exv10w3



 






Exhibit 10.3




AMENDED AND RESTATED SECURITY AGREEMENT




     This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of September 27, 2005, is entered into
among MATRIXX INITIATIVES, INC., a Delaware corporation (“Matrixx”), and ZICAM, LLC, an Arizona
limited liability company (“Zicam”) (Matrixx and Zicam are sometimes individually referred to
herein as a “Borrower” and collectively referred to herein as “Borrowers”) and COMERICA BANK, a
Michigan banking corporation (“Secured Party”), with reference to the following facts:



R E C I T A L S




          A. Borrowers and Secured Party have previously entered into that certain Credit Agreement,
dated as of May 29, 2002 (as amended to date, the “Prior Agreement”).




          B. Borrowers and Secured Party are contemporaneously herewith entering into the Loan Agreement
(as hereinafter defined), which shall amend and restate the Prior Agreement in its entirety.




          C. Borrowers have previously entered into those certain Security Agreements dated as of May
29, 2002 and July 10, 2002 (as amended to date, collectively, the “Prior Security Agreements”).




          D. Borrowers and Secured Party desire to amend and restate the Prior Security Agreements in
their entirety in accordance with the terms and conditions of this Security Agreement.




          In order to induce Secured Party to enter into the Loan Agreement, Borrower has agreed to
enter into this Security Agreement in order to grant to Secured Party a first priority security
interest in the Collateral to secure prompt payment and performance of the Secured Obligations.




A G R E E M E N T




     NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions,
representations, and warranties hereinafter set forth, and for other good and valuable
consideration, the parties hereto agree as follows:



     1. Definitions. All initially capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Loan Agreement. In addition, as used herein, the following terms
shall have the following meanings:



          “Account Debtor” means any Person who is or who may become obligated with respect to, or on
account of, an Account, Chattel Paper or General Intangible.




          “Accounts” means any and all of each Borrowers’ presently existing and hereafter arising
accounts (including health-care-insurance receivables, contract rights, and all other forms of
monetary obligations owing to any Borrower, and all credit insurance, guaranties, or security
therefor), irrespective of whether earned by performance.




1









 








          “Borrower’s Books” means any and all presently existing and hereafter acquired or created
books and records of any Borrower, including all records (including maintenance and warranty
records), ledgers, computer programs, disc or tape files, printouts, runs, and other computer
prepared information indicating, summarizing, or evidencing the Collateral.




          “Chattel Paper” means all of each Borrowers’ presently existing and hereafter acquired or
created chattel paper (including tangible chattel paper and electronic chattel paper).




          “Code” means the Arizona Uniform Commercial Code, as amended or supplemented from time to
time. Any and all terms used in this Security Agreement which are defined in the Code shall be
construed and defined in accordance with the meaning and definition ascribed to such terms under
the Code, unless otherwise defined herein.




          “Collateral” means the following, collectively: any and all of the Accounts, Chattel Paper,
Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Instruments, Inventory, Investment
Property, General Intangibles, Letter of Credit Rights, Negotiable Collateral, Supporting
Obligations, each Borrower’s Books, in each case whether now existing or hereafter acquired or
created, any money or other assets of any Borrower that now or hereafter come into the possession,
custody, or control of Secured Party and any Proceeds or products of any of the foregoing, or any
portion thereof.




          “Collateral Access Agreement” means a landlord waiver, mortgagee waiver, bailee letter, or
acknowledgement agreement of any warehouseman, processor, lessor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in the Equipment or Inventory, in
each case, in form and substance satisfactory to Secured Party.




          “Commercial Tort Claims” means all of each Borrower’s presently existing and hereafter
acquired or arising commercial tort claims (as such term is defined in the Code).




          “Deposit Account” means any demand, time, savings, passbook or similar account now or
hereafter maintained by or for the benefit of any Borrower with an organization that is engaged in
the business of banking including a bank, savings bank, savings and loan association, credit union
and trust companies, and all funds and amounts therein, whether or not restricted or designated for
a particular purpose.




          “Documents” means any and all documents and documents of title, including documents of title,
bills of lading, dock warrants, dock receipts, warehouse receipts and other documents of any
Borrower, whether or not negotiable, and including all other documents which purport to be issued
by a bailee or agent and purport to cover goods in any bailee’s or agent’s possession which are
either identified or are fungible portions of an identified mass, including such documents of title
made available to any Borrower for the purpose of ultimate sale or exchange of goods or for the
purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing or
otherwise dealing with goods in a manner preliminary to their sale or exchange, in each case
whether now existing or hereafter acquired.




          “Equipment” means any and all of each Borrowers’ presently existing and hereafter acquired
equipment, wherever located, including machinery, furniture, furnishings, fixtures, computer and
other electronic data processing equipment and other office equipment




2









 







and supplies, computer programs and related data processing software, spare parts, tools,
motors, automobiles, trucks, tractors and other motor vehicles, rolling stock, jigs, and other
goods (other than Inventory, farm products, and consumer goods), including software embedded in
such goods, together with any and all parts, improvements, additions, attachments, replacements,
accessories, and substitutions thereto or therefor, and all other rights of any Borrower relating
thereto, whether in the possession and control of any Borrower, or in the possession and control of
a third party for the account of any Borrower.




          “Expenses” has the meaning of “Expenses” under the Loan Agreement and shall also mean: any
and all costs or expenses required to be paid by Borrowers under this Security Agreement which are
paid or advanced by Secured Party; all costs and expenses of Secured Party, including its
reasonable attorneys’ fees and expenses (including reasonable attorneys’ fees incurred pursuant to
proceedings arising under the Bankruptcy Code to the extent permitted by law), incurred or expended
to correct any default or enforce any provision of this Security Agreement, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale,
or advertising to sell the Collateral, irrespective of whether a sale is consummated; and all costs
and expenses of suit incurred or expended by Secured Party, including its reasonable attorneys’
fees and expenses (including reasonable attorneys’ fees incurred pursuant to proceedings arising
under the Bankruptcy Code) in enforcing or defending this Security Agreement, irrespective of
whether suit is brought.




          “FEIN” means Federal Employer Identification Number.




          “General Intangibles” means any and all of each Borrowers’ presently existing and hereafter
acquired or arising general intangibles and any other intangible personal property of every kind
and description, including:




               (a) contracts and contract rights, noncompetition covenants, licensing and distribution
agreements, indemnity agreements, guaranties, insurance policies, franchise agreements and lease
agreements;



               (b) uncertificated certificates of deposit, and interests in any joint ventures, partnerships
or limited liability companies;



               (c) choses in action and causes of action (whether legal or equitable, whether in contract or
tort or otherwise, and however arising);



               (d) licenses, approvals, permits or any other authorizations issued by any Governmental
Authority;



               (e) Intellectual Property Collateral;



               (f) computer software (including without limitation any computer program that is embedded in
goods that consist solely of the medium in which the program is embedded), magnetic media,
electronic data processing files, systems, programs, and information contained on computer disks or
tapes;



3









 





               (g) rights of stoppage in transit, replevin and reclamation, rebates (including without
limitation insurance premium rebates) or credits of every kind and nature to which Borrowers may be
entitled;



               (h) purchase orders, customer lists, subscriber lists and goodwill;



               (i) monies due or recoverable from pension funds, refunds and claims for tax or other refunds
against any Governmental Authority;



               (j) payment intangibles; and



               (k) other contractual, equitable and legal rights of whatever kind and nature.



          “Instruments” means any and all negotiable instruments, and every other writing which
evidences a right to the payment of a monetary obligation, in each case whether now existing or
hereafter acquired.




          “Intellectual Property Collateral” means the following Assets owned or held by each Borrower
or in which each Borrower otherwise have any interest, now existing or hereafter acquired or
arising:




               (a) all patents and patent applications, domestic or foreign, all licenses relating to any of
the foregoing and all income and royalties with respect to any licenses, all rights to sue for
past, present or future infringement thereof, all rights arising therefrom and pertaining thereto
and all reissues, divisions, continuations, renewals, extensions and continuations in-part thereof;



               (b) all copyrights and applications for copyright, domestic or foreign, together with the
underlying works of authorship (including titles), whether or not the underlying works of
authorship have been published and whether said copyrights are statutory or arise under the common
law, and all other rights and works of authorship, all rights, claims and demands in any way
relating to any such copyrights or works, including royalties and rights to sue for past, present
or future infringement, and all rights of renewal and extension of copyright;



               (c) all state (including common law), federal and foreign trademarks, service marks and trade
names, and applications for registration of such trademarks, service marks and trade names, all
licenses relating to any of the foregoing and all income and royalties with respect to any
licenses, whether registered or unregistered and wherever registered, all rights to sue for past,
present or future infringement or unconsented use thereof, all rights arising therefrom and
pertaining thereto and all reissues, extensions and renewals thereof;



               (d) all trade secrets, confidential information, customer lists, license rights, advertising
materials, operating manuals, methods, processes, know-how, sales literature, sales and operating
plans, drawings, diagrams, schematics, specifications, blue prints, descriptions, inventions, name
plates, reports and catalogs;



4









 





               (e) the entire goodwill of or associated with the businesses now or hereafter conducted by
each Borrower connected with and symbolized by any of the aforementioned properties and assets; and



               (f) Intellectual Property Collateral shall include, without limitation, rights and interests
pursuant to licensing or other contracts in favor of each Borrower pertaining to patents,
trademarks, copyrights and other intellectual property presently or in the future owned or used by
third Persons.



          “Inventory” means any and all of each Borrowers’ presently existing and hereafter acquired
goods (including software embedded in such goods) of every kind and description (including goods in
transit) which are held for sale or lease, or to be furnished under a contract of service or which
have been so leased or furnished, or other disposition, wherever located, including those held for
display or demonstration or out on lease or consignment or are raw materials, work in process,
finished materials, or materials used or consumed, or to be used or consumed, in each Borrowers’
business, and the resulting product or mass, and all repossessed, returned, rejected, reclaimed and
replevied goods, together with all materials, parts, supplies, packing and shipping materials used
or usable in connection with the manufacture, packing, shipping, advertising, selling or furnishing
of such goods; and all other items hereafter acquired by each Borrower by way of substitution,
replacement, return, repossession or otherwise, and all additions and accessions thereto, and any
Document representing or relating to any of the foregoing at any time.




          “Investment Property” means any and all of each Borrowers’ presently existing and hereafter
acquired investment property (including without limitation securities and securities entitlements).




          “Letter of Credit Rights” means any and all of each Borrowers’ presently existing and
hereafter acquired letter of credit rights.




          “Loan Agreement” means that certain Amended and Restated Credit Agreement, dated as of even
date herewith, among Borrowers and Secured Party, as may be at any time hereafter supplemented,
modified, amended or restated.




          “Negotiable Collateral” means any and all of each Borrowers’ presently existing and hereafter
acquired or arising letters of credit, letter of credit rights, advises of credit, certificates of
deposit, notes, drafts, money, Instruments, Documents and tangible Chattel Paper.




          “Proceeds” means whatever is receivable or received from or upon the sale, lease, license,
collection, use, exchange or other disposition, whether voluntary or involuntary, of any
Collateral, including “proceeds” as defined in the Code, any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to or for the account of Borrowers from time to time with
respect to any of the Collateral, any and all payments (in any form whatsoever) made or due and
payable to Borrowers from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of Governmental Authority), any and all other amounts
from time to time paid or payable under or in connection with any of the Collateral or




5









 







for or on account of any damage or injury to or conversion of any Collateral by any Person,
any and all other tangible or intangible property received upon the sale or disposition of
Collateral, and all proceeds of proceeds.




          “Rights to Payment” means all Accounts and any and all rights and claims to the payment or
receipt of money or other forms of consideration of any kind in, to and under all electronic
Chattel Paper, General Intangibles, Letter of Credit Rights, Negotiable Collateral and Proceeds
thereof.




          “Secured Obligations” shall have the meaning of “Obligations” under the Loan Agreement and
shall also mean any and all debts, liabilities, obligations, or undertakings owing by any Borrower
to Secured Party arising under, advanced pursuant to, or evidenced by this Security Agreement,
whether direct or indirect, absolute or contingent, matured or unmatured, due or to become due,
voluntary or involuntary, whether now existing or hereafter arising, and including all interest not
paid when due and all Expenses which any Borrower is required to pay or reimburse pursuant to this
Security Agreement, the Loan Agreement, the other Loan Documents or by law.




          “Security Agreement” means this Security Agreement, as amended or restated from time to time.




          “Supporting Obligations” has the meaning given to such term in the Code.




     2. Construction. Unless the context of this Security Agreement clearly requires otherwise,
references to the plural include the singular and to the singular include the plural, references to
any gender include any other gender, the part includes the whole, the term including is not
limiting, and the term or has, except where otherwise indicated, the inclusive meaning represented
by the phrase and/or. References in this Security Agreement to determination by Secured Party
include good faith estimates by Secured Party (in the case of quantitative determinations), and
good faith beliefs by Secured Party (in the case of qualitative determinations). The words hereof,
herein, hereby, hereunder, and similar terms in this Security Agreement refer to this Security
Agreement as a whole and not to any particular provision of this Agreement. Article, section,
subsection, clause, exhibit and schedule references are to this Security Agreement, unless
otherwise specified. Any reference in this Security Agreement or any of the Loan Documents to this
Security Agreement or any of the Loan Documents includes any and all permitted alterations,
amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as
applicable.



     3. Creation of Security Interest. Borrowers hereby grant to Secured Party a continuing
security interest in all presently existing and hereafter acquired or arising Collateral in order
to secure the prompt payment and performance of all of the Secured Obligations. Borrowers
acknowledge and affirm that such security interest in the Collateral has attached to all Collateral
without further act on the part of Secured Party or Borrowers except as contemplated in Section
4.6.



     4. Further Assurances.



6









 





          4.1 Borrowers shall execute and deliver to Secured Party concurrently with Borrowers’
execution of this Security Agreement, and from time to time at the request of Secured Party, and
Borrowers hereby authorize Secured Party to file, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, assignments, and all other
documents that Secured Party may require, in form satisfactory to Secured Party, to perfect and
maintain perfected Secured Party’s security interests in the Collateral, and in order to consummate
fully all of the transactions contemplated by this Security Agreement and the Loan Agreement.
Borrowers hereby irrevocably make, constitute, and appoint Secured Party (and Secured Party’s
officers, employees, or agents) as Borrowers’ true and lawful attorney with power to sign the name
of each Borrower on any of the above-described documents or on any other similar documents which
need to be executed, recorded, or filed, and to do any and all things necessary in the name and on
behalf of Borrowers in order to perfect, or continue the perfection of, Secured Party’s security
interests in the Collateral. Borrowers agree that neither Secured Party, nor any of its designees
or attorneys-in-fact, will be liable for any act of commission or omission, or for any error of
judgment or mistake of fact or law with respect to the exercise of the power of attorney granted
under this Section 4.1, other than as a result of its or their gross negligence or willful
misconduct. THE POWER OF ATTORNEY GRANTED UNDER THIS SECTION 4.1 IS COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE UNTIL ALL OF THE SECURED OBLIGATIONS HAVE BEEN INDEFEASIBLY PAID IN FULL, THE
LOAN AGREEMENT TERMINATED, AND ALL BORROWERS’ DUTIES HEREUNDER AND THEREUNDER HAVE BEEN DISCHARGED
IN FULL.




          4.2 Without limiting the generality of the foregoing Section 4.1 or any of the provisions of
the Loan Agreement, Borrowers shall: (i) at the request of Secured Party, mark conspicuously each
Borrower’s Books with a legend, in form and substance satisfactory to Secured Party, indicating
that the Collateral is subject to the security interest granted hereby; (ii) immediately mark all
Chattel Paper with a conspicuous legend indicating Secured Party’s security interest therein and
otherwise in form and substance satisfactory to Secured Party; and (iii) at the request of Secured
Party, appear in and defend any action or proceeding which may affect Borrowers’ title to, or the
security interest of Secured Party in, any of the Collateral.




          4.3 With respect to the Negotiable Collateral (other than checks and drafts received in the
ordinary course of business so long as no Event of Default is continuing), Borrowers shall,
immediately upon request by Secured Party, endorse (where appropriate) and assign the Negotiable
Collateral over to Secured Party, and deliver to Secured Party actual physical possession of the
Negotiable Collateral together with any instruments of transfer or assignment, all in form and
substance satisfactory to Secured Party, in order to fully perfect the security interest therein of
Secured Party.




          4.4 In the event that any Collateral is in the possession of a third party, Borrowers shall
join with Secured Party in notifying such third party of Secured Party’s security interest and
obtaining an acknowledgement from such third party that it is holding such Collateral for the
benefit of Secured Party.




          4.5 Borrowers shall cooperate with Secured Party and use its commercially reasonable efforts
in obtaining a control agreement in form and substance satisfactory to Secured




7









 







Party with respect to all Deposit Accounts, electronic Chattel Paper, Investment Property, and
Letter of Credit Rights.




          4.6 Borrowers shall promptly notify Secured Party of any Commercial Tort Claims any of them
may bring against any Person, including the name and address of each defendant, a summary of the
facts, an estimate of such Borrower’s damages, copies of any complaint or demand letter submitted
by Borrowers, and such other information as Secured Party may request, and in connection therewith,
at Secured Party’s request, Borrowers and Secured Party shall enter into an amendment to this
Security Agreement granting a security interest to Secured Party in each such Commercial Tort Claim
to secured the Secured Obligations.




     5. Representations and Warranties. In order to induce Secured Party to enter into the Loan
Agreement and to make Loans to Borrowers or issue any Letter of Credit, in addition to the
representations and warranties of Borrowers set forth in the Loan Agreement which are incorporated
herein by this reference, each Borrower represents and warrants to Secured Party that on the
Closing Date and thereafter on the date of each and every Borrowing or issuance of a Letter of
Credit:



          5.1 Legal Name; State of Organization; Location of Chief Executive Office and Collateral;
FEIN. Each Borrower’s exact legal name, state of incorporation and/or organization (as
applicable), FEIN and charter or organizational identification number is accurately set forth in
Schedule 1. Each Borrower’s chief executive office is located at the address set forth in Schedule
1, and all other locations where Borrowers conduct business or Collateral is kept is set forth in
Schedule 1.




          5.2 Locations of Each Borrower’s Books. All locations where each Borrower’s Books are kept,
including all equipment necessary for accessing any Borrower’s Books and the names and addresses of
all service bureaus, computer or data processing companies and other Persons keeping any Borrower’s
Books or collecting Rights to Payment for Borrower, are set forth in Schedule 1.




          5.3 Trade Names and Trade Styles. All trade names and trade styles under which each Borrower
presently conducts its business operations are set forth in Schedule 1, and, except as set forth in
Schedule 1, neither Borrower has, at any time during the preceding five years: (i) been known as or
used any other corporate, trade or fictitious name; (ii) changed its name; (iii) been the surviving
or resulting corporation in a merger or consolidation; or (iv) acquired through asset purchase or
otherwise any business of any Person.




          5.4 Ownership of Collateral. Each Borrower has rights in and the power to transfer the
Collateral, and Borrowers’ title to the Collateral is free from all Liens and restrictions other
than Permitted Liens.




          5.5 Enforceability; Priority of Security Interest. (i) This Security Agreement creates a
security interest which is enforceable against the Collateral in which Borrowers now have rights
and will create a security interest which is enforceable against the Collateral in which Borrowers
hereafter acquire rights at the time Borrowers acquire any such rights, and (ii) Secured Party has
a perfected security interest (to the fullest extent perfection can be

8









 








obtained by filing, notification to third parties, possession or control) and a first priority
security interest in the Collateral in which Borrowers now have rights (subject only to Permitted
Liens), and will have a perfected and first priority security interest (to the fullest extent
perfection can be obtained by filing, notification to third parties, possession or control) in the
Collateral in which Borrowers hereafter acquire rights at the time any Borrower acquires any such
rights (subject only to Permitted Liens), in each case securing the payment and performance of the
Secured Obligations.




          5.6 Other Financing Statements. Other than financing statements in favor of Secured Party and
financing statements filed in connection with Permitted Liens, no effective financing statement
naming any Borrower as debtor, assignor, grantor, mortgagor, pledgor or the like and covering all
or any part of the Collateral is on file in any filing or recording office in any jurisdiction.




          5.7 Rights to Payment.




               (a) to the Knowledge of Borrowers, the Rights to Payment represent valid, binding and
enforceable obligations of the Account Debtors or other Persons obligated thereon, representing
undisputed, bona fide transactions completed in accordance with the terms and provisions contained
in any documents related thereto, and are and will be genuine, free from Liens, adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, retainages, holdbacks and conditions
precedent of any kind of character, except to the extent reflected by each Borrowers’ reserves for
uncollectible Rights to Payment;



               (b) to each Borrower’s Knowledge, all Account Debtors and other obligors on the Rights to
Payment are Solvent and generally paying their debts as they come due;



               (c) all Rights to Payment comply with all applicable laws concerning form, content and manner
of preparation and execution, including where applicable any federal and state consumer credit
laws;



               (d) neither Borrower has assigned any of its rights under the Rights to Payment other than to
Secured Party pursuant to this Security Agreement;



               (e) all statements made, all unpaid balances and all other information in each Borrower’s
Books and other documentation relating to the Rights to Payment are true and correct in all
material respects and in all material respects what they purport to be; and



               (f) neither Borrower has Knowledge of any fact or circumstance which would impair the validity
or collectibility in any material respect of any of the Rights to Payment.



          5.8 Inventory. Except as disclosed in Schedule 1 hereto, no Inventory is stored with any
bailee, warehouseman or similar Person or on any premises leased to any Borrower, nor has any
Inventory been consigned to any Borrower or consigned by any Borrower to any Person or is held by
any Borrower for any Person under any “bill and hold” or other arrangement.




9









 








          5.9 Intellectual Property.




               (a) except as set forth in Schedule 1, each Borrower does not own, possess or use under any
licensing arrangement any patents, copyrights, trademarks, service marks or trade names, nor is
there currently pending before any Governmental Authority any application for registration of any
patent, copyright, trademark, service mark or trade name;



               (b) all patents, copyrights, trademarks, service marks and trade names are subsisting and have
not been adjudged invalid or unenforceable in whole or in part;



               (c) all maintenance fees required to be paid on account of any patents have been timely paid
for maintaining such patents in force, and, to the best of each Borrower’s knowledge, each of the
patents is valid and enforceable and each Borrower has notified Secured Party in writing of all
prior art (including public uses and sales) of which it is aware;



               (d) to the best of each Borrower’s Knowledge after due inquiry, no infringement or
unauthorized use presently is being made of any Intellectual Property Collateral by any Person;



               (e) each Borrower is the sole and exclusive owner of the Intellectual Property Collateral and
the past, present and contemplated future use of such Intellectual Property Collateral by any
Borrower has not, does not and will not infringe or violate any right, privilege or license
agreement of or with any other Person; and



               (f) each Borrower owns, has material rights under, is a party to, or an assignee of a party to
all material licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, trade names and all other Intellectual Property Collateral necessary to
continue to conduct its business as heretofore conducted.



          5.10 Equipment.




               (a) none of the Equipment or other Collateral is affixed to real property, except Collateral
with respect to which any Borrower has supplied Secured Party with all information and
documentation necessary to make all fixture filings required to perfect and protect the priority of
Secured Party’s security interest in all such Collateral which may be fixtures as against all
Persons having an interest in the premises to which such property may be affixed; and



               (b) none of the Equipment is leased from or to any Person, except as set forth in Schedule 1.



          5.11 Deposit Accounts. The names and addresses of all financial institutions at which each
Borrower maintains its Deposit Accounts, and the account numbers and account names of such Deposit
Accounts, are set forth in Schedule 1.




          5.12 Investment Property. All Investment Property is set forth and described in Schedule 1,
and all financial institutions or financial intermediaries holding or in possession of such
Investment Property are set forth in Schedule 1.




10









 








          5.13 Commercial Tort Claims. All of Debtor’s Commercial Tort Claims that it has brought
against any Person, including the name and address of each defendant, a summary of the facts, and
an estimate of Debtor’s damages, are set forth in Schedule 1.




     6. Covenants. In addition to the covenants of Borrowers set forth in the Loan Agreement which
are incorporated herein by this reference, each Borrower agrees that from the Closing Date and
thereafter until the payment, performance and satisfaction in full, in cash, of the Secured
Obligations, and all of Secured Party’s obligations under the Loan Agreement to Borrowers have been
terminated and no Letters of Credit are outstanding:



          6.1 Defense of Collateral. Each Borrower shall appear in and defend any action, suit or
proceeding which may affect its title to or right or interest in, or Secured Party’s right or
interest in, the Collateral.




          6.2 Preservation of Collateral. Each Borrower shall do and perform all commercially
reasonable acts that may be necessary and appropriate to maintain, preserve and protect the
Collateral.




          6.3 Compliance with Laws, Etc. Each Borrower shall comply with all laws, regulations and
ordinances, and all policies of insurance, relating to the possession, operation, maintenance and
control of the Collateral.




          6.4 Location of Each Borrower’s Books and Chief Executive Office. Each Borrower shall: (i)
keep all Borrower’s Books at the locations set forth in Schedule 1; and (ii) maintain the location
of each Borrower’s chief executive office or principal place of business at the location set forth
in Schedule 1; provided, however, that any Borrower may amend Schedule 1 so long as (i) such
amendment occurs by written notice to Secured Party not less than 30 days prior to the date on
which the location of any Borrower’s Books or any Borrower’s chief executive office or principal
place of business is changed, and (ii) at the time of such written notification, the applicable
Borrower executes and delivers any financing statement amendments or fixture filing amendments
necessary to perfect or continue perfected Secured Party’s security interests in the Collateral and
also obtains for Secured Party such duly executed Collateral Access Agreement as Secured Party
shall require with respect to such new location.




          6.5 Location of Collateral. Each Borrower shall keep the Inventory and Equipment only at the
locations identified on Schedule 1; provided, however, that any Borrower may amend Schedule 1 so
long as (i) such amendment occurs by written notice to Secured Party not less than 30 days prior to
the date on which the Inventory or Equipment is moved to such new location, (ii) such new location
is within the continental United States, and (iii) at the time of such written notification, the
applicable Borrower executes and delivers any financing statements or fixture filings necessary to
perfect and continue perfected Secured Party’s security interests in such Assets and also obtains
for Secured Party such duly executed Collateral Access Agreement as Secured Party shall require
with respect to such new location.




          6.6 Change in Name, Trade Name, Trade Style or FEIN. Each Borrower shall not change its legal
name, trade names, trade styles or FEIN, or add any new trade names or trade styles from those
listed on Schedule 1; provided, however, that any Borrower may amend

11









 








Schedule 1 so long as (i) such amendment occurs by written notice to Secured Party not less
than 30 days prior to the date on which such new name, trade name, trade style or FEIN becomes
effective, and (ii) at the time of such written notification, the applicable Borrower executes and
delivers any financing statement amendments or fixture filing amendments necessary to continue
perfected Secured Party’s security interests in the Collateral.




          6.7 State of Incorporation or Formation. Each Borrower shall not change the state of its
incorporation or formation.




          6.8 Maintenance of Records. Each Borrower shall keep separate, accurate and complete
Borrower’s Books, disclosing Secured Party’s security interest hereunder.




          6.9 Disposition of Collateral. Each Borrower shall not surrender or lose possession of (other
than to Secured Party), sell, lease, rent, license, or otherwise dispose of or transfer any of the
Collateral or any right or interest therein other than the sale of Inventory in the ordinary course
of business.




          6.10 Liens. Each Borrower shall keep the Collateral free of all Liens except Permitted Liens.




          6.11 Leased Premises. At Secured Party’s request, each Borrower shall use commercially
reasonable efforts to obtain from each Person from whom any Borrower leases any premises at which
any Collateral is at any time present, such Collateral Access Agreements as Secured Party may
require.




          6.12 Rights to Payment. Each Borrower shall:




               (a) perform and observe, in all material respects, all terms and provisions of the Rights to
Payment and all material obligations to be performed or observed by it in connection therewith and
maintain the Rights to Payment in full force and effect;



               (b) enforce all Rights to Payment strictly in accordance with their terms, and take all such
action to such end as may be from time to time reasonably requested by Secured Party;



               (c) if, to the Knowledge of any Borrower, any dispute, setoff, claim, counterclaim or defense
shall exist or shall be asserted or threatened with respect to a Right to Payment (whether with or
against any Borrower or otherwise), disclose such fact fully to Secured Party in any Borrower’s
Books relating to such Account or other Right to Payment and in connection with any report
furnished by any Borrower to Secured Party relating to such Right to Payment;



               (d) furnish to Secured Party such information and reports regarding the Rights to Payment as
Secured Party may request, and upon request of Secured Party make such demands and requests for
information and reports as any Borrower is entitled to make in respect of the Rights to Payment;
and



12









 





               (e) upon the occurrence of any Event of Default, establish such lockbox or similar
arrangements for the payment of the Rights to Payment as Secured Party shall require.



          6.13 Inventory. Each Borrower shall:




               (a) at such times as Secured Party shall request, prepare and deliver to Secured Party
periodic reports pertaining to the Inventory, in form and substance satisfactory to Secured Party;



               (b) upon the request of Secured Party, take a physical listing of the Inventory and promptly
deliver a copy of such physical listing to Secured Party; provided that unless an Event of Default
exists, Secured Party shall not request such a physical listing of the Inventory more frequently
than once per calendar year.



               (c) not store any Inventory with a bailee, warehouseman or similar Person or on premises
leased to any Borrower without obtaining for Secured Party such Collateral Access Agreements as
Secured Party shall require; and



               (d) not dispose of any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on
approval, consignment or similar basis, nor acquire any Inventory from any Person on any such
basis, without in each case giving Secured Party prior written notice thereof.



          6.14 Equipment. Each Borrower shall, upon Secured Party’s request, deliver to Secured Party a
report of each item of Equipment, in form and substance satisfactory to Secured Party.




          6.15 Intellectual Property Collateral. Each Borrower shall:




               (a) not enter into any agreement (including any license or royalty agreement) pertaining to
any Intellectual Property Collateral without in each case giving Secured Party prior notice
thereof;



               (b) not allow or suffer any Intellectual Property Collateral to become abandoned, nor any
registration thereof to be terminated, forfeited, expired or dedicated to the public;



               (c) promptly give Secured Party notice of any rights any Borrower may obtain to any new
patentable inventions, trademarks, servicemarks, copyrightable works or other new Intellectual
Property Collateral, prior to the filing of any application for registration thereof; and



               (d) diligently prosecute all applications for patents, copyrights and trademarks, and file and
prosecute any and all continuations, continuations-in-part, applications for reissue, applications
for certificate of correction and like matters as shall be reasonable and appropriate in accordance
with prudent business practice, and promptly and timely pay any and



13









 




all maintenance, license, registration and other fees, taxes and expenses incurred in
connection with any Intellectual Property Collateral.




     7. Collection of Rights to Payment. Secured Party shall have the right at any time after an
Event of Default has occurred and is continuing (i) to notify the Account Debtors to make payments
directly to Secured Party or a lockbox account as set forth in clause (iii) of this Section 7, (ii)
to enforce each Borrowers’ rights against the Account Debtors, and (iii) to require that all
payments made by Account Debtors be deposited directly into a lockbox account as Secured Party may
specify, pursuant to a lockbox agreement in form and substance satisfactory to Secured Party, with
a lockbox servicing Secured Party acceptable to Secured Party.



     8. Events of Default. The occurrence of any Event of Default under the Loan Agreement shall
constitute an event of default (“Event of Default”) hereunder.



     9. Rights and Remedies.



          9.1 During the continuance of an Event of Default, Secured Party, without notice or demand,
may do any one or more of the following, all of which are authorized by Borrowers:




               (a) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon
terms which Secured Party considers advisable, and in such cases, Secured Party will credit the
Secured Obligations with only the net amounts received by Secured Party in payment of such disputed
Accounts after deducting all Expenses incurred or expended in connection therewith;



               (b) Cause any Borrower to hold all returned Inventory in trust for Secured Party, segregate
all returned Inventory from all other property of any Borrower or in any Borrower’s possession and
conspicuously label said returned Inventory as the property of Secured Party;



               (c) Without notice to or demand upon any Borrower or any guarantor, make such payments and do
such acts as Secured Party considers necessary or reasonable to protect its security interests in
the Collateral. Each Borrower agrees to assemble the Collateral if Secured Party so requires, and
to make the Collateral available to Secured Party as Secured Party may designate. Each Borrower
authorizes Secured Party to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or Lien that in Secured Party’s determination appears to
conflict with its security interests and to pay all expenses incurred in connection therewith.
With respect to any of each Borrowers’ owned or leased premises, each Borrower hereby grants
Secured Party a license to enter into possession of such premises and to occupy the same, without
charge, for up to 120 days in order to exercise any of Secured Party’s rights or remedies provided
herein, at law, in equity, or otherwise;



               (d) Without notice to Borrowers (such notice being expressly waived), and without constituting
a retention of any collateral in satisfaction of an obligation), set off and apply to the Secured
Obligations any and all (i) balances and Deposit Accounts of Borrowers



14









 




held by Secured Party, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrowers held by Secured Party;




               (e) Hold, as cash collateral, any and all balances and Deposit Accounts of Borrowers held by
Secured Party, to secure the full and final repayment of all of the Secured Obligations;



               (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell (in the manner provided for herein) the Collateral. Secured Party is hereby granted
a license or other right to use, without charge, any Borrower’s labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and any Borrower’s rights under all licenses and
all franchise agreements shall inure to Secured Party’s benefit;



               (g) Sell the Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such places (including any
Borrower’s premises) as Secured Party determines is commercially reasonable. Secured Party shall
have no obligation to clean-up or otherwise prepare the Collateral for sale. It is not necessary
that the Collateral be present at any such sale;



               (h) Secured Party shall give notice of the disposition of the Collateral as follows:



               (i) Secured Party shall give each Borrower and each holder of a security interest in the
Collateral who has filed with Secured Party a written request for notice, a notice in writing of
the time and place of public sale, or, if the sale is a private sale or some other disposition
other than a public sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;



                    (i) The notice shall be personally delivered or mailed, postage prepaid, to the applicable
Borrower as provided in Section 10.1 of the Loan Agreement, at least ten (10) days before the date
fixed for the sale, or at least ten (10) days before the date on or after which the private sale or
other disposition is to be made; no notice needs to be given prior to the disposition of any
portion of the Collateral that is perishable or threatens to decline speedily in value or that is
of a type customarily sold on a recognized market. Notice to Persons other than any Borrower
claiming an interest in the Collateral shall be sent to such addresses as they have furnished to
Secured Party;



                    (ii) If the sale is to be a public sale, Secured Party also shall give notice of the time and
place by publishing a notice one time at least ten (10) days before the date of the sale in a
newspaper of general circulation in the county in which the sale is to be held;



                    (iii) Secured Party may credit bid and purchase at any public sale; and



               (j) The proceeds of any sale or other disposition of Collateral authorized by this Agreement
shall be applied by Secured Party first upon all Secured Party



15









 




Expenses, the balance of the proceeds of the sale or other disposition shall be applied in the
payment of the Secured Obligations, first to interest, then to principal, then to remaining Secured
Obligations and the surplus, if any, shall be paid over to Borrowers, without interest, or to such
other person(s) as may be entitled to it under applicable law. Borrowers shall remain liable for
any deficiency, which it shall pay to Secured Party immediately upon demand. Borrowers agree that
Agent shall be under no obligation to accept any noncash proceeds in connection with any sale or
disposition of Collateral unless failure to do so would be commercially unreasonable. If Secured
Party agrees in its sole discretion to accept noncash proceeds (unless the failure to do so would
be commercially unreasonable), Secured Party may ascribe any commercially reasonable value to such
proceeds. Without limiting the foregoing, Secured Party may apply any discount factor in
determining the present value of proceeds to be received in the future or may elect to apply
proceeds to be received in the future only as and when such proceeds are actually received in cash
by Secured Party; and




               (k) The following shall be the basis for any finder of fact’s determination of the value of
any Collateral which is the subject matter of a disposition giving rise to a calculation of any
surplus or deficiency under Section 9615(f) of the Code: (i) the Collateral which is the subject
matter of the disposition shall be valued in an “as is” condition as of the date of the
disposition, without any assumption or expectation that such Collateral will be repaired or
improved in any manner; (ii) the valuation shall be based upon an assumption that the transferee of
such Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days)
following the disposition; (iii) all reasonable closing costs customarily borne by the seller in
commercial sales transactions relating to property similar to such Collateral shall be deducted
including, without limitation, brokerage commissions, tax prorations, attorney’s fees, whether
in-house or outside counsel is used, and marketing costs; (iv) the value of the Collateral which is
the subject matter of the disposition shall be further discounted to account for any estimated
holding costs associated with maintaining such Collateral pending sale (to the extent not accounted
for in (iii) above), and other maintenance, operational and ownership expenses; and (v) any expert
opinion testimony given or considered in connection with a determination of the value of such
Collateral must be given by persons having at least 5 years experience in appraising property
similar to the Collateral and who have conducted and prepared a complete written appraisal of such
Collateral taking into consideration the factors set forth above. The “value” of any such
Collateral shall be a factor in determining the amount of proceeds which would have been realized
in a disposition to a transferee other than a secured party, a person related to a secured party or
a secondary obligor under Section 9615(f) of the Uniform Commercial Code.



          9.2 Secured Party shall have no obligation to attempt to satisfy the Secured Obligations by
collecting them from any third Person which may be liable for them or any portion thereof, and
Secured Party may release, modify or waive any collateral provided by any other Person as
security for the Secured Obligations or any portion thereof, all without affecting Secured Party’s
rights against any Borrower. Each Borrower waives any right it may have to require Secured Party
to pursue any third Person for any of the Secured Obligations.




          9.3 Secured Party may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral, and Secured Party’s compliance

16









 








therewith will not be considered to adversely affect the commercial reasonableness of any sale
of the Collateral.




          9.4 Secured Party may sell the Collateral without giving any warranties as to the Collateral.
Secured Party may specifically disclaim any warranties of title or the like. This procedure will
not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.




          9.5 If Secured Party sells any of the Collateral upon credit, Borrowers will be credited only
with payments actually made by the purchaser, received by Secured Party and applied to the
indebtedness of the purchaser. In the event that the purchaser fails to pay for the Collateral,
Secured Party may resell the Collateral and Borrowers will be credited with the proceeds of such
sale.




          9.6 Secured Party shall be under no obligation to marshal any assets in favor of Borrowers, or
against or in payment of the Secured Obligations or any other obligation owned to Secured Party by
Borrowers or any other Person.




          9.7 Upon the exercise by Secured Party of any power, right, privilege, or remedy pursuant to
this Security Agreement which requires any consent, approval, registration, qualification, or
authorization of any Governmental Authority, each Borrower agrees to execute and deliver, or will
cause the execution and delivery of, all applications, certificates, instruments, assignments, and
other documents and papers that Secured Party or any purchaser of the Collateral may be required to
obtain for such governmental consent, approval, registration, qualification, or authorization.




          9.8 The rights and remedies of Secured Party under this Security Agreement, the Loan
Agreement, the other Loan Documents, and all other agreements contemplated hereby and thereby shall
be cumulative. Secured Party shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Secured Party of any one right or
remedy shall be deemed an election of remedies, and no waiver by Secured Party of any default on
any Borrower’s part shall be deemed a continuing waiver of any further defaults. No delay by
Secured Party shall constitute a waiver, election or acquiescence with respect to any right or
remedy.




     10. Secured Party Not Liable. So long as Secured Party complies with the obligations, if any,
imposed by the Code, Secured Party shall not otherwise be liable or responsible in any way or
manner for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion or from any cause; (c) any diminution in the value thereof; or (d)
any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever. Borrowers bear the risk of loss or damage of the Collateral.



     11. Indefeasible Payment. The Secured Obligations shall not be considered indefeasibly paid
for purposes of this Security Agreement unless and until all payments to Secured Party are no
longer subject to any right on the part of any Person, including any Borrower, any Borrower as a
debtor in possession, or any trustee (whether appointed under the



17









 




Bankruptcy Code or otherwise) of any Borrower or any Borrower’s Assets to invalidate or set
aside such payments or to seek to recoup the amount of such payments or any portion thereof, or to
declare same to be fraudulent or preferential. In the event that, for any reason, any portion of
such payments to Secured Party is set aside or restored, whether voluntarily or involuntarily,
after the making thereof, then the obligation intended to be satisfied thereby shall be revived and
continued in full force and effect as if said payment or payments had not been made.




     12. Notices. All notices or demands by any party hereto to the other party and relating to
this Security Agreement shall be made in the manner and to the addresses set forth in Section 10.1
of the Loan Agreement.



     13. General Provisions.




          13.1 Successors and Assigns. This Security Agreement shall bind and inure to the benefit of
the respective successors and assigns of Borrowers and Secured Party; provided, however, that
Borrowers may not assign this Security Agreement nor delegate any of its duties hereunder without
Secured Party’s prior written consent and any prohibited assignment or delegation shall be
absolutely void. No consent by Secured Party to an assignment by either Borrower shall release any
Borrower from the Secured Obligations. Secured Party reserves its right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in, the rights and
benefits hereunder pursuant to and in accordance with the provisions of the Loan Agreement. In
connection therewith, Secured Party may disclose all documents and information which Secured Party
now or hereafter may have relating to any Borrower, any Borrower’s business, or the Collateral to
any such prospective or actual Transferee, subject to the terms of Section 10.5(e) of the Loan
Agreement.




          13.2 Exhibits and Schedules. All of the exhibits and schedules attached hereto shall be
deemed incorporated by reference.




          13.3 No Presumption Against Any Party. Neither this Security Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Secured Party or any Borrower, whether
under any rule of construction or otherwise. On the contrary, this Security Agreement has been
reviewed by each of the parties and their counsel and shall be construed and interpreted according
to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of
all parties hereto.




          13.4 Amendments and Waivers. Any provision of this Security Agreement or any of the Loan
Documents to which any Borrower is a party may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the party asserted to be bound thereby, and then such
amendment or waiver shall be effective only in the specific instance and specific purpose for which
given.




          13.5 Counterparts; Integration; Effectiveness. This Security Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Security Agreement constitutes
the entire agreement and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter hereof.




18









 







This Security Agreement shall become effective when executed by each of the parties hereto and
delivered to Secured Party.




          13.6 Severability. The provisions of this Security Agreement are severable. The invalidity,
in whole or in part, of any provision of this Security Agreement shall not affect the validity or
enforceability of any other of its provisions. If one or more provisions hereof shall be declared
invalid or unenforceable, the remaining provisions shall remain in full force and effect and shall
be construed in the broadest possible manner to effectuate the purposes hereof.




          13.7 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.




               (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO
THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND
THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO
SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ARIZONA, WITHOUT REGARD FOR PRINCIPLES OF CONFLICTS OF LAWS.



               (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF MARICOPA, STATE OF ARIZONA, PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT SECURED PARTY’S
OPTION, IN THE COURTS OF ANY JURISDICTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
EACH BORROWER AND SECURED PARTY WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.7.



               (c) EACH BORROWER AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH BORROWER
AND SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF



19









 




LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.




          13.8 No Novation. Borrowers and Bank hereby agree that, effective upon the satisfaction or
waiver in writing by Bank of all conditions precedent set forth in Section 4.1 of the Loan
Agreement, this Security Agreement shall amend, restate and supersede in its entirety the Prior
Security Agreements. Nothing herein contained shall be construed as a substitution or novation of
the obligations of Borrowers outstanding under the Prior Security Agreements, which obligations
shall remain in full force and effect, except to the extent that the terms thereof are modified
hereby or by instruments executed concurrently herewith. Nothing expressed or implied in this
Security Agreement shall be construed as a release or other discharge of any Borrower or any
guarantor from any of its obligations or liabilities under the Prior Security Agreement or any of
the other original Loan Documents except to the extent that the terms thereof are modified hereby
or by instruments executed concurrently herewith.




[remainder of this page intentionally left blank]




20









 








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



	 	 	 	 	 	 
	Borrowers:

	 	MATRIXX
 INITIATIVES, INC., a Delaware corporation

	 
	 	 	 	 	 
	 

	 	By:
	 	/s/ William Hemelt	 
	 

	 	 	 	 	 
	 

	 	Name:
	 	William Hemelt	 
	 

	 	Title:
	 	Executive Vice President, CFO, Treasurer	 
	 
	 	 	 	 	 
	 

	 	ZICAM, LLC, an Arizona limited liability company

	 
	 	 	 	 	 
	 

	 	By:
	 	/s/ William Hemelt	 
	 

	 	 	 	 	 
	 

	 	Name:
	 	William Hemelt	 
	 

	 	Title:
	 	Manager	 
	 
	 	 	 	 	 
	Secured Party:

	 	COMERICA BANK
	 
	 
	 	 	 	 	 
	 

	 	By:
	 	/s/ William J. Kirschner	 
	 

	 	 	 	 	 
	 

	 	Name:
	 	William J. Kirschner	 
	 

	 	Title:
	 	Assistant Vice President	 





S-1




Amended and Restated Security Agreement