto, the Lenders
and the Loan Parties, and the respective successors and assigns of each of the foregoing, and no
other person or entity is intended to be benefited hereby.



     If the foregoing sets forth the terms and conditions of our mutual understanding and agreement
with respect to the matters set forth therein, please so indicate by executing this letter
agreement in the space provided below.



	 	 	 	 	 
	 	Very truly yours,





______________________________ (“Vendor”)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	Accepted and Agreed:





BANK OF AMERICA, N.A., as Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



(Signatures continue on following page)














 








			
	 	 	_______________________, 2007






	 	 	 	 	 
	 	SALTON, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TOASTMASTER INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA INCORPORATED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA CONSUMER PRODUCTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA AMERICAS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	APPLICA CANADA CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title: