Document:

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                                                                    EXHIBIT 10.4

                     AMENDED AND RESTATED SECURITY AGREEMENT

         THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement"), dated
December , 2001, is entered into by and among INTERIORS, INC., a Delaware
corporation (the "Debtor"), PETALS, INC., a Delaware corporation ("Petals"),
PETALS FACTORY OUTLET OF CONNECTICUT, INC., a Connecticut corporation
("Petals-CT"), PETALS FACTORY OUTLET, INC., a New York corporation
("Petals-NY"), PETALS FACTORY OUTLET OF FLORIDA, INC., a Florida corporation
("Petals-FL"), PETALS FACTORY OUTLET OF PENNSYLVANIA, INC., a Pennsylvania
corporation ("Petals-PA"), HABITAT SOLUTIONS, INC., a Delaware corporation
("Habitat"), WINDSOR ART, INC., a California corporation ("Windsor"), TBD THREE,
INC. f/k/a STYLECRAFT LAMPS, INC., a Tennessee corporation ("Stylecraft"), TBD
TWO, INC., f/k/a TROY LIGHTING, INC., a California corporation ("Troy"), TBD
ONE, INC., f/k/a CSL LIGHTING MFT., INC., a Delaware corporation ("CSL"), DECOR
GROUP, INC., a Delaware corporation ("Decor") and CONCEPTS 4, INC., a California
corporation ("Concepts 4") Petals, Petals-CT, Petals-NY, Petals-FL, Petals-PA,
Habitat, Stylecraft, Troy, CSL, Decor and Concepts 4, collectively, the
"Subsidiaries") and LIMERIDGE LLC (the "Secured Party").

                              W I T N E S S E T H:

         WHEREAS, on September 30, 1999, the Debtor issued to the Secured Party
that certain Secured Convertible Note due September 29, 2004, in the original
principal amount of Thirteen Million Five Hundred Forty Thousand Six Hundred and
Twenty-Six Dollars ($13,540,626) (the "Convertible Note"), pursuant to the terms
and provisions of that certain Convertible Note Purchase Agreement, dated as of
September 30, 1999, by and among the Debtor and the Secured Party (the "Purchase
Agreement"); and

         WHEREAS, in connection with the issuance of the Convertible Note to the
Secured Party, as security for the payment and performance of the Debtor's
obligations under the Convertible Note, the Debtor, Petals and the Secured Party
entered into that certain Security Agreement, dated as of September 30, 1999
(the "Security Agreement"), pursuant to which the Debtor and Petals granted to
Secured Party a security interest in and lien on all of the outstanding
securities of Petals owned by the Debtor and Petals; and

         WHEREAS, as of April 26, 2001, the Secured Party, The Endeavour Capital
Fund, S.A., The Endeavour Capital Investment Fund, S.A. (the Endeavour Funds
collectively, "Endeavour"), Debtor, Petals, Stylecraft and Habitat entered into
a Forbearance and Acknowledgement Agreement (the "Forbearance Agreement"),
pursuant to which, inter alia, the Debtor reaffirmed its indebtedness, as of
April 1, 2001 to the Secured Party in the amount of $19,868,514.25 and to
Endeavour in the amount of $2,616,389.95, and based on Debtor's covenant to
execute, by not later than July 31, 2001, definitive contracts with bona fide
unaffiliated third parties to sell the equity or assets of any of Petals,
Stylecraft or the Subsidiaries at prices aggregating not less than $38.0 million
with "Contingencies" (as defined in the Forbearance Agreement) to expire by
August 31, 2001, the Secured Party and Endeavour agreed to forbear from
exercising their rights and remedies against the Debtor and the Collateral
through September 30, 2001; and

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         WHEREAS, on September 28, 2001, Debtor, Petals, Habitat, Stylecraft,
Concepts, the Secured Party and Endeavour entered into a comprehensive
amendment, guaranty and security agreement, pursuant to which, inter alia, (a)
the Secured party and Endeavour were paid the sum of $2,800,000 from the sale of
the Stylecraft assets, (b) the Debtor reaffirmed its indebtedness, as of
September 15, 2001 to the Secured Party in the amount of $22,829,283.12 and to
Endeavour in the amount of $3,013,994.67 (prior to credit for the $2,800,000
from the sale of the Stylecraft assets), (c) Petals, Stylecraft, Habitat and
Concepts agreed to guaranty Debtor's indebtedness to the Secured Party and
Endeavour and secure such guarantees with subordinate liens on their assets, (d)
the Secured Party and Endeavour agreed to permit the sale of the Stylecraft
assets to occur and (e) the Secured Party and Endeavour agreed to further
temporarily forbear from exercising their rights and remedies with respect to
the material events of default under the loan documents relating to the Debtor's
indebtedness to Secured Party and Endeavour and the Forbearance Agreement
through December 31, 2001 (the "Second Forbearance Agreement"; together with the
Forbearance Agreement, the "Forbearance Agreements"); and

         WHEREAS, Debtor has again materially defaulted under the Second
Forbearance Agreement including, without limitation (a) the entry of a judgment
against Interiors and Petals in excess of $1.9 million by Matrix Leasing,
resulting in a Forbearance Default under the terms of the Forbearance
Agreements, and (b) breach of representations relating to intercompany advances
or loans of money between the Debtor, Petals, Stylecraft, Habitat and Concepts;
and

         WHEREAS, on December 24, 2001, the Debtor, Petals, Stylecraft, Habitat,
Concepts and the Secured Party, and Endeavour entered into that certain Debt
Restructuring Agreement, dated as of December , 2001 (the "Debt Restructuring
Agreement"), pursuant to which the Debtor has agreed with the Secured Party and
Endeavour to restructure certain debt owed by the Debtor to the Secured Party,
Endeavour and others; and

         WHEREAS, on the date hereof, in accordance with the terms and
provisions of the Debt Restructuring Agreement, the Debtor has issued to the
Secured Party, and the Secured Party has accepted, that certain Amended and
Restated Secured Convertible Note, pursuant to which the terms and provisions of
the Convertible Note have been amended and restated in their entirety (the
"Amended and Restated Convertible Note"); and

         WHEREAS, in order to induce the Secured Party to consummate the
transactions contemplated by the Debt Restructuring Agreement and to accept the
Amended and Restated Convertible Note, the Debtor and the Subsidiaries have
agreed to reconfirm and, as applicable, grant to the Secured Party a lien and
security interest in all of the respective assets and properties and all of the
outstanding securities owned by them in one another, all under the terms and
subject to the conditions of this Agreement; and

         WHEREAS, each of the Subsidiaries which were not a party to the
Security Agreement will derive substantial benefit from the terms and provisions
of the Amended and Restated Convertible Note and the Debt Restructuring
Agreement; and

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         WHEREAS, in connection with the issuance of the Amended and Restated
Convertible Note and in accordance with the terms and provisions of the Debt
Restructuring Agreement, the Debtor, the Subsidiaries and the Secured Party
desire herein to amend and restate the terms and provisions of the Security
Agreement, provided that, nothing herein contained shall release, discharge,
extinguish, limit, impair or alter the liens and security interests created
under the Security Agreement or any existing priority thereof.

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

         1. Definitions.

                  (a) Certain Defined Terms. The following terms, as used
herein, have the meanings set forth below:

         Collateral shall mean all of the following property of Debtor and each
of the Subsidiaries:

                  (a) All now owned and hereafter acquired right, title and
interest of the Debtor and each of the Subsidiaries in, to and in respect of
all: accounts, interests in goods represented by accounts, returned, reclaimed
or repossessed goods with respect thereto and rights as an unpaid vendor;
contract rights; commercial tort claims; chattel paper; investment property;
general intangibles (including but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service marks,
certificates, copyrights trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists, licenses,
whether as licensor or licensee, choses in action and other claims, and existing
and future leasehold interests in equipment, real estate and fixtures);
documents; instruments; letters of credit, letter of credit rights, bankers'
acceptances or guaranties; cash moneys, deposits; securities, financial assets,
bank accounts, deposit accounts, credits and other property whether now or
hereafter held at any depository or other institution or otherwise;

                  (b) All now owned and hereafter acquired right, title and
interest of the Debtor and each of the Subsidiaries in, to and in respect of
goods, including, but not limited to:

                           (i) All inventory, wherever located, whether now
owned or hereafter acquired, of whatever kind, nature or description, including
all raw materials, work-in-process, finished goods, and materials to be used or
consumed in the Debtor's and the Subsidiaries' respective businesses; and all
names or marks affixed to or to be affixed thereto for purposes of selling same
by the seller, manufacturer, lessor or licensor thereof and all inventory which
may be returned to Debtor or the Subsidiaries by their respective customers or
repossessed by Debtor or the Subsidiaries and all of Debtor's and the
Subsidiaries' respective right, title and interest in and to the foregoing
(including all of Debtor's rights as a seller of goods);

                           (ii) All equipment and fixtures, wherever located,
whether now owned or hereafter acquired, including, without limitation, all
machinery, motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto (including, but not limited to Debtor's and the Subsidiaries' respective
rights to acquire any of the foregoing, whether by exercise of a purchase option
or otherwise);

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                  (c) All now owned and hereafter acquired right, title and
interest of Debtor and each of the Subsidiaries in, to and in respect of any
real or other personal property in or upon which Debtor or the Subsidiaries has
or may hereafter own, lease or have a security interest, lien or right of
setoff;

                  (d) All present and future books and records relating to any
of the above including, without limitation, all computer programs, printed
output and computer readable data in the possession or control of the Debtor,
any computer service bureau or other third party;

                  (e) All products and proceeds of the foregoing in whatever
form and wherever located, including, without limitation, all insurance proceeds
and all claims against third parties for loss or destruction of or damage to any
of the foregoing.

                  (f) All right, title and interest of the Debtor and/or any
Subsidiaries in the Shares.

         Event of Default has the meaning assigned to that term in Section 9.

         Note means that certain Amended and Restated Secured Convertible Note,
dated December , 2001, in the aggregate original principal amount of
$15,115371.80, made and executed by Debtor and issued to Secured Party, and all
amendments and supplements thereto, restatements thereof and renewals,
extensions, restructuring and refinancings thereof.

         Person means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.

         Proceeds means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims against third parties for
loss of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance with respect to any Collateral,
and any condemnation or requisition payments with respect to any Collateral, in
each case whether now existing or hereafter arising.

         Secured Obligations has the meaning assigned to that term in Section 3.

         Security Interests means the security interests granted pursuant to
Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.

         Shares means all of the outstanding securities of the Subsidiaries.

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         UCC - means the Uniform Commercial Code as in effect on the date hereof
in the State of New York, provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy.

         (b) Other Definition Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1(a) may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference. All references to statutes and related regulations shall include
(unless otherwise specifically provided herein) any amendments of same and any
successor statutes and regulations.

         2. Grant of Security Interest

         In order to secure the payment and performance of the Secured
Obligations in accordance with the terms thereof, the Debtor and the
Subsidiaries hereby grant to the Secured Party a continuing security interest in
and to all right, title and interest of the Debtor and/or the Subsidiaries in
the Collateral.

         3. Security for Obligations

         This Agreement secures the payment and performance of the Purchase
Agreement and the Note, and all renewals, extensions, restructuring and
refinancings thereof (the "Secured Obligations").

         4. Representations and Warranties. The Debtor and the Subsidiaries
represent and warrant as follows:

                  (a) Binding Obligation. This Agreement has been duly executed
and delivered by the Debtor and the Subsidiaries, and is a legal, valid and
binding obligation of the Debtor and the Subsidiaries, enforceable against the
Debtor and the Subsidiaries in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws or equitable principles relating to or limiting creditor's rights
generally. This Agreement is not in violation of any other agreements,
instruments, order or judgment by which the Debtor and/or the Subsidiaries is
bound or subject. The execution, delivery and performance of this Agreement by
the Debtor and the Subsidiaries do not require the consent or approval of any
other person, entity or governmental agency.

                  (b) Ownership of Collateral. The Debtor and the Subsidiaries
own the Collateral free and clear of any lien, security interest or encumbrance.
No effective financing statement or other form of lien notice covering all or
any part of the Collateral is on file in any recording office. The Debtor and
the Subsidiaries are, and as long as this Agreement shall be in effect pursuant
to its terms, shall be the sole, record, legal and beneficial owner of, and have
good and marketable title to, the Collateral and the Shares owned by them,
subject to no liens, pledges or encumbrances, except the lien on the Collateral
created by this Agreement.

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                  (c) Office Locations; Debtor Names.

                           (i) As of the date hereof, the chief place of
business, the chief executive office and the office where the Debtor and the
Subsidiaries keep their books and records is located at 320 Washington Street,
Mount Vernon, New York, 10553. The Debtor and/or the Subsidiaries have not
maintained any other address at any time during the five years preceding the
date hereof for such books and records..

                           (ii) The Debtor and the Subsidiaries do not do
business nor, as of the date hereof, have they done business during the past
five years under any corporate name, trade name or fictitious business name
except for their respective corporate names set forth above. The Debtor and the
Subsidiaries will notify Secured Party promptly in writing at least thirty (30)
calendar days prior to (a) any change in the Debtor and/or the Subsidiaries'
names and (b) the Debtor and/or the Subsidiaries commencing the use of any trade
name, assumed name or fictitious name.

                  (d) Perfection. This Agreement, together with the UCC filings
referenced herein, create, and as applicable, confirm a valid, perfected and
priority security interest in the Collateral to secure the Secured Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.

                  (e) Governmental Authorizations; Consents. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or consent of any other Person is required either
(i) for the grant by the Debtor and the Subsidiaries of the Security Interests
granted hereby or for the execution, delivery or performance of this Agreement
by the Debtor and the Subsidiaries or (ii) for the perfection of or the exercise
by the Secured Party of its rights and remedies hereunder (except as may have
been taken by or at the direction of the Debtor, the Subsidiaries or the Secured
Party) other than the filing of financing statements in connection with the
perfection of the Security Interests.

                  (f) Accurate Information. All information heretofore, herein
or hereafter supplied to the Secured Party by or on behalf of the Debtor and the
Subsidiaries with respect to the Collateral is and will be accurate and complete
in all material respects.

                  (g) Deficiency. The Debtor and the Subsidiaries will remain
liable for any deficiency in the event that the delivery of the Collateral to
the Secured Party is insufficient to satisfy the Debtor's obligations under the
Notes.

                  (h) Survival. From and after the date hereof and so long as
this Agreement shall be in effect pursuant to its terms, the Debtor and the
Subsidiaries agree that they shall not take any action that would cause the
Debtor and/or the Subsidiaries to be in breach or default of any of the Secured
Obligations, that all representations and warranties made by the Debtor and the
Subsidiaries shall survive this Agreement and that as of the date hereof, the
Secured Party shall be deemed to have a priority lien on the Collateral for the
purposes and in accordance with the terms and provisions hereof, and the Debtor
and the Subsidiaries shall cooperate with the Secured Party and take all action
requested by the Secured Party to ensure the representations and warranties
shall survive this Agreement with respect thereto.

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                  (i) Delivery. Upon the Shares forming a part of the
Collateral, being delivered to the Secured Party as heretofore provided, they
shall become fully the property of the Secured Party. In addition, the Debtor
and the Subsidiaries shall promptly take all necessary action, at the direction
of the Secured Party (at no cost to the Secured Party) to transfer the Shares to
the Secured Party or its nominee for sale

                  (j) Valid Issuances. The Subsidiaries' performance of their
obligations under this Agreement will not (i) result in the creation or
imposition by the Debtor and the Subsidiaries of any liens, charges, claims or
other encumbrances upon the Collateral, or any of the assets of the Subsidiaries
other than the security interest granted under this Agreement, or (ii) entitle
the holders of outstanding capital shares of such Subsidiaries to preemptive or
other rights to subscribe to or acquire any capital shares or other securities
of the Subsidiaries.

                  (k) No Conflicts. The execution, delivery and performance of
this Agreement by the Debtor and the Subsidiaries and the consummation by the
Debtor and the Subsidiaries of the transactions contemplated hereby do not and
will not (i) result in a violation of their respective Articles of Incorporation
or ByLaws or (ii) conflict with, or constitute a material default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, patent, patent license, indenture, instrument or any "lock-up" or
similar provision of any underwriting or similar agreement to which the Debtor
or the Subsidiaries are a party, or (iii) result in a violation of any federal,
state or local law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Debtor or
the Subsidiaries or by which any property or asset of the Debtor or the
Subsidiaries is bound or affected, nor is the Debtor or the Subsidiaries
otherwise in violation of, in conflict with, or in default under, any of the
foregoing except as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect (as defined in the Purchase Agreement).
The businesses of the Debtor and the Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations that either singly or in the aggregate would not
reasonably be expected to have a Material Adverse Effect.

                  (l) No Undisclosed Liabilities. The Debtor and the
Subsidiaries have no liabilities or obligations, known or unknown, absolute or
otherwise (individually or in the aggregate), which have not been disclosed in
writing to the Secured Party or otherwise publicly announced, or as incurred in
the ordinary course of business since September 30, 2001, or which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect.

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                  (m) Litigation and Other Proceedings. There are no lawsuits or
proceedings pending or to the knowledge of the Debtor and/or the Subsidiaries
threatened, against the Debtor and the Subsidiaries, nor has the Debtor and the
Subsidiaries received any written or oral notice of any such action, suit,
proceeding or investigation, which would reasonably be expected to have a
Material Adverse Effect. No judgment, order, writ, injunction or decree or award
has been issued by or, so far as is known by the Debtor and the Subsidiaries,
requested of any court, arbitrator or governmental agency which would be
reasonably expected to result in a Material Adverse Effect.

                  (n) Employee Relations. The Debtor and the Subsidiaries are
not involved in any labor dispute, nor, to the knowledge of the Debtor and the
Subsidiaries, is any such dispute threatened which could reasonably be expected
to have a Material Adverse Effect. None of the Debtor's or the Subsidiaries'
employees is a member of a union and the Debtor and the Subsidiaries believe
that their relations with their employees are good.

                  (o) Insurance. The Debtor and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Debtor and the Subsidiaries believe to
be prudent and customary in the businesses in which the Debtor and the
Subsidiaries is engaged. The Debtor and the Subsidiaries have no reason to
believe that they will not be able to renew its existing insurance coverage as
and when such coverage expires, or obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

                  (p) Patents and Trademarks. The Debtor and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses, trade
secrets and other intellectual property rights which are necessary for use in
connection with their business or which the failure to so have would have a
Material Adverse Effect (collectively, the "Intellectual Property Rights"). To
the best knowledge of the Debtor and the Subsidiaries, none of the Intellectual
Property Rights is infringing, or will infringe on any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence rights of any other Person, and the Debtor and the
Subsidiaries either own or have duly licensed or otherwise acquired all
necessary rights with respect to the Intellectual Property Rights. The Debtor
and the Subsidiaries have not received any notice from any third party of any
claim of infringement by the Debtor or the Subsidiaries of any of the
Intellectual Property Rights, and have no reason to believe there is any basis
for any such claim. To the best knowledge of the Debtor and the Subsidiaries,
there is no existing infringement by another person on any of the Intellectual
Property Rights.

                  (q) Permits; Compliance. The Debtor and the Subsidiaries are
in possession of and operating in compliance with all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate their
properties and to carry on their business as it is now being conducted
(collectively, the "Permits"), all of which are valid and in full force and
effect, and there is no action pending or, to the knowledge of the Debtor and
the Subsidiaries, threatened regarding the suspension or cancellation of any of
the Permits except for such Permits, the failure of which to possess, or the
cancellation, or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. To the Debtor's and/or the
Subsidiaries' knowledge, neither the Debtor nor any Subsidiary is in material
conflict with, or in material default or material violation of, any of the
Permits. Since September 30, 2001, neither the Debtor nor any Subsidiary has
received any notification with respect to possible material conflicts, material
defaults or material violations of applicable laws.

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                  (r) Taxes. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Debtor and
the Subsidiaries have been filed and such returns are complete and accurate and
disclose all taxes (whether based upon income, operations, purchases, sales,
payroll, licenses, compensation, business, capital, properties or assets or
otherwise) required to be paid in the periods covered thereby.

                  (s) No Bankruptcy. The Debtor and the Subsidiaries are aware
of no facts or claims against them that would, and the Debtor and/or the
Subsidiaries have no present intention to, liquidate any of their respective
assets and/or seek bankruptcy protection either voluntarily or involuntarily.

                  (t) No Default. Except as described in the Debt Restructuring
Agreement, neither the Debtor nor any Subsidiary is in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound

                  (u) Title to Assets. The Debtor and the Subsidiaries have good
and marketable title to all properties and material assets as owned by them,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Debtor or the Subsidiaries.

                  (v) Organization of the Debtor and the Subsidiaries. The
Debtor and each Subsidiary is a corporation duly incorporated and existing in
good standing under the laws of their respective jurisdiction of incorporation
and have all requisite corporate authority to own their respective properties
and to carry on their respective business as now being conducted. Each of the
Debtor and the Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by they make such qualification
necessary, other than those (individually or in the aggregate) in which the
failure so to qualify would not reasonably be expected to have a Material
Adverse Effect. The Debtor and the Subsidiaries are not in violation of any
material terms of their respective Articles of Incorporation or Bylaws.

                  (w) Authority. (i) The Debtor and the Subsidiaries have the
requisite corporate power and authority to enter into and perform their
respective obligations under this Agreement, (ii) the execution, issuance and
delivery of this Agreement by the Debtor and the Subsidiaries and the
consummation by them of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Debtor and the Subsidiaries, their respective shareholders,
or their respective Board of Directors is necessary, and (iii) this Agreement
has been duly executed and delivered by the Debtor and the Subsidiaries and
constitutes valid and binding obligations of the Debtor and the Subsidiaries
enforceable against them in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. Upon their
issuance and delivery pursuant to this Agreement, the Shares forming a part of
the Collateral will be validly issued, fully paid and nonassessable, and will be
free of any liens or encumbrances other than those created hereunder or by the
actions of the Secured Party.

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         5. Further Assurances; Covenants

                  (a) Other Documents and Actions. The Debtor and the
Subsidiaries will, from time to time, at their expense, promptly execute and
deliver all further instruments and documents and take all further action that
may be necessary or desirable, or that the Secured Party may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Debtor and/or the Subsidiaries will: (i)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby;
(ii) at any reasonable time, upon demand by the Secured Party exhibit the
Collateral to allow inspection of the Collateral by the Secured Party or persons
designated by the Secured Party; (iii) upon the Secured Party's request, appear
in and defend any action or proceeding that may affect the Debtor's or the
Subsidiaries' title to or the Secured Party's security interest in the
Collateral, and (iv) take all action necessary to have the Collateral, including
the Shares, transferred in the name of the Pledgee.

                  (b) Secured Party Authorized. The Debtor and the Subsidiaries
hereby authorize the Secured Party to file one or more financing or continuation
statements, and amendments thereto, relating to all or any part of the
Collateral without the signature of the Debtor and/or the Subsidiaries where
permitted by law.

                  (c) Stock Dividends, Distributions, etc. If, while this
Agreement is in effect, the Debtor and/or the Subsidiaries shall become entitled
to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend, stock split,
conversion of a convertible security or a distribution in connection with any
reclassification or any increase or reduction of capital, or issued in
connection with any reorganization), option or right, whether as an addition to,
in substitution, of or in exchange for any of the Shares, the Debtor and the
Subsidiaries agree that such stock certificate, option or right shall be
additional collateral security for the Secured Obligations, and shall be
delivered to Escrow Agent to be held as Collateral pursuant to the terms of this
Agreement.

                  (d) Other Information. The Debtor and the Subsidiaries will,
promptly upon request, provide to the Secured Party all information and evidence
it may reasonably request concerning the Collateral to enable the Secured Party
to enforce the provisions of this Agreement.

                                       10
<PAGE>

                  (e) Maintenance. The Debtor and the Subsidiaries will maintain
their respective businesses as presently operated, and shall take any and all
actions necessary for such maintenance as are customary.

         6. [Intentionally Omitted]

         7. Voting Rights. Unless an Event of Default, as defined herein or in
the Note, shall have occurred, the Debtor and the Subsidiaries shall be entitled
to vote the Shares and to give consents, waivers and ratifications in respect of
the Shares; provided, however, that no vote shall be cast, or consent, waiver or
ratification given or action taken, which would violate any rights the Secured
Party has to the Shares under the terms of this Agreement or the Amended and
Restated Convertible Note.

         8. Rights of Secured Party. Any of the Shares may, if an Event of
Default has occurred and is continuing (as defined below or in the Note), (a) be
registered in the name of the Secured Party and its nominees (for which a power
of attorney coupled with an interest is hereby granted), which may thereafter
exercise all voting and other rights and exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or options
pertaining to any of the Shares as if it were the absolute owner thereof or (b)
to the extent permitted by law, be sold by the Secured Party in the name of the
Debtor or the Subsidiaries, as the case may be, to any third party with proceeds
(up to the amount equal to the Secured Obligations plus any and all monies due
to the Secured Party pursuant to this Agreement and the Purchase Agreement) of
such sale being paid to the Secured Party (for which a power of attorney coupled
with an interest is hereby granted). In addition, the Debtor and the
Subsidiaries grant to the Secured Party a power of attorney coupled with an
interest to sign on behalf of the Debtor and the Subsidiaries after an Event of
Default (as defined herein or in the Amended and Restated Convertible Note), a
statement renouncing or modifying the Debtor's and the Subsidiaries' rights
under section 9-505 of the Uniform Commercial Code of the State of New York.

         9. Secured Party Appointed Attorney-in-Fact. The Debtor and the
Subsidiaries hereby irrevocably appoint the Secured Party as its
attorney-in-fact, with full authority in the place and stead of the Debtor and
the Subsidiaries and in the name of the Debtor and the Subsidiaries, the Secured
Party or otherwise, from time to time in the Secured Party's discretion to take
any action and to execute any instrument that the Secured Party may deem
necessary or advisable after the occurrence and during the continuation of an
Event of Default to accomplish the purposes of this Agreement, including,
without limitation:

                  (a) to obtain and adjust insurance required to be paid to the
Secured Party;

                  (b) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for monies due and to become due under
or in respect of any of the Collateral;

                  (c) to file any claims or take any action or institute any
proceedings that the Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Secured Party with respect to any of the Collateral;

                                       11
<PAGE>

                  (d) to pay or discharge taxes or liens, levied or placed upon
or threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by the Secured Party in
its sole discretion, and such payments made by the Secured Party to become
obligations of the Debtor and the Subsidiaries, due and payable immediately
without demand and secured by the Security Interests; and

                  (e) generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner thereof for all
purposes, and to do, at the Secured Party's option and the Debtor's and
Subsidiaries' expense, at any time or from time to time, all acts and things
that the Secured Party deems necessary to protect, preserve or realize upon the
Collateral.

         This power, being coupled with an interest, is irrevocable so long as
this Agreement shall remain in force.

         10. Transfers and Other Liens. The Debtor and the Subsidiaries shall
not, without the Secured Party's prior written consent:

                  (a) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral.

                  (b) create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the Collateral to
secure indebtedness of any person except for the security interest created by
this Agreement.

         11. Events of Default. The occurrence of any "Event of Default" as that
term is defined in Note shall constitute an Event of Default by the Debtor
and/or the Subsidiaries under this Agreement.

         12. Remedies

                  (a) If any Event of Default shall have occurred and be
continuing, the Secured Party may declare the entire outstanding principal
amount of the Note immediately due and payable without any notice, demand or
other action on the part of the Secured Party.

                  (b) If any Event of Default shall have occurred and be
continuing, the Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the UCC (whether or not the UCC applies to the affected Collateral) and also
may: (i) without notice or demand or legal process, take possession of the
Collateral and take any and all actions necessary to transfer or sell the
Collateral in the name of the Secured Party; (ii) without notice except as
specified below, sell the Collateral or any part thereof at such time or times,
for cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Secured Party may deem commercially reasonable; (iii)
notify the obligors on any Accounts or Instruments to make payments there under
directly to the Secured Party; (iv) without notice to the Debtor and/or the
Subsidiaries, renew, modify or extend any of the Accounts and Instruments or
grant waivers or indulgences with respect thereto or accept partial payment
thereof, or substitute any obligor thereon, in any manner as the Secured Party
may deem advisable, without affecting or diminishing the Debtor's and/or the
Subsidiaries' continuing obligations hereunder, and (v) and shall have all
applicable remedies set forth in the New York Uniform Commercial Code.

                                       12
<PAGE>

         13. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default as set forth herein, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by the Secured Party
with respect to the Collateral; and second, to the Secured Obligations. The
Secured Party shall pay over to the Debtor and the Subsidiaries any surplus and
the Debtor and the Subsidiaries shall remain liable for any deficiency.

         14. Expenses. The Debtor and the Subsidiaries agree to pay all
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining and shipping the Collateral, all
costs, fees and expenses of perfecting and maintaining the Security Interests,
and any and all excise, property, sales and use taxes imposed by any state,
federal or local authority on any of the Collateral, or with respect to periodic
appraisals and inspections of the Collateral, or with respect to the sale or
other disposition thereof. If the Debtor and/or the Subsidiaries fail promptly
to pay any portion of the above expenses when due or to perform any other
obligation of the Debtor and/or the Subsidiaries under this Agreement, The
Secured Party may, at its option, but shall not be required to, pay or perform
the same, and the Debtor and the Subsidiaries agree to reimburse the Secured
Party therefor on demand. All sums so paid or incurred by the Secured Party for
any of the foregoing, any and all other sums for which the Debtor and the
Subsidiaries may become liable hereunder and all costs and expenses (including
attorneys' fees, legal expenses and court costs) incurred by the Secured Party
in enforcing or protecting the Security Interests or any of their rights or
remedies under this Agreement shall be payable on demand, shall constitute
Secured Obligations, shall bear interest until paid at the rate provided in the
Amended and Restated Convertible Note and shall be secured by the Collateral.

         15. Termination of Security Interests; Release of Collateral. Upon
payment in full of all Secured Obligations, the Security Interests shall
terminate and all rights to the Collateral shall revert to the Debtor and the
Subsidiaries. Upon such termination of the Security Interests or release of any
Collateral, the Secured Party will, at the expense of the Debtor and the
Subsidiaries, execute and deliver to the Debtor and the Subsidiaries such
documents as the Debtor and the Subsidiaries shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.

         16. Notices. Each notice, communication and delivery under this
Agreement: (a) shall be made in writing signed by the party giving it; (b) shall
specify the section of this Agreement pursuant to which given; (c) shall either
be delivered in person or by telecopier, a nationally recognized next business
day courier service or Express Mail; (d) unless delivered in person, shall be
given to the address specified below; (e) shall be deemed to be given (i) if
delivered in person, on the date delivered, (ii) if sent by telecopier, on the
date of telephonic confirmation of receipt, (iii) if sent by a nationally
recognized next business day courier service with all costs paid, on the next
business day after it is delivered to such courier, or (iv) if sent by Express
Mail (with postage and other fees paid), on the next business day after it is
mailed. Such notice shall not be effective unless copies are provided
contemporaneously as specified below, but neither the manner nor the time of
giving notice to those to whom copies are to be given (which need not be the
same as the addressee) shall control the date notice is given or received. The
addresses and requirements for copies are as follows:

                                       13
<PAGE>

         If to the Debtor or any Subsidiary:

                           Interiors, Inc.
                           320 Washington Street
                           Mount Vernon, New York 10553
                           Telephone:  (914) 665-5400
                           Facsimile: (914) 665-5469
                           Attention: Chief Executive Officer

         With a copy to:

                           Greenberg Traurig
                           200 Park Avenue
                           New York, New York 10166
                           Telephone: (212) 801-9200
                           Facsimile: (212) 801-6400
                           Attention: Stephen A. Weiss, Esq.

         If to Secured Party:

                           Limeridge LLC
                           c/o Citco Trustees Cayman Limited
                           Corporate Centre
                           PO Box 31106SMB
                           Grand Cayman, Cayman Islands
                           British West Indies
                           Attention: Sabrina Hew
                           Facsimile: 345 945-7566
                           Telephone: 345 949-3977

         Except as otherwise expressly set forth in any particular provision of
this Agreement, any consent or approval required or permitted by this Agreement
to be given by the Secured Party may be given, and any term of this Agreement or
of any other instrument related hereto or mentioned herein may be amended, and
the performance or observance by the Debtor and/or the Subsidiaries of any term
of this Agreement, the Purchase Agreement or the Amended and Restated
Convertible Note may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written specific
consent of the Secured Party. No waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Secured Party in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial thereto. No
notice to or demand upon the Debtor and/or the Subsidiaries shall entitle the
Debtor and/or the Subsidiaries to other or further notice or demand in similar
or other circumstances. The rights in this Agreement, the Purchase Agreement and
the Amended and Restated Convertible Note are cumulative and are not exclusive
of any other remedies provided by law. The invalidity, illegality or
unenforceability of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement.

                                       14
<PAGE>

         17. Successors and Assigns. This Agreement is for the benefit of the
Secured Party and its successors and assigns, and in the event of an assignment
of all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the Secured Obligations so assigned, may be transferred with such
Secured Obligations. This Agreement shall be binding on the Debtor and the
Subsidiaries and their respective successors and assigns, provided that the
Debtor and/or the Subsidiaries shall not assign this Agreement without the
Secured Party's prior written consent.

         18. Changes in Writing. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any departure by the
Debtor and/or the Subsidiaries therefrom, shall in any event be effective
without the written concurrence of the Secured Party, the Debtor, and the
Subsidiaries.

         19. Governing Law/Venue/Jurisdiction. This Agreement shall be
exclusively governed by and construed in accordance with the laws of the State
of New York, without giving effect to the conflicts of law principles thereof.
Each of the parties consents to the exclusive jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York sitting in
Manhattan in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if the other party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law. Each party waives its right to a trial by jury.

         20. Headings. Cross reference pages and headings contained herein are
for convenience of reference only, do not constitute a part of this Agreement,
and shall not be deemed to limit or affect any of the provisions hereof.

                                       15
<PAGE>

         21. Counterparts. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby by facsimile transmission to another party and such delivery
shall have the same force and effect as any other delivery of a manually signed
copy of this Agreement or of such other documents.

                 [balance of this page intentionally left blank]

                                       16
<PAGE>

         This Security Agreement has been duly executed and delivered by the
parties on the date first written above.

DEBTOR:

INTERIORS, INC.

By:
   ---------------------------------
   Name:  Max Munn
   Title: President

SUBSIDIARIES:

PETALS, INC.

By:
   ---------------------------------
   Name:
   Title:

PETALS FACTORY OUTLET OF CONNECTICUT, INC.

By:
   ---------------------------------
   Name:
   Title:

PETALS FACTORY OUTLET, INC.

By:
   ---------------------------------
   Name:
   Title:

<PAGE>

PETALS FACTORY OUTLET OF FLORIDA, INC.

By:
   ---------------------------------
   Name:
   Title:

PETALS FACTORY OUTLET OF PENNSYLVANIA, INC.

By:
   ---------------------------------
   Name:
   Title:

HABITAT SOLUTIONS, INC.

By:
   ---------------------------------
   Name:
   Title:

WINDSOR ART, INC.

By:
   ---------------------------------
   Name:
   Title:

TBD THREE, INC. F/K/A STYLECRAFT LAMPS, INC.

By:
   ---------------------------------
   Name:
   Title:

TBD TWO, INC. F/K/A TROY LIGHTING, INC.

By:
   ---------------------------------
   Name:
   Title:

<PAGE>

TBD ONE, INC. F/K/A CSL LIGHTING MFT., INC.

By:
   ---------------------------------
   Name:
   Title:

DECOR GROUP, INC.

By:
   ---------------------------------
   Name:
   Title:

CONCEPTS 4, INC.

By:
   ---------------------------------
   Name:
   Title:

SECURED PARTY:

LIMERIDGE LLC

By:
   ---------------------------------
   Name:
   Title:<PAGE>
                                                                    EXHIBIT 10.5

                     AMENDED AND RESTATED SECURITY AGREEMENT

         THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement"), dated
December , 2001, is entered into by and among INTERIORS, INC., a Delaware
corporation (the "Debtor"), PETALS, INC., a Delaware corporation ("Petals"),
PETALS FACTORY OUTLET OF CONNECTICUT, INC., a Connecticut corporation
("Petals-CT"), PETALS FACTORY OUTLET, INC., a New York corporation
("Petals-NY"), PETALS FACTORY OUTLET OF FLORIDA, INC., a Florida corporation
("Petals-FL"), PETALS FACTORY OUTLET OF PENNSYLVANIA, INC., a Pennsylvania
corporation ("Petals-PA"), HABITAT SOLUTIONS, INC., a Delaware corporation
("Habitat"), WINDSOR ART, INC., a California corporation ("Windsor"), TBD THREE,
INC. f/k/a STYLECRAFT LAMPS, INC., a Tennessee corporation ("Stylecraft"), TBD
TWO, INC., f/k/a TROY LIGHTING, INC., a California corporation ("Troy"), TBD
ONE, INC., f/k/a CSL LIGHTING MFT., INC., a Delaware corporation ("CSL"), DECOR
GROUP, INC., a Delaware corporation ("Decor") and CONCEPTS 4, INC., a California
corporation ("Concepts 4"), Petals, Petals-CT, Petals-NY, Petals-FL, Petals-PA,
Habitat, Stylecraft, Troy, CSL, Decor, and Concepts 4, collectively, the
"Subsidiaries") and ENDEAVOUR CAPITAL FUND SA (the "Secured Party").

                              W I T N E S S E T H:

         WHEREAS, on December , 1999, the Debtor issued to the Secured Party
that certain Secured Convertible Note due September 29, 2004, in the original
principal amount of One Million Seven Hundred Forty-Four Thousand Five Hundred
Eighteen Dollars ($1,744,518) (the "Convertible Note"), pursuant to the terms
and provisions of that certain Exchange Agreement, dated as of December , 1999,
by and among the Debtor and the Secured Party (the "Exchange Agreement"); and

         WHEREAS, in connection with the issuance of the Convertible Note to the
Secured Party, as security for the payment and performance of the Debtor's
obligations under the Convertible Note, the Debtor, Petals and the Secured Party
entered into that certain Security Agreement, dated as of September 30, 1999
(the "Security Agreement"), pursuant to which the Debtor and Petals granted to
Secured Party a security interest in and lien on all of the outstanding
securities of Petals owned by the Debtor and Petals; and

         WHEREAS, as of April 26, 2001, the Secured Party, The Endeavour Capital
Investment Fund, S.A. ("Endeavour"), Limeridge LLC ("Limeridge"), Debtor,
Petals, Stylecraft and Habitat entered into a Forbearance and Acknowledgement
Agreement (the "Forbearance Agreement"), pursuant to which, inter alia, the
Debtor reaffirmed its indebtedness, as of April 1, 2001 to Limeridge in the
amount of $19,868,514.25 and to the Secured Party and Endeavour in the amount of
$2,616,389.95, and based on Debtor's covenant to execute, by not later than July
31, 2001, definitive contracts with bona fide unaffiliated third parties to sell
the equity or assets of any of Petals, Stylecraft or the Subsidiaries at prices
aggregating not less than $38.0 million with "Contingencies" (as defined in the
Forbearance Agreement) to expire by August 31, 2001, the Secured Party,
Endeavour and Limeridge agreed to forbear from exercising their rights and
remedies against the Debtor and the Collateral through September 30, 2001; and

<PAGE>

         WHEREAS, on September 28, 2001, the Debtor, Petals, Habitat,
Stylecraft, Concepts, the Secured Party, Endeavour and Limeridge entered into a
comprehensive amendment, guaranty and security agreement pursuant to which,
inter alia, (a) the Secured Party, Endeavour and Limeridge were paid the sum of
$2,800,000 from the sale of the Stylecraft assets, (b) the Debtor reaffirmed its
indebtedness, as of September 15, 2001 to Limeridge in the amount of
$22,829,283.12 and to the Secured Party and Endeavour in the amount of
$3,013,994.67 (prior to credit for the $2,800,000 from the sale of the
Stylecraft assets), (c) Petals, Stylecraft, Habitat and Concepts agreed to
guaranty Debtor's indebtedness to the Secured Party, Endeavour and Limeridge and
secure such guarantees with subordinate liens on their assets, (d) the Secured
Party, Endeavour and Limeridge agreed to permit the sale of the Stylecraft
assets to occur, and (e) the Secured Party, Endeavour and Limeridge agreed to
further temporarily forbear from exercising their rights and remedies with
respect to the material events of default under the loan documents relating to
the Debtor's indebtedness to the Secured Party, Endeavour and Limeridge and the
Forbearance Agreement through December 31, 2001 (the "Second Forbearance
Agreement"; together with the Forbearance Agreement, the "Forbearance
Agreements"); and

         WHEREAS, the Debtor, Petals, Stylecraft, Habitat and Concepts have
again materially defaulted under the Second Forbearance Agreement including,
without limitation (a) the entry of a judgment against Interiors and Petals in
excess of $1.9 million by Matrix Leasing, resulting in a Forbearance Default
under the terms of the Forbearance Agreements, and (b) breach of representations
relating to intercompany advances or loans of money between the Debtor, Petals,
Stylecraft, Habitat and Concepts; and

         WHEREAS, on December 24, 2001, the Debtor, Petals, Stylecraft, Habitat,
Concepts, the Secured Party, Endeavour and Limeridge entered into that certain
Debt Restructuring Agreement, dated as of December , 2001 (the "Debt
Restructuring Agreement"), pursuant to which the Debtor has agreed with the
Secured Party, and Endeavour and Limeridge, among others to restructure certain
debt owed by the Debtor to the Secured Party, Endeavour and Limeridge, among
others; and

         WHEREAS, on the date hereof, in accordance with the terms and
provisions of the Debt Restructuring Agreement, the Debtor has issued to the
Secured Party, and the Secured Party has accepted, that certain Amended and
Restated Secured Convertible Note, pursuant to which the terms and provisions of
the Convertible Note have been amended and restated in their entirety (the
"Amended and Restated Convertible Note"); and

         WHEREAS, in order to induce the Secured Party to consummate the
transactions contemplated by the Debt Restructuring Agreement and to accept the
Amended and Restated Convertible Note, the Debtor and the Subsidiaries have
agreed to reconfirm and, as applicable, grant to the Secured Party a lien and
security interest in all of the respective assets and properties and all of the
outstanding securities owned by them in one another, all under the terms and
subject to the conditions of this Agreement; and

                                       2
<PAGE>

         WHEREAS, each of the Subsidiaries which were not a party to the
Security Agreement will derive substantial benefit from the terms and provisions
of the Amended and Restated Convertible Note and the Debt Restructuring
Agreement; and

         WHEREAS, in connection with the issuance of the Amended and Restated
Convertible Note and in accordance with the terms and provisions of the Debt
Restructuring Agreement, the Debtor, the Subsidiaries and the Secured Party
desire herein to amend and restate the terms and provisions of the Security
Agreement, provided that nothing herein contained shall release, discharge,
extinguish, limit, impair or alter the liens and security interests created
under the Security Agreement or any existing priority thereof.

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

         1. Definitions.

                  (a) Certain Defined Terms. The following terms, as used
herein, have the meanings set forth below:

         Collateral shall mean all of the following property of Debtor and each
of the Subsidiaries:

                  (a) All now owned and hereafter acquired right, title and
interest of the Debtor and each of the Subsidiaries in, to and in respect of
all: accounts, interests in goods represented by accounts, returned, reclaimed
or repossessed goods with respect thereto and rights as an unpaid vendor;
contract rights; commercial tort claims; chattel paper; investment property;
general intangibles (including but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service marks,
certificates, copyrights trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists, licenses,
whether as licensor or licensee, choses in action and other claims, and existing
and future leasehold interests in equipment, real estate and fixtures);
documents; instruments; letters of credit, letter of credit rights, bankers'
acceptances or guaranties; cash moneys, deposits; securities, financial assets,
bank accounts, deposit accounts, credits and other property whether now or
hereafter held at any depository or other institution or otherwise;

                  (b) All now owned and hereafter acquired right, title and
interest of the Debtor and each of the Subsidiaries in, to and in respect of
goods, including, but not limited to:

                           (i) All inventory, wherever located, whether now
owned or hereafter acquired, of whatever kind, nature or description, including
all raw materials, work-in-process, finished goods, and materials to be used or
consumed in the Debtor's and the Subsidiaries' respective businesses; and all
names or marks affixed to or to be affixed thereto for purposes of selling same
by the seller, manufacturer, lessor or licensor thereof and all inventory which
may be returned to Debtor or the Subsidiaries by their respective customers or
repossessed by Debtor or the Subsidiaries and all of Debtor's and the
Subsidiaries' respective right, title and interest in and to the foregoing
(including all of Debtor's rights as a seller of goods);

                                       3
<PAGE>

                           (ii) All equipment and fixtures, wherever located,
whether now owned or hereafter acquired, including, without limitation, all
machinery, motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto (including, but not limited to Debtor's and the Subsidiaries' respective
rights to acquire any of the foregoing, whether by exercise of a purchase option
or otherwise);

                  (c) All now owned and hereafter acquired right, title and
interest of Debtor and each of the Subsidiaries in, to and in respect of any
real or other personal property in or upon which Debtor or the Subsidiaries has
or may hereafter own, lease or have a security interest, lien or right of
setoff;

                  (d) All present and future books and records relating to any
of the above including, without limitation, all computer programs, printed
output and computer readable data in the possession or control of the Debtor,
any computer service bureau or other third party;

                  (e) All products and proceeds of the foregoing in whatever
form and wherever located, including, without limitation, all insurance proceeds
and all claims against third parties for loss or destruction of or damage to any
of the foregoing.

                  (f) All right, title and interest of the Debtor and/or any
Subsidiaries in the Shares.

         Event of Default has the meaning assigned to that term in Section 9.

         Note means that certain Amended and Restated Secured Convertible Note,
dated December , 2001, in the aggregate original principal amount of
$1,972,417.47, made and executed by Debtor and issued to Secured Party, and all
amendments and supplements thereto, restatements thereof and renewals,
extensions, restructuring and refinancings thereof.

         Person means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.

         Proceeds means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims against third parties for
loss of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance with respect to any Collateral,
and any condemnation or requisition payments with respect to any Collateral, in
each case whether now existing or hereafter arising.

         Secured Obligations has the meaning assigned to that term in Section 3.

                                       4
<PAGE>

         Security Interests means the security interests granted pursuant to
Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.

         Shares means all of the outstanding securities of the Subsidiaries.

         UCC - means the Uniform Commercial Code as in effect on the date hereof
in the State of New York, provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy.

         (b) Other Definition Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1(a) may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference. All references to statutes and related regulations shall include
(unless otherwise specifically provided herein) any amendments of same and any
successor statutes and regulations.

         2. Grant of Security Interest

         In order to secure the payment and performance of the Secured
Obligations in accordance with the terms thereof, the Debtor and the
Subsidiaries hereby grant to the Secured Party a continuing security interest in
and to all right, title and interest of the Debtor and/or the Subsidiaries in
the Collateral.

         3. Security for Obligations

         This Agreement secures the payment and performance of the Purchase
Agreement and the Note, and all renewals, extensions, restructuring and
refinancings thereof (the "Secured Obligations").

         4. Representations and Warranties. The Debtor and the Subsidiaries
represent and warrant as follows:

                  (a) Binding Obligation. This Agreement has been duly executed
and delivered by the Debtor and the Subsidiaries, and is a legal, valid and
binding obligation of the Debtor and the Subsidiaries, enforceable against the
Debtor and the Subsidiaries in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws or equitable principles relating to or limiting creditor's rights
generally. This Agreement is not in violation of any other agreements,
instruments, order or judgment by which the Debtor and/or the Subsidiaries is
bound or subject. The execution, delivery and performance of this Agreement by
the Debtor and the Subsidiaries do not require the consent or approval of any
other person, entity or governmental agency.

                                       5
<PAGE>

                  (b) Ownership of Collateral. The Debtor and the Subsidiaries
own the Collateral free and clear of any lien, security interest or encumbrance.
No effective financing statement or other form of lien notice covering all or
any part of the Collateral is on file in any recording office. The Debtor and
the Subsidiaries are, and as long as this Agreement shall be in effect pursuant
to its terms, shall be the sole, record, legal and beneficial owner of, and have
good and marketable title to, the Collateral and the Shares owned by them,
subject to no liens, pledges or encumbrances, except the lien on the Collateral
created by this Agreement.

                  (c) Office Locations; Debtor Names.

                           (i) As of the date hereof, the chief place of
business, the chief executive office and the office where the Debtor and the
Subsidiaries keep their books and records is located at 320 Washington Street,
Mount Vernon, New York, 10553. The Debtor and/or the Subsidiaries have not
maintained any other address at any time during the five years preceding the
date hereof for such books and records..

                           (ii) The Debtor and the Subsidiaries do not do
business nor, as of the date hereof, have they done business during the past
five years under any corporate name, trade name or fictitious business name
except for their respective corporate names set forth above. The Debtor and the
Subsidiaries will notify Secured Party promptly in writing at least thirty (30)
calendar days prior to (a) any change in the Debtor and/or the Subsidiaries'
names and (b) the Debtor and/or the Subsidiaries commencing the use of any trade
name, assumed name or fictitious name.

                  (d) Perfection. This Agreement, together with the UCC filings
referenced herein, create, and as applicable, confirm a valid, perfected and
priority security interest in the Collateral to secure the Secured Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.

                  (e) Governmental Authorizations; Consents. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or consent of any other Person is required either
(i) for the grant by the Debtor and the Subsidiaries of the Security Interests
granted hereby or for the execution, delivery or performance of this Agreement
by the Debtor and the Subsidiaries or (ii) for the perfection of or the exercise
by the Secured Party of its rights and remedies hereunder (except as may have
been taken by or at the direction of the Debtor, the Subsidiaries or the Secured
Party) other than the filing of financing statements in connection with the
perfection of the Security Interests.

                  (f) Accurate Information. All information heretofore, herein
or hereafter supplied to the Secured Party by or on behalf of the Debtor and the
Subsidiaries with respect to the Collateral is and will be accurate and complete
in all material respects.

                  (g) Deficiency. The Debtor and the Subsidiaries will remain
liable for any deficiency in the event that the delivery of the Collateral to
the Secured Party is insufficient to satisfy the Debtor's obligations under the
Notes.

                                       6
<PAGE>

                  (h) Survival. From and after the date hereof and so long as
this Agreement shall be in effect pursuant to its terms, the Debtor and the
Subsidiaries agree that they shall not take any action that would cause the
Debtor and/or the Subsidiaries to be in breach or default of any of the Secured
Obligations, that all representations and warranties made by the Debtor and the
Subsidiaries shall survive this Agreement and that as of the date hereof, the
Secured Party shall be deemed to have a priority lien on the Collateral for the
purposes and in accordance with the terms and provisions hereof, and the Debtor
and the Subsidiaries shall cooperate with the Secured Party and take all action
requested by the Secured Party to ensure the representations and warranties
shall survive this Agreement with respect thereto.

                  (i) Delivery. Upon the Shares forming a part of the
Collateral, being delivered to the Secured Party as heretofore provided, they
shall become fully the property of the Secured Party. In addition, the Debtor
and the Subsidiaries shall promptly take all necessary action, at the direction
of the Secured Party (at no cost to the Secured Party) to transfer the Shares to
the Secured Party or its nominee for sale

                  (j) Valid Issuances. The Subsidiaries' performance of their
obligations under this Agreement will not (i) result in the creation or
imposition by the Debtor and the Subsidiaries of any liens, charges, claims or
other encumbrances upon the Collateral, or any of the assets of the Subsidiaries
other than the security interest granted under this Agreement, or (ii) entitle
the holders of outstanding capital shares of such Subsidiaries to preemptive or
other rights to subscribe to or acquire any capital shares or other securities
of the Subsidiaries.

                  (k) No Conflicts. The execution, delivery and performance of
this Agreement by the Debtor and the Subsidiaries and the consummation by the
Debtor and the Subsidiaries of the transactions contemplated hereby do not and
will not (i) result in a violation of their respective Articles of Incorporation
or ByLaws or (ii) conflict with, or constitute a material default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, patent, patent license, indenture, instrument or any "lock-up" or
similar provision of any underwriting or similar agreement to which the Debtor
or the Subsidiaries are a party, or (iii) result in a violation of any federal,
state or local law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Debtor or
the Subsidiaries or by which any property or asset of the Debtor or the
Subsidiaries is bound or affected, nor is the Debtor or the Subsidiaries
otherwise in violation of, in conflict with, or in default under, any of the
foregoing except as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. The businesses of the Debtor and the
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations that
either singly or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.

                  (l) No Undisclosed Liabilities. The Debtor and the
Subsidiaries have no liabilities or obligations, known or unknown, absolute or
otherwise (individually or in the aggregate), which have not been disclosed in
writing to the Secured Party or otherwise publicly announced, or as incurred in
the ordinary course of business since September 30, 2001, or which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect.

                                       7
<PAGE>

                  (m) Litigation and Other Proceedings. There are no lawsuits or
proceedings pending or to the knowledge of the Debtor and/or the Subsidiaries
threatened, against the Debtor and the Subsidiaries, nor has the Debtor and the
Subsidiaries received any written or oral notice of any such action, suit,
proceeding or investigation, which would reasonably be expected to have a
Material Adverse Effect. No judgment, order, writ, injunction or decree or award
has been issued by or, so far as is known by the Debtor and the Subsidiaries,
requested of any court, arbitrator or governmental agency which would be
reasonably expected to result in a Material Adverse Effect.

                  (n) Employee Relations. The Debtor and the Subsidiaries are
not involved in any labor dispute, nor, to the knowledge of the Debtor and the
Subsidiaries, is any such dispute threatened which could reasonably be expected
to have a Material Adverse Effect. None of the Debtor's or the Subsidiaries'
employees is a member of a union and the Debtor and the Subsidiaries believe
that their relations with their employees are good.

                  (o) Insurance. The Debtor and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Debtor and the Subsidiaries believe to
be prudent and customary in the businesses in which the Debtor and the
Subsidiaries is engaged. The Debtor and the Subsidiaries have no reason to
believe that they will not be able to renew its existing insurance coverage as
and when such coverage expires, or obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

                  (p) Patents and Trademarks. The Debtor and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses, trade
secrets and other intellectual property rights which are necessary for use in
connection with their business or which the failure to so have would have a
Material Adverse Effect (collectively, the "Intellectual Property Rights"). To
the best knowledge of the Debtor and the Subsidiaries, none of the Intellectual
Property Rights is infringing, or will infringe on any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence rights of any other Person, and the Debtor and the
Subsidiaries either own or have duly licensed or otherwise acquired all
necessary rights with respect to the Intellectual Property Rights. The Debtor
and the Subsidiaries have not received any notice from any third party of any
claim of infringement by the Debtor or the Subsidiaries of any of the
Intellectual Property Rights, and have no reason to believe there is any basis
for any such claim. To the best knowledge of the Debtor and the Subsidiaries,
there is no existing infringement by another person on any of the Intellectual
Property Rights.

                  (q) Permits; Compliance. The Debtor and the Subsidiaries are
in possession of and operating in compliance with all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate their
properties and to carry on their business as it is now being conducted
(collectively, the "Permits"), all of which are valid and in full force and
effect, and there is no action pending or, to the knowledge of the Debtor and
the Subsidiaries, threatened regarding the suspension or cancellation of any of
the Permits except for such Permits, the failure of which to possess, or the
cancellation, or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. To the Debtor's and/or the
Subsidiaries' knowledge, neither the Debtor nor any Subsidiary is in material
conflict with, or in material default or material violation of, any of the
Permits. Since September 30, 2001, neither the Debtor nor any Subsidiary has
received any notification with respect to possible material conflicts, material
defaults or material violations of applicable laws.

                                       8
<PAGE>

                  (r) Taxes. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Debtor and
the Subsidiaries have been filed and such returns are complete and accurate and
disclose all taxes (whether based upon income, operations, purchases, sales,
payroll, licenses, compensation, business, capital, properties or assets or
otherwise) required to be paid in the periods covered thereby.

                  (s) No Bankruptcy. The Debtor and the Subsidiaries are aware
of no facts or claims against them that would, and the Debtor and/or the
Subsidiaries have no present intention to, liquidate any of their respective
assets and/or seek bankruptcy protection either voluntarily or involuntarily.

                  (t) No Default. Except as described in the Debt Restructuring
Agreement, neither the Debtor nor any Subsidiary is in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound

                  (u) Title to Assets. The Debtor and the Subsidiaries have good
and marketable title to all properties and material assets as owned by them,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Debtor or the Subsidiaries.

                  (v) Organization of the Debtor and the Subsidiaries. The
Debtor and each Subsidiary is a corporation duly incorporated and existing in
good standing under the laws of their respective jurisdiction of incorporation
and have all requisite corporate authority to own their respective properties
and to carry on their respective business as now being conducted. Each of the
Debtor and the Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by they make such qualification
necessary, other than those (individually or in the aggregate) in which the
failure so to qualify would not reasonably be expected to have a Material
Adverse Effect. The Debtor and the Subsidiaries are not in violation of any
material terms of their respective Articles of Incorporation or Bylaws.

                  (w) Authority. (i) The Debtor and the Subsidiaries have the
requisite corporate power and authority to enter into and perform their
respective obligations under this Agreement, (ii) the execution, issuance and
delivery of this Agreement by the Debtor and the Subsidiaries and the
consummation by them of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Debtor and the Subsidiaries, their respective shareholders,
or their respective Board of Directors is necessary, and (iii) this Agreement
has been duly executed and delivered by the Debtor and the Subsidiaries and
constitutes valid and binding obligations of the Debtor and the Subsidiaries
enforceable against them in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. Upon their
issuance and delivery pursuant to this Agreement, the Shares forming a part of
the Collateral will be validly issued, fully paid and nonassessable, and will be
free of any liens or encumbrances other than those created hereunder or by the
actions of the Secured Party and those granted to Limeridge LLC.

                                       9
<PAGE>

         5. Further Assurances; Covenants

                  (a) Other Documents and Actions. The Debtor and the
Subsidiaries will, from time to time, at their expense, promptly execute and
deliver all further instruments and documents and take all further action that
may be necessary or desirable, or that the Secured Party may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Debtor and/or the Subsidiaries will: (i)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby;
(ii) at any reasonable time, upon demand by the Secured Party exhibit the
Collateral to allow inspection of the Collateral by the Secured Party or persons
designated by the Secured Party; (iii) upon the Secured Party's request, appear
in and defend any action or proceeding that may affect the Debtor's or the
Subsidiaries' title to or the Secured Party's security interest in the
Collateral, and (iv) take all action necessary to have the Collateral, including
the Shares, transferred in the name of the Pledgee.

                  (b) Secured Party Authorized. The Debtor and the Subsidiaries
hereby authorize the Secured Party to file one or more financing or continuation
statements, and amendments thereto, relating to all or any part of the
Collateral without the signature of the Debtor and/or the Subsidiaries where
permitted by law.

                  (c) Stock Dividends, Distributions, etc. If, while this
Agreement is in effect, the Debtor and/or the Subsidiaries shall become entitled
to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend, stock split,
conversion of a convertible security or a distribution in connection with any
reclassification or any increase or reduction of capital, or issued in
connection with any reorganization), option or right, whether as an addition to,
in substitution, of or in exchange for any of the Shares, the Debtor and the
Subsidiaries agree that such stock certificate, option or right shall be
additional collateral security for the Secured Obligations, and shall be
delivered to Escrow Agent to be held as Collateral pursuant to the terms of this
Agreement.

                  (d) Other Information. The Debtor and the Subsidiaries will,
promptly upon request, provide to the Secured Party all information and evidence
it may reasonably request concerning the Collateral to enable the Secured Party
to enforce the provisions of this Agreement.

                                       10
<PAGE>

                  (e) Maintenance. The Debtor and the Subsidiaries will maintain
their respective businesses as presently operated, and shall take any and all
actions necessary for such maintenance as are customary.

         6. [Intentionally Omitted]

         7. Voting Rights. Unless an Event of Default, as defined herein or in
the Note, shall have occurred, the Debtor and the Subsidiaries shall be entitled
to vote the Shares and to give consents, waivers and ratifications in respect of
the Shares; provided, however, that no vote shall be cast, or consent, waiver or
ratification given or action taken, which would violate any rights the Secured
Party has to the Shares under the terms of this Agreement or the Amended and
Restated Convertible Note.

         8. Rights of Secured Party. Any of the Shares may, if an Event of
Default has occurred and is continuing (as defined below or in the Note), (a) be
registered in the name of the Secured Party and its nominees (for which a power
of attorney coupled with an interest is hereby granted), which may thereafter
exercise all voting and other rights and exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or options
pertaining to any of the Shares as if it were the absolute owner thereof or (b)
to the extent permitted by law, be sold by the Secured Party in the name of the
Debtor or the Subsidiaries, as the case may be, to any third party with proceeds
(up to the amount equal to the Secured Obligations plus any and all monies due
to the Secured Party pursuant to this Agreement and the Exchange Agreement) of
such sale being paid to the Secured Party (for which a power of attorney coupled
with an interest is hereby granted). In addition, the Debtor and the
Subsidiaries grant to the Secured Party a power of attorney coupled with an
interest to sign on behalf of the Debtor and the Subsidiaries after an Event of
Default (as defined herein or in the Amended and Restated Convertible Note), a
statement renouncing or modifying the Debtor's and the Subsidiaries' rights
under section 9-505 of the Uniform Commercial Code of the State of New York.

         9. Secured Party Appointed Attorney-in-Fact. The Debtor and the
Subsidiaries hereby irrevocably appoint the Secured Party as its
attorney-in-fact, with full authority in the place and stead of the Debtor and
the Subsidiaries and in the name of the Debtor and the Subsidiaries, the Secured
Party or otherwise, from time to time in the Secured Party's discretion to take
any action and to execute any instrument that the Secured Party may deem
necessary or advisable after the occurrence and during the continuation of an
Event of Default to accomplish the purposes of this Agreement, including,
without limitation:

                  (a) to obtain and adjust insurance required to be paid to the
Secured Party;

                  (b) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for monies due and to become due under
or in respect of any of the Collateral;

                                       11
<PAGE>

                  (c) to file any claims or take any action or institute any
proceedings that the Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Secured Party with respect to any of the Collateral;

                  (d) to pay or discharge taxes or liens, levied or placed upon
or threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by the Secured Party in
its sole discretion, and such payments made by the Secured Party to become
obligations of the Debtor and the Subsidiaries, due and payable immediately
without demand and secured by the Security Interests; and

                  (e) generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner thereof for all
purposes, and to do, at the Secured Party's option and the Debtor's and
Subsidiaries' expense, at any time or from time to time, all acts and things
that the Secured Party deems necessary to protect, preserve or realize upon the
Collateral.

         This power, being coupled with an interest, is irrevocable so long as
this Agreement shall remain in force.

         10. Transfers and Other Liens. The Debtor and the Subsidiaries shall
not, without the Secured Party's prior written consent:

                  (a) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral.

                  (b) create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the Collateral to
secure indebtedness of any person except for the security interest created by
this Agreement.

         11. Events of Default. The occurrence of any "Event of Default" as that
term is defined in Note shall constitute an Event of Default by the Debtor
and/or the Subsidiaries under this Agreement.

         12. Remedies

                  (a) If any Event of Default shall have occurred and be
continuing, the Secured Party may declare the entire outstanding principal
amount of the Note immediately due and payable without any notice, demand or
other action on the part of the Secured Party.

                  (b) If any Event of Default shall have occurred and be
continuing, the Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the UCC (whether or not the UCC applies to the affected Collateral) and also
may: (i) without notice or demand or legal process, take possession of the
Collateral and take any and all actions necessary to transfer or sell the
Collateral in the name of the Secured Party; (ii) without notice except as
specified below, sell the Collateral or any part thereof at such time or times,
for cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Secured Party may deem commercially reasonable; (iii)
notify the obligors on any Accounts or Instruments to make payments there under
directly to the Secured Party; (iv) without notice to the Debtor and/or the
Subsidiaries, renew, modify or extend any of the Accounts and Instruments or
grant waivers or indulgences with respect thereto or accept partial payment
thereof, or substitute any obligor thereon, in any manner as the Secured Party
may deem advisable, without affecting or diminishing the Debtor's and/or the
Subsidiaries' continuing obligations hereunder, and (v) and shall have all
applicable remedies set forth in the New York Uniform Commercial Code.

                                       12
<PAGE>

         13. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default as set forth herein, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by the Secured Party
with respect to the Collateral; and second, to the Secured Obligations. The
Secured Party shall pay over to the Debtor and the Subsidiaries any surplus and
the Debtor and the Subsidiaries shall remain liable for any deficiency.

         14. Expenses. The Debtor and the Subsidiaries agree to pay all
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining and shipping the Collateral, all
costs, fees and expenses of perfecting and maintaining the Security Interests,
and any and all excise, property, sales and use taxes imposed by any state,
federal or local authority on any of the Collateral, or with respect to periodic
appraisals and inspections of the Collateral, or with respect to the sale or
other disposition thereof. If the Debtor and/or the Subsidiaries fail promptly
to pay any portion of the above expenses when due or to perform any other
obligation of the Debtor and/or the Subsidiaries under this Agreement, The
Secured Party may, at its option, but shall not be required to, pay or perform
the same, and the Debtor and the Subsidiaries agree to reimburse the Secured
Party therefor on demand. All sums so paid or incurred by the Secured Party for
any of the foregoing, any and all other sums for which the Debtor and the
Subsidiaries may become liable hereunder and all costs and expenses (including
attorneys' fees, legal expenses and court costs) incurred by the Secured Party
in enforcing or protecting the Security Interests or any of their rights or
remedies under this Agreement shall be payable on demand, shall constitute
Secured Obligations, shall bear interest until paid at the rate provided in the
Amended and Restated Convertible Note and shall be secured by the Collateral.

         15. Termination of Security Interests; Release of Collateral. Upon
payment in full of all Secured Obligations, the Security Interests shall
terminate and all rights to the Collateral shall revert to the Debtor and the
Subsidiaries. Upon such termination of the Security Interests or release of any
Collateral, the Secured Party will, at the expense of the Debtor and the
Subsidiaries, execute and deliver to the Debtor and the Subsidiaries such
documents as the Debtor and the Subsidiaries shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.

         16. Notices. Each notice, communication and delivery under this
Agreement: (a) shall be made in writing signed by the party giving it; (b) shall
specify the section of this Agreement pursuant to which given; (c) shall either
be delivered in person or by telecopier, a nationally recognized next business
day courier service or Express Mail; (d) unless delivered in person, shall be
given to the address specified below; (e) shall be deemed to be given (i) if
delivered in person, on the date delivered, (ii) if sent by telecopier, on the
date of telephonic confirmation of receipt, (iii) if sent by a nationally
recognized next business day courier service with all costs paid, on the next
business day after it is delivered to such courier, or (iv) if sent by Express
Mail (with postage and other fees paid), on the next business day after it is
mailed. Such notice shall not be effective unless copies are provided
contemporaneously as specified below, but neither the manner nor the time of
giving notice to those to whom copies are to be given (which need not be the
same as the addressee) shall control the date notice is given or received. The
addresses and requirements for copies are as follows:

                                       13
<PAGE>

         If to the Debtor or any Subsidiary:

                           Interiors, Inc.
                           320 Washington Street
                           Mount Vernon, New York 10553
                           Telephone:  (914) 665-5400
                           Facsimile: (914) 665-5469
                           Attention: Chief Executive Officer

         With a copy to:

                           Greenberg Traurig
                           200 Park Avenue
                           New York, New York 10166
                           Telephone: (212) 801-9200
                           Facsimile: (212) 801-6400
                           Attention: Stephen A. Weiss, Esq.

         If to Secured Party:

                           Endeavour Capital Fund SA
                           The Maduro Building, P.O. Box 662,
                           Wickhams Cay, Road Town, Tortola
                           British Virgin Islands
                           Telephone: (284) 494-2217
                           Facsimile: (284) 494-3917
                           Attention: Phil Williams

         Except as otherwise expressly set forth in any particular provision of
this Agreement, any consent or approval required or permitted by this Agreement
to be given by the Secured Party may be given, and any term of this Agreement or
of any other instrument related hereto or mentioned herein may be amended, and
the performance or observance by the Debtor and/or the Subsidiaries of any term
of this Agreement, the Exchange Agreement or the Amended and Restated
Convertible Note may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written specific
consent of the Secured Party. No waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Secured Party in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial thereto. No
notice to or demand upon the Debtor and/or the Subsidiaries shall entitle the
Debtor and/or the Subsidiaries to other or further notice or demand in similar
or other circumstances. The rights in this Agreement, the Exchange Agreement and
the Amended and Restated Convertible Note are cumulative and are not exclusive
of any other remedies provided by law. The invalidity, illegality or
unenforceability of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement.

                                       14
<PAGE>

         17. Successors and Assigns. This Agreement is for the benefit of the
Secured Party and its successors and assigns, and in the event of an assignment
of all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the Secured Obligations so assigned, may be transferred with such
Secured Obligations. This Agreement shall be binding on the Debtor and the
Subsidiaries and their respective successors and assigns, provided that the
Debtor and/or the Subsidiaries shall not assign this Agreement without the
Secured Party's prior written consent.

         18. Changes in Writing. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any departure by the
Debtor and/or the Subsidiaries therefrom, shall in any event be effective
without the written concurrence of the Secured Party, the Debtor, and the
Subsidiaries.

         19. Governing Law/Venue/Jurisdiction. This Agreement shall be
exclusively governed by and construed in accordance with the laws of the State
of New York, without giving effect to the conflicts of law principles thereof.
Each of the parties consents to the exclusive jurisdiction of the U.S. District
Court sitting in the Southern District of the State of New York sitting in
Manhattan in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if the other party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law. Each party waives its right to a trial by jury.

         20. Headings. Cross reference pages and headings contained herein are
for convenience of reference only, do not constitute a part of this Agreement,
and shall not be deemed to limit or affect any of the provisions hereof.

         21. Counterparts. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby by facsimile transmission to another party and such delivery
shall have the same force and effect as any other delivery of a manually signed
copy of this Agreement or of such other documents.

                                       15
<PAGE>

         This Security Agreement has been duly executed and delivered by the
parties on the date first written above.

DEBTOR:

INTERIORS, INC.

By:
   -----------------------------------------
   Name:  Max Munn
   Title: President

SUBSIDIARIES:

PETALS, INC.

By:
   -----------------------------------------
   Name:
   Title:

PETALS FACTORY OUTLET OF CONNECTICUT, INC.

By:
   -----------------------------------------
   Name:
   Title:

PETALS FACTORY OUTLET, INC.

By:
   -----------------------------------------
   Name:
   Title:

<PAGE>

PETALS FACTORY OUTLET OF FLORIDA, INC.

By:
   -----------------------------------------
   Name:
   Title:

PETALS FACTORY OUTLET OF PENNSYLVANIA, INC.

By:
   -----------------------------------------
   Name:
   Title:

HABITAT SOLUTIONS, INC.

By:
   -----------------------------------------
   Name:
   Title:

WINDSOR ART, INC.

By:
   -----------------------------------------
   Name:
   Title:

TBD THREE, INC. F/K/A STYLECRAFT LAMPS, INC.

By:
   -----------------------------------------
   Name:
   Title:

TBD TWO, INC. F/K/A TROY LIGHTING, INC.

By:
   -----------------------------------------
   Name:
   Title:

<PAGE>

TBD ONE, INC. F/K/A CSL LIGHTING MFT., INC.

By:
   -----------------------------------------
   Name:
   Title:

DECOR GROUP, INC.

By:
   -----------------------------------------
   Name:
   Title:

CONCEPTS 4, INC.

By:
   -----------------------------------------
   Name:
   Title:

SECURED PARTY:

ENDEAVOUR CAPITAL FUND SA

By:
   -----------------------------------------
   Name:
   Title:

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