Document:

Exhibit 10.8

PROMISSORY NOTE

TERM LOAN COMMITMENT

 

		

$1,251,500.00
	
			November 1, 2006

FOR VALUE RECEIVED, HOME SOLUTIONS OF AMERICA, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay
to the order of BANK OF OKLAHOMA, NA (the "Lender") at the
Principal Office of Texas Capital Bank, National Association, as administrative
agent (the "Administrative Agent") at 2100 McKinney Avenue,
Suite 900, Dallas, Texas 75201, the principal sum of ONE MILLION, TWO HUNDRED
FIFTY-ONE THOUSAND FIVE HUNDRED No/100 Dollars ($1,251,500.00) in lawful money
of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement (defined
below), and to pay interest, at such office, in like money and funds, at the
rates per annum and on the dates provided in the Credit Agreement.  Each
payment made on account of the principal and interest hereof shall be recorded
by the Lender on its books.

This Promissory Note (this "Note") is
one of the promissory notes referred to in that certain Credit Agreement dated
of even date herewith among the Borrower, the Lenders which are or become
parties thereto (including the Lender) and the Administrative Agent, and
evidences the Loan made by the Lender thereunder (as the same may be amended,
restated, modified or otherwise supplemented from time to time, the "Credit
Agreement").  Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.

This Note is issued pursuant to the Credit Agreement and
is entitled to the benefits provided for in the Credit Agreement and the other
Loan Documents.  The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events, for prepayments of
the Loans upon the terms and conditions specified therein and that, as more
fully set forth in the Credit Agreement, the aggregate of all interest
contracted for, charged or received under or otherwise in connection herewith
shall under no circumstances exceed the Maximum Rate permitted by applicable
law, and other provisions relevant to this Note.

This Note and the other Loan Documents embody the entire agreement
and understanding between the parties and supersede all other agreements and
understandings between such parties relating to the subject matter hereof and
thereof.  This Note and the other Loan Documents represent the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.  There are no
unwritten oral agreements between the parties.

This Note and the other Loan Documents
shall be construed in accordance with and governed by the laws of the state of Texas. 
The Borrower and the Administrative Agent agree that the state and federal
courts of Texas shall have jurisdiction over proceedings in connection with
this Note and the other Loan Documents.

 

IN WITNESS WHEREOF, the party
hereto has caused this Note to be duly executed the date as first written
herein.

 

		

HOME SOLUTIONS OF AMERICA, INC.

By:         /s/    Jeff Mattich                                 

                      Jeff Mattich

                      Chief Financial OfficerExhibit 10.9

PROMISSORY NOTE

TERM LOAN COMMITMENT

		

$2,498,500.00
	
			November 1, 2006

FOR VALUE RECEIVED, HOME SOLUTIONS OF AMERICA, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay
to the order of COMPASS BANK (the "Lender") at the Principal
Office of Texas Capital Bank, National Association, as administrative agent
(the "Administrative Agent") at 2100 McKinney Avenue, Suite
900, Dallas, Texas 75201, the principal sum of TWO MILLION, FOUR HUNDRED
NINETY-EIGHT THOUSAND, FIVE HUNDRED No/100 Dollars ($2,498,500.00) in lawful
money of the United States of America and in immediately available funds, on
the dates and in the principal amounts provided in the Credit Agreement
(defined below), and to pay interest, at such office, in like money and funds,
at the rates per annum and on the dates provided in the Credit Agreement.  Each
payment made on account of the principal and interest hereof shall be recorded
by the Lender on its books.

This Promissory Note (this "Note") is
one of the promissory notes referred to in that certain Credit Agreement dated
of even date herewith among the Borrower, the Lenders which are or become
parties thereto (including the Lender) and the Administrative Agent, and
evidences the Loan made by the Lender thereunder (as the same may be amended,
restated, modified or otherwise supplemented from time to time, the "Credit
Agreement").  Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.

This Note is issued pursuant to the Credit Agreement and
is entitled to the benefits provided for in the Credit Agreement and the other
Loan Documents.  The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events, for prepayments of
the Loans upon the terms and conditions specified therein and that, as more
fully set forth in the Credit Agreement, the aggregate of all interest
contracted for, charged or received under or otherwise in connection herewith
shall under no circumstances exceed the Maximum Rate permitted by applicable
law, and other provisions relevant to this Note.

This Note and the other Loan Documents embody the entire agreement
and understanding between the parties and supersede all other agreements and
understandings between such parties relating to the subject matter hereof and
thereof.  This Note and the other Loan Documents represent the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.  There are no
unwritten oral agreements between the parties.

This Note and the other Loan Documents
shall be construed in accordance with and governed by the laws of the state of Texas. 
The Borrower and the Administrative Agent agree that the state and federal
courts of Texas shall have jurisdiction over proceedings in connection with
this Note and the other Loan Documents.

IN WITNESS WHEREOF, the party
hereto has caused this Note to be duly executed the date as first written
herein.

 

		

HOME SOLUTIONS OF AMERICA, INC.

By:         /s/    Jeff Mattich                                 

                      Jeff Mattich

                      Chief Financial OfficerExhibit 10.10

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT is entered
into as of November 1, 2006 by and among Home Solutions of America, Inc.,
a Delaware corporation (the "Borrower"), each of the Debtors
set forth on the signature pages hereof (each a "Debtor", and collectively with the
Borrower, the "Debtors"), and
Texas Capital Bank, National Association, as Administrative Agent for itself
and the other Lenders party thereto ("Agent") on behalf of
itself and its Affiliates. 

PRELIMINARY STATEMENT

Borrower, Agent and Lenders are entering into a
Credit Agreement dated as of November 1, 2006 (as it may be amended,
restated or modified from time to time, the "Credit Agreement"). 
Borrower and Debtors are entering into this Pledge and Security Agreement (as
it may be amended, restated or modified from time to time, the "Security
Agreement") in order to, among other things, induce Agent and Lenders
to enter into and extend credit to Borrower under the Credit Agreement. 

ACCORDINGLY, Borrower, Debtors and Secured
Party hereby agree as follows:

ARTICLE
I

DEFINITIONS

1.1             
Terms Defined in Credit Agreement.  All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.

1.2             
Terms Defined in Texas Uniform Commercial Code.  Terms defined in
the Texas Uniform Commercial Code which are not otherwise defined in this
Security Agreement are used herein as defined in the Texas Uniform Commercial
Code as in effect on the date hereof.

1.3             
Definitions of Certain Terms Used Herein.  As used in this
Security Agreement, in addition to the terms defined in the Preliminary
Statement, the following terms shall have the following meanings:

"Accounts" mean any
"account," as such term is defined in Section 9.102(a)(2) of the
UCC, now owned or hereafter acquired by any Debtor, and, in any event, shall
include, without limitation, each of the following, whether now owned or
hereafter acquired by such Debtor:  (a) all rights of such Debtor to
payment for goods sold or leased or services rendered or the license of
Intellectual Property, whether or not earned by performance, (b) all accounts
receivable (including Health Care Insurance Receivables) of such Debtor, (c)
all rights of such Debtor to receive any payment of money or other form of consideration,
(d) all security pledged, assigned, or granted to or held by such Debtor to
secure any of the foregoing, (e) all guaranties of, or indemnifications with
respect to, any of the foregoing, (f) all Chattel Paper, (g) all Instruments,
and (h) all rights of such Debtor as unpaid sellers of goods or services,
including, but not limited to, all rights of stoppage in transit, replevin,
reclamation, and resale.

 

"Account Debtor" means any
Person who is or who may become obligated to any Debtor under, with respect to,
or on account of an Account.

"Article" means a numbered
article of this Security Agreement, unless another document is specifically
referenced.

"Chattel Paper" means any
"chattel paper", as such term is defined in Section 9.102(a)(11)
of the UCC, now owned or hereafter acquired by any Debtor and, in any event,
shall include, without limitation, all Electronic Chattel Paper, Tangible
Chattel Paper and all records that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, or a lease of specific goods, now owned or
hereafter acquired by such Debtor.

"Collateral" means all
Accounts, Chattel Paper, Documents, Equipment, General Intangibles, Financial
Assets, Letter of Credit Rights, Commercial Tort Claims, Fixtures, Investment
Property, Instruments, Inventory, Pledged Securities, Health Care Insurance
Receivables, Intellectual Property, Deposit Accounts, including all funds,
certificates, checks, drafts, wire transfer receipts, and other earnings,
profits, or other proceeds from time to time representing, evidencing,
deposited into, or held in Deposit Accounts, Stock Rights and Other Collateral,
wherever located, in which any Debtor now has or hereafter acquires any right
or interest, and the Proceeds, insurance proceeds and products thereof,
together with all books and records, customer lists, credit files, computer
files, programs, printouts and other computer materials and records related
thereto.  

"Commercial Tort Claims" means
any "commercial tort claim", as such term is defined in
Section 9.102(a)(13) of the UCC, now owned or hereafter acquired by any
Debtor and in any event, shall include, without limitation, any claim now owned
or hereafter acquired by such Debtor, arising in tort with respect to which: 
(a) the claimant is an organization; or (b) the claimant is an individual and
the claim (i) arose in the course of the claimant's business or profession and
(ii) does not include damages arising out of personal injury to or the death of
an individual.

"Control" shall have the
meaning set forth in Section 9.314 of the UCC.

"Debtors" shall mean,
collectively, the Borrower, the Debtors, and their respective successors and
assigns.

"Deposit Accounts" means any
"deposit account", as such term is defined in
Section 9.102(a)(29) of the UCC, now owned or hereafter acquired by any
Debtor and in any event, shall include, without limitation, any and all deposit
accounts or other bank accounts now owned or hereafter acquired or opened by
such Debtor, and any account which is a replacement or substitute for any of
such accounts, including, without limitation, those deposit accounts identified
on Exhibit A.

"Documents" means any
"document", as such term is defined in Section 9.102(a)(30) of
the UCC, now owned or hereafter acquired by any Debtor, including without
limitation all bills of lading, dock warrants, dock receipts, warehouse
receipts and orders for the delivery of goods, and also any other document which
in the regular course of business or financing is treated as adequately
evidencing that the person in possession of it is entitled to receive, hold and
dispose of the document and the goods it covers.

 

Page 2

 

"Electronic Chattel Paper"
means any "electronic chattel paper", as such term is defined in
Section 9.102(a)(31) of the UCC, now owned or hereafter acquired by any
Debtor.

"Equipment" means any
"equipment", as such term is defined in Section 9.102(a)(33) of
the UCC, now owned or hereafter acquired by any Debtor and, in any event, shall
include, without limitation, all machinery, equipment, furnishings, Fixtures
and vehicles now owned or hereafter acquired by such Debtor and any and all
additions, substitutions, and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment, and accessories
installed thereon or affixed thereto.

"Exhibit" refers to a specific
exhibit to this Security Agreement, unless another document is specifically
referenced.

"Financial Assets" means any
"financial asset", as such term is defined in
Section 8.102(a)(9) of the UCC, now owned or hereafter acquired by any
Debtor.

"Fixtures" means all goods
which become so related to particular real estate that an interest in such
goods arises under any real estate law applicable thereto, including, without
limitation, all trade fixtures.

"General Intangibles" means
any "general intangibles", as such term is defined in
Section 9.102(a)(42) of the UCC, now owned or hereafter acquired by any
Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by such Debtor:  (a) all of
such Debtor's trade secrets, Intellectual Property, registrations, renewal
rights, goodwill franchises, licenses, permits, proprietary information,
customer lists, designs, and inventions, (b) all of such Debtor's books,
records, data, plans, manuals, computer software, and computer programs, (c)
all of such Debtor's contract rights, partnership interests, joint venture
interests, securities, deposit accounts, investment accounts, certificates of
deposit, and investment property, (d) all rights of such Debtor to payment
under letters of credit and similar agreements, (e) all tax refunds and tax
refund claims of such Debtor, (f) all choses in action and causes of action of
such Debtor (whether arising in contract, tort, or otherwise and whether or not
currently in litigation) and all judgments in favor of such Debtor, (g) all
rights and claims of such Debtor under warranties and indemnities, and (h) all
rights of such Debtor under any insurance, surety, or similar contract or
arrangement.  General intangibles includes payment intangibles.

"Health Care Insurance Receivable"
means any "health care insurance receivable", as such term is defined
in Section 9.102(a)(46) of the UCC, now owned or hereafter acquired by any
Debtor and, in any event, shall include, without limitation, any interest in or
claim under a policy of insurance that is a right to payment of a monetary obligation
for health care goods or services provided, whether now owned or hereafter
acquired by such Debtor.

"Instrument" means any
"instrument", as such term is defined in Section 9.102(a)(47) of
the UCC, now owned or hereafter acquired by any Debtor, other than stock and
other securities, and in any event, shall include, without limitation, all
promissory notes, drafts, bills of exchange and trade acceptances of such
Debtor, whether now owned or hereafter acquired.

 

Page 3

 

"Intellectual Property" means
the copyrights, copyright licenses, patents, patent licenses, trademarks, and
trademark licenses now owned or hereafter acquired by any Debtor.

"Inventory" means any
"inventory", as such term is defined in Section 9.102(a)(48) of
the UCC, now owned or hereafter acquired by any Debtor, and, in any event,
shall include, without limitation, each of the following, whether now owned or
hereafter acquired by such Debtor:  (a) all goods and other personal property
of such Debtor that are held for sale or lease or to be furnished under any
contract of service, (b) all raw materials, work-in-process, finished goods,
inventory, supplies, and materials of such Debtor, (c) all wrapping, packaging,
advertising, and shipping materials of such Debtor, (d) all goods that have
been returned to, repossessed by, or stopped in transit by such Debtor, and (e)
all Documents evidencing any of the foregoing.

"Investment Property" means
any "investment property", as such term is defined in
Section 9.102(a)(49) of the UCC, now owned or hereafter acquired by any
Debtor, and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by such Debtor:  (a) any
security, whether certificated or uncertificated; (b) any security entitlement;
(c) any securities account (including, without limitation, those described on Exhibit B); (d) any commodity contract;
and (e) any commodity account (including, without limitation, those identified
on Exhibit B).

"Letter-of-Credit Right" means
any "letter-of-credit right", as such term is defined in
Section 9.102(a)(51) of the UCC, now owned or hereafter acquired by any
Debtor, and in any event, shall include, without limitation, any right to
payment or performance under a letter of credit, whether or not the beneficiary
has demanded or is at the time entitled to demand payment or performance (but
shall not include any right of a beneficiary to demand payment or performance
under a letter of credit), now owned or hereafter acquired by such Debtor.

"Obligations" means:

(a)        each Debtor's obligations and indebtedness
under the Credit Agreement, each Loan Document and this Security Agreement;

(b)        all future advances by Agent or any Lender or their
Affiliates to any Debtor under the Credit Agreement;

(c)        all costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by
Agent or its Affiliates to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this Security Agreement;

(d)        all other obligations, indebtedness, and
liabilities of each Debtor to Agent and each Lender or their Affiliates, now
existing or hereafter arising, regardless of whether such obligations,
indebtedness, and liabilities are similar, dissimilar, related, unrelated, direct,
indirect, fixed, contingent, primary, secondary, joint, several, or joint and
several;

Page 4

 

(e)        all amounts owed under any extension, renewal,
or modification of any of the foregoing; and

(f)         any of the foregoing that arises after the
filing of a petition by or against any Debtor under the Bankruptcy Code, even
if the obligations due do not accrue because of the automatic stay under
Bankruptcy Code § 362 or otherwise.

"Other Collateral" means any
property of any Debtor, other than real estate, not included within the defined
terms Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
Financial Assets Instruments, Letter-of-Credit Rights, Commercial Tort Claims,
Inventory, Investment Property, Pledged Securities, Deposit Accounts, including
all funds, certificates, checks, drafts, wire transfer receipts, and other
earnings, profits, or other proceeds from time to time representing,
evidencing, deposited into, or held in Deposit Accounts, and Stock Rights,
including, without limitation, all cash on hand and all deposit accounts or
other deposits (general or special, time or demand, provisional or final) with
any bank or other financial institution, it being intended that the Collateral
include all property of any Debtor other than real estate.

"Pledged Securities" means
100% (50% in the case of Southern Stone Cabinets, Inc., a Florida corporation)
of all capital stock (or other equity interests) now or in the future issued by
each present and future Debtors (other than the Borrower) and each present and
future Subsidiary.

"Proceeds" means any
"proceeds," as such term is defined in Section 9.102(a)(65) of
the UCC and, in any event, shall include, but not be limited to, (a) any and
all proceeds of any insurance, indemnity, warranty, or guaranty payable to any
Debtor from time to time with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable to any Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure, or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any person acting under color of Governmental Authority), and (c)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.

"Receivables" means the
Accounts, Chattel Paper, Documents, Investment Property, Instruments, or
Commercial Tort Claims, and any other rights or claims to receive money which
are General Intangibles or which are otherwise included as Collateral.

"Section" means a numbered
Section of this Security Agreement, unless another document is
specifically referenced.

"Secured Obligations" means
the Obligations, including without limitation any such Obligations incurred or
accrued during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, whether or not allowed or allowable in such
proceeding.

"Secured Party" means Agent,
Lenders and each of their Affiliates.

"Security" has the meaning set
forth in 8.102(a)(15) of the UCC.

 

Page 5

 

"Stock Rights" means any
securities, dividends or other distributions and any other right or property
which any Debtor shall receive or shall become entitled to receive for any
reason whatsoever with respect to, in substitution for or in exchange for any
securities or other ownership interests in a corporation, partnership, joint
venture or limited liability company constituting Collateral and any
securities, any right to receive securities and any right to receive earnings,
in which any Debtor now has or hereafter acquires any right, issued by an
issuer of such securities.

"Tangible Chattel Paper" means
any "tangible chattel paper", as such term is defined in
Section 9.102(a)(79) of the UCC, now owned or hereafter acquired by any
Debtor.

"UCC" means the Uniform Commercial
Code as in effect in the State of Texas, as the same has been or may be amended
or revised from time to time, or, if so required with respect to any particular
Collateral by mandatory provisions of applicable law, as in effect in the
jurisdiction in which such Collateral is located.

The foregoing definitions shall be equally
applicable to both the singular and plural forms of the defined terms.

ARTICLE
II

GRANT OF SECURITY INTEREST

2.1             
Security Interest.  Each Debtor hereby pledges, assigns and
grants to Secured Party (including their Affiliates), a security interest in
all of such Debtor's right, title and interest in and to the Collateral to
secure the prompt and complete payment and performance of the Secured
Obligations.  If the security interest granted hereby in any rights of any
Debtor under any contract included in the Collateral is expressly prohibited by
such contract, then the security interest hereby granted therein nonetheless
remains effective to the extent allowed by Article or Chapter 9 of the UCC
or other applicable law but is otherwise limited by that prohibition.  Secured
Party acknowledges that the attachment of its security interest in any
Commercial Tort Claim as Collateral is subject to each Debtor's compliance with
Section 4.15.

2.2             
Debtors Remain Liable.  Notwithstanding anything to the contrary
contained herein, (a) each Debtor shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein to
perform all of its respective duties and obligations thereunder to the same
extent as if this Security Agreement had not been executed, (b) the
exercise by Secured Party of any of its rights hereunder shall not release any
Debtor from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) Secured Party shall not have any
obligation or liability under any of the contracts and agreements included in
the Collateral by reason of this Security Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of any Debtor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

2.3             
Authorization to File Financing Statements.  Each Debtor hereby
irrevocably authorizes Secured Party at any time and from time to time to file
in any UCC jurisdiction any initial financing statements and amendments thereto
that (a) indicate the Collateral (i) as all assets of such Debtor or
words of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article or Chapter 9 of the UCC,
or (ii) as being of an equal or lesser scope or with greater detail, and
(b) contain any other information required by subchapter E of
Chapter 9 of the UCC for the sufficiency or filing office acceptance of
any financing statement or amendment, including (A) whether such Debtor is
an organization, the type of organization and any organization identification
number issued to such Debtor and (B) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as‐extracted
collateral or timber to be cut, a sufficient description of real property to
which the Collateral relates.  Each Debtor agrees to furnish any such
information to Secured Party promptly upon request.

 

Page 6

 

ARTICLE
III

REPRESENTATIONS AND WARRANTIES

Each Debtor represents and warrants to Secured
Party that:

3.1             
Title, Authorization, Validity and Enforceability.  Each Debtor
has good and valid rights in and title to the Collateral with respect to which
it has purported to grant a security interest hereunder, and has full power and
authority to grant to Secured Party the security interest in such Collateral
pursuant hereto.  The execution and delivery by each Debtor of this Security
Agreement has been duly authorized by proper corporate proceedings, and this
Security Agreement constitutes a legal, valid and binding obligation of such
Debtor and creates a security interest which is enforceable against such Debtor
in all now owned and hereafter acquired Collateral.  When financing statements
have been filed in the appropriate offices against each Debtor in the locations
listed on Exhibit C, Secured Party
will have a fully perfected first priority security interest in that Collateral
in which a security interest may be perfected by filing.

3.2             
Conflicting Laws and Contracts.  Neither the execution and
delivery by any Debtor of this Security Agreement, the creation and perfection
of the security interest in the Collateral granted hereunder, nor compliance
with the terms and provisions hereof will be a material violation of any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
such Debtor or such Debtor's articles or certificate of incorporation, bylaws,
articles of organization or operating agreement or other charter documents, as
the case may be, the provisions of any indenture, instrument or agreement to
which such Debtor is a party or is subject, or by which it, or its property, is
bound, or conflict with or constitute a material default thereunder, or result
in the creation or imposition of any Lien pursuant to the terms of any such
indenture, instrument or agreement (other than any Lien of Secured Party).

3.3             
Principal Location.  Each Debtor's mailing address, and the
location of its chief executive office and of the books and records relating to
the Receivables, are disclosed in Exhibit D; no Debtor has any
other places of business except those set forth in Exhibit D.

3.4             
Property Locations.  The Inventory, Equipment and Fixtures are
located solely at the locations described in Exhibit D.  All of
said locations are owned by a Debtor except for locations (i) which are leased
by a Debtor as lessee and designated in Part B of Exhibit D
and (ii) at which Inventory is held in a public warehouse or is otherwise
held by a bailee or on consignment as designated in Part C of Exhibit D,
with respect to which Inventory such Debtor has delivered bailment agreements,
warehouse receipts, financing statements or other documents satisfactory to the
Banks to protect the Secured Party's security interest in such Inventory.

 

Page 7

 

3.5             
Deposit, Commodity, and Securities Account.  Exhibit A
correctly identifies all deposit, commodity, and securities accounts owned by
each Debtor and the institutions holding such accounts.  No Person other than a
Debtor has control over any Investment Property.

3.6             
Litigation.  To each Debtor's knowledge after due inquiry, there
is no litigation investigation or governmental proceeding threatened against
any Debtor or any of its properties which if adversely determined would have a
material adverse effect on the Collateral or the financial condition,
operations, or business of such Debtor.

3.7             
No Other Names.  No Debtor has conducted business under any name
except the name in which it has executed this Security Agreement.

3.8             
No Event of Default.  No Event of Default exists.

3.9             
Accounts and Chattel Paper.  The names of the obligors, amounts
owing, due dates and other information with respect to the Accounts and Chattel
Paper are and will be correctly stated in all records of each Debtor relating
thereto and in all invoices and reports with respect thereto furnished to
Secured Party by each Debtor from time to time.  As of the time when each
Account or each item of Chattel Paper arises, each Debtor shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case
may be, and all records relating thereto, are genuine and in all material respects
what they purport to be.

3.10         
No Financing Statements.  No financing statement describing all
or any portion of the Collateral which has not lapsed or been terminated naming
any Debtor as debtor has been filed in any jurisdiction except financing
statements naming the Secured Party as the secured party.

3.11         
Federal Employer Identification Number.  Each Debtor's Federal employer
identification number is as listed on Exhibit E.

3.12         
Pledged Securities and Other Investment Property.  Exhibit B sets forth a complete and
accurate list of the Instruments, Securities and other Investment Property
owned by each Debtor.  Each Debtor is the direct and beneficial owner of each
Instrument, Security and other type of Investment Property listed on Exhibit B as being owned by it, free and
clear of any Liens, except for the security interest granted to Secured Party
hereunder.  Each Debtor further represents and warrants that (i) all such
Instruments, Securities or other types of Investment Property which are shares
of stock in a corporation or ownership interests in a partnership or limited
liability company have been (to the extent such concepts are relevant with
respect to such Instrument, Security or other type of Investment Property) duly
and validly issued, are fully paid and non‐assessable and (ii) with
respect to any certificates delivered to the Secured Party representing an
ownership interest in a partnership or limited liability company, either such
certificates are Securities as defined in Article 8 of the UCC of the
applicable jurisdiction as a result of actions by the issuer or otherwise, or,
if such certificates are not Securities, such Debtor has so informed Secured
Party so that Secured Party may take steps to perfect its security interest
therein as a General Intangible.  With respect to ownership interests in its
Subsidiaries, Borrower represents and warrants that the Pledged Securities
constitute 100% of the issued and outstanding capital stock (or other equity
interests) in all of the Debtors.

 

Page 8

 

ARTICLE
IV

COVENANTS

From the date of this Security Agreement, and
thereafter until this Security Agreement is terminated:

4.1             
General.

4.1.1       
Reserved.

4.1.2       
Reserved.

4.1.3       
Reserved.

4.1.4       
Financing Statements and Other Actions; Defense of Title.  Each
Debtor will execute and deliver to Secured Party all financing statements and
other documents and take such other actions as may from time to time be
requested by Secured Party in order to maintain a first perfected security
interest in and, in the case of Investment Property, Deposit Accounts,
Letter-of-Credit-Rights, and Electronic Chattel Paper, Control of, the
Collateral.  Each Debtor will take any and all actions necessary to defend
title to the Collateral against all persons and to defend the security interest
of the Secured Party in the Collateral and the priority thereof against any
Lien not expressly permitted hereunder.

4.1.5       
Proceeds of Collateral.  While an Event of Default exists, the
Debtor will deposit all proceeds of Inventory and Accounts into Deposit
Accounts under the Secured Party's Control.

4.1.6       
Reserved.

4.1.7       
Change in Location, Jurisdiction of Organization or Name.  No
Debtor will (i) have any Inventory, Equipment or Fixtures or proceeds or
products thereof (other than Inventory and proceeds thereof disposed of as
permitted by Section 4.1.5) at a location other than a location
specified in Exhibit D, (ii) maintain records relating to the
Receivables at a location other than at the location specified on Exhibit D,
(iii) maintain a place of business at a location other than a location
specified on Exhibit D, (iv) change its name or taxpayer
identification number, (v) change its mailing address, or (vi) change
its jurisdiction of organization, unless such Debtor shall have given Secured
Party not less than 30 days' prior written notice thereof, and the Secured
Party shall have determined in its reasonable discretion that such change will
not adversely affect the validity, perfection or priority of Secured Party's
security interest in the Collateral.

Page 9

 

4.1.8       
Other Financing Statements.  No Debtor will sign or authorize the
signing on its behalf of any financing statement naming it as debtor covering
all or any portion of the Collateral.

4.2             
Receivables.  

4.2.1       
Certain Agreements on Receivables.  No Debtor will make or agree
to make any discount, credit, rebate or other reduction in the original amount
owing on a Receivable or accept in satisfaction of a Receivable less than the
original amount thereof, except that, prior to the occurrence of an Event of
Default, such Debtor may reduce the amount of Accounts arising from the sale of
Inventory in accordance with its present policies and in the ordinary course of
business.

4.2.2       
Collection of Receivables.  Except as otherwise provided in this
Security Agreement, each Debtor will collect and enforce, at such Debtor's sole
expense, all amounts due or hereafter due to such Debtor under the Receivables.

4.2.3       
Delivery of Invoices.  Each Debtor will deliver to Secured Party
immediately upon its request after the occurrence of an Event of Default
duplicate invoices with respect to each Account bearing such language of
assignment as Secured Party shall specify.

4.2.4       
Disclosure of Counterclaims on Receivables.  If (i) any
discount, credit or agreement to make a rebate or to otherwise reduce the
amount owing on a Receivable exists or (ii) if, to the knowledge of any
Debtor, any dispute, setoff, claim, counterclaim or defense exists or has been
asserted or threatened with respect to a Receivable, each Debtor will disclose
such fact to Secured Party in writing in connection with the inspection by the Secured
Party of any record of such Debtor relating to such Receivable and in
connection with any invoice or report furnished by such Debtor to Secured Party
relating to such Receivable.

4.3             
Inventory and Equipment.

4.3.1       
Maintenance of Goods.  Each Debtor will do all things reasonably
necessary and consistent with its present policies and practices to maintain,
preserve, protect and keep the Inventory and the Equipment in good repair and
working and saleable condition.

4.3.2       
Insurance.  Each Debtor will (i) maintain fire and extended
coverage insurance on the Inventory and Equipment containing a lender's loss
payable clause in favor of Secured Party, and providing that said insurance
will not be terminated except after at least 30 days' written notice from the
insurance company to Secured Party, (ii) maintain such other insurance on
the Collateral for the benefit of Secured Party as Secured Party shall from
time to time request, (iii) furnish to Secured Party upon the request of
Secured Party from time to time the originals of all policies of insurance on
the Collateral and certificates with respect to such insurance and
(iv) maintain general liability insurance naming Secured Party as an
additional insured.

Page 10

 

4.3.3       
Safekeeping of Inventory; Inventory Covenants.  Secured Party
shall not be responsible for (i) the safekeeping of the Inventory;
(ii) any loss or damage thereto or destruction thereof occurring or arising
in any manner or fashion from any cause; (iii) any diminution in the value
of Inventory or (iv) any act or default of any carrier, warehouseman,
bailee or forwarding agency or any other Person in any way dealing with or
handling the Inventory, except to the extent that any Debtor incurs any loss,
cost, claim or damage from any of the foregoing as a result of the gross
negligence or willful misconduct of Secured Party.  All risk of loss, damage,
distribution or diminution in value of the Inventory shall, except as noted in
the previous sentence, be borne by the Debtors.

4.3.4       
Records and Schedules of Inventory.  Each Debtor shall keep
correct and accurate daily records on a first-in, first-out basis, itemizing
and describing the kind, type, quality and quantity of Inventory, such Debtor's
cost therefor and selling price thereof, and the daily withdrawals therefrom
and additions thereto and Inventory then on consignment, and shall, at the reasonable
request of the Secured Party, furnish to the Secured Party, daily copies of the
working papers related thereto.  A physical count of the Inventory shall be
conducted no less often than annually and a report based on such count of
Inventory shall promptly thereafter be provided to Secured Party together with
such supporting information including, without limitation invoices relating to
such Debtor's purchase of goods listed in said report, as Secured Party shall reasonably
request.

4.3.5       
Returned and Repossessed Inventory.  If at any time prior to the
occurrence of an Event of Default, any Account Debtor returns any Inventory to
any Debtor with a value in excess of $200,000, such Debtor shall promptly
determine the reason for such return and, if such Debtor accepts such return,
issue a credit memorandum (with a copy to be sent to the Secured Party if the
Secured Party has so requested) in the appropriate amount to such Account
Debtor.  After the occurrence of and during the continuance of an Event of
Default, each Debtor shall hold all returned Inventory in trust for Secured
Party, shall segregate all returned Inventory from all other property of such
Debtor or in its possession and shall conspicuously label said returned
Inventory as the property of Secured Party.  Each Debtor shall, in all cases,
immediately notify Secured Party of the return of any Inventory with a value in
excess of $200,000, specifying the reason for such return and the location and
condition of the returned Inventory.

4.4             
Instruments, Securities, Chattel Paper, and Documents.  Each
Debtor will (i) deliver to Secured Party immediately upon execution of
this Security Agreement the originals of all Chattel Paper, Securities and
Instruments (if any then exist), (ii) hold in trust for Secured Party upon
receipt and immediately thereafter deliver to Secured Party any Chattel Paper,
Securities and Instruments constituting Collateral, and (iii) upon Secured
Party's request, deliver to Secured Party (and thereafter hold in trust for
Secured Party upon receipt and immediately deliver to Secured Party) any
Document evidencing or constituting Collateral.

4.5             
Uncertificated Securities and Certain Other Investment Property. 
Each Debtor will permit Secured Party from time to time to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated securities or other types of
Investment Property not represented by certificates which are Collateral to
mark their books and records with the numbers and face amounts of all such
uncertificated securities or other types of Investment Property not represented
by certificates and all rollovers and replacements therefor to reflect the Lien
of Secured Party granted pursuant to this Security Agreement.  Each Debtor will
make commercially reasonable efforts to cause (i) the issuers of uncertificated
securities which are Collateral and which are Securities and (ii) any
financial intermediary which is the holder of any Investment Property, to cause
Secured Party to have and retain Control over such Securities or other
Investment Property.  Without limiting the foregoing, each Debtor will, with
respect to Investment Property held with a financial intermediary, take
commercially reasonable efforts to cause such financial intermediary to enter
into a control agreement with the Secured Party in form and substance
satisfactory to Secured Party.

 

Page 11

 

4.6             
Stock and Other Ownership Interests.

4.6.1       
Changes in Capital Structure of Issuers.  No Debtor will
(i) permit or suffer any issuer of privately held corporate securities or
other ownership interests in a corporation, partnership, joint venture or
limited liability company constituting Collateral to dissolve, liquidate,
retire any of its capital stock or other Instruments or Securities evidencing
ownership, reduce its capital or merge or consolidate with any other entity, or
(ii) vote any of the Instruments, Securities or other Investment Property
in favor of any of the foregoing.

4.6.2       
Issuance of Additional Securities.  No Debtor will permit or
suffer the issuer of privately held corporate securities or other ownership interests
in a corporation, partnership, joint venture or limited liability company
constituting Collateral to issue any such securities or other ownership
interests, any right to receive the same or any right to receive earnings,
except to such Debtor.

4.6.3       
Registration of Pledged Securities and other Investment Property.  
Each Debtor will permit any registerable Collateral to be registered in the
name of Secured Party or its nominee at any time.

4.6.4       
Exercise of Rights in Pledged Securities and other Investment Property. 
Each Debtor will permit Secured Party or its nominee at any time after the
occurrence of and during the continuance of an Event of Default, without
notice, to exercise all voting and corporate rights relating to the Collateral,
including, without limitation, exchange, subscription or any other rights,
privileges, or options pertaining to any corporate securities or other
ownership interests or Investment Property in or of a corporation, partnership,
joint venture or limited liability company constituting Collateral and the
Stock Rights as if it were the absolute owner thereof.

4.6.5       
Issuance of Securities.  Debtors shall not permit any limited
partnership interests or ownership interests in a limited liability company
which are included within the Collateral to at any time constitute a Security
or consent to the issuer of any such interests taking any action to have such
interests treated as a Security unless (i) all certificates or other
documents constituting such Security have been delivered to Secured Party and
such Security is properly defined as such under Article 8 of the UCC of
the applicable jurisdiction, whether as a result of actions by the issuer
thereof or otherwise, or (ii) Secured Party has entered into a control
agreement with the issuer of such Security or with a securities intermediary
relating to such Security and such Security is defined as such under
Article 8 of the UCC of the applicable jurisdiction, whether as a result
of actions by the issuer thereof or otherwise.

Page 12

 

4.7             
Accounts.

4.7.1       
Verification of Accounts.  Secured Party shall have the right, at
any time or times hereafter, in its name or in the name of a nominee of Secured
Party, to verify the validity, amount or any other matter relating to any
Accounts, by mail, telephone, telegraph or otherwise.

4.7.2       
Appointment of the Agent as Attorney‐in‐Fact.  Each
Debtor hereby irrevocably designates, makes, constitutes and appoints Secured
Party (and all persons designated by Secured Party), exercisable after the
occurrence of and during the continuance of an Event of Default, as its true
and lawful attorney‐in‐fact, and authorizes Secured Party, in such
Debtor's or Secured Party's name, to: (i) demand payment of Accounts;
(ii) enforce payment of Accounts by legal proceedings or otherwise;
(iii) exercise all of such Debtor's rights and remedies with respect to
proceedings brought to collect an Account; (iv) sell or assign any Account
upon such terms, for such amount and at such time or times as Secured Party
deems advisable; (v) settle, adjust, compromise, extend or renew an
Account; (vi) discharge and release any Account; (vii) take control
in any manner of any item of payment or proceeds thereof; (viii) prepare,
file and sign such Debtor's name on any proof of claim in bankruptcy or other
similar document against any Account Debtor; (ix) endorse such Debtor's
name upon any items of payment or proceeds thereof and deposit the same in
Secured Party's account on account of the Obligations; (x) endorse such
Debtor's name upon any chattel paper, document, instrument, invoice, or similar
document or agreement relating to any Account or any goods pertaining thereto;
(xi) sign such Debtor's name on any verification of Accounts and notices
thereof to Account Debtor; (xii) notify the post office authorities to change the
address for delivery of such Debtor's  mail to an address designated by Secured
Party, have access to any lock box or postal box into which any of such
Debtor's mail is deposited, and open and dispose of all mail addressed such
Debtor, and (xiii) do all acts and things which are necessary, in Secured
Party's sole discretion, to fulfill such Debtor's obligations under this
Security Agreement.

4.7.3       
Notice to Account Debtor.  Secured Party may, in its sole
discretion, at any time or times after an Event of Default has occurred and is
continuing, and without prior notice to any Debtor, notify any or all Account
Debtors that the Accounts have been assigned to Secured Party and that Secured
Party has a security interest therein.  Secured Party may direct any or all Account
Debtors to make all payments upon the Accounts directly to Secured Party. 
Secured Party shall furnish the Debtors with a copy of such notice.  If
requested by Secured Party while an Event of Default exists, Debtor shall
require all Account Debtors to direct payments to a lockbox designated by the
Secured Party and maintained under the Secured Party's dominion and control. 
Proceeds of such lockbox will be deposited into a cash collateral account at
Secured Party.

 

Page 13

 

4.8             
Deposit Accounts.  Each Debtor will (i) upon Secured Party's
request, notify each bank or other financial institution in which it maintains
a Deposit Account or other deposit (general or special, time or demand,
provisional or final) of the security interest granted to Secured Party hereunder
and take all steps necessary to cause each such bank or other financial
institution to acknowledge such notification in writing and (ii) cause
each such bank or other financial institution to enter into a control agreement,
in form and substance acceptable to the Secured Party, transferring dominion
and control over each such account to Secured Party.

4.9             
Federal, State or Municipal Claims.  Each Debtor will notify
Secured Party of any Collateral which constitutes a claim against a governmental
authority, or any instrumentality or agency thereof, the assignment of which
claim is restricted by federal, state or municipal law.

4.10         
Warehouse Receipts Non‐Negotiable.  Each Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in
Section 7‐104 of the UCC).

4.11         
Mortgagee's and Landlord Waivers.  Each Debtor shall cause each
mortgagee of real property owned by such Debtor (upon request by Secured Party)
and each landlord of real property leased by such Debtor to execute and deliver
instruments satisfactory in form and substance to Secured Party by which such
mortgagee or landlord waives their rights, if any, in the Collateral.

4.12         
Reserved.

4.13         
Reserved.

4.14         
Commercial Tort Claims.  If any Debtor at any time holds or
acquires a Commercial Tort Claim, such Debtor shall immediately notify Secured
Party in writing of the details thereof and grant to Secured Party in writing a
security interest therein or lien thereon and in the Proceeds thereof, in form
and substance reasonably satisfactory to Secured Party.

4.15         
Letters‐of‐Credit Rights.  If any Debtor is at any
time a beneficiary under a letter of credit now or hereafter issued in favor of
any Debtor, such Debtor shall promptly notify Secured Party thereof in writing
and, at Secured Party's request, such Debtor shall, pursuant to an agreement in
form and substance reasonably satisfactory to Secured Party, either
(a) arrange for the issuer or any confirmer of such letter of credit to
consent to an assignment to Secured Party of the proceeds of any drawing under
the letter of credit or (b) arrange for Secured Party to become the
transferee beneficiary of the letter of credit, with Secured Party agreeing, in
each case, that the proceeds of any drawing under the letter of credit are to
be applied as provided in the Credit Agreement.

4.16         
Further Assurances; Additional Debtors.  At any time and from
time to time, upon the request of Secured Party, and at the sole expense of the
Debtors, each Debtor shall promptly execute and deliver all such further
instruments and documents and take such further action as Secured Party may reasonably
deem necessary or desirable to preserve and perfect its security interest in
the Collateral and carry out the provisions and purposes of this Security
Agreement, including, without limitation, (a) the execution and filing of
such financing statements as Secured Party may require and (b) the deposit
of all certificates of title issuable with respect to any of the Collateral and
noting thereon the security interest hereunder.  A carbon, photographic, or
other reproduction of this Security Agreement or of any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement and may be filed as a financing statement.  Each Debtor shall
promptly endorse and deliver to Secured Party all documents, instruments, and
chattel paper that it now owns or may hereafter acquire.  Upon the execution
and delivery by any Person of a security agreement supplement in substantially
the form of Exhibit F attached hereto (each a "Security
Agreement Supplement"), (a) such Person shall be and become a Debtor
hereunder and each reference in this Agreement and the other Loan Documents to
"Debtor" shall also mean and be a reference to such Person, and (b)
the supplemental exhibits A, B, C, D and E attached to each Security Agreement
Supplement shall be incorporated into and become a part of and supplement Exhibits
A, B, C, D and E, respectively, hereto, and
Secured Party may attach such supplemental exhibits to such Exhibits; and each
reference to such Exhibits shall mean and be a reference to such Exhibits as
supplemented pursuant to each Security Agreement Supplement.

 

Page 14

 

ARTICLE
V

DEFAULT

5.1             
Acceleration and Remedies.  Upon the occurrence of and during the
continuance of an Event of Default under the Credit Agreement or any other Loan
Document, Secured Party may exercise any or all of the following rights and
remedies:

5.1.1       
Those rights and remedies provided in this Security Agreement, the Credit
Agreement, or any other Loan Document, provided that this Section 5.1.1
shall not be understood to limit any rights or remedies available to Secured
Party prior to an Event of Default.

5.1.2       
Those rights and remedies available to a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) or under any other
applicable law (including, without limitation, any law governing the exercise
of a bank's right of setoff or bankers' lien) when a debtor is in default under
a security agreement.

5.1.3       
Without notice except as specifically provided in Section 8.1
or elsewhere herein, sell, lease, assign, grant an option or options to
purchase or otherwise dispose of the Collateral or any part thereof in one or
more parcels at public or private sale, for cash, on credit or for future
delivery, and upon such other terms as Secured Party may deem commercially
reasonable.

5.2             
Debtors' Obligations Upon Event of Default.  Upon the request of
Secured Party after the occurrence of and during the continuance of an Event of
Default, each Debtor will:

5.2.1       
Assembly of Collateral.  Assemble and make available to Secured
Party the Collateral and all records relating thereto at any place or places
specified by Secured Party.

 

Page 15

 

5.2.2       
Secured Party Access.  Permit Secured Party, by Secured Party's
representatives and agents, to enter any premises where all or any part of the
Collateral, or the books and records relating thereto, or both, are located, to
take possession of all or any part of the Collateral and to remove all or any
part of the Collateral.

5.3             
License.  Secured Party is hereby granted a license or other
right to use, following the occurrence and during the continuance of an Event
of Default, without charge, each Debtor's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks,
customer lists and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, for the limited purpose of completing production
of, advertising for sale, and selling any Collateral, and, following the
occurrence and during the continuance of an Event of Default, each Debtor's
rights under all licenses and all franchise agreements shall inure to Secured
Party's benefit.  In addition, each Debtor hereby irrevocably agrees that
Secured Party may, following the occurrence and during the continuance of an
Event of Default, sell any of such Debtor's Inventory directly to any Person,
including without limitation Persons who have previously purchased such
Debtor's Inventory from such Debtor and in connection with any such sale or
other enforcement of Secured Party's rights under this Security Agreement, may
sell Inventory which bears any trademark owned by or licensed to such Debtor
and any Inventory that is covered by any copyright owned by or licensed to such
Debtor and Secured Party may finish any work in process and affix any trademark
owned by or licensed to such Debtor and sell such Inventory as provided herein.

ARTICLE
VI

WAIVERS, AMENDMENTS AND REMEDIES

No delay or omission of Secured Party to
exercise any right or remedy granted under this Security Agreement shall impair
such right or remedy or be construed to be a waiver of any Event of Default, or
an acquiescence therein, and any single or partial exercise of any such right
or remedy shall not preclude any other or further exercise thereof or the
exercise of any other right or remedy.  No waiver, amendment or other variation
of the terms, conditions or provisions of this Security Agreement whatsoever
shall be valid unless in writing signed by Secured Party and then only to the
extent in such writing specifically set forth.  All rights and remedies
contained in this Security Agreement or by law afforded shall be cumulative and
all shall be available to Secured Party until the Secured Obligations have been
paid in full.

ARTICLE
VII

PROCEEDS; COLLECTION OF RECEIVABLES

7.1             
Lockboxes.  During the continuance of an Event of Default, upon
request of Secured Party, each Debtor shall execute and deliver to Secured
Party irrevocable lockbox agreements in the form provided by or otherwise
acceptable to Secured Party, which agreements shall be accompanied by an
acknowledgment by the bank where the lockbox is located of the Lien of Secured
Party granted hereunder and of irrevocable instructions to wire all amounts
collected therein to a special collateral account at Secured Party.

Page 16

 

7.2             
Collection of Receivables.  Upon the occurrence and continuation
of a an Event of Default, Secured Party may at any time in its sole discretion,
by giving the Debtors written notice, elect to require that the Receivables be
paid directly to Secured Party.  In such event, each Debtor shall, and shall
permit Secured Party to, promptly notify the Account Debtors or obligors under
the Receivables of the Banks' interest therein and direct such Account Debtors
or obligors to make payment of all amounts then or thereafter due under the
Receivables directly to Secured Party.  Upon receipt of any such notice from
Secured Party, each Debtor shall thereafter hold in trust for Secured Party,
all amounts and proceeds received by it with respect to the Receivables and
Other Collateral and immediately and at all times thereafter deliver to Secured
Party all such amounts and proceeds in the same form as so received, whether by
cash, check, draft or otherwise, with any necessary endorsements.  Secured
Party shall hold and apply funds so received as provided by the terms of Sections
7.3 and 7.4.

7.3             
Post Default Application.  If any Event of Default has occurred
and is continuing, Secured Party may, from time to time, apply the collected
balances in said cash collateral account to the payment of the Secured
Obligations whether or not the Secured Obligations shall then be due.

7.4             
Application of Proceeds.  After the occurrence and during the
continuation of an Event of Default, the proceeds of the Collateral shall be
applied by Secured Party to payment of the Secured Obligations in such manner
and order as Secured Party may elect in its sole discretion.

ARTICLE
VIII

GENERAL PROVISIONS

8.1             
Notice of Disposition of Collateral.  Each Debtor hereby waives
notice of the time and place of any public sale or the time after which any
private sale or other disposition of all or any part of the Collateral may be
made.  To the extent such notice may not be waived under applicable law, any
notice made shall be deemed reasonable if sent to any Debtor, addressed as set
forth in Article IX, at least 10 days prior to (i) the date of
any such public sale or (ii) the time after which any such private sale or
other disposition may be made.

8.2             
Compromises and Collection of Collateral.  Each Debtor and
Secured Party recognize that setoffs, counterclaims, defenses and other claims
may be asserted by obligors with respect to certain of the Receivables, that
certain of the Receivables may be or become uncollectible in whole or in part
and that the expense and probability of success in litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be
recovered with respect to a Receivable.  In view of the foregoing, each Debtor
agrees that Secured Party may at any time and from time to time, if an Event of
Default has occurred and is continuing, compromise with the obligor on any
Receivable, accept in full payment of any Receivable such amount as Secured
Party in its sole discretion shall determine or abandon any Receivable, and any
such action by Secured Party shall be commercially reasonable so long as
Secured Party acts in good faith based on information known to it at the time
it takes any such action.

Page 17

 

8.3             
Secured Party Performance of Debtors' Obligations.  Without
having any obligation to do so, Secured Party may perform or pay any obligation
which any Debtor has agreed to perform or pay in this Security Agreement and
each Debtor shall, jointly and severally, reimburse Secured Party for any
amounts paid by Secured Party pursuant to this Section 8.3.  Each
Debtor's obligation to reimburse Secured Party pursuant to the preceding
sentence shall be a Secured Obligation payable on demand.

8.4             
Authorization for Secured Party to Take Certain Action.  Each
Debtor irrevocably authorizes Secured Party at any time and from time to time
in the sole discretion of Secured Party and appoints Secured Party as its
attorney in fact (i) to execute on behalf of such Debtor as debtor and to
file financing statements necessary or desirable in the Secured Party's sole
discretion to perfect and to maintain the perfection and priority of Secured
Party's security interest in the Collateral, (ii) to, after the occurrence
and during the continuance of an Event of Default, indorse and collect any cash
proceeds of the Collateral, (iii) to file a carbon, photographic or other
reproduction of this Security Agreement or any financing statement with respect
to the Collateral as a financing statement in such offices as the Secured Party
in its sole discretion deems necessary or desirable to perfect and to maintain
the perfection and priority of Secured Party's security interest in the Collateral,
(iv) to contact and enter into one or more agreements with the issuers of
uncertificated securities which are Collateral and which are Securities or with
financial intermediaries holding other Investment Property as may be necessary
or advisable to give Secured Party Control over such Securities or other
Investment Property, (v) subject to the terms of Section 4.1.4,
to enforce payment of the Receivables in the name of Secured Party or such
Debtor, (vi) to, after the occurrence and during the continuance of an
Event of Default, apply the proceeds of any Collateral received by Secured
Party to the Secured Obligations as provided in Article VII and
(vii) to discharge past due taxes, assessments, charges, fees or Liens on
the Collateral (except for such Liens as are specifically permitted hereunder),
and such Debtor agrees to reimburse Secured Party on demand for any payment
made or any expense incurred by Secured Party in connection therewith, provided
that this authorization shall not relieve any Debtor of any of its obligations
under this Security Agreement or under the Credit Agreement.

8.5             
Specific Performance of Certain Covenants.  Each Debtor
acknowledges and agrees that a breach of any of the covenants contained in Sections 4.1.4,
4.4, 5.3, or 8.7 or in Article VII will cause irreparable
injury to Secured Party, that Secured Party has no adequate remedy at law in
respect of such breaches and therefore agrees, without limiting the right of
Secured Party to seek and obtain specific performance of other obligations of
such Debtor contained in this Security Agreement, that the covenants of such
Debtor contained in the Sections referred to in this Section 8.5
shall be specifically enforceable against such Debtor.

8.6             
Use and Possession of Certain Premises.  Upon the continuance of
an Event of Default, Secured Party shall be entitled to occupy and use any
premises owned or leased by any Debtor where any of the Collateral or any
records relating to the Collateral are located until the Secured Obligations
are paid or the Collateral is removed therefrom, whichever first occurs,
without any obligation to pay such Debtor for such use and occupancy.

8.7             
Dispositions Not Authorized.  No Debtor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1.5
and notwithstanding any course of dealing between any Debtor and the Secured
Party or other conduct of the Secured Party, no authorization to sell or
otherwise dispose of the Collateral (except as set forth in Section 4.1.5)
shall be binding upon Secured Party unless such authorization is in writing
signed by Secured Party.

 

Page 18

 

8.8             
Benefit of Agreement.  The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Debtors,
Secured Party and their respective successors and assigns, except that no
Debtor shall have the right to assign its rights or delegate its obligations
under this Security Agreement or any interest herein, without the prior written
consent of Secured Party.

8.9             
Survival of Representations.  All representations and warranties
of each Debtor contained in this Security Agreement shall survive the execution
and delivery of this Security Agreement.

8.10         
Taxes and Expenses.  Any taxes (including income taxes) payable
or ruled payable by Federal or State authority in respect of this Security
Agreement shall be paid by each Debtor, together with interest and penalties,
if any.  Debtors shall jointly and severally reimburse Secured Party for any
and all out‐of‐pocket expenses and internal charges (including
reasonable attorneys', auditors' and accountants' fees and reasonable time
charges of attorneys, paralegals, auditors and accountants who may be employees
of Secured Party) paid or incurred by Secured Party in connection with the
preparation, execution, delivery, administration, collection and enforcement of
this Security Agreement and in the audit, analysis, administration, collection,
preservation or sale of the Collateral (including the expenses and charges
associated with any periodic or special audit of the Collateral).  Any and all
costs and expenses incurred by each Debtor in the performance of actions
required pursuant to the terms hereof shall be borne solely by such Debtor.

8.11         
Headings.  The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.

8.12         
Termination.  This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated
pursuant to its express terms and (ii) all of the Secured Obligations have
been indefeasibly paid and performed in full and no commitments of Secured
Party which would give rise to any Secured Obligations are outstanding.  Upon
termination of this Security Agreement, Secured Party shall promptly authorize
the Debtor to file termination statements in the appropriate offices and
jurisdictions releasing all security interests and liens Secured Party has on
the Collateral, and shall otherwise perform all other actions reasonably
requested by Debtor to release such security interests and liens, but all such
actions shall be at Debtors' expense.

8.13         
Entire Agreement.  This Security Agreement embodies the entire
agreement and understanding between the Debtors and Secured Party relating to
the Collateral and supersedes all prior agreements and understandings between
the Debtors and Secured Party relating to the Collateral.

Page 19

 

8.14         
CHOICE OF LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

8.15         
INDEMNITY.  EACH DEBTOR HEREBY AGREES TO INDEMNIFY SECURED PARTY
AND ITS RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS, ATTORNEYS, AND EMPLOYEES, FROM
AND AGAINST ANY AND ALL LIABILITIES, DAMAGES, PENALTIES, SUITS, COSTS, AND
EXPENSES OF ANY KIND AND NATURE  (INCLUDING, WITHOUT LIMITATION, ALL EXPENSES
OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT SECURED PARTY IS A PARTY
THERETO) IMPOSED ON, INCURRED BY OR ASSERTED AGAINST SECURED PARTY OR THEIR
RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS, ATTORNEYS, AND EMPLOYEES, IN ANY WAY
RELATING TO OR ARISING OUT OF THIS SECURITY AGREEMENT, OR THE MANUFACTURE,
PURCHASE, ACCEPTANCE, REJECTION, OWNERSHIP, DELIVERY, LEASE, POSSESSION, USE,
OPERATION, CONDITION, SALE, RETURN OR OTHER DISPOSITION OF ANY COLLATERAL
(INCLUDING, WITHOUT LIMITATION, LATENT AND OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE BY THE Secured Party
OR THE DEBTORS, AND ANY CLAIM FOR PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT). 
NOTWITHSTANDING THE FOREGOING, NO PERSON SHALL BE INDEMNIFIED HEREUNDER FOR
ACTS OR OMISSIONS ARISING OUT OF OR RESULTING FROM SUCH PERSON'S GROSS
NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUD.

ARTICLE
IX

NOTICES

9.1             
Sending Notices.  Any notice required or permitted to be given
under this Security Agreement shall be sent (and deemed received) in the manner
and to the addresses set forth in the Credit Agreement.  All such notices to
any Debtor hereunder shall be given or made at the appropriate address or
telecopier number of Borrower in accordance with the Credit Agreement. 

9.2             
Change in Address for Notices.  Each of the Debtors and Secured
Party may change the address for service of notice upon it by a notice in
writing to the other parties.

 

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Blank] 

Page 20

 

IN WITNESS
WHEREOF, the Debtors and Secured Party have executed this Security Agreement as
of the date first above written.

		

BORROWER:

HOME SOLUTIONS OF AMERICA, INC.

By:          /s/   Jeff Mattich                                               

                     Jeff Mattich

                     Chief Financial Officer

			
	

DEBTORS:

CORNERSTONE MARBLE & GRANITE, INC.

By:          /s/ Rick J. O'Brien                                         

            Name:
Rick J. O'Brien

            Title: 

			
	

FIBER-SEAL SYSTEMS, L.P.

By:       FSS Holding Corp., 

            its general partner

            

           
By:          /s/ Rick J. O'Brien                               

                        Name:
Rick J. O'Brien

                        Title:
President

                        

			
	

FIRELINE RESTORATION, INC.

By:      /s/ Brian Marshall                                              

            Name:
Brian Marshall

            Title:
President

            

			

	

 

Page 21

 

	 

	
			

HOME SOLUTIONS RESTORATION OF 

LOUISIANA, INC.

By:         /s/ Stephen Scott Sewell                                   

            Name:
Stephen Scott Sewell

            Title: 
Chairman

				
	

P.W. STEPHENS, INC.

By:           /s/ Scott
Johnson                                           

            Name:
Scott Johnson

            Title:
President

				
	

SOUTHERN EXPOSURE UNLIMITED OF 

FLORIDA, INC.

By:          /s/ Dale Mars                                                   

            Name:
Dale Mars

            Title:
President

S.E. TOPS OF FLORIDA, INC.

By:         /s/ Dale Mars                                                       

            Name:
Dale Mars

            Title:
President 

				
	

FSS HOLDING CORP.

By:          /s/ Rick J. O'Brien                                                 

            Name:
Rick J. O'Brien

            Title:
President

				
	

SOUTHERN EXPOSURE HOLDINGS, INC.

By:          /s/ Dale Mars                                                       

            Name:
Dale Mars

            Title: 
President

				

	

	 

Page 22

 

		

SECURED PARTY:

TEXAS CAPITAL BANK, NATIONAL ASSOCIATION

By:          /s/ Ronald K. Baker                                                   

            Ronald K. Baker

            Executive Vice President

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