8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

                         October 1, 2007                      

Date of Report (Date of earliest event reported)

                              Salton, Inc.                               

(Exact name of registrant as specified in its charter)

Delaware	0-19557	36-3777824
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

   1955 W. Field Court, Lake Forest, Illinois  60045

(Address of principal executive offices) (Zip Code)

          (847) 803-4600  

        (Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

þ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Agreement and Plan of Merger

Form of Certificate of Amendment

Form of Certificate of Amendment

Form of Certificate of Designation

Commitment Agreement

Form of Registration Rights Agreement

Registration Rights Agreement

Form of Release

Loan Purchase Agreement

Reimbursement and Senior Secured Credit Agreement

Waiver, Consent, Forbearance and Seventeenth Amendment to Amended and Restated Credit Agreement

Waiver, Consent and First Amendment to Credit Agreement

Amended and Restated Intercreditor Agreement

Junior Intercreditor Agreement

Third Amendment to Rights Agreement

Form of Amendment to Restated Certificate of Incorporation

Press Release

Item 1.01 Entry into a Material Definitive Arrangement

Merger Agreement

          On October 1, 2007, Salton, Inc. (the “Company” or “Salton”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SFP Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company (“MergerSub”), and APN Holding Company, Inc., a Delaware corporation (“APN Holdco”). APN Holdco owns all of the issued and outstanding capital stock of Applica Incorporated, a Florida corporation (“Applica”). Pursuant to, and subject to the terms and conditions set forth in, the Merger Agreement, MergerSub will merge with and into APN Holdco (the “Merger”) and as a result thereof, the shares of common stock of APN Holdco issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) will be converted into an aggregate of 595,500,405 shares of common stock, par value $0.01 per share (“Company Common Stock”), and APN Holdco will become a wholly-owned subsidiary of the Company. Shares of Company Common Stock outstanding immediately prior to the Merger will remain outstanding following the Merger. Because the number of shares of Company Common Stock issuable in the Merger and the related transactions described below exceeds the number of shares of Company Common Stock currently authorized by the Company’s Amended and Restated Certificate of Incorporation, consummation of the Merger is subject to the approval by the Company’s stockholders of an amendment to the Company’s Amended and Restated Certificate of Incorporation increasing the number of authorized shares of Company Common Stock.

          Currently, Harbinger Capital Partners Master Fund I, Ltd. (the “Master Fund”) owns approximately 75% of the outstanding shares of common stock of APN Holdco and Harbinger Capital Partners Special Situations Fund, L.P. (together with the Master Fund, “Harbinger Capital Partners”) owns approximately 25% of the outstanding shares of common stock of APN Holdco. In addition, Harbinger Capital Partners currently own an aggregate of 701,600 shares of the Company Common Stock, 30,000 shares of the Company’s Series A Convertible Voting Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), 47,164 shares of the Company’s Series C Nonconvertible (Non Voting) Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), $14,989,000 principal amount of the Company’s 12 1/4% Senior Subordinated Notes due 2008 (the “2008 Notes”) and $89,606,859 principal amount of the Company’s second lien notes (the “Second Lien Notes”).

          In connection with the consummation of the Merger, the Company has proposed amending the terms of the Series A Preferred Stock and the terms of the Series C Preferred Stock to provide for the mandatory conversion, concurrently with the Effective Time, of each share of Series A Preferred Stock into 2197.49 shares of Company Common Stock (“Series A Amendment”) and of each share of Series C Preferred Stock into 249.56 shares of Company Common Stock (“Series C Amendment”). In connection with the execution of the Merger Agreement, the Company obtained written consents from holders of shares of Series A Preferred Stock and from holders of shares of Series C Preferred Stock sufficient to satisfy the requirement that the respective amendment be approved by the holders of a majority of the outstanding shares

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of such series of preferred stock, although each amendment is subject to further approval by the holders of Company voting stock at the meeting described below. Approval of such amendments by the Company’s stockholders is a condition to the consummation of the Merger.

          In connection with the execution of the Merger Agreement, subject to the terms and conditions contained in a Commitment Agreement between the Company and Harbinger Capital Partners, Harbinger Capital Partners have also committed to purchase, at the Effective Time, shares of a new series of non-convertible Company preferred stock to be named the Company’s Series D Nonconvertible (NonVoting) Preferred Stock having an initial liquidation preference equal to the sum of (1) the aggregate redemption or repurchase price which would have been required to be paid on the date on which the Effective Time occurs in connection with a change in control in respect of the principal amount of 2008 Notes and Second Lien Notes owned by Harbinger Capital Partners on the Closing Date, plus (2) any accrued and unpaid interest thereon through the Closing Date (the “Aggregate Purchase Price”). Each share of Series D Nonconvertible (NonVoting) Preferred Stock will have an initial liquidation preference of $1,000 per share and the holders thereof will be entitled to cumulative dividends payable quarterly at an annual rate of 16%. The complete terms of the Series D Nonconvertible (Non Voting) Preferred Stock will be set forth in the terms of the Certificate of The Powers, Designations, Preferences And Rights Of The Series D Preferred Stock (“Series D Certificate of Designation”). Harbinger Capital Partners will pay the aggregate purchase price for the Series D Nonconvertible (Non Voting) Preferred Stock by surrendering to the Company their 2008 Notes and Second Lien Notes. Issuance by the Company of the shares of Series D Nonconvertible Preferred Stock is subject to approval by the holders of Company voting stock at the meeting described below.

          The proposed issuance of the shares of Series D Nonconvertible Preferred Stock, together with the issuance of shares of Company Common Stock as merger consideration pursuant to the Merger Agreement and upon mandatory conversion of shares of Series A Preferred Stock and Series C Preferred Stock, are together referred to as the “Share Issuances.”

          Immediately after giving effect to the Merger and the Share Issuances, Harbinger Capital Partners would beneficially own 92 percent of the outstanding shares of Company Common Stock (including the 701,600 shares of Company Common Stock currently owned by Harbinger Capital Partners) and 100 percent of outstanding shares of Series D Nonconvertible (NonVoting) Preferred Stock. Existing holders of Salton’s Series A Preferred Stock (other than Harbinger Capital Partners), Series C Preferred Stock (other than Harbinger Capital Partners) and Company Common Stock (other than Harbinger Capital Partners) would own approximately 3%, 3% and 2%, respectively, of the shares of Company Common Stock outstanding immediately following the Merger and the Share Issuances.

          The Company has made customary representations and warranties in the Merger Agreement, including representations and warranties with respect to, among other things, (1) due organization and corporate power, (2) authority and validity of agreement, (3) consents and approvals, (4) absence of untrue statements or material omissions in the proxy statement and additional filings with the Securities and Exchange Commission, (5) capitalization, (6) absence

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of certain events, (7) litigation, (8) title to property, (9) absence of undisclosed liabilities, and (10) compliance with law.

          The Company has also agreed to certain restrictions and limitations on future transactions pending the closing of the Merger, including covenants to, among other things, (1) carry on the business of the Company in the ordinary course, (2) not pay any dividends on or make other distributions in respect of its capital stock, (3) not amend its certificate of incorporation, bylaws or other governing documents (except to the extent contemplated by the transaction) and (4) not make any acquisitions or loans other than those permitted by the Merger Agreement.

          Consummation of the Merger and the Share Issuances is subject to various conditions, including the approval by the Company’s stockholders of an amendment to the Company’s Amended and Restated Certificate of Incorporation increasing the Company’s authorized capitalization as well as other matters in connection with the Share Issuances, and the absence of legal impediments. In the Merger Agreement, the Company has agreed hold a meeting of Company stockholders as promptly as practical at which Company stockholders will be asked to approve the actions necessary to consummate the Merger and the Share Issuance. The Merger and the Share Issuances are not subject to any financing condition.

          Harbinger Capital Partners have agreed that at, and subject to, the consummation of the Merger, Harbinger Capital Partners will provide, or cause to be provided to the Company, a senior secured revolving credit facility (the “Harbinger Facility”) to provide for financing for the transactions contemplated by the Merger Agreement. The terms of the Harbinger Facility will provide for a scheduled maturity no sooner than three years from the Effective Date, an interest rate (assuming no default) of 650 basis points over LIBOR and a 6.5% prepayment penalty declining ratably on an annual basis until maturity. The Company will pay Harbinger Capital Partners a fee of $5 million for providing financing for the transaction (pro rated to the extent a portion of the financing is provided by other sources).

          The Merger Agreement contains certain termination rights for both the Company and APN Holdco. The Merger Agreement further provides that upon termination of the Merger Agreement as the result of either the Company’s Board of Directors withdrawing its recommendation for the Merger or a superior proposal, the Company would be obligated to pay APN Holdco a termination fee of $1.0 million plus up to $1.0 million of expenses.

          It is contemplated that as of the closing of the Merger all of the directors of the Company will be replaced by designees of APN Holdco.

          Concurrently with the execution of the Merger Agreement, Harbinger Capital Partners entered into a Commitment Agreement pursuant to which Harbinger Capital Partners, among other things, agree (1) to execute and deliver and not revoke or modify their unanimous written consent approving the transaction, (2) subject to certain exceptions, not to transfer any of their shares of APN Holdco common stock or any Second Lien Notes or 2008 Notes prior to the Effective Time and (3) to surrender their 2008 Notes and Second Lien Notes to the Company in

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payment of the Aggregate Purchase Price for the shares of Salton’s Series D Nonconvertible (NonVoting) Preferred Stock.

          The foregoing descriptions of the Merger Agreement, the Series A Amendment, the Series C Amendment, the Series D Certificate of Designation and the Commitment Agreement do not purport to describe all of the terms of such documents and are qualified in their entirety by reference to the full text of such documents, copies of which are filed as Exhibit 99.1, 99.2, 99.3, 99.4 and 99.5 respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Registration Rights Agreements

          The Merger Agreement requires that at the Effective Time the Company and Harbinger Capital Partners enter into a Registration Rights Agreement (the “Merger Registration Rights Agreement”) pursuant to which the Company agreed to provide certain demand and piggyback registration rights to APN Holdco Stockholders.

          The foregoing description of the Merger Registration Rights Agreement does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of the form of such agreement, a copy of which is filed as Exhibit 99.6 to this Current Report on Form 8-K and is incorporated by reference herein.

          In order to induce Contrarian Equity Fund, L.P., which beneficially owns approximately 46% of the outstanding shares of Series C Preferred Stock, to consent to the Series C Amendment, the Company and Contrarian entered into a Registration Rights Agreement (the “Contrarian Registration Rights Agreement”) pursuant to which the Company agreed, subject to certain terms and conditions, to register the shares of Company Common Stock issued to Contrarian in connection with the Series C Amendment.

          The foregoing description of the Contrarian Registration Rights Agreement does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of the form of such agreement, a copy of which is filed as Exhibit 99.7 to this Current Report on Form 8-K and is incorporated by reference herein.

Release

          The Merger Agreement requires that at the Effective Time the Company enter into a Release on behalf of itself and its subsidiaries releasing APN Holdco, Applica, Harbinger Capital Partners and their respective affiliates from any and all causes of actions and liabilities arising prior to the Effective Time, including with respect to the termination of the prior merger agreement between the Company and APN Holdco.

          The foregoing description of the Release does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of the form of such

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agreement, a copy of which is filed as Exhibit 99.8 to this Current Report on Form 8-K and is incorporated by reference herein.

Financing Related Agreements

          Concurrently with the execution and delivery of the Merger Agreement, Salton, its subsidiaries, Silver Point Finance, LLC, (“Silver Point”) as co-agent for the lenders under Salton’s senior secured credit facility and Harbinger Capital Partners entered into a Loan Purchase Agreement. The Loan Purchase Agreement provides that at any time (1) from and after the date any party to the Merger Agreement has, or asserts, the right to terminate the Merger Agreement or the Merger Agreement is terminated and/or (2) on or after November 10, 2007 and prior to February 1, 2008 (provided, in each case, no insolvency proceeding with respect to Salton or its subsidiaries is then proceeding), at the request of Silver Point, Harbinger Capital Partners shall purchase from Silver Point certain overadvance loans outstanding under Salton’s senior secured credit facility having an aggregate principal amount of up to approximately $68.5 million. The purchase price shall be equal to 100% of the outstanding principal amount of the overadvance loans, plus all accrued and unpaid interest thereon through and including the date of purchase.

          In the event that Harbinger Capital Partners purchase the overadvance loans pursuant to the Loan Purchase Agreement, the amount of the purchased overadvance loans will be deemed discharged under Salton’s senior secured credit facility and the principal amount of such over advance loans, plus all accrued and unpaid interest thereon and a $5 million drawdown fee payable to Harbinger Capital Partners as a result of such purchase, will be automatically converted to loans under a new Reimbursement and Senior Secured Credit Agreement dated as of October 1, 2007 among Harbinger Capital Partners, Salton and its subsidiaries that are signatories thereto as borrowers and guarantors.

          The Loan Purchase Agreement also provides that under certain circumstances, including the commencement of an insolvency proceeding with respect to Salton or its subsidiaries, at the request of Silver Point, Harbinger Capital Partners shall purchase from Silver Point all of the outstanding obligations under Salton’s senior secured credit facility (and Harbinger Capital Partners Special Situations Fund, L.P. shall become the agent and co-agent thereunder).

          The Reimbursement and Senior Secured Credit Agreement has a maturity date of January 30, 2008. The interest rate with respect to loans under the Reimbursement and Senior Secured Credit Agreement is the six month LIBOR plus 10.5%, payable in cash on the last business day of each month. The default rate is LIBOR plus 12.5%.

          The Reimbursement and Senior Secured Credit Agreement contains covenants that are substantially the same as the covenants contained in Salton’s senior secured credit facility except there are no financial maintenance covenants. Under the terms of the Reimbursement and Senior Secured Credit Agreement, to the extent that the lenders under Salton’s senior secured credit facility amend or modify the covenants under such facility, the parallel covenants under the

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Reimbursement and Senior Secured Credit Agreement shall be automatically deemed amended or modified; provided that the lenders under Salton’s senior secured credit facility may not amend or modify the covenant limiting the maximum amount of Salton’s senior secured credit facility.

          Subject to the Amended and Restated Intercreditor Agreement described below, if an event of default (other than an event of default resulting from certain events of bankruptcy, insolvency or reorganization) occurs and is continuing, the agent under the Reimbursement and Senior Secured Credit Agreement and the holders of at least 66-2/3% in principal amount of loans thereunder then outstanding may declare the principal of and accrued but unpaid interest on all of such loans to be due and payable. If an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs and is continuing, the principal of and interest on all of the loans thereunder shall automatically become immediately due and payable without notice or demand of any kind.

          The loans under the Reimbursement and Senior Secured Credit Agreement are secured by a second-priority lien on substantially all of Salton’s domestic assets and a pledge of the capital stock of our domestic subsidiaries and certain of our foreign subsidiaries. The loans are also unconditionally guaranteed by each of Salton’s direct and indirect domestic subsidiaries.

          In connection with the Loan Purchase Agreement: (a) Salton entered into a waiver, consent, forbearance and seventeenth amendment to its senior secured credit agreement pursuant to which Silver Point (1) permits the transactions contemplated by the Loan Purchase Agreement and related documents, (2) waives any event of default resulting from a going concern qualification in the report by Salton’s independent auditors accompanying Salton’s audited financial statements as of and for the period ending June 30, 2007, and (3) subject to certain conditions, forbears from exercising remedies with respect to certain existing events of default relating to, among other things, the filing of Salton’s annual report on Form 10-K for the fiscal year ended June 30, 2007 and the delivery of foreign stock pledge agreements and blocked account control agreements; (b) Salton entered into a waiver, consent and first amendment to its second lien credit agreement which, among other things, permits the transactions contemplated by the Loan Purchase Agreement and related documents; (c) the agent and co-agent for Salton’s senior secured credit agreement, the agent for the Reimbursement and Senior Secured Credit Agreement and the second lien agent for Salton’s second lien credit agreement entered into an Amended and Restated Intercreditor Agreement which, among other things, governs the priority of rights among the lenders; and (d) the agent for the Reimbursement and Senior Secured Credit Agreement and the second lien agent for the second lien credit agreement entered into a Junior Intercreditor Agreement governing the priority of rights among the lenders thereunder.

          The foregoing description of each of the Loan Purchase Agreement, Reimbursement and Senior Secured Credit Agreement, seventeenth amendment to Salton’s senior secured credit agreement, amendment to Salton’s second lien credit agreement, Amended and Restated Intercreditor Agreement and Junior Intercreditor Agreement does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of such

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agreement, a copy of which is filed as Exhibits 99.9, 99.10, 99.11, 99.12, 99.13 and 99.14, respectively, to this Current Report on Form 8-K and is incorporated herein by reference.

Item 3.02 Unregistered Sales Of Equity Securities

          The disclosures in Item 1.01 are incorporated in this Item 3.02 by reference.

          The shares of Company Common Stock and Series D Nonconvertible (NonVoting) Preferred Stock issuable in connection with the Merger and the Share Issuances will be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to one or more exemptions therefrom, including Section 5 of the Securities Act set forth in Section 4(2) thereof and Regulation D promulgated thereunder. Each of APN Holdco and the Harbinger Capital Partners is an accredited investor as defined in Rule 501 of the Regulation D promulgated under the Securities Act of 1933.

          Such shares of Company Common Stock and Series D Nonconvertible (NonVoting) Preferred Stock have not been registered under the Securities Act or applicable state securities laws and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or an applicable exemption from registration requirements. Salton may be required to register the shares under the Securities Act pursuant to the terms of the Merger Registration Rights Agreement and the Contrarian Registration Rights Agreement.

Item 3.03 Material Modification To Rights Of Security Holders

          The disclosures in Item 1.01 are incorporated in this Item 3.03 by reference.

          In connection with the Merger Agreement, the Company and UMB Bank, N.A., the Rights Agent entered into a Third Amendment to Rights Agreement, which has the effect of making the Company’s existing Rights Agreement, dated as of June 28, 2004 and as subsequently amended as of June 7, 2006 and on February 7, 2007, and the rights issued to the Company’s stockholders thereunder, inapplicable to the specific transactions contemplated by the Merger Agreement.

          In connection with the Merger Agreement, the board of directors of the Company approved and recommended for approval by the stockholders of the Company: (1) an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 1 billion; (2) the Series A Amendment pursuant to which each share of Salton’s Series A Voting Convertible Preferred Stock will be converted, contemporaneously with the Effective Time, into 2197.49 shares of Salton’s common stock; (3) the Series C Amendment pursuant to which each share of Salton’s Series C Nonconvertible (NonVoting) Preferred Stock will be converted, contemporaneously with the Effective Time, into 249.56 shares of Salton’s common stock; and (4) the Share Issuances.

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          The foregoing description of the Third Amendment to the Rights Agreement, the amendment to the Company’s Restated Certificate of Incorporation, the Series A Amendment and the Series C Amendment do not purport to describe all of the terms of such amendments and are qualified in their entirety by reference to the full text of such amendments, copies of which are filed as Exhibit 99.15, 99.16, 99.2 and 99.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 8.01 Other Events

          On October 2, 2007, the Company issued a press release, a copy of which is attached hereto as Exhibit 99.17 and incorporated herein by reference, announcing the signing of the Merger Agreement.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          Certain matters discussed in this Form 8-K are “forward-looking statements” intended to qualify for the safe harbors from liability established by the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salton undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) the failure to obtain approval of the merger from Salton stockholders, (2) the ability of the two businesses to be integrated successfully, (3) the ability of the new company to fully realize the cost savings and any synergies from the proposed transaction within the proposed time frame, (4) disruption from the merger making it more difficult to maintain relationships with customers, employees or suppliers, (5) customer acceptance of the new combined entity, (6) changes in the sales prices, product mix or levels of consumer purchases of kitchenware and small electric household appliances, economic conditions and the retail environment, (7) bankruptcy of or loss of major retail customers or suppliers, (8) changes in costs including transportation costs, of raw materials, key component parts or sourced products, (9) delays in delivery or the unavailability of raw materials, key component parts or sourced products, (10) changes in suppliers, (11) exchange rate fluctuations, changes in the foreign import tariffs and monetary policies, and other changes in the regulatory climate in the foreign countries in which Salton and Applica buy, operate and/or sell products, (12) product liability, regulatory actions or other litigation, warranty claims or returns of products, (13) customer acceptance of changes in costs of, or delays in the development of new products, (14) delays in or increased costs of restructuring programs and (15) increased competition, including consolidation within the industry; as well as other risks and uncertainties detailed from time to time in Salton’s Securities and Exchange Commission filings.

ADDITIONAL INFORMATION

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          In connection with the Merger, Salton intends to file with the SEC and furnish to its stockholders a proxy statement. Stockholders are advised to read the proxy statement when it is finalized and distributed to stockholders because it will contain important information about the Merger. Stockholders will be able to obtain a free-of-charge copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC’s website at www.sec.gov. Stockholders will also be able to obtain a free-of-charge copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to Salton, Inc. 1955 W. Field Court, Lake Forest, Illinois 60045, Attention: Corporate Secretary, Telephone (847) 803-4600, or from Salton’s website, www.salton.com.

          Salton and certain of its directors, executive officers and other members of management and employees may, under the rules of the SEC, be deemed to be “participants” in the solicitation of proxies from stockholders of Salton in favor of the amendment to the Company’s Certificate of Incorporation and the Share Issuances. Information regarding the persons who may be considered “participants” in the solicitation of proxies will be set forth in Salton’s proxy statement when it is filed with the SEC. Information regarding certain of these persons and their beneficial ownership of Salton common stock is also set forth in Salton’s most recent proxy statement and annual report on Form 10-K, which are available on Salton’s website and www.sec.gov. Additional information regarding the interests of the participants will be included in the proxy statement and other relevant documents filed with the SEC.

Item 9.01 Financial Statements and Exhibits

          (c) Exhibits

99.1	Agreement and Plan of Merger dated as of October 1, 2007 by and between Salton, Inc., SFP Merger Sub, Inc. and APN Holding Company, Inc.
99.2	Form of Certificate of Amendment to Certificate of Designation of Series A Voting Convertible Preferred Stock
99.3	Form of Certificate of Amendment to Certificate of Designation of Series C Nonconvertible (NonVoting) Preferred Stock
99.4	Form of Certificate of Designation of Series D Nonconvertible (NonVoting) Preferred Stock
99.5	Commitment Agreement dated as of October 1, 2007 by and between Salton, Inc., Harbinger Capital Partners Master Fund I, Ltd., and Harbinger Capital Partners Special Situations Fund, L.P.
99.6	Form of Registration Rights Agreement by and between Salton, Inc., Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P.

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99.7	Registration Rights Agreement dated as of October 1, 2007 by and between Salton, Inc. and Contrarian Equity Fund L.P.
99.8	Form of Release by Salton, Inc.
99.9	Loan Purchase Agreement dated as of October 1, 2007, by and between Silver Point Finance, as co-agent for the Lenders (as defined therein), Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Salton and each of Salton’s subsidiaries identified on the signature pages thereof as Borrowers and Guarantors.
99.10	Reimbursement and Senior Secured Credit Agreement dated as of October 1, 2007 by and among Harbinger Capital Partners Maser Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P., as the lenders, Harbinger Capital Partners Master Fund I, Ltd., as the agent, Salton, Inc. and each of its subsidiaries that are signatories thereto, as the borrowers, and each of its other subsidiaries that are signatories thereto, as guarantors.
99.11	Waiver, Consent, Forbearance and Seventeenth Amendment to Amended and Restated Credit Agreement dated as of October 1, 2007 by and among the Lenders, Wells Fargo Foothill, Inc., as administrative agent, and collateral agent for the Lenders, Silver Point Finance, LLC, as co-agent, syndication agent, documentation agent, arranger and book runner, Salton, Inc., each of Salton’s subsidiaries identified on the signature pages thereof as Borrowers and each of Salton’s Subsidiaries identified on the signature pages thereof as Guarantors.
99.12	Waiver, Consent and First Amendment to Credit Agreement dated as of October 1, 2007 among the financial institutions named therein, as the lenders, The Bank of New York, as the agent, Salton, Inc. and each of its subsidiaries that are signatories thereto, as the borrowers, and each of its other subsidiaries that are signatories thereto, as guarantors.
99.13	Amended and Restated Intercreditor Agreement dated as of October 1, 2007 by and between Silver Point Finance, LLC, Wells Fargo Foothill, Inc., The Bank of New York and Harbinger Capital Partners Master Fund I, Ltd.
99.14	Junior Intercreditor Agreement dated as of October 1, 2007 by and between The Bank of New York and Harbinger Capital Partners Master Fund I, Ltd.
99.15	Third Amendment to Rights Agreement dated as of October 1, 2007, by and between Salton, Inc. and UMB Bank, N.A.

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99.16	Form of Amendment to Restated Certificate of Incorporation of Salton, Inc.
99.17	Press Release issued on October 2, 2007.

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SIGNATURE

          Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 1, 2007

SALTON, INC.

/s/ WILLIAM LUTZ          

William Lutz

Chief Financial Officer

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EXHIBIT INDEX

Exhibit
No.	Description
99.1	Agreement and Plan of Merger dated as of October 1, 2007 by and between Salton, Inc., SFP Merger Sub, Inc. and APN Holding Company, Inc.
99.2	Form of Certificate of Amendment to Certificate of Designation of Series A Voting Convertible Preferred Stock
99.3	Form of Certificate of Amendment to Certificate of Designation of Series C Nonconvertible (NonVoting) Preferred Stock
99.4	Form of Certificate of Designation of Series D Nonconvertible (NonVoting) Preferred Stock
99.5	Commitment Agreement dated as of October 1, 2007 by and between Salton, Inc., Harbinger Capital Partners Master Fund I, Ltd., and Harbinger Capital Partners Special Situations Fund, L.P.
99.6	Form of Registration Rights Agreement by and between Salton, Inc., Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P.
99.7	Registration Rights Agreement dated as of October 1, 2007 by and between Salton, Inc. and Contrarian Equity Fund, L.P.
99.8	Form of Release by Salton, Inc.
99.9	Loan Purchase Agreement dated as of October 1, 2007, by and between Silver Point Finance, as co-agent for the Lenders (as defined therein), Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Salton and each of Salton’s subsidiaries identified on the signature pages thereof as Borrowers and Guarantors.
99.10	Reimbursement and Senior Secured Credit Agreement dated as of October 1, 2007 by and among Harbinger Capital Partners Maser Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P., as the lenders, Harbinger Capital Partners Master Fund I, Ltd., as the agent, Salton, Inc. and each of its subsidiaries that are signatories thereto, as the borrowers, and each of its other subsidiaries that are signatories thereto, as guarantors.

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Exhibit
No.	Description
99.11	Seventeenth Amendment to Amended and Restated Credit Agreement dated as of October 1, 2007 by and among the Lenders, Wells Fargo Foothill, Inc., as administrative agent, and collateral agent for the Lenders, Silver Point Finance, LLC, as co-agent, syndication agent, documentation agent, arranger and book runner, Salton, Inc., each of Salton’s subsidiaries identified on the signature pages thereof as Borrowers and each of Salton’s Subsidiaries identified on the signature pages thereof as Guarantors.
99.12	Waiver, Consent and First Amendment to Credit Agreement dated as of October 1, 2007 among the financial institutions named therein, as the lenders, The Bank of New York, as the agent, Salton, Inc. and each of its subsidiaries that are signatories thereto, as the borrowers, and each of its other subsidiaries that are signatories thereto, as guarantors.
99.13	Amended and Restated Intercreditor Agreement dated as of October 1, 2007 by and between Silver Point Finance, LLC, Wells Fargo Foothill, Inc., The Bank of New York and Harbinger Capital Partners Master Fund I, Ltd.
99.14	Junior Intercreditor Agreement dated as of October 1, 2007 by and between The Bank of New York and Harbinger Capital Partners Master Fund I, Ltd.
99.15	Third Amendment to Rights Agreement dated as of October 1, 2007, by and between Salton, Inc. and UMB Bank, N.A.
99.16	Form of Amendment to Restated Certificate of Incorporation of Salton, Inc.
99.17	Press Release issued on October 2, 2007.

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EX-99.1

Exhibit 99.1

Execution Version

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

SALTON, INC.,

SFP MERGER SUB, INC.

AND

APN HOLDING COMPANY, INC.

DATED AS OF OCTOBER 1, 2007

TABLE OF CONTENTS

	Page No.
I. DEFINITIONS		2
1.1 Definitions		2
1.2 Interpretation		10
II. MERGER		11
2.1 The Merger		11
2.2 Certificate of Incorporation and Bylaws		11
2.3 Directors		11
2.4 Officers		12
III. CONVERSION OF SHARES AND OTHER MATTERS		12
3.1 Conversion of Capital Stock		12
3.2 Adjustments to Prevent Dilution		13
3.3 Exchange of Certificates		13
3.4 Treatment of Strawberry Stock Options and Other Equity Based Awards		14
3.5 No Further Rights; Stock Transfer Books		14
3.6 Tax Consequences		14
3.7 Securities Act Exemption and Compliance; Registration Rights		14
IV. REPRESENTATIONS AND WARRANTIES OF PARENT		15
4.1 Due Organization, Good Standing and Corporate Power		15
4.2 Authorization and Validity of Agreement		15
4.3 Consents and Approvals; No Violations		16
4.4 Information to be Supplied		17
4.5 Capitalization of Parent and MergerSub		17
4.6 Absence of Certain Events		19
4.7 Litigation		19
4.8 Title to Properties; Encumbrances		20
4.9 Strawberry SEC Reports; Financial Statements		20
4.10 No Undisclosed Liabilities		21
4.11 Compliance with Law		21
4.12 Insurance		22
4.13 Regulatory Matters		22
4.14 Broker’s or Finder’s Fee		23
4.15 Taxes, Tax Returns, Tax Treatment		23
4.16 Employee Benefit Matters		24
4.17 Intellectual Property		26
4.18 Environmental Liability		26
4.19 Material Contracts		27
4.20 Labor Relations		27
4.21 State Takeover Laws		28

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	Page No.
4.22 Voting Requirements; Approval; Board Approval		28
4.23 Opinion of Parent Financial Advisor		29
4.24 Transactions with Related Parties		29
4.25 Customers		29
4.26 Strawberry Rights Agreements		30
4.27 MergerSub Formation		30
V. REPRESENTATIONS AND WARRANTIES OF APPLE HOLDCO		30
5.1 Due Organization, Good Standing and Corporate Power		31
5.2 Authorization and Validity of Agreement		31
5.3 Consents and Approvals; No Violations		31
5.4 Information to be Supplied		32
5.5 Capitalization of Apple Holdco and Apple		32
5.6 Absence of Certain Events		34
5.7 Litigation		34
5.8 Title to Properties; Encumbrances		34
5.9 Apple SEC Reports; Financial Statements		34
5.10 No Undisclosed Liabilities		36
5.11 Compliance with Law		36
5.12 Insurance		36
5.13 Regulatory Matters		36
5.14 Broker’s or Finder’s Fee		37
5.15 Taxes, Tax Returns, Tax Treatment		37
5.16 Employee Benefit Matters		38
5.17 Intellectual Property		40
5.18 Environmental Liability		41
5.19 Material Contracts		41
5.20 Labor Relations		42
5.21 State Takeover Laws		42
5.22 Voting Requirements; Approval; Board Approval		42
5.23 Transactions with Related Parties		43
5.24 Customers		43
5.25 Apple Holdco		43
VI. COVENANTS		44
6.1 Covenants of Parent		44
6.2 Covenants of Apple Holdco		47
6.3 Antitrust Clearance		48
6.4 Efforts to Close		50
6.5 Confidentiality		50
6.6 Access		50
6.7 Public Announcements		51
6.8 Board Recommendation; Strawberry Stockholders Meeting		51
6.9 Preparation of Proxy Statement and Additional Filings		51
6.10 No Solicitation; Other Offers		53
6.11 Notification of Certain Matters		55
6.12 Fees and Expenses		55

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	Page No.
6.13 Directors’ and Officers’ Indemnification and Insurance		55
6.14 Financing		57
6.15 Litigation		59
6.16 Director Resignations; Appointments		59
6.17 Post Closing Governance of Parent		59
6.18 Transaction Documents		59
6.19 401(k) Plan		59
6.20 Anti-Dilution Protection		59
VII. CONDITIONS TO THE MERGER		60
7.1 Conditions to the Merger		60
7.2 Conditions to the Obligations of Apple Holdco		60
7.3 Conditions to the Obligations of Parent and MergerSub		63
VIII. TERMINATION AND ABANDONMENT		64
8.1 Termination		64
8.2 Effect of Termination		65
8.3 Fees and Expenses		65
IX. MISCELLANEOUS		66
9.1 Nonsurvival of Representations, Warranties and Covenants		66
9.2 Amendment and Modification		66
9.3 Waiver of Compliance		66
9.4 Notices		67
9.5 Third Party Beneficiaries		67
9.6 Successors and Assigns		68
9.7 Severability		68
9.8 Governing Law		68
9.9 Submission to Jurisdiction; Waivers		68
9.10 Specific Performance		69
9.11 Counterparts		69
9.12 Entire Agreement		69
9.13 Waiver of Jury Trial		69

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EXHIBITS

Exhibit A	Amended Strawberry Certificate of Incorporation
Exhibit B	Series A Amendment
Exhibit C	Commitment Agreement
Exhibit D	Release
Exhibit E	Series C Amendment
Exhibit F	Surviving Corporation Certificate of Incorporation
Exhibit G	Surviving Corporation Bylaws
Exhibit H	New Senior Secured Credit Agreements
Exhibit I	Apple Holdco Stockholders Registration Rights Agreement
Exhibit J	Series D Certificate of Designation

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AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), is dated as of October 1, 2007, by and among Salton, Inc., a Delaware corporation (“Parent”), SFP Merger Sub, Inc., a Delaware corporation (“MergerSub”) and a wholly owned direct subsidiary of Parent, and APN Holding Company, Inc., a Delaware corporation (“Apple Holdco”) and the direct parent of Applica Incorporated, a Florida corporation (“Apple”).

RECITALS

     A. Each of the boards of directors of Parent, MergerSub and Apple Holdco has approved and declared advisable the business combination transaction contemplated by this Agreement in which MergerSub will merge with and into Apple Holdco (the “Merger”), with Apple Holdco being the surviving corporation (as such, the “Surviving Corporation”), all on the terms and subject to the conditions set forth in this Agreement.

     B. By virtue of the Merger, all of the issued and outstanding shares of common stock, par value $0.01 per share, of Apple Holdco (the “Apple Holdco Common Stock”) will be converted into the right to receive fully paid and non assessable shares of common stock, par value $0.01 per share, of Parent (the “Strawberry Common Stock”).

     C. Parent’s board of directors has approved and has resolved to recommend to Parent’s stockholders that they approve (i) the issuance of Strawberry Common Stock to be issued to (1) the Apple Holdco Stockholders in connection with the Merger (2) the holders of Strawberry Series A Preferred upon conversion of such shares in accordance with the Series A Amendment (as defined herein), and (3) the holders of Series C Preferred upon conversion of such shares in accordance with the Series C Amendment (as defined herein) (collectively, the “Common Share Issuance”) and (ii) an amendment of the Certificate of Incorporation of Parent to be effected contemporaneously with the consummation of the Merger such that, after giving effect thereto, the Certificate of Incorporation of Parent shall be substantially in the form attached hereto as Exhibit A (the “Strawberry Charter Amendment”).

     D. Parent’s board of directors has approved and has resolved to recommend to Parent’s stockholders that they approve the issuance of Series D Preferred, $0.01 par value per share, of Parent (“Strawberry Series D Preferred”) to be issued to the Apple Holdco Stockholders in exchange for Strawberry Second Lien Notes and Strawberry Subordinated Notes (each as defined herein) (the “Preferred Shares Issuance” and together with the Common Share Issuance, the “Share Issuances”) in accordance with the Commitment Agreement (as defined below).

     E. Parent’s board of directors approved and recommended to Parent’s stockholders that they approve the Series A Amendment, and subsequent to such approval and recommendation, the holders of all of the outstanding Strawberry Series A Preferred acting by written consent have approved the Series A Amendment.

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     F. Parent’s board of directors approved and recommended to Parent’s stockholders that they approve the Series C Amendment, and subsequent to such approval and recommendation, the holders of in excess of a majority of the outstanding Strawberry Series C Preferred acting by written consent have approved the Series C Amendment.

     G. Concurrently with the execution of this Agreement, and as a condition to the willingness of Parent to enter into this Agreement, each of the Apple Holdco Stockholders, and Parent have entered into a reimbursement and senior secured credit agreement and related documents in the form attached hereto as Exhibit H (the “New Senior Secured Credit Agreements”).

     H. Concurrently with the execution of this Agreement, and as a condition to the willingness of Parent to enter into this Agreement, Parent and each of the Apple Holdco Stockholders are entering into a commitment agreement in the form attached hereto as Exhibit C, pursuant to which the Apple Holdco Stockholders, among other things, agree (i) to execute and deliver, and not to revoke or modify, the unanimous written consent of the Apple Holdco Stockholders approving the Transactions, (ii) not to transfer any of their shares of Apple Holdco Common Stock or any Strawberry Second Lien Notes or Strawberry Subordinated Notes except as permitted thereby and (iii) to exchange their Strawberry Second Lien Notes and the Strawberry Subordinated Notes for shares of Strawberry Series D Preferred (the “Commitment Agreement”).

     I. Concurrently with the execution of this Agreement, and as a condition to the willingness of Parent to enter into this Agreement, Apple Holdco and each of the Apple Holdco Stockholders are entering into a commitment letter pursuant to which the Apple Holdco Stockholders agree to provide the Harbinger Facility as contemplated by Section 6.14 hereof (the “Harbinger Financing Commitment Letter”).

     J. For federal income tax purposes, the Merger will constitute a reorganization within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code and the exchange of Apple Holdco Common Stock for Strawberry Common Stock pursuant to the Merger will constitute an exchange of securities in pursuance of a plan of reorganization within the meaning of Section 354(a) of the Code.

     Accordingly, the parties agree as follows:

I. DEFINITIONS

     1.1 Definitions.

          (a) In addition to the terms defined elsewhere herein, as used in this Agreement, the following terms have the meanings specified below when used in this Agreement with initial capital letters:

     “Action” means any controversy, claim, action, litigation, arbitration, mediation or any other proceeding by or before any Governmental Entity, arbitrator,

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mediator or other Person acting in a dispute resolution capacity, or any investigation, subpoena or demand preliminary to any of the foregoing.

     “Adverse Recommendation Change” means either (i) any failure by the board of directors of Parent to make, or any withdrawal, qualification, amendment or modification in a manner adverse to Apple Holdco of, the Strawberry Board Recommendation or (ii) any approval, endorsement or recommendation by Parent’s board of directors of a Strawberry Competing Transaction.

     “Affiliate” means, with respect to a Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. For purposes of this Agreement, (i) Apple Holdco and its Subsidiaries shall not be considered Affiliates of Parent, MergerSub or their respective Affiliates and (ii) Parent, MergerSub and their respective Affiliates shall not be considered Affiliates of Apple Holdco or any of its Subsidiaries.

     “Antitrust Laws” means the Sherman Antitrust Act, as amended, the Clayton Act of 1914, as amended, the HSR Act, the Federal Trade Commission Act of 1914, as amended, and all other Laws and Orders that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

     “Apple Confidentiality Agreement” means the confidentiality agreement entered into by and among Apple and Parent, dated as of November 11, 2005, as the same may be amended from time to time in accordance with its terms.

     “Apple Holdco Interest” means, as of any date, the percentage of the Total Voting Power Beneficially Owned by the Apple Holdco Stockholders and their Affiliates (taken as a whole) on such date.

     “Apple Material Adverse Effect” means a material adverse effect on (i) the business, financial condition or results of operations of Apple Holdco and its Subsidiaries taken as a whole or (ii) the ability of Apple Holdco to consummate the Merger or to perform its obligations under this Agreement on a timely basis or to consummate the Transactions on a timely basis; provided, however, that in no event shall any of the following be deemed to constitute an Apple Material Adverse Effect: any event, circumstance, change or effect resulting from or relating to (i) a change in general political, economic or financial market conditions, (ii) changes affecting the industries generally in which Apple or its Subsidiaries conduct business, (iii) seasonal fluctuations in the business of Apple and its Subsidiaries, (iv) any acts of terrorism or war or (v) compliance with the terms of, or the taking of any action required by, this Agreement; except in the case of each of clauses (i), (ii), (iii) and (iv) to the extent such event, circumstance, change or effect has had a disproportionate effect on Apple and its Subsidiaries as compared to other Persons in the industry in which Apple and its Subsidiaries conduct their business.

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     “Apple Holdco Stockholders” means (i) prior to the Effective Time, the holders of record of Apple Holdco Common Stock, and (ii) after the Effective Time, the holders of record immediately prior to the Effective Time of Apple Holdco Common Stock.

     “Authorization” means any legally required consent or Permit of or from, or declaration or filing with, any Governmental Entity, including any legally required filing with any Governmental Entity and the subsequent expiration of any legally required waiting period under any Antitrust Laws.

     “Beneficially Owned” has the meaning specified in Rule 13d-3 under the Exchange Act.

     “Business Day” means any day on which commercial banks in New York, New York are not required or authorized to be closed by Law or executive order.

     “Centre Partner Entities” means Centre Capital Investors II, L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre Capital Offshore Investors II, L.P., Centre Parallel Management Partners, L.P., Centre Partners Co-Investment, L.P. and the State Board of Administration of Florida.

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

     “Confidentiality Agreements” means the Apple Confidentiality Agreement and the Harbinger Confidentiality Agreement.

     “Contract” means any legally binding instrument or legal obligation of any kind, whether written or oral.

     “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as a trustee or executor, by Contract or credit arrangement or otherwise.

     “Encumbrance” means any lien, security interest, pledge, mortgage, deed of trust, charge, option or other encumbrance attaching to title to any tangible or intangible property or right.

     “Environment” means any land, soil, substrata, groundwater, surface water, drinking water, sediment, air or terrestrial or aquatic biota.

     “Environmental Laws” means all Laws and Orders in effect on and after the date hereof relating to the protection of human health and the Environment, including Laws relating to Releases or threatened Releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

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

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Expenses” means all out of pocket costs and expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party to this Agreement or such party’s Affiliates) incurred at or prior to the Effective Time by a party to this Agreement or on its behalf in connection with or related to the authorization, preparation, negotiation, execution or performance of this Agreement and the Transactions, excluding all costs and expenses that constitute ongoing business expenses (as opposed to Transaction related expenses) of such party, or such party’s Affiliates, including, salary and benefits of a party’s, or such party’s Affiliates’, employees or similar overhead costs that a party, or such party’s Affiliates, would have regardless of pursuit of the Transactions.

     “GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

     “Governmental Entity” means any arbitrator, court, judicial, legislative, administrative or regulatory agency, commission, department, board, bureau, body or other governmental authority or instrumentality or any Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, whether foreign, federal, state or local.

     “Harbinger Confidentiality Agreement” means the confidentiality agreement entered into by and between Harbinger Capital Partners Master Fund I, Ltd. and Parent, dated as of October 25, 2006 an amended November 3, 2006, as the same may be amended from time to time in accordance with its terms.

     “Hazardous Materials” means any material, substance, chemical, waste, hazardous waste, pollutant, contaminant or hazardous or toxic substance as to which liabilities, restrictions or standards of conduct are imposed pursuant to any Environmental Laws, including asbestos, formaldehyde, polychlorinated biphenyls, lead based paint, radioactive materials, waste oil and other petroleum products.

     “IRS” means the Internal Revenue Service.

     “Indebtedness” means without duplication, (i) indebtedness for borrowed money (excluding any interest thereon), secured or unsecured, (ii) obligations under conditional sale or other title retention Contracts relating to purchased property, (iii) capitalized lease obligations, (iv) obligations under interest rate cap, swap, collar or similar transactions or currency hedging, transactions and (v) guarantees of any Indebtedness of the foregoing of any other Person.

     “Knowledge” (and any variation thereof) means (i) in the case of Apple Holdco, the actual knowledge after due inquiry of the individuals listed on

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Section 1.1(a)(i) of the Apple Disclosure Schedule as of the date of the applicable representation or warranty, and (ii) in the case of Parent, the actual knowledge after due inquiry of the individuals listed on Section 1.1(a)(ii) of the Strawberry Disclosure Schedule as of the date of the applicable representation or warranty.

     “Law” means any statute, law, ordinance, rule or regulation of any Governmental Entity.

     “Merger Consideration” shall mean 595,500,405 fully paid and non-assessable shares of Strawberry Common Stock, as such number may be adjusted pursuant to Sections 3.2 and 6.20(a).

     “MergerSub Common Stock” means the MergerSub Common Stock, par value $0.01 per share.

     “Order” means any order, judgment, ruling, decree, writ, permit, license or other requirement of any Governmental Entity.

     “Permit” means any permit, approval, license, authorization, certificate, right, exemption or Order from any Governmental Entity.

     “Person” means any individual or legal entity, including any partnership, joint venture, corporation, trust, unincorporated organization, limited liability company or Governmental Entity.

     “Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor Environment, including the movement of Hazardous Materials through ambient air, soil, surface water, sewer system, groundwater, wetlands, or land surface strata.

     “SEC” means the Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Series A Amendment” means the Certificate of Amendment to Series A Certificate of Designation in the form attached hereto as Exhibit B pursuant to which each share of Strawberry Series A Preferred is converted, contemporaneously with the Effective Time, into 2197.49 shares of Strawberry Common Stock.

     “Series A Certificate of Designation” shall mean the Certificate of Designation of Series A Voting Convertible Preferred Stock of the Company.

     “Series C Amendment” means the Certificate of Amendment to Series C Certificate of Designation in the form attached hereto as Exhibit E pursuant to which each share of Strawberry Series C Preferred is converted, contemporaneously with the Effective Time, into 249.56 shares of Strawberry Common Stock.

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     “Series C Certificate of Designation” shall mean the Certificate of Designation of Series C Preferred Stock of the Company.

     “Series D Certificate of Designation” shall mean the Certificate of Designation of Series D Preferred Stock of the Company in the form attached hereto as Exhibit K.

     “Special Committee” means a committee of Parent’s board of directors, the members of which are not affiliated with Parent and are not members of Parent’s management, formed for the reasons set forth in the resolution establishing such committee.

     “Strawberry Material Adverse Effect” means a material adverse effect on (i) the business, financial condition or results of operations of Parent and its Subsidiaries taken as a whole or (ii) the ability of Parent and/or Merger Sub to consummate the Merger or to perform their respective obligations under this Agreement on a timely basis or to consummate the Transactions on a timely basis; provided, however, that in no event shall any of the following be deemed to constitute a Strawberry Material Adverse Effect: any event, circumstance, change or effect resulting from or relating to (i) a change in general political, economic or financial market conditions, (ii) changes affecting the industries generally in which Parent or its Subsidiaries conduct business, (iii) seasonal fluctuations in the business of Parent and its Subsidiaries, (iv) any acts of terrorism or war, (v) compliance with the terms of, or the taking of any action required by, this Agreement or (vi) any matter listed on Schedule 1.1 (provided that the underlying causes of such matters shall not be excluded from the determination of a Strawberry Material Adverse Effect); except in the case of each of clauses (i), (ii), (iii) and (iv) to the extent such event, circumstance, change or effect has had a disproportionate effect on Parent and its Subsidiaries as compared to other Persons in the industry in which Parent and its Subsidiaries conduct their business.

     “Strawberry Option Plans” means (i) the Salton/Maxim Housewares, Inc. Stock Option Plan, (ii) the Salton/Maxim Housewares, Inc. Non-Employee Directors Stock Option Plan, (iii) the Salton/Maxim Housewares, Inc. 1995 Employee Stock Option Plan, (iv) the Salton/Maxim Housewares, Inc. 1998 Stock Option Plan, (v) the Salton, Inc. 1999 Employee Stock Option Plan, (vi) the Salton, Inc. 2001 Employee Stock Option Plan, and (vii) the Salton, Inc. 2002 Stock Option Plan.

     “Strawberry Second Lien Notes” means the Second Lien Notes of Parent issued pursuant to that Credit Agreement dated as of August 26, 2005 among the financial institutions named therein as the Lenders and The Bank of New York as the Agent and Parent and each of its Subsidiaries that are signatories thereto as Borrowers and Guarantors.

     “Strawberry Stockholders” means the holders of record of Strawberry Common Stock.

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     “Strawberry Subordinated Notes” mean the 12-1/4% Senior Subordinated Notes due 2008 issued pursuant to the Indenture, dated as of April 23, 2001, among Parent, the Guarantors (as defined therein) identified on the signature pages thereto and Sun Trust Bank (as successor to Wells Fargo Bank Minnesota, N.A.), as trustee, as amended by the First Supplement to the Indenture, dated as of August 26, 2005.

     “Subsidiary” of any Person means any Person whose financial condition is required to be consolidated with the financial condition of the first Person in the preparation of the first Person’s financial statements under GAAP.

     “Tax” means (i) any federal, state, local or foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding, intangibles, franchise, backup withholding, or other tax, charge, levy, duty or like assessment imposed by a Tax Authority together with all penalties and additions and interest thereon and (ii) any liability for Taxes described in clause (i) under Treasury Regulation Section 1.1502 6 (or any similar provision of state, local or foreign Law) or pursuant to agreement, successor liability or otherwise.

     “Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax and agency (if any) charged with the collection of such Tax for such entity or subdivision.

     “Tax Return” means a report, return, statement or other information (including any attached schedules or any amendments to such report, return or other information) required to be supplied to or filed with a Tax Authority with respect to any Tax, including an information return, claim for refund, amended return or declaration of estimated Tax.

     “Total Voting Power” means, at any date, the total number of votes that may be cast in the election of directors of Parent at any meeting of stockholders of the Company held on such date assuming all shares of Voting Stock were present and voted at such meeting, other than votes that may be case only by one class or series of stock (other than Strawberry Common Stock) or upon the happening of contingency.

     “Transaction Documents” means this Agreement, the Commitment Agreement, the New Senior Secured Credit Agreements, the Release, the Harbinger Financing Commitment Letter and the Apple Holdco Stockholders Registration Rights Agreement.

     “Transactions” means the Merger, the Common Share Issuance, the Preferred Share Issuance, the Strawberry Charter Amendment, the transactions contemplated by the New Senior Secured Credit Agreements and the other transactions contemplated by this Agreement.

     “Voting Stock” means Strawberry Common Stock and all other securities of the Company, if any, entitled to vote generally in the election of directors.

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          (b) The following terms have the meanings specified in the indicated Sections:

Term	Section
Apple Financial Statements	6.9(d)
Closing Date	2.1(b)
Commitment Agreement	Recitals
Common Share Issuance	Recitals
Contingent Workers	4.16(e)
DGCL	2.1(a)
Distribution Date	4.26(b)
Dissenting Holders	6.19(b)
Dissenting Shares	6.19(b)
Effective Time	2.1(c)
Financing	6.14(a)
FIRPTA	7.2(d)
Harbinger Facility	6.14(b)
Harbinger Financing Commitment Letter	Recitals
Harbinger Funds	6.14(b)
HSR Act	4.3
Indemnified Parties	6.13(a)
Indemnifying Party	6.13(a)
Master Fund	6.14(b)
Maximum Premium	6.13(b)
Measurement Date	IV
Merger	Recitals
MergerSub	Preamble
New Senior Secured Credit Agreements	Recitals
Outside Date	8.1(e)
Parent	Preamble
Preferred Share Issuance	Recitals
Proxy Statement	4.3
Registration Rights Agreement	3.7(c)
Share Issuance	Recitals
Shares Acquisition Date	4.26(b)
Silver Point	Recitals
Strawberry Benefit Plans	4.16(a)
Strawberry Board Recommendation	4.22(c)
Strawberry Certificates	3.1(a)
Strawberry Charter Amendment	Recitals
Strawberry Common Stock	Recitals
Strawberry Competing Transaction	6.10(b)
Strawberry Disclosure Schedule	IV
Strawberry Equity Interests	4.5(a)
Strawberry ERISA Affiliate	4.16(a)
Strawberry Financial Statements	4.9(b)
Strawberry Foreign Plan	4.16(a)

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Term	Section
Strawberry Intellectual Property	4.17
Strawberry Options	4.5(a)
Strawberry Preferred	4.5(a)
Strawberry Restricted Share	3.4
Strawberry Rights	4.5(a)
Strawberry Rights Agreement	4.5(a)
Strawberry SEC Reports	4.9(a)
Strawberry Series A Preferred	4.5(a)
Strawberry Series B Preferred	4.5(a)
Strawberry Series C Preferred	4.5(a)
Strawberry Series D Preferred	Recitals
Strawberry Stock	4.5(a)
Strawberry Stockholder Approval	4.22(a)
Strawberry Stockholders Meeting	6.8
Strawberry Superior Proposal	6.10(f)
Strawberry Warrants	4.5(a)
Triggering Event	4.26(b)

     1.2 Interpretation.

          (a) When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference will be to an Article or Section or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” Unless the context otherwise requires, (i) “or” is disjunctive but not necessarily exclusive, (ii) words in the singular include the plural and vice versa, (iii) the use in this Agreement of a pronoun in reference to a party hereto includes the masculine, feminine or neuter, as the context may require, and (iv) unless otherwise defined herein, terms used herein which are defined in GAAP have the meanings ascribed to them therein. This Agreement will not be interpreted or construed to require any Person to take any action, or fail to take any action, that would violate any applicable Law. The Apple Disclosure Schedule, the Strawberry Disclosure Schedule, as well as all other Schedules and all Exhibits hereto, will be deemed part of this Agreement and included in any reference to this Agreement. Notwithstanding anything in this Agreement to the contrary, the mere inclusion of an item in any Schedule or Exhibit hereto as an exception to a representation or warranty will not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would, individually or in the aggregate, have a Strawberry Material Adverse Effect or an Apple Material Adverse Effect, as the case may be.

          (b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties,

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and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

II. MERGER

     2.1 The Merger.

          (a) On the terms and subject to the conditions of this Agreement and in accordance with the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), at the Effective Time, MergerSub will merge with and into Apple Holdco. Following the Merger, Apple Holdco will continue as the Surviving Corporation and the separate corporate existence of MergerSub will cease.

          (b) On the terms and subject to the conditions of this Agreement, the closing of the Merger (the “Closing”) will take place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York at 10:00 a.m., New York City time, as soon as practicable, but in no event later than the third Business Day, following satisfaction or waiver of the conditions set forth in Article VII hereof (other than those conditions that by their nature or pursuant to the terms of this Agreement are to be satisfied or waived at or immediately prior to the Closing, but subject to the satisfaction or, where permitted, the waiver of those conditions), or at such other date, time or place as Parent and Apple Holdco may agree. The date on which the Closing occurs is referred to as the “Closing Date.”

          (c) The Merger will become effective as set forth in the certificate of merger relating thereto (the “Certificate of Merger”) that will be filed on the Closing Date with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL and that will state, unless the parties otherwise agree, that the effective time of the Merger will occur upon filing. The time that the Merger becomes effective in accordance with Section 251 of the DGCL is referred to in this Agreement as the “Effective Time.”

          (d) The Merger will have the effects set forth in Section 259 of the DGCL. Without limiting the generality or effect of the foregoing, as of the Effective Time, all properties, rights, privileges, powers and franchises of MergerSub and Apple Holdco will vest in the Surviving Corporation and all debts, liabilities and duties of MergerSub and Apple Holdco will become debts, liabilities and duties of the Surviving Corporation.

     2.2 Certificate of Incorporation and Bylaws. The certificate of incorporation and the bylaws of Apple Holdco as in effect immediately prior to the Effective Time, attached as Exhibit F and G, respectively, will be the certificate of incorporation and bylaws of the Surviving Corporation at the Effective Time until thereafter amended further in compliance with the DGCL.

     2.3 Directors. Apple Holdco shall take all requisite action so that, at the Effective Time, the board of directors of the Surviving Corporation will consist of individuals identified or designated by Apple Holdco who will hold office until their

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respective successors are duly elected or appointed and qualified, or their earlier death, resignation or removal, in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and the DGCL.

     2.4 Officers. At the Effective Time, the officers of Apple Holdco shall resign and the board of directors of the Surviving Corporation shall appoint officers of the Surviving Corporation to hold office until their respective successors are duly appointed and qualified, or their earlier death, resignation or removal, in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and the DGCL.

III. CONVERSION OF SHARES AND OTHER MATTERS

     3.1 Conversion of Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, MergerSub, Apple Holdco or the holders of the following securities:

          (a) Conversion of Apple Holdco Common Stock. Each share of Apple Holdco Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive an amount of fully paid and non assessable shares of Strawberry Common Stock equal to the quotient of (x) the Merger Consideration divided by (y) the number of Shares of Apple Holdco Common Stock issued and outstanding immediately prior to the Effective Time, subject to the payment of cash in lieu of fractional shares of Parent Common Stock as provided in Section 3.1(c). All shares of Apple Holdco Common Stock that have been so converted into the right to receive shares of Strawberry Common Stock shall be canceled automatically and shall cease to exist, and the holders of certificates, which immediately prior to the Effective Time represented those shares (“Apple Certificates”), shall cease to have any rights with respect to those shares, other than the right to receive certificates representing shares of Strawberry Common Stock (“Strawberry Certificates”) and cash in lieu of fractional shares of Parent Common Stock as provided in Section 3.1(c) upon surrender of Apple Certificates in accordance with Section 3.3(a).

          (b) Conversion of MergerSub Capital Stock. Each share of MergerSub Common Stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Parent, MergerSub or Apple Holdco, be converted into one share of common stock of the Surviving Corporation.

          (c) Fractional Shares. No fractional shares of Strawberry Common Stock shall be issued in connection with the Merger, and no certificates or scrip for any such fractional shares shall be issued. Any Apple Holdco Stockholder who would otherwise be entitled to receive a fraction of a share of Strawberry Common Stock (after aggregating all fractional shares of Strawberry Common Stock issuable to such holder) shall, in lieu of such fraction of a share and upon surrender of such holder’s certificates that formerly evidenced shares of Apple Holdco Common Stock, be paid in cash the dollar amount (rounded to the nearest whole cent), without interest, determined

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by multiplying such fraction by the closing price of a share of Strawberry Common Stock on the date that the Merger becomes effective.

     3.2 Adjustments to Prevent Dilution. If, after the date hereof and prior to the Effective Time, Parent (i) declares a stock dividend or other distribution payable in shares of Strawberry Common Stock or securities convertible or exchangeable into or exercisable for shares of Strawberry Common Stock or (ii) effects a stock split (including a reverse stock split), reclassification, combination or other similar change with respect to the Strawberry Common Stock, then the Merger Consideration shall be equitably adjusted to eliminate the effects of that stock dividend, distribution, stock split, reclassification, combination or other change.

     3.3 Exchange of Certificates.

          (a) Exchange Procedures. At the Closing, in exchange for Strawberry Certificates and cash in lieu of fractional shares pursuant to Section 3.1(c), each Apple Holdco Stockholder shall deliver to Parent Apple Certificates representing the Apple Holdco Common Stock owned by such holder, duly endorsed in blank or accompanied by stock powers duly endorsed in blank in proper form for transfer. Upon surrender to Parent of an Apple Certificate for cancellation, the holder of such Apple Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Strawberry Common Stock (after taking into account all Apple Certificates surrendered by such holder) to which such holder is entitled pursuant to Section 3.1(a) and payment in lieu of fractional shares to which such holder is entitled pursuant to Section 3.1(c), and the Apple Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 3.3(a), each Apple Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender shares of Strawberry Common Stock pursuant to Section 3.1(a) and cash in lieu of fractional shares pursuant to Section 3.1(c). No interest shall be paid or will accrue on any cash payable in lieu of fractional shares to Apple Holdco Stockholders pursuant to the provisions of this Article III.

          (b) Withholding Rights. Each of Parent and the Surviving Company shall be entitled to deduct and withhold from any consideration otherwise payable pursuant to this Agreement to any Apple Holdco Stockholder such amounts as it is required to deduct and withhold with respect to such payment under all applicable Tax laws and pay such withholding amount over to the appropriate taxing authority. To the extent that amounts are so properly withheld by Parent or the Surviving Company, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Apple Holdco Stockholder in respect of which such deduction and withholding was made by Parent or the Surviving Company, as the case may be.

          (c) Lost, Stolen or Damaged Certificates. If any Apple Certificate shall have been lost, stolen, defaced or destroyed, Parent may, in its reasonable discretion and as a condition to the issuance of any Strawberry Certificate, require the owner of such lost, stolen, defaced or destroyed Apple Certificate to make an

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affidavit of that fact and provide an indemnity against any claim that may be made against it or the Surviving Company with respect to such Apple Certificate.

     3.4 Treatment of Strawberry Stock Options and Other Equity Based Awards. The Strawberry Option Plans shall remain outstanding and governed by the terms of the existing Strawberry Option Plans. Notwithstanding anything to the contrary in this Agreement, each share of Strawberry Common Stock which is unvested or is subject to any conditions or restrictions under any applicable restricted stock agreement or other Contract (a “Strawberry Restricted Share”) shall continue to be governed by the terms of the restrictions applicable to such Strawberry Restricted Share and the restrictions shall not lapse as a result of the transactions contemplated by this Agreement.

     3.5 No Further Rights; Stock Transfer Books. At the Effective Time, the stock transfer books of Apple Holdco shall be closed, and there shall be no further registration of transfers of Apple Holdco Common Stock issued and outstanding immediately prior to the Effective Time thereafter on the records of Parent. From and after the Effective Time, the Apple Holdco Stockholders shall cease to have any rights with respect to any shares of Apple Holdco Common Stock outstanding immediately prior to the Effective Time, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Apple Certificates presented to Parent for any reason shall be canceled against delivery of the consideration to which the holders thereof are entitled pursuant to Section 3.1(a) and Section 3.1(c), without interest.

     3.6 Tax Consequences. For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368 of the Code. The parties hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.

     3.7 Securities Act Exemption and Compliance; Registration Rights.

          (a) Private Placement. The Strawberry Common Stock to be issued pursuant to this Agreement initially will not be registered under the Securities Act in reliance on the exemptions from the registration requirements of Section 5 of the Securities Act set forth in Section 4(2) thereof and Regulation D promulgated thereunder.

          (b) Legends. In addition to any legend imposed by applicable state securities laws or by any contract which continues in effect after the Effective Time, the certificates representing the shares of Strawberry Common Stock issued pursuant to this Agreement shall bear a restrictive legend (and stop transfer orders shall be placed against the transfer thereof with Parent’s transfer agent), stating substantially as follows:

          “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR, AN

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OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.”

          (c) Registration Rights. The Apple Holdco Stockholders shall be entitled to the registration rights set forth in the Registration Rights Agreement to be executed and delivered by Parent and each of the Apple Holdco Stockholders at Closing in the form attached hereto as Exhibit I (the “Apple Holdco Stockholders Registration Rights Agreement”), in each case on the terms and subject to the conditions set forth therein.

IV. REPRESENTATIONS AND WARRANTIES OF PARENT

     Except as disclosed in (x) the Strawberry SEC Reports filed prior to the close of business on October 1, 2007 (the “Measurement Date”), but excluding any risk factor disclosure contained in any such Strawberry SEC Reports under the heading “Risk Factors” or “Cautionary Statement Regarding Forward Looking Statements” or otherwise, (y) the preliminary proxy statement filed by Parent on Schedule 14A with the SEC on June 28, 2007 (the “June Proxy Statement”), but excluding any risk factor disclosure contained in the June Proxy Statement under the heading “Risk Factors” or “Special Note Regarding Forward Looking Statements” or otherwise, or (z) the disclosure schedule (the “Strawberry Disclosure Schedule”) delivered by Parent to Apple Holdco in connection with the execution of this Agreement (which schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article IV), Parent hereby represents and warrants to Apple Holdco as follows:

     4.1 Due Organization, Good Standing and Corporate Power. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted. Each of Parent’s Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing or has equivalent status under the laws of its jurisdiction of organization and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted. Each of Parent and its Subsidiaries is duly qualified or licensed to do business and is in good standing or has equivalent status in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing or to have equivalent status would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.2 Authorization and Validity of Agreement. Each of Parent and MergerSub has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by each of Parent and MergerSub, the consummation by Parent and MergerSub of the Transactions, have been duly authorized and approved by their

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respective boards of directors, and except for the Strawberry Stockholder Approval and approval by Parent in its capacity as sole stockholder of MergerSub, no other corporate action on the part of Parent or MergerSub is necessary to authorize the execution and delivery of this Agreement or the consummation of the Transactions. This Agreement has been, and each of the other Transaction Documents to which it is a party will be when executed and delivered, duly executed and delivered by each of Parent and MergerSub, and, to the extent it is a party thereto, each is, or will be when executed and delivered, a valid and binding obligation of each of Parent and MergerSub enforceable against each of Parent and MergerSub in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

     4.3 Consents and Approvals; No Violations. Assuming (a) the filings required under the Hart-Scott Rodino Antitrust Improvement Act of 1976, as amended (the “HSR Act”) and any other applicable Antitrust Law, are made and the waiting periods thereunder (if applicable) have been terminated or expired, (b) the applicable requirements of the Securities Act and state securities or “blue sky” laws and the Exchange Act are met, including the filing with the SEC of a proxy statement in definitive form that will be mailed to Strawberry Stockholders in connection with the Strawberry Stockholders Meeting (the “Proxy Statement”), (c) compliance with applicable foreign competition laws, (d) the filing of the Certificate of Merger and other appropriate merger documents, if any, as required by the DGCL, are made, (e) the filing of the Strawberry Charter Amendment, (f) the filing of the Series A Amendment, (g) the filing of the Series C Amendment, (h) the filing of the Series D Certificate of Designation and (i) the Strawberry Stockholder Approval and approval by Parent in its capacity as sole stockholder of MergerSub is obtained, the execution and delivery of this Agreement and the other Transaction Documents to which it is a Party by Parent and MergerSub and the consummation by each of Parent and MergerSub of the Transactions, do not and will not (i) violate or conflict with any provision of their respective certificates of incorporation or bylaws or the comparable governing documents of any of its Subsidiaries, (ii) violate or conflict with any Law or Order applicable to Parent or any of its Subsidiaries or by which any of their respective properties or assets may be bound, (iii) require any filing with, or Permit, consent or approval of, or the giving of any notice to, any Governmental Entity, or (iv) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, cancellation or acceleration of, or result in the creation of any Encumbrance upon any of the properties or assets of Parent or any of its Subsidiaries under, or give rise to any obligation, right of termination, cancellation, acceleration or increase of any obligation or a loss of a material benefit under, any of the terms, conditions or provisions of any Contract to which Parent or any of its Subsidiaries is a party, or by which Parent or any of its Subsidiaries may be bound, excluding in the case of clauses (iii) and (iv) above, conflicts, violations, breaches, defaults, rights of termination, cancellations, accelerations, increases, losses, creations and impositions of Encumbrances which would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

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     4.4 Information to be Supplied. None of the information included or incorporated by reference in the Proxy Statement or any Additional Filings will, in the case of the Proxy Statement, at the date it is first mailed to Strawberry Stockholders or at the time of the Strawberry Stockholders Meeting or at the time of any amendment or supplement thereof, or, in the case of any Additional Filing, at the date it is first mailed to Strawberry Stockholders or at the date it is first filed with the SEC or applicable Governmental Entity, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading in any material respect, except that no representation is made by Parent and MergerSub with respect to statements made or incorporated by reference therein based on information supplied in writing by Apple Holdco, its stockholders or any Affiliate of Apple Holdco or its stockholders in connection with the preparation of the Proxy Statement or the Additional Filings for inclusion or incorporation by reference therein. The Proxy Statement and the Additional Filings that are filed by Parent with the SEC will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder.

     4.5 Capitalization of Parent and MergerSub.

          (a) The authorized capital stock of Parent as of the Measurement Date consists of: (i) 40,000,000 shares of Strawberry Common Stock and (ii) 2,000,000 shares of Preferred Stock, 40,000 of which are designated Series A Voting Convertible Preferred Stock, $0.01 par value per share and convertible into shares of Strawberry Common Stock (the “Strawberry Series A Preferred”), 500,000 of which are designated Series B Junior Participating Preferred Stock, $0.01 par value per share (the “Strawberry Series B Preferred”), 150,000 of which are designated Series C Preferred Stock, $0.01 par value per share (the “Strawberry Series C Preferred”), and 1,310,000 of which are designated Preferred Stock, $0.01 par value per share (the “Strawberry Preferred” and together with the Strawberry Common Stock, the Strawberry Series A Preferred, the Strawberry Series B Preferred and the Strawberry Series C Preferred, the “Strawberry Stock”). As of the Closing, the authorized capital stock of Parent will consist of : (i) 1,000,000,000 shares of Strawberry Common Stock and (ii) 2,000,000 shares of Preferred Stock, 40,000 of which are designated Strawberry Series A Preferred, 500,000 of which are designated Strawberry Series B Preferred, 150,000 of which are designated Strawberry Series C Preferred, 150,000 of which are designated Strawberry Series D Preferred and 1,160,000 of which are designated Strawberry Preferred. As of the Measurement Date, there were 15,351,539 shares of Strawberry Common Stock (of which 32,000 were Strawberry Restricted Shares) issued and outstanding, 40,000 shares of Strawberry Series A Preferred issued and outstanding, no shares of Strawberry Series B Preferred issued and outstanding, 135,217 shares of Strawberry Series C Preferred issued and outstanding, and no shares of Strawberry Preferred issued and outstanding. As of the Measurement Date, no shares of Strawberry Common Stock were reserved for issuance except for (a) 2,150,795 shares of Strawberry Common Stock that were reserved for issuance upon the exercise of outstanding options (the “Strawberry Options”), (b) 719,320 shares of Strawberry Common Stock reserved for issuance upon the exercise of outstanding warrants (the “Strawberry Warrants”) and (c) 3,529,412 shares of

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Strawberry Common Stock reserved for issuance upon the conversion of the Strawberry Series A Preferred for Strawberry Common Stock. Between the Measurement Date and the date hereof, Parent has not issued any shares of Strawberry Common Stock (other than pursuant to the exercise of Strawberry Options outstanding as of the Measurement Date) or awarded any Strawberry Options. The Strawberry Series B Preferred are issuable in connection with the rights to purchase those shares (the “Strawberry Rights”) issued under the Rights Agreement, dated as of June 28, 2004 and as amended on June 7, 2006, February 7, 2007 and the date hereof (the “Strawberry Rights Agreement”), by and between Parent and UMB Bank N.A., as rights agent. All issued and outstanding shares of Strawberry Stock have been duly authorized and validly issued and are fully paid and nonassessable. As of the date hereof, except as set forth above and except for shares of Strawberry Common Stock issuable pursuant to the Strawberry Options, Strawberry Warrants and the Strawberry Series A Preferred outstanding as of the Measurement Date, there are no outstanding or authorized options, warrants, rights, calls, commitments, preemptive rights, subscriptions, claims of any character, convertible or exchangeable securities, or other Contracts, contingent or otherwise, relating to Strawberry Common Stock or any capital stock or capital stock equivalent or other nominal interest in Parent or any of its Subsidiaries which relate to Parent (collectively, “Strawberry Equity Interests”) pursuant to which Parent or any of its Subsidiaries is or may become obligated to issue or sell shares of its capital stock or other equity interests or any securities convertible into, or exchangeable for, or evidencing the right to subscribe for, any Strawberry Equity Interests. There are no outstanding obligations of Parent to repurchase, redeem or otherwise acquire any outstanding securities of Parent or any Strawberry Equity Interests. There are no Contracts to which Parent is a party relating to the issuance, sale, transfer, registration or voting of any equity securities or other securities of Parent. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which Strawberry Stockholders may vote are issued or outstanding as of the date hereof.

          (b) When issued in accordance with the terms of this Agreement, the Strawberry Common Stock to be issued in connection with the Share Issuance will be duly authorized, validly issued, fully paid and non assessable free and clear of all Encumbrances (other than as imposed by federal or state securities laws).

          (c) Exhibit 21.1 to Parent’s Annual Report on Form 10 K for the fiscal year ended July 1, 2006 includes all the Subsidiaries of Parent that constitute “significant subsidiaries” as defined in Rule 1-02(w) of Regulation S-X in existence as of the date hereof. All of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of Parent are owned by Parent, directly or indirectly, free and clear of any Encumbrances, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. No such Subsidiary has or is bound by any outstanding or authorized subscriptions, options, rights, preemptive rights, warrants, calls, commitments, claims of any character, convertible or exchangeable securities, or Contracts, contingent or otherwise, of any nature relating to the purchase or issuance of any shares of capital stock or any other security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any

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other security of such Subsidiary. There are no outstanding obligations to repurchase, redeem or otherwise acquire any outstanding securities of any such Subsidiary and there are no Contracts to which any Subsidiary of Parent is a party relating to the issuance, sale, transfer, registration or voting of any equity securities or other securities of Parent or any of its Subsidiaries.

          (d) All Strawberry Options have an exercise price per share that was not less than the “fair market value” of a share of Strawberry Common Stock on the date of grant, as determined in accordance with the terms of the applicable Strawberry Option Plan and, to the extent applicable, Sections 162(m), 409A and 422 of the Code. All Strawberry Options have been properly accounted for by Parent in accordance with GAAP, and no change is expected in respect of any prior Strawberry Financial Statement relating to expenses for stock compensation. There is no pending audit, investigation or inquiry by Parent, or to the Knowledge of Parent, any governmental agency with respect to the Parent’s stock option granting practices or other equity compensation practices. Except as set forth in Section 4.5(d) of the Strawberry Disclosure Schedule, the terms of each of the option agreements for each optionee are substantially similar to the forms of such option agreement attached to Section 4.5(d) of the Strawberry Disclosure Schedule, and no such option agreement or Strawberry Option Plan provides for any payment or other transfer from Parent or any Affiliate of Parent or for any adjustment to the terms of the option in connection with the Transactions contemplated by this Agreement that is not provided for in such forms.

          (e) Each subsidiary of Parent constitutes a Subsidiary of Parent as defined in this Agreement.

          (f) The authorized capital stock of MergerSub consists of 10,000 shares of common stock, $0.01 par value per share, 1,000 of which have been duly authorized and validly issued, are fully paid and nonassessable and are owned by Parent free and clear of any Encumbrance.

     4.6 Absence of Certain Events. Except as required or expressly permitted by this Agreement or as reflected in the Strawberry Financial Statements filed on or prior to the Measurement Date, since March 31, 2007, Parent and its Subsidiaries have operated their respective businesses only in the ordinary course of business and there has not occurred any event, occurrence or condition which (i) would have been a breach of Section 6.1 had such Section 6.1 been in effect since March 31, 2007, or (ii) would, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.7 Litigation. There are no Actions pending against Parent or any of its Subsidiaries or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries (or any of their respective properties, rights or franchises), at law or in equity, or before or by any Governmental Entity, that would, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, and, to the Knowledge of Parent, no development has occurred with respect to any pending or threatened Action that, individually or in the aggregate, would reasonably be expected to

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have a Strawberry Material Adverse Effect. Neither Parent nor any of its Subsidiaries are subject to any Orders that, individually or in the aggregate, would reasonably be expected to have a Strawberry Material Adverse Effect.

     4.8 Title to Properties; Encumbrances. Each of Parent and its Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, except where the failure to have such good and valid title or valid leasehold interests, as applicable, would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, in each case subject to no Encumbrances, except for (a) Encumbrances consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such property by Parent or any of its Subsidiaries, (b) Encumbrances for current Taxes, assessments or governmental charges or levies on property not yet due or which are being contested in good faith and for which appropriate reserves in accordance with GAAP have been created, (c) Encumbrances which would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.9 Strawberry SEC Reports; Financial Statements.

          (a) Each of Parent and its Subsidiaries has timely filed with the SEC all registration statements, prospectuses, reports, schedules, forms, proxy statements, certifications and other documents (including exhibits and all other information incorporated by reference therein) required to be filed by Parent since June 28, 2003 (the “Strawberry SEC Reports”). The Strawberry SEC Reports (i) were prepared and will be prepared (when filed after the date of this Agreement) in all material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed and will not, when filed after the date of this Agreement, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected by a subsequent Strawberry SEC Report filed with the SEC prior to the date of this Agreement. No Subsidiary of Parent is subject to the periodic reporting requirements of the Exchange Act by Law or Contract.

          (b) Each of the consolidated financial statements of Parent (including, in each case, any notes thereto) contained in the Strawberry SEC Reports (the “Strawberry Financial Statements”) was prepared and will be prepared (when filed after the date of this Agreement) in accordance with GAAP (except as may be indicated in the notes thereto) and presented fairly and will present fairly (when filed after the date of this Agreement) in all material respects the consolidated financial position and consolidated results of operations of Parent and its Subsidiaries as of the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein and subject, in the case of unaudited statements, to normal year end audit adjustments in amounts that are immaterial in nature and amounts consistent with past experience. The books and records of Parent and its Subsidiaries (i) have been, and are being, maintained in

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accordance with GAAP and any other applicable legal and accounting requirements, (ii) reflect only actual transactions, (iii) are complete and accurate in all material respects, and (iv) reflect in reasonable detail all material transactions to which Parent and its Subsidiaries are a party.

          (c) The records, systems, controls, data and information of Parent and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Parent or its Subsidiaries, except for any non exclusive ownership and non direct control that would not have a material adverse effect on the system of internal accounting controls described in the following sentence. Parent and its Subsidiaries have devised and maintain a system of internal controls over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Parent (i) has designed disclosure controls and procedures to ensure that material information relating to Parent, including its consolidated Subsidiaries, is made known to its management by others within those entities and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to Parent’s auditors and the audit committee of Parent’s board of directors (A) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Parent’s ability to record, process, summarize and report financial data and have identified for Parent’s auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls. Parent has made available to Apple Holdco a summary of each such disclosure made by management to its auditors and audit committee since July 2, 2005.

     4.10 No Undisclosed Liabilities. Except for those liabilities that are reflected or reserved against on the consolidated financial statements of Parent as of and for the period ended March 31, 2007 included in Parent’s Form 10 Q for the quarter ended March 31, 2007, including the notes thereto, since such date, neither Parent nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due and including any off balance sheet financings, loans, indebtedness, make whole or similar liabilities or obligations) whether or not required to be reflected in a consolidated balance sheet of Parent prepared in accordance with GAAP, except for liabilities incurred in the ordinary course of business that would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.11 Compliance with Law.

          (a) Each of Parent and its Subsidiaries is, and since July 2, 2005, has been, in compliance with all Laws and Orders applicable to it, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

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          (b) Each of Parent and its Subsidiaries holds, to the extent legally required, all Permits that are required for the lawful operation of its business as now conducted, except where the failure to hold any such Permit would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, and there has not occurred any default under any such Permit, except to the extent that such default would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.12 Insurance. Parent and its Subsidiaries maintain insurance coverage with reputable insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of Parent and its Subsidiaries. Except as set forth on Section 4.12 of the Strawberry Disclosure Schedule, each insurance policy of Parent and/or its Subsidiaries shall survive the Closing and continue in full force and effect as policies of the Parent and/or its Subsidiaries.

     4.13 Regulatory Matters.

          (a) Except for such of the following as would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, there are no facts:

               (i) which would furnish a substantial basis for the recall, withdrawal or suspension of any products of Parent or its Subsidiaries by any competent Governmental Entity; or

               (ii) which would otherwise reasonably be expected to cause Parent or its Subsidiaries to withdraw, recall or suspend any products of Parent or its Subsidiaries from the market or to change the marketing classification of any products of Parent or its Subsidiaries or to terminate or suspend testing of any products of Parent or its Subsidiaries.

          (b) There are no:

               (i) products which have been recalled by Parent or its Subsidiaries (whether voluntarily or otherwise) at any time since June 28, 2003; or

               (ii) Actions pending, or to the Knowledge of Parent, contemplated or threatened, and no such Actions have been settled or resolved since July 3, 2004, seeking the recall, suspension or seizure of any products of Parent or its Subsidiaries.

          (c) Since July 3, 2004, Parent and each of its Subsidiaries has timely filed or submitted all reports, filings, applications and notifications required by statutes or regulations administered by the U.S. Consumer Products Safety Commission including, without limitation, 15 U.S.C. §§ 2064(b) and 2084) and any other Governmental Entity with respect to the manufacture, distribution and safety of any products manufactured, imported, distributed or sold by Parent or any of its Subsidiaries.

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Each such report, filing, application and notification complied, at the time of such filing or submission, in all material respects, with the requirements for such report, filing, application and notification, and has been supplemented to the extent required by applicable law or regulation.

     4.14 Broker’s or Finder’s Fee. Except for Houlihan Lokey Howard & Zukin Capital, Inc., to which only Parent has any liability or obligation as set forth on Section 4.14 of the Strawberry Disclosure Schedule, no Person acting on behalf of Parent or any of its Subsidiaries is, or will be, entitled to any investment banking, broker’s, finder’s or similar fee for which Parent, MergerSub, Apple Holdco, Apple or any of their respective Affiliates or the Surviving Corporation after the Effective Time could have any liabilities in connection with this Agreement or any of the Transactions.

     4.15 Taxes, Tax Returns, Tax Treatment.

          (a) Parent and each of its subsidiaries has duly filed all Tax Returns required to be filed by it on or prior to the date of this Agreement (all such returns being accurate and complete in all material respects) and has duly paid or made provision for the payment of all Taxes that have been incurred or are due or claimed to be due from it by federal, state, foreign or local Tax Authorities other than (i) Taxes that (a) are not yet delinquent or (b) are being contested in good faith, have not been finally determined and have been adequately reserved against or (ii) Tax Returns or Taxes as to which the failure to file, pay or make provision for would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect. The period (including any extensions) within which the IRS may assess federal income Taxes against Parent and its subsidiaries has closed with respect to all taxable years through and including the fiscal year ended June 30, 1999 and any liability with respect thereto has been satisfied. There are no disputes pending, or claims asserted, for Taxes or assessments upon Parent or any of its subsidiaries for which Parent does not have adequate reserves that would, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect. Neither Parent nor any of its Subsidiaries joins or has joined in the filing of any affiliated, aggregate, consolidated, combined or unitary federal, state, local and foreign Tax Return other than consolidated Tax Returns for the affiliated group of its corporations of which Parent is the common parent, and neither Parent nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes with any person that is not a member of such affiliated group. Neither Parent nor any of its subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among Parent and its subsidiaries). Within the past two years, neither Parent nor any of its subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify under Section 355(a) of the Code. No disallowance of a deduction under Sections 162(m) or 280G of the Code for employee remuneration of any amount paid or payable by Parent or any of its subsidiaries under any contract, plan, program or arrangement or understanding would, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect. Parent and its subsidiaries have complied with the requirements of Code Section 409A (and its related reporting and

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withholding requirements), for all amounts paid or payable under any contract, plan, program or arrangement or understanding except where such failure to comply would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.16 Employee Benefit Matters.

          (a) Section 4.16 of the Strawberry Disclosure Schedule sets forth a true and complete list of each benefit or compensation plan, arrangement or agreement, and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control or fringe benefit plan, program or agreement, whether written or oral, that is maintained, or contributed to, for the benefit of current or former officers, directors, Contingent Workers or employees of Parent and its Subsidiaries, with respect to which Parent or its Subsidiaries may, directly or indirectly, have any liability (whether contingent or otherwise), as of the date of this Agreement or as of the Closing Date, including all material plans of any Strawberry ERISA Affiliate that are subject to Title IV of ERISA (the “Strawberry Benefit Plans”). For purposes of this Agreement, (i) a “Strawberry ERISA Affiliate” is any trade or business, whether or not incorporated, all of which together with Parent would be deemed a “single employer” within the meaning of Section 4001(a) or (b) of ERISA or Section 414 of the Code and (ii) a “Strawberry Foreign Plan” means any Strawberry Benefit Plan that is maintained outside of the United States (and each such Strawberry Foreign Plan is separately identified on Section 4.16(a) of the Strawberry Disclosure Schedule).

          (b) Except with respect to clauses (i), (iii), (v), (vii), (ix), (x), and (xi) below (as would not, either individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect) (i) each of the Strawberry Benefit Plans has been operated and administered in compliance in all material respects with its terms and applicable Laws, including ERISA and the Code, (ii) each of the Strawberry Benefit Plans intended to be “qualified” within the meaning of Section 401(a) of the Code has received or timely filed for a favorable determination letter from the IRS with respect to all changes in applicable Law for which certain qualified plans were required to be amended, and there are no existing circumstances or any events that have occurred that will adversely affect the qualified status of any such Strawberry Benefit Plan, (iii) no Strawberry Benefit Plan is a “defined benefit plan” as defined in Section 3(35) of ERISA, (iv) no Strawberry Benefit Plan provides benefits coverage, including death or medical benefits coverage (whether or not insured), with respect to current or former officers, employees, Contingent Workers or directors of Parent or its Subsidiaries beyond their retirement or other termination of service, other than (A) coverage mandated by applicable Law, (B) death benefits or retirement benefits under any “employee pension plan” (as such term is defined in Section 3(2) of ERISA), (C) benefits the full cost of which is borne by the current or former employee, consultant, leased employee or director (or his beneficiary) or (D) coverage through the last day of the calendar month in which retirement or other termination of service occurs, (v) no Strawberry Benefit Plan is or was a “multiemployer pension plan” (as such term is defined in Section 3(37) of ERISA) or a “multiple employer plan” (as such term is

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defined Section 210(a) of ERISA or Section 413(c) of the Code), (vi) none of Parent or its Subsidiaries or, to the Knowledge of Parent, any other person, including any fiduciary, has engaged in a transaction in connection with which Parent, its Subsidiaries or any Strawberry Benefit Plan would reasonably be expected to be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material Tax imposed pursuant to Section 4975 or 4976 of the Code, (vii) to the Knowledge of Parent, (A) there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Strawberry Benefit Plans or any trusts or other funding vehicles related thereto and (B) no administrative investigation, audit or proceeding is pending or in progress with respect to the Strawberry Benefit Plans, (viii) all contributions or other amounts payable by Parent or its Subsidiaries as of the Effective Time with respect to each Strawberry Benefit Plan in respect of current or former plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code and, other than transfers incident to an incentive stock option plan within the meaning of Section 422 of the Code or as restricted under Section 162(m) of the Code, have been or are fully deductible under the Code, (ix) with respect to any insurance policy providing funding for benefits under any Strawberry Benefit Plan, (A) there is no liability of Parent or its Subsidiaries, in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability, nor would there be any such liability if such insurance policy was terminated at or after the Closing Date and (B) no insurance company issuing any such policy is in receivership, conservatorship, liquidation or similar proceeding and, to the Knowledge of Parent, no such proceedings with respect to any insurer are imminent, (x) Parent and its Subsidiaries have reserved all rights necessary to amend or terminate each of the Strawberry Benefit Plans, without the consent of any other Person, and (xi) no Strawberry Benefit Plan provides benefits to any individual who is not a current or former employee of Parent or its Subsidiaries, or the dependents or other beneficiaries of any such current or former employee.

          (c) In addition to the representation contained in Subsection (b) above (if applicable), except as would not, either individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, (i) each Strawberry Foreign Plan complies with all applicable Laws (including, without limitation, applicable Laws regarding the funding, form and operation of the Strawberry Foreign Plan); (ii) the Strawberry Financial Statements accurately reflect the Strawberry Foreign Plan liabilities and accruals for contributions required to be paid to the Strawberry Foreign Plans, in accordance with GAAP, (iii) there have not occurred, nor are there continuing any transactions or breaches of fiduciary duty under applicable Law, and (iv) no administrative investigation, audit or other proceeding by any Governmental Authority is pending or in progress or, to the Knowledge of Parent and its Subsidiaries, threatened, with respect to any Strawberry Foreign Plan.

          (d) Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (either alone or in conjunction with any other event) (i) result in any payment (including severance, unemployment compensation, “excess parachute payment” (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any director, consultant, employee or former employee of Parent or any of its Subsidiaries from Parent or any of

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its Subsidiaries under any Strawberry Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Strawberry Benefit Plan or otherwise, or (iii) result in any acceleration of the time of funding, payment or vesting of any such benefits.

          (e) Except as would not reasonably be expected to have a Strawberry Material Adverse Effect, with respect to independent contractors, consultants and leased employees (collectively, “Contingent Workers”) who are located within the United States, (i) all Persons so classified satisfy and have at all times satisfied in all material respects the requirements of applicable Law to be so classified, (ii) Parent and its Subsidiaries have fully and accurately reported such persons’ compensation on IRS Form 1099 when required to do so, (iii) neither Parent or its Subsidiaries has or had any obligations to provide benefits with respect to such persons under any Strawberry Benefit Plan or otherwise and (iv) Parent and its Subsidiaries have no material liability with respect to the misclassification of any Contingent Worker.

     4.17 Intellectual Property. Section 4.17 of the Strawberry Disclosure Schedule identifies (i) all applied for and registered trademarks and service marks, trade names, domain names, registered copyrights, pending and issued patents owned, used or licensed by or to Parent or any of its Subsidiaries that are material to the conduct of the business of Parent and its Subsidiaries, and (ii) all agreements and licenses relating to trademarks, technology, know how or processes that Parent or its Subsidiaries is licensed or authorized to use, or which it licenses or authorizes others to use, that is material to the conduct of the business of Parent and its Subsidiaries (collectively, the “Strawberry Intellectual Property”). Parent and its Subsidiaries own and possess all rights, title and interest in and to, or as of the Closing, will own and possess all rights, title and interest in and to, free and clear of all Encumbrances, all of the Strawberry Intellectual Property and, as of the Closing, all of the Strawberry Intellectual Property will be in the name of Parent or its Subsidiaries. Parent and its Subsidiaries own or have the right to use the Strawberry Intellectual Property without infringing or violating the rights of any third parties, except where such infringement or violation would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect. No consent of any third party will be required for the use by the Parent or its Subsidiaries of the Strawberry Intellectual Property after the Effective Time. There are no Actions pending or claims asserted in writing by any Person against Parent or any of its Subsidiaries regarding the ownership of or the right to use any Strawberry Intellectual Property or challenging the rights of Parent or any of its Subsidiaries with respect to any of the Strawberry Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect. To the Knowledge of Parent as of the date hereof, there is no infringement or misappropriation of the Strawberry Intellectual Property by any Person.

     4.18 Environmental Liability. Except for such of the following as would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, (i) the operations of Parent and its Subsidiaries are and have been in compliance with all applicable Environmental Laws, (ii) each of Parent and its Subsidiaries possess and maintains in effect all environmental permits, licenses, authorizations and approvals required under Environmental Law with respect to the

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properties and business of Parent and its Subsidiaries, (iii) to the Knowledge of Parent, there has been no release of any Hazardous Materials which would reasonably be expected to result in liability to Parent or any of its Subsidiaries, (iv) there are no legal, administrative or arbitral bodies seeking to impose, nor are there Actions of any nature reasonably likely to result in the imposition of, on Parent or any of its Subsidiaries, any liability or obligation arising under common law relating to the Environment or under any Environmental Law, nor are there any such liabilities or obligations pending or, to the Knowledge of Parent, threatened against Parent or its Subsidiaries and (v) neither Parent nor any of its Subsidiaries is subject to any Order by or with any Governmental Entity or third party imposing any liability or obligation with respect to the foregoing. To the Knowledge of Parent, as of the date of this Agreement, the Strawberry Financial Statements contain an adequate reserve as determined in accordance with GAAP for Environmental liabilities and obligations.

     4.19 Material Contracts. Neither Parent nor any of its Subsidiaries is a party to or bound by (a) except for the Contracts contemplated by the Exhibits to this Agreement, any “material contract” as defined in Item 601(b)(10) of Regulation S K promulgated by the SEC or any Contract that would be such a “material contract” but for the exception for Contracts entered into in the ordinary course of business or (b) any non competition or other Contract that materially limits or will materially limit Parent or any of its Subsidiaries from engaging in the business currently conducted by it. Each of the “material contracts” (as defined above) of Parent and its Subsidiaries is valid and in full force and effect and neither Parent nor any of its Subsidiaries has violated any provisions of, or committed or failed to perform any act that, with or without notice, lapse of time, or both, would constitute a default under the provisions of any such “material contract.” To Parent’s Knowledge, the other party to any “material contract” described in this Section 4.19 is not in material breach of or default under such “material contract.”

     4.20 Labor Relations.

          (a) As of the date of this Agreement and during the preceding three (3) years, (i) none of Parent, its Subsidiaries or any of their controlled Affiliates or Strawberry ERISA Affiliates are a party to any collective bargaining agreement, works council or workers’ association or similar arrangements, (ii) except as would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect, no labor organization or group of employees of Parent or any of its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of Parent, threatened to be brought or filed, with the National Labor Relations Board or any other domestic or foreign labor relations tribunal or authority, (iii) there are no organizing activities, strikes, work stoppages, slowdowns, lockouts, arbitrations or grievances, or other labor disputes pending or, to the Knowledge of Parent, threatened against or involving any of Parent or its Subsidiaries, and (iv) to the Knowledge of Parent, Parent and its Subsidiaries are in compliance with their obligations pursuant to the Workers Adjustment and Retraining Notification Act.

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          (b) To the Knowledge of Parent, Parent and its Subsidiaries are in material compliance with all applicable Laws, governmental orders, agreements, contracts and policies relating to the employment of their employees, including, without limitation, all such Laws relating to wages, overtime, terms and conditions of employment, discrimination, immigration, disability, workers’ compensation, the collection and payment of withholding and/or social contribution taxes and similar Taxes, except where noncompliance would not reasonably be expected, individually or in the aggregate, to have a Strawberry Material Adverse Effect.

     4.21 State Takeover Laws. Parent’s certificate of incorporation contains a provision expressly electing that Parent not be governed by Section 203 of the DGCL and Parent shall not amend its certificate of incorporation to amend or remove such election. No applicable “takeover” or “interested stockholder” Law is applicable to this Agreement and the Transactions.

     4.22 Voting Requirements; Approval; Board Approval.

          (a) The only stockholder votes required to approve and adopt this Agreement and the Transactions are (i) in the case of the Merger, the affirmative vote of Parent, as the sole stockholder of MergerSub, (ii) in the case of the Common Share Issuance and the Strawberry Charter Amendment, the affirmative vote of the holders of a majority of the outstanding shares of Strawberry Common Stock and Strawberry Series A Preferred (assuming conversion of all of the outstanding shares of Strawberry Series A Preferred) voting as a single class at a meeting of the Strawberry Stockholders or any adjournment or postponement thereof, (iii) in the case of the Preferred Share Issuance, the affirmative vote of the holders of a majority of the outstanding shares of Strawberry Common Stock and Strawberry Series A Preferred (assuming conversion of all of the outstanding shares of Strawberry Series A Preferred) voting as a single class at a meeting of the Strawberry Stockholders or any adjournment or postponement thereof, (iv) in the case of the Series A Amendment, (x) the affirmative vote of the holders of a majority of the outstanding shares of Strawberry Series A Preferred and (y) the affirmative vote of the holders of a majority of the outstanding shares of Strawberry Common Stock and Strawberry Series A Preferred (assuming conversion of all of the outstanding shares of Strawberry Shares A Preferred) voting as a single class at a meeting of the Strawberry Stockholders of any adjournment or postponement thereof and (v) in the case of the Series C Amendment, (x) the affirmative vote of the holders of a majority of the outstanding shares of Strawberry Series C Preferred and (y) the affirmative vote of the holders of a majority of the outstanding shares of Strawberry Common Stock and Strawberry Series A Preferred (assuming conversion of all of the outstanding shares of Strawberry Series A Preferred) voting as a single class at a meeting of the Strawberry Stockholders or any adjournment or postponement thereof (the votes referred to in clauses (ii), (iii), (iv) and (v) of this Section 4.22(a), the “Strawberry Stockholder Approval”).

          (b) The board of directors of MergerSub has, at a meeting duly called and held, by a unanimous vote (i) determined that the Merger is advisable and in the best interest of MergerSub and Parent, as the sole stockholder of MergerSub,

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(ii) adopted this Agreement, (iii) resolved to recommend that Parent, as the sole stockholder of MergerSub, vote in favor of adopting this Agreement and (iv) directed that this Agreement and the Merger be submitted to Parent, as the sole stockholder of MergerSub, for approval at a duly held meeting of such stockholder.

          (c) The board of directors of Parent has, at a meeting duly called and held, by a unanimous vote (with one director abstaining) (i) determined that the Merger, the Share Issuances, the Strawberry Charter Amendment, the Series A Amendment, the Series C Amendment and the Series D Certificate of Designation are advisable and in the best interest of Parent, (ii) adopted this Agreement, (iii) approved and resolved to recommend (the “Strawberry Board Recommendation”) that the stockholders of Parent vote in favor of (A) approving the Common Share Issuance and the Strawberry Charter Amendment to be effected contemporaneously with the consummation of the Merger such that, after giving effect thereto, the Strawberry Charter Amendment shall be substantially in the form attached hereto as Exhibit A, (B) the Preferred Share Issuance to be effected contemporaneously with the consummation of the Merger, (c) the Series A Amendment to be effected contemporaneously with the consummation of the Merger and (D) the Series C Amendment to be effected contemporaneously with the consummation of the Merger.

     4.23 Opinion of Parent Financial Advisor. The board of directors of Parent have received the opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. to the effect that, as of the date of such opinion and subject to the matters set forth therein, the Merger Consideration issued by Parent pursuant to the Merger, giving effect to the other Transactions is fair, from a financial point of view, to Parent.

     4.24 Transactions with Related Parties. Parent is not a party to any transaction or proposed transaction, with its directors, officers or employees, or any other Person who is an Affiliate of Parent (other than the Persons listed on Section 4.24 of the Strawberry Disclosure Schedule). Neither Parent nor any of its Affiliates owns or has any ownership interest in any Person which is in competition with Parent or which is engaged in a related or similar business to the business conducted by Parent and none of such Persons has entered into any Contract or understanding in effect on or after the date hereof contemplating such ownership or ownership interest.

     4.25 Customers.

          (a) Between July 2, 2005 and the date hereof, no material customer or group of customers (whether or not related) of Parent or any of its Subsidiaries has canceled or otherwise terminated its Contract or relationship with Parent or any of its Subsidiaries or has at any time decreased significantly its purchases of products from Parent or any of its Subsidiaries and, to the Knowledge of Parent, there has been no material adverse change in the business relationship of Parent or any of its Subsidiaries with any of their material customers or group of customers. To the Knowledge of Parent, no such customer or group of customers intends to cancel or otherwise terminate its relationship with Parent or any of its Subsidiaries or to decrease significantly its purchases of the products from Parent or its Subsidiaries, except for such

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of the foregoing arising after the date hereof as would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

          (b) To the Knowledge of Parent, there is no dispute with any material customer or group of customers (whether or not related) or delays or other problem in connection with any products sold or services rendered by Parent or any of its Subsidiaries to any material customer or group of customers that have given rise or could reasonably be expected to give rise to a liability or the need to provide additional products or services for the customer or group of customers involved, in each case that would, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

     4.26 Strawberry Rights Agreements. Parent has made available to Apple Holdco a correct and complete copy of the Strawberry Rights Agreement in effect as of the date of this Agreement. Parent has taken all necessary action to:

          (a) render the Strawberry Rights inapplicable to this Agreement, the Merger, the Share Issuances, the Strawberry Charter Amendment and the other transactions contemplated by this Agreement;

          (b) ensure that (i) none of the Apple Holdco Stockholders nor any of their Affiliates will become or be deemed to be an “Acquiring Person” (as defined in the Strawberry Rights Agreement) and (ii) no “Distribution Date,” “Shares Acquisition Date” or “Triggering Event” (each as defined in the Strawberry Rights Agreement) will occur by reason of (A) the approval, execution or delivery of this Agreement, (B) the approval of the Merger, the Share Issuances or the Strawberry Charter Amendment, (C) the announcement or consummation of the Merger, the Share Issuances or the Strawberry Charter Amendment or (D) the consummation of any of the other transactions contemplated by this Agreement; and

          (c) cause the Strawberry Rights to expire immediately prior to the Effective Time.

     4.27 MergerSub Formation. Except as set forth on Section 4.27 of the Strawberry Disclosure Schedule, MergerSub was formed solely for the purpose of engaging in the Transactions contemplated by this Agreement and has not engaged, and will not engage, in any business activities or conducted, and will not conduct, any operations other than in connection with the Transactions and this Agreement, except for such of the foregoing as would not, individually or in the aggregate, reasonably be expected to have a Strawberry Material Adverse Effect.

V. REPRESENTATIONS AND WARRANTIES
OF APPLE HOLDCO

     Except as disclosed in (x) the Apple SEC Reports filed prior to the close of business on the Measurement Date, but excluding any risk factor disclosure contained in any such Apple SEC Reports under the heading “Risk Factors” or “Cautionary

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Statement Regarding Forward Looking Statements” or otherwise (y) the June Proxy Statement excluding any risk factor disclosure contained under the heading “Risk Factors” or “Special Note Regarding Forward Looking Statements” or otherwise (z) the disclosure schedule (the “Apple Disclosure Schedule”) delivered by Apple Holdco to Parent and MergerSub in connection with the execution of this Agreement (which schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article V), Apple Holdco hereby represents and warrants to Parent and MergerSub as follows:

     5.1 Due Organization, Good Standing and Corporate Power. Apple Holdco is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted. Each of Apple Holdco’s Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing or has equivalent status under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted. Each of Apple Holdco and its Subsidiaries is duly qualified or licensed to do business and is in good standing or has equivalent status in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing or to have equivalent status would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.2 Authorization and Validity of Agreement. Apple Holdco has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by Apple Holdco, and the consummation by Apple Holdco of the Merger, have been duly authorized and approved by its board of directors and, other than the approval of the stockholders of Apple Holdco, which will be granted in accordance with the terms of the Commitment Agreement, no other corporate action on the part of Apple Holdco is necessary to authorize the execution and delivery of this Agreement or the consummation of the Merger. This Agreement has been and the other Transaction Documents will be when executed and delivered, duly executed and delivered by Apple Holdco to the extent it is a party thereto and is, or will be when executed and delivered, a valid and binding obligation of Apple Holdco enforceable against Apple Holdco in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

     5.3 Consents and Approvals; No Violations. Assuming (a) the filings required under the HSR Act and any other applicable Antitrust Law are made and the waiting periods thereunder (if applicable) have been terminated or expired, (b) the applicable requirements of the Securities Act and state securities or “blue sky” laws and the Exchange Act are met, including the filing with the SEC of Proxy Statement,

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(c) compliance with applicable foreign competition laws, (d) the approval of the stockholders of Apple Holdco in accordance with the Commitment Agreement and (e) the filing of the Certificate of Merger and other appropriate merger documents, if any, as required by the DGCL, are made, the execution and delivery of this Agreement and the other Transaction Documents by Apple Holdco and the consummation by Apple Holdco of the Transactions, do not and will not (i) violate or conflict with any provision of its certificate of incorporation or bylaws or the comparable governing documents of any of its Subsidiaries, (ii) violate or conflict with any Law or Order applicable to Apple Holdco or any of its Subsidiaries or by which any of their respective properties or assets may be bound, (iii) require any filing with, or Permit, consent or approval of, or the giving of any notice to, any Governmental Entity, or (iv) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, cancellation or acceleration of, or result in the creation of any Encumbrance upon any of the properties or assets of Apple Holdco or any of its Subsidiaries under, or give rise to any obligation, right of termination, cancellation, acceleration or increase of any obligation or a loss of a material benefit under, any of the terms, conditions or provisions of any Contract to which Apple Holdco or any of its Subsidiaries is a party, or by which Apple Holdco or any of its Subsidiaries may be bound, excluding in the case of clauses (iii) and (iv) above, conflicts, violations, breaches, defaults, rights of termination, cancellations, accelerations, increases, losses, creations and impositions of Encumbrances which would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.4 Information to be Supplied. None of the information supplied in writing by Apple Holdco for inclusion or incorporation by reference in the Proxy Statement or any Additional Filings will, in the case of the Proxy Statement, at the date it is first mailed to Strawberry Stockholders or at the time of the Strawberry Stockholders Meeting or at the time of any amendment or supplement thereof, or, in the case of any Additional Filing, at the date it is first mailed to Strawberry Stockholders or, at the date it is first filed with the SEC or other Governmental Entity, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. No representation is made by Apple Holdco with respect to statements made or incorporated by reference therein based on information supplied by Parent and/or MergerSub in connection with the preparation of the Proxy Statement or the Additional Filings for inclusion or incorporation by reference therein.

     5.5 Capitalization of Apple Holdco and Apple.

          (a) The authorized capital stock of Apple Holdco consists of 1,000 shares of Apple Holdco Common Stock. As of the Measurement Date, there were 123.6 shares of Apple Holdco Common Stock issued and outstanding. As of the Measurement Date, no shares of Apple Holdco Common Stock were reserved for issuance. Section 5.5 of the Apple Disclosure Schedule sets forth a true and complete list of each recordholder of Apple Holdco Common Stock as of the Measurement Date and the number of shares of Apple Holdco Common Stock so owned by such Person as of the Measurement Date. All issued and outstanding shares of Apple Holdco Common Stock

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have been duly authorized and validly issued and are fully paid and nonassessable. As of the date hereof, except as set forth above, there are no outstanding or authorized options, warrants, rights, calls, commitments, preemptive rights, subscriptions, claims of any character, convertible or exchangeable securities, or other Contracts, contingent or otherwise, relating to Apple Holdco Common Stock or any capital stock or capital stock equivalent or other nominal interest in Apple Holdco or any of its Subsidiaries which relate to Apple Holdco (collectively, “Apple Holdco Equity Interests”) pursuant to which Apple Holdco or any of its Subsidiaries is or may become obligated to issue or sell shares of its capital stock or other equity interests or any securities convertible into, or exchangeable for, or evidencing the right to subscribe for, any Apple Holdco Equity Interests. There are no outstanding obligations of Apple Holdco to repurchase, redeem or otherwise acquire any outstanding securities of Apple Holdco or any Apple Holdco Equity Interests. There are no Contracts to which Apple Holdco is a party relating to the issuance, sale, transfer, registration or voting of any equity securities or other securities of Apple Holdco. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which Apple Holdco Stockholders may vote are issued or outstanding as of the date hereof.

          (b) Apple Holdco has no Subsidiaries other than Apple. Exhibit 21.1 of Apple Annual Report on Form 10-K for the fiscal year ended December 31, 2005 includes all the Subsidiaries of Apple that constitute “significant subsidiaries” as defined in Rule 1-02(w) of Regulation S-X in existence as of the date hereof. All of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of Apple Holdco are owned by Apple Holdco, directly or indirectly, free and clear of any Encumbrances, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. No such Subsidiary has or is bound by any outstanding or authorized subscriptions, options, rights, preemptive rights, warrants, calls, commitments, claims of any character, convertible or exchangeable securities, or Contracts, contingent or otherwise, of any nature relating to the purchase or issuance of any shares of capital stock or any other security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other security of such Subsidiary. There are no outstanding obligations to repurchase, redeem or otherwise acquire any outstanding securities of any such Subsidiary and there are no Contracts to which any Subsidiary of Apple Holdco is a party relating to the issuance, sale, transfer, registration or voting of any equity securities or other securities of Apple Holdco or any of its Subsidiaries.

          (c) Each subsidiary of Apple Holdco constitutes a Subsidiary of Apple Holdco as defined in this Agreement.

          (d) Apple properly accounted for options to purchase common stock, par value $0.01 per share, of Apple in accordance with GAAP, and no change is expected in respect of any prior Apple Financial Statement relating to expenses for such compensation. There is no pending audit, investigation or inquiry by Apple, or, to the Knowledge of Apple Holdco, any governmental agency with respect to Apple’s stock option granting practices or other equity compensation practice).

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          (e) The authorized capital stock of Apple consists of 10,000 shares of common stock, $0.01 par value per share. All issued shares have been duly authorized and validly issued, are fully paid and nonassessable and are owned by Apple Holdco free and clear of any Encumbrances (other than as imposed by federal or state securities laws).

     5.6 Absence of Certain Events. Except as required or expressly permitted by this Agreement or as reflected in the Apple Financial Statements filed on or prior to the Measurement Date, since March 31, 2007, Apple Holdco and its Subsidiaries have operated their respective businesses only in the ordinary course of business and there has not occurred any event, occurrence or condition which (i) would have been a breach of Section 6.2 had such Section 6.2 been in effect since March 31, 2007, or (ii) would, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.7 Litigation. There are no Actions pending against Apple Holdco or any of its Subsidiaries or, to the Knowledge of Apple Holdco, threatened against Apple Holdco or any of its Subsidiaries (or any of their respective properties, rights or franchises), at law or in equity, or before or by any Governmental Entity, that would, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect, and, to the Knowledge of Apple Holdco, no development has occurred with respect to any pending or threatened Action that, individually or in the aggregate, would reasonably be expected to have an Apple Material Adverse Effect. Neither Apple Holdco nor any of its Subsidiaries are subject to any Orders that, individually or in the aggregate, would reasonably be expected to have an Apple Material Adverse Effect.

     5.8 Title to Properties; Encumbrances. Each of Apple Holdco and its Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, except where the failure to have such good and valid title or valid leasehold interests, as applicable, would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect, in each case subject to no Encumbrances, except for (a) Encumbrances consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such property by Apple Holdco or any of its Subsidiaries, (b) Encumbrances for current Taxes, assessments or governmental charges or levies on property not yet due or which are being contested in good faith and for which appropriate reserves in accordance with GAAP have been created, and (c) Encumbrances which would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.9 Apple SEC Reports; Financial Statements.

          (a) Each of Apple and its Subsidiaries has timely filed with the SEC all registration statements, prospectuses, reports, schedules, forms, proxy statements, certifications and other documents (including exhibits and all other information incorporated by reference therein) required to be filed by Apple between

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January 1, 2003 and January 23, 2007 (the “Apple SEC Reports”). The Apple SEC Reports (i) were prepared in all material respects in accordance with the requirements of the Securities Act or the Exchange Act and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected by a subsequent Apple SEC Report filed with the SEC prior to the date of this Agreement. Neither Apple Holdco nor any of its Subsidiaries is subject to the periodic reporting requirements of the Exchange Act by Law or Contract.

          (b) Each of the consolidated financial statements of Apple (including, in each case, any notes thereto) contained in the June Proxy Statement was prepared and the Apple Financial Statements will be prepared in accordance with GAAP (except as may be indicated in the notes thereto) and presented fairly and will present fairly (when filed after the date of this Agreement) in all material respects the consolidated financial position and consolidated results of operations of Apple and its Subsidiaries as of the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein and subject, in the case of unaudited statements, to normal year end audit adjustments in amounts that are immaterial in nature and amounts consistent with past experience. The books and records of Apple and its Subsidiaries (i) have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements, (ii) reflect only actual transactions, (iii) are complete and accurate in all material respects, and (iv) reflect in reasonable detail all material transactions to which Apple and its Subsidiaries are a party.

          (c) The records, systems, controls, data and information of Apple and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Apple or its Subsidiaries, except for any non exclusive ownership and non direct control that would not have a material adverse effect on the system of internal accounting controls described in the following sentence. Apple and its Subsidiaries have devised and maintain a system of internal controls over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Apple (i) has designed disclosure controls and procedures to ensure that material information relating to Apple, including its consolidated Subsidiaries, is made known to its management by others within those entities and (ii) has disclosed, based on its most recent evaluation prior to the date hereof, to Apple’s auditors and the audit committee of Apple’s board of directors (A) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Apple’s ability to record, process, summarize and report financial data and have identified for Apple’s auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Apple’s internal controls. Apple has made available to Parent a summary of each such disclosure made by management to its auditors and audit committee since January 1, 2005.

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     5.10 No Undisclosed Liabilities. Except for those liabilities that are reflected or reserved against on the consolidated financial statements of Apple as of and for the period ended March 31, 2007 included in the June Proxy Statement, including the notes thereto, since such date, neither Apple nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due and including any off balance sheet financings, loans, indebtedness, make whole or similar liabilities or obligations) whether or not required to be reflected in a consolidated balance sheet of Apple prepared in accordance with GAAP, except for liabilities incurred in the ordinary course of business that would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.11 Compliance with Law.

          (a) Each of Apple Holdco and its Subsidiaries is, and since January 1, 2005, has been, in compliance with all Laws and Orders applicable to it, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

          (b) Each of Apple Holdco and its Subsidiaries holds, to the extent legally required, all Permits that are required for the lawful operation of its business as now conducted, except where the failure to hold any such Permit would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect, and there has not occurred any default under any such Permit, except to the extent that such default would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.12 Insurance. Apple Holdco and its Subsidiaries maintain insurance coverage with reputable insurers in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of Apple Holdco and its Subsidiaries.

     5.13 Regulatory Matters.

          (a) Except for such of the following as would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect, there are no facts:

               (i) which would furnish a substantial basis for the recall, withdrawal or suspension of any products of Apple Holdco or its Subsidiaries by any competent Governmental Entity; or

               (ii) which would otherwise reasonably be expected to cause Apple Holdco or its Subsidiaries to withdraw, recall or suspend any products of Apple Holdco or its Subsidiaries from the market or to change the marketing classification of any products of Apple Holdco or its Subsidiaries or to terminate or suspend testing of any products of Apple Holdco or its Subsidiaries.

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          (b) There are no:

               (i) products which have been recalled by Apple Holdco or its Subsidiaries (whether voluntarily or otherwise) at any time since January 1, 2003; or

               (ii) Actions pending, or to the Knowledge of Apple Holdco, contemplated or threatened, and no such Actions have been settled or resolved since January 1, 2004, seeking the recall, suspension or seizure of any products of Apple Holdco or its Subsidiaries.

          (c) Since January 1, 2004, Apple Holdco and each of its Subsidiaries has timely filed or submitted all reports, filings, applications and notifications required by statutes or regulations administered by the U.S. Consumer Products Safety Commission including, without limitation, 15 U.S.C. §§ 2064(b) and 2084) and any other Governmental Entity with respect to the manufacture, distribution and safety of any products manufactured, imported, distributed or sold by Apple Holdco or any of its Subsidiaries. Each such report, filing, application and notification complied, at the time of such filing or submission, in all material respects, with the requirements for such report, filing, application and notification, and has been supplemented to the extent required by applicable law or regulation.

     5.14 Broker’s or Finder’s Fee. Except for Lazard Frères & Co. LLC and for fees payable in connection with the Financing (including the in connection with the Harbinger Facility and the New Senior Secured Credit Agreements), no Person acting on behalf of Apple Holdco or any of its Subsidiaries is, or will be, entitled to any investment banking, broker’s, finder’s or similar fee for which Parent, MergerSub, Apple Holdco, Apple or any of their respective Affiliates or the Surviving Corporation after the Effective Time could have any liabilities in connection with this Agreement or any of the Transactions.

     5.15 Taxes, Tax Returns, Tax Treatment.

          (a) Apple Holdco and each of its subsidiaries has duly filed all Tax Returns required to be filed by it on or prior to the date of this Agreement (all such returns being accurate and complete in all material respects) and has duly paid or made provision for the payment of all Taxes that have been incurred or are due or claimed to be due from it by federal, state, foreign or local Tax Authorities other than (i) Taxes that (a) are not yet delinquent or (b) are being contested in good faith, have not been finally determined and have been adequately reserved against or (ii) Tax Returns or Taxes as to which the failure to file, pay or make provision for would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect. The period (including any extensions) within which the IRS may assess federal income Taxes against Apple Holdco and its subsidiaries has closed with respect to all taxable years through and including the fiscal year ended December 31, 1998 and any liability with respect thereto has been satisfied. There are no disputes pending, or claims asserted, for Taxes or assessments upon Apple Holdco or any of its subsidiaries for which Apple Holdco does

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not have adequate reserves that would, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect. Neither Apple Holdco nor any of its Subsidiaries joins or has joined in the filing of any affiliated, aggregate, consolidated, combined or unitary federal, state, local and foreign Tax Return other than consolidated Tax Returns for the affiliated group of its corporations of which Apple Holdco is the common parent, and neither Apple Holdco nor any of its Subsidiaries is a party to any agreement providing for the allocation of sharing of Taxes with any person that is not a member of such affiliated group. Neither Apple Holdco nor any of its subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among Apple Holdco and its subsidiaries). Within the past two years, neither Apple Holdco nor any of its subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify under Section 355(a) of the Code. No disallowance of a deduction under Sections 162(m) or 280G of the Code for employee remuneration of any amount paid or payable by Apple Holdco or any of its subsidiaries under any contract, plan, program or arrangement or understanding would, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect. Apple Holdco and its subsidiaries have complied with the requirements of Code Section 409A (and its related reporting and withholding requirements), for all amounts paid or payable under any contract, plan, program or arrangement or understanding except where such failure to comply would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.16 Employee Benefit Matters.

          (a) Section 5.16 of the Apple Disclosure Schedule sets forth a true and complete list of each benefit or compensation plan, arrangement or agreement, and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control or fringe benefit plan, program or agreement, whether written or oral, that is maintained, or contributed to, for the benefit of current or former officers, directors, Contingent Workers or employees of Apple Holdco and its Subsidiaries, with respect to which Apple Holdco or its Subsidiaries may, directly or indirectly, have any liability (whether contingent or otherwise), as of the date of this Agreement or as of the Closing Date, including all material plans of any Apple ERISA Affiliate that are subject to Title IV of ERISA (the “Apple Benefit Plans”). For purposes of this Agreement, (i) an “Apple ERISA Affiliate” is any trade or business, whether or not incorporated, all of which together with Apple Holdco would be deemed a “single employer” within the meaning of Section 4001(a) or (b) of ERISA or Section 414 of the Code and (ii) an “Apple Foreign Plan” means any Apple Benefit Plan that is maintained outside of the United States (and each such Apple Foreign Plan is separately identified on Section 5.16(a) of the Apple Disclosure Schedule).

          (b) Except with respect to clauses (i), (iii), (v), (vii), (ix), (x), and (xi) below (as would not, either individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect) (i) each of the Apple Benefit Plans has been operated and administered in compliance in all material respects with its terms and applicable Laws, including ERISA and the Code, (ii) each of the Apple Benefit Plans

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intended to be “qualified” within the meaning of Section 401(a) of the Code has received or timely filed for a favorable determination letter from the IRS with respect to all changes in applicable Law for which certain qualified plans were required to be amended, and there are no existing circumstances or any events that have occurred that will adversely affect the qualified status of any such Apple Benefit Plan, (iii) no Apple Benefit Plan is a “defined benefit plan” as defined in Section 3(35) of ERISA, (iv) no Apple Benefit Plan provides benefits coverage, including death or medical benefits coverage (whether or not insured), with respect to current or former officers, employees, Contingent Workers or directors of Apple Holdco or its Subsidiaries beyond their retirement or other termination of service, other than (A) coverage mandated by applicable Law, (B) death benefits or retirement benefits under any “employee pension plan” (as such term is defined in Section 3(2) of ERISA), (C) benefits the full cost of which is borne by the current or former employee, consultant, leased employee or director (or his beneficiary) or (D) coverage through the last day of the calendar month in which retirement or other termination of service occurs, (v) no Apple Benefit Plan is or was a “multiemployer pension plan” (as such term is defined in Section 3(37) of ERISA) or a “multiple employer plan” (as such term is defined Section 210(a) of ERISA or Section 413(c) of the Code), (vi) none of Apple Holdco or its Subsidiaries or, to the Knowledge of Apple Holdco, any other person, including any fiduciary, has engaged in a transaction in connection with which Apple Holdco, its Subsidiaries or any Apple Benefit Plan would reasonably be expected to be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material Tax imposed pursuant to Section 4975 or 4976 of the Code, (vii) to the Knowledge of Apple Holdco, (A) there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Apple Benefit Plans or any trusts or other funding vehicles related thereto and (B) no administrative investigation, audit or proceeding is pending or in progress with respect to the Apple Benefit Plans, (viii) all contributions or other amounts payable by Apple Holdco or its Subsidiaries as of the Effective Time with respect to each Apple Benefit Plan in respect of current or former plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code and, other than transfers incident to an incentive stock option plan within the meaning of Section 422 of the Code or as restricted under Section 162(m) of the Code, have been or are fully deductible under the Code, (ix) with respect to any insurance policy providing funding for benefits under any Apple Benefit Plan, (A) there is no liability of Apple Holdco or its Subsidiaries, in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability, nor would there be any such liability if such insurance policy was terminated at or after the Closing Date and (B) no insurance company issuing any such policy is in receivership, conservatorship, liquidation or similar proceeding and, to the Knowledge of Apple Holdco, no such proceedings with respect to any insurer are imminent, (x) Apple Holdco and its Subsidiaries have reserved all rights necessary to amend or terminate each of the Apple Benefit Plans, without the consent of any other Person, and (xi) no Apple Benefit Plan provides benefits to any individual who is not a current or former employee of Apple Holdco or its Subsidiaries, or the dependents or other beneficiaries of any such current or former employee.

          (c) In addition to the representation contained in Subsection (b) above (if applicable), except as would not, either individually or in the aggregate,

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reasonably be expected to have an Apple Material Adverse Effect, (i) each Apple Foreign Plan complies with all applicable Laws (including, without limitation, applicable Laws regarding the funding, form and operation of the Apple Foreign Plan); (ii) the Apple Financial Statements accurately reflect the Apple Foreign Plan liabilities and accruals for contributions required to be paid to the Apple Foreign Plans, in accordance with GAAP, (iii) there have not occurred, nor are there continuing any transactions or breaches of fiduciary duty under applicable Law, and (iv) no administrative investigation, audit or other proceeding by any Governmental Authority is pending or in progress or, to the Knowledge of Apple Holdco and its Subsidiaries, threatened, with respect to any Apple Foreign Plan.

          (d) Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (either alone or in conjunction with any other event) (i) result in any payment (including severance, unemployment compensation, “excess parachute payment” (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any director, consultant, employee or former employee of Apple Holdco or any of its Subsidiaries from Apple Holdco or any of its Subsidiaries under any Apple Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Apple Benefit Plan or otherwise, or (iii) result in any acceleration of the time of funding, payment or vesting of any such benefits.

          (e) Except as would not reasonably be expected to have an Apple Material Adverse Effect, with respect to Contingent Workers who are located within the United States, (i) all Persons so classified satisfy and have at all times satisfied in all material respects the requirements of applicable Law to be so classified, (ii) Apple Holdco and its Subsidiaries have fully and accurately reported such persons’ compensation on IRS Form 1099 when required to do so, (iii) neither Apple Holdco or its Subsidiaries has or had any obligations to provide benefits with respect to such persons under any Apple Benefit Plan or otherwise and (iv) Apple Holdco and its Subsidiaries have no material liability with respect to the misclassification of any Contingent Workers.

     5.17 Intellectual Property. Section 5.17 of the Apple Disclosure Schedule identifies (i) all applied for and registered trademarks and service marks, trade names, domain names, registered copyrights, pending and issued patents owned, used or licensed by or to Apple Holdco or any of its Subsidiaries that are material to the conduct of the business of Apple Holdco and its Subsidiaries, and (ii) all agreements and licenses relating to trademarks, technology, know how or processes that Apple Holdco or its Subsidiaries is licensed or authorized to use, or which it licenses or authorizes others to use, that is material to the conduct of the business of Apple Holdco and its Subsidiaries (collectively, the “Apple Intellectual Property”). Apple Holdco and its Subsidiaries own and possess all rights, title and interest in and to, or as of the Closing, will own and possess all rights, title and interest in and to, free and clear of all Encumbrances, all of the Apple Intellectual Property and, as of the Closing, all of the Apple Intellectual Property will be in the name of Apple Holdco or its Subsidiaries. Apple Holdco and its Subsidiaries own or have the right to use the Apple Intellectual Property without infringing or violating the rights of any third parties, except where such infringement or

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violation would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect. No consent of any third party will be required for the use by the Surviving Corporation or its Subsidiaries of the Apple Intellectual Property after the Effective Time. There are no Actions pending or claims asserted in writing by any Person against Apple Holdco or any of its Subsidiaries regarding the ownership of or the right to use any Apple Intellectual Property or challenging the rights of Apple Holdco or any of its Subsidiaries with respect to any of the Apple Intellectual Property which would, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect. To the Knowledge of Apple Holdco as of the date hereof, there is no infringement or misappropriation of the Apple Intellectual Property by any Person.

     5.18 Environmental Liability. Except for such of the following as would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect, (i) the operations of Apple Holdco and its Subsidiaries are and have been in compliance with all applicable Environmental Laws, (ii) each of Apple Holdco and its Subsidiaries possess and maintains in effect all environmental permits, licenses, authorizations and approvals required under Environmental Law with respect to the properties and business of Apple Holdco and its Subsidiaries, (iii) to the Knowledge of Apple Holdco, there has been no release of any Hazardous Materials which would reasonably be expected to result in liability to Apple Holdco or any of its Subsidiaries, (iv) there are no legal, administrative or arbitral bodies seeking to impose, nor are there Actions of any nature reasonably likely to result in the imposition of, on Apple Holdco or any of its Subsidiaries, any liability or obligation arising under common law relating to the Environment or under any Environmental Law, nor are there any such liabilities or obligations pending or, to the Knowledge of Apple Holdco, threatened against Apple Holdco or its Subsidiaries and (v) neither Apple Holdco nor any of its Subsidiaries is subject to any Order by or with any Governmental Entity or third party imposing any liability or obligation with respect to the foregoing. To the Knowledge of Apple Holdco, as of the date of this Agreement, the Apple Financial Statements contain an adequate reserve as determined in accordance with GAAP for Environmental liabilities and obligations.

     5.19 Material Contracts. Neither Apple Holdco nor any of its Subsidiaries is a party to or bound by (a) any “material contract” as defined in Item 601(b)(10) of Regulation S K promulgated by the SEC or any Contract that would be such a “material contract” but for the exception for Contracts entered into in the ordinary course of business or (b) any non competition or other Contract that materially limits or will materially limit Apple Holdco or any of its Subsidiaries from engaging in the business currently conducted by it. Each of the “material contracts” (as defined above) of Apple Holdco and its Subsidiaries is valid and in full force and effect and neither Apple Holdco nor any of its Subsidiaries has violated any provisions of, or committed or failed to perform any act that, with or without notice, lapse of time, or both, would constitute a default under the provisions of any such “material contract.” To Apple Holdco’s Knowledge, the other party to any “material contract” described in this Section 5.19 is not in material breach of or default under such “material contract.”

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     5.20 Labor Relations.

          (a) As of the date of this Agreement and during the preceding three (3) years, (i) none of Apple Holdco, its Subsidiaries or any of their controlled Affiliates or Apple ERISA Affiliates are a party to any collective bargaining agreement, works council or workers’ association or similar arrangements, (ii) except as would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect, no labor organization or group of employees of Apple Holdco or any of its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of Apple Holdco, threatened to be brought or filed, with the National Labor Relations Board or any other domestic or foreign labor relations tribunal or authority, (iii) there are no organizing activities, strikes, work stoppages, slowdowns, lockouts, arbitrations or grievances, or other labor disputes pending or, to the Knowledge of Apple Holdco, threatened against or involving any of Apple Holdco or its Subsidiaries, and (iv) to the Knowledge of Apple Holdco, Apple Holdco and its Subsidiaries are in compliance with their obligations pursuant to the Workers Adjustment and Retraining Notification Act.

          (b) To the Knowledge of Apple Holdco, Apple Holdco and its Subsidiaries are in material compliance with all applicable Laws, governmental orders, agreements, contracts and policies relating to the employment of their employees, including, without limitation, all such Laws relating to wages, overtime, terms and conditions of employment, discrimination, immigration, disability, workers’ compensation, the collection and payment of withholding and/or social contribution taxes and similar Taxes, except where noncompliance would not reasonably be expected, individually or in the aggregate, to have an Apple Material Adverse Effect.

     5.21 State Takeover Laws. The board of directors of Apple Holdco has taken all necessary action to ensure that the restrictions on business combinations contained in Section 203 of the DGCL will not apply to this Agreement. No applicable “takeover” or “interested stockholder” Law is applicable to this Agreement and the Transactions.

     5.22 Voting Requirements; Approval; Board Approval.

          (a) Except for the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Apple Holdco Common Stock entitled to vote, no other vote of the holders of Apple Holdco Common Stock is necessary for Apple Holdco to approve and consummate the Transactions.

          (b) The board of directors of Apple Holdco has, by a unanimous consent, (i) determined that the Merger is advisable and in the best interest of Apple Holdco and the Apple Holdco Stockholders, (ii) adopted this Agreement, (iii) resolved to recommend that the Apple Holdco Stockholders vote in favor of adopting this Agreement, and (iv) directed that this Agreement and the Merger be submitted to the Apple Holdco Stockholders for approval by such stockholders.

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     5.23 Transactions with Related Parties. Except in respect of the Harbinger Facility and the New Senior Secured Credit Agreements, Apple Holdco is not a party to any transaction or proposed transaction, with its directors, officers or employees, or any other Person who is an Affiliate of Apple Holdco (other than the Persons listed in Section 5.23 of the Apple Disclosure Schedule). Neither Apple Holdco nor any of its Subsidiaries owns or has any ownership interest in any Person (other than Parent) which is in competition with Apple Holdco or which is engaged in a related or similar business to the business conducted by Apple Holdco and none of such Persons has entered into any Contract or understanding in effect on or after the date hereof contemplating such ownership or ownership interest.

     5.24 Customers.

          (a) Between January 1, 2005 and the date hereof, no material customer or group of customers (whether or not related) of Apple or any of its Subsidiaries has canceled or otherwise terminated its Contract or relationship with Apple or any of its Subsidiaries or has at any time decreased significantly its purchases of products from Apple and, to the Knowledge of Apple Holdco, there has been no material adverse change in the business relationship of Apple or any of its Subsidiaries with any of their material customers or group of customers. To the Knowledge of Apple Holdco, no such customer or group of customers intends to cancel or otherwise terminate its relationship with Apple or any of its Subsidiaries or to decrease significantly its purchases of the products from Apple or its Subsidiaries, except for such of the foregoing arising after the date hereof as would not, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

          (b) To the Knowledge of Apple Holdco, there is no dispute with any material customer or group of customers (whether or not related) or delays or other problem in connection with any products sold or services rendered by Apple or any of its Subsidiaries to any material customer or group of customers that have given rise or could reasonably be expected to give rise to a liability or the need to provide additional products or services for the customer or group of customers involved, in each case that would, individually or in the aggregate, reasonably be expected to have an Apple Material Adverse Effect.

     5.25 Apple Holdco. Apple Holdco was formed solely for the purpose of engaging in the transactions contemplated by the Agreement of Plan and Merger, dated October 19, 2006, by and among Apple Holdco, APN Mergersub, Inc. a Florida corporation, and Apple (as amended, the “Apple Merger Agreement”) and, except as set forth in Section 5.25 of the Apple Disclosure Schedule, has not engaged, and will not engage, in any business activities or conducted, and will not conduct, any operations other than in connection with the Transactions, this Agreement, the transactions contemplated by the Apple Merger Agreement, the Apple Merger Agreement, the Financing, the Harbinger Facility, and other activities incident to its ownership of Apple, except for such of the foregoing as would not, individually or in the aggregate, reasonably be expected to have a Apple Material Adverse Effect.

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     5.26 No Financing Condition. Apple Holdco understands and confirms that there is no financing contingency to the closing of the Transactions.

VI. COVENANTS

     6.1 Covenants of Parent. During the period from the date of this Agreement and continuing until the Effective Time, Parent agrees as to itself and its Subsidiaries that (except for the Merger, as required or otherwise expressly contemplated or permitted by this Agreement or Section 6.1 (including its subsections) of the Strawberry Disclosure Schedule, as required by a Governmental Entity or to the extent that Apple Holdco otherwise consents in writing in its sole discretion):

          (a) Ordinary Course. Parent will, and will cause each of its Subsidiaries to, carry on their respective businesses in the ordinary course, in substantially the same manner as heretofore conducted and use commercially reasonable efforts to preserve intact their present business organizations, keep available the services of their current officers and other key employees and preserve their relationships with customers, suppliers and others having business dealings with them, except that no action by Parent or its Subsidiaries with respect to matters specifically addressed by any other provision of this Section 6.1 will be deemed a breach of this Section 6.1(a) unless such action would constitute a breach of one or more of such other provisions. Without limiting the generality or effect of the foregoing, other than in connection with acquisitions permitted by Section 6.1(e) or investments permitted by Section 6.1(g), Parent will not, and will cause its Subsidiaries not to, (i) enter into any new material line of business, (ii) enter into any Contract with a supplier, distributor or customer representative that involves the purchase, distribution or sale of goods or services with a term extending more than one year that is not terminable by Parent or any of its Subsidiaries upon less than 30 days prior written notice, (iii) enter into any Contract with respect to the licensing of any Strawberry Intellectual Property with a term extending more than one year that is not terminable by Parent or any of its Subsidiaries without penalty or premium upon less than 30 days prior written notice, or (iv) incur or commit to any capital expenditures or any obligations or liabilities in connection with any capital expenditures other than capital expenditures and obligations or liabilities in connection therewith incurred or committed to in the ordinary course of business consistent with past practice.

          (b) Dividends; Changes in Share Capital. Parent will not, and will cause its foreign Subsidiaries not to, declare or pay any dividends on or make other distributions (whether in cash, stock or property) in respect of any of its capital stock. Except to the extent required to comply with its obligations hereunder and as set forth in Section 6.1(b) of the Strawberry Disclosure Schedule, Parent will not, and will cause its Subsidiaries not to (i) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (ii) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, except upon the exercise of Strawberry Options pursuant to the terms of the Strawberry Option Plans.

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          (c) Issuance of Securities. Except as set forth in Section 6.1(c) of the Strawberry Disclosure Schedule and for Strawberry Common Stock to be issued in connection with the Merger, the Series A Amendment and the Series C Amendment and the Strawberry Series D Preferred to be issued pursuant to the Commitment Agreement, Parent will not, and will cause its Subsidiaries not to, offer, issue, deliver, sell, pledge or otherwise Encumber, or authorize or propose the offering, issuance, delivery, sale, pledge or Encumbrance of, any shares of its capital stock of any class or any securities convertible into or exercisable for, or any rights, warrants, calls or options to acquire, any such shares, or enter into any commitment, arrangement, undertaking or agreement with respect to any of the foregoing, except upon the exercise of Strawberry Options pursuant to the terms of the Strawberry Option Plans.

          (d) Governing Documents. Except to the extent required to comply with its obligations hereunder or with applicable Laws, Parent will not amend or propose to amend its certificate of incorporation, bylaws or other governing documents and will not, and will cause each of its Subsidiaries not to, amend its certificate of incorporation, bylaws or other governing documents.

          (e) No Acquisitions. Parent will not, and will cause its Subsidiaries not to, acquire or agree to acquire by merger or consolidation, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, limited liability entity, joint venture, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets (excluding the acquisition of assets in the ordinary course of business consistent with past practice); provided, however, that the foregoing restrictions will not prohibit (i) internal reorganizations or consolidations involving Subsidiaries of Parent in existence on the date of this Agreement or (ii) the creation of new direct or indirect wholly owned Subsidiaries of Parent organized to conduct or continue activities otherwise permitted by this Agreement.

          (f) No Dispositions. Other than (i) internal reorganizations or consolidations involving existing Subsidiaries of Parent or (ii) as may be required by or in conformance with applicable Laws in order to permit or facilitate the consummation of the Transactions, Parent will not, and will cause its Subsidiaries not to, sell, lease, license or otherwise Encumber or subject to any Encumbrance or otherwise dispose of, or agree to sell, lease, license or otherwise Encumber or subject to any Encumbrance or otherwise dispose of, any assets (including capital stock of any Subsidiary of Parent, but excluding inventory and obsolete equipment in the ordinary course of business consistent with past practice).

          (g) Investments; Indebtedness. Parent will not, and will cause its Subsidiaries not to, (i) make any loans, advances or capital contributions to, or investments in, any other Person, other than (A) investments by Parent or any of its Subsidiaries to or in Parent or any other wholly owned Subsidiary of Parent, or (B) pursuant to any Contract or other legal obligation of Parent as in effect on the date of this Agreement, or (C) employee loans or advances for travel, business, relocation or other reimbursable expenses made in the ordinary course of business; or (ii) create, incur,

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assume or suffer to exist any indebtedness, issuances of debt securities, guarantees, loans or advances not in existence as of the date of this Agreement other than (A) in the ordinary course of business pursuant to its existing revolving credit facility or (B) for trade payables incurred in the ordinary course of business or as otherwise permitted by this Section 6.1(g).

          (h) Compensation. Except (i) as required by applicable Laws or Contract in effect on the date hereof that relates to Parent or any of its Subsidiaries or any of their employees or (ii) as required under this Agreement, Parent will not, and will cause its Subsidiaries not to, increase the amount of compensation or employee benefits of any employee, consultant or director of Parent or any of its Subsidiaries, pay any severance, pension, retirement, savings or profit sharing allowance to any employee, consultant or director that is not required by any existing plan or agreement, enter into any Contract with any employee, consultant or director regarding his or her employment or service, compensation or benefits, increase or commit to increase any benefits for employees, consultants or directors, adopt or amend or make any commitment to adopt or amend, other than amendments required by Law, any Strawberry Benefit Plan or make any contribution, other than regularly scheduled contributions, to any Strawberry Benefit Plan for the benefit of any Person. Parent will not accelerate the vesting of, or the lapsing of restrictions with respect to, any stock options or other equity based compensation, except as may be required by any plan or agreement presently in effect pursuant to which such stock options or other equity based compensation were granted, any applicable Laws or in accordance with this Agreement and as such shall be set forth on Section 6.1(h) of the Strawberry Disclosure Schedule.

          (i) Accounting Methods; Income Tax Elections. Except as reflected in the Strawberry Financial Statements filed on or prior to the Measurement Date, as required by a Governmental Entity or as required by changes in GAAP as concurred in by Parent’s independent public accountants, Parent will not make, and Parent will cause its Subsidiaries not to make, any material change in method of accounting in effect as of the date of this Agreement. Parent will not, and will not permit any of its Subsidiaries to, (i) change its fiscal year or (ii) make any material Tax election or settle or compromise any material income Tax liability with respect to matters that will be a liability of Parent or any of its Subsidiaries after the Merger, other than in the ordinary course of business consistent with past practice.

          (j) Certain Agreements and Arrangements. Parent will not, and will cause its Subsidiaries not to, enter into any Contract that will limit or otherwise restrict, after the Effective Time, Parent or any of its Subsidiaries, or any of their respective Affiliates or any successor thereto, from engaging or competing in any line of business in any geographic area or by any means, which Contracts, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, following the Merger.

          (k) Actions Regarding Strawberry Benefit Plans. Parent will, effective at (or, at the election of Parent, immediately prior to), the Effective Time, take

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or cause to be taken with respect to the Strawberry Benefit Plans the actions set forth in Section 6.1(k) of the Strawberry Disclosure Schedule.

          (l) Actions Regarding Anti Takeover Statutes. If the provisions of any potentially applicable anti takeover or similar statute is or becomes applicable to the Transactions or Apple Holdco or its Affiliates, Parent and its board of directors shall grant such approvals and take such other actions to the extent permitted by applicable Law as may be required so that the Transactions may be consummated as promptly as practicable on the terms and conditions set forth in this Agreement.

          (m) No Related Actions. Parent will not, and will not permit any of its Subsidiaries to, agree or commit to do any of the foregoing actions that are prohibited or restricted by this Section 6.1.

     6.2 Covenants of Apple Holdco. During the period from the date of this Agreement and continuing until the Effective Time, Apple Holdco agrees as to itself and its Subsidiaries that (except for the Merger, as required or otherwise expressly contemplated or permitted by this Agreement or Section 6.2 (including its subsections) of the Apple Disclosure Schedule, as required by a Governmental Entity or to the extent that Parent otherwise consents in writing in its sole discretion):

          (a) Ordinary Course. Apple Holdco will, and will cause each of its Subsidiaries to, carry on their respective businesses in the ordinary course, in substantially the same manner as heretofore conducted and use commercially reasonable efforts to preserve intact their present business organizations, keep available the services of their current officers and other key employees and preserve their relationships with customers, suppliers and others having business dealings with them, except that no action by Apple Holdco or its Subsidiaries with respect to matters specifically addressed by any other provision of this Section 6.2 will be deemed a breach of this Section 6.2(a) unless such action would constitute a breach of one or more of such other provisions.

          (b) Dividends; Changes in Share Capital. Apple Holdco will not, and will cause its foreign Subsidiaries not to, declare or pay any dividends on or make other distributions (whether in cash, stock or property) in respect of any of its capital stock. Except as set forth in Section 6.2(b) of the Apple Disclosure Schedule, Apple Holdco will not, and will cause its Subsidiaries not to (i) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (ii) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock.

          (c) Issuance of Securities. Apple Holdco will not, and will cause its Subsidiaries not to, offer, issue, deliver, sell, pledge or otherwise Encumber, or authorize or propose the offering, issuance, delivery, sale, pledge or Encumbrance of, any shares of its capital stock of any class or any securities convertible into or exercisable for, or any rights, warrants, calls or options to acquire, any such shares, or enter into any

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commitment, arrangement, undertaking or agreement with respect to any of the foregoing.

          (d) Governing Documents. Except to the extent required to comply with its obligations hereunder or with applicable Laws, Apple Holdco will not amend or propose to amend its certificate of incorporation, bylaws or other governing documents and will not, and will cause each of its Subsidiaries not to, amend its certificate of incorporation, bylaws or other governing documents.

          (e) Actions Regarding Anti Takeover Statutes. If the provisions of any potentially applicable anti takeover or similar statute is or becomes applicable to the Transactions or Parent, MergerSub or their Affiliates, Apple Holdco and its board of directors shall grant such approvals and take such other actions to the extent permitted by applicable Law as may be required so that the Transactions may be consummated as promptly as practicable on the terms and conditions set forth in this Agreement.

          (f) No Related Actions. Apple Holdco will not, and will not permit any of its Subsidiaries to, agree or commit to do any of the foregoing actions that are prohibited or restricted by this Section 6.2.

     6.3 Antitrust Clearance.

          (a) Each of Parent, MergerSub and Apple Holdco shall comply fully with all applicable notification, reporting and other requirements under any Antitrust Laws. The parties and the Master Fund have previously filed a Notification and Report Form pursuant to the HSR Act. If it is determined that any further or additional Notification and Report Form is required to be filed in connection with the Transactions, within 10 Business Days after the date of this Agreement, Parent and Apple Holdco shall prepare and file such Notification and Report Form pursuant to the HSR Act. Within 10 Business Days after the date of this Agreement, or any shorter period as required by applicable Antitrust Law, each of Parent and Apple Holdco shall, and shall cause their respective Subsidiaries to, file any other required notifications with the appropriate Governmental Entities, in each case pursuant to and in compliance with the respective Antitrust Laws. Parent and Apple Holdco shall, and shall cause their respective Subsidiaries to, as soon as practicable file any additional information reasonably requested by any Governmental Entity in respect of the Merger. If Parent or Apple Holdco (or any of their respective Affiliates) receives a request for additional information from any such Governmental Entity that is related to the transactions contemplated by this Agreement, then such party will endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response to such request.

          (b) Upon and subject to the terms of this Section 6.3, Parent and Apple Holdco shall, and shall cause their respective Subsidiaries to: (i) use their reasonable best efforts to obtain prompt termination of any requisite waiting period under any applicable Antitrust Law; (ii) cooperate and consult with each other in connection

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with the making of all filings, notifications and any other material actions pursuant to this Section 6.3, including subject to applicable Antitrust Law, by permitting counsel for the other party to review in advance, and consider in good faith the views of the other party in connection with, any proposed written communication to any Governmental Entity and by providing counsel for the other party with copies of all filings and submissions made by such party and all correspondence between such party (and its advisors) with any Governmental Entity and any other information supplied by such party and such party’s Affiliates to a Governmental Entity or received from such a Governmental Entity in connection with the transactions contemplated by this Agreement, provided, however, that materials may be redacted before being provided to the other party (A) to remove references concerning the valuation of Parent, Apple Holdco, or any of their Subsidiaries, (B) as necessary to comply with contractual arrangements, and (C) as necessary to address reasonable privilege or confidentiality concerns; (iii) furnish to the other parties such information and assistance as such parties reasonably may request in connection with the preparation of any submissions to, or agency proceedings by, any Governmental Entity; and (iv) promptly inform the other party of any communications with, and inquiries or requests for information from, such Governmental Entities in connection with the transactions contemplated by the Agreement. In furtherance and not in limitation of the covenants of the parties contained in Section 6.3(a) and this Section 6.3(b), each of Parent and Apple Holdco agrees to cooperate and use its reasonable best efforts to assist in any defense by the other party hereto of the transactions contemplated by this Agreement before any Governmental Entity reviewing the transactions contemplated by this Agreement, including by providing (as promptly as practicable) such information as may be requested by such Governmental Entity or such assistance as may be reasonably requested by the other party hereto in such defense.

          (c) If any objections are asserted by any Governmental Entity with respect to the transactions contemplated hereby, or if any Action is instituted by any Governmental Entity challenging any of the transactions contemplated hereby as violative of any applicable Antitrust Law or an Order is issued enjoining the Merger under any applicable Antitrust Law, each of Parent and Apple Holdco shall, subject to the provisions of this Section 6.3, use its reasonable best efforts to resolve any such objections or challenge as such Governmental Entity may have to such transactions under such Law or to have such Order vacated, reversed or otherwise removed in accordance with applicable legal procedures with the goal of enabling the transactions contemplated by this Agreement to be consummated by the Outside Date. Parent and Apple Holdco shall, and shall cause their respective Subsidiaries to, subject to the provision of this Section 6.3, use their respective reasonable best efforts to seek to lift, reverse or remove any temporary restraining order, preliminary or permanent injunction or other order or decree that would prohibit, prevent or restrict consummation of the transactions contemplated by this Agreement.

          (d) Notwithstanding anything to the contrary contained in this Agreement, in no event will Parent, MergerSub or Apple Holdco be required to take any action or accept any condition, restriction, obligation or requirement with respect to Parent, Apple Holdco, their respective Subsidiaries or their and their respective Subsidiaries’ assets if such action, condition, restriction, obligation or requirements

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(i) would reasonably be expected to require Parent, Apple Holdco or their respective Subsidiaries to sell, license, transfer, assign, lease, dispose of or hold separate any material business or assets, (ii) would reasonably be expected to result in any material limitations on Parent, Apple Holdco or their respective Subsidiaries to own, retain, conduct or operate all or a material portion of their respective businesses or assets or (iii) would bind Parent, Apple Holdco or any of their Subsidiaries to take an action irrespective of whether the Closing occurs.

     6.4 Efforts to Close.

          (a) (i) Subject to Sections 6.3(d), each of Parent and MergerSub on the one hand, and Apple Holdco on the other, will use its reasonable best efforts to cause all of the conditions, as specified in Article VII, to the obligations of the other party to consummate the Transactions to be met as soon as practicable after the date of this Agreement, (ii) each of Parent and MergerSub will not, and Parent will cause its Subsidiaries to not, take or cause to be taken any action that would reasonably be expected to have, with respect to actions of Parent or MergerSub, a Strawberry Material Adverse Effect and (iii) Apple Holdco will not, and will cause its Subsidiaries not to, take or cause to be taken any action that would reasonably be expected to have, with respect to actions of Apple Holdco or its Subsidiaries, an Apple Material Adverse Effect.

          (b) Subject to Sections 6.3(d), each of Parent, MergerSub and Apple Holdco and their respective Subsidiaries will use its reasonable best efforts to obtain, as soon as practicable, the Authorizations and third party consents that may be or become necessary for the performance of its respective obligations under this Agreement and the consummation of the Transactions and will cooperate fully with each other in promptly seeking to obtain such Authorizations and third party consents, except that no such party hereto will be required to make any material expenditures in connection with its obligations under this Section 6.4, except as required by Section 6.3.

     6.5 Confidentiality. Prior to the Effective Time, each of Parent, MergerSub and Apple Holdco will, and will cause each of their respective Subsidiaries, if any, and controlling Affiliates, to comply with, all of their respective obligations under the Confidentiality Agreements with respect to any information obtained by any such Person in connection with this Agreement and the Transactions.

     6.6 Access.

          (a) From the date hereof to the Effective Time, as applicable, (i) each of Parent, on the one hand, and Apple Holdco on the other, will allow all designated officers, attorneys, accountants, and other representatives of Apple Holdco and Parent, as the case may be, and (ii) Parent will allow the financing sources of Apple Holdco, access at reasonable times upon reasonable notice and in a manner as will not adversely impact the conduct of the business of Apple Holdco, Parent, MergerSub or any of their respective Subsidiaries, to the personnel, records, files, correspondence, audits and properties, as well as to all information relating to commitments, contracts, titles and

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financial position, or otherwise pertaining to the business and affairs, of Parent and Apple Holdco, as the case may be, including inspection of such properties.

          (b) No investigation pursuant to this Section 6.6 will affect any representation or warranty given by any party hereunder, and, notwithstanding the provision of information or investigation by any party, no party will be deemed to make any representation or warranty except as expressly set forth in this Agreement. Notwithstanding the foregoing, no party will be required to provide any information which it reasonably believes it may not provide to the other party by reason of applicable Law, which such party reasonably believes constitutes information protected by attorney/client privilege or the attorney work product doctrine or which it is required to keep confidential by reason of Contracts with third parties. The parties hereto will make reasonable and appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. All information provided by a party to the other party hereunder will be subject to the confidentiality provisions of Section 6.5.

     6.7 Public Announcements. Prior to the Effective Time, Parent, MergerSub and Apple Holdco will consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement, or the Transactions, and none of them will issue any such press release or make any such public statement or communication without the prior approval of the others, except as any party may determine in good faith is required by Law or by obligations pursuant to any listing agreement with any national securities market or exchange.

     6.8 Board Recommendation; Strawberry Stockholders Meeting. Parent’s board of directors has made the Strawberry Board Recommendation and will, as promptly as practicable, cause Parent to take all lawful action to solicit the Strawberry Stockholder Approval. Subject to Section 6.10, neither the board of directors of Parent nor any committee thereof will withdraw or modify, or propose to withdraw or modify, in a manner adverse to Apple Holdco, the Strawberry Board Recommendation. Unless this Agreement is terminated in accordance with its terms, Parent will call and hold a meeting of the Strawberry Stockholders (the “Strawberry Stockholders Meeting”) as promptly as practicable for the purpose of obtaining the Strawberry Stockholder Approval regardless of any action contemplated by Section 6.10, including receipt of a Strawberry Superior Proposal and whether or not Parent’s board of directors makes an Adverse Recommendation Change.

     6.9 Preparation of Proxy Statement and Additional Filings.

          (a) As promptly as reasonably practicable after the execution of this Agreement, Parent will prepare, and Parent will file with the SEC, the Proxy Statement. The parties hereto will furnish all information concerning themselves, their Affiliates and the holders of their capital stock as required in connection with such action, the preparation of the Proxy Statement and the preparation of any other SEC filing required in connection with the Transactions contemplated by this Agreement (“Additional Filings”) including, with respect to Apple Holdco, any information required

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by Regulation 14(f)(1) under the Exchange Act. As promptly as practicable Parent will mail the Proxy Statement to the Strawberry Stockholders. The Proxy Statement will include the Strawberry Board Recommendation unless the board of directors of Parent has withdrawn or modified the Strawberry Board Recommendation in accordance with Section 6.10.

          (b) No amendment or supplement to the Proxy Statement will be made without the consent of the parties hereto (which consent will not be unreasonably withheld or delayed). The parties hereto will advise each other promptly after any of them receives notice of any request by the SEC for amendment of the Proxy Statement or any Additional Filings or comments thereon and responses thereon or requests by the SEC for additional information.

          (c) If at any time prior to the Effective Time any information relating to Parent, MergerSub or any of their respective Affiliates, officers or directors, should be discovered by Parent or MergerSub which should be set forth in an amendment or supplement to the Proxy Statement or the Additional Filings so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, Parent or MergerSub will, as applicable, promptly notify Apple Holdco and, to the extent required by applicable Laws, will promptly file with the SEC and disseminate to the Strawberry Stockholders an appropriate amendment or supplement describing such information.

          (d) Without limiting the generality of the foregoing, Apple Holdco shall use its commercially reasonable efforts to deliver to Parent for inclusion in the Proxy Statement as promptly as practicable any audited and unaudited consolidated balance sheet and related consolidated statements of operations, cash flows and shareholders’ equity for Apple and its Subsidiaries, accompanied by the report thereon of Apple’s independent certified public accountants with respect to the audited financial statements (the “Apple Financial Statements”), required to be included in the Proxy Statement. If at any time prior to the Effective Time, any event or circumstance relating to Apple Holdco or its officers or directors, should be discovered by Apple Holdco and such information should be set forth in an amendment or supplement to the Proxy Statement or the Additional Filings so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, Apple Holdco will promptly notify Parent and MergerSub and, to the extent required by applicable Laws, Parent or MergerSub will promptly file with the SEC and, if required by Law, disseminate to the Strawberry Stockholders an appropriate amendment or supplement describing such information.

          (e) All documents that either of Parent or MergerSub and their Affiliates are responsible for filing with the SEC in connection with the Transactions will comply as to form and substance in all material aspects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder.

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     6.10 No Solicitation; Other Offers.

          (a) Parent will immediately cease, terminate and discontinue any discussions or negotiations with any Person conducted before the date of this Agreement with respect to any Strawberry Competing Transaction, and will promptly, following the execution of this Agreement, request the return or destruction (and certification thereof) (as provided in the applicable agreement) of all confidential information provided by or on behalf of Parent to all Persons who have had such discussions or negotiations or who have entered into confidentiality agreements with Parent pertaining to a Strawberry Competing Transaction.

          (b) Prior to the Effective Time, Parent will not, and will cause its Affiliates and representatives not to, directly or indirectly (i) solicit, initiate, encourage or take any action to facilitate or encourage any inquiries or proposals from, discuss or negotiate with, or provide any non public information to, any Person (other than Apple Holdco and its representatives) relating to any merger, consolidation, share exchange, business combination or other transaction or series of transactions involving Parent that is conditioned on the termination of this Agreement or could reasonably be expected to preclude or materially delay the completion of the Merger (a “Strawberry Competing Transaction”), (ii) make an Adverse Recommendation Change, (iii) enter into any agreement in principle, letter of intent, term sheet, merger agreement, stock purchase agreement or similar instrument relating to a Strawberry Competing Transaction (other than a confidentiality agreement of the type and in the circumstances described in Section 6.10(d)), or (iv) propose or agree to do or propose any of the foregoing. Parent agrees that any failure on the part of its Affiliates and representatives to comply with this Section 6.10(b) shall be deemed to be a breach of this Section 6.10(b) by Parent.

          (c) Parent will promptly (and in any event within 24 hours) notify Apple Holdco of its or any of its officers’, directors’ or representatives’ receipt of any inquiry or proposal relating to, a Strawberry Competing Transaction, including the identity of the Person submitting such inquiry or proposal and the terms thereof.

          (d) Notwithstanding anything in this Agreement to the contrary, Parent or its board of directors will be permitted to engage in any discussions or negotiations with, or provide any information to, any Person in response to an unsolicited bona fide written offer regarding a Strawberry Competing Transaction by any such Person (which has not been withdrawn), if and only to the extent that, (i) the Strawberry Stockholder Approval has not been given, (ii) Parent has received an unsolicited bona fide written offer regarding a Strawberry Competing Transaction from such third party (which has not been withdrawn) and its board of directors has determined, after consultation with its outside counsel and financial advisor, in good faith that there is a reasonable likelihood that such Strawberry Competing Transaction would constitute a Strawberry Superior Proposal, (iii) its board of directors, after consultation with its outside counsel, determines in good faith that such action is required by its fiduciary duties, (iv) prior to providing any information or data to any Person in connection with a Strawberry Competing Transaction by any such Person or entering into discussions or negotiations with any Person, it receives from such Person an executed confidentiality

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agreement containing terms Parent determines to be substantially the same (including with respect to standstill provisions, as such provisions were in effect on the date of execution of the Harbinger Confidentiality Agreement) as the Harbinger Confidentiality Agreement (but permitting the disclosures to Apple Holdco and its Affiliates described in this Section 6.10(d) to be made to Apple Holdco and its Affiliates); provided that (1) such confidentiality agreement may not restrict Parent in any way from complying with Sections 6.8, 6.9 or 6.10, and (2) Parent advises Apple Holdco of all non public information delivered to such person concurrently with delivery to such person and concurrently with such delivery also delivers all such information to Apple Holdco that was not previously provided to Apple Holdco, and (v) prior to providing any information or data to any Person or entering into discussions or negotiations with any Person, it complies with Section 6.10(c). Parent will use its commercially reasonable efforts to keep Apple Holdco and its Affiliates informed promptly of the status and terms of any such proposal or offer and the status and terms of any such discussions or negotiations and will promptly provide Apple Holdco with any such written proposal or offer. Parent will promptly inform its directors, officers, key employees, agents and representatives of the obligations undertaken by Parent in this Section 6.10. Nothing in this Section 6.10(d), (x) permits Parent to terminate this Agreement or (y) affects any other obligation of Parent or Apple Holdco under this Agreement.

          (e) Notwithstanding anything in this Agreement to the contrary (but subject to the next sentence), Parent’s board of directors shall be permitted to effect an Adverse Recommendation Change if (i) Parent shall not have received the Strawberry Stockholder Approval, (ii) Parent has received an unsolicited bona fide written offer regarding a Strawberry Competing Transaction from a third party, (iii) Parent’s board of directors has determined in good faith by a majority vote (after consultation with its outside counsel and its financial advisor) that such Strawberry Competing Transaction constitutes a Superior Proposal, (iv) Parent’s board of directors, after consultation with its outside counsel, determines in good faith by a majority vote that such action is required by its fiduciary duties under applicable Law and (v) Parent has complied with the terms of this Section 6.10. However, Parent’s board of directors shall nevertheless not make such an Adverse Recommendation Change, unless, (x) Parent promptly notifies Apple Holdco, in writing at least four (4) Business Days before taking such action, of its intention to make an Adverse Recommendation Change and attaching the most current version of any proposed agreement (including any schedules, exhibits and annexes thereto) and a detailed summary of all material terms of any such proposal and the identity of the offeror (an “ARC Notice”), and (y) Apple Holdco does not propose, within such four (4) Business Days after its receipt of such ARC Notice, such adjustments to the terms and conditions of this Agreement as would enable Parent’s board of directors to determine in good faith (after consultation with its outside counsel and its financial advisor) that such proposal is at least as favorable in the aggregate (taking into account all of the factors and other aspects of such proposal included in the definition of Strawberry Superior Proposal) to the Strawberry Stockholders as such Strawberry Superior Proposal. Any material amendment to any offer regarding a Strawberry Competing Transaction will be deemed to be a new offer regarding a Strawberry Competing Transaction for purposes of re-starting the four (4) Business Day clock described in the preceding sentence.

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          (f) For purposes of this Agreement, “Strawberry Superior Proposal” means a bona fide written offer regarding a Strawberry Competing Transaction (i) made by a Person other than a party hereto or its controlled Affiliates which the board of directors of Parent concludes, after consultation with its financial advisor and following receipt of the advice of its outside counsel, is more favorable (taking into account the terms and conditions thereof) from a financial point of view to the Strawberry Stockholders than the transactions contemplated hereby (including any alterations to this Agreement proposed by Apple Holdco in response thereto) and (ii) is reasonably likely to be consummated.

          (g) No provision of this Agreement will be deemed to prohibit Parent from publicly disclosing any information which its board of directors determines, after consultation with outside counsel, is required to be disclosed by Law, whether pursuant to the federal securities laws, state law fiduciary requirements or otherwise.

     6.11 Notification of Certain Matters. Each of Parent and Apple Holdco will give prompt written notice to the other of (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions, (b) any Action commenced or threatened in writing against, relating to or involving or otherwise affecting it or any of its Subsidiaries that relates to the consummation of the Transactions, and (c) any change that would reasonably be expected to have, individually or in the aggregate, a Strawberry Material Adverse Effect or an Apple Material Adverse Effect, as the case may be.

     6.12 Fees and Expenses. Except for filing fees paid under Antitrust Laws and fees incurred in connection with the filing, printing and mailing of the Proxy Statement or any other document filed with the SEC in connection with the Transactions, which will be borne equally by Apple Holdco and Parent, (a) Apple Holdco will bear all of the Expenses of Apple Holdco and its Affiliates, including the broker’s or finder’s fees referred to in Section 5.14 and (b) MergerSub and Parent will bear all of the respective Expenses of Parent, MergerSub and their respective Affiliates, including the broker’s or finder’s fees referred to in Section 4.14.

     6.13 Directors’ and Officers’ Indemnification and Insurance.

          (a) In the event of any threatened or actual Action, whether civil or administrative, including any such Action in which any present or former director or officer of Parent or any of its Subsidiaries (together, the “Indemnified Parties”) is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining in whole or in part to, any action or failure to take action by any such Person in such capacity taken prior to the Effective Time, Parent (the “Indemnifying Party”) will, from and after the Effective Time, indemnify, defend and hold harmless, as and to the fullest extent permitted or required by applicable Law in effect on the date of this Agreement, against any losses, claims, damages, liabilities, costs, legal and other expenses (including reimbursement for legal and other fees and expenses incurred in advance of the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party), judgments, fines and amounts paid in settlement actually and

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reasonably incurred by such Indemnified Party in connection with such claim Action, subject to or Parent’s receipt of an undertaking by such Indemnified Party to repay such legal and other fees and expenses paid in advance if it is ultimately determined that such Indemnified Party is not entitled to be indemnified under applicable Law; provided, however, Parent will not be liable for any settlement effected without Parent’s prior written consent (which will not be unreasonably delayed or withheld) and will not be obligated to pay the fees and expenses of more than one counsel (selected by a plurality of the applicable Indemnified Parties) for all Indemnified Parties in any jurisdiction with respect to any single such Action, except to the extent that two or more of such Indemnified Parties have conflicting interests in the outcome of such claim, action, suit, proceeding or investigation.

          (b) Parent will (i) maintain in effect for a period of six years after the Effective Time, if available, the current policies of directors’ and officers’ liability insurance maintained by Parent (provided that Parent may substitute therefore policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous to the directors and officers of Parent) or (ii) obtain as of the Effective Time “tail” insurance policies with a claims period of six years from the Effective Time with at least the same coverage and amounts and containing terms and conditions which are no less advantageous to the directors and officers of Parent, in each case, with respect to claims arising out of or relating to events which occurred before or at the Effective Time; provided, however, that in no event will the Surviving Corporation or Parent be required to expend an annual premium for such coverage in excess of 250% of the last annual premium paid by Parent for such insurance prior to the Measurement Date (the “Maximum Premium”). If such insurance coverage cannot be obtained at all, or can only be obtained at an annual premium in excess of the Maximum Premium, the Surviving Corporation or Parent will obtain that amount of directors’ and officers’ insurance (or “tail” coverage) obtainable for an annual premium equal to the Maximum Premium.

          (c) The provisions of this Section 6.13 will survive the Closing and are intended to be for the benefit of, and will be enforceable by, each Indemnified Party and its successors and representatives after the Effective Time and their rights under this Section 6.13 are in addition to, and will not be deemed to be exclusive of, any other rights to which an Indemnified Party is entitled, whether pursuant to Law, Contract or otherwise.

          (d) The obligations under this Section 6.13 may not be terminated or modified by the Surviving Corporation or Parent in a manner as to adversely affect any Indemnified Party to whom this Section 6.13 applies without the consent of the affected Indemnified Party. In the event that the Surviving Corporation, Parent or any of their respective successors or assigns (i) consolidates with or merges into any other Persons or (ii) transfers 50% or more of its properties or assets to any Person, then and in each case, proper provision will be made so that the applicable successors, assigns or transferees assume the obligations set forth in this Section 6.13.

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     6.14 Financing.

          (a) Apple Holdco shall cause to be provided to Parent at, and subject to, the Closing, aggregate borrowing availability which, together with all cash available at Apple Holdco, Parent and their respective Subsidiaries, is sufficient to (a) refinance in full all amounts outstanding under the Indebtedness listed on Section 6.14(a) of the Apple Disclosure Schedule (other than amounts required to refinance such of the Strawberry Subordinated Notes and Strawberry Second Lien Notes as will be exchanged by the Apple Holdco Stockholders in connection with the Commitment Agreement), (b) provide such reasonable working capital and sufficient liquidity for Parent and its Subsidiaries after the Effective Time as Apple Holdco shall deem appropriate and (c) pay all fees and expenses incurred in connection with the Transactions (the “Financing”).

          (b) In accordance with the terms of the Harbinger Financing Commitment Letter, Harbinger Capital Partners Master Fund I, Ltd. (the “Master Fund”) and Harbinger Capital Partners Special Situations Fund, L.P. (together, the “Harbinger Funds”) have agreed that at, and subject to, the Closing, the Harbinger Funds will provide, or cause to be provided to Parent, a senior secured revolving credit facility (the “Harbinger Facility”) to provide the Financing. The terms of the Harbinger Facility will provide for a scheduled maturity no sooner than three years from the Effective Date, an interest rate (assuming no default) of 650 basis points over LIBOR and a 6.5% prepayment penalty declining ratably on an annual basis until maturity. The Harbinger Funds shall be paid up-front fees by Parent aggregating $5,000,000, assuming that the entire Financing is provided pursuant to the Harbinger Facility. If only a portion of the Financing is provided by the Harbinger Facility, the up-front fee payable to the Harbinger Funds shall be equal to the product of $5,000,000 and a fraction, the numerator of which is the amount of borrowing availability under the Harbinger Facility and the denominator of which is the aggregate amount of the Financing being provided by all sources. There will be no warrants or other equity issued in connection with the Harbinger Facility or any other portion of the Financing.

          (c) Without limiting its obligations pursuant to Section 6.14(a), Apple Holdco may at its option, but shall not be obligated to, seek to obtain some or all of the Financing from third party lenders rather than from the Harbinger Funds pursuant to Section 6.14(b). Any such third party financing shall be on such terms and conditions as may be acceptable to Apple Holdco in its reasonable discretion; it being understood that the terms of such financing may be different in material respects from the terms of the Harbinger Facility outlined in Section 6.14(b). If Apple Holdco elects to seek any such third party financing, it shall keep Parent informed on a reasonably current basis of its efforts to obtain such third party financing and of the terms being proposed in connection therewith.

          (d) Parent shall, and shall cause its Subsidiaries and their respective representatives to, reasonably cooperate (provided that such cooperation does not unreasonably interfere with the ongoing operations of Parent and its Subsidiaries) in connection with obtaining the Financing, including by (i) taking reasonable actions as may be necessary or advisable to consummate such Financing, (ii) providing assistance

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from the senior management of Parent and its Subsidiaries in the preparation for, and participation in, meetings, drafting sessions, due diligence sessions, road shows and similar presentations to and with, among others, prospective lenders, investors and rating agencies, (iii) furnishing Apple Holdco and its financing sources with financial and other pertinent information regarding Parent and its Subsidiaries as may be reasonably requested by Apple Holdco, including financial statements and financial data of the type required by Regulation S-X and Regulation S-K under the Securities Act and of the type and form customarily included in private placements under Rule 144A of the Securities Act to consummate the offering of senior or senior subordinated notes and such monthly financial information as is prepared by Parent or its Subsidiaries in the ordinary course of business in a manner consistent with past practice, (iv) assisting Apple Holdco and its financing sources in the preparation of (A) an offering document, private placement memorandum and bank information memorandum for any debt or equity to be raised to complete the Financing and (B) in the case of any debt financing, materials for rating agency presentations, (v) reasonably cooperating with the marketing efforts of Apple Holdco and its financing sources for any equity or debt to be raised to complete the Financing, (vi) forming new direct or indirect Subsidiaries, (vii) providing and executing such documents as may be reasonably requested by Apple Holdco, including a certificate of the chief financial officer of Parent or any of its Subsidiaries with respect to solvency matters and consents of accountants for use of their reports in an offering document relating to the Financing, (viii) using commercially reasonable efforts to facilitate the pledging of collateral and (ix) using commercially reasonable efforts to obtain accountants’ comfort letters and consents, legal opinions, surveys and title insurance and provide management representation letters relating to such comfort letters, as reasonably requested by Apple Holdco. In no event shall Parent or any of its Subsidiaries be required to pay any commitment or similar fee or incur any other liability in connection with the Financing prior to the Closing. It is understood and agreed that notwithstanding the Confidentiality Agreements, Apple Holdco and its Affiliates shall be permitted to include financial and other information concerning Parent and its Subsidiaries in filings made under the Securities Act and the Exchange Act, regardless of whether in connection with the Financing. Parent hereby consents to the use of the logos of the Parent or any of its Subsidiaries in connection with the Financing. Notwithstanding anything to the contrary, the condition set forth in Section 7.2(a) of this Agreement, as it applies to Parent’s obligations under this Section 6.14(d), shall be deemed satisfied unless the Financing has not been obtained as a result of Parent’s breach of its obligations under this Section 6.14(d).

          (e) Parent agrees to provide, and shall cause its Subsidiaries to provide, all reasonable cooperation requested by Apple Holdco in connection with the repayment of such outstanding indebtedness, including, without limitation, cooperating in connection with (i) the repayment or defeasance of any such indebtedness, (ii) delivering payoff, redemption, defeasance or similar notices and (iii) obtaining payoff letters, UCC 3 financing statements and such other documents and instruments as may reasonably be required to demonstrate the repayment of such indebtedness and release of any Encumbrances on the properties or assets of Parent and/or any of its Subsidiaries.

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     6.15 Litigation. Except as otherwise required by Law or to the extent, in the reasonable opinion of outside counsel to Parent, there exists a conflict between Apple Holdco and Parent, Parent shall give Apple Holdco the opportunity to participate in the defense or settlement of any stockholder or other material litigation against Parent and/or its directors relating to the Transactions contemplated by this Agreement, and no such settlement shall be agreed to without the prior written consent of Apple Holdco, which shall not be unreasonably withheld or delayed in the event that the settlement would not be material.

     6.16 Director Resignations; Appointments.

          (a) Parent shall use its reasonable best efforts to obtain and deliver to Apple Holdco written resignation letters, effective as of the Effective Time, from those members of the boards of directors of Parent and/or any of its Subsidiaries designated by Apple Holdco to Parent in writing at least five calendar days prior to Closing.

          (b) Parent shall use its reasonable best efforts to cause the persons designated by Apple Holdco to Parent to be appointed to the board of directors of Parent as of the Closing, to serve as directors until their respective successors are duly elected or appointed and qualified, or their earlier death, resignation or removal, in accordance with the certificate of incorporation and bylaws of Parent and the DGCL.

     6.17 Post Closing Governance of Parent. Subject to the receipt of the Strawberry Stockholder Approval, Parent shall take all action necessary to cause each of the Strawberry Charter Amendment, Series C Amendment and the Series D Certificate of Designation to be duly executed, acknowledged and filed with the Secretary of State of the State of Delaware effective as of the Closing.

     6.18 Transaction Documents. At or prior to the Closing, each of Parent, MergerSub and Apple Holdco shall, and Apple Holdco shall cause the Apple Holdco Stockholders to, execute and deliver each Transaction Document to which it has been designated to become a party thereto pursuant to this Agreement.

     6.19 401(k) Plan. Parent agrees that its 401(k) plan will be terminated at the Closing.

     6.20 Anti-Dilution Protection.

          (a) In the event that any time between the date hereof and the Effective Time any shares of Strawberry Common Stock are issued (i) upon exercise of any Strawberry Options or (ii) upon exercise of any Strawberry Warrants, then the Merger Consideration shall be increased by such additional number of shares of Strawberry Common Stock as shall be necessary to cause the total number of shares of Strawberry Common Stock Beneficially Owned by the Apple Holdco Stockholders after receipt of the Merger Consideration, conversion of their shares of Strawberry Series A Preferred Stock pursuant to the Series A Amendment and conversion of their shares of Strawberry Series C Preferred Stock in accordance with the Series C Amendment to be

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equal 92% of the shares of Strawberry Common Stock issued and outstanding immediately after giving effect to the consummation of the Transactions.

          (b) From and after the Effective Time until such time as the Apple Holdco Interest has been less than 50% for a period of at least ten (10) consecutive days, in the event at any time or from time to time the number of outstanding shares of Voting Stock is increased due to the issuance of shares upon the exercise of stock options outstanding on the date hereof, then in connection with each such issuance Apple Holdco and/or its Affiliates shall have the right, but not the obligation, to purchase from Parent at the same exercise price per share, up to such number of additional shares of Voting Stock as may then be necessary solely as a result of such issuance to restore the Apple Holdco Interest to the same percentage of the Total Voting Power as existed immediately prior to such increase in the number of outstanding shares of Voting Stock. The Company shall notify Apple Holdco in writing of any such exercise within 15 days following any such exercise. The purchase right set forth in this Section 6.20(b) shall be exercisable at any time and from time to time until 30 days after Apple Holdco’s receipt of notice of such issuance.

VII. CONDITIONS TO THE MERGER

     7.1 Conditions to the Merger. The respective obligations of Parent, MergerSub and Apple Holdco to effect the Merger are subject to the satisfaction or waiver of the following conditions:

          (a) the Strawberry Stockholder Approval shall have been obtained at the Strawberry Stockholders Meeting;

          (b) no preliminary or permanent injunction or other Order shall have been issued that would make unlawful the consummation of the Transactions, and consummation of the Transactions shall not be prohibited or made illegal by any Law;

          (c) all applicable waiting periods under the HSR Act shall have terminated or expired; and

          (d) all other Authorizations of or filings with any Governmental Entity required in connection with the consummation of the Transactions shall have been made or obtained, except where the failure to make or obtain such Authorizations or filings would not, individually or in the aggregate, have a Strawberry Material Adverse Effect or an Apple Material Adverse Effect.

     7.2 Conditions to the Obligations of Apple Holdco. The obligation of Apple Holdco to effect the Merger is subject to the satisfaction of each of the following conditions (each of which is for the exclusive benefit of Apple Holdco and may be waived by Apple Holdco):

          (a) (i) all covenants of MergerSub under this Agreement to be performed by MergerSub on or before the Closing shall have been duly performed by MergerSub in all material respects;

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               (ii) all covenants of Parent under this Agreement to be performed by Parent on or before the Closing shall have been duly performed by Parent in all material respects;

          (b) the representations and warranties of Parent in this Agreement (which for purposes of this paragraph shall be read as though none of them contained any materially or material adverse effect qualifications) shall have been true and correct on the date of this Agreement and shall be true and correct as of the Closing with the same effect as though made as of the Closing, except where the failure of such representations and warranties to be true and correct in all respects as of the applicable time would not, individually or in the aggregate, have a Strawberry Material Adverse Effect. In addition, the representations and warranties set forth in Section 4.5(a), (b) and (f) shall have been true and correct in all material respects on the date of this Agreement and shall be true and correct in all material respects as of the Closing with the same effect as though made as of the Closing;

          (c) (i) Apple Holdco shall have received a certificate of MergerSub addressed to Apple Holdco and dated the Closing Date, signed by an executive officer of MergerSub (on MergerSub’s behalf and without personal liability), confirming the matters set forth in Section 7.2(a)(i);

               (ii) Apple Holdco shall have received a certificate of Parent addressed to Apple Holdco and dated the Closing Date, signed by an executive officer of Parent (on Parent’s behalf and without personal liability), confirming the matters set forth in Section 7.2(a)(ii) and Section 7.2(b).

          (d) no event, circumstance, change or effect shall have occurred since the date of this Agreement that, individually or in the aggregate, with all other events, circumstances, changes and effects, is or would reasonably be expected to have a Strawberry Material Adverse Effect;

          (e) there is no Action pending, which the board of directors of Apple Holdco determines, following the receipt of the advice from its outside counsel, would reasonably be expected to have a Strawberry Material Adverse Effect;

          (f) Parent shall, on or prior to the Closing, provide Apple Holdco with a properly executed Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) Notification Letter, in form and substance reasonably satisfactory to Apple Holdco, which states that shares of capital stock of Parent do not constitute “United States real property interests” under Section 897(c) of the Code, for purposes of satisfying Apple Holdco’s obligations under Treasury Regulations Section 1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification Letter, Parent shall have provided to Apple Holdco, as agent for Parent, a form of notice to the IRS in accordance with the requirements of Treasury Regulations Section 1.897-2(h)(2) along with written authorization for Apple Holdco to deliver such notice form to the IRS on behalf of Parent upon the consummation of the Merger;

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          (g) Apple Holdco shall have received the opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, in form and substance reasonably satisfactory to Apple Holdco, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Effective Time, to the effect that for U.S. federal income tax purposes, the Merger will constitute a reorganization within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code and the exchange of Apple Holdco Common Stock for Strawberry Common Stock pursuant to the Merger will constitute an exchange of securities in pursuance of a plan of reorganization within the meaning of Section 354(a) of the Code. In rendering such opinion, such counsel shall be entitled to rely upon customary representations of officers of Parent, Apple Holdco, and MergerSub;

          (h) All of the resignations of directors of Parent and its Subsidiaries, requested by Apple Holdco pursuant to Section 6.16(a) shall have been obtained and each of the Persons identified pursuant to Section 6.16(b) shall have been appointed to Parent’s board of directors; and

          (i) Each of Parent and MergerSub shall have executed and delivered each Transaction Document to which they are or have been designated to become a party pursuant to this Agreement;

          (j) Parent shall have executed and delivered to Apple Holdco a release in the form attached hereto as Exhibit D (the “Release”).

          (k) The Series A Amendment shall have been filed with the Secretary of State of Delaware and be effective.

          (l) The Series C Amendment shall have been filed with the Secretary of State of Delaware and be effective.

          (m) The Series D Certificate of Designation shall have been filed with the Secretary of State of Delaware and be effective.

          (n) Since the date of this Agreement, without the prior written consent of Apple Holdco, neither Parent nor any of its Subsidiaries shall have (i) entered in any amendment or modification of, or obtained any waiver under, that certain Amended and Restated Credit Agreement, dated as of June 15, 2004, as amended through the Seventeenth Amendment thereof dated as of the date hereof (the “Senior Credit Agreement”), by and among the lenders party thereto (the “Lenders”), Wells Fargo Foothills Inc., as administrative agent and collateral agent for the Lenders, Silver Point Finance, LLC, as the co-agent, syndication agent, documentation agent, arranger and book runner, Parent and each Parent’s Subsidiaries party thereto as borrowers or guarantors that increases the borrower’s borrowing availability thereunder, modifies the definition of “borrowing base” set forth therein or modifies the interest rate or prepayment terms (including any prepayment penalties or premiums) applicable to borrowings thereunder, or (ii) entered into or obtained any other amendment, modification, waiver or extension of or under the Senior Credit Agreement that requires the payment of any fee or other form of consideration (other than reimbursement of

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attorneys’ fees and actual out of pocket expenses) in excess of an aggregate of $4,500,000 for all such amendments, modifications, waivers or extensions.

          (o) At the Closing Date, Parent’s and its Subsidiaries’ aggregate principal amount of borrowings under the Senior Credit Agreement shall not exceed the lesser of (x) (1) $187.5 million plus (2) $5,000,000 minus the principal amount of loans then outstanding under the New Senior Secured Credit Agreements, and (y) Parent’s “borrowing base” as of such date, as such term is defined in the Senior Credit Agreement, plus $5,000,000.

     7.3 Conditions to the Obligations of Parent and MergerSub. The obligations of Parent or MergerSub to effect the Merger are subject to the satisfaction of each of the following conditions (each of which is for the exclusive benefit of Parent and MergerSub and may be waived by Parent, on behalf of itself and MergerSub):

          (a) all covenants of Apple Holdco under this Agreement to be performed on or before the Closing Date shall have been duly performed by Apple Holdco in all material respects;

          (b) the representations and warranties of Apple Holdco in this Agreement (which for purposes of this paragraph shall be read as though none of them contained any materiality or material adverse effect qualifications) shall have been true and correct on the date of this Agreement and shall be true and correct as of the Closing with the same effect as though made as of the Closing, except where the failure of such representations and warranties to be true and correct in all respects as of the applicable time would not, individually or in the aggregate, have an Apple Material Adverse Effect. In addition, the representations and warranties set forth in Section 5.5(a) shall have been true and correct on the date of this Agreement and shall be true and correct as of the Closing with the same effect as though made as of the Closing;

          (c) Parent shall have received a certificate of Apple Holdco addressed to Parent and dated the Closing Date, signed by an executive officer of Apple Holdco (on Apple Holdco’s behalf and without personal liability), confirming the matters set forth in Section 7.3(a) and Section 7.3(b);

          (d) no event, circumstance, change or effect shall have occurred since the date of this Agreement that, individually or in the aggregate, with all other events, circumstances, changes and effects, is or would reasonably be expected to have an Apple Material Adverse Effect;

          (e) there is no Action pending which the board of directors of Parent determines, following the receipt of the advice from its outside counsel would reasonably be expected to have an Apple Material Adverse Effect;

          (f) Apple Holdco shall, on or prior to the Closing Date, provide Parent with a properly executed FIRPTA Notification Letter, in form and substance reasonably satisfactory to Parent, which states that shares of capital stock of Apple Holdco do not constitute “United States real property interests” under Section

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897(c) of the Code, for purposes of satisfying Parent’s obligations under Treasury Regulations Section 1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification Letter, Apple Holdco shall have provided to Parent, as agent for Apple Holdco, a form of notice to the IRS in accordance with the requirements of Treasury Regulations Section 1.897-2(h)(2) along with written authorization for Parent to deliver such notice form to the IRS on behalf of Apple Holdco upon the consummation of the Merger;

          (g) Parent shall have received the opinion of Sonnenschein Nath & Rosenthal LLP in form and substance reasonably satisfactory to Parent, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Effective Time, to the effect that for U.S. federal income tax purposes, the Merger will constitute a reorganization within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code and the exchange of Apple Holdco Common Stock for Strawberry Common Stock pursuant to the Merger will constitute an exchange of securities in pursuance of a plan of reorganization within the meaning of Section 354(a) of the Code. In rendering such opinion, such counsel shall be entitled to rely upon customary representations of officers of Parent, Apple Holdco, and MergerSub;

          (h) Each of Apple Holdco and the Apple Holdco Stockholders shall have executed and delivered each Transaction Document to which they are or have been designated to become a party pursuant to this Agreement; and

          (i) All conditions to the Closing of the Preferred Share Issuance pursuant to the Commitment Agreement shall have been satisfied (other than due to a breach by the Company of its obligations thereunder) and the exchange contemplated by the Commitment Agreement will be consummated concurrently with the Effective Time.

VIII. TERMINATION AND ABANDONMENT

     8.1 Termination. Except as otherwise provided in this Section 8.1, this Agreement may be terminated at any time prior to the Effective Time, whether before or after the Strawberry Stockholder Approval:

          (a) by mutual written consent of Parent and Apple Holdco;

          (b) by Apple Holdco (provided that Apple Holdco is not then in material breach of any covenant, representation, warranty or other agreement contained herein), if there has been a breach by Parent or MergerSub of any of their respective representations, warranties, covenants or agreements contained in this Agreement or any such representation and warranty has become untrue, in either case such that Section 7.2(a), Section 7.2(b) or Section 7.2(d) would be incapable of being satisfied, and such breach or condition either by its terms cannot be cured or if reasonably capable of being cured has not been cured within 30 calendar days following receipt by Parent of notice of such breach;

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          (c) by Parent (provided that neither Parent nor MergerSub is then in material breach of any covenant, representation, warranty or other agreement contained herein), if there has been a breach by Apple Holdco of any of its representations, warranties, covenants or agreements contained in this Agreement, or any such representation and warranty has become untrue, in either case such that Section 7.3(a), Section 7.3(b) or Section 7.3(d) would be incapable of being satisfied, and such breach or condition either by its terms cannot be cured or if reasonably capable of being cured has not been cured within 30 calendar days following receipt by Apple Holdco of notice of such breach;

          (d) by either Parent or Apple Holdco if any Order preventing or prohibiting consummation of the Transactions has become final and nonappealable; provided, however, that the party terminating this Agreement pursuant to this Section 8.1(d) shall use all commercially reasonable efforts to have such Order vacated;

          (e) by either Parent or Apple Holdco if the Merger shall not have occurred on or prior to January 30, 2008 (the “Outside Date”);

          (f) by either Parent or Apple Holdco if the Strawberry Stockholder Approval is not obtained at the Strawberry Stockholders Meeting; or

          (g) by Apple Holdco if the board of directors of Parent or the Special Committee shall have modified or withdrawn the Strawberry Board Recommendation, delivered an ARC Notice or failed to confirm the Strawberry Board Recommendation within four Business Days after Apple Holdco’s request to do so (it being understood, however, that for all purposes of this Agreement, and without limitation, the fact that Parent, in compliance with this Agreement, has supplied any Person with information regarding Parent or has entered into discussions or negotiations with such Person as permitted by this Agreement, or the disclosure of such facts, shall not be deemed a withdrawal or modification of the Strawberry Board Recommendation).

     8.2 Effect of Termination. In the event of termination of this Agreement by either Parent or Apple Holdco pursuant to Section 8.1, this Agreement will forthwith become void and there will be no liability under this Agreement on the part of Parent, MergerSub or Apple Holdco, except (i) to the extent that such termination results from the willful and material breach by a party of any of its representations, warranties or covenants in this Agreement and (ii) as provided in Section 8.3; provided, however, that the provisions of Sections 6.5, 6.12, this Section 8.2, Section 8.3, and Article IX will each remain in full force and effect and will survive any termination of this Agreement.

     8.3 Fees and Expenses.

          (a) Notwithstanding Section 6.12, if this Agreement is terminated by (i) Apple Holdco or Parent pursuant to either Section 8.1(e) (unless the failure of the Merger to have occurred by such date is due to the failure of Apple Holdco to perform in all material respects the covenants and agreements of Apple Holdco set forth herein) or Section 8.1(f) and prior to the time of such termination a Strawberry

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Competing Transaction has been made or proposed to Parent’s board of directors or its stockholders or otherwise publicly announced (whether or not conditional) and within twelve months Parent enters into any agreement in principle, arrangement, understanding or Contract providing for the implementation of a Strawberry Competing Transaction or shall complete a Strawberry Competing Transaction whether or not such Strawberry Competing Transaction was the same as the initial Strawberry Competing Transaction referred to in this clause (i) or (ii) Apple Holdco pursuant to Section 8.1(g), then Parent will pay to Apple Holdco a termination fee equal to $1.0 million plus up to $1.0 million of reasonable documented, third party, out of pocket Expenses.

          (b) Each of the parties acknowledges that the agreements contained in this Section 8.3 are an integral part of the Transactions and that, without these agreements, the other party would not enter into this Agreement. In the event that Parent fails to pay the amounts due pursuant to this Section 8.3 when due, and, in order to obtain such payment, Apple Holdco commences a suit that results in a judgment against Parent for the amounts set forth in this Section 8.3, Parent will pay to Apple Holdco (i) the costs and expenses (including all reasonable fees and expenses of counsel) in connection with any action taken to obtain a judgment and (ii) interest on the amounts set forth in this Section 8.3, commencing on the date that such amounts become due, at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in The City of New York, as such bank’s base rate plus 2.00%.

IX. MISCELLANEOUS

     9.1 Nonsurvival of Representations, Warranties and Covenants. Except for the covenants set forth in Section 6.13, none of the representations, warranties or covenants in this Agreement will survive the Merger.

     9.2 Amendment and Modification. Subject to applicable Law, this Agreement may be amended, modified, or supplemented only by the written agreement of the parties hereto before the Effective Time; provided, however, that after the Strawberry Stockholder Approval is obtained there will not be any amendment that by Law requires further approval by the Strawberry Stockholders without further approval of such stockholders.

     9.3 Waiver of Compliance. Except as otherwise provided in this Agreement, the failure by any Person to comply with any obligation, covenant, agreement or condition may be waived by the Person entitled to the benefit thereof only by a written instrument signed by the Person granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. The failure of any Person to enforce at any time any of the provisions of this Agreement will in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part of this Agreement or the right of any Person thereafter to enforce each and every such provision. No waiver of any breach of any provisions of this Agreement will be held to be a waiver of any other or subsequent breach.

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     9.4 Notices. All notices required or permitted pursuant to this Agreement will be in writing and will be deemed to be properly given when actually received by the Person entitled to receive the notice at the address stated below, or at such other address as a party may provide by notice to the other:

  If to Apple Holdco:

c/o 555 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Philip A. Falcone
Facsimile: (212) 508 3721

  With a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019 6064
Attention: Bruce A. Gutenplan
                 Robert B. Schumer

Facsimile: (212) 757 3990

and:

One Riverchase Parkway South
Birmingham, Alabama 35244
Attention: General Counsel
Facsimile: (205) 987 5505

  If to Parent or MergerSub:

Salton, Inc.
1955 W. Field Court
Lake Forest, Illinois 60045
Attention: Marc Levenstein
Facsimile: (847) 803 1186

     With a copy to:

Sonnenschein Nath & Rosenthal LLP
7800 Sears Tower, 233 South Wacker Drive
Chicago, IL 60606 6404
Attention: Neal Aizenstein
Facsimile: (312) 876 7934

     9.5 Third Party Beneficiaries. Except as specifically set forth in Section 6.13(c), nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

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     9.6 Successors and Assigns. This Agreement will be binding upon and will inure to the benefit of the signatories hereto and their respective successors and permitted assigns. None of Parent, MergerSub or Apple Holdco may assign this Agreement or any of their rights or liabilities thereunder without the prior written consent of the other parties hereto, and any attempt to make any such assignment without such consent will be null and void. Any such assignment will not relieve the party making the assignment from any liability under such agreements.

     9.7 Severability. The illegality or partial illegality of any of this Agreement, or any provision hereof, will not affect the validity of the remainder of this Agreement, or any provision hereof, and the illegality or partial illegality of this Agreement will not affect the validity of this Agreement in any jurisdiction in which such determination of illegality or partial illegality has not been made, except in either case to the extent such illegality or partial illegality causes this Agreement to no longer contain all of the material provisions reasonably expected by the parties to be contained herein.

     9.8 Governing Law. This Agreement will be governed by and construed in accordance with the internal Laws of the State of Delaware applicable to Contracts made and wholly performed within such state, without regard to any applicable conflict of laws principles.

     9.9 Submission to Jurisdiction; Waivers. Each of Apple Holdco, Parent and MergerSub irrevocably agrees that any Action with respect to this Agreement, the Transactions, any provision hereof, the breach, performance, validity or invalidity hereof or for recognition and enforcement of any judgment in respect hereof brought by another party hereto or its successors or permitted assigns shall be brought and determined in the Court of Chancery or other courts of the State of Delaware located in the State of Delaware, and each of Apple Holdco, Parent and MergerSub hereby irrevocably submits and consents with regard to any such Action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of Apple Holdco, Parent and MergerSub hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any Action with respect to this Agreement, the Transactions, any provision hereof or the breach, performance, enforcement, validity or invalidity hereof, (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by applicable Laws, that (i) Action in any such court is brought in an inconvenient forum, (ii) the venue of such Action is improper and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Each party hereto hereby agrees that, to the fullest extent permitted by Law, service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth in Section 9.4 shall be effective service of process for any suit or proceeding in connection with this Agreement or the transactions contemplated hereby.

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     9.10 Specific Performance. The parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the Transactions, will cause irreparable injury to the other parties for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder.

     9.11 Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.

     9.12 Entire Agreement. This Agreement (including the documents and the instruments referred to in this Agreement), the Transaction Documents and the Confidentiality Agreements constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement.

     9.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE MERGER. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE MERGER, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.13.

[SIGNATURES ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, each of the signatories hereto has caused this Agreement to be signed by their respective duly authorized officers as of the date first above written.

SALTON, INC.
By:	/s/ William Lutz
	Name:	William Lutz
	Title:	Interim Chief Executive Officer and Chief Financial Officer
SFP MERGER SUB, INC.
By:	/s/ William Lutz
	Name:	William Lutz
	Title:	Interim Chief Executive Officer and Chief Financial Officer
APN HOLDING COMPANY, INC.
By:	/s/ Philip A. Falcone
	Name:	Philip A. Falcone
	Title:	Vice President and Senior Managing Director

[Signature Page to Merger Agreement]

EX-99.2

Exhibit 99.2

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION
OF
SERIES A VOTING CONVERTIBLE PREFERRED STOCK
OF
SALTON, INC.

     SALTON, INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify:

1.	The Certificate of Designation of Series A Voting Convertible Preferred Stock of the Corporation is hereby amended by adding the following Section immediately after Section 10 of the Certificate of Designation of Series A Voting Convertible Preferred Stock:
	“Section 11. Matters Relating To Merger with APN Holding Company, Inc.

     (a) Immediately prior to the Effective Time, as defined in that certain Agreement and Plan of Merger dated October 1, 2007, among the Corporation, SFP MergerSub, Inc. and APN Holding Company, Inc. (the “Merger Agreement”), the following shall occur:

          (i) each share of Convertible Preferred Stock issued and outstanding immediately prior to the Effective Time shall be automatically, and without any further action on the part of any Person, converted into 2197.49 shares of the Corporation’s Common Stock, subject to adjustment pursuant to Section 11(d) hereof;

          (ii) upon such automatic conversion, any and all accrued and unpaid dividends shall be extinguished and canceled and shall not be paid;

          (iii) upon the automatic conversion of the Convertible Preferred Stock as described in (i) above, all shares of Convertible Preferred Stock shall no longer be deemed to be outstanding, and all rights with respect to such shares shall immediately cease and terminate, except only for the right of the holders thereof to receive shares of Common Stock as described in (i) above; and

          (iv) upon the automatic conversion of the Convertible Preferred Stock as described in (i) above, each certificate for shares of Convertible Preferred Stock shall be deemed to represent the number of shares of Common Stock into which such shares of Convertible Preferred Stock are converted as described in (i) above.

     (b) From and after the Effective Time, the Corporation shall, or shall cause the transfer agent of the Corporation to, deliver to each holder of a certificate for shares of Convertible Preferred Stock who delivers such certificate to the Corporation (or such transfer agent) a certificate representing the number of shares of Common Stock into which such shares of Convertible Preferred Stock were converted as described in Section 11(a)(i) above.

     (c) Each share of Common Stock issued pursuant to the automatic conversion of the Convertible Preferred Stock as described in Section 11(a)(i) above will: (x) not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions from the registration requirements of Section 5 of the Securities Act set forth in Section 4(2) thereof and Regulation D promulgated thereunder; and (y) bear a restrictive legend stating substantially as follows:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR, AN EXEMPTION SUCH THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.”

     (d) If, after October 1, 2007 and prior to the Effective Time, the Corporation (i) declares a stock dividend or other distribution payable in shares of Common Stock or securities convertible or exchangeable into or exercisable for shares of Common Stock or (ii) effects a stock split (including a reverse stock split), reclassification, combination or other similar change with respect to the Common Stock, then the number of shares of Common Stock into which each share of Convertible Preferred Stock shall be converted pursuant to Section 11(a)(i) hereof shall be equitably adjusted to eliminate the effects of that stock dividend, distribution, stock split, reclassification, combination or other change.

2

     (e) Any agreement currently in effect pursuant to which the Corporation has granted registration rights to the holder of any shares of Convertible Preferred Stock shall be understood, from and after the Effective Time, to grant such rights to such holder in respect of shares of Common Stock received by such holder upon conversion of shares of Convertible Preferred Stock pursuant to this Section 11.

     (f) Other than the provisions of this Section 11, none of the other provisions of the Certificate of Designation of Series A Voting Convertible Preferred Stock shall be applicable or operative with respect to the transactions contemplated by the Merger Agreement.”

     The remainder of the Certificate of Designation of Series A Voting Convertible Preferred Stock, as in effect prior to this amendment, shall continue to be in full force and effect without change.

2. The amendment to the Corporation’s Certificate of Designation of Series A Voting Convertible Preferred Stock set forth above was duly adopted by (i) the holders of a majority of the voting power of the outstanding shares of Series A Voting Convertible Preferred Stock voting separately, and (ii) the holders of a majority of the voting power of the outstanding shares of the Corporation’s capital stock entitled to vote thereon, all in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its Chief Executive Officer this                      day of                     , 2007.

By:
	Name:	William M. Lutz
	Title:	Chief Executive Officer

3

EX-99.3

Exhibit 99.3

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
SALTON, INC.

     SALTON, INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify:

1.	The Certificate of Designation of Series C Preferred Stock of the Corporation is hereby amended by adding the following Section immediately after Section 9 of the Certificate of Designation of Series C Preferred Stock:
	“Section 10. Matters Relating To Merger with APN Holding Company, Inc.

     (a) Immediately prior to the Effective Time, as defined in that certain Agreement and Plan of Merger dated October 1, 2007, among the Corporation, SFP MergerSub, Inc. and APN Holding Company, Inc. (the “Merger Agreement”), the following shall occur:

          (i) each share of Series C Preferred Stock issued and outstanding immediately prior to the Effective Time shall be automatically, and without any further action on the part of any Person, converted into 249.56 shares of the Corporation’s Common Stock, subject to adjustment pursuant to Section 10(d) hereof;

          (ii) upon such automatic conversion, any and all accrued and unpaid dividends shall be extinguished and canceled and shall not be paid;

          (iii) upon the automatic conversion of the Series C Preferred Stock as described in (i) above, all shares of Series C Preferred shall no longer be deemed to be outstanding, and all rights with respect to such shares shall immediately cease and terminate, except only for the right of the holders thereof to receive shares of Common Stock as described in (i) above; and

          (iv) upon the automatic conversion of the Series C Preferred Stock as described in (i) above, each certificate for

shares of Series C Preferred Stock shall be deemed to represent the number of shares of Common Stock into which such shares of Series C Preferred Stock are converted as descried in (i) above.

     (b) On and after the Effective Time, the Corporation shall, or shall cause the transfer agent of the Corporation to, deliver to each holder of a certificate for shares of Series C Preferred Stock who delivers such certificate to the Corporation (or such transfer agent) a certificate representing the number of shares of Common Stock into which such shares of Series C Preferred Stock were converted as described in (i) above.

     (c) Each share of Common Stock issued pursuant to the automatic conversion of the Series C Preferred Stock as described in (i) above will: (x) not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions from the registration requirements of Section 5 of the Securities Act set forth in Section 4(2) thereof and Regulation D promulgated thereunder; and (y) bear a restrictive legend stating substantially as follows:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR, AN EXEMPTION SUCH THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.”

     (d) If, after October 1, 2007 and prior to the Effective Time, the Corporation (i) declares a stock dividend or other distribution payable in shares of Common Stock or securities convertible or exchangeable into or exercisable for shares of Common Stock or (ii) effects a stock split (including a reverse stock split), reclassification, combination or other similar change with respect to the Common Stock, then the number of shares of Common Stock into which each share of Series C Preferred Stock shall be converted pursuant to Section 10(a)(i) hereof shall be equitably adjusted to eliminate the effects of that stock dividend, distribution, stock split, reclassification, combination or other change.

     (e) Any agreement currently in effect pursuant to which the Corporation has granted registration rights to the holder of any

shares of Series C Preferred Stock shall be understood, from and after the Effective Time, to grant such rights to such holder in respect of shares of Common Stock received by such holder upon conversion of shares of Series C Preferred Stock pursuant to this Section 10.

     (f) Other than the provisions of this Section 10, none of the other provisions of the Certificate of Designation of the Series C Preferred Stock shall be applicable or operative with respect to the transactions contemplated by the Merger Agreement.”

     The remainder of the Certificate of Designation of Series C Preferred Stock, as in effect prior to this amendment, shall continue to be in full force and effect without change.

2. The amendment to the Corporation’s Certificate of Designation of Series C Preferred Stock set forth above was duly adopted by (i) the holders of a majority of the voting power of the outstanding shares of Series C Preferred Stock voting separately, and (ii) holders of a majority of the voting power of the outstanding shares of the Corporation’s capital stock entitled to vote thereon, all in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its Chief Executive Officer this                      day of                     , 2007.

By:
	Name:	William B. Lutz
	Title:	Chief Executive Officer

EX-99.4

Exhibit 99.4

SALTON, INC.
FORM OF CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES D PREFERRED STOCK,
PAR VALUE $0.01 PER SHARE

Pursuant to Section 151 of the Delaware General Corporation Law

     The undersigned,      ,      of Salton, Inc., a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY that the following resolution, creating a series of 150,000 shares of Preferred Stock was duly adopted by the Board of Directors, on October 1, 2007:

     WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in Article IV of the Second Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), to provide by resolution or resolutions for the issuance of shares of Preferred Stock, par value $0.01 per share, of the Corporation, in one or more classes or series with such voting powers, full or limited, if any, and such preferences and relative, participating, optional or other rights and limitations as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in the Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the General Corporation Law of the State of Delaware (the “DGCL”); and

     WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series.

     NOW, THEREFORE, BE IT RESOLVED:

     Section 1.  Designation and Number of Shares.  There shall be hereby created and established a series of Preferred Stock designated as “Series D Preferred Stock” (the “Series D Preferred Stock”). The authorized number of shares of Series D Preferred Stock shall be 150,000. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 9 below.

     Section 2.  Rank.  The Series D Preferred Stock shall with respect to dividends and distributions of assets and rights upon the occurrence of a Liquidation or a Sale Transaction rank (i) junior to all currently outstanding shares of preferred stock of the Corporation and (ii) senior to (x) all classes of common stock of the Corporation (including, without limitation, the Common Stock), and (y) each other class or series of Capital Stock of the Corporation hereafter created which does not expressly rank pari passu with or senior to the Series D Preferred Stock (clauses (ii)(x) and (ii)(y) collectively, referred to as “Junior Stock”). The Corporation may not issue any class or series of Capital Stock that ranks on a parity with the Series D Preferred Stock as to dividends and distributions upon the occurrence of a Liquidation or Sale Transaction (collectively, referred to as “Parity Stock”) or senior to the Series D Preferred Stock as to dividends and distributions upon the occurrence of a Liquidation or Sale Transaction (collectively, referred to as “Senior Stock”) other than in accordance with Section 3(b).

     Section 3.  Vote.

     (a) The holders of Series D Preferred Stock, except as otherwise required under the DGCL or as set forth in this Section 3, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation.

     (b) So long as any shares of the Series D Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of holders of at least a majority of the then outstanding shares of Series D Preferred Stock, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting:

     (i) authorize or issue any class of Senior Stock or Parity Stock; or

     (ii) amend this Certificate of Designations or the Certificate of Incorporation, whether by merger, consolidation or otherwise, so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of Series D Preferred Stock.

     (c) In any case in which the holders of Series D Preferred Stock shall be entitled to vote pursuant to this Section 3 or pursuant to the DGCL, each holder of Series D Preferred Stock entitled to vote with respect to such matter shall be entitled to one vote for each share of Series D Preferred Stock held.

     Section 4.  Dividends.

     (a) The holders of shares of Series D Preferred Stock shall receive when, as and if declared by the Board of Directors, out of funds legally available therefor cumulative dividends at an annual rate equal to 16%, compounded quarterly, of the Series D Liquidation Preference, calculated on the basis of a 360-day year, consisting of twelve 30-day months. The Board of Directors may fix a record date for the determination of holders of shares of Series D Preferred Stock entitled to receive payment of such dividends, which record date shall not be more than 60 days prior to the applicable dividend payment date. To the extent not paid, such dividends shall accrue on a daily basis and accumulate and compound on a quarterly basis from the Original Date of Issuance, in each case, whether or not declared. For purposes hereof, the term “Original Date of Issuance” shall mean          , 2007. All accrued and unpaid dividends, if any, shall, to the extent funds are legally available therefor, be mandatorily paid upon the earlier to occur of (i) a Liquidation or (ii) a redemption of shares of Series D Preferred Stock pursuant to Section 6 below (each, a “Mandatory Dividend Payment Date”). On a Mandatory Dividend Payment Date, all accrued and unpaid dividends shall be paid in cash.

     (b) Junior Stock Dividends.  The Corporation shall not declare or pay any dividends on, or make any other distributions with respect to (other than dividends or distributions paid solely in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) or redeem, purchase or otherwise acquire (other than a redemption, purchase or other acquisition of Common Stock made for purposes of, and in compliance with, requirements of an employee incentive or benefit plan or other compensatory arrangement of the Corporation or any subsidiary) for consideration, any shares of any Junior Stock unless and until all accrued and unpaid dividends on all outstanding shares of Series D Preferred Stock have been paid in full.

     Section 5.  Liquidation Preference.

     (a) Series D Priority Payment.  Upon the occurrence of a Liquidation, the holders of shares of Series D Preferred Stock shall be paid for each share of Series D Preferred Stock held thereby, out of, but only to the extent of, funds legally available therefore, an amount in cash equal to the sum of (x) $1,000 (as adjusted for stock splits, reverse-stock splits, combinations, stock dividends, recapitalizations or other similar events of the Series D Preferred Stock, the “Series D Liquidation Preference”) plus, (y) as provided in Section 4 above, all unpaid, accrued or accumulated dividends or other amounts due, if any, with respect to each share of Series D Preferred Stock, before any payment or distribution is made to any Junior Stock.

     (b) Insufficient Assets.  If the assets of the Corporation available for distribution to the holders of shares of Series D Preferred Stock and the holders of any other Parity Stock shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive upon a Liquidation, then all of the assets available for distribution to such holders shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full.

     (c) Notice.  Written notice of a Liquidation stating a payment or payments and the place where such payment or payments shall be payable, shall be delivered in person, mailed by certified mail, return receipt

requested, mailed by overnight mail or sent by telecopier, not less than ten (10) days prior to the earliest payment date stated therein, to the holders of record of shares of Series D Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation.

     Section 6.  Redemption.  The Corporation shall, as provided below, redeem the shares of Series D Preferred Stock.

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     (a) Mandatory Redemption.  Upon the earlier to occur of (i) a Sale Transaction or (ii) the sixth (6^th) anniversary of the Original Date of Issuance (the earlier such date, the “Mandatory Redemption Date”), each outstanding share of Series D Preferred Stock shall automatically, with no further action required to be taken by the Corporation or the holder thereof, be redeemed (unless otherwise prevented by applicable law), at a redemption price per share equal to 100% of the Series D Liquidation Preference, plus all unpaid, accrued or accumulated dividends or other amounts due, if any, on the shares of Series D Preferred Stock. The total sum payable per share of Series D Preferred Stock to be redeemed on the Mandatory Redemption Date is hereinafter referred to as the “Preferred Redemption Price,” and the payment to be made on the Mandatory Redemption Date for the Series D Preferred Stock is hereinafter referred to as the “Preferred Redemption Payment.” Upon written notice from the Corporation, each holder of Series D Preferred Stock shall promptly surrender to the Corporation, at any place where the Corporation shall maintain a transfer agent for its Series D Preferred Stock, certificates representing the shares so redeemed, duly endorsed in blank or accompanied by proper instruments of transfer. In case fewer than the total number of shares of Series D Preferred Stock represented by any certificate are redeemed, a new certificate representing the number of unredeemed shares shall be issued to the holder thereof without cost to such holder within ten (10) business days after surrender of the certificate representing the redeemed shares.

     (b) Termination of Rights.  Except as set forth in this Section 6(b) and Section 6(c), on and after the Mandatory Redemption Date all rights of any holder of Series D Preferred Stock shall cease and terminate; and all shares of Series D Preferred Stock shall be canceled and shall no longer be deemed to be outstanding, whether or not the certificates representing such shares have been received by the Corporation; provided, however, that, if the Corporation defaults in the payment of the Preferred Redemption Payment in respect of any share of Series D Preferred Stock for any reason, including, without limitation, the lack of legally available funds therefor, the rights, preferences and privileges of the holder of such share of Series D Preferred Stock shall continue to inure to the benefit of such holder of Series D Preferred Stock until the Corporation cures such default and such share which has not been redeemed shall continue to be outstanding until full payment of the Preferred Redemption Price and any other amounts required under Section 6(c) is made in respect thereof.

     (c) Insufficient Funds for Redemption.  If the funds of the Corporation available for redemption of the Series D Preferred Stock to be redeemed in accordance with Section 6(a) and any other Parity Stock required to be redeemed on the Mandatory Redemption Date by law are insufficient to redeem such shares on such date, the holders of Series D Preferred Stock and such Parity Stock shall share ratably in any funds available by law for redemption of such shares according to the respective amounts which would be payable with respect to the number of shares owned by them if the shares to be so redeemed on such Mandatory Redemption Date were redeemed in full. The Corporation shall in good faith use all reasonable efforts as expeditiously as possible to eliminate, or obtain an exception, waiver or exemption from, any and all restrictions under applicable law that prevented the Corporation from paying the Redemption Price and redeeming all of the Series D Preferred Stock to be redeemed hereunder. At any time thereafter when additional funds of the Corporation are available by law for the redemption of shares of Series D Preferred Stock, such funds will be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are available, on the basis set forth above. In the event that funds are not available by law for the payment in full of the Preferred Redemption Price for the shares of Series D Preferred Stock to be so redeemed on the Mandatory Redemption Date, then the Corporation shall be obliged to make such partial redemption so that the number of shares of Series D Preferred Stock held by each holder shall be reduced in an amount which shall bear the same ratio to the actual number of shares of Series D Preferred Stock to be redeemed on such Mandatory Redemption Date as the number of shares of Series D Preferred Stock then held by such holder bears to the aggregate number of shares of Series D

Preferred Stock then outstanding. In the event that the Corporation fails to redeem shares of Series D Preferred Stock for which redemption is required, then during the period from the Mandatory Redemption Date through the date on which such shares that the Corporation failed to redeem on the Mandatory Redemption Date are actually redeemed, dividends on such shares shall accrue and be cumulative at an annual rate equal to 18%, compounded quarterly, of the Series D Liquidation Preference, calculated on the basis of a 360-day year consisting of twelve 30-day months. To the extent not paid, dividends shall accrue on a daily basis and accumulate and compound on a quarterly basis (to the extent not otherwise declared and paid as set forth above), in each case whether or not declared.

     (d) Notices.  In case at any time or from time to time:

     (i) the Corporation shall declare a dividend (or any other distribution) on its shares of Common Stock; or

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     (ii) there shall be a Sale Transaction;

then the Corporation shall mail to each holder of shares of Series D Preferred Stock at such holder’s address as it appears on the transfer books of the Corporation, as promptly as possible but in any event at least ten (10) days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or (B) the date on which such Sale Transaction is expected to become effective.

     Section 7.  General.

     (a) Notices.  Except as otherwise expressly provided, whenever notices or other communications are required to be made, delivered or otherwise given to holders of shares of the Series D Preferred Stock, the notice or other communication shall be made in writing and shall be by registered or certified first class mail, return receipt requested, telecopier, courier service or personal delivery, addressed to the Persons shown on the books of the Corporation as such holders at the addresses as they appear in the books of the Corporation, as of a record date or dates determined in accordance with the Corporation’s Certificate of Incorporation and by-laws and applicable law, as in effect from time to time. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five business days after being deposited in the U.S. mail, postage prepaid, if mailed; and if sent by telecopy or facsimile transmission (and receipt is confirmed), when transmitted at or before 5:00 p.m. local time at the location of receipt on a Business Day, on such Business Day, and if received after 5:00 p.m. on a Business Day or on a day other than a Business Day, on the next following Business Day, but only if also sent by reputable overnight air courier within one Business Day following transmission.

     (b) Certain Remedies.  Any registered holder of shares of Series D Preferred Stock shall be entitled to an injunction or injunctions to prevent violations of the provisions of the Certificate of Incorporation and this Certificate of Designations and to enforce specifically the terms and provisions of the Certificate of Incorporation and this Certificate of Designations in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which such holder may be entitled at law or in equity. Notwithstanding the foregoing, the observance of any term of the Certificate of Incorporation and/or this Certificate of Designations which benefits only the holders of the Series D Preferred Stock may be waived by holders of at least a majority of all issued and outstanding Series D Preferred Stock (either generally or in a particular instance and either retroactively or prospectively).

     (c) Invalidity.  If any right, preference or limitation of the Series D Preferred Stock set forth herein (as amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule or law or public policy, all other rights, preferences and limitations set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation herein set forth shall not be deemed dependant upon any other such right, preference or limitation unless so expressed herein.

     Section 8.  Business Day.  If any payment shall be required by the terms hereof to be made on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day.

     Section 9.  Specified Debt.  Notwithstanding any provision to the contrary contained in the Certificate of Incorporation or this Certificate of Designations, the Corporation shall not pay any cash dividends on, or make any other cash distributions with respect to or redeem, repurchase or otherwise acquire for cash, any shares of Series D Preferred Stock until the all unpaid principal and interest under the Specified Debt has been paid in full and all obligations to lend thereunder have terminated.

     Section 10.  Definitions.  As used in this Certificate of Designations, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:

     “Board of Directors” means the Board of Directors of the Corporation.

     “Business Day” means any day except a Saturday, a Sunday, or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close.

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     “Capital Stock” means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person’s capital stock and any and all rights, warrants or options exchangeable for or convertible into such capital stock (but excluding any debt security whether or not it is exchangeable for or convertible into such capital stock).

     “Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of the Corporation.

     “Common Stock” shall mean the common stock, par value $0.01 per share of the Corporation.

     “Corporation” means Salton, Inc., a Delaware corporation.

     “DGCL” means the General Corporation Law of the State of Delaware, as amended.

     “Junior Stock” has the meaning ascribed to it in Section 2.

     “Liquidation” shall mean the voluntary or involuntary liquidation under applicable bankruptcy or reorganization legislation, or the dissolution or winding up of the Corporation.

     “Mandatory Dividend Payment Date” has the meaning ascribed to it in Section 4(a).

     “Mandatory Redemption Date” has the meaning ascribed to it in Section 6(a).

     “Original Date of Issuance” has the meaning ascribed to it in Section 4(a).

     “Parity Stock” has the meaning ascribed to it in Section 2.

     “Person” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind.

     “Preferred Redemption Payment” has the meaning ascribed to it in Section 6(a).

     “Preferred Redemption Price” has the meaning ascribed to it in Section 6(a).

     “Sale Transaction” shall mean (a) (i) the merger or consolidation of the Corporation into or with one or more Persons, (ii) the merger or consolidation of one or more Persons into or with the Corporation or (iii) a tender offer or other business combination if, in the case of (i), (ii) or (iii), the stockholders of the Corporation prior to such merger or consolidation do not retain at least a majority of the voting power of the surviving Person, (b) the voluntary sale, conveyance, exchange or transfer to another Person of (i) the voting Capital Stock of the Corporation if, after such sale, conveyance, exchange or transfer, the stockholders of the Corporation prior to such sale, conveyance, exchange or transfer do not retain at least a majority of the voting power of the Corporation or (ii) all or substantially all of the assets of the

Corporation or (c) the election to the Board of Directors of individuals who would constitute a majority of the members of the Board of Directors and the election or the nomination for election by the Corporation’s stockholders of such directors was not approved by a vote of at least a majority of the directors in office immediately prior to such election or nomination.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

     “Senior Stock” has the meaning ascribed to it in Section 2.

     “Series D Liquidation Preference” shall have the meaning ascribed to it in Section 5(a).

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     “Specified Debt” means.

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     IN WITNESS WHEREOF, the undersigned has executed and subscribed this certificate this      day of      , 2007.

Name: 

Title: 

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EX-99.5

Exhibit 99.5

COMMITMENT AGREEMENT

          COMMITMENT AGREEMENT dated as of October 1, 2007 (this “Agreement”) among Salton, Inc., a Delaware corporation (“Parent”), Harbinger Capital Partners Master Fund I, Ltd., a company organized under the laws of the Cayman Islands (the “Master Fund”), and Harbinger Capital Partners Special Situations Fund, L.P., a Delaware limited partnership (“Special Situations Fund” and, together with the Master Fund, the “Securityholders”).

          WHEREAS, Parent, SFP Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (“MergerSub”), and APN Holding Company, Inc., a Delaware corporation (“APN Holdco”), propose to enter into an Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended or supplemented, the “Merger Agreement”; capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement);

          WHEREAS, each Securityholder owns the number of shares of APN Holdco Common Stock set forth opposite its name on Schedule A hereto (such shares of APN Holdco Common Stock, together with any other shares of capital stock of APN Holdco acquired by such Securityholder after the date hereof and during the term of this Agreement, being collectively referred to herein as the “Subject Shares” of such Securityholder);

          WHEREAS, each Securityholder owns the principal amount of Parent’s Second Lien Notes set forth opposite its name on Schedule B hereto (the “Subject Second Lien Notes”), and the principal amount of Parent’s 12-1/4% Senior Subordinated Notes due 2008 set forth opposite its name on Schedule B hereto (the “Subject Subordinated Notes,” and together with the Subject Second Lien Notes, the “Subject Notes”); and

          WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent has requested that each Securityholder enter into this Agreement.

          NOW, THEREFORE, the parties hereto agree as follows:

          SECTION 1 Representations and Warranties of Each Securityholder. Each Securityholder hereby, severally and not jointly, represents and warrants to Parent as of the date hereof in respect of itself as follows:

               (a) Organization; Authority; Execution and Delivery; No Conflicts; Enforceability.

                    (i) The Securityholder is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.

                    (ii) The Securityholder has the requisite power and authority to execute and deliver this Agreement and the unanimous written consent of the

APN Holdco Securityholders in the form attached as Exhibit A to this Agreement (the “Securityholder Consent”) and to perform its obligations hereunder. The execution and delivery by the Securityholder of this Agreement and the Securityholder Consent have been duly authorized and approved by all necessary action on the part of the Securityholder. This Agreement constitutes the valid and binding obligation of the Securityholder, enforceable against the Securityholder in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

                    (iii) The execution and delivery by the Securityholder of this Agreement and the Securityholder Consent and the performance of its obligations hereunder and compliance with the terms hereof do not and will not, (i) violate or conflict with any provision of its articles of incorporation, certificate of formation, bylaws or partnership agreement, as applicable, (ii) violate or conflict with any Law or Order applicable to the Securityholder or by which any of its properties or assets may be bound, (iii) require any filing with, or Permit, consent or approval of, or the giving of any notice to, any Governmental Entity, or (iv) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, cancellation or acceleration of, or result in the creation of any Encumbrance upon any of the properties or assets of the Securityholder under, or give rise to any obligation, right of termination, cancellation, acceleration or increase of any obligation or a loss of a material benefit under, any of the terms, conditions or provisions of any Contract to which the Securityholder is a party, or by which the Securityholder may be bound, excluding in the case of clauses (iii) and (iv) above, conflicts, violations, breaches, defaults, rights of termination, cancellations, accelerations, increases, losses, creations and impositions of Encumbrances which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Securityholder to perform its obligations under this Agreement.

               (b) The Subject Shares. The Securityholder is the record and beneficial owner of, and has good and marketable title to, the Subject Shares set forth opposite its name on Schedule A hereto, free and clear of any Encumbrances (other than Encumbrances created pursuant to the terms of this Agreement or arising under federal or state securities Laws). The Securityholder does not own, of record or beneficially, any shares of capital stock of APN Holdco other than the Subject Shares set forth opposite its name on Schedule A attached hereto. The Securityholder has the sole right to vote such Subject Shares, none of such Subject Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting or the Transfer (as defined in Section 4(b) below) of such Subject Shares, except as contemplated by this Agreement.

               (c) The Subject Notes. The Securityholder is the record and beneficial owner of, and has good and marketable title to, the principal amount Subject Second Lien Notes and Subject Subordinated Notes set forth opposite its name on Schedule B hereto, free and clear of any Encumbrances (other than Encumbrances

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created pursuant to the terms of this Agreement or arising under federal or state securities Laws).

               (d) Investor Representations. The Securityholder acknowledges that the Strawberry Common Stock to be issued pursuant to the Merger Agreement and the shares of Strawberry Series D Preferred Stock to be issued to it pursuant to Section 3 of this Agreement initially will not be registered under the Securities Act in reliance on the exemptions from the registration requirements of Section 5 of the Securities Act set forth in Section 4(2) thereof and Regulation D promulgated thereunder. In connection therewith: (i) the Securityholder hereby represents and warrants to Parent that (A) it is an “accredited investor” as such term is defined under the Securities Act, or, alternatively, has such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in Parent and the Parent Common Stock, and (B) the shares of Strawberry Common Stock to be issued to such Securityholder pursuant to the Merger Agreement and the shares of Strawberry Series D Preferred Stock to be issued to it pursuant to Section 3 of this Agreement are being purchased for investment for the account of such Securityholder and without the intent of participating directly or indirectly in a distribution of such shares in violation of the Securities Act or other applicable securities laws; (ii) in addition to any legend imposed by applicable state securities laws, the certificates representing the shares of Strawberry Common Stock to be issued pursuant to the Merger Agreement and the shares of Strawberry Series D Preferred Stock to be issued to it pursuant to Section 3 of this Agreement will bear the restrictive legends set forth in the Merger Agreement, and stop transfer orders shall be placed against the transfer thereof with Parent’s transfer agent; and (iii) the shares of Strawberry Common Stock to be issued pursuant to the Merger and the shares of Strawberry Series D Preferred Stock to be issued to it pursuant to Section 3 of this Agreement will be subject to transfer restrictions imposed by federal and state securities laws.

               (e) Information to be Supplied. None of the information supplied in writing by Securityholder for inclusion or incorporation by reference in the Proxy Statement or any Additional Filings will, in the case of the Proxy Statement, at the date it is first mailed to Strawberry Stockholders or at the time of the Strawberry Stockholders Meeting or at the time of any amendment or supplement thereof, or, in the case of any Additional Filing, at the date it is first mailed to Strawberry Stockholders or, at the date it is first filed with the SEC or other Governmental Entity, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. No representation is made by Securityholder with respect to statements made or incorporated by reference therein based on information supplied by Parent, MergerSub and/or APN Holdco in connection with the preparation of the Proxy Statement or the Additional Filings for inclusion or incorporation by reference therein.

               (f) Broker’s or Finder’s Fee. Except for Lazard Frères & Co. LLC and in connection with the Financing and the Letter of Credit Agreement, no Person

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acting on behalf of Securityholder is, or will be, entitled to any investment banking, broker’s, finder’s or similar fee for which Parent, MergerSub, APN Holdco or any of their respective Affiliates or the Surviving Corporation after the Effective Time could have any liabilities in connection with this Agreement, the Merger Agreement or any of the Transactions.

          SECTION 2 Representations and Warranties of Parent. Parent hereby represents and warrants to each Securityholder and APN Holdco as follows:

               (a) Parent is duly organized, validly existing and in good standing under the laws of the State of Delaware.

               (b) Parent has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Parent of this Agreement have been duly authorized and approved by all necessary corporate action on the part of Parent. This Agreement constitutes the valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

               (c) The execution and delivery by Parent of this Agreement and the performance of its obligations hereunder and compliance with the terms hereof do not and will not, (i) violate or conflict with any provision of its certificate of incorporation or bylaws or the comparable governing documents of any of its Subsidiaries, (ii) violate or conflict with any Law or Order applicable to Parent or any of its Subsidiaries or by which any of their respective properties or assets may be bound, (iii) require any filing with, or Permit, consent or approval of, or the giving of any notice to, any Governmental Entity, or (iv) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, cancellation or acceleration of, or result in the creation of any Encumbrance upon any of the properties or assets of Parent or any of its Subsidiaries under, or give rise to any obligation, right of termination, cancellation, acceleration or increase of any obligation or a loss of a material benefit under, any of the terms, conditions or provisions of any Contract to which Parent or any of its Subsidiaries is a party, or by which Parent or any of its Subsidiaries may be bound, excluding in the case of clauses (iii) and (iv) above, conflicts, violations, breaches, defaults, rights of termination, cancellations, accelerations, increases, losses, creations and impositions of Encumbrances which would not, individually or in the aggregate, reasonably be expected to have an Strawberry Material Adverse Effect.

               (d) When issued in accordance with the terms of this Agreement, the shares of Strawberry Series D Preferred Stock to be issued to it pursuant to Section 3 of this Agreement will be duly authorized, validly issued, fully paid and non assessable free and clear of all Encumbrances (other than as imposed by federal or state securities laws).

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               (e) The representations and warranties of Parent set forth in the Merger Agreement are true and correct in all material respects.

          SECTION 3 Purchase and Sale of Series D Preferred Stock.

               (a) Subject to the satisfaction or waiver of the conditions to the closing of the Merger set forth in the Merger Agreement, and concurrently with the Effective Time, each Security Holder agrees to purchase from Parent, and Parent agrees to issue and sell to each Securityholder, a number of shares of Parent Series D Preferred Stock to be issued pursuant to the terms of a Certificate of the Powers, Designations, Preferences and Rights annexed hereto as Exhibit B (the “Certificate of Designation”) having an initial aggregate Series D Liquidation Preference (as defined in the Certificate of Designation) equal to the sum of (i) the aggregate redemption or repurchase price which would have been required to be paid on the Closing Date in connection with a change in control in respect of the principal amount of Parent’s 12 1/4% Senior Subordinated Notes due 2008 and Second Lien Notes owned by the such Securityholder on the Closing Date, plus (ii) any accrued and unpaid interest thereon through the Closing Date (the “Aggregate Purchase Price”).

               (b) The Securityholders will pay the Aggregate Purchase Price for the shares of Series D Preferred Stock to be issued to and purchased by them pursuant to Section 3(a) hereof by surrendering to Parent the Subject Notes set forth beside its name on Schedule B hereto.

          SECTION 4 Covenants of Each Securityholder. Each Securityholder, severally and not jointly, covenants and agrees as follows:

               (a) Immediately following the execution and delivery of the Merger Agreement, the Securityholder shall execute and deliver the Securityholder Consent to APN Holdco, with a copy to Parent. The Securityholder will not thereafter revoke or modify, or encourage other Securityholders to revoke or modify, the Securityholder Consent, and the Securityholder will not thereafter execute another written consent or vote (or cause to be voted) the Subject Shares of the Securityholder for any proposal that will approve any action in conflict with the Securityholder Consent or that would otherwise be reasonably likely to impede, frustrate, prevent or nullify any provision of the Merger Agreement, the Merger or the consummation of any of the transactions contemplated hereby or thereby.

               (b) The Securityholder shall not Transfer, except to another Securityholder, any Subject Shares to any person other than pursuant to the Merger Agreement, this Agreement or another Transaction Document. The Securityholder shall not Transfer any Subject Notes to any person except to another Securityholder or to another Person who agrees to accept such Subject Notes subject to the terms this Agreement and agrees to be bound by the terms hereof. “Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of (by operation of law or otherwise).

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               (c) At or prior to the Closing, the Securityholder shall execute and deliver each Transaction Document to which it has been designated to become a party thereto pursuant to the Merger Agreement.

               (d) Each Securityholder will provide Parent and MergerSub with the information concerning itself in the form required to be included in the Proxy Statement and the Additional Filings (including by reason of any SEC comments thereto or subsequent requests thereon). If at any time prior to the Effective Time, any event or circumstance relating to such Securityholder or its officers or directors, should be discovered by such Securityholder and such information should be set forth in an amendment or supplement to the Proxy Statement or the Additional Filings so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Securityholder will promptly notify Parent and MergerSub and, to the extent required by applicable Laws, Parent or MergerSub, as applicable, will promptly file with the SEC and, if required by Law, disseminate to the Strawberry Securityholders an appropriate amendment or supplement describing such information.

          SECTION 5 Termination. This Agreement shall terminate upon the earliest of (i) the Effective Time and (ii) the termination of the Merger Agreement in accordance with its terms, other than with respect to the liability of any party for breach hereof prior to such termination.

          SECTION 6 Securityholder Capacity. Each Securityholder signs solely in its capacity as the record holder and beneficial owner of such Securityholder’s Subject Shares and Subject Notes and nothing herein shall limit or affect any actions taken by a partner or an officer, employee or agent of a Securityholder, in his or her capacity as an officer or director of APN Holdco or Parent in exercising his or her rights under the Merger Agreement to the extent that such actions are permitted under the Merger Agreement.

          SECTION 7 Right of First Refusal. In consideration of the agreements of the Securityholders contained herein, Parent agrees that if at any time during the First Refusal Period (as defined below) Parent shall propose to issue or sell to any Person any debt or equity securities other than in a Permitted Issuance (as defined below), Parent shall notify the Securityholders in writing of such proposed issuance, which notice (an “Offer Notice”) shall describe the terms, rights and priveleges of such securities (the “Offered Securities”) and the purchase price to be paid therefor and offer the Securityholders or their designees an opportunity to purchase all, but not less than all, of the Offered Securities from Parent at the price and on the terms and conditions as set forth in such Offer Notice. Following receipt by the Securityholders of an Offer Notice, the Securityholders (or any one of them) shall have 10 days from the date that it receives the Offer Notice (the “Offer Period”) to notify Parent in writing by delivering an

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“Acceptance Notice” whether it wishes to purchase the Offered Securities from Parent on the terms set forth in the Offer Notice. If Parent receives an Acceptance Notice during the Offer Period, Parent shall sell the Offered Securites to the Securityholders (or their designees) on the terms set forth in the Offer Notice at a closing (to be held at Parent’s corporate offices) on the date set forth in the Acceptance Notice, which date shall be no less than 10 nor more than 30 days following the date on which the Securityholders (or any one of them) shall have delivered to Parent its Acceptance Notice, unless Parent and the Securityholders shall otherwise agree to a different closing date. If (but only if) the Securityholders shall not have responded to the Offer Notice during the Offer Period (or if the Securityholders shall each have informed Parent in writing during the Offer Period that it is not exercising its purchase right), Parent may sell all, but not less than all, of the Offered Securities to a third party on the same terms and conditions as offered to the Securityholders as set forth in the Offer Notice; provided, however such sale of the Offered Securities must take place on or prior to the earlier of (a) 90 days following the end of the Offer Period, and (b) 90 days following the date that the last of the Securityholders shall have informed Parent that it is not exercising its purchase right. If (x) such third party sale does not close within the 90 day period referenced in the preceding sentence, or (y) if the terms of either the proposed sale or the Offered Securities are in any material respect more favorable to the third party purchaser than those set forth in the Offer Notice, or (z) the size of the offering is increased or decreased from that contemplated by the Offer Notice, Parent may not proceed with such third party sale unless and until it shall have given the Securityholders a further opportunity to purchase such securities (such further offer shall be made by delivering a new Offer Notice and shall otherwise be subject to the terms outlined above). If the Securityholders, or any one of them, shall have deliverded an Acceptance Notice during the Offer Period, the Securityholders shall agree as between themselves, and shall inform Parent prior to the closing date for the sale of the Offered Securities, as to the number or amount of the Offered Securities to be purchased by each of them or their designees (so long as the aggregate number or amount of such securities to be purchased by Securityholders and their designees, taken together, constitute all of the Offered Securities). As used in this Section 7, the “First Refusal Period” shall be the period commencing on the Closing Date, and terminating on the date that the Securityholders or their Affiliates (considered for purposes of this Section 7 as a single entity) cease to beneficially own at least 50% of the total number of outstanding shares of Strawberry Series D Preferred Stock, a “Permitted Issuance” means any issuance or sale of shares of Strawberry Common Stock (or securities convertible into or exercisable or exchangeable for shares of Strawberry Common Stock) (i) to an employee, director, consultant or agent of Parent or any of its Subsidiaries pursuant to a stock option plan or other employee benefit plan or arrangement approved or adopted by the Board of Directors of Parent, (ii) pursuant to the conversion, exercise or exchange of any securities convertible into or exercisable or exchangeable for Strawberyy Common Stock outstanding on the Closing Date pursuant to the terms thereof existing on the Closing Date, (iv) as consideration for an acquisition approved by the Board of Directors of Parent, or (v) to any Person in connection with any strategic commercial arrangement with Parent or any of its Subsidiaries as approved by the Board of Direc tors of Parent.

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          SECTION 8 General Provisions.

               (a) Further Assurances. Each Securityholder and Parent shall, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as the other party may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and the Merger Agreement.

               (b) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

               (c) Notice. All notices required or permitted pursuant to this Agreement will be in writing and will be deemed to be properly given when actually received by the Person entitled to receive the notice at the address set forth on Exhibit C hereto, or at such other address as a party may provide by notice to the other.

               (d) Interpretation.

                    (i) When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference will be to an Article or Section or Exhibit or Schedule to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” Unless the context otherwise requires, (i) “or” is disjunctive but not necessarily exclusive, (ii) words in the singular include the plural and vice versa, (iii) the use in this Agreement of a pronoun in reference to a party hereto includes the masculine, feminine or neuter, as the context may require, and (iv) unless otherwise defined herein, terms used herein which are defined in GAAP have the meanings ascribed to them therein. This Agreement will not be interpreted or construed to require any Person to take any action, or fail to take any action, that would violate any applicable Law.

                    (ii) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

               (e) Severability. The illegality or partial illegality of any of this Agreement, or any provision hereof, will not affect the validity of the remainder of this Agreement, or any provision hereof, and the illegality or partial illegality of this Agreement will not affect the validity of this Agreement in any jurisdiction in which such determination of illegality or partial illegality has not been made, except in either case to the extent such illegality or partial illegality causes this Agreement to no longer contain all of the material provisions reasonably expected by the parties to be contained therein.

               (f) Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will

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become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.

               (g) Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement.

               (h) Third Party Beneficiaries. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

               (i) Governing Law. This Agreement will be governed by and construed in accordance with the internal Laws of the State of Delaware applicable to Contracts made and wholly performed within such state, without regard to any applicable conflict of laws principles.

               (j) Successors and Assigns. This Agreement will be binding upon and will inure to the benefit of the signatories hereto and their respective successors and permitted assigns. Neither Parent nor any Securityholder may assign this Agreement or any of their rights or liabilities thereunder without the prior written consent of the other parties hereto, and any attempt to make any such assignment without such consent will be null and void. Any such assignment will not relieve the party making the assignment from any liability under such agreements. The foregoing notwithstanding, nothing set forth herein shall limit the right of the Securityholders to assign their rights under Section 7 hereof to any Person

               (k) Submission to Jurisdiction; Waivers. Each Securityholder and Parent irrevocably agrees that any Action with respect to this Agreement, any provision hereof, the breach, performance, validity or invalidity hereof or for recognition and enforcement of any judgment in respect hereof brought by another party hereto or its successors or permitted assigns shall be brought and determined in the Court of Chancery or other courts of the State of Delaware located in the State of Delaware, and each Securityholder and Parent hereby irrevocably submits and consents with regard to any such Action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of Securityholder and Parent hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any Action with respect to this Agreement, any provision hereof or the breach, performance, enforcement, validity or invalidity hereof, (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent

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permitted by applicable Laws, that (i) Action in any such court is brought in an inconvenient forum, (ii) the venue of such Action is improper and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Each party hereto hereby agrees that, to the fullest extent permitted by Law, service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth in Section 8(c) shall be effective service of process for any suit or proceeding in connection with this Agreement or the transactions contemplated hereby.

               (l) Specific Performance. The parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the Transactions, will cause irreparable injury to the other parties for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder.

               (m) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE MERGER. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE MERGER, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(m).

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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          IN WITNESS WHEREOF, Parent and each Securityholder has caused this Agreement to be signed by its officer thereunto duly authorized, all as of the date first written above.

SALTON, INC.
By:	/s/ William Lutz
	Name:	William Lutz
	Title:	Interim Chief Executive Officer and Chief Financial Officer

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By: Harbinger Capital Partners Offshore Manager, L.L.C., its investment manager
By:	/s/ Philip A. Falcone
	Name:	Philip A. Falcone
	Title:	Senior Managing Director

HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P. By: Harbinger Capital Partners Special Situations GP, LLC, its general partner By: HMC — New York, Inc., its managing member
By:	/s/ William R. Lucas, Jr.
	Name:	William R. Lucas, Jr.
	Title:	Senior Vice President and General Counsel

Exhibit A

APN HOLDING COMPANY, INC.

Unanimous Written Consent of the
Stockholders in Lieu of Meeting

          The undersigned, being all of the holders of the common stock, par value $0.01 per share, of APN Holding Company, Inc., a Delaware corporation (the “Corporation”), acting pursuant to Section 228(a) of the General Corporation Law of the State of Delaware, as amended, do hereby adopt and approve of the following Resolution:

          RESOLVED, that the Agreement and Plan of Merger, dated as of September ___, 2007 (the “Merger Agreement”), by and among the Corporation, Salton, Inc., a Delaware corporation (the “Parent”), and SFP Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Parent (“Merger Sub”), and the merger of Merger Sub with and into the Corporation as contemplated thereby, be and they are adopted and approved.

          This consent may be executed in counterparts that when so executed shall constitute one consent, notwithstanding that all the stockholders are not signatories to the original or the same counterpart.

          IN WITNESS WHEREOF, consent has been executed as of September ___, 2007.

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.		HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.
By: Harbinger Capital Partners Offshore Manager, L.L.C., its investment manager		By: Harbinger Capital Partners Special Situations GP, LLC, its General Partner
By:
	Name: Philip A. Falcone	By: HMC — New York, Inc., its Managing Member
	Title: Senior Managing Director
		By:
			Name: William R. Lucas, Jr.
			Title: Senior Vice President

Exhibit B

SALTON, INC.
FORM OF CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES D PREFERRED STOCK,
PAR VALUE $0.01 PER SHARE

Pursuant to Section 151 of the Delaware General Corporation Law

     The undersigned,      ,      of Salton, Inc., a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY that the following resolution, creating a series of                      shares of Preferred Stock was duly adopted by the Board of Directors, on          , 2007:

     WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in Article IV of the Second Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), to provide by resolution or resolutions for the issuance of shares of Preferred Stock, par value $0.01 per share, of the Corporation, in one or more classes or series with such voting powers, full or limited, if any, and such preferences and relative, participating, optional or other rights and limitations as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in the Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the General Corporation Law of the State of Delaware (the “DGCL”); and

     WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series.

     NOW, THEREFORE, BE IT RESOLVED:

     Section 1.  Designation and Number of Shares.  There shall be hereby created and established a series of Preferred Stock designated as “Series D Preferred Stock” (the “Series D Preferred Stock”). The authorized number of shares of Series D Preferred Stock shall be                     . Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 9 below.

     Section 2.  Rank.  The Series D Preferred Stock shall with respect to dividends and distributions of assets and rights upon the occurrence of a Liquidation or a Sale Transaction rank (i) junior to all currently outstanding shares of preferred stock of the Corporation and (ii) senior to (x) all classes of common stock of the Corporation (including, without limitation, the Common Stock), and (y) each other class or series of Capital Stock of the Corporation hereafter created which does not expressly rank pari passu with or senior to the Series D Preferred Stock (clauses (ii)(x) and (ii)(y) collectively, referred to as “Junior Stock”). The Corporation may not issue any class or series of Capital Stock that ranks on a parity with the Series D Preferred Stock as to dividends and distributions upon the occurrence of a Liquidation or Sale Transaction (collectively, referred to as “Parity Stock”) or senior to the Series D Preferred Stock as to dividends and distributions upon the occurrence of a Liquidation or Sale Transaction (collectively, referred to as “Senior Stock”) other than in accordance with Section 3(b).

     Section 3.  Vote.

     (a) The holders of Series D Preferred Stock, except as otherwise required under the DGCL or as set forth in this Section 3, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation.

     (b) So long as any shares of the Series D Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of holders of at least a majority of the then outstanding shares of Series D

Preferred Stock, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting:

     (i) authorize or issue any class of Senior Stock or Parity Stock; or

     (ii) amend this Certificate of Designations or the Certificate of Incorporation, whether by merger, consolidation or otherwise, so as to affect adversely the specified rights, preferences, privileges or voting rights of holders of shares of Series D Preferred Stock.

     (c) In any case in which the holders of Series D Preferred Stock shall be entitled to vote pursuant to this Section 3 or pursuant to the DGCL, each holder of Series D Preferred Stock entitled to vote with respect to such matter shall be entitled to one vote for each share of Series D Preferred Stock held.

     Section 4.  Dividends.

     (a) The holders of shares of Series D Preferred Stock shall receive when, as and if declared by the Board of Directors, out of funds legally available therefor cumulative dividends at an annual rate equal to 16%, compounded quarterly, of the Series D Liquidation Preference, calculated on the basis of a 360-day year, consisting of twelve 30-day months. The Board of Directors may fix a record date for the determination of holders of shares of Series D Preferred Stock entitled to receive payment of such dividends, which record date shall not be more than 60 days prior to the applicable dividend payment date. To the extent not paid, such dividends shall accrue on a daily basis and accumulate and compound on a quarterly basis from the Original Date of Issuance, in each case, whether or not declared. For purposes hereof, the term “Original Date of Issuance” shall mean      , 2007. All accrued and unpaid dividends, if any, shall, to the extent funds are legally available therefor, be mandatorily paid upon the earlier to occur of (i) a Liquidation or (ii) a redemption of shares of Series D Preferred Stock pursuant to Section 6 below (each, a “Mandatory Dividend Payment Date”). On a Mandatory Dividend Payment Date, all accrued and unpaid dividends shall be paid in cash.

     (b) Junior Stock Dividends.  The Corporation shall not declare or pay any dividends on, or make any other distributions with respect to (other than dividends or distributions paid solely in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) or redeem, purchase or otherwise acquire (other than a redemption, purchase or other acquisition of Common Stock made for purposes of, and in compliance with, requirements of an employee incentive or benefit plan or other compensatory arrangement of the Corporation or any subsidiary) for consideration, any shares of any Junior Stock unless and until all accrued and unpaid dividends on all outstanding shares of Series D Preferred Stock have been paid in full.

     Section 5.  Liquidation Preference.

     (a) Series D Priority Payment.  Upon the occurrence of a Liquidation, the holders of shares of Series D Preferred Stock shall be paid for each share of Series D Preferred Stock held thereby, out of, but only to the extent of, funds legally available therefore, an amount in cash equal to the sum of (x) $1,000 (as adjusted for stock splits, reverse-stock splits, combinations, stock dividends, recapitalizations or other similar events of the Series D Preferred Stock, the “Series D Liquidation Preference”) plus, (y) as provided in Section 4 above, all unpaid, accrued or accumulated dividends or other amounts due, if any, with respect to each share of Series D Preferred Stock, before any payment or distribution is made to any Junior Stock.

     (b) Insufficient Assets.  If the assets of the Corporation available for distribution to the holders of shares of Series D Preferred Stock and the holders of any other Parity Stock shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive upon a Liquidation, then all of the assets available for distribution to such holders shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full.

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     (c) Notice.  Written notice of a Liquidation stating a payment or payments and the place where such payment or payments shall be payable, shall be delivered in person, mailed by certified mail, return receipt

requested, mailed by overnight mail or sent by telecopier, not less than ten (10) days prior to the earliest payment date stated therein, to the holders of record of shares of Series D Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation.

     Section 6.  Redemption.  The Corporation shall, as provided below, redeem the shares of Series D Preferred Stock.

     (a) Mandatory Redemption.  Upon the earlier to occur of (i) a Sale Transaction or (ii) the sixth (6^th) anniversary of the Original Date of Issuance (the earlier such date, the “Mandatory Redemption Date”), each outstanding share of Series D Preferred Stock shall automatically, with no further action required to be taken by the Corporation or the holder thereof, be redeemed (unless otherwise prevented by applicable law), at a redemption price per share equal to 100% of the Series D Liquidation Preference, plus all unpaid, accrued or accumulated dividends or other amounts due, if any, on the shares of Series D Preferred Stock. The total sum payable per share of Series D Preferred Stock to be redeemed on the Mandatory Redemption Date is hereinafter referred to as the “Preferred Redemption Price,” and the payment to be made on the Mandatory Redemption Date for the Series D Preferred Stock is hereinafter referred to as the “Preferred Redemption Payment.” Upon written notice from the Corporation, each holder of Series D Preferred Stock shall promptly surrender to the Corporation, at any place where the Corporation shall maintain a transfer agent for its Series D Preferred Stock, certificates representing the shares so redeemed, duly endorsed in blank or accompanied by proper instruments of transfer. In case fewer than the total number of shares of Series D Preferred Stock represented by any certificate are redeemed, a new certificate representing the number of unredeemed shares shall be issued to the holder thereof without cost to such holder within ten (10) business days after surrender of the certificate representing the redeemed shares.

     (b) Termination of Rights.  Except as set forth in this Section 6(b) and Section 6(c), on and after the Mandatory Redemption Date all rights of any holder of Series D Preferred Stock shall cease and terminate; and all shares of Series D Preferred Stock shall be canceled and shall no longer be deemed to be outstanding, whether or not the certificates representing such shares have been received by the Corporation; provided, however, that, if the Corporation defaults in the payment of the Preferred Redemption Payment in respect of any share of Series D Preferred Stock for any reason, including, without limitation, the lack of legally available funds therefor, the rights, preferences and privileges of the holder of such share of Series D Preferred Stock shall continue to inure to the benefit of such holder of Series D Preferred Stock until the Corporation cures such default and such share which has not been redeemed shall continue to be outstanding until full payment of the Preferred Redemption Price and any other amounts required under Section 6(c) is made in respect thereof.

     (c) Insufficient Funds for Redemption.  If the funds of the Corporation available for redemption of the Series D Preferred Stock to be redeemed in accordance with Section 6(a) and any other Parity Stock required to be redeemed on the Mandatory Redemption Date by law are insufficient to redeem such shares on such date, the holders of Series D Preferred Stock and such Parity Stock shall share ratably in any funds available by law for redemption of such shares according to the respective amounts which would be payable with respect to the number of shares owned by them if the shares to be so redeemed on such Mandatory Redemption Date were redeemed in full. The Corporation shall in good faith use all reasonable efforts as expeditiously as possible to eliminate, or obtain an exception, waiver or exemption from, any and all restrictions under applicable law that prevented the Corporation from paying the Redemption Price and redeeming all of the Series D Preferred Stock to be redeemed hereunder. At any time thereafter when additional funds of the Corporation are available by law for the redemption of shares of Series D Preferred Stock, such funds will be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are available, on the basis set forth above. In the event that funds are not available by law for the payment in full of the Preferred Redemption Price for the shares of Series D Preferred Stock to be so redeemed on the Mandatory Redemption Date, then the Corporation shall be obliged to make such partial redemption so that the number of shares of Series D Preferred Stock held by each holder shall be reduced in an amount which shall bear the same ratio to the actual number of

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shares of Series D Preferred Stock to be redeemed on such Mandatory Redemption Date as the number of shares of Series D Preferred Stock then held by such holder bears to the aggregate number of shares of Series D

Preferred Stock then outstanding. In the event that the Corporation fails to redeem shares of Series D Preferred Stock for which redemption is required, then during the period from the Mandatory Redemption Date through the date on which such shares that the Corporation failed to redeem on the Mandatory Redemption Date are actually redeemed, dividends on such shares shall accrue and be cumulative at an annual rate equal to 18%, compounded quarterly, of the Series D Liquidation Preference, calculated on the basis of a 360-day year consisting of twelve 30-day months. To the extent not paid, dividends shall accrue on a daily basis and accumulate and compound on a quarterly basis (to the extent not otherwise declared and paid as set forth above), in each case whether or not declared.

     (d) Notices.  In case at any time or from time to time:

     (i) the Corporation shall declare a dividend (or any other distribution) on its shares of Common Stock; or

     (ii) there shall be a Sale Transaction;

then the Corporation shall mail to each holder of shares of Series D Preferred Stock at such holder’s address as it appears on the transfer books of the Corporation, as promptly as possible but in any event at least ten (10) days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or (B) the date on which such Sale Transaction is expected to become effective.

     Section 7.  General.

     (a) Notices.  Except as otherwise expressly provided, whenever notices or other communications are required to be made, delivered or otherwise given to holders of shares of the Series D Preferred Stock, the notice or other communication shall be made in writing and shall be by registered or certified first class mail, return receipt requested, telecopier, courier service or personal delivery, addressed to the Persons shown on the books of the Corporation as such holders at the addresses as they appear in the books of the Corporation, as of a record date or dates determined in accordance with the Corporation’s Certificate of Incorporation and by-laws and applicable law, as in effect from time to time. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five business days after being deposited in the U.S. mail, postage prepaid, if mailed; and if sent by telecopy or facsimile transmission (and receipt is confirmed), when transmitted at or before 5:00 p.m. local time at the location of receipt on a Business Day, on such Business Day, and if received after 5:00 p.m. on a Business Day or on a day other than a Business Day, on the next following Business Day, but only if also sent by reputable overnight air courier within one Business Day following transmission.

     (b) Certain Remedies.  Any registered holder of shares of Series D Preferred Stock shall be entitled to an injunction or injunctions to prevent violations of the provisions of the Certificate of Incorporation and this Certificate of Designations and to enforce specifically the terms and provisions of the Certificate of Incorporation and this Certificate of Designations in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which such holder may be entitled at law or in equity. Notwithstanding the foregoing, the observance of any term of the Certificate of Incorporation and/or this Certificate of Designations which benefits only the holders of the Series D Preferred Stock may be waived by holders of at least a majority of all issued and outstanding Series D Preferred Stock (either generally or in a particular instance and either retroactively or prospectively).

     (c) Invalidity.  If any right, preference or limitation of the Series D Preferred Stock set forth herein (as amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule or law

4

or public policy, all other rights, preferences and limitations set forth in this Certificate of Designations (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation herein set forth shall not be deemed dependant upon any other such right, preference or limitation unless so expressed herein.

     Section 8.  Business Day.  If any payment shall be required by the terms hereof to be made on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day.

     Section 9.  Specified Debt.  Notwithstanding any provision to the contrary contained in the Certificate of Incorporation or this Certificate of Designations, the Corporation shall not pay any cash dividends on, or make any other cash distributions with respect to or redeem, repurchase or otherwise acquire for cash, any shares of Series D Preferred Stock until the all unpaid principal and interest under the Specified Debt has been paid in full and all obligations to lend thereunder have terminated.

     Section 10.  Definitions.  As used in this Certificate of Designations, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:

     “Board of Directors” means the Board of Directors of the Corporation.

     “Business Day” means any day except a Saturday, a Sunday, or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close.

     “Capital Stock” means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person’s capital stock and any and all rights, warrants or options exchangeable for or convertible into such capital stock (but excluding any debt security whether or not it is exchangeable for or convertible into such capital stock).

     “Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of the Corporation.

     “Common Stock” shall mean the common stock, par value $0.01 per share of the Corporation.

     “Corporation” means Salton, Inc., a Delaware corporation.

     “DGCL” means the General Corporation Law of the State of Delaware, as amended.

     “Junior Stock” has the meaning ascribed to it in Section 2.

     “Liquidation” shall mean the voluntary or involuntary liquidation under applicable bankruptcy or reorganization legislation, or the dissolution or winding up of the Corporation.

     “Mandatory Dividend Payment Date” has the meaning ascribed to it in Section 4(a).

     “Mandatory Redemption Date” has the meaning ascribed to it in Section 6(a).

     “Original Date of Issuance” has the meaning ascribed to it in Section 4(a).

     “Parity Stock” has the meaning ascribed to it in Section 2.

     “Person” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind.

     “Preferred Redemption Payment” has the meaning ascribed to it in Section 6(a).

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     “Preferred Redemption Price” has the meaning ascribed to it in Section 6(a).

     “Sale Transaction” shall mean (a) (i) the merger or consolidation of the Corporation into or with one or more Persons, (ii) the merger or consolidation of one or more Persons into or with the Corporation or (iii) a tender offer or other business combination if, in the case of (i), (ii) or (iii), the stockholders of the Corporation prior to such merger or consolidation do not retain at least a majority of the voting power of the surviving Person, (b) the voluntary sale, conveyance, exchange or transfer to another Person of (i) the voting Capital Stock of the Corporation if, after such sale, conveyance, exchange or transfer, the stockholders of the Corporation prior to such sale, conveyance, exchange or transfer do not retain at least a majority of the voting power of the Corporation or (ii) all or substantially all of the assets of the

Corporation or (c) the election to the Board of Directors of individuals who would constitute a majority of the members of the Board of Directors and the election or the nomination for election by the Corporation’s stockholders of such directors was not approved by a vote of at least a majority of the directors in office immediately prior to such election or nomination.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

     “Senior Stock” has the meaning ascribed to it in Section 2.

     “Series D Liquidation Preference” shall have the meaning ascribed to it in Section 5(a).

     “Specified Debt” means      .

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the undersigned has executed and subscribed this certificate this       day of       , 2007.

Name: 

Title: 

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Exhibit C

Addresses for Notice

Salton, Inc.
1955 W. Field Court
Lake Forest, Illinois 60045
Attention:
Facsimile: (847) 803-1186

With a copy to:

Sonnenschein Nath & Rosenthal LLP
7800 Sears Tower, 233 South Wacker Drive
Chicago, IL 60606 6404
Attention: Neal Aizenstein
Facsimile: 312.876.7934

Harbinger Capital Partners Master Fund I, Ltd.
c/o 555 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Philip A. Falcone
Facsimile: (212) 508-3721

With a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019 6064
Attention: Bruce A. Gutenplan
                 Robert B. Schumer
Facsimile: (212) 757 3990

Harbinger Capital Partners Special Situations Fund, L.P.
c/o 555 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Philip A. Falcone
Facsimile: (212) 508-3721

With a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019 6064
Attention: Bruce A. Gutenplan
                 Robert B. Schumer
Facsimile: (212) 757 3990

Schedule A

Shares

Securityholder	Shares
Harbinger Capital Partners Master Fund I, Ltd.	92.7
Harbinger Capital Partners Special Situations Fund, L.P.	30.9

Prior to the Effective Time, each Securityholder may receive additional shares of APN Holdco Common Stock in exchange for a cash contribution by each Securityholder.

Schedule B

Subject Notes

		12-1/4% Senior
		Subordinated
Securityholder	Second Lien Notes	Notes
Harbinger Capital Partners Master Fund I, Ltd.	$59,767,813	$9,429,000
Harbinger Capital Partners Special Situations Fund, L.P.	$29,839,046	$5,560,000

EX-99.6

Exhibit 99.6

FORM OF

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

SALTON, INC.,

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.

AND

HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.

DATED AS OF                           , 2007

TABLE OF CONTENTS

			Page
1.	Registration Rights.		2
	1.1	Definitions.	2
	1.2	Request for Registration.	4
	1.3	Company Registration.	6
	1.4	Form S-3 Registration.	6
	1.5	Obligations of the Company.	8
	1.6	Registration In Connection With Hedging Transactions.	12
	1.7	Furnish Information; Limitation of Obligations.	13
	1.8	Expenses of Registrations.	13
	1.9	Indemnification.	13
	1.10	Rule 144 Reporting.	16
	1.11	Assignment of Registration Rights.	16
	1.12	Limitations on Subsequent Registration Rights.	16
	1.13	Additional Restrictions.	16
	1.14	Confidential Information.	17
	1.15	Termination of Registration Rights.	17
2.	Representations and Warranties of the Company.		17
3.	Miscellaneous.		18
	3.1	Successors and Assigns.	18
	3.2	Governing Law.	18
	3.3	Counterparts.	18
	3.4	Notices.	18
	3.5	Attorneys’ Fees.	18
	3.6	Amendments and Waivers.	19
	3.7	Other Agreements.	19
	3.8	Specific Performance.	19
	3.9	Severability.	19
	3.10	Rules of Construction.	20
	3.11	Entire Agreement.	20

Exhibits

Exhibit A – Shares of Common Stock
Exhibit B – Addresses for Notice

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FORM OF

REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of                                , 2007 by and between Salton, Inc., a Delaware corporation (the “Company”), Harbinger Capital Partners Master Fund I, Ltd., a company organized under the laws of the Cayman Islands (“HCP Master Fund”) and Harbinger Capital Partners Special Situations Fund, L.P., a Delaware limited partnership (together with HCP Master Fund, the “Investors”).

          WHEREAS, pursuant to the Stock Purchase Agreement, dated as of December 28, 2006, by and among the Company and HCP Master Fund, HCP Master Fund purchased 701,600 shares of Common Stock (as hereinafter defined) (the “Pre-Merger HCP Common Stock”);

          WHEREAS, pursuant to the Registration Rights Agreement (the “HCP Registration Rights Agreement”), dated as of December 28, 2006, by and among the Company and HCP Master Fund, HCP Master Fund was granted registration rights with respect to the Pre-Merger HCP Common Stock;

          WHEREAS, the Company and HCP Master Fund wish to terminate the HCP Registration Rights Agreement and replace it in its entirety with this Agreement;

          WHEREAS, the Investors own all of the issued and outstanding shares of common stock, par value $0.01 per share, of APN Holding Company, Inc., a Delaware corporation (“APN Holdco”);

          WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of           , 2007 (as the same may be amended, modified and supplemented from time to time prior to the date hereof, the “Merger Agreement”), by and among the Company, SFP Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“MergerSub”), and APN Holdco, MergerSub will merge with and into APN Holdco (the “Merger”), and each outstanding share of the common stock, par value $0.01 per share, of APN Holdco will be converted into the right to receive fully paid and non assessable shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”);

          WHEREAS, pursuant to the terms of an amendment to the terms of the Certificate of Designation of Series A Voting Convertible Preferred Stock of the Company dated           , 2007, simultaneously with the Closing of the Merger, shares of the Company’s Series A Voting Convertible Preferred Stock owned by HCP Master Fund will be converted into shares of Common Stock;

          WHEREAS, pursuant to the terms of an amendment to the terms of the Certificate of Designation of Series C Preferred Stock of the Company dated           , 2007, simultaneously with the Closing of the Merger, shares of the Company’s Series C Preferred Stock owned by the Investors will be converted into shares of Common Stock;

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          WHEREAS, in connection with the Merger, the Investors have agreed to purchase shares of a new series of preferred stock, to be referred to as the “Series D Preferred Stock” in exchange for certain outstanding Company indebtedness held by the Investors;

          WHEREAS, after giving effect to the transactions contemplated by the Merger Agreement, each Investor will own the number of shares of Common Stock set forth opposite such Investor’s name on Schedule A hereto; and

          WHEREAS, in order to induce the Investors to consummate the transactions contemplated by the Merger Agreement and receive additional shares of Common Stock and shares of Series D Preferred Stock, the Company wishes to provide the Investors with the registration rights set forth herein

          NOW, THEREFORE, in consideration of the foregoing, the mutual promises set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Registration Rights.

     1.1 Definitions.

          For purposes of this Agreement:

          (a) “Disclosure Package” means (i) the preliminary prospectus, (ii) each Free Writing Prospectus and (iii) all other information that is deemed, under Rule 159 under the Securities Act, to have been conveyed to purchasers of securities at the time of sale (including, without limitation, a contract of sale).

          (b) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (c) “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

          (d) “Free Writing Prospectus” means any “free writing prospectus,” as defined in Rule 405 of the Securities Act.

          (e) “Hedging Counterparty” means a broker-dealer registered under Section 15(b) of the Exchange Act or an affiliate thereof or any other financial institution or third party.

          (f) “Hedging Transaction” means any transaction involving a security linked to the Registrable Class Securities or any security that would be deemed to be a “derivative security” (as defined in Rule 16a-1(c) under the Exchange Act) with respect to the Registrable Class Securities or any transaction (even if not a security) which would (were it a security) be considered such a derivative security, or which transfers some or all of the economic risk of

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ownership of the Registrable Class Securities, including, without limitation, any forward contract, equity swap, put or call, put or call equivalent position, collar, non-recourse loan, sale of exchangeable security or similar transaction. For the avoidance of doubt, the following transactions shall be deemed to be Hedging Transactions:

               (i) transactions by a Holder in which a Hedging Counterparty engages in short sales of Registrable Class Securities pursuant to a prospectus and may use Registrable Securities to close out its short position;

               (ii) transactions pursuant to which a Holder sells short Registrable Class Securities pursuant to a prospectus and delivers Registrable Securities to close out its short position; and

               (iii) transactions by a Holder in which the Holder delivers, in a transaction exempt from registration under the Securities Act, Registrable Securities to the Hedging Counterparty who will then publicly resell or otherwise transfer such Registrable Securities pursuant to a prospectus or an exemption from registration under the Securities Act.

          (g) “Holder” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof.

          (h) “Law” means any statute, law, ordinance, rule or regulation of any governmental entity.

          (i) “Public Sale” means any sale of Registrable Securities to the public pursuant to a public offering registered under the Securities Act or to the public through a broker or market-maker pursuant to the provisions of Rule 144 (or any successor rule) adopted under the Securities Act or any other public offering not required to be registered under the Securities Act.

          (j) “Register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

          (k) “Registrable Class Securities” means securities of the Company that are of the same class and series as the Registrable Securities.

          (l) “Registrable Securities” means (i) the Common Stock owned by Holders on the date hereof (which include the Pre-Merger HCP Common Stock and the Common Stock received by the Investors pursuant to the Merger Agreement); (ii) any shares of Common Stock acquired on or after the date hereof by any of the Holders, including any and all shares of Common Stock acquired upon conversion of HCP Master Fund’s shares of Company Series A Voting Convertible Stock or upon conversion of the Investors’ shares of the Company’s Series C Preferred Stock (iii) the shares of Series D Preferred Stock issued to the Investors on the date hereof; and (iv) any Company capital stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i), (ii) or (iii) above; provided, that Registrable Securities shall not include shares of Common Stock

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previously (A) sold in a Public Sale, or (B) sold in a transaction in which the transferor’s rights hereunder are not assigned in accordance with Section 1.11 hereof.

          (m) The number of shares of “Registrable Common Securities then outstanding” shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities.

          (n) The number of shares of “Registrable Preferred Securities then outstanding” shall be determined by the number of shares of Series D Preferred Stock outstanding which are, and the number of shares of Series D Preferred Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities.

          (o) The term “SEC” means the Securities and Exchange Commission.

          (p) “Securities Act” means the Securities Act of 1933, as amended.

     1.2 Request for Registration.

          (a) If at any time after                     ¹ the Company shall receive a written request from the Holders of at least a majority of the Registrable Common Securities then outstanding or the holders of at least a majority of the Registrable Preferred Securities then outstanding (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of at least 10% of the Registrable Common Securities then outstanding, as the case may be, or Registrable Preferred Securities then outstanding, or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $5.0 million, then the Company shall:

               (i) within ten (10) days of the receipt thereof, give written notice of such request to all Holders; and

               (ii) use commercially reasonable efforts to effect promptly, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered, subject to the limitations of subsection 1.2(b), in a written request received by the Company within fifteen (15) days of the making of the notice pursuant to Section 1.2(a)(i).

          (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter or underwriters will be selected by the Company, subject to the approval of a majority in interest of the Initiating Holders. In such event, the right of any Holder to include Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting

¹ Insert date that is 90 days after the closing of the Merger.

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shall (together with the Company as provided in subsection 1.5(i)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the managing underwriter advises the Company and the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated first among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder at the time of the filing of the registration statement; provided, however, that the number of shares of Registrable Securities held by Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

          (c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Company’s chief executive officer or the chairman of the board of directors of the Company (the “Board”) stating that in the good faith judgment of the Board, as evidenced by a resolution by the Board, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than sixty (60) days after receipt of the request of the Initiating Holders; provided, that the Company may not utilize this right more than once in any twelve month period; provided further, that this right is cumulative to the right under Section 1.4(b)(iii) such that the Company may only defer the filing of a registration statement under Section 1.2(c) or Section 1.4(b)(iii) once in any twelve-month period.

          (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2:

               (i) After the Company has effected five (5) registrations pursuant to this Section 1.2 and such registration statements have been declared or ordered effective and have remained effective for a period of at least 180 days; provided, that if such request pursuant to this Section 1.2 is subsequently withdrawn by the requester in writing, it shall not be counted against the limitation of requests set forth in this Section 1.2(d)(i);

               (ii) If the Company has effected a registration pursuant to this Section 1.2 within the preceding six (6) months, and such registration has been declared or ordered effective; or

               (iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.4 below.

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     1.3 Company Registration.

          (a) If (but without any obligation to do so) the Company proposes to register any of its capital stock under the Securities Act for its own account or the account of any of its stockholders with registration rights (other than in connection with a registration effected solely to implement an employee benefit plan or arrangement or a business combination transaction or any other similar transaction for which a registration statement on Form S-4 under the Securities Act or any comparable successor form is applicable), the Company will promptly give written notice thereof to the Holders of Registrable Securities at least twenty (20) days prior to the filing of such registration statement, or such lesser time that is reasonable taking into account the Company’s contractual obligation to file such registration statement. Upon the written request of each Holder given within fifteen (15) days after the giving of such notice by the Company, the Company shall, subject to the provisions of this Section 1.3, cause to be registered under the Securities Act in such registration statement all of the Registrable Securities that each such Holder has requested to be registered.

          (b) In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under this Section 1.3 to include any of the Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. Regardless of any other provision of this Section 1.3, if the underwriter advises the Company that marketing factors require a reduction in the number of shares to be underwritten, then the number of shares of Registrable Securities that may be included in the underwriting shall be allocated first, to the Company and the Person or Persons requesting such registration (if other than the Company) shall be entitled to participate in accordance with the relative priorities, if any, as shall exist among them; and then second, all other holders of securities having the right to include such securities in such registration (including the Holders of the Registrable Securities) shall be entitled to participate pro rata based on the number of shares requested to be sold by such Holders. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The registration expenses of such withdrawn registration shall be borne by the Company in accordance with Section 1.8 hereof.

     1.4 Form S-3 Registration.

          Notwithstanding anything in Section 1.2 or Section 1.3 to the contrary, if at any time after                     ,² in case the Company shall receive from any Holders of Registrable Common Securities then outstanding or Registrable Preferred Securities then outstanding, a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, and the Company is then eligible to use Form S-3 for the resale of Registrable Securities, the Company will:

² Insert date that is 90 days after the closing of the Merger.

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          (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

          (b) promptly effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4:

               (i) if Form S-3 is not available for such offering by the Holders;

               (ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $2.5 million;

               (iii) if the Company shall furnish to the Holders a certificate signed by the Company’s chief executive officer or chairman of the Board stating that in the good faith judgment of the Board as evidenced by a resolution by the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than sixty (60) days after receipt of the request of the Holder or Holders under this Section 1.4; provided, that the Company shall not utilize this right more than once in any twelve-month period; provided further, that this right is cumulative to the right under Section 1.2(c) such that the Company may only defer the filing of a registration statement under Section 1.2(c) or Section 1.4(b)(iii) once in any twelve-month period;

               (iv) if the Company has, within the six (6) month period preceding the date of such request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 1.3, provided, that any such registration shall be deemed to have been “effected” if the registration statement relating thereto (A) has become or been declared or ordered effective under the Securities Act, and any of the Registrable Securities of the Initiating Holder(s) included in such registration have actually been sold thereunder and (B) has remained effective for a period of at least 180 days; or

               (v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

          (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered promptly after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as requests for registration effected pursuant to Section 1.2 or Section 1.3 respectively.

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          (d) If the Holders intend to distribute the Registrable Securities covered by their request under this Section 1.4 by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 1.4 and the Company shall include such information in the written notice referred to in subsection 1.4(a). The underwriter or underwriters will be selected by the Company, subject to the approval of a majority in interest of the Holders participating in such registration. In such event, the right of any Holder to include Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Holders participating in the registration and the Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.5(i)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.4, if the managing underwriter advises the Company and the Holders participating in such underwriting in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated first among all Holders thereof, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder at the time of the filing of the registration statement; provided, however, that the number of shares of Registrable Securities held by Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

     1.5 Obligations of the Company.

          Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

          (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use commercially reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for 180 days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, that, in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 180-day period shall be extended, if necessary, to keep the registration statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for sales of such Registrable Securities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time, until the earlier of when (i) the Holders have sold all of such Registrable Securities and (ii) the Holders may sell all of such Registrable Securities on a single day pursuant to Rule 144(k) promulgated under the Securities Act as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders.

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          (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement provided that before filing a registration statement, or any amendments or supplements thereto, the Company will furnish to counsel selected by the Holders of the Registrable Securities covered by such registration statement to represent such Holders, copies of all documents proposed to be filed, which documents (other than the documents incorporated by reference therein) will be subject to the review of such counsel.

          (c) Furnish to the Holders and any Hedging Counterparty, if any, such numbers of copies of such registration statement, the prospectus included in such registration statement (including each preliminary prospectus, summary prospectus and Free Writing Prospectus), and of each amendment and supplement thereto (in each case including all exhibits filed therewith, including any documents incorporated by reference), in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the public sale or other disposition of Registrable Securities owned by such Holder or Hedging Counterparty.

          (d) Register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided, that the Company shall not be required in connection therewith or as a condition thereto (i) to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, (ii) subject itself to taxation in any jurisdiction or (iii) in the case of a registration pursuant to Section 1.3, register or qualify such Holder’s Registrable Securities in any jurisdiction where shares to be sold by the Company or any other Person initiating such registration are not to be registered or qualified.

          (e) Notify each Holder of Registrable Securities covered by such registration statement and any Hedging Counterparty, if applicable, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the Company’s becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such Holder or Hedging Counterparty, prepare and furnish to such Holder and Hedging Counterparty a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such amended or supplemental prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

          (f) Cause all such Registrable Securities registered pursuant to this Agreement to be listed on any securities exchange on which any shares of the Common Stock are then listed.

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          (g) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

          (h) Enter into and perform its obligations under such customary agreements (including an underwriting agreement in customary form), which may include indemnification provisions in favor of underwriters and other persons in addition to, or in substitution for the provisions of Section 1.9 hereof, and take such other actions as sellers of a majority of shares of such Registrable Securities, a Hedging Counterparty, if any, or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities or any Registrable Class Securities in connection with any Hedging Transaction.

          (i) Make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement, by any Hedging Counterparty, and by any attorney, accountant or other agent retained by any such seller, any such underwriter, or any such Hedging Counterparty all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, Hedging Counterparty, attorney, accountant or agent in connection with such registration statement.

          (j) Obtain for delivery to the Holders of Registrable Securities being registered and to the underwriter or agent, and, in connection with a Hedging Transaction, to any Hedging Counterparty, an opinion or opinions from counsel for the Company in customary form and in form, substance and scope reasonably satisfactory to such Holders, underwriters or agents and their counsel.

          (k) Use commercially reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus relating to such registration statement, and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment.

          (l) Respond promptly to any comments received from the SEC and request acceleration of effectiveness promptly after it learns that the Commission will not review the registration statement or after it has satisfied comments received from the SEC.

          (m) Promptly notify the Holders of Registrable Securities to be sold and confirm such notice in writing, (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a registration statement or any post-effective amendment, when the same has become effective, (ii) of the receipt of any comments from the SEC, (iii) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a registration statement or related prospectus, (iv) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a registration statement, or of any order preventing or suspending the use of any preliminary prospectus relating to such registration statement, or the initiation of any proceedings for such purpose(s), (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the

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Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the discovery of any event that makes any statement made in such registration statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in a registration statement, prospectus or any such document so that, in the case of the registration statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances under which they were made, and, in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (vii) of the Company’s reasonable determination that a post-effective amendment to a registration statement would be appropriate. In the event a registration statement is interfered with by any event of the kind described in clauses (iv) through (vii) of the first sentence of this Section 1.5(m) for more than twenty (20) days, such registration shall not be deemed “effected” for purposes of Section 1.2(d) or Section 1.4(b).

          (n) If requested by the managing underwriter or agent or any Holder of Registrable Securities covered by the registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or agent or such Holder reasonably requests to be included therein, including, without limitation, with respect to the number of Registrable Securities being sold by such Holder to such underwriter or agent, the purchase price being paid therefor by such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment.

          (o) Cooperate with the Holders of Registrable Securities covered by the registration statement and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or agent, if any, or such Holders may request.

          (p) Cooperate with each seller of Registrable Securities, any Hedging Counterparty, and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD.

          (q) With respect to each Free Writing Prospectus or other materials to be included in the Disclosure Package, ensure that no Registrable Securities be sold “by means of” (as defined in Rule 159A(b) under the Securities Act) such Free Writing Prospectus or other materials without the prior written consent of the Holders of the Registrable Securities covered by such registration statement, which Free Writing Prospectuses or other materials shall be subject to the review of counsel to such Holders.

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          (r) Make all required filings of all Free Writing Prospectuses with the Commission.

          Each Holder shall be deemed to have agreed by acquisition of the Registrable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in clauses (iv) through (vii) of subsection (m) of this section 1.5, such Holder will forthwith discontinue its disposition of the Registrable Securities pursuant to the Registration Statement relating thereto until Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (e) of this section 1.5 and, if so directed by the Company, will deliver to the Company all copies, other than permanent file copies, then in Holder’s possession of the prospectus relating to the Registrable Securities current at the time of receipt of such notice.

     1.6 Registration In Connection With Hedging Transactions.

          (a) The Company acknowledges that from time to time a Holder may seek to enter into one or more Hedging Transactions with a Hedging Counterparty. Notwithstanding anything to the contrary provided herein, the Company agrees that, in connection with any proposed Hedging Transaction, if, in the reasonable judgment of counsel to the Holder (after good faith consultation with counsel to the Company), it is necessary or desirable to register under the Securities Act such Hedging Transaction or sales or transfers (whether short or long) of Registrable Class Securities in connection therewith, then the Company shall use its commercially reasonable efforts to take such actions (which may include among other things, the filing of a post-effective amendment to any shelf registration statement to include additional or changed information that is material or is otherwise required to be disclosed, including, without limitation, a description of such Hedging Transaction, the name of the Hedging Counterparty, identification of the Hedging Counterparty or its affiliates as underwriters or potential underwriters, if applicable, or any change to the plan of distribution) as may reasonably be required to register such Hedging Transactions or sales or transfers of Registrable Class Securities in connection therewith under the Securities Act in a manner consistent with the rights and obligations of the Company hereunder with respect to the registration of Registrable Securities.

          (b) The Company agrees to include in each prospectus supplement filed in connection with any proposed Hedging Transaction language mutually agreed upon by the Company, the Holder and the Hedging Counterparty describing such Hedging Transaction.

          (c) Any information regarding the Hedging Transaction included in a registration statement or prospectus pursuant to this Section 1.6 shall be deemed to be information provided by the Holder selling Registrable Securities pursuant to such registration statement or prospectus for purposes of Section 1.5 of this Agreement.

          (d) If in connection with a Hedging Transaction a Hedging Counterparty or any affiliate thereof is (or may be considered) an underwriter or selling securityholder, then it shall be required to provide customary indemnities to the Company regarding itself, the plan of distribution and like matters.

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     1.7 Furnish Information; Limitation of Obligations.

          It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any selling Holder as to which a registration is being effected to furnish, and such Holder shall furnish, to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be reasonably required to effect the registration of such Holder’s Registrable Securities.

     1.8 Expenses of Registrations.

          All expenses other than underwriting discounts and commissions incurred in connection with registrations pursuant to this Section 1, including without limitation all registration, filing and qualification fees, printers’ and accounting fees and reasonable fees and disbursements of counsel for the Company and one counsel for the participating Holders, shall be borne by the Company; provided, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 or Section 1.4 as applicable, if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear all such expenses incurred), unless, in the case of a registration requested under Section 1.2, the Holders of a majority of the Registrable Securities agree to forfeit one demand registration pursuant to Section 1.2.

     1.9 Indemnification.

          (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder, their respective affiliates and controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the partners, officers, directors members, representatives, agents and employees of each Holder, and each such person (collectively, the “Holder Indemnified Parties”), against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including without limitation any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any untrue statement or alleged untrue statement of a material fact contained in the Disclosure Package or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, or (iv) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder Indemnified Party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that the

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indemnity agreement contained in this Section 1.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the written consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case to any Holder Indemnified Party for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished by such Holder Indemnified Party under an instrument duly executed by any such Holder Indemnified Party expressly for use in connection with such registration by such Holder; provided further, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder Indemnified Party from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder Indemnified Party to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. For purposes of the last proviso to the immediately preceding sentence, the term “prospectus” shall not be deemed to include the documents, if any, incorporated therein by reference, and no person who participates as an underwriter in the offering or sale of Registrable Securities or any other person, if any, who controls such underwriter within the meaning of the Securities Act, shall be obligated to send or give any supplement or amendment to any document incorporated by reference in any preliminary prospectus or the final prospectus to any person other than a person to whom such underwriter had delivered such incorporated document or documents in response to a written request therefor. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such party and shall survive the transfer of such securities.

          (b) To the extent permitted by law, each Holder shall, if shares held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, each underwriter and each other stockholder selling securities under such registration statement against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder expressly for use in connection with such registration; and each Holder shall reimburse any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 1.9(b), in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such violation; provided, that the indemnity agreement contained in this Section 1.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the written consent of such Holder, which consent shall not be unreasonably withheld; provided further, that the liability of each Holder under this Section 1.9(b) shall be limited to an amount equal to the net proceeds actually received and

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retained by such Holder in the registered public offering out of which such liability arises, unless such liability arises out of or is based on willful misconduct by such Holder.

          (c) Promptly after receipt by an indemnified party under this Section 1.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.9 to the extent so prejudiced, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9.

          (d) If the indemnification provided for in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by a Holder that is a selling party under this Section 1.9(d) exceed the net proceeds from the offering received by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

          (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

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          (f) The obligations of the Company and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1 and otherwise.

     1.10 Rule 144 Reporting.

          With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC which may permit the sale of the Registrable Securities to the public without registration or pursuant to a registration on Form S-3, the Company agrees to use commercially reasonable efforts to:

          (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act;

          (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act; and

          (c) so long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon written request: (i) a written statement by the Company as to its compliance with the reporting requirements of SEC Rule 144 and the Exchange Act; (ii) a copy of the most recent annual or quarterly report of the Company; and (iii) such other reports and documents as a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.

     1.11 Assignment of Registration Rights.

          A Holder may assign any or all of its rights hereunder (but only with all related obligations) to any person or entity to whom the Holder may transfer or assign its Common Stock or Series D Preferred Stock; provided, that: (i) the Company is, within ten (10) days after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; and (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act.

     1.12 Limitations on Subsequent Registration Rights.

          The Company shall not, without the prior written consent of the Holders of at least a majority of the Registrable Common Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant to such holder or prospective holder registration rights superior to or, except with respect to piggyback or incidental registration rights, on parity with those granted under this Section 1.

     1.13 Additional Restrictions.

          So long as this Agreement is in effect, each of the Holders of Registrable Securities agrees that during the 90-day period following the date any Registration Statement

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(which such Holder had the opportunity to participate in under Section 1.2, 1.3 or 1.4) with respect to an underwritten public offering of equity securities of the Company becomes effective, such Holder will not effect any sale or distribution of equity securities of the Company or any other security of the Company convertible, exchangeable or exercisable (directly or indirectly) for or into equity securities of the Company (other than pursuant to such Registration Statement) including, without limitation, pursuant to Rule 144 or in a transaction which would require registration under the Securities Act, unless the managing underwriter of such public offering otherwise agrees in writing.

     1.14 Confidential Information.

          Each Holder of Registrable Securities agrees that any information obtained pursuant to this Agreement which the Company identifies to be proprietary to the Company or otherwise confidential will not be disclosed without the prior written consent of the Company. Notwithstanding the foregoing, each Holder of Registrable Securities may disclose such information, on a need to know basis, to their employees, accountants or attorneys (so long as each such person to whom confidential information is disclosed agrees to keep such information confidential) or to the extent required by applicable law, rule, regulation or court order. Each Holder of Registrable Securities further acknowledges, understands and agrees that any confidential information will not be utilized in connection with purchases and/or sales of the Company’s securities except in compliance with applicable state and federal antifraud statutes.

     1.15 Termination of Registration Rights.

          No Holder shall be entitled to exercise any right provided for in this Section 1 after such time at which all Registrable Securities held by such Holder (and any affiliate of the Holder or other person with whom such Holder must aggregate sales under Rule 144 of the Securities Act) can be sold without restriction (including volume and manner-of-sale restrictions) on a single day without registration in compliance with Rule 144 of the Securities Act (or any similar provision then in effect) and such Holder has received, upon such Holder’s request, an opinion of counsel to the Company to that effect.

2. Representations and Warranties of the Company.

          The Company represents and warrants to the Holders as follows:

          (a) The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware.

          (b) The Company has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement have been duly authorized and approved by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

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          (c) The execution and delivery by the Company of this Agreement and the performance of its obligations hereunder and compliance with the terms hereof do not and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation, bylaws or any provision of any indenture, agreement or other instrument to which it or any of its properties or assets is bound, and will not conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.

3. Miscellaneous.

     3.1 Successors and Assigns.

          This Agreement will be binding upon and will inure to the benefit of the signatories hereto and their respective successors and permitted assigns (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.

     3.2 Governing Law.

          This Agreement will be governed by and construed in accordance with the internal Laws of the State of New York applicable to Contracts made and wholly performed within such state, without regard to any applicable conflict of laws principles.

     3.3 Counterparts.

          This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart.

     3.4 Notices.

          All notices required or permitted pursuant to this Agreement will be in writing and will be deemed to be properly given when actually received by the Person entitled to receive the notice at the address set forth on Exhibit B hereto, or at such other address as a party may provide by notice to the other.

     3.5 Attorneys’ Fees.

          If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

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     3.6 Amendments and Waivers.

          Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company, the holders of at least a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company.

     3.7 Other Agreements.

          Neither the Company nor any of its subsidiaries has entered, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Investors in this Agreement or otherwise conflicts with the provisions hereof. Notwithstanding the foregoing, the Holders acknowledge that the Company has previously entered or on the date hereof will enter into (i) the Registration Rights Agreement dated as of August 26, 2005 between the Company and Angelo, Gordon & Co., L.P., (ii) the Registration Rights Agreement dated as of July 15, 1998 by and among the Company and the parties listed on the signature pages thereto (iii) the Registration Rights Agreement dated as of February 8, 2006 by and between the Company and Silver Point Finance, LLC and (iv) a Registration Rights Agreement of even date herewith among the Company and the former holders (other than the Investors) of the shares of the Company’s Series A Voting Convertible Preferred Stock and Series C Preferred Stock (as each is in effect on the date hereof, the “Prior Registration Rights Agreements”) and that nothing in this Agreement is intended to, or shall, impair or conflict with the rights of the parties to the Prior Registration Rights Agreements under the terms of the Prior Registration Rights Agreements.

     3.8 Specific Performance.

          The parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the Transactions, will cause irreparable injury to the other parties for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder.

     3.9 Severability.

          The illegality or partial illegality of any of this Agreement, or any provision hereof, will not affect the validity of the remainder of this Agreement, or any provision hereof, and the illegality or partial illegality of this Agreement will not affect the validity of this Agreement in any jurisdiction in which such determination of illegality or partial illegality has not been made, except in either case to the extent such illegality or partial illegality causes this Agreement to no longer contain all of the material provisions reasonably expected by the parties to be contained therein.

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     3.10 Rules of Construction.

          (a) When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference will be to an Article or Section or Exhibit or Schedule to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” Unless the context otherwise requires, (i) “or” is disjunctive but not necessarily exclusive, (ii) words in the singular include the plural and vice versa, and (iii) the use in this Agreement of a pronoun in reference to a party hereto includes the masculine, feminine or neuter, as the context may require. This Agreement will not be interpreted or construed to require any Person to take any action, or fail to take any action, that would violate any applicable Law.

          (b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

     3.11 Entire Agreement.

          This Agreement constitutes the entire agreement and supersedes the HCP Registration Rights Agreement (which is hereby terminated) and all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement.

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          IN WITNESS WHEREOF, each of the Company and the Investors have caused this Registration Rights Agreement to be signed by its officer thereunto duly authorized, all as of the date first written above.

SALTON, INC.
By:
Name: William Lutz
Title: Interim Chief Executive Officer and Chief Financial Officer
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
By:	Harbinger Capital Partners Offshore Manager,
	L.L.C., its investment manager
By:
	Name: Philip A. Falcone
	Title: Senior Managing Director
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.
By:	Harbinger Capital Partners Special Situations
	GP, LLC, its general partner
By:	HMC — New York, Inc., its managing member
By:
	Name: William R. Lucas, Jr.
	Title: Senior Vice President and General Counsel

[Signature Page to Registration Rights Agreement

Exhibit A

Shares of Common Stock

	Shares of
Stockholder	Common Stock
Harbinger Capital Partners Master Fund I, Ltd.	[     ]
Harbinger Capital Partners Special Situations Fund, L.P.	[     ]

Exhibit B

Addresses for Notice

Salton, Inc.
1955 W. Field Court
Lake Forest, Illinois 60045
Attention: General Counsel
Facsimile: (847) 803-1186

With a copy to:

Sonnenschein Nath & Rosenthal LLP
7800 Sears Tower, 233 South Wacker Drive
Chicago, IL 60606 6404
Attention: Neal Aizenstein
Facsimile: 312.876.7934

Harbinger Capital Partners Master Fund I, Ltd.
c/o 555 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Philip A. Falcone
Facsimile: (212) 508-3721

With a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019 6064
Attention: Bruce A. Gutenplan
Robert B. Schumer
Facsimile: (212) 757 3990

Harbinger Capital Partners Special Situations Fund, L.P.
c/o 555 Madison Avenue, 16th Floor
New York, New York 10022
Attention: Philip A. Falcone
Facsimile: (212) 508-3721

With a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019 6064
Attention: Bruce A. Gutenplan
Robert B. Schumer
Facsimile: (212) 757 3990

EX-99.7

Exhibit 99.7

REGISTRATION RIGHTS AGREEMENT

between

SALTON INC.,

and

CONTRARIAN EQUITY FUND, L.P.

Dated as of October 1, 2007

TABLE OF CONTENTS

Page

Section 1.	Definitions	1
Section 2.	Registration	3
Section 3.	Stockholder’s Obligations	6
Section 4.	Registration Expenses	6
Section 5.	Indemnification	7
Section 6.	Miscellaneous	9

 i

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of October 1, 2007 by and between Salton, Inc., a Delaware corporation (the “Company”), and Contrarian Equity Fund, L.P., a Delaware limited liability (the “Stockholder”).

     WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of October ___, 2007 (as the same may be amended, modified and supplemented from time to time prior to the date hereof, the “Merger Agreement”), by and among the Company, SFP Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“MergerSub”), and APN Holding Company, Inc. a Delaware corporation (“APN Holdco”), MergerSub will merge with and into APN Holdco (the “Merger”), and as a result thereof APN Holdco, the parent company of Applica, Inc., will become a wholly-owned subsidiary of the Company, and each outstanding share of the common stock of APN Holdco will be converted into the right to receive fully paid and non assessable shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”);

     WHEREAS, pursuant to the terms of an amendment to the terms of the Certificate of Designation of Series C Preferred Stock of the Company (the “Series C Amendment”), concurrently with the effective time of the Merger (the “Effective Time”), outstanding shares of the Company’s Series C Preferred Stock (including shares of Series C Preferred Stock owned by the Stockholder) will be converted into shares of Common Stock;

     WHEREAS, in order to induce the Stockholder to consent to the Series C Amendment, the Company has agreed to provide the Stockholder with the registration rights set forth herein

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

     Section 1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

     “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

     “Agreement” has the meaning set forth in the preamble.

     “Business Day” means any day other than a Saturday, Sunday or other day on which banks in New York City are permitted or required by law to be closed, and shall consist of the time period from 12:01 a.m. through 12:00 midnight Eastern time.

     “Closing Date” has the meaning set forth in the Merger Agreement.

     “Common Stock” has the meaning set forth in the recitals.

     “Company” has the meaning set forth in the preamble.

     “Deferral Notice” has the meaning set forth in Section 2(e)(ii).

     “Deferral Period” shall mean a period commencing on the date that the Company delivers a Deferral Notice to the Stockholder and terminating on the date that the Company informs that Stockholder pursuant to Section 2(f) that it may continue to sell Registrable Securities pursuant to the Prospectus.

     “Disclosure Package” means (i) the preliminary prospectus, (ii) each Free Writing Prospectus and (iii) all other information that is deemed, under Rule 159 under the Securities Act, to have been conveyed to purchasers of securities at the time of sale (including, without limitation, a contract of sale).

     “Effective Time” has the meaning set forth in the recitals.

     “Effectiveness Period” means the period commencing on the day on which the Effective Time occurs and ending on the earlier of (i) September 7, 2008 and (ii) the date that all Registrable Securities have ceased to be Registrable Securities.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

     “Free Writing Prospectus” means any “free writing prospectus,” as defined in Rule 405 of the Securities Act.

     “Holder Indemnified Party” has the meaning set forth in Section 5(a).

     “Indemnified Party” has the meaning set forth in Section 5(c).

     “Indemnifying Party” has the meaning set forth in Section 5(c).

     “Losses” has the meaning set forth in Section 5(a).

     “Material Event” has the meaning set forth in Section 2(e).

     “Merger” has the meaning set forth in the recitals.

     “Merger Agreement” has the meaning set forth in the recitals.

     “Merger Sub” has the meaning set forth in the recitals.

     “Person” means any individual or legal entity, including any partnership, joint venture, corporation, trust, unincorporated organization, limited liability company or governmental entity.

     “Prospectus” means the prospectus included in the Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any amendment or

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prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus.

     “Public Sale” means any sale of Registrable Securities to the public pursuant to a public offering registered under the Securities Act or to the public through a broker or market maker pursuant to the provisions of Rule 144 or any other public offering not required to be registered under the Securities Act.

     “Questionnaire” means a written notice and questionnaire in customary form delivered by the Stockholder to the Company.

     “Registrable Securities” means any and all shares of Common Stock owned by the Stockholder immediately after the Effective Time (including shares of Common Stock into which the Stockholder’s shares of Series C Preferred Stock have been converted as a result of the Series C Amendment) and any shares of capital stock or other equity interests issued or issuable to the Stockholder with respect to such shares of Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided, however, Registrable Securities shall not include shares of Common Stock (or any other shares of capital stock or other equity interests) that (i) have been sold in a Public Sale, (ii) may be sold by the Stockholder without restriction (including volume and manner of sale restrictions) on a single day without registration in compliance with Rule 144 or (iii) cease to be outstanding.

     “Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such rule.

     “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act subsequently adopted by the SEC which permits forward inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

     “SEC” means the Securities and Exchange Commission or any successor agency then having jurisdiction to enforce the Securities Act.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.

     “Series C Amendment” has the meaning set forth in the recitals.

     “Shelf Registration Statement” has the meaning set forth in Section 2(a) Agreement including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement.

     “Stockholder” has the meaning set forth in the preamble.

     Section 2. Registration.

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          (a) The Company shall use commercially reasonable efforts to (i) prepare and file or cause to be prepared and filed with the SEC, not later than 75 days after the effective date of the Merger, a registration statement on Form S-3 (or such other form appropriate for such purpose) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a “Shelf Registration Statement”) registering the resale from time to time by the Stockholder of all of the Registrable Securities, and (ii) cause the Shelf Registration Statement to be declared effective under the Securities Act within 120 days following the Effective Time and, subject to any Deferral Periods, to keep the Shelf Registration Statement continuously effective under the Securities Act until the expiration of the Effectiveness Period. At the time the Shelf Registration Statement is declared effective, the Stockholder shall be named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit the Stockholder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law.

          (b) The Company will notify the Stockholder as promptly as practicable, (i) when the Shelf Registration Statement, the Prospectus, any prospectus supplement, any Disclosure Package or any post-effective amendment to the Shelf Registration Statement has been filed with the SEC and, with respect to the Shelf Registration Statement or any post-effective amendment, when the same has been declared effective, (ii) of any request, following the effectiveness of the Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to the Shelf Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the occurrence of a Material Event and (vi) of the determination by the Company that a post-effective amendment to the Shelf Registration Statement will be filed with the SEC, which notice may, at the discretion of the Company (or as required pursuant to Section 2(e)), state that it constitutes a Deferral Notice, in which event the provisions of Section 2(e) shall apply.

          (c) The Company will provide to the Stockholder, without charge, at least one conformed copy of the Registration Statement and any amendment thereto, excluding all schedules, exhibits and all documents incorporated or deemed to be incorporated therein by reference.

          (d) During the Effectiveness Period, the Company will deliver to the Stockholder, in connection with any sale of Registrable Securities pursuant to the Shelf Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as the Stockholder may reasonably request; and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by the Stockholder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein.

          (e) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of

4

any event or the existence of any fact (a “Material Event”) as a result of which the financial statements included in the Shelf Registration Statement become ineligible for inclusion therein, the Shelf Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any related Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any pending corporate development that, in the good faith judgment of the Company makes it necessary or advisable to suspend the availability of the Shelf Registration Statement and the related Prospectus for a discrete period of time because not to do so would be detrimental to the Company and its subsidiaries:

               (i) Subject to the Deferral Period, the Company shall, as promptly as practicable, prepare and file, if necessary pursuant to applicable law, a post-effective amendment to the Shelf Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into the Shelf Registration Statement and Prospectus so that the Shelf Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to the Shelf Registration Statement, use its commercially reasonable efforts to cause it to be declared effective as promptly as is practicable, and

               (ii) give notice to the Stockholder that the availability of the Shelf Registration Statement is suspended (a “Deferral Notice”) and, upon receipt of any Deferral Notice, the Stockholder agrees not to sell any Registrable Securities pursuant to the Shelf Registration Statement until the Stockholder’s receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus.

          (f) The Company shall use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) or (B) above, as promptly as is practicable, and (y) in the case of clause (C) above, as soon as practicable after, in the good faith judgment of the Company, public disclosure of such pending corporate development would no longer be detrimental to the interests of the Company. The Company shall promptly notify the Stockholder when the use of the Prospectus may be so resumed.

          (g) Prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, the Company shall (x) use commercially reasonable efforts to (i) register or qualify or cooperate with the Stockholder in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as the Stockholder reasonably requests in writing (which request may be included in the Questionnaire), and (ii) keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with the offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and (y) do any and

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all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the Shelf Registration Statement and the related Prospectus; provided, that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject.

          (h) The Company shall cooperate with the Stockholder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Shelf Registration Statement, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such full share denominations and registered in such names as the Stockholder may request.

          (i) The Company shall use its reasonable best efforts to cause all Registrable Securities registered under to the Shelf Registration Statement to be listed on the OTC Bulletin Board or any other securities exchange, quotation system or market, if any, on which similar securities issued by the Company are then listed or traded.

          (j) Not less than four trading days prior to the filing of the Shelf Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall furnish to the Stockholder copies of the “Selling Stockholder” section of such document, the “Plan of Distribution” and any risk factor contained in such document that addresses specifically the Selling Stockholder, as proposed to be filed which documents will be subject to the review of the Stockholder. The Company shall not file a Shelf Registration Statement, any Prospectus or any amendments or supplements thereto in which the “Selling Stockholder” section thereof differs from the disclosure received from a Stockholder in its Questionnaire (as amended or supplemented).

     Section 3. Stockholder’s Obligations. The Stockholder agrees that it shall not be entitled to sell any of such Registrable Securities pursuant to the Shelf Registration Statement or to receive a Prospectus relating thereto, unless it has furnished the Company with a Questionnaire (including the information required to be included in the Questionnaire) and the information set forth in the next sentence. The Stockholder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by the Stockholder not misleading and any other information regarding the Stockholder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. The sale of any Registrable Securities by the Stockholder shall constitute a representation and warranty by the Stockholder that the information relating to the Stockholder and its plan of distribution is as set forth in the Prospectus delivered by the Stockholder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by the Stockholder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by the Stockholder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading.

     Section 4. Registration Expenses. The Company shall bear all fees and expenses incurred by it in connection with the performance by the Company of its obligations under Section 2 of this Agreement. Such fees and expenses shall include, without limitation, (i) all registration and filing fees, (ii) printing expenses, (iii) duplication expenses relating to copies of the Shelf Registration Statement or Prospectus delivered to the Stockholder hereunder, (iv) fees and

6

disbursements of counsel for the Company. Notwithstanding the provisions of this Section 4, the Company shall not be responsible to pay any underwriting discounts, commissions or any stock transfer taxes which may be incurred by the Stockholder in connection with any sale of Registrable Securities.

     Section 5. Indemnification.

          (a) Indemnification by the Company. The Company shall indemnify and hold harmless the Stockholder, each director, officer or Affiliate of any of the Stockholder and each Person, if any, who controls (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) any of the foregoing Persons (collectively the “Holder Indemnified Parties”), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (collectively, “Losses”) caused by any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or the Disclosure Package, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading or any other violations of applicable securities laws, except insofar as such Losses are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to such Holder Indemnified Party furnished to the Company in writing by such Holder Indemnified Party expressly for use therein; provided, that the Company shall not be liable to any Holder Indemnified Party to the extent that such Losses arise out of or are based upon an untrue statement or alleged untrue statement of material fact or omission or alleged omission if either (i) (A) such Holder Indemnified Party was required by law to send or deliver, and failed to send or deliver, a copy of the Prospectus with or prior to delivery written confirmation of the sale by such Holder Indemnified Party to the Person asserting the claims from which the Losses arise and (B) the Prospectus would have corrected such untrue statement or omission or alleged omission or (ii) (A) such Holder Indemnified Party disposed of Registrable Securities to the Person asserting the claim from which such Losses arise pursuant to the Shelf Registration Statement and sent or delivered, or was required by law to send or deliver, a Prospectus to such Person in connection with the disposition, (B) such Holder Indemnified Party received a Deferral Notice in writing prior to the date of such disposition and (C) such untrue statement or omission or alleged omission was the reason for the Deferral Notice.

          (b) Indemnification by Stockholder. The Stockholder agrees to indemnify and hold harmless the Company, the directors of the Company, the officers of the Company who sign the Registration Statement, and each person, if any, who controls the Company (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against all Losses caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or the Disclosure Package, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only (i) with reference to information relating to such Stockholder furnished to the Company in writing by such Stockholder expressly for use in the Shelf Registration Statement, any preliminary prospectus, the Prospectus, the Disclosure Package or any amendments or supplements thereto or (ii) with respect to any Losses that may arise as a result of the disposition by the Stockholder of Registrable Securities to the Person asserting the claim from which such

7

Losses arise pursuant to the Shelf Registration Statement, the Prospectus or any amendments or supplements thereto if the Stockholder sent or delivered, or was required by law to send or deliver, a Prospectus in connection with such disposition, the Stockholder received a Deferral Notice with respect to such prospectus in writing prior to the date of such disposition and the untrue statement or alleged untrue statement or omission or alleged omission was the reason for the Deferral Notice. In no event shall the liability of the Stockholder hereunder be greater in amount than the dollar amount of the net proceeds received by the Stockholder upon the sale of the Registrable Securities giving rise to such indemnifications obligation.

          (c) Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 6(a) or 6(b), such Person (the “Indemnified Party”) shall promptly notify the Person against whom such indemnity may be sought (the “Indemnifying Party”) in writing and the Indemnifying Party, upon request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying Party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party has agreed in writing to pay such fees and expenses or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and, in the reasonable judgment of the Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that all such fees and expenses shall be reimbursed as they are incurred upon presentation of a statement or statements thereof in reasonable detail and subject to an undertaking to return such amounts if it is determined that such party is not entitled to indemnification under this Agreement in respect of such matter. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding.

          (d) Contribution. To the extent that the indemnification provided for in Sections 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient in respect of any Losses referred to therein, then each Indemnifying Party under such paragraph, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the Indemnified Party or parties on the other hand from the offering of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party or parties on the one hand and of the Indemnified Party or parties on the other hand in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Stockholder on the one hand and the Company on the other hand shall be determined by reference to, among other things, whether

8

the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Stockholder or by the Company, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

          (e) The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Party at law or in equity.

          (f) The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Stockholder or any person controlling the Stockholder, or the Company, or the Company’s officers or directors or any person controlling the Company and (iii) the sale of any Registrable Securities by the Stockholder.

     Section 6. Miscellaneous.

          (a) No Inconsistent Agreements. The Company represents and warrants that it has not granted to any Person the right to request or require the Company to register any securities issued by the Company that is inconsistent with the rights granted to the Stockholder in this Agreement. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Stockholder in this Agreement and the Company will not include in the Shelf Registration Statement any securities other than the Registrable Securities.

          (b) Interpretation. Any reference in this Agreement to a statute shall be to such statute, as amended from time to time prior to the date hereof, and to the rules and regulations promulgated thereunder prior to the date hereof. Any reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with its terms. Unless the context otherwise requires, (1) all references made in this Agreement to an Article or Section are to an Article or Section of this Agreement, (2) “or” is disjunctive but not necessarily exclusive, (3) “will” shall be deemed to have the same meaning as the word “shall” and (4) words in the singular include the plural and vice versa. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not so followed. All references to “$” or dollar amounts are to lawful currency of the United States of America, unless otherwise expressly stated. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

          (c) Amendments and Waivers. This Agreement may be amended or modified, and any of the terms hereof may be waived, only by written instrument duly executed by the Company and the Stockholder. No waiver by any party of any term or condition contained in

9

this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition contained in this Agreement on any future occasion.

          (d) Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be delivered by hand or overnight courier service or by facsimile:

If to the Stockholder, to:

                                                    
Attention:                                 
Fax:                                             

If to the Company, to:

Salton, Inc.
1955 West Field Court
Lake Forest, Illinois 60045
Attention: General Counsel
Fax: (847) 803-1186

or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to receive such communication as provided above. Each such communication shall be effective (i) if delivered by hand, when such delivery is made at the address specified in this Section 6(e), (ii) if delivered by overnight courier service, the next Business Day after such communication is sent to the address specified in this Section 6(d) or (iii) if delivered by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 6(d) and appropriate confirmation is received.

          (e) Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors. Neither party may assign its rights or duties hereunder, in whole or in part, other than by operation of law. Any purported assignment not in accordance with this Agreement shall be null and void. Except as provided in Section 6(e), this Agreement is not intended to confer any rights or remedies upon any Person other than the parties to this Agreement.

          (f) Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto.

          (g) Governing Law. This Agreement and any claim or controversy relating hereto shall be governed by and construed in accordance with the law of the State of New York, without regard to the conflicts of law rules of such state that would result in the application of the law of another jurisdiction.

          (h) Jurisdiction. Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any

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provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby or thereby shall be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 6 shall be deemed effective service of process on such party.

          (i) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

          (j) Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of that provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted for that provision in order to carry out, so far as may be valid and enforceable, the intent and purpose of the invalid or unenforceable provision and (b) the remainder of this Agreement and the application of that provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of that provision, or the application of that provision, in any other jurisdiction.

          (k) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.

          (l) Rules of Construction. The parties to this Agreement have been represented by counsel during the negotiation and execution of this Agreement and waive the application of any laws or rule of construction providing that ambiguities in any agreement or other document shall be construed against the party drafting such agreement or other document. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

          (m) Remedies. Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement shall be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at law or in equity. The exercise by a party to this Agreement of any one remedy shall not preclude the exercise by it of any other remedy.

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          (n) Termination. This Agreement and the obligations of the parties hereunder shall terminate upon the earlier of the date on which all Registrable Securities held by the Stockholder can be sold without restriction (including volume and manner of sale restrictions) on a single day without registration in compliance with Rule 144; provided, that any liabilities or obligations under Section 3, 4, or 5 shall survive termination and remain in effect in accordance with their terms.

          (o) Piggyback Registrations. If at any time during the Effectiveness Period there is not an effective Shelf Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to the Stockholder written notice of such determination and, if within fifteen days after receipt of such notice, the Stockholder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights.

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

SALTON, INC.
By:	/s/ William Lutz
	Name:	William Lutz
	Title:	Interim Chief Executive Officer
		and Chief Financial Officer
CONTRARIAN EQUITY FUND, L.P.
By: Contrarian Capital Management, L.L.C.
	By:	/s/ Jason Mudrick Name: Jason Mudrick
		Title: Portfolio Manager

EX-99.8

Exhibit 99.8

FORM OF RELEASE

          Each of the undersigned Salton, Inc., a Delaware corporation (“Salton”) and SFP Merger Sub, Inc., a Delaware corporation (“SFP”), on its own behalf and on behalf of each of its subsidiaries, predecessors, successors and assigns, and any person acting or purporting to act by or in the right of any of the foregoing, does hereby:

          1. Release APN Holding Company, Inc., a Delaware corporation (“APN Holdco”), Applica Incorporated, Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P. and each of their respective past, present and future parents, subsidiaries, stockholders, partners and other affiliates, predecessors, successors and assigns, and each of the foregoing’s officers, employees, directors, representatives, agents and attorneys from any and all liability and accountability with respect to any and all actions, causes of action, suits, charges, disputes, controversies, debts, dues, sums of money, damages, judgments, executions, claims and demands whatsoever, in law or in equity, known or unknown, which the undersigned ever had, now have or may hereafter have, for, upon, or by reason of any matter, act, omission, cause or thing whatsoever from the beginning of the world to the date of this Release, including but not limited to any matter, cause or thing relating to or arising out of (i) that certain Agreement and Plan of Merger, dated February 7, 2007 (the “Terminated Merger Agreement”), by and among Salton, SFP, and APN Holdco, (ii) any agreement contemplated by or entered into in connection with such Terminated Merger Agreement, and (iii) the termination of the Terminated Merger Agreement.

          2. acknowledge that this Release was made in exchange for good and valuable consideration;

          3. acknowledge that this Release represents the entire release and may not be changed orally;

          4. acknowledge that this Release is to be governed by New York law without regard to the conflict of laws principles of such law; and

          5. acknowledge that for the purpose of this Release (i) the term “affiliate” means, as to the entity in question, any person or entity that directly or indirectly controls, is controlled by or is under common control with, the entity in question, (ii) the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity whether through ownership of voting securities, by contract or otherwise, and (iii) the term “subsidiary” means, as to the entity in question, any corporation, partnership, joint venture or other legal entity of which the entity in question owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which generally are entitled to vote for

the election of the board of directors or other governing body of such corporation, partnership, joint venture or other legal entity.

Dated: October           , 2007.

SALTON, INC.

By

Name:

Title:

SFP MERGER SUB, INC.

By

Name:

Title:

STATE OF NEW YORK	)
	: ss.:
COUNTY OF NEW YORK	)

          On this       day of                , 2007, before me personally came [      ], to me known and known to me to be the individual described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same.

  Notary Public

STATE OF NEW YORK	)
	: ss.:
COUNTY OF NEW YORK	)

          On this       day of                , 2007, before me personally came [       ], to me known and known to me to be the individual described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same.

  Notary Public

EX-99.9

Exhibit 99.9

Execution Version

LOAN PURCHASE AGREEMENT

          THIS LOAN PURCHASE AGREEMENT (this “Agreement”), dated as of October 1, 2007, is by and between SILVER POINT FINANCE, LLC as Co-Agent for the Lenders (as defined below) party hereto, HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. and HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P. (individually, each a “Purchaser”, or collectively, the “Purchasers”) and SALTON, INC. (“Salton”) and each of Salton’s Subsidiaries identified as Borrowers and Guarantors on the signature pages. Capitalized terms used but not defined herein shall have the meaning ascribed to such term in the Credit Agreement (as defined hereinafter).

RECITALS:

          A. Salton has entered into that certain Amended and Restated Credit Agreement, dated as of May 9, 2003 and amended and restated as of June 15, 2004, as amended and restated and further amended, by and among Salton, the financial institutions named therein as lenders (“Lenders”), Wells Fargo Foothill, Inc., in its capacity as administrative agent and collateral agent for the agents and lenders party thereto, together with its successors and assigns thereto in such capacities, and Silver Point Finance LLC, in its capacity as the co-agent, syndication agent, and documentation agent for the lenders party thereto in such capacities, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof (the “Credit Agreement”).

          B. Under the Credit Agreement, Salton has loans available to it based on the amounts described in clause (a)(D) of the definition of “Borrowing Base” contained in the Credit Agreement (the “Stretch Loans”). Salton is obligated to repay any amounts outstanding of the Stretch Loans on November 10, 2007.

          C. Salton and APN Holding Company, a wholly owned subsidiary of Purchasers, have entered into an Agreement and Plan of Merger as of October 1, 2007 (the “Merger Agreement”) and as a condition to entering into the Merger Agreement, Salton has required Purchasers to enter into this Agreement for the benefit of the Lenders.

          D. Silver Point Finance LLC, as Co-Agent under the Credit Agreement, Wells Fargo Foothill, Inc., as Agent under the Credit Agreement, and The Bank of New York, as Second Lien Agent under the Second Lien Credit Agreement, and Harbinger Capital Partners Special Situations Fund, L.P., as Agent under the Reimbursement and Credit Agreement, have entered into an Amended and Restated Intercreditor Agreement dated as of the date hereof (the “Intercreditor Agreement”) and acknowledged by Salton and each of Salton’s Subsidiaries identified as Borrowers and Guarantors on the signature pages to the Credit Agreement.

NOW THEREFORE, the parties hereby agree as follows:

     1. Sale and Purchase.

          (a) Purchasers agree to buy, in such allocation as they may determine, upon receipt, from time to time during the Stretch Put Period (as defined hereinafter), of a notice (substantially in

the form attached hereto as Exhibit A, (a “Stretch Loan Put Notice”)), from the Co-Agent on behalf of the Lenders holding the Stretch Loans , the principal amount of Stretch Loans specified in such Stretch Loan Put Notice as set forth in Section 3 below; provided, however, that notwithstanding anything to the contrary in this Agreement, Purchasers shall not be obligated to purchase Stretch Loans having an aggregate principal amount exceeding $68,489,510. The Stretch Loans so purchased by the Purchasers are referred to herein as the “Purchased Stretch Loans”. The Purchaser shall be entitled to receive all accrued and unpaid interest on the principal amount of the Purchased Stretch Loans.

          (b) Purchasers agree to buy, in such allocation as they may determine, upon receipt during the Breach Put Period (as defined hereinafter), of a notice (substantially in the form attached hereto as Exhibit B (a “Breach Put Notice”)) from the Co-Agent, on behalf of the Lenders, all, but not less than all, of the outstanding Obligations (as that term is defined in the Credit Agreement).

          (c) Any Obligation, including the Stretch Loans, purchased by the Purchasers are referred to herein as the “Purchased Loans”. The Purchasers shall be entitled to receive all accrued and unpaid interest on the principal amount of the Purchased Loans.

     2. Purchase Price.

The purchase price (“Purchase Price”) for (i) the Purchased Stretch Loans shall be an amount equal to 100% of the outstanding principal amount thereof, plus all accrued and unpaid interest thereon through and including the date of purchase and (ii) the Obligations (other than the Purchased Stretch Loans) shall be 100% of the outstanding amount thereof.

     3. Put Period and Purchase Procedures.

          (a) The Co-Agent shall have the right to deliver a Stretch Loan Put Notice (i) from and after the date any party to the Merger Agreement has, or asserts, the right to terminate the Merger Agreement or the Merger Agreement is terminated, and/or (ii) on or after November 10, 2007 and prior to January 30, 2008: provided, in the case of (i) and/or (ii), no Insolvency Proceeding with respect to Salton or any of its Subsidiaries is then pending (the “Stretch Put Period”).

          (b) The Co-Agent shall have the right to deliver a Breach Put Notice any time during the period commencing on the date that is the earlier of the date the Co-Agent obtains actual knowledge that (i) a Purchaser or any of its affiliates has breached any of the terms of the Intercreditor Agreement, (ii) after the commencement of an Insolvency Proceeding (as defined in the Intercreditor Agreement) with respect to Salton or any of its Subsidiaries, if all of the Stretch Loans have not been purchased pursuant to Section 1(a) above and (iii) following the initial funding under a DIP Financing (as defined in the Intercreditor Agreement) provided by any of the Purchasers or any of their affiliates, any of the conditions set forth in Section 5.d(1) of the Intercreditor Agreement have not been continuously satisfied and ending of the date that is 60 days thereafter(the “Breach Put Period”).

          (c) On the third Business Day following receipt of a Stretch Loan Put Notice or a Breach Put Notice, the Purchasers shall wire transfer, in immediately available funds, the full amount of the Purchase Price against delivery to Purchasers of an executed Assignment Agreement in the form attached hereto as Exhibit C to the account or accounts specified in such Stretch Loan

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Put Notice or Breach Put Notice and upon receipt of such Purchase Price, Lenders holding a principal amount of Obligations to be paid shall deliver to Purchasers such executed Assignment Agreement evidencing the transfer of such Purchased Loans.

          (d) Each of Salton and Purchasers agree that immediately upon transfer of any Purchased Stretch Loans to the Purchasers, the Purchased Stretch Loans will be deemed discharged under the Credit Agreement and automatically converted to loans under the New Second Lien Credit Agreement. Each of Salton and the Purchasers expressly acknowledge and agree that immediately upon consummation of the purchase thereof: (i) the Purchased Stretch Loans and all rights with respect thereto and security therefore will no longer be governed by, or entitled to, the benefits of the Credit Agreement or any other Loan Document, (ii) no Purchaser shall be a “Lender” under the Credit Agreement or any of the other Loan Documents, (iii) neither the Agent nor the Co-Agent shall be an agent of any of Purchaser and (iv) neither shall the Agent nor the Co-Agent shall have any duties of any kind or nature whatsoever to any of the Purchasers.

          (e) Upon the consummation of the purchase of Obligations pursuant to a Breach Put Notice, the Agent and the Co-Agent, notwithstanding anything to the contrary set forth in the Credit Agreement, shall be deemed to have resigned as Agent and Co-Agent and Harbinger Capital Partners Special Situations Fund, L.P. shall be the Agent and the Co-Agent.

          (f) Each of the Purchasers expressly acknowledge and agree that the purchase of any Stretch Loans under a Stretch Loan Put Notice entitles the Purchasers to the payment of only the principal thereof and accrued and unpaid interest thereon and does not give Purchasers any rights to any other Obligation under the Credit Agreement, including without limitation, the Make-Whole Amount, all of which other Obligations are expressly reserved by the Lenders. Upon such purchase the Purchased Stretch Loans shall be deemed discharged under the Credit Agreement and automatically converted to loans under the New Second Lien Credit Agreement (as defined in the Intercreditor Agreement).

     4. No Representations. The purchase and sale of the Stretch Loans and/or other Obligations hereunder shall be without representation or warranty of any kind or nature by the selling Lenders except each selling Lender represents and warrants that it is owner of the any such Stretch Loans or Obligations to be purchased free and clear of Liens and except as expressly set forth in an Assignment Agreement delivered to the Purchasers.

     5. Waivers. Each of the Purchasers acknowledges and agrees that its obligations under this Agreement shall be unaffected by the following:

          (a) any First Lien Modification (as defined in the Intercreditor Agreement) that does not violate the terms of the Intercreditor Agreement;

          (b) any event or circumstance that would constitute a defense of a surety or guarantor or any other obligor on any obligations arising in connection with or in respect of any of the following (and each of the Purchasers hereby agrees that its obligations under this Agreement are absolute and unconditional and shall not be discharged or otherwise affected as a result of any of the following):

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     (i) the invalidity or unenforceability of any of the Obligations or any security for, or guaranty of, the Obligations or any part of them, or the lack of perfection or continuing perfection or failure of priority of any security for the Obligations or any part of them;

     (ii) the absence of any attempt to collect the Obligations or any part of them from the borrower or any other obligor thereof or other action to enforce the same;

     (iii) failure by any of the Agent, Co-Agent or any Lender to take any steps to perfect and maintain any lien on, or to preserve any rights to, any collateral;

     (iv) the commencement of any Insolvency Proceeding (as defined in the Intercreditor Agreement), including any discharge of, or bar or stay against collecting, any Obligation (or any part of them or interest thereon) in or as a result thereof; any election by the Agent, Co-Agent or any Lender, in any proceeding instituted under chapter 11 of the Bankruptcy Code or the application of Section 1111(b)(2) of the Bankruptcy Code, or any applicable provisions of comparable state or foreign law; the disallowance, under Section 502 of the Bankruptcy Code, all or any portion of any claim (or claims) for repayment of any of the Obligations; or any agreement or stipulation as to the provision of adequate protection in any bankruptcy proceeding or the avoidance of any Lien in favor of the Guarantied Parties or any of them for any reason;

     (v) any election to proceed separately against the personal property Collateral or, if the Collateral consists of both personal and real property, to proceed against such personal and real property;

     (vi) any change in the corporate existence or structure of the Borrower or any other obligor;

     (vii) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any guarantor or any other person against any of the Agent, Co-Agent or the Lenders;

     (viii) any law, rule, regulation or determination of an arbitrator or of a governmental authority affecting any term of any Purchaser’s obligations under this Agreement; or

     (ix) any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a Purchaser’s obligations hereunder.

     6. Information. Each Purchaser hereby assumes responsibility for keeping itself informed of the financial condition of the Borrower and its Subsidiaries and all guarantors of all or any part of the Obligations, and of all other circumstances bearing upon the risk of nonpayment of the Obligations, or any part thereof, that diligent inquiry would reveal, and each Purchaser hereby agrees that none of the Agent, Co-Agent or any Lender shall have any duty to advise any Purchaser of information known to it regarding such condition or any such circumstances. In the event any Agent,

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Co-Agent or Lender , in its sole discretion, undertakes at any time or from time to time to provide any such information to any Purchaser, such Agent, Co-Agent or Lender shall be under no obligation (a) to undertake any investigation, (b) to disclose any information that such Agent, Co-Agent or Lender wishes to maintain confidential or (c) to make any other or future disclosures of such information or any other information to any Purchaser.

     7. Notices. Any notice or other communications required or permitted under or given in connection with this Agreement shall be in writing and shall be mailed or sent by telecopy, email, pdf or other form of electronic communication, or delivered to it, addressed as follows:

     if to Purchasers,

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.
555 Madison Avenue
15th Floor
New York, New York 1022
Attn: David Maura
Fax No.: (212) 508-3721

with a copy to:

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, New York 10019
Attn: Eric Goodison
Fax No: (212) 757-3990

if to the Co-Agent:

SILVER POINT FINANCE, LLC
Two Greenwich Plaza, 1st Floor
Greenwich, Connecticut 06830
Attention: Craig Hamrah
Fax No.: (203) 542-4318

With a copy to:

WEIL, GOTSHAL & MANGES, LLP
767 Fifth Avenue
New York, New York 10153
Attn: Elaine Stangland, Esq.
Fax No.: (212) 310-8007

if to a Lender:
to the Co-Agent, with a copy to the Agent

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if to Salton,

SALTON, INC.
1955 Field Court
Lake Forest, Illinois 60045
Attn: William Lutz
Fax No,: (847) 803-4641

With a copy to:

SONNENSCHEIN NATH & ROSENTHAL LLP
8000 Sears Tower
Chicago, Illinois 60606
Attn: Neal Aizenstein, Esq.
Fax No.: (312) 876-7934

          or as to any party at such other address as shall be designated by such party in a written notice to the other parties complying as to delivery with the terms of this Section 7. All such demands, notices and other communications shall be effective, when mailed, three Business Days after deposit in the mails, postage prepaid, when sent by telecopy, e mail, pdf or other form of electronic communication, when receipt is acknowledged by the receiving equipment, or when delivered, as the case may be, addressed as aforesaid.

     8. Waiver. Any term, condition or provision of this Agreement may be waived in writing at any time by the party which is entitled to the benefits thereof.

     9. Governing Law The terms and provisions hereof shall be governed by, and construed in accordance with, the substantive laws of the State of New York without regard to conflict of law principles.

     10. Binding Agreement. This Agreement shall be binding upon the heirs, executors, administrators, personal representatives, successors and assigns of the parties hereto.

     11. Construction. Whenever the context hereof so requires, reference to the singular shall include the plural and the plural shall include the singular; words denoting gender shall be construed to mean the masculine, feminine or neuter, as appropriate; and specific enumeration shall not exclude the general, but shall be construed as cumulative of the general recitation. The headings contained in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

     12. Severability. If any clause or provision of this Agreement is held to be illegal, invalid or unenforceable under any law applicable to the terms hereof, then the remainder of this Agreement shall not be affected thereby, and in lieu of each such clause or provision of this Agreement that is illegal, invalid or unenforceable, such clause or provision shall be judicially construed and interpreted to be as similar in substance and content to such illegal, invalid or unenforceable clause or provision, as the context thereof would reasonably suggest, so as to thereafter be legal, valid and enforceable.

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     13. Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature and acknowledgment of, or on behalf of, each party, or that the signature and acknowledgment of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than a single counterpart containing the respective signatures and acknowledgments of each of the parties hereto.

     14. NO ORAL AGREEMENTS. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREIN, SUPERSEDES ANY AND ALL PRIOR DISCUSSIONS AND AGREEMENTS (WRITTEN OR ORAL) BETWEEN PARTIES HERETO WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

     15. Rule of Construction. The parties acknowledge that each party and its counsel have reviewed this Agreement, and the parties hereby agree that normal rules of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.

     16. Amendments. This Agreement shall not be amended except by a writing signed on behalf of the party to be charged with such amendment.

     17. Joint and Several Obligations. All of the obligations of the Purchasers hereunder shall be joint and several.

     18. Draws Under Reimbursement and Credit Agreement. Purchasers agree that no loans, fees or other amount shall be owing under the Reimbursement and Credit Agreement unless and until the Stretch Loan is purchased hereunder pursuant to a Stretch Loan Put Notice.

     19. No Third Party Beneficiaries. No person or entity (other than the Lenders and the Agent) not a party to this Agreement shall have any third party beneficiary claim or other right hereunder or with respect thereto.

     20. Jury Waiver. EACH PARTY HERETO DOES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ANY ACTION OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER TO THIS AGREEMENT, THE LOAN OR THE LOAN DOCUMENTS (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first above written

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
By: Harbinger Capital Partners Offshore Manager, L.L.C. Its: Investment Manager
By:	/s/ William R. Lucas, Jr.
Name: William R. Lucas, Jr.
Title: Executive Vice President – General Counsel & Secretary
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P		.
By: Harbinger Capital Partners Special Situations GP, LLC Its: General Partner
By:	/s/ William R. Lucas, Jr.
Name: William R. Lucas, Jr.
Title: Executive Vice President — General Counsel & Secretary
SILVER POINT FINANCE, LLC
By:	/s/ Richard Petrilli
Title:

[Signature Page to Loan Purchase Agreement]

SALTON, INC., a Delaware corporation
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer
TOASTMASTER INC., a Missouri corporation
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer
SALTON TOASTMASTER LOGISTICS LLC, a Delaware limited liability company
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer
HOME CREATIONS DIRECT, LTD., A Delware corporation
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer

[Signature Page to Loan Purchase Agreement]

SONEX INTERNATIONAL CORPORATION, a Delaware corporation
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer
ICEBOX, LLC, an Illinois limited liability company
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer
FAMILY PRODUCTS INC., a Delaware corporation
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer
SALTON HOLDINGS, INC., a Delaware corporation
By: Name:	/s/ William Lutz William Lutz
Title:	Interim Chief Executive Officer
	and Chief Financial Officer

[Signature Page to Loan Purchase Agreement]

EX-99.10

Exhibit 99.10

Execution Version

REIMBURSEMENT AND SENIOR SECURED CREDIT AGREEMENT
Dated as of October 1, 2007
Among
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
And
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.
As The Lenders,
And
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD,
As The Agent
And
SALTON, INC.
As The Parent And As The Administrative Borrower
And
Each Of Its Subsidiaries That Are Signatories Hereto
As The Borrowers
And
Each Of Its Other Subsidiaries That Are Signatories Hereto
As The Guarantors

TABLE OF CONTENTS

ARTICLE I REIMBURSEMENT AND TERM LOAN		2
1.1.	Loan Purchase Agreement	2
1.2.	Reimbursement Obligation	2
1.3.	Obligation Absolute	2
1.4.	Conversion to Term Loan	2
1.5.	Drawdown Fee	2
1.6.	Intentionally Omitted	3
1.7.	Term Notes	3
1.8.	Stated Maturity Date	3
ARTICLE II INTEREST AND FEES		3
2.1.	Interest	3
2.2.	Intentionally Omitted	3
2.3.	Maximum Interest Rate	3
ARTICLE III PAYMENTS AND PREPAYMENTS		4
3.1.	Repayment of Term Loan	4
3.2.	Termination	4
3.3.	Intentionally Omitted	4
3.4.	Payments by the Borrowers	4
3.5.	Intentionally Omitted	5
3.6.	Apportionment, Application and Reversal of Payments	5
3.7.	Indemnity for Returned Payments	5
3.8.	Agent’s and Lenders’ Books and Records; Monthly Statements	5
ARTICLE IV TAXES		6
4.1.	Taxes	6
ARTICLE V BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES		7
5.1.	Books and Records	7
5.2.	Financial Information	7
5.3.	Additional Financial Information	9
5.4.	Notices to the Lenders	10
5.5.	Collateral Reporting	12
ARTICLE VI GENERAL WARRANTIES AND REPRESENTATIONS		13
6.1.	Authorization, Validity, and Enforceability of this Agreement and the Loan Documents	13
6.2.	Validity and Priority of Security Interest	13
6.3.	Organization and Qualification	13
6.4.	Corporate Name; Prior Transactions	13

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TABLE OF CONTENTS
(continued)

		Page
6.5.	Subsidiaries and Affiliates		14
6.6.	Financial Statements and Projections		14
6.7.	Capitalization		14
6.8.	Intentionally Omitted		14
6.9.	Debt		14
6.10.	Distributions		15
6.11.	Real Estate; Leases		15
6.12.	Proprietary Rights		15
6.13.	Trade Names		15
6.14.	Litigation		15
6.15.	Labor Disputes		15
6.16.	Environmental Laws		16
6.17.	No Violation of Law		17
6.18.	No Default		17
6.19.	ERISA Compliance		17
6.20.	Taxes		18
6.21.	Regulated Entities		18
6.22.	Use of Proceeds		18
6.23.	Copyrights, Patents, Trademarks and Licenses, etc		18
6.24.	No Material Adverse Change		18
6.25.	Full Disclosure		18
6.26.	Material Agreements		18
6.27.	Bank Accounts		18
6.28.	Governmental Authorization		19
6.29.	Tax Shelter Regulations		19
ARTICLE VII AFFIRMATIVE AND NEGATIVE COVENANTS			19
7.1.	Taxes and Other Obligations		19
7.2.	Legal Existence and Good Standing; Name Changes		19
7.3.	Compliance with Law and Agreements; Maintenance of Licenses		20
7.4.	Maintenance of Property; Inspection of Property		20
7.5.	Insurance		20
7.6.	Insurance and Condemnation Proceeds		20
7.7.	Environmental Laws		21
7.8.	Compliance with ERISA		21
7.9.	Mergers, Consolidations or Sales		21
7.10.	Distributions; Capital Change; Restricted Investments		23
7.11.	Intentionally Omitted		23
7.12.	Guaranties		23
7.13.	Debt		23
7.14.	Prepayment		23
7.15.	Transactions with Affiliates		23
7.16.	Investment Banking and Finder’s Fees		24
7.17.	Business Conducted		24
7.18.	Liens		24
7.19.	Sale and Leaseback Transactions		24
7.20.	No New Subsidiaries		24

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TABLE OF CONTENTS
(continued)

		Page
7.21.	Fiscal Year		24
7.22.	Use of Proceeds		24
7.23.	Intentionally Omitted		24
7.24.	Intentionally Omitted		24
7.25.	Further Assurances		24
7.26.	Intentionally Omitted		25
7.27.	Subsidiary Distributions		25
7.28.	No Amendments to Debt Agreements		25
7.29.	Additional Stock Pledges		25
7.30.	Modification of Covenants		25
7.31.	Post-Closing Covenants		26
ARTICLE VIII CONDITIONS OF CLOSING			27
8.1.	Required Deliveries on or before the Closing Date		27
ARTICLE IX DEFAULT; REMEDIES			28
9.1.	Events of Default		28
9.2.	Remedies		31
9.3.	Waiver of Default or Event of Default under First Lien Credit Agreement		32
ARTICLE X BINDING OBLIGATIONS			32
ARTICLE XI AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS			33
11.1.	Amendments and Waivers		33
11.2.	Assignments; Participations		34
ARTICLE XII THE AGENT			36
12.1.	Appointment and Authorization		36
12.2.	Delegation of Duties		36
12.3.	Liability of Agent		37
12.4.	Reliance by Agent		37
12.5.	Notice of Default		37
12.6.	Credit Decision		37
12.7.	Indemnification		38
12.8.	Agent in Individual Capacity		38
12.9.	Successor Agent		38
12.10.	Withholding Tax		39
12.11.	Collateral Matters		40
12.12.	Restrictions on Actions by Lenders; Sharing of Payments		41
12.13.	Agency for Perfection		42
12.14.	Payments by Agent to Lenders		42
12.15.	Intentionally Omitted		42
12.16.	Intentionally Omitted		42

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TABLE OF CONTENTS
(continued)

		Page
12.17.	Concerning the Collateral and the Related Loan Documents		42
12.18.	Intentionally Omitted		43
12.19.	Relation Among Lenders		43
12.20.	Additional Agents		43
ARTICLE XIII MISCELLANEOUS			43
13.1.	No Waivers; Cumulative Remedies		43
13.2.	Severability		43
13.3.	Governing Law; Choice of Forum; Service of Process		43
13.4.	Waiver of Jury Trial		44
13.5.	Survival of Representations and Warranties		44
13.6.	Other Security and Guaranties		45
13.7.	Fees and Expenses		45
13.8.	Notices		45
13.9.	Waiver of Notices		47
13.10.	Binding Effect		47
13.11.	Indemnity of the Agent, Agent Related Persons and the Lenders by the Borrowers		48
13.12.	Limitation of Liability		49
13.13.	Final Agreement		49
13.14.	Counterparts		49
13.15.	Captions		49
13.16.	Right of Setoff		49
13.17.	Confidentiality		50
13.18.	Conflicts with Other Loan Documents		50
13.19.	The Administrative Borrower		51
ARTICLE XIV JOINT AND SEVERAL OBLIGATIONS			51
14.1.	All Obligations to Constitute Joint and Several Obligations		51

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ANNEXES, EXHIBITS AND SCHEDULES

ANNEX A	DEFINED TERMS
EXHIBIT A	FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
EXHIBIT B	FORM OF NOTE
SCHEDULE 6.3	-	ORGANIZATION AND QUALIFICATIONS
SCHEDULE 6.4	-	CORPORATE NAME; PRIOR TRANSACTIONS
SCHEDULE 6.5	-	SUBSIDIARIES AND AFFILIATES
SCHEDULE 6.7	-	CAPITALIZATION
SCHEDULE 6.11	-	REAL ESTATE; LEASES
SCHEDULE 6.12	-	PROPRIETARY RIGHTS
SCHEDULE 6.13	-	TRADE NAMES
SCHEDULE 6.14	-	LITIGATION
SCHEDULE 6.15	-	LABOR DISPUTES
SCHEDULE 6.16(a)	-	ENVIRONMENTAL LAWS AND COMPLIANCE
SCHEDULE 6.16(f)	-	ENVIRONMENTAL DISCLOSURE
SCHEDULE 6.18	-	DEFAULTS
SCHEDULE 6.26	-	MATERIAL AGREEMENTS
SCHEDULE 6.27	-	BANK ACCOUNTS
SCHEDULE 6.28	-	AUTHORIZATIONS
SCHEDULE 7.13	-	DEBT
SCHEDULE 7.16	-	FEES/COMMISSIONS
SCHEDULE 9.1(k)	-	JUDGMENTS
SCHEDULE E-1	-	PERMITTED LIENS
SCHEDULE E-2	-	IMPAIRMENT LOSSES

REIMBURSEMENT AND SENIOR SECURED CREDIT AGREEMENT

     This Reimbursement and Senior Secured Credit Agreement, dated as of October 1, 2007 (this “Agreement”), among HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. and HARBINGER CAPITAL PARTNERS SPECIAL SITUATION FUND, L.P. (each individually as a “Lender” and collectively as the “Lenders”), HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD, as administrative agent and collateral agent for the Lenders (the “Agent”), SALTON, INC., a Delaware corporation, with offices at 1955 Field Court, Lake Forest, Illinois 60045 (the “Parent”), each of the Parent’s Subsidiaries identified on the signature pages hereof as Borrowers and each of the Parent’s other Subsidiaries identified on the signature pages hereof as Guarantors.

W I T N E S S E T H:

     WHEREAS, the Parent has previously executed that certain that certain Amended and Restated Credit Agreement, dated as of May 9, 2003 and amended and restated as of June 15, 2004, as amended and restated and further amended, by and among the Parent, Borrowers, Wells Fargo Foothill, Inc., in its capacity as administrative agent and collateral agent for the agents and lenders party thereto, together with its successors and assigns thereto in such capacities, Silver Point Finance, LLC, in its capacity as the co-agent, syndication agent, and documentation agent for the lenders party thereto (“Silver Point”), together with its successors and assigns thereto in such capacities, and the lenders from time to time party thereto, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof(the “First Lien Credit Agreement”);

     WHEREAS, Applica Incorporated, a Florida corporation (“Applica”) is wholly owned by APN Holding Company, Inc., a Delaware corporation (“APN Holdco”);

     WHEREAS, the Lenders are current stockholders of APN Holdco;

     WHEREAS, Parent and APN Holdco have executed agreements (the “Definitive Agreements”) pursuant to which Parent, APN Holdco and Applica have agreed to combine their businesses through a merger transaction (the “Merger”);

     WHEREAS, under the First Lien Credit Agreement, as part of the revolving portion of the First Lien Loan (as defined herein), the Parent has an amount not to exceed $68,489,519.48 available to it pursuant to clause (a)(D) of the definition of “Borrowing Base” contained in the First Lien Credit Agreement (the “Stretch Loan”), any amount outstanding thereunder, the Parent is obligated to pay on November 10, 2007, unless extended;

     WHEREAS, on the date hereof, Silver Point, the Lenders, Parent and each of Parent’s Subsidiaries have entered into a Loan Purchase Agreement (the “Loan Purchase Agreement”), pursuant to which the Lenders have agreed under certain circumstances to purchase certain Obligations (as defined on the First Lien Credit Agreement). In the event of any such purchase pursuant to Section 1(a) of the Loan Purchase Agreement, such Purchased Stretch Loans (as defined in the Loan Purchase Agreement), shall be deemed discharged under the First Lien Credit Agreement and automatically converted to a term loan, together with accrued interest on the principal amount of the Purchased Stretch Loan and the Drawdown Fee to the extent provided in Section 1.5 (“Term Loan”); and

     WHEREAS, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed thereto in Annex A which is attached hereto and incorporated herein; the rules of construction contained therein shall govern the interpretation of this Agreement, and all Annexes, Exhibits and Schedules attached hereto are incorporated herein by reference.

     NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Lenders, the Agent, the Borrowers, and the Guarantors hereby agree as follows.

ARTICLE I
REIMBURSEMENT AND TERM LOAN

     1.1. Loan Purchase Agreement. The Lenders agree to enter, upon the terms, subject to the conditions and relying upon the agreements and representations set forth in this Agreement, the Loan Purchase Agreement substantially in the form of Appendix I hereto.

     1.2. Reimbursement Obligation. Upon transfer of any Purchased Stretch Loan to the Lenders pursuant to Section 1(a) of the Loan Purchase Agreement, the amount of the Purchased Stretch Loan, plus all accrued and unpaid interest thereon, shall be deemed discharged under the First Lien Credit Agreement and automatically converted to a Term Loan hereunder and the Borrower Parties shall be obligated to repay the Term Loan in accordance with the terms hereof.

     1.3. Obligation Absolute. The Reimbursement Obligation of the Borrower Parties to repay the Term Loan as provided in Section 1.2 shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of the Loan Purchase Agreement, or this Agreement, or any term or provision therein; (ii) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 1.3, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of the Borrower Parties hereunder; (iii) the fact that a Default or an Event of Default shall have occurred and be continuing; or (iv) any material adverse change in the business, property, results of operations, prospects or condition, financial or otherwise, of the Borrower Parties.

     1.4. Conversion to Term Loan. When the Purchased Stretch Loan is purchased under the Loan Purchase Agreement, the aggregate amount so purchased shall automatically and without any action on the part of any Person, be deemed to be converted into a Term Loan from the Lenders to the Borrower Parties (as defined in the recitals hereto).

     1.5. Drawdown Fee.

          (a) When the Purchased Stretch Loan is purchased under Section 1(a) of the Loan Purchase Agreement, the Borrower Parties shall pay the Agent, on behalf of the Lenders, a fee of $5,000,000 (the “Drawdown Fee”). The Drawdown Fee shall be earned and payable in cash simultaneously with the purchase of the Purchased Stretch Loan.

          (b) If no Default or Event of Default has occurred or is continuing when the Drawdown Fee is due under Section 1.5(a), the aggregate principal amount of the Drawdown Fee shall

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automatically and without any action on the part of any Person, be deemed to be converted into an additional advance under the Term Loan.

     1.6. Intentionally Omitted.

     1.7. Term Notes. Borrower Parties shall execute and deliver to each Lender a note (“Note”) to evidence such Lender’s Term Loan.

     1.8. Stated Maturity Date. The Term Loan will mature on the Stated Maturity Date.

ARTICLE II
INTEREST AND FEES

     2.1. Interest.

          (a) Interest Rates. All outstanding Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on interest thereon not paid when due) from the date made until paid in full in cash at a rate determined by reference to the LIBOR Rate plus the Applicable Margin, but not to exceed the Maximum Rate. All interest charges shall be computed on the basis of a year of three hundred sixty (360) days and actual days elapsed (which results in more interest being paid than if computed on the basis of a three hundred and sixty-five (365) day year). Interest shall be payable in cash only, shall accrue monthly and shall be paid on the last Business Day of each month and on the Termination Date.

          (b) Default Rate. If any Default or Event of Default occurs and is continuing, then, while any such Default or Event of Default is continuing, all of the Obligations shall bear interest at the Default Rate applicable thereto.

     2.2. Intentionally Omitted.

     2.3. Maximum Interest Rate. In no event shall any interest rate provided for hereunder exceed the maximum rate legally chargeable by any Lender under applicable law for such Lender with respect to loans of the type provided for hereunder (the “Maximum Rate”). If, in any month, any interest rate, absent such limitation, would have exceeded the Maximum Rate, then the interest rate for that month shall be the Maximum Rate, and, if in future months, that interest rate would otherwise be less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would, but for this Section 2.3, have been paid or accrued if the interest rate otherwise set forth in this Agreement had at all times been in effect, then the Borrowers shall, to the extent permitted by applicable law, pay the Agent, for the account of the Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have accrued had the interest rate otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest actually paid or accrued under this Agreement. If a court of competent jurisdiction determines that the Agent and/or any Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on account of, and shall automatically be applied to reduce, the Obligations other than

3

interest, in the inverse order of maturity, and if there are no Obligations outstanding, the Agent and/or such Lender shall refund to the Borrowers such excess.

ARTICLE III
PAYMENTS AND PREPAYMENTS

     3.1. Repayment of Term Loan.

          (a) Intentionally Omitted.

          (b) Term Loan. The Term Loan shall be due and payable in full, together with all accrued and unpaid interest thereon, on the Stated Maturity Date. The Term Loan may not be prepaid, except to the extent set forth in clauses (c) and (d) below.

          (c) Optional Prepayments. Solely to the extent permitted by the First Lien Credit Agreement, Borrowers may prepay or optionally redeem all or any part of the Term Loan on a ratable basis at any time prior to the Stated Maturity Date a redemption price, of one-hundred eight percent (108%) of the amount so prepaid or redeemed plus all accrued interest thereon (the “Redemption Price”).

          (d) Mandatory Prepayment. (a) Upon a Change of Control, the Borrowers shall be required to prepay the Term Loan in full and (b) subject to the terms of the First Lien Credit Agreement and the Intercreditor Agreement, any proceeds received in connection with any asset sale as described under Sections 7.9(g) and (h) shall be applied by the Borrower to prepay the outstanding principal amount of the Term Loan in an amount equal to 100% of the Net Cash Proceeds received in connection therewith. The principal amount to be paid on such mandatory prepayments shall be based on the Redemption Price set forth in Section 3.1(c) applicable to Optional Prepayments.

     3.2. Termination. The Borrowers may not terminate this Agreement except until after the purchase of the Stretch Loan under the Loan Purchase Agreement and upon the payment in full of the aggregate principal amount of the Term Loan outstanding, together with accrued interest thereon.

     3.3. Intentionally Omitted.

     3.4. Payments by the Borrowers.

          (a) All payments to be made by the Borrowers shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Borrowers shall be made to the Agent for the account of the Lenders, at the account designated by the Agent and shall be made in Dollars and in immediately available funds, no later than 2:00 p.m. (New York, New York time) on the date specified herein. Any payment received by the Agent after such time shall be deemed (for purposes of calculating interest only) to have been received on the following Business Day and any applicable interest shall continue to accrue. All payments made by the Agent to any Lender shall be by wire transfer to accounts designated by each of the Lenders in writing to Agent. In the event any Lender fails to provide the Agent with valid wire instructions, then the Agent may hold such payments for the account of such Lender but without interest until such Lender provides such instructions.

4

          (b) Whenever any payment is due on a day other than a Business Day, such payment shall be due on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

     3.5. Intentionally Omitted.

     3.6. Apportionment, Application and Reversal of Payments. Principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Loans held by each Lender and to which such payments relate) and payments of the fees shall, as applicable, be apportioned ratably among the Lenders, except for fees and other Obligations payable solely to the Agent and except as provided in Section 11.1(b). All payments made hereunder, and all proceeds of Accounts or other Collateral received hereunder, shall be applied subject to the provisions of this Agreement and the Intercreditor Agreement and remitted to Agent. After an Event of Default, notwithstanding any other provision in the Loan Documents, but subject to the Intercreditor Agreement, all payments and proceeds shall be applied in the following order:  first, to pay any fees, indemnities or expense reimbursements and any other Obligations then due to any Agent or any other Agent-Related Person from any Loan Party; second, to pay, ratably, any fees or expense reimbursements then due to the Lenders from the Borrowers; third, to pay, ratably, interest then due on the Term Loan; fourth, to pay or prepay principal of the Term Loan; fifth, to the payment of any other Obligation due to the Agent or any Lender by the Borrowers; and sixth, subject to the Intercreditor Agreement, upon request by the Borrowers, to the Borrowers. The Agent shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations in accordance with this Agreement.

     3.7. Indemnity for Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Agent or any Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Agent or such Lender and the Borrowers shall be liable to pay to the Agent and the Lenders, and each Borrower hereby does indemnify the Agent and the Lenders and hold the Agent and the Lenders harmless for, the amount of such payment or proceeds surrendered. The provisions of this Section 3.7 shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent or any Lender in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Agent’s and the Lenders’ rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable. The provisions of this Section 3.7 shall survive the termination of this Agreement and the payment of the Obligations.

     3.8. Agent’s and Lenders’ Books and Records; Monthly Statements. The Agent shall record the principal amount of the Loans owing to each Lender from time to time on its books and on the register maintained by the Agent. In addition, each Lender may note the date and amount of each payment or prepayment of principal of such Lender’s Loans in its books and records. Failure by the Agent or any Lender to make such notation shall not affect the obligations of the Borrowers with respect to the Loans. The Borrowers agree that the Agent’s and each Lender’s books and records showing the Obligations and the transactions pursuant to this Agreement and the other Loan Documents shall be admissible in any action or proceeding arising therefrom, and shall constitute rebuttably presumptive proof thereof, irrespective of whether any Obligation is also evidenced by a Note or other instrument. The Agent will

5

provide to the Administrative Borrower within thirty (30) days after the last day of each calendar month a monthly statement of Loans and payments pursuant to this Agreement. Such statement shall be deemed correct, accurate, and binding on the Borrowers and an account stated (except for reversals and reapplications of payments made as provided in Section 3.6 and corrections of errors discovered by or acknowledged and agreed to by the Agent), unless the Administrative Borrower, on behalf of the Borrowers, notifies the Agent in writing to the contrary within thirty (30) days after such statement is rendered in accordance with Section 13.8. In the event a timely written notice of objections is given by the Administrative Borrower, only the items to which exception is expressly made will be considered to be disputed by the Borrowers.

ARTICLE IV
TAXES

     4.1. Taxes.

          (a) Any and all payments by the Borrowers to each Lender or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Agent or any Lender as a result of a present or former connection between the Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Agent’s or such Lender’s having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document) (“Excluded Taxes”). In addition, the Borrowers shall pay all Other Taxes.

          (b) Each Borrower agrees to indemnify and hold harmless each Lender and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by any Lender or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within thirty (30) days after the date such Lender or the Agent makes written demand therefor.

          (c) If the Borrowers shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, then:

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

               (ii) the Borrowers shall make such deductions and withholdings;

               (iii) the Borrowers shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law or, if being contested in good faith, set up reserves determined by the Agent in its commercially reasonable discretion to be adequate for such Taxes or Other Taxes; and

6

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

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

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

ARTICLE V
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

     5.1. Books and Records. The Borrower Parties shall maintain, at all times, correct and complete books, records and accounts in which complete, correct and timely entries are made of its transactions and such books, records and accounts on a consolidated basis shall be prepared in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a). The Parent on a consolidated basis shall, by means of appropriate entries, reflect in such accounts and in all Financial Statements proper liabilities and reserves for all taxes and proper provision for depreciation and amortization of property and bad debts, all in accordance with GAAP. Each Borrower Party shall maintain at all times books and records pertaining to the Collateral in such detail, form and scope as the Agent or any Lender shall reasonably require, including, but not limited to, records of (a) all payments received and all credits and extensions granted with respect to the Accounts; (b) the return, rejection, repossession, stoppage in transit, loss, damage, or destruction of any Inventory; and (c) all other dealings affecting the Collateral.

     5.2. Financial Information. The Borrower Parties shall promptly furnish to each Lender the financial information set forth below. Such documents and financial information may be delivered by electronic posting on a digital workspace provided by IntraLinks, Inc. or another digital workspace provider reasonably acceptable to the Agent and to which the Lenders have access; provided, however, if the Borrower Parties determine such digital posting is or has become impractical, then the Borrower Parties may deliver such information via any means described in Section 13.8, including via electronic mail at the e-mail address set forth therein. The Agent shall have no duty to maintain copies of any such documents or notices. Without limiting the foregoing, the Administrative Borrower shall furnish the following to each Lender:

          (a) Annual Financial Statements. As soon as available, but in any event not later than ninety (90) days after the close of each Fiscal Year, consolidated audited balance sheets as of the date thereof and for the Fiscal Year then ended, and consolidated audited statements of earnings, cash flows and stockholders’ equity for the Parent for such Fiscal Year, including a footnote containing supplemental consolidating financial information for (a) the Borrower Parties on a consolidated basis and (b) for the Subsidiaries of Parent other than domestic Subsidiaries (collectively, the “Foreign Subsidiaries”) on a consolidated basis. Such supplemental consolidating financial information will

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include balance sheets, statements of earnings and statements of cash flows. Notwithstanding the foregoing, for the fiscal year ended June 30, 2007, the deliveries required by this Section 5.2(a), shall be delivered no later than October 15, 2007.

          (b) General. The audited statements set forth above in Section 5.2(a) shall be examined in accordance with generally accepted auditing standards by and, in the case of such statements performed on a consolidated basis, accompanied by a report thereon unqualified with respect to going concerns (except with respect to the fiscal year ended June 30, 2007) by independent certified public accountants selected by the audit committee of the board of directors of the Parent and reasonably satisfactory to the Agent. The Borrower Parties hereby authorize the Agent (as directed by the Lenders) to communicate directly with their certified public accountants and, by this provision, authorizes those accountants to disclose to the Agent any and all financial statements and other supporting financial documents and schedules relating to the Borrower Parties and to discuss directly with the Agent the finances and affairs of the Borrower Parties.

          (c) Quarterly Financial Statements. As soon as available, but in any event not later than forty-five (45) days after the close of first, second and third Fiscal Quarters of each Fiscal Year, consolidated unaudited balance sheets as of the date thereof, and consolidated unaudited statements of earnings, cash flows and stockholders’ equity for the Parent for such Fiscal Quarter, including a footnote containing supplemental consolidating financial information for (a) the Borrower Parties on a consolidated basis and (b) for Foreign Subsidiaries on a consolidated basis. Such supplemental consolidating financial information will include balance sheets, statements of earnings and statements of cash flows. The consolidated unaudited statements referred to in the first sentence of this Section 5.2(c), shall fully present in all material respects the consolidated financial position and consolidated results of operations of the Parent as at the date thereof and for the Fiscal Quarter then ended, and, in each case, in comparable form, figures for the corresponding period in the prior Fiscal Year and prepared in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a) (except as disclosed therein). The Parent shall certify by a certificate signed by its senior financial officer thereof that all such consolidated unaudited statements referred to in the first sentence of this Section 5.2(c) have been prepared in accordance with GAAP and present fairly in all material respects the Parent’s consolidated financial position as at the dates thereof and its consolidated results of operations for the periods then ended, subject to recurring year-end adjustments and required quarterly footnotes.

          (d) Within forty-five (45) days after the end of each Fiscal Quarter (after making all quarter end adjustments), a certificate of the senior financial officer of the Parent setting forth in reasonable detail the amount of all Capital Expenditures incurred by the Borrower Parties for the Fiscal Year to date. Within forty-five (45) days after the end of each Fiscal Quarter, a certificate of the chief financial officer of the Parent stating that, except as explained in reasonable detail in such certificate, to the Knowledge of such senior financial officer, (A) all of the representations and warranties of the Borrower Parties contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date, (B) the Borrower Parties are, at the date of such certificate, in compliance with all of their respective covenants and agreements in this Agreement and the other Loan Documents, (C) no Default or Event of Default then exists or existed during the period covered by the Financial Statements for such month, and (D) the Management’s Discussion and Analysis contained in the Form 10-Q for such Fiscal Quarter filed with the SEC complies in all material respects with the requirements of the SEC for that disclosure and does not contain any untrue statement of material fact or omit to state a material fact

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necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading in any material respect. If such certificate discloses that a representation or warranty is not correct or complete in all material respects, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action the Borrower Parties have taken or propose to take with respect thereto.

          (e) Promptly, and in any event within five (5) Business Days after filing with the PBGC and the IRS, a copy of each annual report or other filing filed with respect to each Plan of any Borrower Party.

          (f) Promptly, and in any event within five (5) Business Days after the filing thereof, copies of all periodic reports, if any, or other documents filed by the Parent or any of its Subsidiaries with the SEC under the Exchange Act, and all reports, notices, or statements sent or received by the Parent or any of its Subsidiaries to or from the holders of any equity interests of the Parent (other than routine non-material correspondence sent by shareholders of the Parent to the Parent and filings with the SEC by any shareholder of the Parent pursuant to Section 13(d) or 16(a) of the Exchange Act) or any such Subsidiary or of any Debt of the Parent or any of its Subsidiaries registered under the Securities Act of 1933, as in effect from time to time, or to or from the trustee under any indenture under which the same is issued.

          (g) As soon as available, but in any event not later than fifteen (15) days after any Borrower Party’s receipt thereof, a copy of all management reports and management letters prepared for such Borrower Party by any independent certified public accountants of the Borrower Parties; provided, that the Borrower Parties shall have no liability hereunder for any failure to deliver such management reports and management letters to the extent such failure results solely from the refusal of such accountants to authorize the Borrower Parties to comply with such obligation.

          (h) Promptly, and in any event within two (2) Business Days after filing with the SEC, copies of any and all proxy statements, financial statements, and reports which the Parent makes available to its shareholders.

          (i) Such additional information as the Agent and/or any Lender may from time to time reasonably request regarding the financial and business affairs of the Parent or any Subsidiary (including, without limitation, a copy of each tax return filed by any Borrower Party), subject to confidentiality obligations in favor of any Borrower Party, including but not limited to any new confidentiality agreement that may be reached with respect to such information.

          (j) As soon as available, but in any event not later than forty-five (45) days after the close of each Fiscal Quarter, a report, in form and substance satisfactory to the Agent, setting forth the reasonably estimated amount of cash in the Foreign Subsidiaries that is available to be repatriated to a Borrower Party without the incurrence of tax liability or other penalties by such Borrower Party as of the close of such Fiscal Quarter, but only to the extent not otherwise prohibited by any applicable financing arrangement.

     5.3. Additional Financial Information. In addition to the financial information provided pursuant to Section 5.2 above, the Administrative Borrower will furnish to the Agent the additional information referenced in this Section, which may be delivered in the same manner as the financial information delivered pursuant to Section 5.2, but only to the Agent and not to any of the Lenders, except as described herein. The Agent will not provide copies of the information delivered pursuant to this

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Section 5.3 to any Lender unless and until (a) such Lender submits a written request for such information to the Agent, and (b) such Lender executes and delivers a confidentiality agreement with the Company and the Agent, in form and substance acceptable to the Company. The additional information includes:

          (a) Consolidated Monthly Financial Statements. As soon as available, but in any event not later than thirty (30) days after the end of each month occurring during each Fiscal Year (other than the first, third, sixth, ninth and twelfth such month and as to such months, as soon as available) unaudited consolidated balance sheets of the Parent as at the end of such month, and unaudited consolidated income statements and statements of cash flows for the Parent for such month and for the period from the beginning of the Fiscal Year to the end of such month, fairly presenting in all material respects the consolidated financial position and consolidated results of operations of the Parent as at the date thereof and for such periods, and prepared in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a) (except as disclosed therein). The Parent shall certify by a certificate signed by its senior financial officer thereof that all such statements have been prepared in accordance with GAAP and present fairly in all material respects the Parent’s consolidated financial position as at the dates thereof and its consolidated results of operations for the periods then ended, subject to normal year-end adjustments and the absence of footnotes; and

          (b) Financial Projections. As soon as available, but in any event not later than forty-five (45) days after the end of each Fiscal Year, annual forecasts (to include forecasted consolidated and consolidating balance sheets, income statements and cash flow statements) for the Parent as at the end of and for each fiscal month of such Fiscal Year.

     5.4. Notices to the Lenders. The Administrative Borrower shall notify the Agent and Lenders in writing of the following matters at the following times:

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

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

          (c) Immediately after becoming aware of any event or circumstance which would have a Material Adverse Effect;

          (d) Immediately after any settlement offer is made by the Parent or any Subsidiary in an amount that would, if consummated, result in an Event of Default hereunder;

          (e) Immediately after becoming aware of any pending action, suit, or proceeding, by any Person, or any pending or threatened investigation by a Governmental Authority, which could reasonably be expected to have a Material Adverse Effect or which involves the same matters that are the subject of class action litigation or matters related thereto;

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          (f) Immediately after becoming aware of any pending strike, work stoppage, unfair labor practice claim, or other labor dispute affecting the Parent or any of its Subsidiaries in a manner which could reasonably be expected to have a Material Adverse Effect;

          (g) Immediately after becoming aware of any violation of any law, statute, regulation, or ordinance of a Governmental Authority affecting the Parent or any Subsidiary which could reasonably be expected to have a Material Adverse Effect;

          (h) Immediately after receipt of any notice of any violation by the Parent or any of its Subsidiaries of any Environmental Law which could reasonably be expected to have a Material Adverse Effect or that any Governmental Authority has asserted in writing that the Parent or any Subsidiary is not in compliance with any Environmental Law or is investigating the Parent’s or such Subsidiary’s compliance therewith;

          (i) Immediately after receipt of any written notice that the Parent or any of its Subsidiaries is or may be liable to any Person as a result of the Release or threatened Release of any Contaminant or that the Parent or any Subsidiary is subject to investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to the Release or threatened Release of any Contaminant which, in either case, is reasonably likely to give rise to liability that is not covered by insurance in excess of $1,000,000;

          (j) Immediately after receipt of any written notice of the imposition of any Environmental Lien against any property to the extent the liability with respect thereto that is not covered by insurance and is in excess of $1,000,000;

          (k) Any change in the Parent’s or any Subsidiary’s name as it appears in the state of its incorporation or other organization, state of incorporation or organization, type of entity, organizational identification number, or, with respect to any Borrower Party, locations of Collateral, or form of organization, trade names under which such Person will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, in each case at least thirty (30) days prior thereto;

          (l) Within ten (10) Business Days after any Borrower Party or any ERISA Affiliate knows, that an ERISA Event or a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any action taken or threatened by the IRS, the DOL or the PBGC with respect thereto;

          (m) Upon request, or, in the event that such filing reflects a significant change with respect to the matters covered thereby, within three (3) Business Days after the filing thereof with the PBGC, the DOL or the IRS, as applicable, copies of the following: (i) each annual report (form 5500 series), including Schedule B thereto, filed with the PBGC, the DOL or the IRS with respect to each Plan, (ii) a copy of each funding waiver request filed with the PBGC, the DOL or the IRS with respect to any Plan and all communications received by any Borrower Party or any ERISA Affiliate from the PBGC, the DOL or the IRS with respect to such request, and (iii) a copy of each other filing or notice filed with the PBGC, the DOL or the IRS, with respect to each Plan by either a Borrower Party or any ERISA Affiliate;

          (n) Within three (3) Business Days after receipt thereof by any Borrower Party or any ERISA Affiliate, copies of the following: (i) any notices of the PBGC’s intention to terminate a Plan

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or to have a trustee appointed to administer such Plan; (ii) any favorable or unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the Code; or (iii) any notice from a Multi-employer Plan regarding the imposition of withdrawal liability;

          (o) Within three (3) Business Days after the occurrence thereof: (i) any changes in the benefits of any existing Plan which increase any Borrower Party’s annual costs with respect thereto by an amount in excess of $1,000,000, or the establishment of any new Plan or the commencement of contributions to any Plan to which any Borrower Party or any ERISA Affiliate was not previously contributing; or (ii) any failure by any Borrower Party or any ERISA Affiliate to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; or

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

          (q) Within forty-five (45) days of the end of each Fiscal Quarter, updated or supplemented as of the last day of such Fiscal Quarter, Schedule 6.7, Schedule 6.9, Schedule 6.11, Schedule 6.12, Schedule 6.13, Schedule 6.14, Schedule 6.15, Schedule 6.16(a), Schedule 6.16(f), or Schedule 6.26, or any of the foregoing in each case as may be required to render correct the representations and warranties contained in the applicable sections to which such schedules relate as of the last day of such Fiscal Quarter without giving effect to any references therein to the “Closing Date” in each case, appropriately marked to show the changes made therein; provided that no such supplement to any such Schedule or representation shall be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by the Lenders in writing.

          (r) Promptly after any Borrower Party has notified the Agent of any intention by such Borrower Party to treat the Loans and related transactions as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4), a duly completed copy of IRS Form 8886 or any successor form.

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

     5.5. Collateral Reporting. The Parent shall provide the Agent with all of the following documents or reports that it provides to the First Lien Agent and the Second Lien Agent: (i) a statement of the balance of each intercompany account (including the Intercompany Account); (ii) such other reports as to the Collateral of each Borrower Party as the Agent shall reasonably request from time to time; and (iii) with the delivery of each of the foregoing, upon the request of the Agent, a certificate of the Parent executed by an officer thereof certifying as to the accuracy and completeness of the foregoing. If any of the Borrower Parties’ records or reports of the Collateral are prepared by an accounting service or other agent, each Borrower Party hereby authorizes such service or agent to deliver such records, reports, and related documents to the Agent, for distribution to the Lenders.

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ARTICLE VI
GENERAL WARRANTIES AND REPRESENTATIONS

     In order to induce the Agent and the Lenders to enter into this Agreement, each Borrower Party makes the following representations and warranties to the Agent and the Lenders which shall be true, correct, and complete, in all material respects, as of the date hereof, and shall be true, correct, and complete, in all material respects, as of the Closing Date and at and as of the date of the making of the Term Loan (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

     6.1. Authorization, Validity, and Enforceability of this Agreement and the Loan Documents. Each Borrower Party has the power and authority to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party and to grant to the Agent Liens upon and security interests in the Collateral with respect to which it has rights, title or ownership and each Borrower has the authority to incur the Obligations. Each Borrower Party has taken all necessary action (including obtaining approval of its stockholders if necessary) to authorize its execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party. This Agreement and the other Loan Documents to which it is a party have been duly executed and delivered by each Borrower Party, and constitute the legal, valid and binding obligations of such Borrower Party, enforceable against it in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). Each Borrower Party’s execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or constitute a violation or breach of, or result in the imposition of any Lien (other than the Liens created by this Agreement and the other Loan Documents) upon the property of the Parent or any of its Subsidiaries, by reason of the terms of (a) any contract, mortgage, lease, agreement, indenture, or instrument to which the Parent or such Subsidiary is a party or which is binding upon it, (b) any Requirement of Law applicable to the Parent or any of its Subsidiaries, or (c) the certificate or articles of incorporation or by-laws or the limited liability company operating agreement or limited partnership agreement of such Borrower Party.

     6.2. Validity and Priority of Security Interest. The provisions of this Agreement and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Agent, for the ratable benefit of the Agent and the Lenders, and such Liens constitute perfected and continuing Liens on all the Collateral, having priority over all other Liens on the Collateral, except for those Liens identified in clauses (c), (d), (e), (f), (h), (i) and (j) of the definition of Permitted Liens securing all the Obligations, and enforceable against the Borrower Parties and all third parties.

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

     6.4. Corporate Name; Prior Transactions. Except as set forth on Schedule 6.4, to the Parent’s Knowledge, none of the Borrower Parties has, during the past five (5) years, been known by or used any

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other corporate or fictitious name, or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property outside of the ordinary course of business.

     6.5. Subsidiaries and Affiliates. Schedule 6.5 is a correct and complete list of the name and relationship to the Parent of each and all of the Subsidiaries and other Affiliates. Each Subsidiary is (a) duly incorporated or organized and validly existing in good standing under the laws of its state of incorporation or organization set forth on Schedule 6.5, and (b) qualified to do business and in good standing in each jurisdiction, in which the failure to so qualify or be in good standing could reasonably be expected to have a Material Adverse Effect and (c) has all requisite power and authority to conduct its business and own its property. The aggregate value of the assets or net worth of Toastmaster V.I., Inc., a Virgin Islands corporation, does not exceed $10,000.00.

     6.6. Financial Statements and Projections.

          (a) The Administrative Borrower has delivered to the Agent and the Lenders the audited consolidated balance sheet and related consolidated statements of income, retained earnings, cash flows, and changes in stockholders equity for the Parent and its Subsidiaries as of July 1, 2006, and for the Fiscal Year then ended, accompanied by the report thereon of the Parent’s independent certified public accountants, Deloitte & Touche. The Administrative Borrower has also delivered to the Agent and the Lenders the unaudited consolidated balance sheet and related unaudited consolidated statements of income and cash flows for the Parent and its Subsidiaries as of March 31, 2007. All such financial statements have been prepared in accordance with GAAP and present accurately and fairly in all material respects the financial position of the Parent and its consolidated Subsidiaries as at the dates thereof and their results of operations for the periods then ended.

          (b) The Latest Projections when submitted to the Agent as required herein represent the Borrower Parties’ good faith estimate of the future consolidated financial performance of the Parent and its Subsidiaries, as applicable, for the periods set forth therein. The Latest Projections have been prepared on the basis of the assumptions set forth therein, which the Borrower Parties believe are fair and reasonable in light of current and reasonably foreseeable business conditions at the time submitted to the Agent.

          (c) The Fiscal Year of the Parent ends each year on the Saturday closest to June 30.

     6.7. Capitalization. Schedule 6.7 sets forth, as of the Closing Date, a complete and accurate description of the authorized capital stock of each Borrower Party and each of its directly-owned Subsidiaries, by class, and a description of the number of shares of each class that are issued and outstanding and the par value thereof. All such shares of capital stock are validly issued, fully-paid and non-assessable.

     6.8. Intentionally Omitted.

     6.9. Debt. As of the Closing Date, the Borrower Parties have no Debt, except (a) Debt permitted under Section 7.13, and (b) Debt as of the Closing Date described on Schedule 7.13.

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     6.10. Distributions. Except as permitted by Section 7.10, since July 1, 2007, no Distribution has been declared, paid, or made upon or in respect of any capital stock or other securities of the Parent or any Subsidiary.

     6.11. Real Estate; Leases. Schedule 6.11 sets forth, as of the Closing Date, a correct and complete list of all Real Estate owned by any Borrower Party, all leases and subleases of real property held by any Borrower Party as lessee or sublessee, including all locations where any Borrower Party conduct any manufacturing operations or distribution business, and all leases and subleases of real property held by any of any Borrower Party as lessor, or sublessor in excess of $200,000. Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, no default by any of any Borrower Party under any such lease or sublease exists and, to the Parent’s Knowledge, no default by any other party under any such lease or sublease exists. Each Borrower Party has good and marketable title in fee simple to the Real Estate identified on Schedule 6.11 as owned by the Borrower Party, or valid leasehold interests in all Real Estate designated therein as “leased” by any of any Borrower Party and each Borrower Party has good, indefeasible, and merchantable title to all of its other property reflected on the Financial Statements delivered to the Agent and the Lenders referenced in Section 6.6 above, except as disposed of in the ordinary course of business since the date thereof, free of all Liens except Permitted Liens.

     6.12. Proprietary Rights. Schedule 6.12 sets forth a correct and complete list as of the Closing Date of all of any Borrower Party’s Proprietary Rights; provided that with respect to Proprietary Rights such Schedule sets forth a correct and complete list of all of any Borrower Party’s trademarks then in use by such Borrower Party. None of such Proprietary Rights is subject to any licensing agreement or similar arrangement except as set forth on Schedule 6.12. To the Parent’s Knowledge (including, at the time of any launch of any new product, after review of a patent search with respect to the Proprietary Rights related to such product or an opinion of counsel with respect thereto and determination by any Borrower Party that there is no infringement or conflict), none of the Proprietary Rights infringes on or conflicts with any other Person’s property, and, to the Parent’s Knowledge and except as otherwise disclosed in writing to the Agent, no other Person’s property infringes on or conflicts with the Proprietary Rights, in each case, to the extent any such infringement, individually or in the aggregate, could reasonably be expected to result in any loss or damage to any Borrower Party in excess of $1,000,000. The Proprietary Rights described on Schedule 6.12 constitute all of the property of such type necessary to the current and anticipated future conduct of each of the Borrower Parties’ business. No claim or litigation regarding any of the foregoing is pending or, to the Parent’s Knowledge, threatened, and no patent, invention, device or application for the same is pending or, to the Parent’s Knowledge, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.

     6.13. Trade Names. All trade names or styles as of the Closing Date under which the Borrower Parties sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, are listed on Schedule 6.13.

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

     6.15. Labor Disputes. Except as set forth on Schedule 6.15, as of the Closing Date (a) there is no collective bargaining agreement or other labor contract covering employees of any of the Borrower

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Parties, (b) no such collective bargaining agreement or other labor contract is scheduled to expire during the term of this Agreement, (c) to the Parent’s Knowledge no union or other labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of employees of any of the Borrower Parties or for any similar purpose, and (d) there is no pending or (to the Parent’s Knowledge) threatened, strike, work stoppage, material unfair labor practice claim, or other material labor dispute against or affecting the Parent or its Subsidiaries or their employees.

     6.16. Environmental Laws. Except as otherwise disclosed in writing to the Agent or except to the extent the failure of any of the following, individually or in the aggregate, to be correct could reasonably be expected to result in any uninsured claim, loss or damage to any Borrower Party in excess of $1,000,000:

          (a) Except as disclosed on Schedule 6.16(a), each of the Parent and each Subsidiary is and has been in compliance with, in all material respects, all Environmental Laws and neither the Parent nor any Subsidiary, nor any of its presently owned real property or presently conducted operations, nor its previously owned real property or prior operations, is subject to any Environmental Claim from any Governmental Authority or private Person respecting (i) compliance with any Environmental Law or (ii) any potential liabilities and costs or actions arising from a Release or threatened Release of a Contaminant.

          (b) Each of the Parent and each Subsidiary has obtained all permits necessary for its current operations under Environmental Laws, and all such permits are in good standing and each of the Parent and each Subsidiary is in compliance with all material terms and conditions of such permits.

          (c) Neither the Parent nor any Subsidiary, nor, to the Parent’s Knowledge (after appropriate due diligence), any of its predecessors in interest, has in violation of applicable law stored, treated or disposed of any Contaminants on any property owned by the Parent or any Subsidiary.

          (d) Neither the Parent nor any Subsidiary has received any summons, complaint, order or similar written notice or an Environmental Claim indicating that it is not currently in compliance with or that any Governmental Authority is investigating its compliance with, any Environmental Laws or that it is or may be liable to any other Person as a result of a Release or threatened Release of a Contaminant.

          (e) To the Parent’s Knowledge, none of the present or past operations of the Parent and its Subsidiaries is the subject of any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a Release or threatened Release of a Contaminant.

          (f) Except as described on Schedule 6.16(f), there is not now, nor to the Parent’s Knowledge has there ever been, on or in the Real Estate:

               (1) any underground storage tanks or surface impoundments,

               (2) any asbestos-containing material, or

               (3) any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers or other equipment.

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          (g) Neither the Parent nor any Subsidiary has filed, or has had the duty to file, any notice under any requirement of Environmental Law reporting a spill or accidental and unpermitted Release or discharge of a Contaminant into the environment.

          (h) Neither the Parent nor any Subsidiary has for the past five (5) years entered into any negotiations or settlement agreements with any Person (including any prior owner of its Real Property) imposing obligations or liabilities on the Parent or any Subsidiary with respect to any Environmental Claim in response to a Release of a Contaminant.

          (i) None of the products manufactured, distributed or sold by the Parent or any Subsidiary contain asbestos containing material.

          (j) No Environmental Lien has attached to the Real Estate.

     6.17. No Violation of Law. Neither the Parent nor any Subsidiary is in violation in any material respect of any material law, statute, regulation, ordinance, judgment, order, or decree applicable to it which could reasonably be expected to result in a Material Adverse Effect.

     6.18. No Default. Except as described on Schedule 6.18, neither the Parent nor any Subsidiary is in default in any material respect with respect to any material note, indenture, loan agreement, mortgage, lease, deed, or other agreement to which the Parent or such Subsidiary is a party or by which it is bound.

     6.19. ERISA Compliance.

     Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the Parent’s Knowledge, nothing has occurred which would cause the loss of such qualification. Each of the Parent, each Subsidiary and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

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

          (b) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) none of the Parent, any Subsidiary or any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) none of the Parent, any Subsidiary or any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan; and (v) none of the Parent, any Subsidiary or any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

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     6.20. Taxes. The Parent and the Subsidiaries have filed all federal and other tax returns and reports required to be filed, and have paid all federal and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable unless (i) such unpaid taxes and assessments would constitute a Permitted Lien, or (ii) such taxes are being contested in good faith and reserves adequate in the commercially reasonable determination of the Agent have been provided by such Person.

     6.21. Regulated Entities. No Borrower Party, any Person controlling a Borrower Party, or any other Subsidiary, is an “Investment Company” within the meaning of the Investment Company Act of 1940. No Borrower Party or any other Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or law, or any other federal or state statute or regulation limiting its ability to incur indebtedness.

     6.22. Use of Proceeds. The proceeds of the Loans are to be used solely for the purchase of the Purchased Stretch Loans pursuant to the terms of the Loan Purchase Agreement.

     6.23. Copyrights, Patents, Trademarks and Licenses, etc. Each Borrower owns or is licensed or otherwise has the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, licenses, rights of way, authorizations and other rights that are reasonably necessary for the operation of its businesses, without conflict with the rights of any other Person. To the Parent’s Knowledge, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower Parties infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or (to the Parent’s Knowledge) threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the Parent’s Knowledge, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.

     6.24. No Material Adverse Change. No Material Adverse Effect has occurred since the latest date of the Financial Statements delivered to the Lenders, except as otherwise disclosed in the Parent’s filings with the Securities and Exchange Commission under the Exchange Act.

     6.25. Full Disclosure. None of the representations or warranties made by any Borrower Party in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of any Borrower Party in connection with the Loan Documents contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.

     6.26. Material Agreements. Schedule 6.26 hereto sets forth as of the Closing Date all agreements and contracts material to the Borrower Parties which would be deemed a material contract as provided in Regulation S-K promulgated by the SEC under the Securities Act of 1933.

     6.27. Bank Accounts. Schedule 6.27 contains, as of the Closing Date, a complete and accurate list of all bank accounts maintained by each Borrower Party with any bank or other financial institution.

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     6.28. Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Borrower Party of any Loan Document, except approvals, consents, exemptions, authorizations, other actions, notices or filings described in Schedule 6.28, which approvals, consents, exemptions, authorizations, other actions, notices or filings have been made or obtained and are in full force and effect.

     6.29. Tax Shelter Regulations. The Borrowers do not intend to treat the Loans as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In the event the Borrowers determine to take any action inconsistent with such intention, each will promptly notify the Agent thereof. If the Borrowers so notify the Agent, the Borrowers acknowledge that one or more of the Lenders may treat its Loans as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the lists and other records required by such Treasury Regulation.

ARTICLE VII
AFFIRMATIVE AND NEGATIVE COVENANTS

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

     7.1. Taxes and Other Obligations. Each Borrower Party shall cause each of its Subsidiaries to (a) file when due (after taking into account any applicable exemptions) all tax returns and other reports which it is required to file; (b) pay, or provide for the payment, when due, of all taxes, fees, assessments and other governmental charges against it or upon its property, income and franchises, make all required withholding and other tax deposits, and establish adequate reserves for the payment of all such items, and provide to the Agent and the Lenders, upon request, satisfactory evidence of its timely compliance with the foregoing; and (c) pay when due all Debt owed by it and all claims of materialmen, mechanics, carriers, warehousemen, landlords, processors and other like Persons, and all other indebtedness owed by it and perform and discharge in a timely manner all other obligations undertaken by it; provided, however, so long as the Administrative Borrower has notified the Agent in writing, no Borrower Party or Subsidiary need pay any tax, fee, assessment, or governmental charge (i) it is contesting in good faith by appropriate proceedings diligently pursued, (ii) as to which such Borrower Party has established proper reserves as required under GAAP, and (iii) the nonpayment of which does not result in the imposition of a Lien (other than a Permitted Lien).

     7.2. Legal Existence and Good Standing; Name Changes.

          (a) Each of the Parent and each Subsidiary shall (i) maintain its legal existence, except as permitted by Section 7.9, and (ii) maintain its qualification and good standing in all jurisdictions in which the failure to maintain such existence and qualification or good standing could reasonably be expected to have a Material Adverse Effect.

          (b) No Borrower Party shall change its name, Federal Employment Identification Number, organizational identification number, corporate structure or identity, or add any new fictitious name or reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof.

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     7.3. Compliance with Law and Agreements; Maintenance of Licenses. The Parent shall and shall cause each Subsidiary to comply in all material respects with all material Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act and all Environmental Laws). The Parent shall and shall cause each of its Subsidiaries to obtain and maintain all material licenses, permits, franchises, and governmental authorizations necessary to own its property and to conduct its business as conducted on the Closing Date. No Borrower Party shall modify, amend or alter (a) its certificate or articles of incorporation, or its limited liability company operating agreement or limited partnership agreement, as applicable, other than in a manner which does not adversely affect the rights of the Lenders or the Agent, or (b) licensing agreements, other than in a manner which does not adversely affect the rights of the Lenders or the Agent with respect to the Inventory.

     7.4. Maintenance of Property; Inspection of Property. Each Borrower Party shall maintain all of its property necessary and useful in the conduct of its business, in good operating condition and repair, ordinary wear and tear excepted.

     7.5. Insurance.

          (a) Each Borrower Party shall maintain, with financially sound and reputable insurers having a rating of at least A- or better by Best Rating Guide, insurance against loss or damage by fire with extended coverage; theft, burglary, pilferage and loss in transit; products liability and third party property damage; larceny, embezzlement or other criminal liability; business interruption; public liability and third party property damage; and such other hazards or of such other types as is customary for Persons engaged in the same or similar business, as the Agent, in its reasonable discretion, shall specify, in amounts, and under policies reasonably acceptable to the Agent Lenders.

          (b) The Borrower Parties shall cause the Agent, for the ratable benefit of the Agent and the Lenders to be named as secured party or mortgagee and sole loss payee or additional insured, in a manner acceptable to the Agent. Each policy of insurance shall contain a clause or endorsement requiring the insurer to give not less than thirty (30) days’ prior written notice to the Agent in the event of cancellation of the policy for any reason whatsoever and a clause or endorsement stating that the interest of the Agent shall not be impaired or invalidated by any act or neglect of the Parent or any of its Subsidiaries or the owner of any Real Estate for purposes more hazardous than are permitted by such policy. All premiums for such insurance shall be paid by the Borrower Parties when due, and certificates of insurance and, if requested by the Agent or any Lender, photocopies of the policies, shall be delivered to the Agent, in each case in sufficient quantity for distribution by the Agent to each of the Lenders. If the Borrower Parties fail to procure such insurance or to pay the premiums therefor when due, the Agent may, and at the direction of the Lenders, shall obtain such insurance and Borrower shall promptly reimburse the Agent for any charges incurred in connection therewith.

     7.6. Insurance and Condemnation Proceeds. The Borrower Parties shall promptly notify the Agent and the Lenders of any loss, damage, or destruction to the Collateral whether or not covered by insurance. The Agent is hereby authorized to collect all insurance and condemnation proceeds in respect of Collateral directly and to apply or remit them as follows:

               (i) With respect to insurance and condemnation proceeds relating to Collateral other than Fixed Assets, after deducting from such proceeds the reasonable expenses, if any,

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incurred by the Agent in the collection or handling thereof, the Agent shall apply such proceeds, ratably, to the reduction of the Obligations in the order provided for in Section 3.6.

               (ii) With respect to insurance and condemnation proceeds relating to Collateral consisting of Fixed Assets, the Agent shall permit or require the Borrowers to use such proceeds, or any part thereof, to replace, repair, restore or rebuild the relevant Fixed Assets in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction so long as (1) no Default or Event of Default has occurred and is continuing, (2) the aggregate proceeds do not exceed $1,000,000 and (3) the Borrower first (i) provides the Agent and the Lenders with plans and specifications for any such repair or restoration which shall be reasonably satisfactory to the Agent and the Lenders and (ii) demonstrates to the reasonable satisfaction of the Agent and the Lenders that the funds available to it will be sufficient to complete such project in the manner provided therein. In all other circumstances, the Agent shall apply such insurance and condemnation proceeds, ratably, to the reduction of the Obligations in the order provided for in Section 3.6.

     7.7. Environmental Laws.

          (a) The Parent shall, and shall cause each of its Subsidiaries to, conduct its business in compliance in all material respects with all material Environmental Laws applicable to it, including those relating to the generation, handling, use, storage, and disposal of any Contaminant. The Parent shall, and shall cause each of its Subsidiaries to, take prompt and appropriate action to respond to any material non-compliance with Environmental Laws and shall regularly report to the Agent on such response.

          (b) Without limiting the generality of the foregoing, the Borrower Parties shall submit to the Agent and the Lenders annually, commencing on the first Anniversary Date and on each Anniversary Date thereafter, an update of the status of each environmental compliance or liability issue. The Agent or any Lender may obtain copies of technical reports prepared by the Parent and its Subsidiaries and their communications with any Governmental Authority to determine whether the appropriate Borrower Parties are proceeding reasonably to correct, cure or contest in good faith any alleged non-compliance or environmental liability.

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

     7.9. Mergers, Consolidations or Sales. Except as set forth on Schedule 7.9, no Loan Party shall enter into any transaction of merger, reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or any part of its property, or wind up, liquidate or dissolve, or agree to do any of the foregoing, except:

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          (a) (i) sales of Inventory in the ordinary course of its business, and (ii) sales of excess Inventory not in the ordinary course of its business as permitted by the First Lien Credit Agreement;

          (b) (i) sales or other dispositions of Equipment of the Parent or the Subsidiaries in the ordinary course of business that are obsolete or no longer useable on a commercially reasonable basis by any such Person in its business, and (ii) so long as no Default or Event of Default has occurred and is continuing, the sale of Equipment by a Borrower to another Borrower and the sale of Equipment by a Guarantor to another Borrower Party. All proceeds of a sale or disposition under clause (i) or (ii) above, after payment of reasonable selling costs, shall be deposited in a Payment Account. All Equipment purchased with such proceeds shall be free and clear of all Liens, except the Agent’s Liens;

          (c) the merger of a Borrower into another Borrower so long as (i) no Default or Event of Default has occurred and is continuing or would be caused thereby, (ii) the Borrower Parties provide the Agent with ten (10) days prior written notice of such merger, (iii) in the event of a merger involving the Parent, the Parent shall be the surviving Person, and (iv) contemporaneously with such merger, the Borrower Parties deliver to the Agent all documents reasonably requested by the Agent to continue the Agent’s Liens on the Collateral, in each case, in form and substance satisfactory to the Agent, including, without limitation, such pledge agreements, new stock certificates and stock powers, financing statements or other documents as shall be reasonably requested by the Agent;

          (d) the merger of a Guarantor into another Guarantor so long as (i) no Default or Event of Default has occurred and is continuing or would be caused thereby, (ii) the Borrower Parties provide the Agent with ten (10) days prior written notice of such merger, and (iii) contemporaneously with such merger, the Borrower Parties deliver to the Agent all documents reasonably requested by the Agent to continue the Agent’s Liens on the Collateral, in each case, in form and substance satisfactory to the Agent, including, without limitation, such pledge agreements, new stock certificates and stock powers, financing statements or other documents as shall be reasonably requested by the Agent; and

          (e) the merger of a Guarantor into a Borrower so long as (i) no Default or Event of Default has occurred and is continuing or would be caused thereby, (ii) the applicable Borrower shall be the surviving Person, (iii) the Borrower Parties provide the Agent with ten (10) days prior written notice of such merger, and (iv) contemporaneously with such merger, the Borrower Parties deliver to the Agent all documents reasonably requested by the Agent to continue the Agent’s Liens on the Collateral, in each case, in form and substance satisfactory to the Agent, including, without limitation, such pledge agreements, new stock certificates and stock powers, financing statements or other documents as shall be reasonably requested by the Agent;

          (f) Permitted Acquisitions;

          (g) disposition of other assets having a fair market value not to exceed $2,000,000 during any Fiscal Year or $7,000,000 in the aggregate during the term of this Agreement;

          (h) disposition of Real Estate acquired in connection with the acquisition of Toastmaster Inc. set forth on Schedule 7.9 and any of the personal property (except Inventory) located thereon; and

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          (i) disposition of Proprietary Rights to a Subsidiary of any Borrower Party; provided, that prior to the consummation of any such disposition, the Agent shall be satisfied in its sole discretion of the continued second lien priority and validity of the Agent’s Lien in all such Proprietary Rights.

     7.10. Distributions; Capital Change; Restricted Investments. No Borrower Party shall (a) directly or indirectly declare or make, or incur any liability to make, any Distribution, except Distributions to a Borrower by its Subsidiaries, (b) make any change in its capital structure which could have a Material Adverse Effect, or (c) make any Restricted Investment.

     7.11. Intentionally Omitted.

     7.12. Guaranties. No Loan Party shall make, issue, or become liable on any Guaranty, except (a) Guaranties of the Obligations in favor of the Agent, the Second Lien Agent or the First Lien Agent, (b) Guaranties by the Parent of Debt permitted by Section 7.13, trade payables and real estate operating leases and (c) Guaranties of Debt by Guarantors permitted by Section 7.13(e), Section 7.13(k) or Section 7.13(m).

     7.13. Debt. No Loan Party shall incur or maintain any Debt, other than: (a) the Obligations; (b) Debt described on Schedule 7.13; (c) Debt of Salton Holdings Limited and Salton Europe Limited, under the Facility Agreement dated 23rd December 2005 among those entities, the lender parties listed therein, Burdale Financial Limited as agent and security trustee, as amended to the date hereof not exceeding the principal amount outstanding set forth on Annex C, Section II during the corresponding periods set forth on Annex C, Section II; (d) [Reserved]; (e) the Senior Notes in a principal amount equal to the principal amount outstanding on August 8, 2007 less any repayments of principal of the Senior Notes after such date; (f) the Intercompany Account so long as such Debt is subject to the Subordination Agreement and, provided that, from and after May 11, 2005 (i) no Borrower Party shall make any Investment in a Foreign Subsidiary and (ii) no Foreign Subsidiary shall make any Investment in another Foreign Subsidiary; (g) Debt in respect of foreign currency hedging agreements with aggregate notional amounts not greater than $2,000,000 at any time; (h) [Reserved]; (i) [Reserved]; (j) [Reserved]: (k) the First Lien Loans; (l) [Reserved]; and (m) the Second Lien Loans. Notwithstanding anything to the contrary contained herein, the Parent shall not, directly or indirectly, enter into any amendment or modification of the documents evidencing the Debt permitted under clause (g) above that is any manner adverse to the Parent, any Subsidiary, the Agent or any Lender.

     7.14. Prepayment. Notwithstanding anything to the contrary contained herein, no Borrower Party shall prepay any Debt, except the First Lien Obligations in accordance with the First Lien Loan Documents.

     7.15. Transactions with Affiliates. Except as set forth below and except for the transactions contemplated under Section 7.9 and the Intercompany Account permitted pursuant to Section 7.13, no Loan Party shall sell, transfer, distribute, or pay any money or property, including, but not limited to, any fees or expenses of any nature (including, but not limited to, any fees or expenses for management services), to any Affiliate, or lend or advance money or property to any Affiliate, or invest in (by capital contribution or otherwise) or purchase or repurchase any stock or indebtedness, or any property, of any Affiliate, or become liable on any Guaranty of the indebtedness, dividends, or other obligations of any Affiliate. Notwithstanding the foregoing, while no Event of Default has occurred and is continuing, the Borrower Parties may engage in transactions with Affiliates in the ordinary course of business consistent

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with past practices, in amounts and upon terms fully disclosed to the Agent and the Lenders, and no less favorable to the Borrower Parties than would be obtained in a comparable arm’s-length transaction with a third party who is not an Affiliate; provided, that in any event all such transactions shall be reflected and itemized on the Intercompany Account.

     7.16. Investment Banking and Finder’s Fees. Except as set forth on Schedule 7.16, no Borrower Party shall pay or agree to pay, or reimburse any other party with respect to, any investment banking or similar or related fee, underwriter’s fee, finder’s fee, or broker’s fee to any Person in connection with this Agreement. Each Borrower Party shall defend and indemnify the Agent and the Lenders against and hold them harmless from all claims of any Person that the Parent or any Subsidiary is obligated to pay for any such fees, and all costs and expenses (including attorneys’ fees) incurred by the Agent and/or any Lender in connection therewith.

     7.17. Business Conducted. No Borrower shall or shall permit any of its Subsidiaries to engage, directly or indirectly, in any line of business other than the businesses in which such Person is engaged on the Closing Date or which are reasonably related thereto, including without limitation the design, marketing and distribution of any products covered by the International Housewares Association.

     7.18. Liens. No Loan Party shall create, incur, assume, or permit to exist any Lien on any property, including without limitation to the Real Estate, now owned or hereafter acquired by any of them, except Permitted Liens.

     7.19. Sale and Leaseback Transactions. No Loan Party shall, directly or indirectly, enter into any arrangement or arrangements, with any Person providing for the Parent or such Subsidiary to lease or rent property that the Parent or such Subsidiary has sold or will sell or otherwise transfer to such Person.

     7.20. No New Subsidiaries. No Loan Party shall, directly or indirectly, organize, create, acquire or permit to exist any Subsidiary.

     7.21. Fiscal Year. No Borrower Party shall change its Fiscal Year without the prior written consent of the Agent.

     7.22. Use of Proceeds. No Borrower shall, nor shall it suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (a) for any purpose inconsistent with the purposes, terms and conditions hereof or other than for lawful and permitted purposes, (b) to purchase or carry Margin Stock, (c) to repay or otherwise refinance indebtedness of the Borrowers or others incurred to purchase or carry Margin Stock, (d) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (e) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act.

     7.23. Intentionally Omitted.

     7.24. Intentionally Omitted.

     7.25. Further Assurances.

          (a) The Borrower Parties shall execute and deliver, or cause to be executed and delivered, to the Agent and/or the Lenders such documents and agreements, and shall take or cause to be

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taken such actions, as the Agent or any Lender may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents.

          (b) The Borrower Parties shall execute and deliver, or cause to be executed and delivered, to the Agent or the Lenders such documents and agreements, and shall take or cause to be taken such actions, as required to grant to the Agent, for the benefit of the Lenders, a perfected Lien in all the property in which the First Lien Agent or First Lien Co-Agent has a perfected Lien.

          (c) With respect to any property acquired after the Closing Date by any Borrower Party as to which the Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Agent such amendments to the Loan Documents as the Agent may deems necessary or advisable to grant the Agent for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Agent, for the benefit of the Lenders, a perfected security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Loan Documents or by law or as may be requested by the Agent.

     7.26. Intentionally Omitted.

     7.27. Subsidiary Distributions. Upon (a) any issuance of Debt or shares of Stock by any Subsidiary or (b) any sale or other disposition of assets by any Subsidiary which would, in either case, require a prepayment pursuant to Section 3.1(d), such Subsidiary shall cause an amount equal to the amount that is required to be used to make the prepayments required pursuant to Section 3.1(d) (such amount, the “Required Amount”) to be distributed to its immediate parent entity and such immediate parent entity shall cause such Required Amount to be distributed to its immediate parent entity and such distributions shall continue until such Required Amount is ultimately distributed to Parent for use by Parent to make the prepayments required pursuant to Section 3.1(d).

     7.28. No Amendments to Debt Agreements. Notwithstanding any other provision in this Agreement, the Borrower Parties shall not and shall not permit Subsidiaries of Borrower Parties to enter into any amendment to the First Lien Credit Agreement that increases the borrowing availability thereunder, modifies the definition of “Borrowing Base” set forth therein or increases the interest rate or prepayment terms (including any prepayment penalties or premiums) applicable to Borrowings thereunder.

     7.29. Additional Stock Pledges. To the extent permitted under applicable law, each Loan Party hereby agrees to unconditionally pledge, transfer, convey, grant and assign to the Agent the Stock of any of its Subsidiaries that is pledged to the First Lien Agent. In addition, in connection therewith, to the extent permitted under applicable law, the applicable Loan Party shall deliver the certificates representing all of the outstanding shares of each of the applicable Subsidiaries owned by it, together with undated stock powers covering each such certificate, duly executed in blank.

     7.30. Modification of Covenants. The Lenders and the Agent acknowledge and agree that the covenants set forth in this Article VII substantially duplicate the covenants set forth in the First Lien Credit Agreement, and to the extent the First Lien Lenders amend or modify the covenants under the First Lien Agreement, the parallel covenants hereunder shall be deemed amended or modified to the extent so amended or modified, without further consent or agreement of the Agent or the Lenders; provided, however, this Section 7.30 shall not apply to a violation of Section 7.14, Section 7.25 or any increase in

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the First Lien Maximum Amount. Notice of any such amendment or modification shall be provided to the Agent by the Company and shall be confirmed in writing by the First Lien Agent and First Lien Co-Agent. Upon the request of the Company, the First Lien Agent or the First Lien Co-Agent, the Agent shall execute a written acknowledgment of such notice and, if requested, an amendment or modification to this Agreement prepared by or on behalf of the Company approved by the First Lien Agent and First Lien Co-Agent to give effect herein to the parallel covenant provisions in the First Lien Credit Agreement.

     7.31. Foreign Subsidiaries. The Borrower Parties shall cause the liabilities owed by Salton Europe Ltd. and/or its Subsidiaries to Salton Hong Kong, Ltd that are secured by any assets of Salton Europe Ltd and/or its Subsidiaries, whether by grant of a lien, retention of title or other means, to not exceed, during the periods set forth on Annex C, Section I, the corresponding amounts for such periods set forth on Annex C; Section I; to the extent so secured such liabilities shall be secured solely by accounts receivable and inventory of Salton Europe Ltd. on a second lien basis, junior to the lien securing the obligations described in Section 7.13 (c); and except as so permitted and notwithstanding, anything to the contrary in the Loan Documents, Salton Hong Kong, Ltd. shall have no Liens on any asset of Salton, Inc. or any of its Subsidiaries;

     7.32. Post-Closing Deliveries. Foreign Pledge Agreements.

               (i) on or before October 30, 2007, Foreign Pledge Agreements pledging as Collateral 100% of the issued and outstanding equity of (A) Salton International C.V., (B) Salton UK, (C) Salton Hong Kong, Ltd., (D) Salton Sarl, (E) Salton Australia, Pty. Ltd., (E) Toastmaster de Mexico SA, and (F) Salton Brazil Limitada, substantially similar to those delivered to the First Lien Agent and the First Lien Co-Agent in connection with the First Lien Credit Agreement; and

               (ii) within 5 days after written request by the First Lien Agent or First Lien Co-Agent with the respect to the First Lien Loans, Foreign Pledge Agreements substantially similar to those delivered to the First Lien Agent and the First Lien Co-Agent pledging as Collateral 100% of the issued and outstanding equity of any other Subsidiary of Salton, Inc. as specified in such request.

          Notwithstanding the foregoing, any interests pledged to the Agent and/or the Lenders pursuant to such Foreign Pledge Agreements shall be subject to the terms and conditions of the Intercreditor Agreement and the Junior Liens Intercreditor Agreement.

          (b) Blocked Account Agreements. On or prior to October 15, 2007 the Borrower Parties shall have delivered to the Agent the Notices with respect to the control agreements described in Paragraph A of Schedule 7.33 of the First Lien Credit Agreement with respect to the J.P. Morgan Chase Accounts described therein.

          (c) Australian Guaranty. On or before January 30, 2008, the Borrower Parties shall have caused Salton Australia, Pty. Ltd. and/or its Subsidiaries to assume or guarantee up to $15,000,000 principal amount of Loans or other Obligations on terms and conditions reasonably satisfactory to the Agent and to secure its (or such Subsidiaries’) obligations under such assumption or guarantee by a first priority perfected lien in all of its and its Subsidiaries’ assets as described in Section 7.31.

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          (d) SEC Report. On or prior to October 15, 2007 the Parent shall have filed its Form 10-K with the SEC and such Form 10-K shall comply in all material respects with all Requirements of Law. The Borrower Parties agree to deliver to the Agent:

ARTICLE VIII
CONDITIONS OF CLOSING

     8.1. Required Deliveries on or before the Closing Date. On the Closing Date, the Agent shall receive the following:

          (a) the Definitive Agreements, duly executed, and in full force and effect;

          (b) the Intercreditor Agreement, duly executed, and in full force and effect;

          (c) the Junior Liens Intercreditor Agreement, duly, executed and in full force and effect;

          (d) a certificate from the Secretary of each Borrower Party (i) attesting to the resolutions of such Borrower Party’s board of directors authorizing its execution, delivery, and performance of all Loan Documents required to be executed and delivered by such Borrower Party on the Closing Date, and authorizing specific officers of such Borrower Party to execute the same and (ii) certifying the names and true signatures of the officers of such Borrower Party authorized to sign such Loan Documents;

          (e) copies of each Borrower Party’s governing documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of each Borrower Party;

          (f) a certificate of status with respect to each Borrower Party, dated within ten (10) days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of the Borrower Party, which certificate shall indicate that such Borrower Party is in good standing in such jurisdiction;

          (g) certificates of status with respect to each Borrower Party, each dated within thirty (30) days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Borrower Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Effect, which certificates shall indicate that such Borrower Party is in good standing in such jurisdictions;

          (h) opinion of counsel for the Borrower Parties in form and substance satisfactory to the Lenders;

          (i) the Agent shall have received duly executed confirmations addressed to each Clearing Bank acknowledging the Agent’s interest in any Blocked Account Agreement;

          (j) the Administrative Borrower shall file financing statements naming the Agent, for the benefit of Lenders, as secured creditors, in order to perfect a security interest in all Collateral, and Lenders shall have received searches reflecting the filing of all such financing statements (such searches to be delivered to the Lenders promptly after the Closing);

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          (k) Each Borrower Party shall have received all licenses, approvals or evidence of other actions required by any Governmental Authority in connection with the execution and delivery by such Borrower Party of this Agreement or any other Loan Document or with the consummation of the transactions contemplated hereby and thereby;

          (l) the Seventeenth Amendment to the First Lien Credit Agreement, in form and substance reasonably satisfactory to the Agent, duly executed and in full force and effect, and;

          (m) the First Amendment to the Second Lien Credit Agreement, in form and substance reasonably satisfactory to the Agent, duly executed and in full force and effect;

          (n) with respect to all copyrightable, patentable and trademarkable materials that are material to the conduct of its business that are not already the subject of either a registration, patent number or a duly prosecuted application with the appropriate filing office(s) therefor (including, without limitation, in the United States Copyright Office and the United States Patent and Trademark Office), cause to be filed all reasonably necessary documents seeking registration of such materials (or, with respect to patentable materials, issuance of a patent, as applicable), in accordance with the procedures and regulations of such filing office(s) and in a manner sufficient to impart constructive notice of the applicable Borrower Party’s complete and undivided ownership thereof;

          (o) with respect to all copyrights, patents and trademarks that are material to the conduct of its business that are already the subject of either a registration, patent number or a duly prosecuted application therefor with the appropriate filing office(s), cause to be filed all reasonably necessary documents identifying the applicable Borrower Party as the sole claimant thereto in a manner sufficient to impart constructive notice of the applicable Borrower Party’s complete and undivided ownership thereof (including, without limitation, all assignments of ownership and changes in name since the original date of registration or issuance of each such copyright, patent and trademark) in accordance with the procedures and regulations of such filing office(s);

          (p) deliver or cause to be delivered to the appropriate filing office(s) (including, without limitation, the United States Copyright Office and the United States Patent and Trademark Office) in accordance with the procedures and regulations of such office(s) all documents, instruments or other information necessary for accurate and proper recordation of the Agent’s security interests, for the benefit of the Lenders, in all copyrights, patents and trademarks that are material to the conduct of such Borrower Party’s business;

          (q) following each filing and/or delivery required under Sections 8.1 (o)-(q) above, promptly provide to the Agent documentation of such filing and/or delivery, including verification of receipt by the applicable filing office(s); and

          (r) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded.

ARTICLE IX
DEFAULT; REMEDIES

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

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

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

          (c) (i) any default shall occur in the observance or performance of any of the covenants and agreements contained in Sections 7.2(a), 7.5, 7.8 through 7.22, (ii) any default shall occur in the observance or performance of any of the covenants and agreements contained in Sections 5.2, or 5.3 and such default shall continue for five (5) days or more; or (iii) any default shall occur in the observance or performance of any of the other covenants or agreements contained in any other Section of this Agreement or any other Loan Document, or any other agreement entered into at any time to which any Borrower Party and the Agent or any Lender are party and such default shall continue for fifteen (15) days or more;

          (d) any default shall occur with respect to any Debt (other than the Obligations) of any Borrower Party in an outstanding principal amount which exceeds $1,000,000, or under any agreement or instrument under or pursuant to which any such Debt may have been issued, created, assumed, or guaranteed by any Borrower Party and such default shall continue for more than the period of grace, if any, therein specified, if the effect thereof (with or without the giving of notice or further lapse of time or both) is to accelerate, or to permit the holders of any such Debt to accelerate, the maturity of any such Debt; or any such Debt shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof;

          (e) the Parent or any of its Subsidiaries shall (i) file a voluntary petition in bankruptcy or file a voluntary petition or an answer or otherwise commence any action or proceeding seeking reorganization, arrangement or readjustment of its debts or for any other relief under the Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing, or consent to, approve of, or acquiesce in, any such petition, action or proceeding; (ii) apply for or acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee or similar officer for it or for all or any part of its property; (iii) make an assignment for the benefit of creditors; or (iv) be unable generally to pay its debts as they become due;

          (f) an involuntary petition shall be filed or an action or proceeding otherwise commenced seeking reorganization, arrangement, consolidation or readjustment of the debts of the Parent or any of its Subsidiaries or for any other relief under the federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law, state or federal, now or hereafter existing and such petition or proceeding shall not be dismissed within thirty (30) days after the filing or commencement thereof or an order of relief shall be entered with respect thereto;

          (g) a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee or similar officer for the Parent or any of its Subsidiaries or for all or any part of its property shall be appointed or a warrant of attachment, execution or similar process shall be issued against any part of the property of the Parent or any of its Subsidiaries;

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          (h) any Borrower Party shall file a certificate of dissolution under applicable state law or shall be liquidated, dissolved or wound-up or shall commence, or the Parent or any of its Subsidiaries shall have commenced against it, any action or proceeding for dissolution, winding-up or liquidation, and such action or proceeding shall not be dismissed within thirty (30) days after the filing or commencement thereof or an order of relief shall be entered with respect thereto;

          (i) all or any material part of the property (including Inventory) of the Parent or any of its Subsidiaries shall be nationalized, expropriated or condemned, recalled, seized or otherwise appropriated, or custody or control of such property or of the Parent or such Subsidiary shall be assumed by any Governmental Authority or any court of competent jurisdiction at the instance of any Governmental Authority, except where contested in good faith by proper proceedings diligently pursued where a stay of enforcement is in effect;

          (j) any Loan Document shall be terminated, revoked or declared void or invalid or unenforceable or challenged by any Borrower Party or any other obligor;

          (k) Except as set forth on Schedule 9.1(k), one or more judgments, orders, decrees (including, without limitation, out of court settlements) or arbitration or mediation awards is entered against or paid by any Borrower Party involving in the aggregate liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related or unrelated series of transactions, incidents or conditions, of $1,000,000 or more the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of thirty (30) days after the entry thereof;

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

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

          (n) any Loan Document ceases to be in full force and effect or any Lien with respect to any material portion of the Collateral intended to be secured thereby ceases to be, or is not, valid, perfected and prior to all other Liens (other than Permitted Liens) or is terminated, revoked or declared void;

          (o) (i) an ERISA Event shall occur with respect to a Pension Plan or Multi-employer Plan which has resulted or could reasonably be expected to result in liability of any Borrower Party under Title IV of ERISA to the Pension Plan, Multi-employer Plan or the PBGC in an aggregate amount, together with the amount of any liability under clauses (ii) and (iii) of this Section 9.1(o), in excess of $1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time, together with the amount of any liability under clauses (i) and (iii) of this Section 9.1(o) exceeds $1,000,000; or (iii) any Borrower Party or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability

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under Section 4201 of ERISA under a Multi-employer Plan in an aggregate amount, together with the amount of any liability under clauses (i) and (ii) of this Section 9.1(o), in excess of $1,000,000;

          (p) there occurs any default or event of default under the Senior Notes, or the Kmart Receivable Purchasing Agreement;

          (q) there occurs a Change of Control; or

          (r) there occurs an event having a Material Adverse Effect.

     9.2. Remedies.

          (a) Subject to the Intercreditor Agreement, if an Event of Default exists, the Agent shall, at the direction of the Lenders, at any time or times without notice to or demand on the Borrower Parties, (A) declare any or all Obligations to be immediately due and payable; provided, however, that upon the occurrence of any Event of Default described in Sections 9.1(e), 9.1(f), 9.1(g), or 9.1(h)(A), all Obligations shall automatically become immediately due and payable without notice or demand of any kind; (B) instruct (which shall be deemed automatically given upon the occurrence of any Event of Default described in Sections 9.1(e), 9.1(f), 9.1(g) or 9.1(h)(A) the Borrower Parties to cash collateralize one hundred eight percent (108%) of the maximum amount that could be purchased under the Loan Purchase Agreement plus the Drawdown Fee in accordance with Section 1.2, provided that the First Lien Agent, on behalf of the First Lien Lenders, shall have a first lien security interest in such account in accordance with the terms of the Intercreditor Agreement, and (C)the Agent shall pursue its other rights and remedies under the Loan Documents and applicable law.

          (b) If an Event of Default has occurred and is continuing: (i) the Agent shall have, for the benefit of the Agent and the Lenders, in addition to all other rights of the Lenders, the rights and remedies of a secured party under the Loan Documents and the UCC; (ii) the Agent may, at any time, take possession of the Collateral and keep it on the Borrower Parties’ premises, at no cost to the Agent or any Lender, or remove any part of it to such other place or places as the Agent may desire, or the Borrower Parties shall, upon the Agent’s demand, at the Borrowers’ cost, assemble the Collateral and make it available to the Agent at a place reasonably convenient to the Agent; and (iii) the Agent may sell and deliver any Collateral at public or private sales, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion, and may, if the Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an announcement at the time and place of sale or of such postponed or adjourned sale without giving a new notice of sale. Without in any way requiring notice to be given in the following manner, the Borrower Parties agree (on their behalf and on behalf of their Subsidiaries) that any notice by the Agent of sale, disposition or other intended action hereunder or in connection herewith, whether required by the UCC or otherwise, shall constitute reasonable notice to the Parent and the Subsidiaries if such notice is mailed by registered or certified mail, return receipt requested, postage prepaid, or is delivered personally against receipt, at least ten (10) calendar days prior to such action to the Administrative Borrower’s address specified in or pursuant to Section 13.8. If any Collateral is sold on terms other than payment in full at the time of sale, no credit shall be given against the Obligations until the Agent or the Lenders receive cash payment, and if the buyer defaults in payment, the Agent may resell the Collateral without further notice to the Parent and the Subsidiaries. In the event the Agent seeks to take possession of all or any portion of the Collateral by judicial process, the Borrower Parties (on their behalf and on behalf of their Subsidiaries) irrevocably waive: (A) the posting of any bond, surety or security with respect thereto which might otherwise be

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required; (B) any demand for possession prior to the commencement of any suit or action to recover the Collateral; and (C) any requirement that the Agent retain possession and not dispose of any Collateral until after trial or final judgment. The Borrower Parties agree (on their behalf and on behalf of their Subsidiaries) that the Agent has no obligation to preserve rights to the Collateral or marshal any Collateral for the benefit of any Person. The Agent is hereby granted a license or other right to use, without charge, the Parent’s and the Subsidiaries’ labels, patents, copyrights, names, trade secrets, trade names, trademarks, and advertising matter, or any similar property, in completing production of, advertising or selling any Collateral, and the Parent’s and the Subsidiaries’ rights under all licenses and all franchise agreements shall inure to the Agent’s benefit for such purpose. The proceeds of sale shall be applied first to all expenses of sale, including attorneys’ fees, and then to the Obligations. The Agent will return any excess to the Parent and the Subsidiaries and the Parent and the Subsidiaries shall remain liable for any deficiency.

          (c) If an Event of Default has occurred and is continuing, the Borrower Parties hereby waive to the extent permitted by law (on their behalf and on behalf of the Subsidiaries) all rights to notice and hearing prior to the exercise by the Agent of the Agent’s rights to repossess the Collateral without judicial process or to replevy, attach or levy upon the Collateral without notice or hearing.

     9.3. Waiver of Default or Event of Default under First Lien Credit Agreement. The Lenders and the Agent acknowledge and agree that to the extent a default or event of a default has occurred under the First Lien Credit Agreement and such default or event of default is waived by the First Lien Lenders, such waiver will be concurrently deemed a waiver of any corresponding default or Event of Default under this Agreement, without any further consent or agreement of the Agent or the Lenders; provided, however, that no such waiver shall be effective with respect to any payment default hereunder, with respect to a waiver of Section 7.14 and Section 7.25 hereof or with respect to a waiver which would result in an increase in the First Lien Maximum Amount. Notice of any such waiver shall be provided to the Agent by the Company confirmed in writing by the First Lien Agent and First Lien Co-Agent and upon the request of the Company, the First Lien Agent or the First Lien Co-Agent, the Agent shall execute a written acknowledgment of the giving of notice of waiver (and each Lender hereby consents to Agent executing such acknowledgement). In the event that the Agent declare a default hereunder and declares any or all Obligations to be immediately due and payable or otherwise pursues any remedies under Section 9.2, and the corresponding default or event of default under the First Lien Credit Agreement is subsequently waived by the First Lien Lenders, the default previously declared hereunder shall be deemed waived and the Obligations that were declared to be immediately due and payable hereunder shall be de-accelerated and shall no longer be immediately due and payable; provided, however, that no such waiver shall be effective with respect to any payment default hereunder, with respect to a waiver of Section 7.14 and Section 7.25 hereof or with respect to a waiver which would result in an increase in the First Lien Maximum Amount.

ARTICLE X
BINDING OBLIGATIONS

     All Obligations (including all unpaid principal, accrued and unpaid interest and any early termination or prepayment fees or penalties) shall be immediately due and payable in full on the Stated Maturity Date. Until all Obligations are indefeasibly paid and performed in full in cash, the Borrower Parties shall remain bound by the terms of this Agreement and shall not be relieved of any of their respective Obligations hereunder or under any other Loan Document and the Agent and the Lenders shall

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retain all their rights and remedies hereunder (including the Agent’s Liens in and all rights and remedies with respect to all then existing and after-acquired or after-arising Collateral).

ARTICLE XI
AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

     11.1. Amendments and Waivers.

          (a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Borrower Parties therefrom, shall be effective unless the same shall be in writing and signed by the Lenders (or by the Agent at the written request of the Lenders and the Borrower Parties party thereto and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders and the Borrower Parties party thereto and acknowledged by the Agent, do any of the following:

               (i) increase or extend the Commitment of any Lender (it being understood and agreed that a waiver of any Default or Event of Default or a modification of any of the defined terms contained herein (other than those defined terms specifically addressed in this Section 11.1) shall not constitute a change in the terms of any Commitment of any Lender);

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

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

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

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

               (vi) release any Guaranties of the Obligations or release Collateral other than as permitted by Section 12.11;

               (vii) change the definition of “Agent”; or

               (viii) increase the First Lien Maximum Amount;

provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the Agent, affect rights or duties of the Agent under this Agreement or any other Loan Document.

          (b) If any fees are paid to the Lenders as consideration for amendments, waivers or consents with respect to this Agreement, at Agent’s election, such fees may be paid only to those Lenders that agree to such amendments, waivers or consents within the time specified for submission thereof.

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     11.2. Assignments; Participations.

          (a) Any Lender may assign and delegate to one or more Eligible Assignees (each an “Assignee”) all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Lender hereunder, in a minimum amount of $5,000,000; provided, however, that the Borrower Parties and the Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Administrative Borrower and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Administrative Borrower and the Agent an Assignment and Acceptance in the form of Exhibit A (“Assignment and Acceptance”), which, upon the receipt thereof, the Agent shall acknowledge; (iii) the Assignee executes and delivers to the First Lien Agent and First Lien Co-Agent a written acknowledgment in which the Assignee acknowledges its agreement to be bound by the terms of the Intercreditor Agreement; and (iv) the assignor Lender or Assignee has paid to the Agent a processing fee in the amount of $3,500;

          (b) From and after the date that the Agent notifies the assignor Lender that it has received an executed Assignment and Acceptance and payment of the above referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents and the Intercreditor Agreement, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents and the Intercreditor Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto).

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

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thereto; and (vi) such Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

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

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

          (f) Notwithstanding any other provision in this Agreement, any Lender that is a member bank of the Federal Reserve System may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Board or United States Treasury Regulation 31 C.F.R. § 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

          (g) Agent shall maintain, or cause to be maintained, a register (the “Register”) on which it enters the name of a Lender as the registered owner of each Term Loan held by such Lender. Other than in connection with an assignment by a Lender of all or any portion of its Term Loan to an Affiliate of such Lender or a Related Fund of such Lender (i) a Registered Loan may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register and the execution and delivery of an Assignment and Consent and (ii) any assignment or sale of all or part of such Registered Loan may be effected only by registration of such assignment or sale on the Register. Prior to the registration of assignment or sale of any Registered Loan (and the Note, if any evidencing the same), Agent shall treat the Person in whose name such Loan is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding the notice to the contrary. In the case of any assignment by a Lender of all or any portion of its Term Loan to an Affiliate of such Lender or a Related Fund of such Lender, and which assignment is not recorded in the Register, the assigning Lender, on behalf of Agent and Administrative Borrower, shall maintain a comparable register.

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          (h) In the event that a Lender sells participations in the Registered Loan, such Lender, on behalf of Agent and Administrative Borrower, shall maintain a register on which it enters the name of all participants in the Registered Loans held by it (the “Participant Register”). A Registered Loan (and the Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each Note shall expressly so provide). Any participation of such Registered Loan (and the Note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register.

ARTICLE XII
THE AGENT

     12.1. Appointment and Authorization. Each Lender hereby designates and appoints the Agent as its agent under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to them by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto, including without limitation, the execution of any Loan Document on behalf of Lenders. The Agent agrees to act as such on the express conditions contained in this Article XXI. The provisions of this Article XII are solely for the benefit of the Agent and the Lenders and, no Borrower Party shall have any rights as a third party beneficiary of any of the provisions contained herein. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law, and Agent shall not be subject to any fiduciary duties to any Lender regardless of whether a Default or Event of Default exists. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Agreement, the Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Agent is expressly entitled to take or assert under this Agreement and the other Loan Documents, including the exercise of remedies pursuant to Section 9.2, and any action so taken or not taken shall be deemed consented to by the Lenders. Notwithstanding any other provision of this Agreement or any Loan Document, Agent shall not be obligated to take any action that, in its opinion or the opinion of its counsel, may expose Agent to liability or that is contrary to any Loan Document or applicable law or would result in Agent incurring any ureimbursed expense in connection with the administration or enforcement of the Loan Documents.

     12.2. Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects as long as such selection was made without gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The exculpatory provisions of this Agreement shall apply to any such sub-agent and to any Agent-Related Person of Agent and any such sub-agent, and shall apply to their

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respective activities in connection with the credit facilities provided for herein as well as activities of Agent.

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

     12.4. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing (including any electronic messages, internet or intranet website posting or other distribution), resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation (written or oral) believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrower Parties), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. Furthermore, Agent may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and other experts selected by it (at the expense of Borrowers), and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     12.5. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Agent shall have received written notice from a Lender or the Borrowers referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.” The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Lenders in accordance with Section 9.2, subject to this Article XII.

     12.6. Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of Borrower Parties and their Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the

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

     12.7. Indemnification. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrowers and without limiting the obligation of the Borrowers to do so), in accordance with their Pro Rata Shares, from and against any and all Indemnified Liabilities as such term is defined in Section 13.11; provided, however, that no Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. Without limitation of the foregoing, each Lender shall reimburse each Agent-Related Person upon demand for its Pro Rata Share of any costs or out of pocket expenses (including Attorney Costs) incurred by such Person in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that such Agent-Related Person is not timely reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.

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

     12.9. Successor Agent. Agent may at any time give notice of its resignation to the Lenders and Borrowers. Upon receipt of any such notice of resignation, the Lenders shall have the right, in consultation with the Borrowers, to appoint a successor, or an Affiliate of any such Lender. If no such

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successor shall have been so appointed by the Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders, appoint a successor Agent meeting the qualifications set forth above provided that if Agent shall notify the Borrowers and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time as the Lenders appoint a successor Agent as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 13.7 and Section 13.11 shall continue in effect for the benefit of such retiring Agent, its sub agents and all Agent Related Persons in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.

     12.10. Withholding Tax.

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

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

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

               (iii) such other original executed form or forms as may be required under the Code or other laws of the United States of America as a condition to exemption from, or reduction of, United States of America withholding tax. Such Lender agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

          (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States of America tax treaty by providing original IRS Form FW-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such

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Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Borrowers to such Lender. To the extent of such percentage amount, the Agent will treat such Lender’s IRS Form W-8BEN as no longer valid.

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

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

          (e) If the IRS or any other Governmental Authority of the United States of America or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent.

     12.11. Collateral Matters.

          (a) The Lenders hereby irrevocably authorize the Agent, at its option and in its sole discretion, to release any Agent’s Liens upon any Collateral, (i) upon the termination of the Commitments and payment and satisfaction in full by Borrowers of all Loans; (ii) constituting property being sold or disposed of if the Borrowers certify to the Agent that the sale or disposition is made in compliance with Section 7.9 (and the Agent may rely conclusively on any such certificate, without further inquiry); (iii) constituting property in which the Borrower Parties owned no interest at the time the Lien was granted or at any time thereafter; or (iv) constituting property leased to the Borrower Parties under a lease which has expired or been terminated in a transaction permitted under this Agreement. Except as provided above, the Agent will not release any of the Agent’s Liens without the prior written authorization of all Lenders; provided that the Agent may, in its discretion, release the Agent’s Liens on Collateral valued in the aggregate not in excess of $500,000 during each Fiscal Year without the prior written authorization of the Lenders and the Agent may release the Agent’s Liens on Collateral valued in the aggregate not in excess of $1,000,000 during each Fiscal Year with the prior written authorization of Lenders. Upon request by the Agent or the Borrowers at any time, the Lenders will confirm in writing the Agent’s authority to release any Agent’s Liens upon particular types or items of Collateral pursuant to this Section 12.11.

          (b) Upon receipt by the Agent of any authorization required pursuant to Section 12.11(a) from the Lenders of the Agent’s authority to release any Agent’s Liens upon particular types or

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

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

          (d) The Agent acknowledges that the face of each Note evidencing the Obligations shall include the legends set forth on the form of Note attached as Exhibit C including the legend thereon indicating that the Note and this Agreement are subject to the terms and provisions of the Intercreditor Agreement. Upon the acceptance of a Note, the Lender accepting such Note shall be deemed to have accepted the terms and provisions of this Agreement, the Intercreditor Agreement, the Junior Liens Intercreditor Agreement and any other agreement executed in connection herewith or therewith.

          (e) The Agent, the Lenders and the Loan Parties acknowledge and agree that this Agreement is subject to the terms and provisions of the Intercreditor Agreement. Notwithstanding anything to the contrary in this Agreement, this Agreement, the rights of the Agent and the Lenders hereunder and the enforcement of the Agent’s and the Lenders’ remedies hereunder, are subject to the terms and provisions of the Intercreditor Agreement and to the extent of any inconsistency between the terms of this Agreement and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall govern and control, and shall be deemed to supersede the applicable inconsistent provisions of this Agreement.

     12.12. Restrictions on Actions by Lenders; Sharing of Payments.

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

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

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

     12.14. Payments by Agent to Lenders. All payments to be made by the Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds to each Lender pursuant to wire transfer instructions delivered in writing to the Agent on or prior to the Closing Date (or if such Lender is an Assignee, on the applicable Assignment and Acceptance), or pursuant to such other wire transfer instructions as each party may designate for itself by written notice to the Agent, provided if any Lender shall fail to provide such wire instructions to Agent, Agent may hold any payments due to such Lender for the account of such Lender without interest until Agent receives such instructions. Concurrently with each such payment, the Agent shall identify whether such payment (or any portion thereof) represents principal, premium or interest on the Term Loan. Unless Agent shall first have received any payments due from Borrowers, Agent shall not be responsible to make any corresponding payment to Lenders.

     12.15. Intentionally Omitted.

     12.16. Intentionally Omitted.

     12.17. Concerning the Collateral and the Related Loan Documents. Each Lender authorizes and directs the Agent to enter into the other Loan Documents and the Intercreditor Agreement, for the ratable benefit and obligation of the Agent and the Lenders. Each Lender agrees that any action taken by the Agent in accordance with the terms of this Agreement, the other Loan Documents or the Intercreditor Agreement, and the exercise by the Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. The Lenders acknowledge that the Term Loan and all interest, fees and expenses hereunder constitute one Debt, secured pari passu by all of the Collateral.

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     12.18. Intentionally Omitted.

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

     12.20. Additional Agents. None of the Lenders or other entities identified on the facing page of or elsewhere in this Agreement as a “Book Manager”, “Arranger”, “Syndication Agent” or “Documentation Agent” shall, in such capacities, have any right, power, obligation, liability, responsibility or duty under this Agreement or any other Loan Document other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any other Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or any other Loan Document or in taking or not taking action hereunder or thereunder.

ARTICLE XIII
MISCELLANEOUS

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

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

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

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

          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES LOCATED IN NEW YORK CITY, NEW YORK; AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF EACH

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

          (c) EACH BORROWER PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE ADMINISTRATIVE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

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

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

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

     13.7. Fees and Expenses. The Borrowers agree to pay to the Agent, for its benefit on demand, all costs and expenses that the Agent or any Agent Related Person pays or incurs in connection with the negotiation, preparation, syndication, delivery, consummation, administration, enforcement, and termination of this Agreement or any of the other Loan Documents, including: (a) Attorney Costs; (b) costs and expenses (including attorneys’ and paralegals’ fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent closing in connection with the Loan Documents and the transactions contemplated thereby; (c) costs and expenses of lien and title searches and title insurance; (d) taxes, fees and other charges for recording any mortgages, filing financing statements and continuations, and other actions to perfect, protect, and continue the Agent’s Liens (including costs and expenses paid or incurred by the Agent or any Agent Related Person in connection with the consummation of this Agreement); (e) sums paid or incurred to pay any amount or take any action required of the Borrower Parties under the Loan Documents that the Borrower Parties fail to pay or take; and (f) costs and expenses of forwarding loan proceeds, collecting checks and other items of payment, and establishing and maintaining Payment Accounts and lock boxes, and costs and expenses of preserving and protecting the Collateral. In addition, the Borrowers agree to pay costs and expenses incurred by the Agent and any other Agent Related Person (including Attorneys’ Costs) to the Agent or such Agent Related Persons, for their respective benefit, on demand, and then to the other Lenders for their benefit, on demand, and all reasonable fees, expenses and disbursements incurred by such other Lenders, in each case, paid or incurred to obtain payment of the Obligations, enforce the Agent’s Liens, sell or otherwise realize upon the Collateral, and otherwise enforce the provisions of the Loan Documents, or to defend any claims made or threatened against the Agent, any Agent-Related Person any Lender arising out of the transactions contemplated hereby (including preparations for and consultations concerning any such matters). The foregoing shall not be construed to limit any other provisions of the Loan Documents regarding costs and expenses to be paid by the Borrowers. All of the foregoing costs and expenses shall be charged to, and promptly reimbursed by, the Borrowers.

     13.8. Notices. Except as otherwise provided herein, all notices, demands and requests that any party is required or elects to give to any other shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, but not limited to, delivery by overnight mail and courier service, (b) four (4) days after it shall have been mailed by United States mail, first class, certified or registered, with postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted and confirmed, in each case addressed to the party to be notified as follows:

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     If to the Agent:

Harbinger Capital Partners Master Fund I, Ltd.
c/o Harbinger Capital Partners Offshore Manager,
One Riverchase Parkway
South Birmingham, Alabama 35244
Attention: General Counsel
Telecopy No.: (205) 987-5505
Email: jmccullough@harbingercap.net

     with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Eric Goodison, Esq.
Telecopy No.: (212) 757-3990
Email: egoodison@paulweiss.com

     If to the Borrower Parties, or any of them:

Salton, Inc.
1955 Field Court
Lake Forest, Illinois 60045
Attention: William Lutz
Telecopy No.: (847) 803-4641
Email: blutz@saltonusa.com

     with a copy to:

Sonnenschein Nath & Rosenthal LLP
8000 Sears Tower
Chicago, Illinois 60606
Attention: Neal Aizenstein, Esq.
Telecopy No.: (312) 876-7934
Email: naizenstein@sonnenschein.com

     If to a Lender, or any of them:

Harbinger Capital Partners
555 Madison Avenue, 16th Floor
New York, New York 10022
Attention: David Maura
Telecopy No.: (212) 508-3721
Email: dmaura@harbingercap.net

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     with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Eric Goodison, Esq.
Telecopy No.: (212) 492-0292
Email: egoodison@paulweiss.com

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

Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article III if such Lender has notified Agent that it is incapable of receiving notices under such Article by electronic communication. Agent or the Borrowers may, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefore.

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

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

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     13.11. Indemnity of the Agent, Agent Related Persons and the Lenders by the Borrowers.

          (a) Each Borrower agrees to defend, indemnify and hold the Agent-Related Persons, and each Lender and each of their respective officers, directors, employees, counsel, representatives, agents and attorneys in fact (each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby or referred to herein, expressly including, without limitation, any other Loan Document or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided that such indemnity shall not, as to any Indemnified Person, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations.

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

          (c) It is understood that the handling of the Collateral of the Borrowers in a combined fashion, as more fully set forth herein, is done solely as an accommodation to the Borrowers in order to utilize the collective borrowing powers of the Borrowers in the most efficient and economical manner and at their request, and that neither the Agent nor any Agent-Related Person nor any Lender shall incur liability to any Borrower as a result hereof. Each Borrower expects to derive benefit, directly or indirectly, from the handling of the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group. To induce the Agent and the Lenders to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify and hold harmless the Agent, each Agent-Related Person and the Lenders against any and all liability, expense, loss or claim of damage or injury, made against the Agent, any Agent-Related Person or the Lenders by any Borrower or by any third party whosoever, arising from or incurred by reason of (i) the handling of the Collateral of the Borrowers as herein provided, (ii) any Agent-Related Person’s or any Lender’s relying on any instructions of the Administrative Borrower, or (iii) any other action taken by the Agent, any Agent-Related Person or any Lender hereunder or under the other Loan Documents.

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     13.12. Limitation of Liability. NO CLAIM MAY BE MADE BY EACH OF ANY BORROWER PARTY, ANY LENDER OR OTHER PERSON AGAINST THE AGENT, ANY AGENT-RELATED PERSON, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH BORROWER PARTY AND EACH LENDER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

     13.13. Final Agreement. This Agreement and the other Loan Documents are intended by the Borrower Parties, the Agent and the Lenders to be the final, complete, and exclusive expression of the agreement between them. This Agreement supersedes any and all prior oral or written agreements relating to the subject matter hereof. No modification, rescission, waiver, release, or amendment of any provision of this Agreement or any other Loan Document shall be made, except by a written agreement signed by the Borrower Parties party thereto and a duly authorized officer of each of the Agent and the Lenders.

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

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

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

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     13.17. Confidentiality.

          (a) The Borrower Parties hereby consent that the Agent and each Lender may issue and disseminate to the public general information describing the credit accommodation entered into pursuant to this Agreement, including the name and address of the Borrower Parties and a general description of the Borrower Parties’ businesses and may use the Borrower Parties’ name in advertising and other promotional material.

          (b) Each Lender severally agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as “confidential” or “secret” by the Borrowers Parties and provided to the Agent or such Lender by or on behalf of the Borrower Parties, under this Agreement or any other Loan Document, except to the extent that such information (i) was or becomes generally available to the public other than as a result of disclosure by the Agent or such Lender, or (ii) was or becomes available on a nonconfidential basis from a source other than the Borrower Parties, provided that such source is not bound by a confidentiality agreement with the Borrower Parties known to the Agent or such Lender; provided, however, that the Agent and any Lender may disclose such information (1) at the request or pursuant to any requirement of any Governmental Authority to which the Agent or such Lender is subject or in connection with an examination of the Agent or such Lender by any such Governmental Authority; (2) pursuant to subpoena or other court process; (3) when required to do so in accordance with the provisions of any applicable Requirement of Law; (4) to the extent reasonably required in connection with any litigation or proceeding (including, but not limited to, any bankruptcy proceeding) to which the Agent, any Lender or their respective Affiliates may be party; (5) to the extent reasonably required in connection with the exercise of any remedy or the enforcement of any action hereunder or under any other Loan Document; (6) to the Agent’s or such Lender’s independent auditors, accountants, attorneys and other professional advisors; (7) to any prospective Participant or Assignee under any Assignment and Acceptance, actual or potential, provided that such prospective Participant or Assignee agrees to keep such information confidential to the same extent required of the Agent and the Lenders hereunder; (8) as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Borrower Parties are party or is deemed party with the Agent or such Lender; (9) to its Affiliates and its Affiliates’ partners, directors, officers, employees, agents, advisors and other representatives; and (10) for the purpose of defending itself, reducing its liability, or protecting or exercising any of its claims, rights, remedies or interests under or in connection with any Loan Document.

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

          (d) This Section 13.17 shall survive the termination of this Agreement.

     13.18. Conflicts with Other Loan Documents. Unless otherwise expressly provided in this Agreement (or in another Loan Document by specific reference to the applicable provision contained in

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this Agreement), if any provision contained in this Agreement conflicts with any provision of any other Loan Document, the provision contained in this Agreement shall govern and control.

     13.19. The Administrative Borrower. Each Borrower hereby irrevocably appoints Salton, Inc. as the borrowing agent and attorney-in-fact for all Borrowers (the “Administrative Borrower”), which appointment shall remain in full force and effect unless and until the Agent shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed the Administrative Borrower. Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (i) to provide the Agent with all notices and instructions under this Agreement and (ii) to take such action as the Administrative Borrower deems appropriate on its behalf to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement.

ARTICLE XIV
JOINT AND SEVERAL OBLIGATIONS

     14.1. All Obligations to Constitute Joint and Several Obligations.

          (a) All Obligations shall constitute joint and several obligations of the Borrowers and shall be secured by the Agent’s Lien upon all of the Collateral, and by all other security interests and Liens heretofore, now or at any time hereafter granted by each Borrower to the Agent and the Lenders, to the extent provided in the Loan Documents under which such Lien arises. Each Borrower expressly represents and acknowledges that it is part of a common enterprise with the other Borrowers and that any financial accommodations by the Agent and the Lenders to any other Borrower hereunder and under the other Loan Documents are and will be of direct and indirect interest, benefit and advantage to all Borrowers. Each Borrower acknowledges that any notice or request given by the Administrative Borrower (including the Administrative Borrower) to the Agent or any Lender shall bind all Borrowers, and that any notice given by the Agent, or any Lender to any Borrower shall be effective with respect to all Borrowers. Each Borrower acknowledges and agrees that each Borrower shall be liable, on a joint and several basis, for all of the Loans and other Obligations, regardless of which Borrower actually may have received the proceeds of any of the Loans or other extensions of credit or the amount of such Loans received or the manner in which the Agent or any of the Lenders accounts among the Borrowers for such Loans or other extensions of credit on its books and records, and further acknowledges and agrees that Loans to any Borrower inure to the mutual benefit of all of the Borrowers and that the Agent and the Lenders are relying on the joint and several liability of the Borrowers in extending the Loans and other financial accommodations hereunder. Each Borrower shall be entitled to subrogation and contribution rights from and against the other Borrowers to the extent any Borrower is required to pay to the Lenders any amount in excess of the Loans advanced directly to, or other Obligations incurred directly by, such Borrower or as otherwise available under Applicable Law; provided, however, that such subrogation and contribution rights are and shall be subject to the terms and conditions of this Section 14.1.

          (b) It is the intent of the Borrowers, the Agent and the Lenders and any other Person holding any of the Obligations that each Borrower’s maximum obligations hereunder (such Borrower’s “Maximum Borrower Liability”) in any case or proceeding referred to below (but only in such a case or proceeding) shall not be in excess of:

               (i) in a case or proceeding commenced by or against such Borrower under the Bankruptcy Code on or within one (1) year from the date on which any of the Obligations of such

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Borrower are incurred, the maximum amount that would not otherwise cause the Obligations of such Borrower hereunder (or any other Obligations of such Borrower to the Agent, the Lenders and any other Person holding any of the Obligations) to be avoidable or unenforceable against such Borrower under (A) Section 548 of the Bankruptcy Code or (B) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or

               (ii) in a case or proceeding commenced by or against such Borrower under the Bankruptcy Code subsequent to one (1) year from the date on which any of the Obligations of such Borrower are incurred, the maximum amount that would not otherwise cause the Obligations of such Borrower hereunder (or any other Obligations of such Borrower to the Agent, the Lenders and any other Person holding any of the Obligations) to be avoidable or unenforceable against such Borrower under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or

               (iii) in a case or proceeding commenced by or against such Borrower under any law, statute or regulation other than the Bankruptcy Code relating to dissolution, liquidation, conservatorship, bankruptcy, moratorium, readjustment of debt, compromise, rearrangement, receivership, insolvency, reorganization or similar debtor relief from time to time in effect affecting the rights of creditors generally (collectively, “Other Debtor Relief Law”), the maximum amount that would not otherwise cause the Obligations of such Borrower hereunder (or any other Obligations of such Borrower to the Agent and the Lenders and any other Person holding any of the Obligations) to be avoidable or unenforceable against such Borrower under such Other Debtor Relief Law, including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding. (The substantive state or federal laws under which the possible avoidance or unenforceability of the Obligations of any Borrower hereunder (or any other Obligations of such Borrower to the Agent, the Lenders and any other Person holding any of the Obligations) shall be determined in any such case or proceeding shall hereinafter be referred to as the “Avoidance Provisions”).

     Notwithstanding the foregoing, no provision of this Section 14.1(b) shall limit any Borrower’s liability for loans advanced directly or indirectly to it under this Agreement.

          (c) To the extent set forth in Section 14.1(b) hereof, but only to the extent that the Obligations of any Borrower hereunder, or the transfers made by such Borrower under any Loan Document, would otherwise be subject to avoidance under any Avoidance Provisions if such Borrower is not deemed to have received valuable consideration, fair value, fair consideration or reasonably equivalent value for such transfers or obligations, or if such transfers or obligations of any Borrower hereunder would render such Borrower insolvent, or leave such Borrower with an unreasonably small capital or unreasonably small assets to conduct its business, or cause such Borrower to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the obligations of such Borrower are deemed to have been incurred and transfers made under such Avoidance Provisions, then the obligations of such Borrower hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Obligations of such Borrower hereunder (or any other Obligations of such Borrower to the Agent, the Lenders or any other Person holding any of the Obligations), as so reduced, to be subject to avoidance under such Avoidance Provisions. This Section 14.1(c) is intended solely to preserve the rights hereunder of the Agent, the Lenders and any other Person holding any of the Obligations to the maximum extent that would not cause the obligations of the Borrowers hereunder to be subject to avoidance under any Avoidance Provisions, and none of the Borrowers nor any other Person shall have any right, defense, offset, or claim under this

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Section 14.1(c) as against the Agent, the Lenders or any other Person holding any of the Obligations that would not otherwise be available to such Person under the Avoidance Provisions.

          (d) Each Borrower agrees that the Obligations may at any time and from time to time exceed the Maximum Borrower Liability of such Borrower, and may exceed the aggregate Maximum Borrower Liability of all Borrowers hereunder, without impairing this Agreement or any provision contained herein or affecting the rights and remedies of the Lenders or the Agent hereunder.

          (e) In the event any Borrower (a “Funding Borrower”) shall make any payment or payments under this Agreement or shall suffer any loss as a result of any realization upon any collateral granted by it to secure its obligations hereunder, each other Borrower (each, a “Contributing Borrower”) shall contribute to such Funding Borrower an amount equal to such payment or payments made, or losses suffered, by such Funding Borrower determined as of the date on which such payment or loss was made multiplied by the ratio of (i) the Maximum Borrower Liability of such Contributing Borrower (without giving effect to any right to receive any contribution or other obligation to make any contribution hereunder), to (ii) the aggregate Maximum Borrower Liability of all Borrowers (including the Funding Borrowers) hereunder (without giving effect to any right to receive, or obligation to make, any contribution hereunder). Nothing in this Section 14.1(e) shall affect any Borrower’s joint and several liability to the Agent and the Lenders for the entire amount of its Obligations. Each Borrower covenants and agrees that its right to receive any contribution hereunder from a Contributing Borrower shall be subordinate and junior in right of payment to all obligations of the Borrowers to the Agent and the Lenders hereunder.

          (f) No Borrower will exercise any rights that it may acquire by way of subrogation hereunder or under any other Loan Document or at law by any payment made hereunder or otherwise, nor shall any Borrower seek or be entitled to seek any contribution or reimbursement from any other Borrower in respect of payments made by such Borrower hereunder or under any other Loan Document, until all amounts owing to the Agent and the Lenders on account of the Obligations are paid in full in cash and the Commitments are terminated. If any amounts shall be paid to any Borrower on account of such subrogation or contribution rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Borrower in trust for the Agent and the Lenders, segregated from other funds of such Borrower, and shall, forthwith upon receipt by such Borrower, be turned over to the Agent in the exact form received by such Borrower (duly endorsed by such Borrower to the Agent, if required), to be applied against the Obligations, whether matured or unmatured, as provided for herein.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

BORROWERS:
SALTON, INC., a Delaware corporation
By:	/s/ William Lutz Title: Executive Vice President
TOASTMASTER, INC., a Missouri corporation
By:	/s/ William Lutz Title: Executive Vice President
SALTON TOASTMASTER LOGISTICS, LLC, a Delaware limited liability company
By:	/s/ William Lutz Title: Executive Vice President
GUARANTORS:
HOME CREATIONS DIRECT, LTD., a Delaware corporation
By:	/s/ William Lutz Title: Executive Vice President
ICEBOX, LLC, an Illinois limited liability company
By:	/s/ William Lutz Title: Executive Vice President
FAMILY PRODUCTS, INC., a Delaware corporation
By:	/s/ William Lutz Title: Executive Vice President

Signature Page — Credit Agreement

S-1

SALTON HOLDINGS, INC., a Delaware corporation
By:	/s/ William Lutz Title: Executive Vice President
SONEX INTERNATIONAL CORPORATION, a Delaware corporation
By:	/s/ William Lutz Title: Executive Vice President

Signature Page — Credit Agreement

S-2

AGENT AND LENDERS:
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD., as Agent and a Lender
By:	Harbinger Capital Partners Offshore Manager, L.L.C., its Investment Manager
	By: Name:	/s/ William R. Lucas, Jr. William R. Lucas, Jr.
	Title:	Executive Vice President – General Counsel & Secretary
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P., as a Lender
By:	Harbinger Capital Partners Special Situations GP, LLC., its General Partner
	By: Name:	/s/ William R. Lucas, Jr. William R. Lucas, Jr.
	Title:	Executive Vice President – General Counsel & Secretary

Signature Page — Credit Agreement

S-3

ANNEX A
to
Credit Agreement
Definitions

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

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

     “Accounts” means all of each Borrower’s now owned or hereafter acquired or arising accounts, as defined in the UCC, including any rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance and all health care receivables.

     “Administrative Borrower” has the meaning specified in Section 13.19.

     “Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or which owns, directly or indirectly, five percent (5%) or more of the outstanding equity interest of such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. No Lender shall be deemed an affiliate of any Borrower Party.

     “Agent” means Harbinger Capital Partners Master Fund I, Ltd.

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

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

     “Agreement” means the Reimbursement and Senior Second Lien Credit Agreement to which this Annex A is attached, as from time to time amended, restated, supplemented or otherwise modified.

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

     “APN Holdco” has the meaning specified in the recitals to this Agreement.

     “Applica” has the meaning specified in the recitals to this Agreement.

     “Applicable Margin” means ten and one half percent (10.50%).

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

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

     “Attorney Costs” means and includes all reasonable fees, expenses and disbursements of any law firm or other counsel engaged by the Agent, and the reasonably allocated costs and expenses of internal legal services of the Agent.

     “Availability” means Availability as such term is defined in the First Lien Credit Agreement, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof.

     “Avoidance Provisions” has the meaning specified in Section 14.1(b)(iii).

     “Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. § 101 et seq.), as in effect from time to time.

     “Blocked Account Agreement” means any agreement among a Borrower, the First Lien Agent and a Clearing Bank, concerning the collection of payments which represent the proceeds of Accounts or of any other Collateral.

     “Borrower Parties” means the Parent, the Borrowers and the Guarantors, and “Borrower Party” shall mean any one of the foregoing Borrower Parties.

     “Borrowers” means the Parent, Toastmaster, Inc. and Salton Toastmaster Logistics LLC and “Borrower” shall mean any one of the foregoing Borrowers.

     “Borrowing” means a borrowing hereunder consisting of the Term Loan made on the Closing Date by the Lenders to the Borrowers.

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

     “Capital Expenditures” means all payments due (whether or not paid during any fiscal period) in respect of the cost of any Fixed Asset or improvement, or replacement, substitution, or addition thereto, which has a useful life of more than one year, including, without limitation, those costs arising in connection with the direct or indirect acquisition of such asset by way of increased product or service charges or in connection with a Capital Lease.

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

     “Change of Control” shall mean (i) directly or indirectly a sale, transfer, or other conveyance of all or substantially all of the assets of the Parent in one transaction or a series of

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transactions, (ii) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than the shareholders of the Parent as of the Original Closing Date (as such term is defined in the First Lien Credit Agreement) (or any Person or group of Persons that, as of the Agreement Date, are Affiliates of such shareholders), is or becomes the “beneficial owner” (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have “beneficial ownership” of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than thirty-five percent (35%) of the aggregate number of votes of all classes of capital stock of the Parent that ordinarily have voting power for the election of directors of the Parent, (iii) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the board of directors of the Parent, together with any new directors whose election by such board or whose nomination for election by the shareholders of the Parent was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the board of directors of the Parent then in office or (iv) the Parent shall cease to own, directly or indirectly, 100% of the Stock of any Subsidiary, except as otherwise permitted by Section 7.9.

     “Chattel Paper” means all of the Parent’s and each Subsidiary’s now owned or hereafter acquired chattel paper, as defined in the UCC, including electronic chattel paper and tangible chattel paper.

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

     “Closing Date” means the date of this Agreement.

     “Code” means the Internal Revenue Code of 1986, as in effect from time to time.

     “Collateral” means all of each Borrower Party’s Accounts, Inventory, Chattel Paper, Documents, Investment Property, Deposit Accounts, Equipment and General Intangibles, and all other assets of any Person from time to time subject to the Agent’s Liens securing payment or performance of the Obligations, but excluding up to thirty-five percent (35%) of the equity interests of any Borrower Party in any Foreign Subsidiary.

     “Collections” means all cash, checks, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).

     “Commitment” means, with respect to each Lender, the principal amount of the Term Loan held by such Lender, and, with respect to all Lenders, the aggregate principal amount of the Term Loan, in each case such Dollar amounts may be set forth on the register maintained by the Lenders or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 11.2, as such Commitment may be adjusted from time to time in accordance with the provisions of Section 11.2, and “Commitments” means, collectively, the aggregate amount of the Commitments of all of the Lenders, as such obligations may be reduced from time to time pursuant to the terms hereof.

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     “Consolidated Adjusted Net Earnings from Operations” means, with respect to any fiscal period of the Parent, the Parent’s net income on a consolidated basis after provision for income taxes for such fiscal period, as determined in accordance with GAAP and reported on the Financial Statements for such period, excluding any and all of the following included in such net income: (a) gain or loss arising from the sale of any capital assets; (b) gain arising from any write up in the book value of any asset or loss arising from any write down in the book value of any asset other than an asset the value of which is included in the calculation of the Borrowing Base (as such term is defined in the First Lien Credit Agreement), (c) earnings or losses of any Person, substantially all the assets or Stock of which have been acquired by the Parent or any of its Subsidiaries in any manner, to the extent realized by such other Person prior to the date of acquisition; (d) earnings or losses of any Person in which the Parent or any of its Subsidiaries has a minority ownership interest unless (and only to the extent) such earnings or losses shall actually have been received by the Parent or any of its Subsidiaries in the form of cash distributions; (e) earnings or losses of any Person to which assets of the Parent or any of its Subsidiaries shall have been sold, transferred or disposed of, or into which the Parent or any of its Subsidiaries shall have been merged, or which has been a party with the Parent or any of its Subsidiaries to any consolidation or other form of reorganization, prior to the date of such transaction; (f) gain arising from the acquisition of debt or equity securities of the Parent or any of its Subsidiaries or from cancellation or forgiveness of Consolidated Debt; and (g) gain and non-cash loss arising from extraordinary items or from any other non-recurring transaction, as determined in accordance with GAAP.

     “Consolidated Debt” means, without duplication, all indebtedness for borrowed money or the deferred purchase price of property, to any Person, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, excluding trade payables, but including (a) all Obligations; (b) all obligations or liabilities created or arising under any Capital Lease or conditional sale or other title retention agreement with respect to property used or acquired by any Borrower Party, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of the Borrower Parties prepared in accordance with GAAP; (c) all obligations and liabilities under Guaranties, (d) the present value (discounted at the Base Rate) of lease payments due under synthetic leases, and (e) earn-outs or other contingent payments incurred in connection with any acquisition to the extent such earn-outs or payments are not reflected as expenses on the income statements of such Person; provided, further, however, that in no event shall the term Consolidated Debt include the capital stock surplus, retained earnings, minority interests in the common stock of Subsidiaries, lease obligations (other than pursuant to (b) or (d) above), reserves for deferred income taxes and investment credits, or other deferred credits or reserves.

     “Consolidated EBITDA” means, with respect to any fiscal period of the Parent, Consolidated Adjusted Net Earnings from Operations, plus, to the extent deducted in the determination of Consolidated Adjusted Net Earnings from Operations for that fiscal period, interest expenses, Federal, state, local and foreign income taxes, depreciation and amortization (including, without limitation, amortization of restricted stock, stock appreciation rights and similar equity instruments), and impairment losses incurred in connection with a restructuring of

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the U.S. operations in an aggregate amount not to exceed the applicable amount set forth in Schedule E-2 for each applicable period.

     “Consolidated Fixed Charge Coverage Ratio” means, as of any date of determination, with respect to any fiscal period of the Parent, on a consolidated basis, the ratio of (a) the sum of (i) Consolidated EBITDA minus (ii) Capital Expenditures (excluding Capital Expenditures funded with Consolidated Debt other than Revolving Loans (as such term is defined in the First Lien Credit Agreement), but including, without duplication, principal payments with respect to such Consolidated Debt) to (b) Consolidated Fixed Charges.

     “Consolidated Fixed Charges” means, with respect to any fiscal period of the Parent on a consolidated basis, without duplication, cash interest expense, principal payments of Consolidated Debt (excluding any historical or future cash payments made with respect to the refinancing of principal of Consolidated Debt), all Distributions paid, all cash Investments, all Specified Transactions, and Federal, state, local and foreign income taxes paid in cash.

     “Contaminant” means any material defined as waste, pollutant, hazardous substance, toxic substance, hazardous waste or special waste under Environmental Laws, including without limitation, petroleum or petroleum-derived substance or waste, asbestos in any form or condition, polychlorinated biphenyls (“PCBs”), or any constituent of any such substance or waste.

     “Contributing Borrower” has the meaning specified in Section 14.1(e).

     “Copyright Security Agreement” means Copyright Security Agreement, executed and delivered by the Borrowers to the Agent, for the benefit of the Agent and the Lenders, to evidence and perfect the Agent’s security interest in the Borrowers’ present and future copyrights and related licenses and rights.

     “Debt” means, without duplication, all indebtedness for borrowed money or the deferred purchase price of property, to any Person, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, excluding trade payables, but including (a) all Obligations; (b) all obligations or liabilities created or arising under any Capital Lease or conditional sale or other title retention agreement with respect to property used or acquired by any Borrower Party, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of the Borrower Parties prepared in accordance with GAAP; (c) all obligations and liabilities under Guaranties; (d) the present value (discounted at the Base Rate) of lease payments due under synthetic leases; (e) earn-outs or other contingent payments incurred in connection with any acquisition to the extent such earn-outs or payments are not reflected as expenses on the income statements of such Person; and (f) all obligations in respect to agreements for the purposes of hedging foreign currency exchange rates; provided, further, however, that in no event shall the term Debt include the capital stock surplus, retained earnings, minority interests in the common stock of Subsidiaries, lease obligations (other than pursuant to (b) or (d) above), reserves for deferred income taxes and investment credits, or other deferred credits or reserves.

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

     “Default Rate” means a fluctuating per annum interest rate at all times equal to the sum of (a) the LIBOR Rate plus (b) twelve and one-half percent (12.5%) per annum. Each Default Rate shall be adjusted simultaneously with any change in the applicable Interest Rate.

     “Definitive Agreements” has the meaning set forth in the recitals to this Agreement.

     “Deposit Accounts” means all “deposit accounts” as such term is defined in the UCC, now or hereafter held in the name of any Borrower Party, including, without limitation, any checking or other demand deposit account, time, savings, passbook or similar account maintained with a bank.

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

     “Documents” means all “documents” as such term is defined in the UCC, including bills of lading, warehouse receipts or other documents of title, now owned or hereafter acquired by any Borrower Party.

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

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

     “Drawdown Fee” has the meaning specified in Section 1.5.

     “EBITDA” means, with respect to any fiscal period of the Borrowers, US Adjusted Net Earnings from Operations, plus, to the extent deducted in the determination of US Adjusted Net Earnings from Operations for that fiscal period, interest expenses, Federal, state, local and foreign income taxes, depreciation and amortization (including, without limitation, amortization of restricted stock, stock appreciation rights and similar equity instruments), and impairment losses incurred in connection with a restructuring of the U.S. operations in an aggregate amount not to exceed the applicable amount set forth in Schedule E-2 for each applicable period.

     “Eligible Accounts” means Eligible Accounts as defined in the First Lien Credit Agreement as in effect on the date hereof.

     “Eligible Assignee” means (a) a qualified institutional buyer (as defined by Rule 144A promulgated under the Securities Act of 1933, as amended); provided, however, a natural person

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cannot be an Eligible Assignee; (b) any Lender listed on the register of the Term Loan maintained by the Agent; (c) any Affiliate of any Lender; and (d) a Related Fund.

     “Eligible In Transit Inventory” means Eligible In Transit Inventory as defined in the First Lien Credit Agreement as in effect on the date hereof..

     “Eligible Landed Inventory” means Eligible Landed Inventory as defined in the First Lien Credit Agreement as in effect on the date hereof..

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

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

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

     “Equipment” means all of any Borrower Party’s now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and other tangible personal property (other than consumer goods, farm products or Inventory), including embedded software, motor vehicles with respect to which a certificate of title has been issued, aircraft, dies, tools, jigs, molds and office equipment, as well as all of such types of property leased by any Borrower Party and all of any Borrower Party’s rights and interests with respect thereto under such leases (including, without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.

     “ERISA” means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder, as in effect from time to time.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with any Borrower Party within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan, (b) a withdrawal by any Borrower Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under

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Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the any Borrower Party or any ERISA Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan is in reorganization, (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multi-employer Plan, (e) the occurrence of an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multi-employer Plan, or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower Party or any ERISA Affiliate.

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

     “Exchange Act” means the Securities Exchange Act of 1934, and regulations promulgated thereunder, as in effect from time to time.

     “Excluded Taxes” has the meaning specified in Section 4.1(a).

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

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

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

     “First Lien Agent” means WFF, in its capacity as administrative agent and collateral agent for the agents and lenders party to the First Lien Credit Agreement, together with its successors and assigns thereto in such capacities.

     “First Lien Co-Agent” means Silver Point, in its capacity as the co-agent, syndication agent, and documentation agent for the lenders party to the First Lien Credit Agreement, together with its successors and assigns thereto in such capacities.

     “First Lien Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of May 9, 2003 and amended and restated as of June 15, 2004, as amended by that certain Resignation and Appointment Agreement dated as of August 30, 2004, as further amended by that certain Second Amendment to Amended and Restated Credit Agreement dated

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as of May 11, 2005, as further amended by that certain Third Amendment to Amended and Restated Credit Agreement dated as of July 8, 2005, as further amended by that certain Fourth Amendment to Amended and Restated Credit Agreement dated as of September 22, 2005, as further amended by that certain Fifth Amendment to Amended and Restated Credit Agreement dated as of October 7, 2005, as further amended by that certain Sixth Amendment to Amended and Restated Credit Agreement dated as of November 9, 2005, as further amended by that certain Seventh Amendment to Amended and Restated Credit Agreement dated as of February 8, 2006, as further amended by that certain Eighth Amendment to Amended and Restated Credit Agreement dated as of May 10, 2006, as further amended by that certain Ninth Amendment to Amended and Restated Credit Agreement dated as of August 15, 2006, as further amended by that certain Tenth Amendment to Amended and Restated Credit Agreement dated as of February 12, 2007, as further amended by that certain Eleventh Amendment to Amended and Restated Credit Agreement dated as of April 13, 2007, as further amended by that certain Twelfth Amendment to Amended and Restated Credit Agreement dated as of June 28, 2007, as further amended by that certain Thirteenth Amendment to Amended and Restated Credit Agreement dated as of July 30, 2007, as further amended by that certain Fourteenth Amendment to Amended and Restated Credit Agreement dated as of July 21, 2007, as further amended by that certain Fifteenth Amendment to Amended and Restated Credit Agreement dated as of August 6, 2007, as further amended by that certain Sixteenth Amendment to Amended and Restated Credit Agreement dated as of August 8, 2007, as further amended by that certain Seventeenth Amendment to Amended and Restated Credit Agreement dated October 1, 2007, and as further amended, by and among the Parent, Borrowers, the First Lien Agent, the First Lien Co-Agent, and the lenders from time to time party thereto, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof.

     “First Lien Lenders” means the Lenders from time to time that are parties to the First Lien Credit Agreement as Lender.

     “First Lien Loan Documents” means the Loan Documents as such term is defined in the First Lien Credit Agreement, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof.

     “First Lien Loans” means the Loans as such term is defined in the First Lien Credit Agreement, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof.

     “First Lien Maximum Amount” means any First Lien Loan; provided that on the date of (and after giving effect to) the incurrence of such First Lien Loan, the aggregate principal amount of all outstanding First Lien Loans did not exceed, the lesser of: (a) (i)$187,500,000 minus the principal amount of Purchased Loans plus (ii) $5,000,000 and (b) the Borrowing Base (as set forth in the Borrowing Base Certificate then in effect pursuant to the First Lien Credit Agreement) plus $5,000,000.

     “First Lien Obligations” means the Obligations as such term is defined in the First Lien Credit Agreement, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof as long as the First Lien Maximum Amount is not increased.

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     “First Lien Term Loan” means the Term Loan as such term is defined in the First Lien Credit Agreement, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof.

     “Fiscal Month” means any fiscal month of any Fiscal Year.

     “Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

     “Fiscal Year” means the Parent’s fiscal year for financial accounting purposes which ends each year on the Saturday closest to June 30. The current Fiscal Year of the Parent will end on June 28, 2008.

     “Fixed Assets” means the Equipment and Real Estate of the Borrowers.

     “Foreign Adjusted Net Earnings from Operations” means, with respect to any fiscal period of the Foreign Subsidiaries, the Foreign Subsidiaries’ net income on a consolidated basis after provision for income taxes for such fiscal period, as determined in accordance with GAAP and reported on the Financial Statements for such period, excluding any and all of the following included in such net income: (a) gain or loss arising from the sale of any capital assets; (b) gain arising from any write up in the book value of any asset or loss arising from any write down in the book value of any asset other than an asset the value of which is included in the calculation of the Borrowing Base (as such term is defined in the First Lien Credit Agreement); (c) earnings or losses of any Person, substantially all the assets or Stock of which have been acquired by the Foreign Subsidiaries in any manner, to the extent realized by such other Person prior to the date of acquisition; (d) earnings or losses of any Person in which any Foreign Subsidiary has a minority ownership interest unless (and only to the extent) such earnings or losses shall actually have been received by such Foreign Subsidiary in the form of cash distributions; (e) earnings or losses of any Person to which assets of any Foreign Subsidiary shall have been sold, transferred or disposed of, or into which any Foreign Subsidiary shall have been merged, or which has been a party with any Foreign Subsidiary to any consolidation or other form of reorganization, prior to the date of such transaction; (f) gain arising from the acquisition of debt or equity securities of any Foreign Subsidiary or from cancellation or forgiveness of Debt; (g) gain and non-cash losses arising from extraordinary items or from any other non-recurring transaction, as determined in accordance with GAAP; and (h) all restructuring charges incurred by the Foreign Subsidiaries through October 31, 2004 as described on Schedule E-3.

     “Foreign EBITDA” means, with respect to any fiscal period of the Foreign Subsidiaries, Foreign Adjusted Net Earnings from Operations, plus, to the extent deducted in the determination of Foreign Adjusted Net Earnings from Operations for that fiscal period, interest expenses, Federal, state, local and foreign income taxes, depreciation and amortization (including, without limitation, amortization of restricted stock, stock appreciation rights and similar equity instruments).

     “Foreign Leverage Ratio” means a ratio determined as of the relevant calculation date by dividing Foreign Net Debt as of the last day of the applicable period by Foreign EBITDA for such period.

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     “Foreign Net Debt” means, with respect to the Foreign Subsidiaries, without duplication, (I) all indebtedness for borrowed money or the deferred purchase price of property, to any Person, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, excluding trade payables, but including (a) all Obligations of the Foreign Subsidiaries; (b) all obligations or liabilities created or arising under any Capital Lease or conditional sale or other title retention agreement with respect to property used or acquired by any Foreign Subsidiary, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Foreign Net Debt only to the extent of the book value of such property as would be shown on a balance sheet of the Foreign Subsidiaries prepared in accordance with GAAP; (c) all obligations and liabilities of the Foreign Subsidiaries under Guaranties; (d) the present value (discounted at the Base Rate) of lease payments of the Foreign Subsidiaries due under synthetic leases, and (e) earn-outs or other contingent payments incurred by the Foreign Subsidiaries in connection with any acquisition to the extent such earn-outs or payments are not reflected as expenses on the income statements of such Person; provided, further, however, that in no event shall the term Foreign Net Debt include the capital stock surplus, retained earnings, minority interests in the common stock of Subsidiaries, lease obligations (other than pursuant to (b) or (d) above), reserves for deferred income taxes and investment credits, or other deferred credits or reserves, minus (II) cash held by the Foreign Subsidiaries.

     “Foreign Pledge Agreements” means, collectively those certain pledge agreements, in form and substance reasonably satisfactory to the Agent, among the Borrower Parties, or any of them, and the Agent for the benefit of the Agent and the other Lenders pursuant to which one or more Borrower Parties or Subsidiaries of Borrower Parties pledge certain equity interest of Foreign Subsidiaries.

     “Foreign Subsidiaries” has the meaning specified in Section 5.2(a).

     “Funded Debt” shall mean, for any date, total outstanding Obligations of Borrowers as of the date of determination.

     “Funding Borrower” has the meaning specified in Section 14.1(e).

     “GAAP” means generally accepted accounting principles and practices set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the United States accounting profession), which are applicable to the circumstances as of the Closing Date.

     “General Intangibles” means all of the Parent’s and each Subsidiary’s now owned or hereafter acquired general intangibles, choses in action and causes of action and all other intangible personal property of the Parent and each Subsidiary of every kind and nature (other than Accounts), including, without limitation, all contract rights, payment intangibles, Proprietary Rights, corporate or other business records, inventions, designs, blueprints, plans, specifications, patents, patent applications, trademarks, service marks, trade names, trade secrets, goodwill,

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copyrights, computer software, customer lists, registrations, licenses, franchises, tax refund claims, any funds which may become due to the Parent or any Subsidiary in connection with the termination of any Plan or other employee benefit plan or any rights thereto and any other amounts payable to the Parent or any Subsidiary from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which the Parent or any Subsidiary is beneficiary, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged equity interests or Investment Property and any letter of credit, guarantee, claim, security interest or other security held by or granted to the Parent or any Subsidiary.

     “Good-Faith Protest” means the right of a Borrower Party to protest any Lien described in clause (d) of the definition of Permitted Liens, provided that (a) a reserve acceptable to the Agent in its commercially reasonable discretion with respect to such obligation is established, (b) any such protest is instituted promptly and prosecuted diligently by such Borrower Party in good faith, and (c) the Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Agent’s Liens.

     “Goods” means all “goods” as defined in the UCC, now owned or hereafter acquired by any Borrower Party, wherever located, including embedded Software to the extent included in “goods” as defined in the UCC.

     “Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

     “Guarantors” means the Parent and those Subsidiaries signatory to the Subsidiary Guaranty from time to time.

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

     “Indemnified Liabilities” has the meaning specified in Section 13.11.

     “Indemnified Person” has the meaning specified in Section 13.11.

     “Indentures” has the meaning specified in the definition of Senior Notes.

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     “Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignment for the benefit of creditors, formal or informal moratoria, composition, extension generally with creditors or proceedings seeking reorganization, arrangement or other similar relief.

     “Instruments” means all “instruments” as such term is defined in the UCC, now owned or hereafter acquired by any Borrower Party.

     “Intercompany Account” means the net aggregate month-end sum of the following accounts: (a) “Notes Receivable-Salton CV”; plus (b) “Interest Receivable- Salton CV” minus (c) “Interco Payable-Salton Hong Kong”; minus (d) Other Payables -Salton UK; plus (e) Interco receivable-Toastmaster de Mexico plus (f) all other accounts receivable maintained by Borrowers with Foreign Subsidiaries minus (g) all other accounts payable maintained by Borrowers with Foreign Subsidiaries.

     “Intercreditor Agreement” means that certain Amended and Restated Intercreditor Agreement dated as of October 1, 2007 among the First Lien Co-Agent, the First Lien Agent, the Second Lien Agent and the Agent as amended, modified, supplemented or restated from time to time.

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

     “Inventory” means all of any Borrower Party’s right, title and interest with respect to “inventory,” as such term is defined in the UCC, wherever located, and in any event including now owned and hereafter acquired inventory, goods and merchandise, wherever located, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, work-in-process, finished goods (including embedded Software), other materials and supplies of any kind, nature or description which are used or consumed in any Borrower Party’s business or used in connection with the packing, shipping, advertising, selling or finishing of such goods, merchandise, and all documents of title or other Documents representing them.

     “Investment” means, as to any Borrower Party, any acquisition of property by such Borrower Party in exchange for cash or other property, whether in the form of an acquisition of stock, debt, or other indebtedness or obligation, or the purchase or acquisition of any other property, or a loan, advance, capital contribution, or subscription.

     “Investment Property” means all of any Borrower Party’s right, title and interest in and to any and all: (a) securities, whether certificated or uncertificated; (b) securities entitlements; (c) securities accounts; (d) commodity contracts; or (e) commodity accounts.

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

     “Junior Liens Intercreditor Agreement” means that certain Junior Liens Intercreditor Agreement dated as of October 1, 2007, among the Second Lien Agent and the Lender, as may be amended, modified, supplemented or restated from time to time.

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     “Knowledge” means, with respect to the Parent or the Administrative Borrower, as applicable, the best knowledge of the senior executive officers of the Parent or the Administrative Borrower, as applicable.

     “Latest Projections” means the projections most recently received by the Agent pursuant to Section 5.3(b).

     “Lender” and “Lenders” have the meanings specified in the introductory paragraph hereof.

     “LIBOR Rate” means, the six month London Interbank Offered Rate, as published in the Wall Street Journal (or, if such rate is no longer published in the Wall Street Journal, in a comparable industry source selected by the Agent) on the first day of each interest period; provided, however, if the first day of any Interest Period is not a Business Day, then it shall be based on such rate published on the Business Day immediately preceding such date. In the event that the LIBOR Rate ceases to be published by the Wall Street Journal or any other industry publication, the Federal Funds Rate as defined herein shall be substituted as the applicable rate and all references herein to “LIBOR Rate” shall mean and refer to the Federal Funds Rate.

     “Lien” means: (a) any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including a security interest, charge, claim, or lien arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes; (b) to the extent not included under the preceding clause (a), any reservation, exception, encroachment, easement, right-of-way, covenant, condition, restriction, lease or other title exception or encumbrance affecting property; and (c) any contingent or other agreement to provide any of the foregoing.

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

     “Loan Documents” means this Agreement, the Intercreditor Agreement, the Patent and Trademark Security Agreement, the Copyright Security Agreement, Security Agreement, the Subsidiary Guaranty, the Pledge Agreement, the Foreign Pledge Agreements and any other agreements, instruments, and documents heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise relating to the Obligations, the Collateral, or any other aspect of the transactions contemplated by this Agreement, in each case as amended, restated, supplemented or otherwise modified from time to time.

     “Loan Parties” means, collectively, the Borrower Parties and the Foreign Subsidiaries (other than Amalgamated Appliance Holding Limited).

     “Loan Purchase Agreement” has the meaning specified in the recitals.

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

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

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

     “Maximum Borrower Liability” has the meaning specified in Section 14.1(b).

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

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

     “Net Amount of Eligible Accounts” means Net Eligible Accounts as defined in the First Lien Credit Agreement as in effect on the date hereof.

     “Net Cash Proceeds” means (a) with respect to the sale or issuance by any Person or any of its Subsidiaries of any shares of its Stock, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary in connection therewith, after deducting therefrom only (i) reasonable costs and expenses related thereto incurred by such Person or such Subsidiary in connection therewith (including, without limitation, legal, accounting and investment banking fees, and underwriting discounts and commissions), (ii) transfer taxes paid by such Person or such Subsidiary in connection therewith and (iii) net income taxes to be paid in connection therewith (after taking into account any tax credits or deductions and any tax sharing arrangements), and (b) with respect to any sale or disposition by any Person or any Subsidiary thereof of property or assets, the amount of Collections received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Person or such Subsidiary, in connection therewith after deducting therefrom only (i) the amount of any Debt secured by any Permitted Lien on any asset (other than (A) Debt owing to Agent or any Lender under this Agreement or the other Loan Documents and (B) Debt assumed by the purchaser of such asset) which is required to be, and is, repaid in connection with such disposition, (ii) reasonable expenses related thereto incurred by such Person or such Subsidiary in connection therewith, and (iii) taxes paid or payable to any taxing authorities by such Person or such Subsidiary in connection therewith, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate and are properly attributable to such transaction; in the case of each of clauses (a) and (b), to the extent, but only to the extent, that the amounts so deducted are (x) actually paid to a Person that, except in the case of reasonable out-of-pocket expenses, is not an Affiliate of such Person or any of its Subsidiaries and (y) properly attributable to such transaction or to the asset that is the subject thereof, as the case may be.

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     “Net Liquidation Value of Inventory” means Net Liquidation Value of Inventory as defined in the First Lien Credit Agreement as in effect on the date hereof.

     “Note” has the meaning specified in Section 1.7.

     “Obligations” means all present and future loans, advances, liabilities, obligations, covenants, duties, and debts owing by the Loan Parties to the Agent, any other Agent-Related Person and/or any Lender, arising under or pursuant to this Agreement or any of the other Loan Documents, whether or not evidenced by any note, or other instrument or document, whether arising from an extension of credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, as principal or guarantor, and including all principal, interest (including interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower Parties, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), charges, expenses, damages, fees, attorneys’ fees, filing fees and any other sums chargeable to any Borrower hereunder or under any of the other Loan Documents. “Obligations” includes, without limitation, all debts, liabilities, and obligations now or hereafter arising from or in connection with the Letter of Credit.

     “Originating Lender” has the meaning specified in Section 11.2(e).

     “Other Debtor Relief Law” has the meaning specified in Section 14.1(b)(iii).

     “Other Taxes” means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents.

     “Parent” has the meaning specified in the preamble of this Agreement.

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

     “Participant Register” has the meaning specified in Section 11.2(h).

     “Patent and Trademark Security Agreement” means any Patent Security Agreement and the Trademark Security Agreement executed and delivered by certain of the Borrower Parties to the Agent to evidence and perfect the Agent’s security interest in such Borrower Parties’ present and future patents, trademarks, and related licenses and rights for the benefit of the Agent and the Lenders.

     “Payment Account” means each bank account, including, without limitation, each lockbox account to which the proceeds of Accounts and other Collateral are deposited or credited, and which is maintained in the name of a Borrower Party or, at any time after Agent has taken full dominion over the Payment Accounts, on terms acceptable to the Agent.

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

     “Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Parent or any Subsidiary sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multi-employer Plan has made contributions at any time during the immediately preceding five (5) plan years.

     “Permitted Acquisition” means any acquisition by any Borrower Party of all or substantially all of the assets or Stock of a Person so long as (a) no Default or Event of Default exists or would be caused thereby and (b) the Administrative Borrower delivers evidence to the Agent that Availability (x) for each of the thirty (30) days most recently ending was not (and after giving effect to such transaction would not have been) and (y) for each of the thirty (30) days immediately succeeding such transaction on a pro forma basis (after giving effect to such transaction) would not be (i) less than (1) $40,000,000 for any day from and after January 1 though June 30 of any year and (2) $30,000,000 for any day from and after July 1 through December 31 of any year, Permitted Acquisitions which do not exceed $5,000,000 with respect to any individual acquisition and (ii) less than (1) $55,000,000 for any day from and after January 1 though June 30 of any year and (2) $40,000,000 for any day from and after July 1 through December 31 of any year, Permitted Acquisitions which exceed $5,000,000 with respect to any individual acquisition; and “Permitted Acquisitions” means each Permitted Acquisition.

     “Permitted Liens” means:

          (a) (i) Liens for Taxes not delinquent or (ii) statutory Liens for Taxes in an amount not to exceed $500,000 (or such greater amount as shall be covered by a bond); provided that the payment of such taxes which are due and payable is being contested in good faith and by appropriate proceedings diligently pursued and as to which adequate financial reserves have been established on the Parent’s and the Subsidiaries’ books and records and a stay of enforcement of any such Lien is in effect;

          (b) the Agent’s Liens;

          (c) Liens held by the First Lien Agent or the First Lien Co-Agent, as agents for the lenders party to the First Lien Credit Agreement, to secure the First Lien Obligations;

          (d) Liens held by the Second Lien Agent, as agent for the lenders party to the Second Lien Credit Agreement, to secure the Second Lien Obligations which are subordinate to the Liens granted to the Agent pursuant to the Loan Documents;

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

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          (f) Liens securing the claims or demands of materialmen, mechanics, carriers, repairmen, warehousemen, landlords and other like Persons, so long as (i) such Liens are subject to a Good-Faith Protest or (ii) with respect to such Liens arising from the nonpayment of such claims or demand when due, such claims or demands do not exceed $200,000 in the aggregate (or such greater amount as shall be covered by a bond);

          (g) Liens constituting encumbrances in the nature of reservations, exceptions, encroachments, easements, rights of way, covenants running with the land, and other similar title exceptions or encumbrances affecting any Real Estate; provided that they do not in the aggregate materially detract from the value of the Real Estate or materially interfere with its use in the ordinary conduct of any Borrower Party’s business;

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

          (i) Liens securing Capital Leases and purchase money Debt permitted in Section 7.13;

          (j) any Liens on Property of a Person acquired in any Permitted Acquisition otherwise permitted hereunder; provided that such Liens (i) attach to assets valued individually or in the aggregate not in excess of $1,000,000 and (b) are existing on the date of such Permitted Acquisition and do not relate to any other then-existing or after-acquired assets of a Borrower Party following such Permitted Acquisition; and

          (k) Liens, if any, in effect as of the Closing Date and described in Schedule E-2.

     “Permitted Transaction” means (1) the purchase, prepayment or redemption of the Senior Notes solely to the extent permitted by the First Lien Credit Agreement, and (2) any one or more of the following transactions of a Borrower Party, on the condition that the Administrative Borrower delivers evidence to the Agent that no Default or Event of Default then exists and that the Availability (x) for each of the thirty (30) days most recently ending was not (and after giving effect to such transaction would not have been) and (y) for each of the thirty (30) days immediately succeeding such transaction on a pro forma basis (after giving effect to such transaction) would not be less than (a) $55,000,000 for any day from and after January 1 through June 30 of any year and (b) $40,000,000 for any day from and after July 1 through December 31 of any year,

               (i) dividends on capital stock of Parent not to exceed $3,000,000 in the aggregate during any Fiscal Year;

               (ii) the redemption or other acquisitions by Parent of any of its bonds or capital stock (or any options or warrants for such stock);

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and “Permitted Transactions” means each Permitted Transaction.

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

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

     “Pledge Agreement” means the Pledge Agreement of even date herewith among certain of the Borrower Parties party thereto and the Agent for the benefit of the Agent and the other Lenders.

     “Proprietary Rights” means all of any Borrower Party’s now owned and hereafter arising or acquired: licenses, franchises, permits, patents, patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, patent applications, copyright applications, trademark and service mark applications, and all licenses and rights related to any of the foregoing, including those patents, trademarks, service marks, trade names and copyrights set forth on Schedule 6.12 hereto, and all other rights under any of the foregoing, all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing.

     “Pro Rata Share” means, with respect to a Lender, a fraction (expressed as a percentage), the numerator of which is the amount of such Lender’s Commitment and the denominator of which is the sum of the amounts of all of the Lenders’ Commitments, or if no Commitments are outstanding, a fraction (expressed as a percentage), the numerator of which is the amount of Obligations owed to such Lender and the denominator of which is the aggregate amount of the Obligations owed to the Lenders.

     “Purchased Loans” has the meaning set forth in the Loan Purchase Agreement.

     “Real Estate” means all of any Borrower Party’s now or hereafter owned or leased estates in real property, including, without limitation, all fees, leaseholds and future interests, together with all of such Borrower Party’s now or hereafter owned or leased interests in the improvements thereon, the fixtures attached thereto and the easements appurtenant thereto.

     “Redemption Price” has the meaning specified in Section 3.1(c).

     “Register” has the meaning specified in Section 11.2(g).

     “Registered Loan” means any loan recorded on the Register pursuant to Section 11.2(g).

     “Reimbursement Obligation” has the meaning specified in Section 1.2.

     “Related Fund” means any fund or account managed by any Lender or an Affiliate of any Lender or by the investment manager of any such fund or account.

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     “Release” means a release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor environment or into or out of any Real Estate or other property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or Real Estate or other property.

     “Report” has the meaning specified in Section 12.18(a).

     “Reportable Event” means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the thirty (30) day notice requirement under ERISA has been waived in regulations issued by the PBGC.

     “Required Amount” has the meaning specified in Section 7.27.

     “Requirement of Law” means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject.

     “Responsible Officer” means the corporate comptroller, vice president of finance, chief financial officer or the president of the Administrative Borrower, any other officer having substantially the same authority and responsibility.

     “Restricted Investment” means, as to any Borrower Party, any Investment, except the following: (a) acquisitions of Equipment and intellectual property to be used in the business of such Borrower Party so long as the acquisition costs thereof constitute, or are deemed to constitute, Capital Expenditures permitted hereunder; (b) acquisitions of Inventory in the ordinary course of business of such Borrower Party; (c) acquisitions of current assets acquired in the ordinary course of business of the Parent; (d) direct obligations of the United States of America, or any agency thereof, or obligations guaranteed by the United States of America, provided that such obligations mature within one year from the date of acquisition thereof; (e) acquisitions of certificates of deposit maturing within one year from the date of acquisition, bankers’ acceptances, Eurodollar bank deposits, or overnight bank deposits, in each case issued by, created by, or with a bank or trust company organized under the laws of the United States of America or any state thereof having capital and surplus aggregating at least $1,000,000,000; (f) acquisitions of commercial paper given a rating of “A2” or better by Standard & Poor’s Corporation or “P2” or better by Moody’s Investors Service, Inc. and maturing not more than ninety (90) days from the date of creation thereof; and (g) Permitted Acquisitions.

     “SEC” means the United States Securities and Exchange Commission and any successor thereto.

     “Second Lien Agent” means The Bank of New York, in its capacity as agent for the lenders party to the Subordinate Second Lien Credit Agreement, together with its successors and assigns.

     “Second Lien Credit Agreement” means that certain Credit Agreement, dated as of August 26, 2005, among the Parent, Borrowers, the Second Lien Agent, and the Lenders from

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time to time party thereto, as such agreement is amended, modified, supplemented or restated in accordance with the terms thereof and hereof..

     “Second Lien Obligations” means the Obligations as such term is defined in the Second Lien Credit Agreement, as such is amended, modified, supplemented or restated from time to time in accordance with the terms thereof and hereof.

     “Security Agreement” means the Security Agreement of even date herewith among the Borrower Parties and the Agent for the benefit of the Lenders.

     “Seller Subordinated Debt” means Debt of the Borrower Parties incurred in connection with any Permitted Acquisition and initially owing to the seller in such Permitted Acquisition; provided, that (a) such Debt shall be subordinated, pursuant to subordination provisions acceptable to the Agent in its sole discretion and such provisions shall be no less favorable to the Lenders than the subordination provisions of any existing subordinated debt, to the obligations of the Borrowers under this Agreement and the other Loan Documents, (b) such Debt shall mature no less than one hundred eighty (180) days after the Termination Date and shall have covenants no more restrictive than those set forth herein and (c) after giving effect to the incurrence of such Debt, no Default or Event of Default shall be in existence.

     “Senior Notes” means those 12 ¹/4% Senior Subordinated Notes Due 2008, issued by the Parent, pursuant to that certain Indenture, dated as of December 16, 1998 in favor of Wells Fargo Bank Minnesota, N.A., as Trustee (the “Indenture”), as amended, restated, supplemented or otherwise modified from time to time.

     “Silver Point” means Silver Point Finance, LLC, a Delaware limited liability company.

     “Software” means all “software” as such term is defined in the UCC, now owned or hereafter acquired by any Borrower Party, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program.

     “Solvent” means, when used with respect to any Person, that at the time of determination:

          (a) the assets of such Person, at a fair valuation, are in excess of the total amount of its debts (including contingent liabilities); and

          (b) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; and

          (c) it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and

          (d) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.

     For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing

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at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

     “Specified Transaction” means any one or more of the following transactions of a Borrower Party, (a) dividends on capital stock of Parent and (b) the redemption or other acquisitions by Parent of any of its bonds or capital stock (or any options or warrants for such stock); and “Specified Transactions” means each Specified Transaction.

     “Stated Maturity Date” means January 30, 2008.

     “Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

     “Subsidiary” of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of the Parent, including, without limitation, each Borrower.

     “Subsidiary Guaranty” means the Subsidiary Guaranty dated as of the date hereof, executed and delivered by the Guarantors for the benefit of the Agent and the Lenders to guarantee the Obligations of the Borrowers under this Agreement.

     “Supporting Obligations” means all “supporting obligations” as such term is defined in the UCC, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.

     “Taxes” means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by the Agent’s or each Lender’s net income in any the jurisdiction (whether federal, state or local and including any political subdivision thereof) under the laws of which such Lender or the Agent, as the case may be, is organized or maintains a lending office.

     “Term Loan” has the meaning specified in recitals.

     “Termination Date” means the earliest to occur of (i) the Stated Maturity Date, (ii) the date the Term Loan is terminated by the Borrowers pursuant to Section 3.2 and (iii) the date this Agreement is otherwise terminated for any reason whatsoever pursuant to the terms of this Agreement.

     “UCC” means the Uniform Commercial Code, as in effect from time to time, of the State of New York or of any other state the laws of which are required as a result thereof to be applied in connection with the issue of perfection of security interests; provided, that to the extent that the UCC is used to define any term herein or in any other documents and such term is defined

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differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.

     “Unfunded Pension Liability” means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

     “US Adjusted Net Earnings from Operations” means, with respect to any fiscal period of the Borrowers, the Borrowers’ net income on a consolidated basis after provision for income taxes for such fiscal period, as determined in accordance with GAAP and reported on the Financial Statements for such period, excluding any and all of the following included in such net income: (a) gain or loss arising from the sale of any capital assets; (b) gain arising from any write up in the book value of any asset or loss arising from any write down in the book value of any asset other than an asset the value of which is included in the calculation of the Borrowing Base (as such term is defined in the First Lien Credit Agreement); (c) earnings or losses of any Person, substantially all the assets or Stock of which have been acquired by the Borrowers in any manner, to the extent realized by such other Person prior to the date of acquisition; (d) earnings or losses of any Person in which any Borrower has a minority ownership interest unless (and only to the extent) such earnings or losses shall actually have been received by such Borrower in the form of cash distributions; (e) earnings or losses of any Person to which assets of any Borrower shall have been sold, transferred or disposed of, or into which any Borrower shall have been merged, or which has been a party with any Borrower to any consolidation or other form of reorganization, prior to the date of such transaction; (f) gain arising from the acquisition of debt or equity securities of any Borrower or from cancellation or forgiveness of Debt; (g) gain and non-cash losses arising from extraordinary items or from any other non-recurring transaction, as determined in accordance with GAAP; and (h) all restructuring charges incurred by the Borrowers through October 31, 2004 as described on Schedule E-3.

     “WFF” means Wells Fargo Foothill, Inc., a California corporation.

     Accounting Terms. Any accounting term used in the Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations in the Agreement shall be computed, unless otherwise specifically provided therein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the Financial Statements.

     Interpretive Provisions. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

          (b) The words “hereof,” “herein,” “hereunder” and similar words refer to the Agreement as a whole and not to any particular provision of the Agreement; and Subsection, Section, Schedule and Exhibit references are to the Agreement unless otherwise specified.

          (c) (i) The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.

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               (ii) The term “including” is not limiting and means “including without limitation.”

               (iii) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including.”

               (iv) The word “or” is not exclusive.

          (d) Unless otherwise expressly provided herein, (i) references to agreements (including the Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

          (e) The captions and headings of the Agreement and other Loan Documents are for convenience of reference only and shall not affect the interpretation of the Agreement.

          (f) The Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

          (g) For purposes of Section 9.1, a breach of the financial covenants referenced in Section 7.23 shall be deemed to have occurred as of any date of determination thereof by the Lenders or as of the last day of any specified measuring period, regardless of when the Financial Statements reflecting such breach are delivered to the Agent.

          (h) The Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Lenders, the Borrower Parties and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Agent merely because of the Agent’s or Lenders’ involvement in their preparation.

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EX-99.11

Exhibit 99.11

Execution Version

WAIVER, CONSENT FORBEARANCE AND
SEVENTEENTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT

     THIS WAIVER, CONSENT, FORBEARANCE AND SEVENTEENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Seventeenth Amendment”) is made and entered into as of October 1, 2007, by and among the financial institutions identified on the signature pages hereof (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO FOOTHILL, INC., a California corporation, as administrative agent and collateral agent for the Lenders (in such capacities, together with any successor administrative agent and collateral agent, the “Agent”), SILVER POINT FINANCE, LLC, as the co-agent, syndication agent, documentation agent (in such capacities, together with any successor co-agent, syndication agent, and documentation agent, the “Co-Agent”), arranger and book runner, SALTON, INC., a Delaware corporation (the “Parent”), each of the Parent’s Subsidiaries identified on the signature pages hereof as Borrowers (collectively with the Parent, the “Borrowers”) and each of the Parent’s Subsidiaries identified on the signature pages hereof as Guarantors (collectively, the “Guarantors” and, together with the Borrowers, the “Borrower Parties”). As provided in Section 1 below, capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement referred to in Recital A. below.

RECITALS:

     A. The Lenders, the Agent, the Co-Agent and the Borrowers are parties to that certain Amended and Restated Credit Agreement, dated as of May 9, 2003 and amended and restated as of June 15, 2004 (as amended as of August 30, 2004, as of May 11, 2005, as of July 8, 2005, as of September 22, 2005, as of October 7, 2005, as of November 9, 2005, as of February 8, 2006, as of May 10, 2006, as of August 15, 2006, as of February 12, 2007, as of April 13, 2007, as of June 28, 2007, as of July 30, 2007, as of July 31, 2007, as of August 6, 2007, as of August 8, 2007 and as it may be further amended, modified, supplemented or amended and restated from time to time, the “Credit Agreement”).

     B. Salton, Inc., SFP Merger Sub, Inc. and APN Holding Company, Inc., a wholly owned subsidiary of Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P. (the “Harbinger Entities”), are, concurrently with the execution and delivery of this Seventeenth Amendment, executing and delivering an Agreement and Plan of Merger dated as of, and as in effect on, the date hereof (“Merger Agreement”).

     C. On or after November 10, 2007, the component of the Borrowing Base described in clause (D) of the definition thereof will be reduced to zero, likely resulting in an Overadvance (as defined below). Pursuant to the terms of the Credit Agreement, the Borrowers are obligated to repay the Obligations in an amount equal to the sum of (i) principal amount of the Overadvance; (ii) accrued and unpaid interest thereon; and (iii) funding losses, if any, as required by Section 4.4 of the Credit Agreement.

     D. Concurrently with the execution and delivery of the Seventeenth Amendment, the Borrower Parties, Co-Agent and the Harbinger Entities are entering into a Loan Purchase Agreement (attached hereto as Exhibit A (the “Loan Purchase Agreement”). The Loan Purchase Agreement provides that upon the occurrence of certain events and according to certain terms, the Harbinger Entities agree to buy certain Loans and Obligations under the Credit Agreement from Co-Agent.

     E. Concurrently with the execution and delivery of this Seventeenth Amendment, Borrowers and the Harbinger Entities are entering into a Reimbursement and Credit Agreement (as defined below) which shall govern the terms and conditions of certain loans and obligations purchased under the Loan Purchase Agreement (as defined below) and provides for the payment of certain fees and expenses as set forth therein. The Harbinger Entities are also entering into an Intercreditor Agreement (“Junior Intercreditor Agreement”) with the Second Lien Agent.

     F. Certain Defaults and Events of Default have occurred and are continuing under Sections 3.1(c)(iv), 7.33 and 7.34 of the Credit Agreement (“Existing Events of Defaults”). The Borrower Parties have requested and the Lenders have agreed to forbear from exercising remedies with respect to the Existing Events of Defaults on the terms and conditions set forth herein.

     G. In order to consummate the transactions contemplated by these Recitals, the Borrowers have requested, and the Agent, Co-Agent and the Lenders have agreed, to certain amendments to the Credit Agreement as set forth herein.

     NOW, THEREFORE, in consideration of the agreements and provisions herein contained the parties hereto do hereby agree as follows:

Section 1.   Definitions. Any capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement (as amended hereby).

Section 2.   Amendments to the Credit Agreement. The Credit Agreement is hereby amended, effective as of the date this Seventeenth Amendment becomes effective in accordance with Section 4 hereof, as follows:

     2.01 Additional Definitions Annex A to the Credit Agreement is hereby amended by adding the following definitions in the correct alphabetical order:

               (a) “Amended and Restated Intercreditor Agreement” means the Amended and Restated Intercreditor Agreement dated as of October 1, 2007 among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., the Second Lien Agent, the Co-Agent and the Agent, as amended, modified, supplemented or restated from time to time.

               (b) “Loan Purchase Agreement” means the Loan Purchase Agreement dated as of October 1, 2007 among Borrower Parties, Co-Agent, Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P., and all exhibits and schedules thereto.

               (c) “Merger Agreement means the Agreement and Plan of Merger dated as of October 1, 2007 among Salton, Inc., SFP Merger Sub, Inc. and APN Holding Company, Inc. as in effect on the date hereof.

               (d) “Merger Agreement Termination” means the Merger Agreement expires or is terminated or is terminable by any party thereto.

               (e) “Overadvance” means an amount equal to the excess of the Aggregate Outstandings over the lower of the Borrowing Base and the Maximum Amount.

               (f) “Overadvance Amount” means an amount equal to the sum of (i) principal amount of the Overadvance; (ii) accrued and unpaid interest thereon and (iii) funding losses, if any, as required by Section 4.4 hereof.

               (g) “Reimbursement and Credit Agreement” means the Reimbursement and Senior Secured Credit Agreement dated October 1, 2007 among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., as the Lenders, Harbinger Capital Partners Master Fund I, Ltd., as Agent, and Salton, Inc., as in effect on such date.

               (h) “Reimbursement Loan Documents” means the “Loan Documents” as defined in the Reimbursement and Credit Agreement.

               (i) “Stretch Loans” means loans made available pursuant to clause (a)(D) of the definition of Borrowing Base

     2.02 Amended Definitions. Annex A to the Credit Agreement is hereby amended by:

               (a) Clause (a)(D) of the definition of “Borrowing Base” is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

          “(D) the sum of

               (i) the lesser of

                    (A) the sum of

                         (I) ten percent (10%) of the Net Amount of Eligible Accounts, plus

                         (II) the sum of (x) twenty-four percent (24%) of the value of the Eligible Landed Inventory, plus (y) twenty-nine percent (29%) of the book value of Eligible In-Transit Inventory valued at the lower of cost (determined on a first-in, first-out basis) or market; and

                    (B) $16,200,000; plus

               (ii) the Stretch Amount;

provided, that, notwithstanding the foregoing, on and after November 10, 2007, the result of this clause (D) shall be zero. The “Stretch Amount” shall be $52,289,509.48.”

               (b) deleting the definition of “Intercreditor Agreement” in its entirety and inserting the following in lieu thereof:

“Intercreditor Agreement” means, prior to the Effective Date (as defined in the Amended and Restated Intercreditor Agreement), that certain Intercreditor Agreement, dated as August 26, 2005, among the Co-Agent and the Agent, on the one hand, and the Second Lien Agent, on the other hand, as amended, modified, supplemented or restated from time to time, and after the Effective Date (as defined in the Amended and Restated Intercreditor), the Amended and Restated Intercreditor Agreement.

               (c) adding the following sentence to the end of the definition of “Loan Documents”:

          “Loan Documents shall also include the Loan Purchase Agreement.”

               (d) deleting the definition of “Maximum Amount” and in its entirety and inserting the following in lieu thereof:

“Maximum Amount” means a principal amount of Loans made and Letters of Credit issued (or guaranteed) under this Agreement equal to $187,500,000 minus the principal amount of Stretch Loans purchased pursuant to the Loan Purchase Agreement.”

               (e) deleting the period at the end of the definition of “Permitted Liens”, inserting the word ‘and” in lieu thereof and adding the following clause (k) thereto:

“(k) Liens, subject to the Intercreditor Agreement, to secure obligations and liabilities arising under the Reimbursement and Credit Agreement and the Reimbursement Loan Documents.”

     2.03 Amendment of Section 1.2(k). Section 1.2 of the Credit Agreement is hereby amended by deleting Section 1.2(k) in its entirety.

     2.04 Amendment of Section 3.1(c). Section 3.1(c) of the Credit Agreement is hereby amended by deleting clause (iv) thereof in its entirety and inserting the following in lieu thereof:

“(iv) If the aggregate principal amount of the Loans exceeds the lesser of the Borrowing Base and the Maximum Amount, the Borrowers shall prepay the outstanding principal amount of the Loans in an amount equal to such excess.”

     2.05 Addition of Section 3.9. The Credit Agreement is hereby amended by adding the following Section 3.9 immediately following Section 3.8:

“Section 3.9. Loan Purchase Agreement. If at any time any Lender sells any Loans pursuant Section 1(a) of the Loan Purchase Agreement, the Loans so purchased shall automatically and without any further action cease to be governed by the terms and conditions of this Agreement and shall be governed by and subject to the terms of the Reimbursement and Credit Agreement. The purchaser of such Loans shall not be a “Lender” hereunder and shall have no rights or obligations hereunder.”

     2.06 Amendment of Section 7.12. Section 7.12 of the Credit Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

“Section 7.12 Guaranties. No Loan party shall make, issue, or become liable on any Guaranty, except: (a) Guaranties of the Obligations in favor of the Agent, (b) Guaranties by the Parent of Debt permitted by Section 7.13, trade payables and real estate operating leases, (c) Guaranties of Debt by Guarantors permitted by Sections 7.13 (e), (k) or (m).”

     2.07 Amendment of Section 7.13. Section 7.13 of the Credit Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

“Section 7.13. Debt. No Loan Party shall incur or maintain any Debt, other than: (a) the Obligations; (b) Debt described on Schedule 7.13; (c) Debt of Salton Holdings Limited and Salton Europe Limited, under the Facility Agreement dated 23rd December 2005 among those entities, the lender parties listed therein, Burdale Financial Limited as agent and security trustee, as amended to the date hereof not exceeding the principal amount outstanding set forth on Annex C, Section II during the corresponding periods set forth on Annex C, Section II; (d) [Reserved]; (e) the Senior Notes in a principal amount equal to the principal amount outstanding on August 8,2007 less any repayments of principal of the Senior Notes after such date; (f) the Intercompany Account so long as such Debt is to the Subordination Agreement and, provided that, from and after May 11, 2005 (i) no Borrower Party shall make any Investment in a Foreign Subsidiary and (ii) no Foreign Subsidiary shall make any Investment in another Foreign Subsidiary; (g) Debt in respect of foreign currency hedging agreements with aggregate notional amounts not greater than $2,000,000 at any time; (h) [Reserved]; (i) [Reserved]; (j) [Reserved]: (k) the Second Lien Term Loan in a principal amount outstanding on August 8, 2007 less any repayments of principal of the Second Lien Term Loan after such date; (l) [Reserved]; and (m) Debt incurred under the Reimbursement and Credit Agreement to fund the purchase of Loans under Section 1(a) of the Loan Purchase Agreement in a principal amount not exceeding the Purchase Price (as defined in the Loan Purchase Agreement) of such Loans, plus fees not to exceed $5,000,000 and expenses reimbursable thereunder. Notwithstanding anything to the contrary contained herein, the Parent shall not, directly or indirectly, enter into any amendment or modification of the documents evidencing the Debt permitted under clause (g) above that is any manner adverse to the Parent, any Subsidiary, the Agent, the Co-agent or any Lender. Notwithstanding anything to the contrary contained herein, no Borrower

Party shall, directly or indirectly, enter into any amendment or modification of the documents evidencing the Debt permitted under clauses (e), (f), (k) or (m) above or any other Second Lien Loan Document or any other Reimbursement Loan Document.

     2.08 Amendment to Schedule 7.33. Paragraph H to Schedule 7.33 of the Credit Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

“The Borrower Parties shall not use any proceeds of the Loans to make any payments of principal, interest, fees or other amounts on or with respect to the Senior Notes, the Second Lien Term Loans or obligations under the Reimbursment and Credit Agreement; provided, however, the Borrower Parties may use proceeds of the Loans to make (A) the scheduled payments of interest on: (i) the Senior Notes due in October 2007, (ii) the Second Lien Term Loan due in January, 2008, and (iii) the principal amount of Debt outstanding under the Reimbursement and Credit Agreement (to extent allowed under Section 7.13) that accrues after the purchase of Obligations under the Loan Purchase Agreement and (B) in the case of each of (A) (i), (ii) and (iii) above, to the extent not paid on the scheduled payment date, all interest accruing after such scheduled payment date up to one month’s additional interest; provided in all cases, that pro forma, after giving effect to each and every such payment, Availability is at least $1.”

     2.09 Addition of Section 7.36. The Credit Agreement is hereby amended by adding Section 7.36 as follows immediately after Section 7.35:

“The Borrower Parties shall not and shall not allow any Subsidiary of the Borrower Parties to waive any provision of the Merger Agreement or amend, supplement or otherwise modify the Merger Agreement.

     2.10 Addition of Section 7.37. The Credit Agreement is hereby amended by adding Section 7.37 as follows immediately after Section 7.36:

“(a) The Borrower Parties shall cause the liabilities owed by Salton Europe Ltd. and/or its Subsidiaries to Salton Hong Kong, Ltd that are secured by any assets of Salton Europe Ltd and/or its Subsidiaries, whether by grant of a lien, retention of title or other means, to not exceed, during the periods set forth on Annex C, Section I, the corresponding amounts for such periods set forth on Annex C; Section I; to the extent so secured such liabilities shall be secured solely by accounts receivable and inventory of Salton Europe Ltd. on a second lien basis, junior to the lien securing the obligations described in Section 7.13 (c); and except as so permitted and notwithstanding, anything to the contrary in the Loan Documents, Salton Hong Kong, Ltd. shall have no Liens on any asset of Salton, Inc. or any of its Subsidiaries;

(b) The Borrower Parties shall cause Salton Australia, Pty. Ltd. and/or its Subsidiaries to assume or guarantee up to $15,000,000 principal amount of

Revolving Loans or other Obligations on terms and conditions reasonably satisfactory to the Agent and Co-Agent and to secure its obligations under such assumption or guarantee by a first priority perfected lien in all of its and its Subsidiaries’ assets and that in the event Salton Australia, Pty. Ltd. and/or its Subsidiaries assumes any of the Revolving Loans or other Obligations, the Interest Rate applicable to such Revolving Loans or other Obligations shall be at an interest rate determined by the Co-Agent to be commercially reasonable in the Australian market for similar credits and the Interest Rate on the Revolving Loans, Term Loan and other Obligations that are not so assumed shall be adjusted so that the weighted average Interest Rate (as determined by the Co-Agent) on the Obligations shall be the same as the Interest Rate thereon would be if no Revolving Loans or other Obligations were so assumed.”

     2.11 Amendment of Section 9.1. Section 9.1 of the Credit Agreement is hereby amended:

          (a) by deleting clause (a) thereof in its entirety and inserting the following in lieu thereof:

“(a) any failure by the Borrowers to pay the principal of, or interest or premium on, any of the Obligations or any fee or other amount owing hereunder when due, whether upon demand or otherwise; provided, however, on and after November 10, 2007, if (i) the Co-Agent is entitled to exercise the Stretch Loan Put Notice (as defined in the Loan Purchase Agreement) as set forth in Section 3(a) of the Loan Purchase Agreement, (ii) the Overadvance Amount is less than or equal to principal amount of Stretch Loans subject to such put option, and (iii) none of Harbinger Capital Partners Master Fund I, Ltd. or Harbinger Capital Partners Special Situations Fund, L.P. have breached any of their obligations under the Loan Purchase Agreement, the failure of the Borrowers to pay, when due, the Overadvance Amount shall not constitute an Event of Default under this clause (a) unless the Co-Agent has attempted to, or is enjoined or otherwise legally prevented from exercising its rights under the Loan Purchase Agreement;”

          (b) by deleting the word “and” at the end of clause (r), redesignating clause (s) as clause (v) and inserting new clauses (s), (t) and (u) as follows:

“(s) there occurs any Default or Event of Default under, and as such terms are defined in, the Reimbursement and Credit Agreement;

(t) any party to the Merger Agreement has, or asserts, the right to terminate the Merger Agreement or the Merger Agreement is terminated;

(u) if, for any reason, the Loans purchased pursuant to Section 1(a) of the Loan Purchase Agreement are not governed by and subject to the terms of the Reimbursement and Credit Agreement or if the Reimbursement and Credit Agreement is ineffective, invalid or unenforceable in any material respect; “

     2.12 Amendment of Section 11.2. Section 11.2 of the Credit Agreement is hereby amended by adding clause (i) as follows immediately after clause (h):

“(i) Notwithstanding any other provision of this Agreement, Loans and Obligations may be assigned pursuant to the Loan Purchase Agreement.”

Section 3.   Representations and Warranties. In order to induce the Agent, the Co-Agent and the Lenders to enter into this Seventeenth Amendment, the Borrower Parties hereby represent and warrant that:

     3.01 Representations and Warranties True and Correct. At and as of the date of this Seventeenth Amendment and both prior to and after giving effect to this Seventeenth Amendment, each of the representations and warranties contained in the Credit Agreement and other Loan Documents is true and correct in all material respects.

     3.02 Corporate Power, Etc. The Borrower Parties (a) have all requisite corporate power and authority to execute and deliver this Seventeenth Amendment and to consummate the transactions contemplated hereby and (b) have taken all action, corporate or otherwise, necessary to authorize the execution and delivery of this Seventeenth Amendment and the consummation of the transactions contemplated hereby.

     3.03 No Conflict. Neither the execution and delivery of this Seventeenth Amendment nor consummation of the transactions contemplated hereby will (a) conflict with or result in any breach or violation of any provision of the certificate of incorporation, certificate of formation or by-laws of the Borrower Parties, (b) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in the creation of a Lien upon any of the properties or assets of the Borrower Parties under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease agreement or other instrument or obligation to which the Borrower Parties are parties or to which any of their properties or assets are subject, (c) require any consent, approval, authorization or permit of, or filing with or notification to, any third party or any Governmental Authority, or (d) violate any order, writ, injunction, decree, judgment, ruling, law, statute, rule or regulation of any Governmental Authority.

     3.04 Binding Effect. This Seventeenth Amendment has been duly executed and delivered by the Borrower Parties and constitutes the legal, valid and binding obligation of the Borrower Parties, enforceable against the Borrower Parties in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors’ rights generally, and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 4.   Waiver and Consent. Subject to the satisfaction of the terms and conditions herein:

     4.01 Waiver. Any Event of Default resulting from the inclusion of a qualification relating to going concerns in the report by the Parent’s independent auditors the accompanies the audited statements as of and for the period ending June 30, 2007 is hereby waived.

     4.02 Consent. The Agent, Co-Agent and Lenders hereby consent to the execution and delivery by the Borrower Parties of the Loan Purchase Agreement, the Amended and Restated Intercreditor Agreement, the Merger Agreement, the Waiver, Consent and First Amendment to the Second Lien Credit Agreement dated the date hereof, the Reimbursement and Credit Agreement and the Reimbursement Loan Documents; provided, however, that such consent shall not be deemed a waiver of any Default or Event of Default resulting from the consummation of the merger pursuant to the Merger Agreement or any amendments or modifications to the foregoing documents.

Section 5.    Forbearance. The Lenders hereby agree to forbear from exercising remedies under Section 9.2 of the Credit Agreement with respect to the Existing Events of Default; provided, the Borrower Parties satisfy each of the following conditions and no such condition has not been satisfied.

     5.01 Foreign Pledges. The Borrower Parties shall have delivered to the Agent and Co-Agent:

(a) On or before October 30, 2007, Foreign Pledge Agreements, substantially similar to those Foreign Pledge Agreements previously delivered or reasonably acceptable to Co-Agent, pledging as Collateral 100% of the issued and outstanding equity of (i) Salton International C.V., (ii) Salton UK (iii) Salton Hong Kong, Ltd., (iv) Salton Sarl, (v) Salton Australia, Pty. Ltd, (vi) Toastmaster de Mexico SA, and (vii) Salton Brazil Limitada; and

(b) Within 5 days after written request by the Agent or the Co-Agent, Foreign Pledge Agreements pledging as Collateral 100% of the issued and outstanding equity of any other Subsidiary of Salton, Inc. as specified in such request;

     5.02 Strategic Plan. On or prior to the date the Merger Agreement is not in full force and effect, is terminated or any party thereto has, or asserts, the right to terminate the Merger Agreement, the Borrower Parties shall have delivered to the Agent and the Co-Agent the comprehensive strategic plan described in Paragraph C of Schedule 7.33 of the Credit Agreement;

     5.03 Blocked Accounts. On or prior to October 15, 2007 the Borrower Parties shall have delivered to the Agent and the Co-Agent the control agreements described in Paragraph A of Schedule 7.33 of the Credit Agreement with respect to the J.P. Morgan Chase Accounts described therein;

     5.04 Australian Guaranty. On or before January 30, 2008, the Borrower Parties shall have caused Salton Australia, Pty. Ltd. and/or its Subsidiaries to assume or guarantee up to $15,000,000 principal amount of Revolving Loans or other Obligations on terms and conditions reasonably satisfactory to the Agent and Co-Agent and to secure its (or such Subsidiaries’) obligations under such assumption or guarantee by a first priority perfected lien in all of its and its Subsidiaries’ assets as described in Section 7.37(b);

     5.05 Chief Restructuring Officer. On or before the date that is 14 days from date of delivery of a written request from the Co-Agent, Salton Inc. shall have appointed a chief restructuring officer reasonably acceptable, and on terms reasonably acceptable, to the Co-Agent.

     5.06 SEC Report. On or prior to October 15, 2007 the Parent shall have filed its Form 10-K with the SEC and such Form 10-K shall comply in all material respects with all Requirements of Law.

Section 6.   Conditions. This Seventeenth Amendment shall be effective upon the fulfillment by the Borrower Parties, in a manner satisfactory to the Co-Agent, the Agent and the Lenders, of all of the following conditions precedent set forth in this Section 4 (such date, the “Effective Date”):

     6.01 Execution of the Seventeenth Amendment. Each of the parties hereto shall have executed an original counterpart of this Seventeenth Amendment and shall have delivered (including by way of telefacsimile or electronic mail) the same to the Co-Agent.

     6.02 Representations and Warranties. As of the Effective Date, the representations and warranties set forth in Section 3 hereof shall be true and correct.

     6.03 Related Transactions.

               (a) The Merger Agreement, in form and substance satisfactory to the Co-Agent, shall have bee executed and delivered by the parties thereto and shall be in full force and effect without breach by any party of its obligations thereunder;

               (b) The Reimbursement and Credit Agreement and the Junior Intercreditor Agreement, each in form and substance, satisfactory to the Co-Agent, shall have been executed and delivered by the parties thereto, all conditions precedent thereto shall have been satisfied or waived and no default or event of default thereunder shall have occurred and be continuing; and

               (c) The Intercreditor Agreement shall have been executed and delivered by the parties thereto and shall be in full force and effect without breach by any party of its obligations thereunder.

               (d) The Loan Purchase Agreement shall have been executed and delivered by the parties thereto and shall be in full force and effect without breach by any party of its obligations thereunder.

     6.04 Document Deliveries. The Co-Agent shall have received:

               (a) copies of the Merger Agreement, the Loan Purchase Agreement, Reimbursement and Credit Agreement, all Reimbursement Loan Documents, the Junior Intercreditor Agreement (as defined in the Intercreditor Agreement); and all other agreements related to any of the foregoing, certified by a Responsible Office of the Administrative Borrower as a true, complete and correct;

               (b) copies of resolutions of the board of directors (and shareholders, if necessary) or other governing body of each party, the agreements described in Section 4.03 and this Seventeenth Amendment, each certified by an officer reasonably acceptable to the Agent and Co-Agent of such party authorizing the execution, delivery and performance of such agreements;

               (c) evidence reasonably satisfactory to the Agent and Co-Agent that the Existing Junior Lien Agent and the New Junior Lien Agent (as such terms are defined in the Intercreditor Agreement) are authorized to enter into such Intercreditor Agreement) on behalf of the Existing Junior Lenders and the New Junior Lenders, respectively (as such terms are defined in the Intercreditor Agreement; and

               (d) such other instruments, documents and agreements as the Co-Agent or the Agent may reasonably request, in form and substance reasonably satisfactory to the Co-Agent and the Agent.

     6.05 Payment of Fees. All fees, costs, expense reimbursements and amounts due and payable to the Agent or the Co-Agent by APN Holding Company, Inc. , the Borrowers and the Guarantors shall have been paid in full.

      Section 7.   Miscellaneous.

     7.01 Continuing Effect. Except as specifically provided herein, the Credit Agreement and the other Loan Documents shall remain in full force and effect in accordance with their respective terms and are hereby ratified and confirmed in all respects.

     7.02 No Waiver; Reservation of Rights. This Seventeenth Amendment is limited as specified and the execution, delivery and effectiveness of this Seventeenth Amendment shall not operate as a modification, acceptance or waiver of any provision of the Credit Agreement, or any other Loan Document, except as specifically set forth herein. Notwithstanding anything contained in this Seventeenth Amendment to the contrary, the Agent, the Co-Agent and the Lenders expressly reserve the right to exercise any and all of their rights and remedies under the Credit Agreement, any other Loan Document and applicable law in respect of any Default or Event of Default not expressly waived herein.

     7.03 References.

               (a) From and after the Effective Date, (i) the Credit Agreement, the other Loan Documents and all agreements, instruments and documents executed and delivered in connection with any of the foregoing shall each be deemed amended hereby to the extent necessary, if any, to give effect to the provisions of this Seventeenth Amendment and (ii) all of the terms and provisions of this Seventeenth Amendment are hereby incorporated by reference

into the Credit Agreement, as applicable, as if such terms and provisions were set forth in full therein, as applicable.

               (b) From and after the Effective Date, (i) all references in the Credit Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended hereby and (ii) all references in the Credit Agreement, the other Loan Documents or any other agreement, instrument or document executed and delivered in connection therewith, “Credit Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended hereby.

     7.04 Governing Law. THIS SEVENTEENTH AMENDMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THE SUBJECT MATTER HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     7.05 Severability. The provisions of this Seventeenth Amendment are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Seventeenth Amendment in any jurisdiction.

     7.06 Overadvance. Agent acknowledges that the full amount of the Overadvance Amount is held by the Co-Agent.

     7.07 Counterparts. This Seventeenth Amendment may be executed in any number of counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of this Seventeenth Amendment by telefacsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart. A complete set of counterparts shall be lodged with the Borrower Parties, the Agent, the Co-Agent and each Lender.

     7.08 Headings. Section headings in this Seventeenth Amendment are included herein for convenience of reference only and shall not constitute a part of this Seventeenth Amendment for any other purpose.

     7.09 Binding Effect; Assignment. This Seventeenth Amendment shall be binding upon and inure to the benefit of the Borrower Parties, the Agent, the Co-Agent and the Lenders and their respective successors and assigns; provided, however, that the rights and obligations of the Borrower Parties under this Seventeenth Amendment shall not be assigned or delegated without the prior written consent of the Agent, the Co-Agent and the Lenders.

     7.10 Expenses. The Borrowers agree to pay the Agent and Co-Agent upon demand, for all reasonable expenses, including reasonable fees of attorneys and paralegals for the Agent, the Co-Agent and the Lenders (who may be employees of the Agent, Co-Agent or the Lenders), incurred by the Agent, the Co-Agent and the Lenders in connection with the preparation,

negotiation and execution of this Seventeenth Amendment and any document required to be furnished herewith.

     7.11 Integration. This Seventeenth Amendment, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

[Signature pages follow]

Execution Version

     IN WITNESS WHEREOF, the parties hereto have caused this Seventeenth Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

BORROWERS:
SALTON, INC., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
TOASTMASTER INC., a Missouri corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
SALTON TOASTMASTER LOGISTICS LLC, a Delaware limited liability company
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
GUARANTORS:
HOME CREATIONS DIRECT, LTD.,
a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
SONEX INTERNATIONAL CORPORATION, a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer

ICEBOX, LLC, an Illinois limited liability company
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer

[17TH AMENDMENT SIGNATURE PAGE]

FAMILY PRODUCTS INC., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
SALTON HOLDINGS, INC., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
AGENT, CO-AGENT AND LENDERS:
WELLS FARGO FOOTHILL, INC.
as the Administrative Agent, the Collateral Agent and as a Lender
By:	/s/ William Plough
Its:
SILVER POINT FINANCE, LLC, as the Co-Agent, the Documentation Agent, and the Syndication Agent
By:	/s/ Richard Petrilli
Its:

[17TH AMENDMENT SIGNATURE PAGE]

SPIRET IV LOAN TRUST 2003-A, as a Lender
By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee
By:	/s/ Erwin M. Soriano
Its:	Assistant Vice President
FIELD POINT I, LTD., as a Lender
By:	/s/ Richard Petrilli
Its:
FIELD POINT II, LTD., as a Lender
By:	/s/ Richard Petrilli
Its:
FIELD POINT III, LTD., as a Lender
By:	/s/ Richard Petrilli
Its:
FIELD POINT IV, LTD., as a Lender
By:	/s/ Richard Petrilli
Its:
SPCP GROUP, L.L.C., as a Lender
By:
Its:

[17TH AMENDMENT SIGNATURE PAGE]

EX-99.12

Exhibit 99.12

Execution Version

WAIVER, CONSENT AND FIRST AMENDMENT
TO CREDIT AGREEMENT

     THIS WAIVER, CONSENT AND FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made and entered into as of October 1, 2007, by and among the financial institutions from time to time parties hereto (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), THE BANK OF NEW YORK, a New York corporation, with offices at 600 E. Los Colinas Blvd., Suite 1300, Irving, Texas 75039, as administrative agent and collateral agent for the Lenders the “Agent”), SALTON, INC., a Delaware corporation with offices at 1955 Field Court, Lake Forest, Illinois 60045 (the “Parent”), each of the Parent’s Subsidiaries identified on the signature pages hereof as Borrowers and each of the Parent’s Subsidiaries identified on the signature pages hereof as Guarantors.

RECITALS:

     WHEREAS, the Lenders, the Agent and the Borrowers are parties to that certain Credit Agreement, dated as of August 26, 2005 (as it may be further amended, modified, supplemented or amended and restated from time to time, the “Credit Agreement”);

     WHEREAS, Salton, Inc., SFP Merger Sub, Inc. and APN Holding Company, Inc. (“APN”) are, concurrently with the execution and delivery of this Amendment, executing and delivering an Agreement and Plan of Merger dated as of, and as in effect on, the date hereof (the “Merger Agreement”);

     WHEREAS, concurrently with the execution and delivery of this Amendment, the Borrowers and the Harbinger Capital Partners Master Fund I, LTD. and Harbinger Capital Partners Special Situation Fund, L.P. (the “Harbinger Entities”) are entering into a Loan Purchase Agreement (the “Loan Purchase Agreement”) that provides that upon the occurrence of certain event and according to certain terms, the Harbinger Entities agree to buy certain loans and obligations outstanding on November 10, 2007 under the First Lien Credit Agreement;

     WHEREAS, concurrently with the execution and delivery of this Amendment, the Borrowers, the Harbinger Entities and Harbinger Capital Partners Master Fund I, LTD., as administrative agent and collateral agent for the Harbinger Entities (the “Senior Second Lien Agent”) are entering into a Reimbursement and Senior Secured Credit Agreement (the “Reimbursement and Credit Agreement”) pursuant to which, among other things, the Borrowers agree to pay or reimburse the Harbinger Entities for all obligations and liabilities that the Harbinger Entities incur in connection with that certain Loan Purchase Agreement;

     WHEREAS, as a condition to entering into the Reimbursement and Credit Agreement, the Senior Second Lien Agent and Harbinger have required a security interest in assets that currently secure the obligations under the First Lien Credit Agreement and the Credit Agreement;

     WHEREAS, concurrently with the execution and delivery of this Amendment, the Senior Lien Agent is entering into an Amended and Restated Intercreditor Agreement (the “Intercreditor Agreement”) with the First Lien Agent and the Senior Second Lien Agent and a Junior Liens Intercreditor Agreement (the “Junior Liens Intercreditor Agreement”) with the Senior Second Lien Agent; and

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     WHEREAS, In order consummate the transactions contemplated by these Recitals, the Borrowers have requested, and the Agent and the Lenders have agreed, to certain amendments to the Credit Agreement as set forth herein.

     NOW, THEREFORE, in consideration of the agreements and provisions herein contained the parties hereto do hereby agree as follows:

Section 1.    Definitions. Any capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement (as amended hereby).

Section 2.    Amendments to the Credit Agreement. The Credit Agreement is hereby amended, effective as of the date this Amendment becomes effective in accordance with Section 6 hereof, as follows:

     2.01 Additional Definitions. Annex A to the Credit Agreement is hereby amended by adding the following definitions in the correct alphabetical order:

     (a) “Harbinger” means the “Lenders” as defined in the Reimbursement and Credit Agreement.

     (b) “Junior Liens Intercreditor Agreement” means the Junior Liens Intercreditor Agreement dated as of October 1, 2007 among the Senior Second Lien Agent and the Agent, as amended, modified, supplemental or restated from time to time.

     (c) “Loan Purchase Agreement” means the Loan Purchase Agreement dated as of October 1, 2007 among the Borrower Parties, the First Lien Co-Agent, the First Lien Lenders and Harbinger, and all exhibits and schedules thereto.

     (d) “Reimbursement and Credit Agreement” means the Reimbursement and Senior Secured Credit Agreement dated October 1, 2007 Harbinger Capital Partners Master Fund I, LTD., Harbinger Capital Partners Special Situation Fund, L.P., (collectively, “Harbinger”) among Harbinger Capital Partners Master Fund I, LTD., as administrative Agent and collateral Agent for Harbinger, and Parent, Borrowers and Guarantors.

     (e) “Reimbursement Loan Documents” means the “Loan Documents” as defined in the Reimbursement and Credit Agreement.

     (f) “Senior Second Lien Agent” means Harbinger Capital Partners Master Fund I, LTD, as administrative agent and collateral agent for Harbinger.

     2.02 Amended Definitions. Annex A to the Credit Agreement is hereby amended by:

     (a) deleting the period at the end of the definition of “Permitted Liens”, inserting the word ‘and” in lieu thereof and adding the following clause (k) thereto:

     2.03 “(k) Liens, subject to the Intercreditor Agreement and the Junior Liens Intercreditor Agreement, to secure obligations and liabilities arising under the Reimbursement and Credit Agreement and the Reimbursement Loan Documents.”

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     (a) deleting the definition of “Intercreditor Agreement” in its entirety and inserting the following in lieu thereof:

“Intercreditor Agreement” means that certain Amended and Restated Intercreditor Agreement dated as of October 1, 2007 among the Senior Second Lien Agent, the First Lien Agent, the First Lien Co-Agent and the Agent, as amended, modified, supplemented or restated from time to time.

     (b) deleting the definition of “Foreign Pledge Agreements” in its entirety and inserting the following in lieu thereof:

     “Foreign Pledge Agreements” means, collectively those certain pledge agreements, in form and substance reasonably satisfactory to the Agent, among the Borrower Parties, or any of them, and the Agent for the benefit of the Agent and the Lenders pursuant to which one or more Borrower Parties or Subsidiaries of Borrower Parties pledge certain equity interest of Foreign Subsidiaries.”

     2.04 Amendment of Section 7.12. Section 7.12 of the Credit Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

     (a) “Section 7.12 Guaranties. No Loan party shall make, issue, or become liable on any Guaranty, except: (a) Guaranties of the Obligations in favor of the Agent, (b) Guaranties by the Parent of Debt permitted by Section 7.13, trade payables and real estate operating leases, (c) Guaranties of Debt by Guarantors permitted by Sections 7.13 (e), (k) or (m).”

     2.05 Amendment of Section 7.13. Section 7.13 of the Credit Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

     (a) “Section 7.13. Debt. No Loan Party shall incur or maintain any Debt, other than: (a) the Obligations; (b) Debt described on Schedule 7.13; (c) Debt of Salton Holdings Limited and Salton Europe Limited, under the Facility Agreement dated 23rd December 2005 among those entities, the lender parties listed therein, Burdale Financial Limited as agent and security trustee, as amended to the date hereof not exceeding the principal amount outstanding set forth on Annex C, Section II during the corresponding periods set forth on Annex C, Section II; (d) [Reserved]; (e) the Senior Notes in a principal amount equal to the principal amount outstanding on August 8, 2007 less any repayments of principal of the Senior Notes after such date; (f) the Intercompany Account so long as such Debt is subject to the Subordination Agreement and, provided that, from and after May 11, 2005 (i) no Borrower Party shall make any Investment in a Foreign Subsidiary and (ii) no Foreign Subsidiary shall make any Investment in another Foreign Subsidiary; (g) Debt in respect of foreign currency hedging agreements with aggregate notional amounts not greater than $2,000,000 at any time; (h) [Reserved]; (i) [Reserved]; (j) [Reserved]: (k) the First Lien Loans; (l) [Reserved]; and (m) Debt incurred under the Reimbursement and Credit Agreement to fund the purchase of First Lien Loans under Section 1(a) of the Loan Purchase Agreement in a principal amount not exceeding the Purchase Price (as defined in the Loan Purchase Agreement) of such First Lien Loans, plus fees not to exceed $5,000,000 and expenses reimbursable thereunder. Notwithstanding anything to the contrary contained herein, the Parent shall not, directly or indirectly, enter into any amendment or modification of the documents evidencing the Debt permitted under clause (g) above that is any manner adverse to the Parent, any Subsidiary, the Agent or any Lender.

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     2.06 Amendment to Section 7.14. Section 7.14 of the Credit Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof:

     (a) “Section 7.14 Prepayment. Notwithstanding anything to the contrary contained herein, no Borrower Party shall prepay any Debt, except (a) First Lien Obligations in accordance with First Lien Loan Documents, (b) Obligations in accordance with the Reimbursement Documents, (c) in connection with a refinancing permitted under Section 7.13(e) above including the application of any proceeds received as a result of an equity infusion to prepay the Debt described in Section 7.13(e), or (d) the principal amount of the 2008 Senior Notes solely to the extent permitted pursuant to Section 3.1(d); provided however, the prepayments permitted under subsection (d) may be made only to the extent such prepayments would not cause a default under the First Lien Credit Agreement.

     2.07 Addition of Section 7.28. Article 7 of the Credit Agreement is hereby amended by adding Section 7.28 as follows immediately after Section 7.27:

     “Section 7.28 Foreign Subsidiaries. The Borrower Parties shall cause the liabilities owed by Salton Europe Ltd. and/or its Subsidiaries to Salton Hong Kong, Ltd that are secured by any assets of Salton Europe Ltd and/or its Subsidiaries, whether by grant of a lien, retention of title or other means, to not exceed, during the periods set forth on Annex C, Section I, the corresponding amounts for such periods set forth on Annex C; Section I; to the extent so secured such liabilities shall be secured solely by accounts receivable and inventory of Salton Europe Ltd. on a second lien basis, junior to the lien securing the obligations described in Section 7.13 (c); and except as so permitted and notwithstanding, anything to the contrary in the Loan Documents, Salton Hong Kong, Ltd. shall have no Liens on any asset of Salton, Inc. or any of its Subsidiaries.”

     2.08 Schedules. The schedules to the Credit Agreement are amended by inserting:

     (a) Annex A hereto as Schedule 7.13 — Debt at August 4, 2007.

Section 3.    Representations and Warranties. In order to induce the Agent and the Lenders to enter into this Amendment, the Borrower Parties hereby represent and warrant that:

     3.01 Representations and Warranties True and Correct. At and as of the date of this Amendment and both prior to and after giving effect to this Amendment, each of the representations and warranties contained in the Credit Agreement and other Loan Documents is true and correct in all material respects.

     3.02 Corporate Power, Etc. The Borrower Parties (a) have all requisite corporate power and authority to execute and deliver this Amendment and to consummate the transactions contemplated hereby and (b) have taken all action, corporate or otherwise, necessary to authorize the execution and delivery of this Amendment and the consummation of the transactions contemplated hereby.

     3.03 No Conflict. Neither the execution and delivery of this Amendment nor consummation of the transactions contemplated hereby will (a) conflict with or result in any breach or violation of any provision of the certificate of incorporation, certificate of formation or by-laws of the Borrower Parties, (b) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in the creation of a Lien upon any of the properties or assets of the

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Borrower Parties under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease agreement or other instrument or obligation to which the Borrower Parties are parties or to which any of their properties or assets are subject, (c) require any consent, approval, authorization or permit of, or filing with or notification to, any third party or any Governmental Authority, or (d) violate any order, writ, injunction, decree, judgment, ruling, law, statute, rule or regulation of any Governmental Authority.

     3.04 Binding Effect. This Amendment has been duly executed and delivered by the Borrower Parties and constitutes the legal, valid and binding obligation of the Borrower Parties, enforceable against the Borrower Parties in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors’ rights generally, and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 4.    Wavier and Consent. Subject to the satisfaction of the terms and conditions herein:

     4.01 Waiver. Any Event of Default resulting from the inclusion of a qualifications relating to going concerns in the report by the Parent’s independent auditors the accompanies the audited statements as of and for the period ending June 30, 2007 is hereby waived.

     4.02 Consent. The Agent and the Required Lenders hereby consent to the execution and delivery by the Borrower Parties of: the Loan Purchase Agreement, the Amended and Restated Intercreditor Agreement, the Merger Agreement, the Reimbursement and Credit Agreement and the Reimbursement Loan Documents; provided, however, that such consent shall not be deemed a waiver of any Default or Event of Default resulting from the consummation of the merger pursuant to the Merger Agreement.

Section 5.    Post First Amendment Effective Date Deliveries.

     5.01 Foreign Pledge Agreements.

     (a) on or before October 30, 2007, Foreign Pledge Agreements pledging as Collateral 100% of the issued and outstanding equity of (A) Salton International C.V., (B) Salton UK, (C) Salton Hong Kong, Ltd., (D) Salton Sarl, (E) Salton Australia, Pty. Ltd., (E) Toastmaster de Mexico SA, and (F) Salton Brazil Limitada, substantially similar to those delivered to the First Lien Agent and the First Lien Co-Agent in connection with the First Lien Credit Agreement; and

     (b) within 5 days after written request by the First Lien Agent or First Lien Co-Agent with the respect to the First Lien Loans, Foreign Pledge Agreements substantially similar to those delivered to the First Lien Agent and the First Lien Co-Agent pledging as Collateral 100% of the issued and outstanding equity of any other Subsidiary of Salton, Inc. as specified in such request.

     Notwithstanding the foregoing, any interests pledged to the Agent and/or the Lenders pursuant to such Foreign Pledge Agreements shall be subject to the terms and conditions of the Intercreditor Agreement and the Junior Liens Intercreditor Agreement

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     5.02 Blocked Account Agreements. On or prior to October 15, 2007 the Borrower Parties shall have delivered to the Agent the Notices with respect to the control agreements described in Paragraph A of Schedule 7.33 of the First Lien Credit Agreement with respect to the J.P. Morgan Chase Accounts described therein.

     5.03 Australian Guaranty. On or before January 30, 2008, the Borrower Parties shall have caused Salton Australia, Pty. Ltd. and/or its Subsidiaries to assume or guarantee up to $15,000,000 principal amount of Loans or other Obligations on terms and conditions reasonably satisfactory to the Agent and to secure its (or such Subsidiaries’) obligations under such assumption or guarantee by a first priority perfected lien in all of its and its Subsidiaries’ assets as described in Section 7.28.

     5.04 SEC Report. On or prior to October 15, 2007 the Parent shall have filed its Form 10-K with the SEC and such Form 10-K shall comply in all material respects with all Requirements of Law.

Section 6.    Conditions. This Amendment shall be effective upon the fulfillment by the Borrower Parties, in a manner satisfactory to the Required Lenders, of all of the following conditions precedent set forth in this Section 6 (such date, the “Effective Date”):

     6.01 Execution of the Amendment. Each of the parties hereto shall have executed an original counterpart of this Amendment and shall have delivered (including by way of telefacsimile or electronic mail) the same to the Agent.

     6.02 Representations and Warranties. As of the Effective Date, the representations and warranties set forth in Section 3 hereof shall be true and correct.

     6.03 Related Transactions.

     (a) The Merger Agreement shall have been executed and delivered by the parties thereto, all conditions precedent thereto shall have been satisfied or waived and no default or event of default thereunder shall have occurred and be continuing;

     (b) The Reimbursement and Credit Agreement shall have been executed and delivered by the parties thereto, all conditions precedent thereto shall have been satisfied or waived and no default or event of default thereunder shall have occurred and be continuing;

     (c) The Intercreditor Agreement shall have been executed and delivered by the parties thereto and shall be in full force and effect without breach by any party of its obligations thereunder; and

     (d) The Junior Liens Intercreditor Agreement shall have been executed and delivered by the parties thereto and shall be in full force and effect without breach by any party of its obligations thereunder.

     6.04 Document Deliveries. The Agent and the Required Lenders shall have received:

     (a) copies of the Merger Agreement, the Loan Purchase Agreement, Reimbursement and Credit Agreement, all Reimbursement Loan Documents, the Junior Liens Intercreditor Agreement, the Amended and Restated Intercreditor Agreement, the Waiver, Consent, Forbearance and Seventeenth Amendment to the First Lien Credit Agreement and all other

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agreements related to any of the foregoing, certified by a Responsible Officer of the Administrative Borrower as a true, complete and correct;

     (b) copies of resolutions of the board of directors (and shareholders, if necessary) or other governing body of each party, the agreements described in Section 6.03 and this Amendment, each certified by an officer reasonably acceptable to the Required Lenders of such party authorizing the execution, delivery and performance of such agreements; and

     (c) such other instruments, documents and agreements as the Required Lenders may reasonably request, in form and substance reasonably satisfactory to the Required Lenders.

     6.05 Payment of Fees. All fees, costs, expense reimbursements and amounts due and payable to the Agent by the Borrowers and the Guarantors shall have been paid in full.

Section 7.    Miscellaneous.

     7.01 Continuing Effect. Except as specifically provided herein, the Credit Agreement and the other Loan Documents shall remain in full force and effect in accordance with their respective terms and are hereby ratified and confirmed in all respects.

     7.02 No Waiver; Reservation of Rights. This Amendment is limited as specified and the execution, delivery and effectiveness of this Amendment shall not operate as a modification, acceptance or waiver of any provision of the Credit Agreement, or any other Loan Document, except as specifically set forth herein. Notwithstanding anything contained in this Amendment to the contrary, the Agent and the Lenders expressly reserve the right to exercise any and all of their rights and remedies under the Credit Agreement, any other Loan Document and applicable law in respect of any Default or Event of Default not expressly waived herein.

     7.03 References.

     (a) From and after the Effective Date, (i) the Credit Agreement, the other Loan Documents and all agreements, instruments and documents executed and delivered in connection with any of the foregoing shall each be deemed amended hereby to the extent necessary, if any, to give effect to the provisions of this Amendment and (ii) all of the terms and provisions of this Amendment are hereby incorporated by reference into the Credit Agreement, as applicable, as if such terms and provisions were set forth in full therein, as applicable.

     (b) From and after the Effective Date, (i) all references in the Credit Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended hereby and (ii) all references in the Credit Agreement, the other Loan Documents or any other agreement, instrument or document executed and delivered in connection therewith, “Credit Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended hereby.

     7.04 Governing Law. THIS AMENDMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THE SUBJECT MATTER HEREOF, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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     7.05 Severability. The provisions of this Amendment are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Amendment in any jurisdiction.

     7.06 Counterparts. This Amendment may be executed in any number of counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by telefacsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart. A complete set of counterparts shall be lodged with the Borrower Parties, the Agent and each Lender.

     7.07 Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

     7.08 Binding Effect; Assignment. This Amendment shall be binding upon and inure to the benefit of the Borrower Parties, the Agent and the Lenders and their respective successors and assigns; provided, however, that the rights and obligations of the Borrower Parties under this Amendment shall not be assigned or delegated without the prior written consent of the Agent and the Required Lenders.

     7.09 Expenses. The Borrowers agree to pay the Agent upon demand, for all reasonable expenses, including reasonable fees of attorneys and paralegals for the Agent and the Lenders (who may be employees of the Agent or the Lenders), incurred by the Agent and the Lenders in connection with the preparation, negotiation and execution of this Amendment and any document required to be furnished herewith.

     7.10 Agent’s Actions. The Lenders that are party hereto certify to the Agent that their Pro Rata Share constitutes more sixty-six and two-thirds percent (66-2/3%) in the aggregate, and such Lenders have instructed Agent to execute this Amendment, the Intercreditor Agreement, the Junior Liens Intercreditor Agreement and all related documents (the “Amendment Documents”). Agent is hereby executing the Amendment Documents solely upon the instructions of the Lenders party hereto, and the Agent is exercising its rights to rely on such instructions pursuant to Section 12.4 of the Credit Agreement. AGENT IS HEREBY RELEASED OF ANY POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, OF ANY LENDER RESULTING FROM THE AMENDMENT DOCUMENTS OR ANY RELATED LOAN DOCUMENTS OR ANY OF THE ACTIONS CONTEMPLATED HEREIN OR THEREIN. Furthermore, pursuant to Section 12.4 of the Credit Agreement, the Lenders ratify the indemnification provisions set forth in Section 12.7 of the Credit Agreement. The Lenders confirm that the definition of “Indemnified Liabilities” includes any all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any Indemnified Person, including, any Agent-Related Persons, in any way relating to or arising out of any of the Amendment Documents or the transactions contemplated hereby or referred to herein. All of the rights, exculpatory provisions and disclaimers of the Agent under Article XII are hereby ratified by the Lenders in connection with the execution of the Amendment Documents.

     7.11 RELEASE. EACH OF THE LOAN PARTIES HEREBY ACKNOWLEDGES THAT THE OBLIGATIONS ARE ABSOLUTE AND UNCONDITIONAL WITHOUT ANY RIGHT OF RECISSION, SETOFF, COUNTERCLAIM, DEFENSE, OFFSET, CROSS-COMPLAINT, CLAIM OR

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DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE OBLIGATIONS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM ANY LENDER. OR THE AGENT OR AGENT-RELATED PERSONS. THE LOAN PARTIES HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE EACH AGENT-RELATED PERSON AND THE LENDERS AND ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS, AND ASSIGNS (COLLECTIVELY, THE “RELEASED PARTIES”), FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THE AMENDMENT DOCUMENTS IS EXECUTED, WHICH THE LOAN PARTIES MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THE AMENDMENT DOCUMENTS.

     7.12 Integration. This Amendment, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

[Signature pages follow]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

BORROWERS:
SALTON, INC., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Offier and Chief Financial Officer
TOASTMASTER INC., a Missouri corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Offier and Chief Financial Officer
SALTON TOASTMASTER LOGISTICS LLC, a Delaware limited liability company
By:	/s/ William Lutz
Title:	Interim Chief Executive Offier and Chief Financial Officer
GUARANTORS:
HOME CREATIONS DIRECT, LTD., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Offier and Chief Financial Officer
SONEX INTERNATIONAL CORPORATION, a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Offier and Chief Financial Officer

Signature Page to First Amendment

ICEBOX, LLC, an Illinois limited liability company
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
FAMILY PRODUCTS INC., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer
SALTON HOLDINGS, INC., a Delaware corporation
By:	/s/ William Lutz
Title:	Interim Chief Executive Officer and Chief Financial Officer

Signature Page to First Amendment

AGENT:

THE BANK OF NEW YORK.

as the Administrative Agent and the Collateral Agent

By:

Its:

Signature Page to First Amendment

LENDERS:
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
By: Harbinger Capital Partners Offshore Manager, L.L.C.,         its Investment Manager
	By:	/s/ William R. Lucas, Jr.
	Name:	William R. Lucas, Jr.
	Title:	Executive Vice President — General Counsel & Secretary
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.
By: Harbinger Capital Partners Special Situations GP, LLC.,         its General Partner
	By:	/s/ William R. Lucas, Jr.
	Name:	William R. Lucas, Jr.
	Title:	Executive Vice President – General Counsel & Secretary

Signature Page to First Amendment

ANNEX A

SCHEDULE 7.13

DEBT AT AUGUST 4, 2007

Capitalized Leases (for computer equipment)	$	7,548
Brazil Pledge Agreement	$	751,417

Signature Page to First Amendment

EX-99.13

Exhibit 99.13

Execution Version

AMENDED AND RESTATED
INTERCREDITOR AGREEMENT

          This AMENDED AND RESTATED INTERCREDITOR AGREEMENT (this “Agreement”), dated as of October 1, 2007 and effective as of the Effective Date (as defined below) is made by and between SILVER POINT FINANCE, LLC, a Delaware limited liability company, as the co-agent, syndication agent, and documentation agent under and pursuant to the First Lien Credit Agreement (as hereinafter defined) (in such capacity, and as further defined in Section 1, below, the “First Lien Co-Agent”), and WELLS FARGO FOOTHILL, INC., a California corporation, as administrative agent and collateral agent under and pursuant to the First Lien Credit Agreement (in such capacity, and as further defined in Section 1, below, the “First Lien Agent”), HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD., an exempted company incorporated with limited liability in the Cayman Islands, as agent under and pursuant to the New Second Lien Credit Agreement (as hereinafter defined) (in such capacity, and as further defined in Section 1, below, the “New Second Lien Agent”) and THE BANK OF NEW YORK, a national banking association, as agent under and pursuant to the Existing Second Lien Credit Agreement (as hereinafter defined) (in such capacity, and as further defined in Section 1, below, the “Existing Second Lien Agent”), and is acknowledged by Salton, Inc., a Delaware corporation (“Parent”), each of Parent’s Subsidiaries identified on the signature pages of the First Lien Credit Agreement or otherwise made a party thereto, as Borrowers (collectively with Parent, the “Borrowers”) and each of Parent’s Subsidiaries identified on the signature pages of the First Lien Credit Agreement, or otherwise made a party thereto, as Guarantors (collectively, the “Guarantors”).

RECITALS

          A. Parent, the Borrowers, the Guarantors, the First Lien Co-Agent, the First Lien Agent, and the lenders party thereto (such lenders, and as further defined in Section 1, below, the “First Lien Lenders”) have entered into that certain Credit Agreement dated as of May 9, 2003 and amended and restated as of June 15, 2004 (as amended as of August 30, 2004, May 11, 2005, July 8, 2005, September 22, 2005, October 7, 2005, November 9, 2005, February 8, 2006, May 10, 2006, August 15, 2006, February 12, 2007, April 13, 2007, June 28, 2007, July 30, 2007, July 31, 2007, August 6, 2007 and August 8, 2007 and as further defined in Section 1, below, the “First Lien Credit Agreement”). The repayment of the Obligations (as that term is defined in the First Lien Credit Agreement) is secured by security interests in and liens on substantially all of the assets of the Borrowers and the Guarantors pursuant to certain collateral documents in favor of the First Lien Agent (such documents as further defined in Section 1, below, together with the other collateral and loan documents executed and delivered in connection with the First Lien Credit Agreement, each as in effect on the date hereof, are referred to herein as the “First Lien Loan Documents”).

          B. Parent, the Borrowers, the Guarantors, the Existing Second Lien Agent, and the lenders party thereto (such lenders, and as further defined in Section 1,

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below, the “Existing Second Lien Lenders”) have entered into a Credit Agreement dated as of August 26, 2005 (such agreement as in effect on the date hereof, and as further defined in Section 1, below, the “Existing Second Lien Credit Agreement”). The repayment of the Obligations (as that term is defined in the Existing Second Lien Credit Agreement) is secured by security interests in and liens on substantially all of the assets of the Borrowers and the Guarantors pursuant to certain collateral documents in favor of the Existing Second Lien Agent, (such documents, and as further defined in Section 1, below, the “Existing Second Lien Loan Documents”).

          C. Each of Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P. has agreed to purchase certain Indebtedness under the First Lien Credit Agreement pursuant to, and subject to the terms and conditions of, the Loan Purchase Agreement dated as of the date hereof among them and certain of the First Lien Lenders (the “Put Agreement”) and upon such purchase the Indebtedness so purchased shall be discharged under the First Lien Credit Agreement and automatically converted into loans under the Reimbursement and Senior Secured Credit Agreement dated as of October 1, 2007 (such agreement as in effect on such date, and as further defined in Section 1, below, the “New Second Lien Credit Agreement”) among the Borrowers, the Guarantors, the New Second Lien Agent, and Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P., as lenders party thereto (such lenders, and as further defined in Section 1, below, the “New Second Lien Lenders”). The repayment of the Obligations (as that term is defined in the New Second Lien Credit Agreement) is secured by security interests in and liens on substantially all of the assets of the Borrowers and the Guarantors pursuant to certain collateral documents in favor of the New Second Lien Agent, (such documents, and as further defined in Section 1, below, the “New Second Lien Loan Documents”).

          D. The First Lien Agent and the First Lien Co-Agent, for and on behalf of themselves and the First Lien Lenders and the Existing Second Lien Agent, for and on behalf of itself and the Existing Second Lien Lenders entered into an Intercreditor Agreement dated as of August 26, 2005, which Intercreditor Agreement was acknowledged by the Borrowers and certain of the Guarantors (“Original Intercreditor Agreement”).

          E. The New Second Lien Agent, for and on behalf of itself and the New Second Lien Lenders and the Existing Second Lien Agent, for and on behalf of itself and the Existing Second Lien Lenders have entered into an Intercreditor Agreement dated as of the date hereof, which Intercreditor Agreement was acknowledged by the Borrowers and certain of the Guarantors (such Intercreditor Agreement as in effect on the date hereof, “Junior Intercreditor Agreement”).

          F. The First Lien Agent and the First Lien Co-Agent, for and on behalf of themselves and the First Lien Lenders, on the one hand and the New Second Lien Agent, for and on behalf of itself and the New Second Lien Lenders and the Existing Second Lien Agent, for and on behalf of itself and the Existing Second Lien Lenders, on the other

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hand, wish to enter into this Agreement to add the Existing Second Lien Agent as a party hereto and to amend and restate in its entirety the Original Intercreditor Agreement.

          NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which is hereby acknowledged, the First Lien Agent, First Lien Co-Agent, New Second Lien Agent and Existing Second Lien Agent hereby agree, effective as of and only from and after the Effective Date, as follows:

          1. Definitions; Rules of Construction.

          a. Definitions. As used in this Agreement, the following terms shall have the following meanings:

          “Adequate Protection Lien” has the meaning set forth in Section 5.d.

          “Agreement” means this Agreement as it may be amended, modified or supplemented from time to time.

          “Application of Proceeds Blockage Event” has the meaning set forth in Section 4.a.

          “Application of Proceeds Blockage Period” has the meaning set forth in Section 4.a.

          “Bank Product Obligations” has the meaning set forth in the First Lien Credit Agreement.

          “Bankruptcy Code” shall mean Title 11 of the United States Code, as in effect from time to time.

          “Borrowers” means Parent and the Subsidiaries of Parent from time to time party to the First Lien Credit Agreement as borrowers.

          “Borrowing Base” has the meaning set forth in the First Lien Credit Agreement.

          “Borrowing Base Certificate” has the meaning set forth in the First Lien Credit Agreement.

          “Capital Stock” means (a) in the case of a corporation, corporate stock, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of property of, the issuing Person.

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          “Cash Collateral” means any Collateral consisting of money or cash equivalents, any security entitlement (as defined in the UCC) and any financial assets (as defined in the UCC).

          “Collateral” means all assets and properties upon which either First Lien Agent or First Lien Co-Agent, on the one hand, or any of the Junior Lien Agents, on the other hand, now has or hereafter acquires a Lien, whether now owned or hereafter acquired by the Borrowers, any Guarantor or any other Person, together with all rents, issues, profits, products, and Proceeds thereof.

          “Control Collateral” means any Collateral consisting of a certificated security (as defined in the UCC), investment property (as defined in the UCC), a deposit account (as defined in the UCC) and any other Collateral as to which a Lien may be perfected through physical possession or control by the secured party or any agent therefor.

          “Credit Support” has the meaning set forth in the First Lien Credit Agreement.

          “DIP Financing” has the meaning set forth in Section 5.d.

          “Discharge of First Lien Indebtedness” means payment in full in cash (or in the case of letters of credit or Bank Product Obligations, the cash collateralization as required by the First Lien Loan Documents) of the First Lien Indebtedness (other than First Lien Indebtedness consisting solely of contingent indemnification obligations under the First Lien Loan Documents for which no claim has been asserted in writing) after or concurrently with termination of all commitments to extend credit under any First Lien Credit Agreement.

          “Discharge of Junior Lien Indebtedness” means payment in full in cash of the Junior Lien Indebtedness (other than Junior Lien Indebtedness consisting solely of contingent indemnification obligations under the Junior Lien Loan Documents for which no claim has been asserted in writing) after or concurrently with termination of all commitments to extend credit under any Junior Lien Credit Agreement.

          “Effective Date” means the date on which the initial purchase of all or any portion of the Stretch Loans (as defined in the Put Agreement) is consummated pursuant to a “Stretch Loan Put Notice” as defined in and delivered pursuant to the Put Agreement.

          “Eligible Junior Agent” means, prior to receipt by the First Lien Agent and the First Lien Co-Agent of written notice that all New Second Lien Indebtedness has been satisfied in full, the New Second Lien Agent and, after such receipt of such notice, the Existing Second Lien Agent.

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          “Equity Interests” means Capital Stock and all warrants, options, or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

          “Event of Default” means “Event of Default” as defined in the First Lien Credit Agreement and/or “Event of Default” as defined any Junior Lien Credit Agreement.

          “Exercise Any Secured Creditor Remedies” or “Exercise of Secured Creditor Remedies” means (a) the taking of any action to enforce or realize upon any Lien, including the institution of any foreclosure proceedings or the noticing of any public or private sale or other disposition pursuant to Article 9 of the UCC, (b) the exercise of any right or remedy provided to a secured creditor or otherwise on account of a Lien under the First Lien Loan Documents, the Junior Lien Loan Documents, applicable law, in an Insolvency Proceeding or otherwise, including the election to retain Collateral in satisfaction of a Lien, (c) the taking of any action or the exercise of any right or remedy in respect of the collection on, set off against, marshaling of, or foreclosure on the Collateral or the Proceeds of Collateral, (d) the sale, lease, license, or other disposition of all or any portion of the Collateral, by private or public sale, other disposition or any other means permissible under applicable law, (e) the solicitation of bids from third parties to conduct the liquidation of all or a material portion of Collateral to the extent undertaken and being diligently pursued in good faith to consummate the sale of such Collateral within a commercially reasonable time, (f) the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, appraisers, auctioneers or other third parties for the purposes of valuing, marketing, promoting and selling the Collateral to the extent undertaken and being diligently pursued in good faith to consummate the sale of such Collateral within a commercially reasonable time, and (g) the exercise of any other enforcement right relating to the Collateral (including the exercise of any voting rights relating to any Capital Stock and including any right of recoupment or set-off) whether under the First Lien Loan Documents, the Junior Lien Loan Documents, applicable law, in an Insolvency Proceeding or otherwise.

          “Existing Second Lien Agent” means the Existing Second Lien Agent as defined in the Recitals, together with its successors and assigns.

          “Existing Second Lien Credit Agreement” means the Existing Second Lien Credit Agreement as defined in the Recitals and as amended, modified, or supplemented from time to time in accordance with the terms of this Agreement.

          “Existing Second Lien Indebtedness” means all obligations and all other amounts owing, due or secured under the terms of the Existing Second Lien Credit Agreement or any other Existing Second Lien Loan Document, including any and all amounts payable to Existing Second Lien Agent or to any Existing Second Lien Lender, all principal, premium, interest, fees, attorneys fees, costs, charges, expenses, reimbursement obligations, indemnities, guarantees, any prepayment or early termination premium, and all other amounts payable under any Existing Second Lien Loan Document

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or in respect thereof (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Obligor, or that would have accrued or become due under the terms of the Existing Second Lien Loan Documents but for the effect of the Insolvency Proceeding or other applicable law, and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding).

          “Existing Second Lien Lenders” means the Existing Second Lien Lenders as defined in the Recitals.

          “Existing Second Lien Loan Documents” means the Existing Second Lien Credit Agreement and the other Loan Documents (as such term is defined in the Existing Second Lien Credit Agreement), or any other security, collateral, ancillary or other document entered into in connection with or related to any agreement that is a Existing Second Lien Credit Agreement.

          “First Lien Agent” means the First Lien Agent as defined in the Recitals , together with its successors, assigns and transferees under any First Lien Credit Agreement.

          “First Lien Amount” means, at any date of determination, the aggregate principal amount of In Formula First Lien Loans outstanding on such date.

          “First Lien Co-Agent” means the First Lien Co-Agent as defined in the Recitals, together with its successors, assigns and transferees under any First Lien Credit Agreement.

          “First Lien Credit Agreement” means the First Lien Credit Agreement as defined in the Recitals and as amended, restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to time, and any other agreement extending the maturity of, consolidating, otherwise restructuring (including adding Subsidiaries or affiliates of any Obligor or any other Persons as parties thereto), renewing, replacing or refinancing all or any portion of the Obligations or Commitments as those terms are defined in the First Lien Credit Agreement or all or any portion of the amounts owed under any other agreement that itself is a First Lien Credit Agreement hereunder and whether by the same or any other agent, lender, or group of lenders and whether or not increasing the amount of First Lien Indebtedness that may be incurred thereunder, in each case, to the extent that any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing is permitted under this Agreement.

          “First Lien Default” means any Event of Default under the First Lien Credit Agreement.

          “First Lien Indebtedness” means the principal amount of all In Formula First Lien Loans outstanding under the First Lien Loan Documents and all other obligations and amounts owing (other than the principal amount of First Lien Loans), due

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or secured under the terms of the First Lien Credit Agreement, any other First Lien Loan Document or any DIP Financing provided by a First Lien Lender, including any and all amounts payable to any First Lien Lender, all premium, interest, fees, attorneys fees, costs, charges, expenses, reimbursement obligations, indemnities, guarantees, the Make-Whole Amount, Bank Product Obligations, Ledger Product Obligations and all other amounts payable under any First Lien Loan Document or in respect thereof (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Obligor, or that would have accrued or become due under the terms of the First Lien Loan Documents but for the effect of the Insolvency Proceeding or other applicable law, and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding).

          “First Lien Lender Sale” has the meaning set forth in Section 2.c(1).

          “First Lien Lenders” means the lenders under any First Lien Credit Agreement or First Lien Loan Documents.

          “First Lien Loan” means (i) any Loan (as that term is defined in the First Lien Credit Agreement) and (ii) any obligation of the Borrowers to reimburse the First Lien Lenders for the face amount of drawings under Letters of Credit or for payments pursuant to any Credit Support.

          “First Lien Loan Documents” means the First Lien Credit Agreement and the other Loan Documents (as such term is defined in the First Lien Credit Agreement), or any other security, collateral, ancillary or other document entered into in connection with or related to any agreement that is a First Lien Credit Agreement, as such documents may be amended, restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to time, in accordance with this Agreement.

          “First Lien Modification” has the meaning set forth in Section 6.a.

          “Forced Obligor Sale” has the meaning set forth in Section 2.c(2).

          “Guarantors” means the Subsidiaries of Parent from time to time party to the First Lien Credit Agreement as guarantors.

          “Harbinger Entities” means Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P. and any of their respective affiliates.

          “In Formula First Lien Loan” means any First Lien Loan; provided that on the date of (and after giving effect to) the incurrence of such First Lien Loan, the aggregate principal amount of all outstanding First Lien Loans did not exceed, the lesser of: (a) $187,500,000 minus the principal amount of Purchased Loans plus $5,000,000 and (b) the Borrowing Base (as set forth in the Borrowing Base Certificate then in effect pursuant to the First Lien Credit Agreement) plus $5,000,000.

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          “Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state, federal or foreign bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

          “Junior Lien Agents” means the New Second Lien Agent and the Existing Second Lien Agent.

          “Junior Lien Credit Agreements” means the New Second Lien Credit Agreement and the Existing Second Lien Credit Agreement.

          “Junior Lien Indebtedness” means the New Second Lien Indebtedness and the Existing Second Lien Indebtedness.

          “Junior Lien Lenders” means the New Second Lien Lenders and the Existing Second Lien Lenders.

          “Junior Lien Loan Documents” means the New Second Lien Loan Documents and the Existing Second Lien Loan Documents.

          “Ledger Product Obligations” has the meaning set forth in the First Lien Credit Agreement.

          “Lender” means a First Lien Lender and/or a Junior Lien Lender, as the context may require.

          “Letter of Credit” has the meaning set forth in the First Lien Credit Agreement.

          “Lien” means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting real property.

          “New Second Lien Agent” means the New Second Lien Agent as defined in the Recitals.

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          “New Second Lien Credit Agreement” means the New Second Lien Credit Agreement as defined in the Recitals and as amended, restated or supplemented in accordance with the terms of this Agreement.

          “New Second Lien Indebtedness” means all obligations and all other amounts owing, due or secured under the terms of the New Second Lien Credit Agreement, any other New Second Lien Loan Document or any DIP Financing provided by any New Second Lien Lender, including any and all amounts payable to New Second Lien Agent or to any New Second Lien Lender, all principal, premium, interest, fees, attorneys fees, costs, charges, expenses, reimbursement obligations, indemnities, guarantees, any prepayment or early termination premium, and all other amounts payable under any New Second Lien Loan Document or in respect thereof (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Obligor, or that would have accrued or become due under the terms of the New Second Lien Loan Documents but for the effect of the Insolvency Proceeding or other applicable law, and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding).

          “New Second Lien Lenders” means the New Second Lien Lenders as defined in the Recitals.

          “New Second Lien Loan Documents” means the New Second Lien Credit Agreement and the other Loan Documents (as such term is defined in the New Second Lien Credit Agreement), or any other security, collateral, ancillary or other document entered into in connection with or related to any agreement that is a New Second Lien Credit Agreement.

          “Notice of Intent to Exercise” means a written notice from or on behalf of any Junior Lien Agent to First Lien Agent and First Lien Co-Agent (a) stating that such Junior Lien Agent intends to Exercise Secured Creditor Remedies, (b) stating that it is a “Notice of Intent to Exercise Secured Creditor Remedies” and (c) describing the Event(s) of Default under the relevant Junior Lien Credit Agreement that is(are) the basis for delivering such notice.

          “Obligor” means the Borrowers, each Guarantor and any other Person that now or hereafter is, or whose assets now or hereafter are, liable for all or any portion of the First Lien Indebtedness or the Junior Lien Indebtedness, as applicable.

          “Payment Collateral” means all accounts, instruments, chattel paper, letters of credit, deposit accounts, securities accounts, and payment intangibles, together with all supporting obligations (as those terms are defined in the UCC), in each case composing a portion of the Collateral.

          “Permitted Application of Proceeds of Collateral” has the meaning set forth in Section 3.

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          “Permitted Replacement Lien” has the meaning set forth in Section 5.i.

          “Person” means any natural person, corporation, limited liability company, limited partnership, general partnership, limited liability partnership, joint venture, trust, land trust, business trust, or other organization, irrespective of whether such organization is a legal entity, and shall include a government and any agency or political subdivision thereof.

          “Proceeds” means (a) all “proceeds” as defined in Article 9 of the UCC with respect to the Collateral, and (b) whatever is recoverable or recovered when Collateral is sold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.

          “Parent” has the meaning set forth in the Recitals.

          “Purchase Notice” has the meaning set forth in Section 10.a.

          “Purchased Loans” has the meaning set forth in the Put Agreement.

          “Put Agreement” has the meaning set forth in Recital C.

          “Recovery” has the meaning set forth in Section 5.c.

          “Reorganization Debt Securities” has the meaning set forth in Section 5.a.

          “Standstill Notice” means a written notice from First Lien Agent or First Lien Co-Agent to the Junior Lien Agents stating that a First Lien Default has occurred and is continuing and stating that it is a “Standstill Notice”.

          “Standstill Period” means the period beginning on the date that a Standstill Notice is received by the Junior Lien Agents through and including the first to occur of (a) the date upon which the Discharge of First Lien Indebtedness shall have occurred, (b) the date upon which First Lien Agent or First Lien Co-Agent shall have waived or acknowledged in writing the termination of the First Lien Default that gave rise to such Standstill Period, or (c) the date that is 270 days after the receipt of such Standstill Notice by Junior Lien Agents.

          “Trigger Event” has the meaning set forth in Section 10.a.

          “Trigger Notice” has the meaning set forth in Section 10.a.

          “UCC” means the Uniform Commercial Code as enacted and in effect from time to time in the State of New York; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect

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in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

          b. Terms Defined in the First Lien Credit Agreement. Unless otherwise defined in this Agreement, any and all initially capitalized terms set forth in this Agreement shall have the meaning ascribed thereto in the First Lien Credit Agreement.

          c. Rules of Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference herein to any Person shall be construed to include such Person’s successors and assigns.

          2. Subordination and Standstill.

          a. Lien Subordination. Notwithstanding (i) the date, time, method, manner or order of grant, attachment, or perfection of any Liens granted to First Lien Agent (or First Lien Co-Agent or any First Lien Lender) or any Junior Lien Agent (or any Junior Lien Lender) in respect of all or any portion of the Collateral, (ii) the order or time of filing or recordation of any document or instrument for perfecting the Liens in favor of First Lien Agent (or First Lien Co-Agent or any First Lien Lender) or any Junior Lien Agent (or any Junior Lien Lender) in any Collateral, (iii) any provision of the UCC, any other applicable law, any of the First Lien Loan Documents or the Junior Lien Loan Documents, (iv) irrespective of whether the Liens securing the First Lien Loan Documents are valid, perfected, enforceable, void, avoidable, subordinated, disputed or allowed, or (v) any other circumstance whatsoever, each of First Lien Agent and First Lien Co-Agent, on behalf of itself and the First Lien Lenders, New Second Lien Agent, on behalf of itself and the Second Lien Lenders and Existing Second Lien Agent, on behalf of itself and the Existing Second Lien Lenders hereby agrees that:

          (1) any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of any Junior Lien Agent or any Junior Lien Lender that secures all or any portion of the Junior Lien Indebtedness, shall in all respects be junior and subordinate to all Liens granted to First Lien Agent, First Lien Co-Agent and the First Lien Lenders in the Collateral to secure all or any portion of the First Lien Indebtedness,

          (2) any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of First Lien Agent, First Lien Co-Agent or any First Lien Lender that secures all or any portion of the First Lien Indebtedness shall in all respects be senior and prior to all Liens granted to any Junior Lien Agent and any of the Junior

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Lien Lenders in the Collateral to secure all or any portion of the Junior Lien Indebtedness,

          (3) any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of Existing Second Lien Agent or any Existing Second Lien Lender that secures all or any portion of the Existing Second Lien Indebtedness, shall in all respects be junior and subordinate to all Liens granted to New Second Lien Agent and any of the New Second Lien Lenders in the Collateral to secure all or any portion of the New Second Lien Indebtedness as provided in the Junior Intercreditor Agreement, and

          (4) any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of New Second Lien Agent or any New Second Lien Lender that secures all or any portion of the New Second Lien Indebtedness shall in all respects be senior and prior to all Liens granted to the Existing Second Lien Agent and any of the Existing Second Lien Lenders in the Collateral to secure all or any portion of the Existing Second Lien Indebtedness as provided in the Junior Intercreditor Agreement.

          b. Remedies Standstill. At any time that a Standstill Period is in effect, none of the Junior Lien Agent and none of the Junior Lien Lenders shall, without the prior written consent of First Lien Co-Agent (acting upon the direction of the requisite First Lien Lenders):

          (1) commence, prosecute, or participate in any lawsuit, action, or proceeding, whether private, judicial, equitable, administrative or otherwise (including any Insolvency Proceeding with respect to any Obligor or any Obligor’s assets) to the extent that any such action could reasonably be expected, in any material respect, to restrain, hinder, limit, delay for any material period or otherwise interfere with the Exercise of Secured Creditor Remedies by First Lien Co-Agent, First Lien Agent or First Lien Lenders; provided that (A) to the extent that commencing, prosecuting, or participating in any such lawsuit, action, or proceeding could not reasonably be expected, in any material respect, to restrain, hinder, limit, delay for any material period or otherwise interfere with the Exercise of Secured Creditor Remedies by First Lien Co-Agent, First Lien Agent or First Lien Lenders and a Junior Lien Agent does, in fact, commence, prosecute, or participate in any such lawsuit, action, or proceeding, then such Junior Lien Agent shall give First Lien Co-Agent and First Lien Agent prompt written notice of any such action, and (B) as more fully set forth in Section 5, Junior Lien Agents and the Junior Lien Lenders may file, prosecute and defend a proof of claim (such proof of claim to indicate the subordination set forth herein) in any Insolvency Proceeding involving any Obligor;

          (2) Exercise Any Secured Creditor Remedies;

          (3) send any notice to or otherwise seek to obtain payment directly from any account debtor of any Obligor, sue for an attachment, an injunction to enjoin any Exercise of Secured Creditor Remedies by First Lien Co-Agent, First Lien Agent or First

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Lien Lenders, a keeper, a receiver or any other similar legal or equitable remedy, exercise any rights of set off or recoupment as against any Obligor; or

          (4) commence or cause to be commenced or join with any creditor in commencing any Insolvency Proceeding against any Obligor or any Obligor’s assets.

          Notwithstanding any other provision hereof, no Junior Lien Agent and no Junior Lien Lender may: (i) Exercise Any Secured Creditor Remedies with respect to any Payment Collateral at any time unless and until the Discharge of First Lien Indebtedness shall have occurred; (ii) exercise any of the remedies described in clauses (1) through (4) above (other than filing, prosecuting or defending a proof of claim permitted under such clause (4)) so long as (A) First Lien Co-Agent or First Lien Agent at such time has commenced and diligently is pursuing in good faith any Exercise of Secured Creditor Remedies with respect to all or a material portion of the Collateral or (B) First Lien Co-Agent, First Lien Agent and Junior Lien Agents are enjoined from the Exercise of Secured Creditor Remedies, in each case, unless and until the Discharge of First Lien Indebtedness shall have occurred; or (iii) exercise any of the remedies described in clauses (1) through (4), above without first providing First Lien Co-Agent and First Lien Agent at least 10 days prior written notice in the form of a Notice of Intent to Exercise (it being understood that (x) notwithstanding anything to the contrary contained herein, such Notice of Intent to Exercise may only be delivered by the Existing Second Lien Agent if there is an Event of Default under Section 9.1(a), Section 9.1(c) (solely with respect to a default under Section 7.23 of the Existing Second Lien Credit Agreement as in effect on the date hereof), or Section 9.1(d) (solely with respect to a default in the payment when due of interest or principal on the Senior Notes under the Indentures) of the Existing Second Lien Credit Agreement as in effect on the date hereof or by the New Second Lien Agent if there is an Event of Default under Section 9.1(a), or Section 9.1(d) (solely with respect to a default in the payment when due of interest or principal on the Senior Notes under the Indentures) of the New Second Lien Credit Agreement as in effect on the date hereof and (y) if First Lien Co-Agent or First Lien Agent does not deliver a Standstill Notice to a Junior Lien Agent by the end of such 10 day period, such Junior Lien Agent may proceed with the exercise of such remedies, and if such Junior Lien Agent elects to exercise such remedies, neither First Lien Agent nor First Lien Co-Agent may exercise any of the remedies of the type described in clauses (1) through (4) above so long as such Junior Lien Agent at such time has commenced and diligently is pursuing in good faith any Exercise of Secured Creditor Remedies with respect to all or a material portion of the Collateral, unless and until the Discharge of Junior Lien Indebtedness shall have occurred); provided, that such Junior Lien Agent shall not be required to provide a Notice of Intent to Exercise to First Lien Agent and First Lien Co-Agent in connection with a permitted Exercise of Secured Creditor Remedies upon the termination of any Standstill Period.

          c. Limitation on Standstill Periods. Subject to clause (ii) in the last paragraph of Section 2.b, in no event shall a Standstill Period extend beyond 270 days from the date of receipt by Junior Lien Agents from First Lien Agent or First Lien Co-Agent of a Standstill Notice initiating such Standstill Period. Any number of notices of a

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First Lien Default may be given during a Standstill Period, but no such notice shall extend such Standstill Period. Only 2 Standstill Periods may be commenced within any 360 day period, and no subsequent Standstill Period may be commenced within 60 days after the termination of the immediately preceding Standstill Period. No First Lien Default that existed or was continuing on the date of the commencement of any Standstill Period and that was known to First Lien Agent, First Lien Co-Agent or any First Lien Lender will be, or can be, made the basis for the commencement of a second Standstill Period, whether or not within a period of 360 consecutive days, unless such First Lien Default has been cured or waived for a period of not less than 60 consecutive days.

          d. Release of Liens.

          (1) In the event of any private or public sale or other disposition of all or any portion of the Collateral by First Lien Agent or First Lien Co-Agent after the occurrence and during the continuance of a First Lien Default (and prior to the date upon which the Discharge of First Lien Indebtedness shall have occurred) in connection with the liquidation by First Lien Agent or First Lien Co-Agent of all or any material portion of the Collateral and the collection by First Lien Agent or First Lien Co-Agent of the First Lien Indebtedness through the sale or other disposition of such Collateral (whether prior to or after the occurrence of an Insolvency Proceeding) (any such sale or other disposition, a “First Lien Lender Sale”), then each of the New Second Lien Agent, on behalf of itself and the New Second Lien Lenders, and the Existing Second Lien Agent, on behalf of itself and the Existing Second Lien Lenders, agrees that such First Lien Lender Sale will be free and clear of the Liens securing the Junior Lien Indebtedness (and, if the First Lien Lender Sale includes Equity Interests in any Obligor, each of the New Second Lien Agent, on behalf of itself and the New Second Lien Lenders, and the Existing Second Lien Agent, on behalf of itself and the Existing Second Lien Lenders, further agrees to release the entities whose Equity Interests are sold from all New Second Lien Indebtedness and Existing Second Lien Indebtedness, as applicable); provided that (x) First Lien Agent, First Lien Co-Agent and the First Lien Lenders also release their Liens on such Collateral (and, if the First Lien Lender Sale includes Equity Interests in any Obligor, the entities whose Equity Interests are sold from all First Lien Indebtedness), (y) the Proceeds of any such First Lien Lender Sale are applied in accordance with Section 9, and (z) First Lien Agent or First Lien Co-Agent shall have conducted such First Lien Lender Sale in a commercially reasonable manner and in accordance with the UCC.

          (2) In the event of any private or public sale or other disposition of all or substantially all of the Collateral by any Obligor with the consent of First Lien Co-Agent and/or First Lien Agent after the occurrence and during the continuance of a First Lien Default (and prior to the date upon which the Discharge of First Lien Indebtedness shall have occurred), which sale or other disposition is conducted by such Obligor with the consent of First Lien Co-Agent and/or First Lien Agent (any such sale or other disposition, a “Forced Obligor Sale”), then each of the New Second Lien Agent, on behalf of itself and the New Second Lien Lenders and the Existing Second Lien Agent, on behalf of itself and the Existing Second Lien Lenders, agrees that such Forced Obligor

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Sale will be free and clear of the Liens securing the New Second Lien Indebtedness and the Existing Second Lien Indebtedness, as applicable (and, if the Forced Obligor Sale includes Equity Interests in any Obligor, each of the New Second Lien Agent, on behalf of itself and the New Second Lien Lenders and the Existing Second Lien Agent, on behalf of itself and the Existing Second Lien Lenders, further agrees to release the entities whose Equity Interests are sold from all New Second Lien Indebtedness and Existing Second Lien Indebtedness, as applicable); provided that (x) First Lien Agent, First Lien Co-Agent and the First Lien Lenders also release their Liens on such Collateral (and, if the Forced Obligor Sale includes Equity Interests in any Obligor, the entities whose Equity Interests are sold from all First Lien Indebtedness), (y) the Proceeds of any such Forced Obligor Sale are applied in accordance with Section 9 (as if it were Proceeds received in connection with any Exercise of Secured Creditor Remedies), and (z) the Obligor conducting such Forced Obligor Sale shall have conducted such Forced Obligor Sale in a commercially reasonable manner as if such Forced Obligor Sale were being conducted by a secured creditor in accordance with the UCC.

          (3) Each Junior Lien Agent agrees that, in connection with any First Lien Lender Sale or Forced Obligor Sale, upon the prior written request of First Lien Co-Agent or First Lien Agent (which request shall specify the proposed terms of the sale and the type and amount of consideration to be received in connection therewith), it will execute and/or file any and all Lien releases or other documents reasonably requested by First Lien Co-Agent or First Lien Agent in connection therewith (copies of which are provided to such Junior Lien Agent) without recourse, representation or warranty and at the sole expense of the Obligors; provided, that (w) in the case of a First Lien Lender Sale, no such release documents shall be delivered to any Obligor, (x) in the case of a Forced Obligor Sale, no such release documents shall be delivered to any Obligor unless First Lien Co-Agent or First Lien Agent has delivered its release documents to such Obligor, (y) no such release documents shall be delivered to a Junior Lien Agent for execution more than 5 days prior to the anticipated closing date of such sale or disposition, and (z) the effectiveness of any such release or termination by such Junior Lien Agent shall be subject to the sale or other disposition of the Collateral described in such request and on the terms described in such request or on substantially similar terms and shall lapse in the event such sale or other disposition does not occur within 10 days of the anticipated closing date (at which time First Lien Co-Agent, First Lien Agent or the Obligors, as the case may be, shall promptly return all release documents to such Junior Lien Agent). Subject to the proviso in the immediately preceding sentence, in the event that a Junior Lien Agent fails to so execute or file any such Lien releases or other documents within 5 Business Days after receipt of written request from First Lien Agent or First Lien Co-Agent, each of First Lien Co-Agent and First Lien Agent is hereby irrevocably authorized to execute and/or file such Lien releases and other documents (provided that such Lien releases and other documents shall not be filed or recorded except substantially contemporaneous with such sale or disposition or until such sale or disposition has been consummated).

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          e. Waiver of Right to Contest First Lien Indebtedness. Each Junior Lien Agent agrees that it and the Junior Lien Lenders for which it is agent shall not, and hereby waive any right to, take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of First Lien Agent (on behalf of itself, the First Lien Co-Agent and the First Lien Lenders) in any Collateral, the validity, priority, enforceability or allowance of the First Lien Indebtedness or any of the claims of First Lien Agent or any holder of First Lien Indebtedness against any Obligor or the validity or enforceability of this Agreement or any of the provisions hereof. Each Junior Lien Agent agrees that neither it nor the Junior Lien Lenders for which it is agent will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by First Lien Co-Agent or First Lien Agent under the First Lien Loan Documents, including any public or private sale, lease, exchange, transfer, or other disposition of any Collateral, whether by foreclosure or otherwise, in any case so long as First Lien Co-Agent or First Lien Agent does not act in contravention of this Agreement or applicable law. Each Junior Lien Agent hereby waives any and all rights it and the Junior Lien Lenders for which it is agent may have as a junior lien creditor or otherwise to contest, protest, object to, interfere with the manner in which First Lien Co-Agent or First Lien Agent seeks to enforce the Liens in any Collateral so long as First Lien Co-Agent or First Lien Agent does not act in contravention of this Agreement or applicable law.

          f. Waiver of Right to Contest Junior Lien Indebtedness. Each of First Lien Agent and First Lien Co-Agent agrees that it and the First Lien Lenders shall not, and hereby waives any right to, take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority (except to the extent expressly provided by this Agreement), enforceability, or perfection of the Liens of Junior Lien Agents (on behalf of themselves and the Junior Lien Lenders) in any Collateral, the validity, priority (except to the extent expressly provided by this Agreement), enforceability or allowance of any of the claims of any Junior Lien Agent or any holder of Junior Lien Indebtedness against any Obligor or the validity or enforceability of this Agreement or any of the provisions hereof. Solely to the extent that a Junior Lien Agent is permitted to Exercise Secured Creditor Remedies under this Agreement, each of First Lien Agent and First Lien Co-Agent agrees that neither it nor the First Lien Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by such Junior Lien Agent under the Junior Lien Loan Documents, including any public or private sale, lease, exchange, transfer, or other disposition of any Collateral, whether by foreclosure or otherwise, in any case so long as such Junior Lien Agent does not act in contravention of this Agreement or applicable law.

          g. Acknowledgement of Liens. Each Junior Lien Agent acknowledges and agrees, for itself and on behalf of the Junior Lien Lenders for which it is agent, that the First Lien Agent, for the benefit of itself, the First Lien Co-Agent and

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the First Lien Lenders, has been and may be granted Liens upon all of the Collateral in which such Junior Lien Agent has been granted Liens and each Junior Lien Agent hereby consents thereto. Each of First Lien Agent and First Lien Co-Agent acknowledges and agrees that the Junior Lien Agents, for the benefit of themselves and the Junior Lien Lenders, has been or, subject to the terms of this Agreement, may be granted Liens upon all of the Collateral in which the First Lien Agent and First Lien Co-Agent has been granted Liens and each of the First Lien Agent and First Lien Co-Agent hereby consents thereto. Each Junior Lien Agent agrees that neither it nor any Junior Lien Lender for which it is agent shall obtain a Lien on any asset or Collateral to secure all or any portion of the Junior Lien Indebtedness unless concurrently therewith, the First Lien Agent (on behalf of itself, the First Lien Co-Agent and the First Lien Lenders) obtains a Lien on such asset or Collateral and the parties hereby agree that all such Liens are and will be subject to this Agreement. The subordination of Liens by the Junior Lien Agents in favor of the First Lien Agent, the First Lien Co-Agent and the First Lien Lenders shall not be deemed to subordinate the Junior Lien Agent’s Liens to the Liens of any other Person that is not a holder of First Lien Indebtedness.

          h. Agent for Perfection. First Lien Agent and First Lien Co-Agent, on the one hand, and each Junior Lien Agent, on the other hand, each agree to hold all Control Collateral and Cash Collateral, as applicable, in their respective possession, custody, or control (or in the possession, custody, or control of agents or bailees for either) as a non-fiduciary agent for the other solely for the purpose of perfecting the security interest granted to each in such Control Collateral or Cash Collateral subject to the terms and conditions of this Section 2.h. None of First Lien Agent, First Lien Co-Agent or the First Lien Lenders, on the one hand, or any of the Junior Lien Agent or the Junior Lien Lenders, on the other hand, as applicable, shall have any obligation whatsoever to the others to assure that the Control Collateral is genuine or owned by any Obligor or any other Person or to preserve their respective rights or benefits or those of any Person. The duties or responsibilities of First Lien Agent, First Lien Co-Agent and each Junior Lien Agent under this Section 2.h are and shall be limited solely to holding or maintaining control of the Control Collateral and the Cash Collateral as a non-fiduciary agent for the other for purposes of perfecting the Lien held by such Junior Lien Agent, on the one hand, or First Lien Agent or First Lien Co-Agent, on the other hand, as applicable. Neither First Lien Agent nor First Lien Co-Agent is and shall not be deemed to be a fiduciary of any kind for any Junior Lien Agent or any other Person. No Junior Lien Agent is or shall be deemed to be a fiduciary of any kind for First Lien Agent, First Lien Co-Agent or any other Person.

          After the Discharge of First Lien Indebtedness shall have occurred, First Lien Agent and First Lien Co-Agent, upon the reasonable request of any Junior Lien Agent, (a) shall promptly deliver any Cash Collateral or Control Collateral, if any, in their possession to the New Second Lien Agent (or as it may direct in writing), and (b) will reasonably cooperate (subject to First Lien Agent and First Lien Co-Agent obtaining satisfactory indemnity agreements from the Obligors and/or such other Persons as First Lien Agent or First Lien Co-Agent may reasonably require) with the Obligors and such

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Junior Lien Agent in order to transfer or assign (to the extent permitted by the applicable agreement) control of the remainder of the Cash Collateral or Control Collateral, if any, under either of First Lien Agent’s or First Lien Co-Agent’s control to New Second Lien Agent (or as it may direct in writing), in each case, at the sole cost and expense of the Obligors and except as may otherwise be required by applicable law or court order. Notwithstanding the foregoing, if this Agreement is reinstated pursuant to Section 5.c hereof and any Cash Collateral or Control Collateral has heretofore been delivered to the Second Lien Agent or at its direction pursuant to this Section 2.h or is otherwise in the possession or control of any Junior Lien Agent or any Junior Lien Lender, then, upon such reinstatement, (i) each Junior Lien Agent and each Junior Lien Lender shall promptly deliver any Cash Collateral or Control Collateral, if any, in their possession or under their control to First Lien Agent, and First Lien Agent shall hold any such Cash Collateral or Control Collateral in accordance with the first sentence of this Section 2.h, and (ii) the Obligors and each Junior Lien Agent will reasonably cooperate with First Lien Agent and First Lien Co-Agent in order to transfer or assign (to the extent permitted by the applicable agreement) control of any Cash Collateral or Control Collateral, if any, under such Junior Lien Agent’s or any Junior Lien Lender’s control to First Lien Agent (to be held in accordance with the first sentence of this Section 2.h), in each case, at the sole cost and expense of the Obligors and except as may otherwise be required by applicable law or court order.

          3. Permitted Applications of Proceeds of Collateral.

          So long as an Application of Proceeds Blockage Period is not then in effect, the Borrowers may pay or apply, and the Junior Lien Agents and the Junior Lien Lenders may accept and receive on account of the Junior Lien Indebtedness, any Proceeds of Collateral whatsoever on account of the Junior Lien Indebtedness in accordance with the terms of the Junior Lien Loan Documents (any such application being referred to as a “Permitted Application of Proceeds of Collateral”).

          4. Application of Proceeds after Exercise of Remedies.

          a. In the event that (i) a First Lien Default shall have occurred and be continuing and (ii) First Lien Agent or First Lien Co-Agent shall have commenced and shall be diligently pursuing any Exercise of Secured Creditor Remedies against all or a material portion of the Collateral and shall be applying all Proceeds of Collateral (to the extent received) in accordance with Section 9 (the occurrence and continuance of items (i) and (ii), collectively, an “Application of Proceeds Blockage Event”), then from and after the commencement of such Application of Proceeds Blockage Event, no Proceeds of Collateral shall be paid or applied by any Obligor, and no Junior Lien Agent and no Junior Lien Lender shall accept, take or receive, any Proceeds of Collateral, on account of the Junior Lien Indebtedness until the earlier to occur of (a) the date of the Discharge of First Lien Indebtedness and (b) the date of termination (including, without limitation, as a result of the failure of any of items (i) or (ii) above to be continuing) or written waiver by First Lien Agent or First Lien Co-Agent of such Application of Proceeds

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Blockage Event (such period of time being an “Application of Proceeds Blockage Period”).

          b. In the event that, notwithstanding the terms of the foregoing Section 4a, the Obligors shall pay or apply or a Junior Lien Agent or a Junior Lien Lender shall receive any Proceeds of Collateral on account of the Junior Lien Indebtedness during an Application of Proceeds Blockage Period, then and in such event the turn-over and other obligations of Junior Lien Agents set forth in Section 8 shall apply.

          c. In the case of any Permitted Application of Proceeds of Collateral on or in respect of any Junior Lien Indebtedness that would (in the absence of any Application of Proceeds Blockage Period) have been made during any Application of Proceeds Blockage Period, the provisions of this Section 4 shall not prevent the application of (and the Obligor may pay or apply and any Junior Lien Agent and any Junior Lien Lenders may accept, take and receive) such Permitted Application of Proceeds of Collateral on or after the date immediately following the termination of such Application of Proceeds Blockage Period.

          5. Insolvency Proceeding.

          a. Continuing Priority. This Agreement shall be applicable both before and after the filing of any Insolvency Proceeding with respect to any Obligor and all converted or succeeding cases in respect thereof. The relative rights of the First Lien Agent, First Lien Co-Agent, Junior Agents and the Lenders in or to any distributions from or in respect of any Collateral or Proceeds of Collateral, shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, the Borrowers or any other Obligor as debtor-in-possession. Each Junior Lien Agent acknowledges and agrees that, in the event of a distribution of any notes or other debt securities under a plan of reorganization under any such Insolvency Proceeding (such notes or other debt securities, “Reorganization Debt Securities”) to each of (i) First Lien Agent, First Lien Co-Agent and the First Lien Lenders and (ii) such Junior Lien Agent and the Junior Lien Lenders for which it is agent, any Lien securing such Reorganization Debt Securities received by such Junior Lien Agent and the Junior Lien Lenders shall be subordinated to any Lien securing Reorganization Debt Securities received by First Lien Agent, First Lien Co-Agent and the First Lien Lenders on terms acceptable to First Lien Agent, First Lien Co-Agent and the First Lien Lenders.

          b. Proof of Claim. Subject to the restrictions set forth in this Agreement, in the event of any Insolvency Proceeding involving any Obligor or any property of any Obligor, the Junior Lien Agents shall retain the right to vote on behalf of Junior Lien Lenders with respect to the Junior Lien Indebtedness. If any Junior Lien Agent or any Junior Lien Lender does not file a proper claim or proof of debt or other document or amendment thereof in the form required in any Insolvency Proceeding prior to 5 days before the expiration of time to file such claim or other document or

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amendment thereof, then First Lien Agent or First Lien Co-Agent shall have the right (but not the obligation) in any such Insolvency Proceeding, and each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby irrevocably appoints each of First Lien Agent and First Lien Co-Agent as such Junior Lien Agent’s and Junior Lien Lenders’ lawful attorney in fact, to file and prove all claims therefor in such circumstances.

          c. Reinstatement. If First Lien Agent, First Lien Co-Agent, any First Lien Lender or any other holder of any First Lien Indebtedness is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay any amount (a “Recovery”) to the estate or to any creditor or representative of an Obligor or any other Person, then the First Lien Indebtedness shall be reinstated to the extent of such Recovery. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the parties hereto from such date of reinstatement. All rights, interests, agreements, and obligations of First Lien Agent, First Lien Co-Agent, the First Lien Lenders and the Junior Lien Agents and the Junior Lien Lenders under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of any Insolvency Proceeding by or against any Obligor or any other Person and irrespective of any other circumstance which otherwise might constitute a defense available to, or a discharge of any Obligor or any other Person in respect of the First Lien Indebtedness. No priority or right of First Lien Agent, First Lien Co-Agent, the First Lien Lenders or any other holder of First Lien Indebtedness shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of any Obligor or any other Person or by the noncompliance by any Person with the terms, provisions, or covenants of the First Lien Loan Documents or the Junior Lien Loan Documents, regardless of any knowledge thereof which First Lien Agent, First Lien Co-Agent, the First Lien Lenders or any holder of First Lien Indebtedness may have.

          d. DIP Financing. If any Borrower or any other Obligor shall be subject to any Insolvency Proceeding and any of the First Lien Agent, the First Lien Co-Agent or any First Lien Lender, any Junior Lien Agent, any Junior Lien Lender or affiliates of any of them shall desire, prior to the Discharge of First Lien Indebtedness, to provide any such Obligor financing (or to permit any such Obligor to obtain financing) (collectively, “DIP Financing”) under Section 363 or Section 364 of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency Proceeding) to be secured by all or any portion of the Collateral, then:

          (1) Each of the First Lien Agent and the First Lien Co-Agent, on behalf of itself and the First Lien Lenders, agrees that so long as the conditions set forth below in this clause (d)(1) are satisfied, it will raise no objection and consents to DIP Financing provided by any Harbinger Entity, except as set forth in this clause (d)(1), and the First Lien Lenders will not provide any DIP Financing:

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(A) the First Lien Co-Agent or one or of its affiliates has delivered a written DIP Financing proposal to be provided by them as lenders to Salton or a subsidiary of Salton (or to any of them as a debtor in the Insolvency Proceeding) and concurrently delivers a copy of such proposal to the New Second Lien Agent;

(B) the terms and conditions (including without limitation, amount, fees, interest rate and covenants) of the DIP Financing proposed by such Harbinger Entity are the same as the DIP Financing so proposed by the First Lien Co-Agent or its affiliates (except as to priority of Liens securing such DIP Financing) and on other terms and conditions reasonably satisfactory to the First Lien Co-Agent (and in any case shall provide that no amendment or modification to, or waiver of, such terms and conditions that is adverse to the interests of the First Lien Agent, First Lien Co-Agent or the First Lien Lenders shall be effective without the prior written approval of the First Lien Co-Agent);

(C) on or before the later of (i) 10 days after the commencement of any such Insolvency Proceeding and (ii) 5 days after receipt by the New Second Lien Agent of a written proposal as described in clause (A) above, an interim order of the court before which such Insolvency Proceeding is pending approving such DIP Financing from such Harbinger Entities shall have been entered and within 45 days of the commencement of such Insolvency Proceeding, a final order of such court approving such DIP Financing shall have been entered;

(D) the Harbinger Entities continue to hold beneficially and of record (x) Existing Second Lien Indebtedness in a principal amount equal to eighty-five percent (85%) of the principal amount of Existing Second Lien Indebtedness owned by them on the date hereof and (b) New Second Lien Indebtedness in a principal amount equal to eighty five-percent (85%) of the principal amount of Purchased Loans;

(E) the First Lien Co-Agent and/or its affiliates:

(i) are lenders in such DIP Financing and:

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(x) all First Lien Indebtedness other than any DIP Financing constituting a part thereof is repaid in cash from the proceeds of such DIP Financing; and

(y) all Liens held by the First Lien Lenders with respect to First Lien Indebtedness (including with respect to the DIP Financing) are senior to all pre and post petition Liens held by the Harbinger Entities, any Junior Lien Agent and any Junior Lien Lender; or

(ii) are not lenders in such DIP Financing and:

(x) no lender under such DIP Facility receives current interest with respect to any claim held by it relating to the DIP Financing;

(y) cash Collateral and/or Proceeds of Collateral may be paid to the lenders under such DIP Facility; (A) only during the period prior to the occurrence of an event of default thereunder, (B) only to the extent consisting of cash proceeds of accounts receivable of the obligors thereunder collected from account debtors in the ordinary course of business and arising from the sale of inventory in the ordinary course of the relevant Obligor’s business to repay revolving loans thereunder, and (C) only to the extent such payment does not result in a reduction in overall availability or the commitments of the lenders thereunder; and

(z) except as set forth in clause (y) above, all cash Collateral and Proceeds of Collateral shall be applied to repay the First Lien Indebtedness;

(F) the First Lien Agent and the First Lien Co-Agent retain a Lien on the Collateral (including Proceeds thereof arising after the commencement of such Insolvency Proceeding) with the same priority as existed prior to the commencement of such Insolvency Proceeding and such

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Lien is senior to any Lien securing such DIP Financing or any other Junior Lien Indebtedness;

(G) the Discharge of the First Lien Indebtedness occurs (i) within 180 days after the commencement of such Insolvency Proceeding or, (ii) provided that at all times from and after the 180th day after the commencement of such Insolvency Proceeding the outstanding amount of First Lien Indebtedness does not exceed the Borrowing Base determined as provided in the First Lien Credit Agreement, within 360 days after such commencement;

(H) any such DIP Financing shall provide that any transaction between any Obligor and any Junior Lender, Junior Agent or an affiliate of any of them shall be subject to the prior written consent of the First Lien Co-Agent unless such transaction results in a Discharge of First Lien Indebtedness; and

(I) such DIP Financing is subject to the terms of this Agreement.

          (2) each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, agrees that, so long as (i) the conditions set forth in clause (d)(1) are not satisfied and the aggregate principal amount of loans and the aggregate outstanding face amount of letters of credit issued under a DIP Financing provided by the First Lien Co-Agent or any affiliate thereof, together with the aggregate principal amount of all other outstanding First Lien Indebtedness, does not exceed the First Lien Indebtedness (other than the DIP Financing) plus $50,000,000, (ii) such Junior Lien Agent retains a Lien on the Collateral (including Proceeds thereof arising after the commencement of such proceeding) with the same priority as existed under applicable law prior to the commencement of the Insolvency Proceeding or obtains a Permitted Replacement Lien to the extent such Collateral or Proceeds are used after the commencement of the Insolvency Proceeding (an “Adequate Protection Lien”), and (iii) such DIP Financing is subject to the terms of this Agreement, it will raise no objection and consents to, such DIP Financing. Each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, hereby agrees that its Liens in the Collateral shall be subordinated to such DIP Financing (and all obligations relating thereto) to the same extent and upon the same terms and conditions specified in this Agreement.

          e. Alternative DIP Financings. Nothing in this Agreement shall limit the rights of any Lender to object to post-petition financing that is provided on terms in contravention of Section 5.d or provided by any Person other than the Harbinger Entities or the First Lien Co-Agent or its affiliates.

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          f. Priming DIP Financing. Each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, agrees that it shall not, directly or indirectly, provide, offer to provide or support any DIP Financing secured by a Lien senior to or pari passu with the Liens securing the First Lien Indebtedness. Each of First Lien Agent and First Lien Co-Agent, on behalf of itself and the First Lien Lenders, agrees that it shall not, directly or indirectly, provide, offer to provide or support any DIP Financing on terms in contravention of Section 5.d.

          g. Other Waivers by Junior Lien Agents. Each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, agrees that, not withstanding any other provision of this Agreement to the contrary, it shall not (without the First Lien Agent’s and First Lien Co-Agent’s prior written consent), in any capacity, in connection with an Insolvency Proceeding of any Obligor: (i) seek relief from the automatic stay of Section 362 of the Bankruptcy Code or any other stay in any Insolvency Proceeding in respect of any portion of the Collateral on which First Lien Agent or First Lien Co-Agent then has or purports to have a Lien; (ii) seek or request any adequate protection, other than Adequate Protection Liens, Permitted Replacement Liens and Permitted Interest Payments, as expressly provided herein; (iii) object to (and each hereby consents to) any sale of all or any portion of the Collateral in accordance with Sections 363 or 365 of the Bankruptcy Code other than (A) any objection that an unsecured creditor could assert or (B) if First Lien Agent, First Lien Co-Agent or any First Lien Lender objects to any such sale to the same extent as such objection; (iv) seek, or support any request, to dismiss any Insolvency Proceeding or to convert any chapter 11 case of any such party from chapter 11 to chapter 7 of the Bankruptcy Code; (v) [Reserved]; (vi) [Reserved]; (vii) seek, or support any request for, the entry of any order modifying, reversing, revoking, staying, rescinding, vacating or amending any DIP Financing order pursuant to which the First Lien Agent, First Lien Co-Agent and/or the First Lien Lenders have provided such financing; (viii) propose, vote in favor of or otherwise approve or support any plan of reorganization, arrangement or liquidation, or file any motion or pleading in support of any plan of reorganization, arrangement or liquidation, unless it provides for the Discharge of First Lien Indebtedness; (ix) object to the treatment under a plan of reorganization or arrangement of the First Lien Lenders’ claims with respect to the First Lien Indebtedness; (x) take any action or vote in any way so as to directly or indirectly challenge or contest (A) the validity or the enforceability of the First Lien Credit Agreement, the other First Lien Loan Documents or the liens and security interests granted to First Lien Agent, First Lien Co-Agent and the First Lien Lenders with respect to the First Lien Indebtedness, (B) the rights and duties of First Lien Agent, First Lien Co-Agent and the First Lien Lenders established in the First Lien Credit Agreement or any other First Lien Loan Document, or (C) the validity or enforceability of this Agreement; or (xi) take any other action which would reasonably be expected to have a material adverse effect on the validity of, or the value of, the First Lien Agent’s or First Lien Co-Agent’s security interest in the Collateral or the claims of the First Lien Lenders. Without in any way limiting the foregoing, the Junior Lien Lenders, in their capacity as unsecured creditors in connection with an Insolvency Proceeding of any Borrower or Guarantor, shall be permitted to exercise all other rights as unsecured

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creditors, including, without limitation, the right to take the following actions (but with respect to the exercise of any such rights, only to the extent that doing so would not be inconsistent with clauses (i) through (xi) of the foregoing sentence): (I) object to or support the retention of one or more professionals for the Borrowers, Guarantors or any committee appointed in an Insolvency Proceeding (the “Insolvency Professionals”); (II) object to or support the fees and expenses of Insolvency Professionals; (III) object to or support the approval of settlements and compromises of claims of parties (other than First Lien Agent, First Lien Co-Agent and the First Lien Lenders); (IV) object to motions for relief from the automatic stay (other than any such motion filed by First Lien Agent, First Lien Co-Agent and/or the First Lien Lenders); (V) object to or support motions to assume or reject or compel assumption or rejection of executory contracts and leases of non-residential real property; (VI) seek to terminate any exclusive periods for filing or soliciting acceptances to a plan or plans of reorganization; and (VII) take actions similar to the actions described in the clauses (I) through (VI) of this sentence.

          h. Other Waivers by First Lien Agent and First Lien Co-Agent. Until the Discharge of Junior Lien Indebtedness has occurred, each of First Lien Agent and First Lien Co-Agent, on behalf of itself and the First Lien Lenders, agrees that it shall not without the relevant Junior Lien Agent’s written consent, take any action or vote in any way so as to directly or indirectly challenge or contest (A) the validity or the enforceability of a relevant Junior Lien Credit Agreement, the other Junior Lien Loan Documents or the liens and security interests granted to the Junior Lien Agents and the Junior Lien Lenders with respect to the Junior Lien Indebtedness, (B) the rights and duties of the Junior Lien Agents and the Junior Lien Lenders established in the Junior Lien Credit Agreements or any other Junior Lien Loan Document to the extent that such rights and duties are not and/or have not been exercised in contravention of this Agreement, or (C) the validity or enforceability of this Agreement.

          i. Rights to Adequate Protection; Use of Cash Collateral.

          (1) Each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, agrees that it will raise no objection to a request for adequate protection by (and hereby consents to adequate protection for) the First Lien Agent, the First Lien Co-Agent or the First Lien Lenders (or any of them) in any form requested; provided, if such adequate protection is in the form of payment of interest on the pre petition First Lien Indebtedness during the pendency of an Insolvency Proceeding such interest shall be at a rate not exceeding the higher of: (a) the rate of interest paid to or requested by any of the Junior Lien Agents or Junior Lien Lenders as adequate protection and (ii) the non default rate applicable to the First Lien Indebtedness immediately prior to the commencement of the Insolvency Proceeding.

          (2) Each of First Lien Agent and First Lien Co-Agent, on behalf of itself and the First Lien Lenders, agrees that it will raise no objection to a request for adequate protection by (and hereby consents to adequate protection for) the Junior Lien Agents and the Junior Lien Lenders in the form of (i) payment of interest on the pre petition Junior Lien Indebtedness during the pendency of an Insolvency Proceeding so long as (A) the

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rate of interest so requested by the relevant Junior Lien Agent and the Junior Lien Lenders does not exceed the non default rate of interest applicable to the Junior Lien Indebtedness immediately prior to the commencement of such Insolvency Proceeding and (B) the First Lien Agent, First Lien Co-Agent and the First Lien Lenders receive adequate protection in the form of payment of interest on the First Lien Indebtedness during the pendency of such Insolvency Proceeding at a rate at least equal to the greater of (x) the non default contractual rate of interest applicable to the First Lien Indebtedness immediately prior to the commencement of such Insolvency Proceeding and (y) the highest rate of interest so requested by a Junior Lien Agent or the Junior Lien Lenders (“Permitted Interest Payments”), (ii) Adequate Protection Liens and (iii) a replacement lien on post-petition assets to the same extent granted to First Lien Agent, with the same priority as existed prior to the commencement of the case under applicable law (a “Permitted Replacement Lien”).

          (3) Each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, agrees that it will raise no objection to and consents to the use of cash Collateral on the terms consented to by the First Lien Co-Agent; provided each retains an Adequate Protection Lien and receives a Permitted Replacement Lien.

          j. Notwithstanding any other provision of this Agreement to the contrary, if any plan of reorganization, arrangement or liquidation in such Insolvency Proceeding does not provide for the Discharge of First Lien Indebtedness, any distribution or payment (including without limitation any Permitted Interest Payment or interest payable with respect to any DIP Financing) on account of Junior Lien Indebtedness of any kind or character, irrespective of whether such payment or distribution was of Collateral or of Proceeds thereof, that any Junior Lien Agent or Junior Lien Lender or Harbinger Entity shall receive (other than Reorganization Debt Securities subordinated as provided in Section 5.a above to Reorganization Debt Securities received by the First Lien Lenders) shall be deemed received and shall be held in trust for the benefit of First Lien Agent, First Lien Co-Agent and the First Lien Lenders and such Junior Lien Agent and Junior Lien Lender shall forthwith deliver such payment, distribution, or proceeds to First Lien Agent in precisely the form received (except for the endorsement or assignment by such Junior Lien Agent or such Junior Lien Lender where necessary), for application on any of the First Lien Indebtedness until the Discharge of the First Lien Indebtedness has occurred and as provided in Section 8 hereof.

          6. Modifications of Indebtedness.

          a. First Lien Indebtedness. All First Lien Indebtedness at any time incurred by any Obligor shall be deemed to have been incurred, and all First Lien Indebtedness held by any First Lien Lender or other holder of First Lien Indebtedness shall be deemed to have been extended, acquired or obtained, as applicable, in reliance upon this Agreement, and, to the extent not otherwise required herein, each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby waives (i) notice of acceptance, or proof of reliance, by First Lien Agent, First Lien Co-Agent, the First Lien Lenders or any other holder of First Lien Indebtedness of this

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Agreement, and (ii) notice of the existence, renewal, extension, accrual, creation, or non-payment of all or any part of the First Lien Indebtedness. Nothing contained in this Agreement shall preclude First Lien Agent, First Lien Co-Agent, First Lien Lenders or any other holder of First Lien Indebtedness from discontinuing the extension of credit to any Obligor (whether under the First Lien Credit Agreement or otherwise). Anything in the Junior Lien Loan Documents to the contrary notwithstanding, each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby agrees that First Lien Agent and First Lien Co-Agent shall have the right, at any time and from time to time, in its sole discretion without the consent of or notice to any Junior Lien Agent or any Junior Lien Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to any Junior Lien Agent or any Junior Lien Lender amend, restate, waive, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify (collectively, any “First Lien Modification”) the First Lien Loan Documents, in any manner whatsoever, including any renewals, extensions or shortening of time of payments (even if such shortening causes any First Lien Indebtedness to be due on demand or otherwise) except to the extent any such First Lien Modification increases the principal amount of the First Lien Loans to an amount in excess of the First Lien Amount or results in a modification to the definition of the Borrowing Base in a manner that increases the amount of First Lien Loans available thereunder and each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, consents and agrees to any such First Lien Modification. Each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, waives notice of any such First Lien Modification, and agrees that no such First Lien Modification shall affect, release, or impair the subordinations or any other obligations of the Junior Lien Agents or any Junior Lien Lender contained herein.

          b. Junior Lien Indebtedness. Anything in the First Lien Loan Documents to the contrary notwithstanding, no Junior Lien Agent shall amend, restate, waive, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the Junior Lien Loan Documents in any manner whatsoever (or consent to any of the foregoing) without the prior written consent of the First Lien Agent or First Lien Co-Agent (acting upon the direction of the requisite First Lien Lenders).

          c. Notice of Acceptance and Other Waivers.

          (1) To the fullest extent permitted by applicable law, each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby waives: (i) notice of acceptance hereof; (ii) notice of any loans or other financial accommodations made or extended under the First Lien Credit Agreement, or the creation or existence of any First Lien Indebtedness; (iii) notice of the amount of the First Lien Indebtedness; (iv) notice of any adverse change in the financial condition of any Obligor or of any other fact that might increase such Junior Lien Agent’s or any Junior Lien Lender’s risk hereunder; (v) notice of presentment for payment, demand, protest, and notice thereof as to any instrument among the First Lien Loan Documents; (vi) notice of any Default or Event of Default under the First Lien Loan Documents or otherwise relating to the First Lien Indebtedness; and (vii) all other notices (except if such notice is

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specifically required to be given to such Junior Lien Agent under this Agreement) and demands to which such Junior Lien Agent or any such Junior Lien Lender might otherwise be entitled. To the fullest extent permitted by applicable law, each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, waives the right by statute or otherwise to require First Lien Agent, First Lien Co-Agent or any holder of First Lien Indebtedness to institute suit against any Obligor or to exhaust any rights and remedies which First Lien Agent, First Lien Co-Agent, any First Lien Lender or any holder of First Lien Indebtedness has or may have against any Obligor. Each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, further waives any defense arising by reason of any disability or other defense of any Obligor or by reason of the cessation from any cause whatsoever of the liability of such Obligor in respect thereof.

          (2) To the fullest extent permitted by applicable law, each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby waives: (i) any rights to assert against First Lien Agent, First Lien Co-Agent, the First Lien Lenders or any other holder of First Lien Indebtedness any defense (legal or equitable), set-off, counterclaim, or claim which any Junior Lien Agent or any Junior Lien Lender may now or at any time hereafter have against any Obligor; (ii) except as otherwise set forth in this Agreement, any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of any First Lien Indebtedness, any Junior Lien Indebtedness or any security for either; and (iii) the benefit of any statute of limitations affecting any Junior Lien Agent’s or any Junior Lien Lender’s obligations hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the First Lien Indebtedness shall similarly operate to defer or delay the operation of such statute of limitations applicable to any Junior Lien Agent’s or any Junior Lien Lender’s obligations hereunder.

          (3) Until such time as the Discharge of First Lien Indebtedness shall have occurred, each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent , hereby postpones any right of subrogation such Junior Lien Agent or any such Junior Lien Lender has or may have as against any Obligor with respect to any First Lien Indebtedness.

          (4) None of First Lien Agent, First Lien Co-Agent, any First Lien Lender or any other holder of First Lien Indebtedness or any of their respective affiliates, directors, officers, employees, or agents shall be liable for failure to demand, collect, or realize upon any of the Collateral or any Proceeds or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof. If First Lien Agent, First Lien Co-Agent or any First Lien Lender honors (or fails to honor) a request by the Borrowers for an extension of credit pursuant to the First Lien Credit Agreement or any of the other First Lien Loan Documents, whether First Lien Agent, First Lien Co-Agent or any First Lien Lender has knowledge that the honoring of (or failure to honor) any such request would constitute a default under the

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terms of any of the Junior Lien Loan Documents or an act, condition, or event that, with the giving of notice or the passage of time, or both, would constitute such a default, or if First Lien Agent, First Lien Co-Agent or any First Lien Lender otherwise should exercise any of its contractual rights or remedies under the First Lien Loan Documents (subject to the express terms and conditions hereof), neither First Lien Agent, First Lien Co-Agent nor any First Lien Lender shall have any liability whatsoever to any Junior Lien Agent or any Junior Lien Lender as a result of such action, omission, or exercise. Each of First Lien Agent, First Lien Co-Agent and each First Lien Lender will be entitled to manage and supervise its loans and extensions of credit under the First Lien Loan Documents as First Lien Agent, First Lien Co-Agent and First Lien Lenders may, in their sole discretion, deem appropriate, and First Lien Agent, First Lien Co-Agent, each First Lien Lender and each other holder of First Lien Indebtedness may manage their loans and extensions of credit without regard to any rights or interests that any Junior Lien Agent or any Junior Lien Lender may have in the Collateral or otherwise except as otherwise expressly set forth in this Agreement. Each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent , agrees that none of First Lien Agent, First Lien Co-Agent, any First Lien Lender or any other holder of First Lien Indebtedness shall incur any liability as a result of a sale, lease, license, application or other disposition of all or any portion of the Collateral or any part or Proceeds thereof conducted in accordance with applicable law and the terms hereof. Subject to the express terms and conditions of this Agreement, First Lien Agent, First Lien Co-Agent, each First Lien Lender and each other holder of First Lien Indebtedness may, from time to time, enter into agreements and settlements with Obligors as it may determine in its sole discretion without impairing any of the subordinations, priorities, rights or obligations of the parties under this Agreement, including substituting Collateral, releasing any Lien and releasing any Obligor. Each Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, waives any and all rights it may have to require First Lien Agent, First Lien Co-Agent, any First Lien Lender or any holder of First Lien Indebtedness to marshal assets, to exercise rights or remedies in a particular manner, or to forbear from exercising such rights and remedies in any particular manner or order.

          7. Indebtedness Owed Only to Lenders.

          The entire Junior Lien Indebtedness is owing only to the Persons that are Junior Lien Agents and the Junior Lien Lenders on the date hereof. No Persons that are Junior Lien Agents and no Junior Lien Lenders may sell or assign or otherwise transfer any part of its interest in the Junior Lien Indebtedness or the Collateral, other than (a) assignments to entities that are Junior Lien Lenders prior to such assignment and (b) participations in accordance with the applicable Junior Lien Credit Agreement, unless, in each case, the transferee executes and delivers to First Lien Agent and First Lien Co-Agent a written acknowledgment in which the transferee acknowledges in writing its agreement to be bound by the terms hereof. Any assignment in violation of the immediately preceding sentence shall be null and void (it being understood and agreed that if a Junior Lien Agent resigns and no successor is appointed in accordance with Section 12.9 of the Existing Second Lien Credit Agreement or Section 12.9 of the New Second Lien Credit

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Agreement, as applicable, such resignation shall be effective so long as such resignation is effective under the New Second Lien Credit Agreement or the Existing Second Lien Credit Agreement, as the case may be and the resigning Junior Lien Agent shall have no further obligation hereunder (other than its obligations pursuant to the last sentence of Section 2.h hereof, after this Agreement has been reinstated pursuant to Section 5.c hereof, to deliver possession, or transfer or assign control, as the case may be, of any Cash Collateral or Control Collateral then held or controlled by the resigning Junior Lien Agent in respect of the resigning Junior Lien Agent’s obligation to continue to hold any collateral security held by the resigning Junior Lien Agent on behalf of the Junior Lien Lenders under any Junior Lien Loan Document until such time as a successor agent under the relevant Junior Lien Credit Agreement is appointed); provided that, if at any subsequent time, any person is appointed as successor agent under the relevant Junior Lien Credit Agreement or any other Junior Lien Loan Document, such appointment shall not be effective unless and until such successor agent acknowledges in writing its agreement to be bound by the terms hereof; provided that such acknowledgment shall not be required to the extent the Required Lenders (as defined in the relevant Junior Lien Credit Agreement) serve as successor Junior Lien Agent under the relevant Junior Lien Credit Agreement; provided, however, that, notwithstanding anything to the contrary contained in this Agreement, if at any time such Required Lenders under a Junior Lien Credit Agreement serve as successor Junior Lien Agent, then, during such period, the term “Junior Lien Agent” used throughout this Agreement shall mean, and shall include, for all purposes, such Required Lenders under such Junior Lien Credit Agreement). A Junior Lien Agent under any Junior Lien Credit Agreement that replaces or refinances the Junior Lien Credit Agreements in effect on the date hereof shall not be entitled to any of the benefits of this Agreement unless and until such Junior Lien Agent acknowledges its agreement to be bound by the terms hereof, but shall be subject to the burdens and obligations, including, without limitation, the lien subordination, provided for herein.

          8. Payments Received by a Junior Lien Agent or Junior Lien Lender.

          If at any time prior to the date upon which the Discharge of First Lien Indebtedness shall have occurred, a Junior Lien Agent or a Junior Lien Lender receives any payment or distribution of any kind or character, whether as a result of an Exercise of Any Secured Creditor Remedies or otherwise, whether in cash, property or securities, from or of any assets of any Obligor (or any Obligor’s Subsidiaries), irrespective of whether such payment or distribution was of Collateral or of Proceeds thereof, in each case, in contravention of the express terms of this Agreement, such Junior Lien Agent or such Junior Lien Lender shall be deemed to receive and hold the same in trust as trustee for the benefit of First Lien Agent, First Lien Co-Agent and the First Lien Lenders and shall forthwith deliver such payment, distribution, or proceeds to First Lien Agent in precisely the form received (except for the endorsement or assignment by such Junior Lien Agent or such Junior Lien Lender where necessary), for application on any of the First Lien Indebtedness, whether then due or yet to become due. In the event of the failure of any Existing Second Lien Agent or Junior Lien Lender to make any such endorsement or assignment to First Lien Agent within five (5) Business Days after receipt of written

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request therefor from First Lien Agent or First Lien Co-Agent, First Lien Agent, First Lien Co-Agent and any of their respective officers or agents are hereby irrevocably authorized to make such endorsement or assignment and such Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby irrevocably appoints each of First Lien Agent and First Lien Co-Agent as the lawful attorney in fact of such Junior Lien Agent and Junior Lien Lenders solely for the purpose of enabling First Lien Agent and/or First Lien Co-Agent to make such endorsement or assignment in the name of such Junior Lien Agent or any such Junior Lien Lender for which it is agent.

          9. Application of Proceeds.

          a. Revolving Nature of First Lien Indebtedness. Each Junior Lien Agent, for and on behalf of itself and the Junior Lien Lenders for which it is agent, expressly acknowledges and agrees that (i) a portion of the First Lien Credit Agreement is a revolving commitment, that in the ordinary course of business First Lien Agent, First Lien Co-Agent and the First Lien Lenders will apply payments and make advances thereunder, and that no application of any Payment Collateral or Cash Collateral in the ordinary course of business and absent any affirmative enforcement action or remedies by First Lien Agent, First Lien Co-Agent or any First Lien Lender to collect or otherwise realize upon such Payment Collateral or Cash Collateral (such Payment Collateral or Cash Collateral, “Ordinary Course Collections”) shall constitute the Exercise of Secured Creditor Remedies under this Agreement; and (ii) all Ordinary Course Collections received by First Lien Agent, First Lien Co-Agent or First Lien Lenders may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, to the portion of the First Lien Credit Agreement that is a revolving commitment without reducing the First Lien Amount at any time. Notwithstanding anything to the contrary contained in this Agreement, the parties hereto hereby agree that all applications of Payment Collateral or Cash Collateral by First Lien Agent, First Lien Co-Agent or any First Lien Lender to First Lien Indebtedness (x) from and after an Exercise of Secured Creditor Remedies by First Lien Agent, First Lien Co-Agent or any First Lien Lender (it being understood and agreed that, subject to clause (y) below, First Lien Agent shall not be obligated to apply Ordinary Course Collections in accordance with Section 9.b even if First Lien Agent, First Lien Co-Agent or any First Lien Lender is otherwise Exercising Secured Creditor Remedies at such time so long as such Ordinary Course Collections do not arise from such Exercise of Secured Creditor Remedies) or (y) from and after the termination or expiration of the Application of Proceeds Blockage Period (if at such time any payment default has occurred and is continuing with respect to any Junior Lien Indebtedness) shall constitute Proceeds of Collateral and shall be applied in accordance with Section 9.b.

          b. All Collateral and all Proceeds, received by any of First Lien Agent, First Lien Co-Agent, First Lien Lenders, any Junior Lien Agent or any Junior Lien Lender in connection with any Exercise of Secured Creditor Remedies shall be:

first, applied to the payment of costs and expenses of First Lien Agent and First Lien Co-Agent in connection with such Exercise of Secured Creditor Remedies,

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second, applied to the payment of the First Lien Indebtedness in accordance with the First Lien Loan Documents, together with the concurrent permanent reduction of any credit commitment thereunder in an amount equal to the amount of such payment, and

third, delivered to the Eligible Junior Agent for application to the Junior Lien Indebtedness in accordance with the Junior Lien Loan Documents and the terms of the Junior Intercreditor Agreement.

          10. Junior Lien Lender Purchase Option.

          a. Upon (i) receipt by the Junior Lien Agents of a notice (a “Trigger Notice”) by First Lien Agent or First Lien Co-Agent of the intent of First Lien Agent, First Lien Co-Agent and the First Lien Lenders to Exercise Any Secured Creditor Remedies, (ii) the commencement of an Insolvency Proceeding with respect to any Obligor, or (iii) receipt by the Junior Lien Agents of a Standstill Notice (each a “Trigger Event”), the Eligible Junior Lien Agent and the Junior Lien Lenders for which it is agent shall have the option, exercised by delivery of written notice by the Eligible Junior Lien Agent to First Lien Agent and First Lien Co-Agent (a “Purchase Notice”), to purchase all (but not less than all) of the First Lien Indebtedness from First Lien Agent, First Lien Co-Agent and the First Lien Lenders. The Purchase Notice shall be irrevocable.

          b. First Lien Agent or First Lien Co-Agent shall deliver to Junior Lien Agents any Trigger Notice referred to in Section 10.a(i) above (i) in the absence of an Exigent Circumstance (defined below), not less than 5 Business Days prior to the taking of the actions described in Section 10.a(i) or (ii) if Exigent Circumstances exist, as soon as practicable and in any event contemporaneously with the taking of such action. The Eligible Junior Lien Agent may send to First Lien Agent and First Lien Co-Agent a Purchase Notice within 5 Business Days of the occurrence of a Trigger Event, in which event, First Lien Agent, First Lien Co-Agent and the First Lien Lenders shall not Exercise Any Secured Creditor Remedies, to the extent such action has not been taken, provided, that, the purchase and sale with respect to the First Lien Indebtedness provided for in this Section 10 shall have closed within 5 Business Days after receipt by First Lien Agent and First Lien Co-Agent of the Purchase Notice and First Lien Agent (on behalf of itself and First Lien Co-Agent and the First Lien Lenders) shall have received payment in full of the First Lien Indebtedness as provided for herein within such 5 Business Day period. As used herein, “Exigent Circumstance” shall mean an event or circumstance that materially and imminently threatens the ability of First Lien Agent or First Lien Co-Agent to realize upon all or a material part of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction (other than to the extent covered by insurance) or material waste thereof, or the failure of any Obligor after reasonable demand to maintain or reinstate adequate casualty insurance coverage with respect thereto.

          c. On the date specified by the Eligible Junior Lien Agent in the Purchase Notice (which shall not be more than 5 Business Days after the receipt by First

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Lien Agent and First Lien Co-Agent of the Purchase Notice), First Lien Agent, First Lien Co-Agent and the First Lien Lenders shall sell to the Junior Lien Lenders for which the Eligible Junior Lien Agent is agent, and such Junior Lien Lenders shall jointly and severally purchase from First Lien Agent, First Lien Co-Agent and the First Lien Lenders, the First Lien Indebtedness.

          d. Upon the date of such purchase and sale, the Junior Lien Lenders purchasing the First Lien Indebtedness shall (i) pay to First Lien Agent, First Lien Co-Agent and the First Lien Lenders as the purchase price therefor the full amount of all the First Lien Indebtedness then outstanding and unpaid, (ii) furnish cash collateral to First Lien Agent, First Lien Co-Agent and the First Lien Lenders in such amounts as First Lien Agent and First Lien Co-Agent determine is reasonably necessary to secure First Lien Agent, First Lien Co-Agent and the First Lien Lenders in connection with (A) any issued and outstanding letters of credit provided by First Lien Agent, First Lien Co-Agent or any First Lien Lender (or letters of credit that First Lien Agent, First Lien Co-Agent or any First Lien Lender has arranged to be provided by third parties pursuant to the First Lien Loan Documents) to any Obligor (but not in any event in an amount greater than 105% of the aggregate undrawn face amount of such letters of credit), (B) Bank Product Obligations owing to the Bank Product Providers (as defined in the First Lien Credit Agreement) (but not in any event in an amount greater than the Bank Product Reserve (as defined in the First Lien Credit Agreement as in effect on the date hereof) established in respect thereof in accordance with the First Lien Credit Agreement as in effect on the date hereof), or (C) Ledger Product Obligations owing to the providers of Ledger Products (as defined in the First Lien Credit Agreement as in effect on the date hereof) (but not in any event in an amount greater than any reserves established in respect thereof in accordance with the First Lien Credit Agreement as in effect on the date hereof), and (iii) jointly and severally agree to reimburse First Lien Agent, First Lien Co-Agent and the First Lien Lenders for all expenses to the extent earned or due and payable in accordance with the First Lien Loan Documents (including the reimbursement of extraordinary expenses, financial examination expenses and appraisal fees), including principal, interest and fees thereon and costs and expense of collection thereof (including reasonable attorneys’ fees and legal expenses). Such purchase price and cash collateral shall be remitted by wire transfer in federal funds to such bank account of First Lien Agent as First Lien Agent may designate in writing to the Eligible Junior Lien Agent for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by the Eligible Junior Lien Agent and the purchasing Junior Lien Lenders to the bank account designated by First Lien Agent are received in such bank account prior to 2:00 p.m., New York City time, and interest shall be calculated to and including such Business Day if the amounts so paid by Eligible Junior Lien Agent and the purchasing Junior Lien Lenders to the bank account designated by First Lien Agent are received in such bank account later than 2:00 p.m., New York City time.

          e. Such purchase shall be expressly made without representation or warranty of any kind by First Lien Agent, First Lien Co-Agent and the First Lien Lenders

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as to the First Lien Indebtedness so purchased or otherwise and without recourse to First Lien Agent, First Lien Co-Agent or any First Lien Lender, except that each First Lien Lender shall represent and warrant: (i) the amount of the First Lien Indebtedness being purchased from it, (ii) that such First Lien Lender owns its portion of the First Lien Indebtedness so purchased free and clear of any Liens or encumbrances and (iii) such First Lien Lender has the right to assign such First Lien Indebtedness and the assignment is duly authorized by such First Lien Lender.

          11. Representations.

Each of First Lien Agent and First Lien Co-Agent represents and warrants to Junior Lien Agents that it has the requisite power and authority to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the First Lien Lenders. Each Junior Lien Agent represents and warrants that it has the requisite power and authority to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the Junior Lien Lenders for which it is agent.

          12. Additional Remedies.

If any Junior Lien Agent or any Junior Lien Lender violates any of the terms of this Agreement, in addition to any remedies in law, equity, or otherwise, First Lien Agent or First Lien Co-Agent may restrain such violation in any court of law and may, in its own or in any Obligor’s name, interpose this Agreement as a defense in any action by any Junior Lien Agent or any Junior Lien Lender. Upon First Lien Agent’s or First Lien Co-Agent’s written request and at the sole expense of Borrowers, each Junior Lien Agent and the Junior Lien Lenders will promptly take all actions reasonably requested by First Lien Agent or First Lien Co-Agent, as the case may be, to carry out the purposes and provisions of this Agreement.

          13. Amendments.

No amendment or waiver of any provision of this Agreement nor consent to any departure by any party hereto shall be effective unless it is in a written agreement executed by each Junior Lien Agent, First Lien Agent and First Lien Co-Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

          14. Instrument Legends.

Each Junior Lien Agent agrees that each of the Junior Lien Credit Agreements, the face of each promissory note evidencing the Junior Lien Indebtedness or any portion thereof and any agreement purporting to grant any security therefor, shall be inscribed with a legend (or otherwise contain a provision) conspicuously indicating that such Junior Lien Credit Agreement, promissory note or security agreement is subject to the terms of this Agreement. Any promissory note evidencing any of the Junior Lien Indebtedness or any portion thereof, and any agreement granting any security therefor, which is hereafter

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executed will, on the date thereof, be inscribed with a similar legend (or otherwise contain a similar provision). The Junior Lien Credit Agreements shall provide that each Junior Lien Lender party thereto shall be required to execute a writing, which may include such Junior Lien Credit Agreement, agreeing to be bound by the terms hereof, and providing that any assignment or transfer of any or all of the Junior Lien Indebtedness to any other Person without such other Person’s written agreement to be bound hereby shall be null and void.

          15. Information Concerning Financial Condition.

Each Junior Lien Agent and each Junior Lien Lender is responsible and hereby assumes responsibility for keeping itself informed of the financial condition of Obligors and of all other circumstances bearing upon the risk of nonpayment of the Junior Lien Indebtedness, and agrees that First Lien Agent, First Lien Co-Agent and the First Lien Lenders have and shall have no duty to advise any Junior Lien Agent or any Junior Lien Lender of information known to First Lien Agent, First Lien Co-Agent or any First Lien Lender regarding such condition or any such circumstances. In the event First Lien Agent, First Lien Co-Agent or any First Lien Lender, in their sole discretion, undertake, at any time or from time to time, to provide any such information to any Junior Lien Agent or any of the Junior Lien Lenders, none of First Lien Agent, First Lien Co-Agent or the First Lien Lenders shall be under any obligation (i) to provide any such information to any other Junior Lien Agent or any other Junior Lien Lender or on any subsequent occasion, (ii) to undertake any investigation, or (iii) to disclose any information which, pursuant to its commercial finance practices, First Lien Agent, First Lien Co-Agent or any First Lien Lender wishes to maintain confidential. Each Junior Lien Agent, on behalf of itself and the Junior Lien Lenders for which it is agent, acknowledges and agrees that none of First Lien Agent, First Lien Co-Agent or any First Lien Lender has made any warranties or representations with respect to the legality, validity, enforceability, collectability or perfection of the First Lien Indebtedness or any liens or security interests held in connection therewith.

          16. Third Party Beneficiaries.

This Agreement is solely for the benefit of First Lien Agent, First Lien Co-Agent, First Lien Lenders, Junior Lien Agents, and the Junior Lien Lenders, and their respective successors and assigns, and neither any Obligor nor any other Persons are intended to be a third party beneficiary hereunder or to have any right, benefit, priority or interest under, or because of the existence of, or to have any right to enforce, this Agreement. Nothing in this Agreement is intended to or shall be deemed to amend or modify the terms and conditions of the First Lien Loan Documents or the Junior Lien Loan Documents. First Lien Agent, First Lien Co-Agent and Junior Lien Agents shall have the right to modify or terminate this Agreement at any time without notice to or approval of any Obligor or any other Person. The Obligors and each of the Junior Lien Agent, on behalf of itself and each Junior Lien Lender for which it is agent, hereby agree that First Lien Agent, First Lien Co-Agent and the First Lien Lenders are entitled to rely on and are intended beneficiaries of each of Section 7.28 and Section 9.3 of the Existing Second Lien Credit

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Agreement and Section 7.30 and Section 9.3 of the New Second Lien Credit Agreement and shall have the right to enforce such provisions against the Obligors, relevant Junior Lien Agent and Junior Lien Lenders.

          17. No Impairment.

Nothing in this Agreement is intended to or shall impair, as between Obligors and Junior Lien Agents and the Junior Lien Lenders, the obligation of Obligors, which is absolute and unconditional, to pay the Junior Lien Indebtedness as and when the same shall become due and payable in accordance with its terms, or affect the relative rights of Junior Lien Agents and the Junior Lien Lenders and creditors of Obligors other than First Lien Agent, First Lien Co-Agent and the First Lien Lenders.

          18. Subrogation.

Solely after the Discharge of First Lien Indebtedness shall have occurred, the Junior Lien Agents and the Junior Lien Lenders shall be subrogated to the rights of First Lien Agent, First Lien Co-Agent and the First Lien Lenders to the extent that distributions otherwise payable to any Junior Lien Agent or any Junior Lien Lender have been applied to the payment of the First Lien Indebtedness in accordance with the provisions of this Agreement. First Lien Agent, First Lien Co-Agent and the First Lien Lenders shall have no obligation or duty to protect any Junior Lien Agent or any Junior Lien Lenders’ rights of subrogation arising pursuant to this Agreement or under any applicable law, nor shall First Lien Agent, First Lien Co-Agent, First Lien Lenders or any other holder of First Lien Indebtedness be liable for any loss to, or impairment of, any subrogation rights held by any Junior Lien Agent or any Junior Lien Lender.

          19. Notices.

All demands, notices, and other communications provided for hereunder shall be in writing and mailed or sent by telecopy or delivered to it, addressed as follows:

if to New Second Lien Agent,

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
c/o Harbinger Capital Partners Offshore Manage, L.L.C.
One Riverchase Parkway
South Birmingham, Alabama 35244
Attn: General Counsel
with a copy to: (205) 987-5505

Paul Weiss, Rifkind, Wharton &Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Attn: Eric Goodison
Telecopy No: (212) 757 3990

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if to the Existing Second Lien Agent,

THE BANK OF NEW YORK
600 E. Las Colinas Blvd.
Suite 1300
Irving, Texas 75039
Attn: Administrative Agent Services
Fax No. (972) 401-8551

With a copy to:

HAYNES AND BOONE, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Attn: Laurie G. Lang
Fax No. (214) 200-0667

and if to First Lien Agent,

WELLS FARGO FOOTHILL, INC.
1100 Abernathy Road, Suite 1600
Atlanta, Georgia 30328
Attention: Business Finance Division Manager
Fax No.: (770) 508-1375

With a copy to:

SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, New York 10022
Attn: Frederic L. Ragucci, Esq.
Fax No.: (212) 593-5955

and if to First Lien Co-Agent, mailed, sent or delivered thereto, addressed to it as follows:

SILVER POINT FINANCE, LLC
Two Greenwich Plaza, 1st Floor
Greenwich, Connecticut 06830
Attention: Craig Hamrah
Fax No.: (203) 542-4318

With a copy to:

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WEIL, GOTSHAL & MANGES, LLP
767 Fifth Avenue
New York, New York 10153
Attn: Elaine Stangland, Esq.
Fax No.: (212) 310-8007

          or as to any party at such other address as shall be designated by such party in a written notice to the other parties complying as to delivery with the terms of this Section 19. All such demands, notices and other communications shall be effective, when mailed, three Business Days after deposit in the mails, postage prepaid, when sent by telecopy, when receipt is acknowledged by the receiving telecopy equipment (or at the opening of the next Business Day if receipt is after normal business hours), or when delivered, as the case may be, addressed as aforesaid.

          20. Costs and Attorneys Fees.

In the event it becomes necessary for First Lien Agent, First Lien Co-Agent, any First Lien Lender, any Junior Lien Agent, or any Junior Lien Lender to commence or become a party to any proceeding or action to enforce the provisions of this Agreement, the court or body before which the same shall be tried shall award to the prevailing party all costs and expenses thereof, including reasonable attorneys’ fees, the usual and customary and lawfully recoverable court costs, and all other expenses in connection therewith.

          21. Consent to Jurisdiction; Waiver of Jury Trial and Other Waivers.

Each Junior Lien Agent, the First Lien Agent and the First Lien Co-Agent: (i) consent to the jurisdiction of any state or federal court located within the County of New York, State of New York; (ii) waives personal service of any and all process upon it, and consents that all service of process be made in the manner set forth in Section 19 of this Agreement for notices and (iii) waives, to the fullest extent each may effectively do so, any defense or objection based upon forum non conveniens and any defense or objection to venue of any action instituted within the County of New York, State of New York. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT.

          22. Governing Law.

This Agreement has been delivered and accepted at and shall be deemed to have been made in the State of New York, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the laws of the State of New York.

          23. Successors and Assigns.

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This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns, subject to the provisions hereof.

          24. Integrated Agreement.

This Agreement sets forth the entire understanding of the parties with respect to the within matters and may not be modified or amended except upon a writing signed by all parties.

          25. Authority.

Each of the parties hereto certifies that such party has all necessary authority to execute this Agreement.

          26. Counterparts.

This Agreement may be executed in one or more counterparts, each one of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally as effective as delivery of an original executed counterpart.

          27. Headings.

The headings contained in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

          28. Severability.

Any provision of this Agreement that is prohibited by law or unenforceable shall be ineffective to the extent of such prohibition or unenforceability, without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision. To the extent permissible, the parties waive any law that prohibits any provision of this Agreement or renders any provision hereof unenforceable.

          29. Conflicts.

To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any First Lien Loan Document or any Junior Lien Loan Document, on the other hand, this Agreement shall control and prevail. The foregoing to the contrary notwithstanding, a covenant in the First Lien Loan Documents prohibiting the Obligors from voluntarily prepaying the Junior Lien Indebtedness shall not be deemed to be in conflict with or inconsistent with the terms of this Agreement. With respect to the rights, remedies and obligations of the First Lien Agent, First Lien Co-Agent and the First Lien Lenders, to the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of that certain Agreement Among Lenders dated as of August 30, 2004 among First Lien Agent, First

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Lien Co-Agent and the First Lien Lenders (the “First Lien Lender Side Letter Agreement”), on the other hand, the First Lien Lender Side Letter Agreement shall control and prevail, and, without limiting the foregoing, First Lien Agent (as opposed to First Lien Co-Agent) shall only have the ability to deliver a Standstill Notice and to exercise remedies under this Agreement to the extent otherwise permitted under the First Lien Loan Documents and the First Lien Lender Side Letter Agreement.

          30. Termination.

This Agreement shall continue in full force and effect until the Discharge of First Lien Indebtedness shall have occurred and shall thereafter be revived to the extent provided for in Section 5.c.

          31. Amendment and Restatement; Effective Date.

This Agreement shall not constitute a novation of any of the obligations or liabilities under the Original Intercreditor Agreement. Effective as of the Effective Date, this Agreement amends and restates in its entirety the Original Intercreditor Agreement without further act of any of the parties hereto. From and after the execution and delivery of this Agreement by the parties hereto and the occurrence of the Effective Date, the Original Intercreditor Agreement shall be of no further force and effect except to evidence the obligations of the parties thereto prior to the date of such execution and delivery of this Agreement. Until the occurrence of the Effective Date the Original Intercreditor Agreement shall be in full force and effect.

          32. Separate Grants of Security and Separate Classification.

          a. Each of the First Lien Co-Agent and the First Lien Agent, for itself and on behalf of the First Lien Lenders, and each of the Junior Lien Agents, for itself and on behalf of the Junior Lien Lenders for which it is agent, acknowledges and agrees that the Liens securing the First Lien Indebtedness and the Liens securing the Junior Lien Indebtedness are intended to be and are separate and distinct grants of Liens, and because of, among other things, their differing rights in the Collateral, the First Lien Indebtedness is fundamentally different from the Junior Lien Indebtedness and must be separately classified in any plan of reorganization proposed or adopted in any Insolvency Proceeding. In furtherance of the foregoing, each of the First Lien Co-Agent and the First Lien Agent, for itself and on behalf of the First Lien Lenders, and each of the Junior Lien Agents, for itself and on behalf of the Junior Lien Lenders for which it is agent, agrees that as between the First Lien Lenders and the Junior Lien Lenders, the Junior Lien Lenders and the First Lien Lenders will vote as separate classes in connection with any plan of reorganization or any other transaction in any Insolvency Proceeding and that none of the First Lien Agent, the First Lien Co-Agent and any First Lien Lender, on the one hand, and the Junior Lien Agents and Junior Lien Lender, on the other hand, will seek to vote with the other as a single class in connection with any plan of reorganization or any other transaction in any Insolvency Proceeding.

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          b. To further effectuate the intent of the parties as provided in this Section 32, if it is held that the claims of the First Lien Agent, First Lien Co-Agent and the First Lien Lenders, on the one hand and the Junior Lien Agents and the Junior Lien Lenders or any of them, on the other hand, constitute only one secured claim (rather than separate classes of senior and junior secured claims), then each of the First Lien Co-Agent and the First Lien Agent, for itself and on behalf of the First Lien Lenders, and each of the Junior Lien Agents, for itself and on behalf of the Junior Lien Lenders for which it is agent, hereby acknowledges and agrees that all distributions shall be made as if there were separate classes of senior and junior secured claims (with the effect being that, to the extent that the aggregate value of the Collateral is sufficient (for this purpose ignoring all claims relating to the Junior Lien Indebtedness), the First Lien Agent and the First Lien Co-Agent shall be entitled to receive, for the benefit of the First Lien Lenders, in addition to amounts distributed to them in respect of First Lien Indebtedness, all amounts owing in respect of post petition interest and claims, including any additional interest payable pursuant to the First Lien Loan Documents, arising from or related to a default, which is disallowed as a claim in any Insolvency Proceeding) before any distribution is made in respect of the claims held by any of the Junior Lien Agents or the Junior Lien Lenders and each further agrees to turn over to the First Lien Agent and the First Lien Co-Agent for the benefit of the First Lien Lenders, amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence.

          IN WITNESS WHEREOF, the First Lien Agent and the First Lien Co-Agent, for and on behalf of itself and the First Lien Lenders, the Existing Second Lien Agent, for and on behalf of itself and the Existing Second Lien Lenders and the New Second Lien Agent, for and on behalf of itself and the New Second Lien Lenders, have caused this Agreement to be duly executed and delivered as of the date first above written.

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Execution Version

WELLS FARGO FOOTHILL, INC., a
California corporation, as First Lien Agent
By:	/s/ William Plough
Name:
Title:

SILVER POINT FINANCE, LLC, a
Delaware limited liability company, as First
Lien Co-Agent
By:	/s/ Richard Petrilli
Name:
Title:

THE BANK OF NEW YORK, a New York corporation, as Existing Second Lien Agent

By:

Name:

Title:

HARBINGER CAPITAL PARTNERS
MASTER FUND I, LTD., an exempted company incorporated with limited liability in the Cayman Islands, as New Second Lien Agent
By:	/s/ William R. Lucas, Jr.
Name:	William R. Lucas, Jr,
Title:	Executive Vice President — General Counsel & Secretary

Execution Version

ACKNOWLEDGMENT

          Each Borrower and each Guarantor hereby acknowledges that it has received a copy of the foregoing Amended and Restated Intercreditor Agreement, consents thereto and agrees to recognize all rights granted thereby to the First Lien Agent, First Lien Co-Agent, First Lien Lenders, Junior Lien Agents, and the Junior Lien Lenders and will not do any act or perform any obligation which is not in accordance with the agreements set forth therein. Each Borrower and each Guarantor further acknowledge and agree that they are not an intended beneficiary or third party beneficiary under this Agreement.

ACKNOWLEDGED AS OF THE DATE
FIRST WRITTEN ABOVE:
BORROWERS:
SALTON, INC., a Delaware corporation
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer
TOASTMASTER INC., a Missouri corporation
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer
SALTON TOASTMASTER
LOGISTICS LLC, a Delaware limited
liability company
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer

GUARANTORS:
HOME CREATIONS DIRECT, LTD.,
a Delaware corporation
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer
SONEX INTERNATIONAL
CORPORATION, a Delaware corporation
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer
ICEBOX, LLC, an Illinois limited liability
company
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer
FAMILY PRODUCTS INC., a Delaware
corporation
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer
SALTON HOLDINGS, INC., a Delaware
corporation
By:	/s/ William Lutz
Name:	William Lutz
Title:	Interim Chief Executive Officer and
	Chief Financial Officer

EX-99.14

Exhibit 99.14

Execution Version

JUNIOR LIENS INTERCREDITOR AGREEMENT

               This JUNIOR LIENS INTERCREDITOR AGREEMENT (this “Agreement”), dated as of October 1, 2007 and effective as of the Effective Date (as defined below), is made by and between Harbinger Capital Partners Master Fund I, LTD., a Cayman Islands corporation, as agent under and pursuant to the Senior Secured Credit Agreement (as herein defined) (in such capacity together with its successors and assigns the “Senior Lien Agent”), on the one hand, and THE BANK OF NEW YORK, a national banking association, as agent under and pursuant to the Junior Lien Credit Agreement (as hereinafter defined) (in such capacity, together with its successors and assigns, the “Junior Lien Agent”), on the other hand, and is acknowledged by Salton, Inc., a Delaware corporation (“Parent”), each of Parent’s Subsidiaries identified on the signature pages of the Senior Secured Credit Agreement or otherwise made a party thereto, as Borrowers (collectively with Parent, the “Borrowers”) and each of Parent’s Subsidiaries identified on the signature pages of the Senior Secured Credit Agreement, or otherwise made a party thereto, as Guarantors (collectively, the “Guarantors”):

               WHEREAS, the Borrowers, Guarantors, the Senior Lien Agent, and the lenders party thereto (such lenders, and as further defined in Section 1, below, the “Senior Lien Lenders”) have entered into a Reimbursement and Senior Secured Credit Agreement dated as of October 1, 2007 (such agreement as in effect on such date, and as further defined in Section 1, below, the “Senior Secured Credit Agreement”) pursuant to which such lenders have agreed, upon the terms and conditions stated therein, to provide a letter of credit to secure certain obligations of the Borrowers and to make certain loans to the Borrowers. The repayment of the Obligations (as that term is defined in the Senior Secured Credit Agreement) is secured by security interests in and liens on substantially all of the assets of the Borrowers and the Guarantors pursuant to certain collateral documents in favor of the Senior Lien Agent, (such documents, and as further defined in Section 1, below, the “Senior Lien Loan Documents”).

               WHEREAS, Parent, the Borrowers, the Guarantors, the Junior Lien Agent, and the lenders party thereto (the “Junior Lien Lenders”) have entered into a Credit Agreement dated as of August 26, 2005 (such agreement as in effect on the date hereof, the “Junior Lien Credit Agreement”) pursuant to which such lenders have agreed, upon the terms and conditions stated therein, to make loans and advances to the Borrowers up to the principal amount of $110,000,000 at any time outstanding. The repayment of the Obligations (as that term is defined in the Junior Lien Credit Agreement) is secured by security interests in and liens on substantially all of the assets of the Borrowers and the Guarantors pursuant to certain collateral documents in favor of the Junior Lien Agent, which documents, together with the other collateral and loan documents executed and delivered in connection with the Junior Lien Credit Agreement, each as in effect on the date hereof, are referred to herein as the “Junior Lien Loan Documents”; and

               WHEREAS, the Senior Lien Agent and the Junior Lien Agent hereby acknowledge that, pursuant to that certain Amended and Restated Intercreditor Agreement of even date herewith (the “Intercreditor Agreement”) among the Senior Lien Agent, the Junior Lien Agent, Silver Point Financial, LLC, a Delaware limited liability company, as the co-agent, syndication agent, and documentation agent under and pursuant to the First Lien Credit Agreement (as hereinafter defined) (in such capacity, together with its successors and assigns, the “First Lien Co-Agent”), and Wells Fargo Foothill, Inc., a California corporation, as administrative agent and collateral agent under and pursuant to the First Lien Credit Agreement (in such capacity, together with its successors and assigns the “First Lien Agent”), that any security interest in or lien on any assets of the Borrowers and the Guarantors held by the Senior Lien Agent, any Senior Lien Lender, the Junior Lien Agent and any Junior Lien Lender is expressly subject to the rights the First Lien Agent and the First Lien Co-Agent, for and on behalf of themselves and the First Lien Lenders (as defined in the Intercreditor Agreement);

               WHEREAS, the Senior Lien Agent, for and on behalf of itself and the Senior Lien Lenders, and the Junior Lien Agent, for and on behalf of itself and the Junior Lien Lenders, wish to enter into this Agreement to establish their respective rights and priorities in the Collateral.

               NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Senior Lien Agent and the Junior Lien Agent hereby agree, effective as of and only from and after the Effective Date, as follows:

          1. Definitions; Rules of Construction.

     a. Other Definitions. As used in this Agreement, the following terms shall have the following meanings:

               “Adequate Protection Lien” has the meaning set forth in Section 5.d.

               “Agreement” means this Agreement as it may be amended, modified or supplemented from time to time.

               “Application of Proceeds Blockage Event” has the meaning set forth in Section 4.a.

               “Application of Proceeds Blockage Period” has the meaning set forth in Section 4.a.

               “Bankruptcy Code” shall mean title 11 of the United States Code, as in effect from time to time.

               “Capital Stock” means (a) in the case of a corporation, corporate stock, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of property of, the issuing Person.

               “Cash Collateral” means any Collateral consisting of money or cash equivalents, any security entitlement (as defined in the UCC) and any financial assets (as defined in the UCC).

               “Collateral” means all assets and properties upon which either First Lien Agent or First Lien Co-Agent, on the one hand, or the Senior Lien Agent of the Junior Lien Agent, on the other hand, now has or hereafter acquires a Lien, whether now owned or hereafter acquired by the Borrowers, any Guarantor or any other Person, together with all rents, issues, profits, products, and Proceeds thereof..

               “Control Collateral” means any Collateral consisting of a certificated security (as defined in the UCC), investment property (as defined in the UCC), any other equity interests, partnership interests, or membership interests in any entity, company, or partnership, a deposit account (as defined in the UCC) and any other Collateral as to which a Lien may be perfected through physical possession or control by the secured party or any agent therefor.

               “DIP Financing” has the meaning set forth in Section 5.d.

               “Discharge of Senior Lien Indebtedness” means payment in full in cash (or in the case of letters of credit, the cash collateralization as required by the Senior Lien Loan Documents) of the Senior

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Lien Loan Documents) of the Senior Lien Indebtedness (other than Senior Lien Indebtedness consisting solely of contingent indemnification obligations under the Senior Lien Loan Documents for which no claim has been asserted in writing) after or concurrently with termination of all commitments to extend credit under any Senior Secured Credit Agreement.

               “Discharge of Junior Lien Indebtedness” means payment in full in cash of the Junior Lien Indebtedness (other than Junior Lien Indebtedness consisting solely of contingent indemnification obligations under the Junior Lien Loan Documents for which no claim has been asserted in writing) after or concurrently with termination of all commitments to extend credit under any Junior Lien Credit Agreement.

               “Effective Date” means the date on which the initial purchase of all or any portion of the Stretch Loan (as defined in the Loan Purchase Agreement dated as of the date hereof among the Senior Lien Lenders and certain of the lenders party to the First Lien Credit Agreement) is consummated pursuant to the “Stretch Loan Put Notice” as defined in such agreement.

               “Equity Interests” means Capital Stock and all warrants, options, or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

               “Event of Default” means “Event of Default” as defined in the Senior Secured Credit Agreement and/or “Event of Default” as defined in the Junior Lien Credit Agreement.

               “Exercise Any Secured Creditor Remedies” or “Exercise of Secured Creditor Remedies” means (a) the taking of any action to enforce or realize upon any Lien, including the institution of any foreclosure proceedings or the noticing of any public or private sale or other disposition pursuant to Article 9 of the UCC, (b) the exercise of any right or remedy provided to a secured creditor or otherwise on account of a Lien under the Senior Lien Loan Documents, the Junior Lien Loan Documents, applicable law, in an Insolvency Proceeding or otherwise, including the election to retain Collateral in satisfaction of a Lien, (c) the taking of any action or the exercise of any right or remedy in respect of the collection on, set off against, marshaling of, or foreclosure on the Collateral or the Proceeds of Collateral, (d) the sale, lease, license, or other disposition of all or any portion of the Collateral, by private or public sale, other disposition or any other means permissible under applicable law, (e) the solicitation of bids from third parties to conduct the liquidation of all or a material portion of Collateral to the extent undertaken and being diligently pursued in good faith to consummate the sale of such Collateral within a commercially reasonable time, (f) the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, appraisers, auctioneers or other third parties for the purposes of valuing, marketing, promoting and selling the Collateral to the extent undertaken and being diligently pursued in good faith to consummate the sale of such Collateral within a commercially reasonable time, and (g) the exercise of any other enforcement right relating to the Collateral (including the exercise of any voting rights relating to any Capital Stock and including any right of recoupment or set-off) whether under the Senior Lien Loan Documents, the Junior Lien Loan Documents, applicable law, in an Insolvency Proceeding or otherwise.

               “First Lien Credit Agreement” means that certain Amended and Restated Credit Agreement, originally dated as of May 9, 2003, as amended and restated and further amended, currently by and among the Parent, each of the Parent’s subsidiaries identified on the signature pages thereof as Borrowers, the First Lien Agent, the First Lien Co-Agent, and the lenders thereto.

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               “First Lien Loans” means, collectively, all loans and advances provided for in the First Lien Credit Agreement.

               “Forced Obligor Sale” has the meaning set forth in Section 2.c(2).

               “Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state, federal or foreign bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

               “Junior Lien Agent” means the Junior Lien Agent, together with its successors, assigns and transferees under any Junior Lien Credit Agreement.

               “Junior Lien Credit Agreement” means the Junior Lien Credit Agreement as amended, restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to time, and any other agreement extending the maturity of, consolidating, otherwise restructuring (including adding Subsidiaries or affiliates of any Obligor or any other Persons as parties thereto), renewing, replacing or refinancing all or any portion of the Obligations or Commitments as those terms are defined in the Junior Lien Credit Agreement or all or any portion of the amounts owed under any other agreement that itself is a Junior Lien Credit Agreement hereunder and whether by the same or any other agent, lender, or group of lenders and whether or not increasing the amount of Junior Lien Indebtedness that may be incurred thereunder, in each case, to the extent that any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing is permitted under this Agreement.

               “Junior Lien Indebtedness” means all obligations and all other amounts owing, due or secured under the terms of the Junior Lien Credit Agreement or any other Junior Lien Loan Document, including any and all amounts payable to Junior Lien Agent or to any Junior Lien Lender, all principal, premium, interest, fees, attorneys fees, costs, charges, expenses, reimbursement obligations, any obligation to post cash collateral in respect of letters of credit or indemnities in respect thereof, indemnities, guarantees, any prepayment or early termination premium, and all other amounts payable under any Junior Lien Loan Document or in respect thereof (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Obligor, or that would have accrued or become due under the terms of the Junior Lien Loan Documents but for the effect of the Insolvency Proceeding or other applicable law, and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding).

               “Junior Lien Lenders” means the Junior Lien Lenders, together with the lenders under any Junior Lien Credit Agreement or Junior Lien Loan Documents.

               “Junior Lien Loan Documents” means the Junior Lien Credit Agreement and the other Loan Documents (as such term is defined in the Junior Lien Credit Agreement), or any other security, collateral, ancillary or other document entered into in connection with or related to any agreement that is a Junior Lien Credit Agreement, as such documents may be amended, restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to time in accordance with this Agreement.

               “Lender” means a Senior Lien Lender and/or a Junior Lien Lender, as the context may require.

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               “Lien” means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting real property.

               “Notice of Intent to Exercise” means a written notice from or on behalf of Junior Lien Agent to Senior Lien Agent (a) stating that Junior Lien Agent intends to Exercise Secured Creditor Remedies, (b) stating that it is a “Notice of Intent to Exercise Secured Creditor Remedies” and (c) describing the Event(s) of Default under the Junior Lien Credit Agreement that is(are) the basis for delivering such notice.

               “Obligor” means the Borrowers, each Guarantor and any other Person that now or hereafter is, or whose assets now or hereafter are, liable for all or any portion of the Senior Lien Indebtedness or the Junior Lien Indebtedness, as applicable.

               “Payment Collateral” means all accounts, instruments, chattel paper, letters of credit, deposit accounts, securities accounts, and payment intangibles, together with all supporting obligations (as those terms are defined in the UCC), in each case composing a portion of the Collateral.

               “Permitted Application of Proceeds of Collateral” has the meaning set forth in Section 3.

               “Permitted Replacement Lien” has the meaning set forth in Section 5.i.

               “Person” means any natural person, corporation, limited liability company, limited partnership, general partnership, limited liability partnership, joint venture, trust, land trust, business trust, or other organization, irrespective of whether such organization is a legal entity, and shall include a government and any agency or political subdivision thereof.

               “Proceeds” means (a) all “proceeds” as defined in Article 9 of the UCC with respect to the Collateral, and (b) whatever is recoverable or recovered when Collateral is sold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.

               “Purchase Notice” has the meaning set forth in Section 10.a.

               “Recovery” has the meaning set forth in Section 5.c.

               “Reorganization Debt Securities” has the meaning set forth in Section 5.a.

               “Senior Lien Agent” means the Senior Lien Agent, together with its successors, assigns and transferees under any Senior Secured Credit Agreement.

               “Senior Lien Amount” means $125,000,000.

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               “Senior Lien Default” means any Event of Default under the Senior Secured Credit Agreement.

               “Senior Lien Indebtedness” means all obligations and all other amounts owing, due or secured under the terms of the Senior Secured Credit Agreement or any other Senior Lien Loan Document, including any and all amounts payable to any Senior Lien Lender, all principal, premium, interest, fees, attorneys fees, costs, charges, expenses, reimbursement obligations, any obligation to post cash collateral in respect of letters of credit or indemnities in respect thereof, indemnities, guarantees, the Make-Whole Amount and all other amounts payable under any Senior Lien Loan Document or in respect thereof (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Obligor, or that would have accrued or become due under the terms of the Senior Lien Loan Documents but for the effect of the Insolvency Proceeding or other applicable law, and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding).

               “Senior Lien Lender Sale” has the meaning set forth in Section 2.c(1).

               “Senior Lien Lenders” means the Senior Lien Lenders, together with the lenders under any Senior Secured Credit Agreement or Senior Lien Loan Documents.

               “Senior Lien Loan Documents” means the Senior Secured Credit Agreement and the other Loan Documents (as such term is defined in the Senior Secured Credit Agreement), or any other security, collateral, ancillary or other document entered into in connection with or related to any agreement that is a Senior Secured Credit Agreement, as such documents may be amended, restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to time, in accordance with this Agreement.

               “Senior Lien Modification” has the meaning set forth in Section 6.a.

               “Senior Secured Credit Agreement” means the Senior Secured Credit Agreement as amended, restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to time, and any other agreement extending the maturity of, consolidating, otherwise restructuring (including adding Subsidiaries or affiliates of any Obligor or any other Persons as parties thereto), renewing, replacing or refinancing all or any portion of the Obligations or Commitments as those terms are defined in the Senior Secured Credit Agreement or all or any portion of the amounts owed under any other agreement that itself is a Senior Secured Credit Agreement hereunder and whether by the same or any other agent, lender, or group of lenders and whether or not increasing the amount of Senior Lien Indebtedness that may be incurred thereunder, in each case, to the extent that any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing is permitted under this Agreement.

               “Standstill Notice” means a written notice from Senior Lien Agent to Junior Lien Agent stating that a Senior Lien Default has occurred and is continuing and stating that it is a “Standstill Notice”.

               “Standstill Period” means the period beginning on the date that a Standstill Notice is received by Junior Lien Agent through and including the first to occur of (a) the date upon which the Discharge of Senior Lien Indebtedness shall have occurred, (b) the date upon which Senior Lien Agent shall have waived or acknowledged in writing the termination of the Senior Lien Default that gave rise to

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such Standstill Period, or (c) the date that is 270 days after the receipt of such Standstill Notice by Junior Lien Agent.

               “Trigger Event” has the meaning set forth in Section 10.a.

               “Trigger Notice” has the meaning set forth in Section 10.a.

               “UCC” means the Uniform Commercial Code as enacted and in effect from time to time in the State of New York; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

     b. Terms Defined in the Senior Secured Credit Agreement. Unless otherwise defined in this Agreement, any and all initially capitalized terms set forth in this Agreement shall have the meaning ascribed thereto in the Senior Secured Credit Agreement.

     c. Rules of Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference herein to any Person shall be construed to include such Person’s successors and assigns.

          2. Subordination and Standstill.

     a. Lien Subordination. Notwithstanding (i) the date, time, method, manner or order of grant, attachment, or perfection of any Liens granted to Senior Lien Agent (or any Senior Lien Lender) or Junior Lien Agent (or any Junior Lien Lender) in respect of all or any portion of the Collateral, (ii) the order or time of filing or recordation of any document or instrument for perfecting the Liens in favor of Senior Lien Agent (or any Senior Lien Lender) or Junior Lien Agent (or any Junior Lien Lender) in any Collateral, (iii) any provision of the UCC, any other applicable law, any of the Senior Lien Loan Documents or the Junior Lien Loan Documents, (iv) irrespective of whether the Liens securing the Senior Lien Loan Documents are valid, perfected, enforceable, void, avoidable, subordinated, disputed or allowed, or (v) any other circumstance whatsoever, the Senior Lien Agent , on behalf of itself and the Senior Lien Lenders, and Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, hereby agree that:

               (1) any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of Junior Lien Agent or any Junior Lien Lender that secures all or any portion of the Junior Lien Indebtedness, shall in all respects be junior and subordinate to all Liens granted to Senior Lien Agent and the Senior Lien Lenders in the Collateral to secure all or any portion of the Senior Lien Indebtedness, and

               (2) any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of Senior Lien Agent or any Senior Lien Lender that secures all or any portion of the Senior

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Lien Indebtedness shall in all respects be senior and prior to all Liens granted to Junior Lien Agent and the Junior Lien Lenders in the Collateral to secure all or any portion of the Junior Lien Indebtedness.

     b. Remedies Standstill. At any time that a Standstill Period is in effect, Junior Lien Agent and Junior Lien Lenders shall not, without the prior written consent of the Senior Lien Agent (acting upon the direction of the requisite Senior Lien Lenders),

               (1) commence, prosecute, or participate in any lawsuit, action, or proceeding, whether private, judicial, equitable, administrative or otherwise (including any Insolvency Proceeding against any Obligor or any Obligor’s assets) to the extent that any such action could reasonably be expected, in any material respect, to restrain, hinder, limit, delay for any material period or otherwise interfere with the Exercise of Secured Creditor Remedies by Senior Lien Agent or Senior Lien Lenders; provided that (A) to the extent that commencing, prosecuting, or participating in any such lawsuit, action, or proceeding could not reasonably be expected, in any material respect, to restrain, hinder, limit, delay for any material period or otherwise interfere with the Exercise of Secured Creditor Remedies by Senior Lien Agent or Senior Lien Lenders and Junior Lien Agent does, in fact, commence, prosecute, or participate in any such lawsuit, action, or proceeding, then Junior Lien Agent shall give Senior Lien Agent prompt written notice of any such action, and (B) as more fully set forth in Section 5, Junior Lien Agent and the Junior Lien Lenders may file, prosecute and defend a proof of claim (such proof of claim to indicate the subordination set forth herein) in any Insolvency Proceeding involving any Obligor,

               (2) Exercise Any Secured Creditor Remedies,

               (3) send any notice to or otherwise seek to obtain payment directly from any account debtor of any Obligor, sue for an attachment, an injunction to enjoin any Exercise of Secured Creditor Remedies by Senior Lien Agent or Senior Lien Lenders, a keeper, a receiver or any other similar legal or equitable remedy, exercise any rights of set off or recoupment as against any Obligor, or

               (4) commence or cause to be commenced or join with any creditor in commencing any Insolvency Proceeding against any Obligor or any Obligor’s assets.

               Notwithstanding any other provision hereof, (i) Junior Lien Agent and Junior Lien Lenders may not Exercise Any Secured Creditor Remedies with respect to any Payment Collateral at any time unless and until the Discharge of Senior Lien Indebtedness shall have occurred; (ii) Junior Lien Agent may not exercise any of the remedies described in clauses (1) through (4) above (other than filing, prosecuting or defending a proof of claim permitted under such clause (4)) so long as (A) Senior Lien Agent at such time has commenced and diligently is pursuing in good faith any Exercise of Secured Creditor Remedies with respect to all or a material portion of the Collateral or (B) Senior Lien Agent and Junior Lien Agent are enjoined from the Exercise of Secured Creditor Remedies, in each case, unless and until the Discharge of Senior Lien Indebtedness shall have occurred; and (iii) Junior Lien Agent may not exercise any of the remedies described in clauses (1) through (4) above without first providing Senior Lien Agent at least 10 days prior written notice in the form of a Notice of Intent to Exercise (it being understood that (x) notwithstanding anything to the contrary contained herein, such Notice of Intent to Exercise may only be delivered by Junior Lien Agent if there is an Event of Default under Section 9.1(a), Section 9.1(c) (solely with respect to a default under Section 7.23 of the Junior Lien Credit Agreement), or Section 9.1(d) (solely with respect to a default in the payment when due of interest or principal on the Senior Notes under the Indentures) of the Junior Lien Credit Agreement; and (y) if Senior Lien Agent does not deliver a Standstill Notice to Junior Lien Agent by the end of such 10 day period, Junior Lien Agent may proceed with the exercise of such remedies, and if Junior Lien Agent elects to exercise such remedies, Senior Lien Agent may not exercise any of the remedies of the type described in clauses (1)

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through (4) above so long as Junior Lien Agent at such time has commenced and diligently is pursuing in good faith any Exercise of Secured Creditor Remedies with respect to all or a material portion of the Collateral, unless and until the Discharge of Junior Lien Indebtedness shall have occurred); provided, that Junior Lien Agent shall not be required to provide a Notice of Intent to Exercise to Senior Lien Agent in connection with a permitted Exercise of Secured Creditor Remedies upon the termination of any Standstill Period.

     c. Limitation on Standstill Periods. Subject to clause (ii) in the last paragraph of Section 2.b, in no event shall a Standstill Period extend beyond 270 days from the date of receipt by Junior Lien Agent from Senior Lien Agent of a Standstill Notice initiating such Standstill Period. Any number of notices of a Senior Lien Default may be given during a Standstill Period, but no such notice shall extend such Standstill Period. Only 2 Standstill Periods may be commenced within any 360 day period, and no subsequent Standstill Period may be commenced within 60 days after the termination of the immediately preceding Standstill Period. No Senior Lien Default that existed or was continuing on the date of the commencement of any Standstill Period and that was known to Senior Lien Agent or any Senior Lien Lender will be, or can be, made the basis for the commencement of a second Standstill Period, whether or not within a period of 360 consecutive days, unless such Senior Lien Default has been cured or waived for a period of not less than 60 consecutive days.

     d. Release of Liens.

               (1) In the event of any private or public sale or other disposition of all or any portion of the Collateral by Senior Lien Agent after the occurrence and during the continuance of a Senior Lien Default (and prior to the date upon which the Discharge of Senior Lien Indebtedness shall have occurred) in connection with the liquidation by Senior Lien Agent of all or any material portion of the Collateral and the collection by Senior Lien Agent of the Senior Lien Indebtedness through the sale or other disposition of such Collateral (whether prior to or after the occurrence of an Insolvency Proceeding) (any such sale or other disposition, a “Senior Lien Lender Sale”), then Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, agrees that such Senior Lien Lender Sale will be free and clear of the Liens securing the Junior Lien Indebtedness (and, if the Senior Lien Lender Sale includes Equity Interests in any Obligor, Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, further agrees to release the entities whose Equity Interests are sold from all Junior Lien Indebtedness); provided that (x) Senior Lien Agent and the Senior Lien Lenders also release their Liens on such Collateral (and, if the Senior Lien Lender Sale includes Equity Interests in any Obligor, the entities whose Equity Interests are sold from all Senior Lien Indebtedness), (y) the Proceeds of any such Senior Lien Lender Sale are applied in accordance with Section 9, and (z) Senior Lien Agent shall have conducted such Senior Lien Lender Sale in a commercially reasonable manner and in accordance with the UCC.

               (2) In the event of any private or public sale or other disposition of all or substantially all of the Collateral by any Obligor with the consent of Senior Lien Agent after the occurrence and during the continuance of a Senior Lien Default (and prior to the date upon which the Discharge of Senior Lien Indebtedness shall have occurred), which sale or other disposition is conducted by such Obligor with the consent of Senior Lien Agent (any such sale or other disposition, a “Forced Obligor Sale”), then Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, agrees that such Forced Obligor Sale will be free and clear of the Liens securing the Junior Lien Indebtedness (and, if the Forced Obligor Sale includes Equity Interests in any Obligor, Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, further agrees to release the entities whose Equity Interests are sold from all Junior Lien Indebtedness); provided that (x) Senior Lien Agent and the Senior Lien Lenders also release their Liens on such Collateral (and, if the Forced Obligor Sale includes Equity Interests in any Obligor, the entities whose Equity Interests are sold from all Senior Lien Indebtedness), (y) the Proceeds of any such Forced Obligor Sale are applied in

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accordance with Section 9 (as if it were Proceeds received in connection with any Exercise of Secured Creditor Remedies), and (z) the Obligor conducting such Forced Obligor Sale shall have conducted such Forced Obligor Sale in a commercially reasonable manner as if such Forced Obligor Sale were being conducted by a secured creditor in accordance with the UCC.

               (3) Junior Lien Agent agrees that, in connection with any Senior Lien Lender Sale or Forced Obligor Sale, upon the prior written request of Senior Lien Agent (which request shall specify the proposed terms of the sale and the type and amount of consideration to be received in connection therewith), it will execute and/or file any and all Lien releases or other documents reasonably requested by Senior Lien Agent in connection therewith (copies of which are provided to Junior Lien Agent) without recourse, representation or warranty and at the sole expense of the Obligors; provided, that (w) in the case of a Senior Lien Lender Sale, no such release documents shall be delivered to any Obligor, (x) in the case of a Forced Obligor Sale, no such release documents shall be delivered to any Obligor unless Senior Lien Agent has delivered its release documents to such Obligor, (y) no such release documents shall be delivered to Junior Lien Agent for execution more than 5 days prior to the anticipated closing date of such sale or disposition, and (z) the effectiveness of any such release or termination by Junior Lien Agent shall be subject to the sale or other disposition of the Collateral described in such request and on the terms described in such request or on substantially similar terms and shall lapse in the event such sale or other disposition does not occur within 10 days of the anticipated closing date (at which time Senior Lien Agent or the Obligors, as the case may be, shall promptly return all release documents to Junior Lien Agent). Subject to the proviso in the immediately preceding sentence, in the event that Junior Lien Agent fails to so execute or file any such Lien releases or other documents within 5 Business Days after receipt of written request from Senior Lien Agent, the Senior Lien Agent is hereby irrevocably authorized to execute and/or file such Lien releases and other documents (provided that such Lien releases and other documents shall not be filed or recorded except substantially contemporaneous with such sale or disposition or until such sale or disposition has been consummated).

     e. Waiver of Right to Contest Senior Lien Indebtedness. Junior Lien Agent agrees that it and the Junior Lien Lenders shall not, and hereby waives any right to, take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of Senior Lien Agent (on behalf of itself and the Senior Lien Lenders) in any Collateral, the validity, priority, enforceability or allowance of any of the claims of Senior Lien Agent or any holder of Senior Lien Indebtedness against any Obligor or the validity or enforceability of this Agreement or any of the provisions hereof. Junior Lien Agent agrees that neither it nor the Junior Lien Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by Senior Lien Agent under the Senior Lien Loan Documents, including any public or private sale, lease, exchange, transfer, or other disposition of any Collateral, whether by foreclosure or otherwise, in any case so long as Senior Lien Agent does not act in contravention of this Agreement or applicable law. Junior Lien Agent hereby waives any and all rights it and the Junior Lien Lenders may have as a junior lien creditor or otherwise to contest, protest, object to, interfere with the manner in which Senior Lien Agent seeks to enforce the Liens in any Collateral so long as Senior Lien Agent does not act in contravention of this Agreement or applicable law.

     f. Waiver of Right to Contest Junior Lien Indebtedness. Senior Lien Agent agrees that it and the Senior Lien Lenders shall not, and hereby waives any right to, take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority (except to the extent expressly provided by this Agreement), enforceability, or perfection of the Liens of Junior Lien Agent (on behalf of itself and the Junior Lien Lenders) in any Collateral, the validity, priority (except to the extent

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expressly provided by this Agreement), enforceability or allowance of any of the claims of Junior Lien Agent or any holder of Junior Lien Indebtedness against any Obligor or the validity or enforceability of this Agreement or any of the provisions hereof. Solely to the extent that Junior Lien Agent is permitted to Exercise Secured Creditor Remedies under this Agreement, Senior Lien Agent agrees that neither it nor the Senior Lien Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by Junior Lien Agent under the Junior Lien Loan Documents, including any public or private sale, lease, exchange, transfer, or other disposition of any Collateral, whether by foreclosure or otherwise, in any case so long as Junior Lien Agent does not act in contravention of this Agreement or applicable law.

     g. Acknowledgement of Liens. The Junior Lien Agent acknowledges and agrees that the Senior Lien Agent, for the benefit of itself and the Senior Lien Lenders, has been and may be granted Liens upon all of the Collateral in which the Junior Lien Agent has been granted Liens and the Junior Lien Agent hereby consents thereto. Senior Lien Agent acknowledges and agrees that Junior Lien Agent, for the benefit of itself and the Junior Lien Lenders, has been or, subject to the terms of this Agreement, may be granted Liens upon all of the Collateral in which the Senior Lien Agent has been granted Liens and each of the Senior Lien Agent hereby consents thereto. The Junior Lien Agent agrees that neither it nor any Junior Lien Lender shall obtain a Lien on any asset or Collateral to secure all or any portion of the Junior Lien Indebtedness unless concurrently therewith, the Senior Lien Agent (on behalf of itself and the Senior Lien Lenders) obtains a Lien on such asset or Collateral and the parties hereby agree that all such Liens are and will be subject to this Agreement. The subordination of Liens by the Junior Lien Agent in favor of the Senior Lien Agent and the Senior Lien Lenders shall not be deemed to subordinate the Junior Lien Agent’s Liens to the Liens of any other Person that is not a holder of Senior Lien Indebtedness.

     h. Agent for Perfection. Senior Lien Agent, on the one hand, and Junior Lien Agent, on the other hand, each agree to hold all Control Collateral and Cash Collateral, as applicable, in their respective possession, custody, or control (or in the possession, custody, or control of agents or bailees for either) as a non-fiduciary agent for the other solely for the purpose of perfecting the security interest granted to each in such Control Collateral or Cash Collateral subject to the terms and conditions of this Section 2.h. None of Senior Lien Agent or the Senior Lien Lenders, on the one hand, or Junior Lien Agent or the Junior Lien Lenders, on the other hand, as applicable, shall have any obligation whatsoever to the others to assure that the Control Collateral is genuine or owned by any Obligor or any other Person or to preserve their respective rights or benefits or those of any Person. The duties or responsibilities of Senior Lien Agent and Junior Lien Agent under this Section 2.h are and shall be limited solely to holding or maintaining control of the Control Collateral and the Cash Collateral as a non-fiduciary agent for the other for purposes of perfecting the Lien held by Junior Lien Agent, on the one hand, or Senior Lien Agent, on the other hand, as applicable. Senior Lien Agent is not and shall not be deemed to be a fiduciary of any kind for Junior Lien Agent or any other Person. Junior Lien Agent is not and shall not be deemed to be a fiduciary of any kind for Senior Lien Agent or any other Person.

               After the Discharge of Senior Lien Indebtedness shall have occurred, Senior Lien Agent, upon the reasonable request of Junior Lien Agent, (a) shall promptly deliver any Cash Collateral or Control Collateral, if any, in their possession to Junior Lien Agent, and (b) will reasonably cooperate (subject to Senior Lien Agent obtaining satisfactory indemnity agreements from the Obligors and/or such other Persons as Senior Lien Agent may reasonably require) with the Obligors and Junior Lien Agent in order to transfer or assign (to the extent permitted by the applicable agreement) control of the remainder of the Cash Collateral or Control Collateral, if any, under Senior Lien Agent’s control to Junior Lien Agent (or as it may direct in writing), in each case, at the sole cost and expense of the Obligors and except as may otherwise be required by applicable law or court order.  Notwithstanding the foregoing, if this Agreement is reinstated pursuant to Section 5.c hereof and any Cash Collateral or Control Collateral has

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heretofore been delivered to the Junior Lien Agent or at its direction pursuant to this Section 2.h or is otherwise in the possession or control of Junior Lien Agent or any Junior Lien Lender, then, upon such reinstatement, (i) Junior Lien Agent and each Junior Lien Lender shall promptly deliver any Cash Collateral or Control Collateral, if any, in their possession to Senior Lien Agent, and Senior Lien Agent shall hold any such Cash Collateral or Control Collateral in accordance with the first sentence of this Section 2.h, and (ii) the Obligors and Junior Lien Agent will reasonably cooperate with Senior Lien Agent in order to transfer or assign (to the extent permitted by the applicable agreement) control of any Cash Collateral or Control Collateral, if any, under Junior Lien Agent’s or any Junior Lien Lender’s control to Senior Lien Agent (to be held in accordance with the first sentence of this Section 2.h), in each case, at the sole cost and expense of the Obligors and except as may otherwise be required by applicable law or court order.

          3. Permitted Applications of Proceeds of Collateral. So long as an Application of Proceeds Blockage Period is not then in effect, the Borrowers may pay or apply, and Junior Lien Agent and the Junior Lien Lenders may accept and receive on account of the Junior Lien Indebtedness, any Proceeds of Collateral whatsoever on account of the Junior Lien Indebtedness in accordance with the terms of the Junior Lien Loan Documents (any such application being referred to as a “Permitted Application of Proceeds of Collateral”).

          4. Application of Proceeds after Exercise of Remedies.

     a. In the event that (i) a Senior Lien Default shall have occurred and be continuing and (ii) Senior Lien Agent shall have commenced and shall be diligently pursuing any Exercise of Secured Creditor Remedies against all or a material portion of the Collateral and shall be applying all Proceeds of Collateral (to the extent received) in accordance with Section 9 (the occurrence and continuance of items (i) and (ii), collectively, an “Application of Proceeds Blockage Event”), then from and after the commencement of such Application of Proceeds Blockage Event, no Proceeds of Collateral shall be paid or applied by any Obligor, and neither Junior Lien Agent nor any Junior Lien Lender shall accept, take or receive, any Proceeds of Collateral, on account of the Junior Lien Indebtedness until the earlier to occur of (a) the date of the Discharge of Senior Lien Indebtedness and (b) the date of termination (including, without limitation, as a result of the failure of any of items (i) or (ii) above to be continuing) or written waiver by Senior Lien Agent of such Application of Proceeds Blockage Event (such period of time being an “Application of Proceeds Blockage Period”).

     b. In the event that, notwithstanding the terms of the foregoing Section 4a, the Obligors shall pay or apply or Junior Lien Agent or the Junior Lien Lenders shall receive any Proceeds of Collateral on account of the Junior Lien Indebtedness during an Application of Proceeds Blockage Period, then and in such event the turn-over and other obligations of Junior Lien Agent set forth in Section 8 shall apply.

     c. In the case of any Permitted Application of Proceeds of Collateral on or in respect of any Junior Lien Indebtedness that would (in the absence of any Application of Proceeds Blockage Period) have been made during any Application of Proceeds Blockage Period, the provisions of this Section 4 shall not prevent the application of (and the Obligor may pay or apply and Junior Lien Agent and the Junior Lien Lenders may accept, take and receive) such Permitted Application of Proceeds of Collateral on or after the date immediately following the termination of such Application of Proceeds Blockage Period.

          5. Insolvency Proceeding.

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     a. Continuing Priority. This Agreement shall be applicable both before and after the filing of any Insolvency Proceeding against any Obligor and all converted or succeeding cases in respect thereof. The relative rights of the Agents and the Lenders in or to any distributions from or in respect of any Collateral or Proceeds of Collateral, shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, the Borrowers or any other Obligor as debtor-in-possession. Junior Lien Agent acknowledges and agrees that, in the event of a distribution of any notes or other debt securities under a plan of reorganization under any such Insolvency Proceeding (such notes or other debt securities, “Reorganization Debt Securities”) to each of (i) Senior Lien Agent and the Senior Lien Lenders and (ii) Junior Lien Agent and the Junior Lien Lenders, such Reorganization Debt Securities received by Junior Lien Agent and the Junior Lien Lenders shall be subordinated to the Reorganization Debt Securities received by Senior Lien Agent and the Senior Lien Lenders on terms acceptable to Senior Lien Agent and the Senior Lien Lenders.

     b. Proof of Claim. Subject to the restrictions set forth in this Agreement, in the event of any Insolvency Proceeding involving any Obligor or any property of any Obligor, Junior Lien Agent shall retain the right to vote on behalf of Junior Lien Lenders with respect to the Junior Lien Indebtedness. If Junior Lien Agent or any Junior Lien Lender does not file a proper claim or proof of debt or other document or amendment thereof in the form required in any Insolvency Proceeding prior to 5 days before the expiration of time to file such claim or other document or amendment thereof, then Senior Lien Agent shall have the right (but not the obligation) in any such Insolvency Proceeding, and Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby irrevocably appoints Senior Lien Agent as Junior Lien Agent’s and Junior Lien Lenders’ lawful attorney in fact, to file and prove all claims therefor in such circumstances.

     c. Reinstatement. If Senior Lien Agent, any Senior Lien Lender or any other holder of any Senior Lien Indebtedness is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay any amount (a “Recovery”) to the estate or to any creditor or representative of an Obligor or any other Person, then the Senior Lien Indebtedness shall be reinstated to the extent of such Recovery. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the parties hereto from such date of reinstatement. All rights, interests, agreements, and obligations of Senior Lien Agent, the Senior Lien Lenders and Junior Lien Agent and the Junior Lien Lenders under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of any Insolvency Proceeding by or against any Obligor or any other Person and irrespective of any other circumstance which otherwise might constitute a defense available to, or a discharge of any Obligor or any other Person in respect of the Senior Lien Indebtedness. No priority or right of Senior Lien Agent, the Senior Lien Lenders or any other holder of Senior Lien Indebtedness shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of any Obligor or any other Person or by the noncompliance by any Person with the terms, provisions, or covenants of the Senior Lien Loan Documents or the Junior Lien Loan Documents, regardless of any knowledge thereof which Senior Lien Agent, the Senior Lien Lenders or any holder of Senior Lien Indebtedness may have.

     d. DIP Financing. If any Borrower or any other Obligor shall be subject to any Insolvency Proceeding and Senior Lien Agent shall desire, prior to the Discharge of Senior Lien Indebtedness, to permit the use of cash collateral or to provide any such Obligor financing (or to permit any such Obligor to obtain financing) (collectively, “DIP Financing”) under Section 363 or Section 364 of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency Proceeding) to be secured by all or any portion of the Collateral, then Junior Lien Agent, on behalf of itself and the Junior Lien

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Lenders, agrees that, so long as (i) the aggregate principal amount of Indebtedness incurred pursuant to such DIP Financing, together with the aggregate principal amount of all other outstanding Senior Lien Indebtedness, does not exceed the sum of the Senior Lien Indebtedness plus $50,000,000, (ii) Junior Lien Agent retains a Lien on the Collateral (including Proceeds thereof arising after the commencement of such proceeding) with the same priority as existed prior to the commencement of the case under applicable law (an “Adequate Protection Lien”), and (iii) such use of cash collateral or DIP Financing is subject to the terms of this Agreement, it will raise no objection to such DIP Financing. Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, hereby agrees that its Liens in the Collateral shall be subordinated to such DIP Financing (and all obligations relating thereto) to the same extent and upon the same terms and conditions specified in this Agreement.

     e. Alternative DIP Financings. Nothing in this Agreement shall limit the rights of any Lender to object to post-petition financing or the use of cash collateral that is provided on terms in contravention of Section 5.d.

     f. Priming DIP Financing. Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, agrees that it shall not, directly or indirectly, provide, offer to provide or support any DIP Financing secured by a Lien senior to or pari passu with the Liens securing the Senior Lien Indebtedness. Senior Lien Agent, on behalf of itself and the Senior Lien Lenders, agrees that it shall not, directly or indirectly, provide, offer to provide or support any DIP Financing on terms in contravention of Section 5.d.

     g. Other Waivers by Junior Lien Agent. Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, agrees that it shall not (without the Senior Lien Agent’s prior written consent), in any capacity, in connection with an Insolvency Proceeding of any Obligor: (i) seek relief from the automatic stay of Section 362 of the Bankruptcy Code or any other stay in any Insolvency Proceeding in respect of any portion of the Collateral on which Senior Lien Agent then has or purports to have a Lien; (ii) seek or request any adequate protection, other than Adequate Protection Liens, Permitted Replacement Liens and Permitted Interest Payments, as expressly provided herein; (iii) object to any sale of all or any portion of the Collateral in accordance with Sections 363 or 365 of the Bankruptcy Code other than (A) any objection that an unsecured creditor could assert or (B) if Senior Lien Agent or any Senior Lien Lender objects to any such sale to the same extent as such objection; (iv) seek, or support any request, to dismiss any Insolvency Proceeding or to convert any chapter 11 case of any such party from chapter 11 to chapter 7 of the Bankruptcy Code; (v) Reserved; (vi) Reserved; (vii) seek, or support any request for, the entry of any order modifying, reversing, revoking, staying, rescinding, vacating or amending any DIP Financing order pursuant to which the Senior Lien Agent and/or the Senior Lien Lenders have provided such financing; (viii) propose, vote in favor of or otherwise approve or support any plan of reorganization, arrangement or liquidation, or file any motion or pleading in support of any plan of reorganization, arrangement or liquidation, unless it provides for the Discharge of Senior Lien Debt; (ix) object to the treatment under a plan of reorganization or arrangement of the Senior Lien Lenders’ claims with respect to the Senior Lien Debt; (x) take any action or vote in any way so as to directly or indirectly challenge or contest (A) the validity or the enforceability of the Senior Secured Credit Agreement, the other Senior Lien Loan Documents or the liens and security interests granted to Senior Lien Agent and the Senior Lien Lenders with respect to the Senior Lien Indebtedness, (B) the rights and duties of Senior Lien Agent and the Senior Lien Lenders established in the Senior Secured Credit Agreement or any other Senior Lien Loan Document, or (C) the validity or enforceability of this Agreement; or (xi) take any other action which would reasonably be expected to have a material adverse effect on the validity of, or the value of, the Senior Lien Agent’s security interest in the Collateral or the claims of the Senior Lien Lenders.  Without in any way limiting the foregoing, Junior Lien Lenders, in their capacity as unsecured creditors in connection with an Insolvency Proceeding of any Borrower or Guarantor, shall be permitted to exercise all other rights as unsecured creditors, including, without limitation, the right to take the following actions

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(but with respect to the exercise of any such rights, only to the extent that doing so would not be inconsistent with clauses (i) through (xi) of the foregoing sentence):  (I) object to or support the retention of one or more professionals for the Borrowers, Guarantors or any committee appointed in an Insolvency Proceeding (the “Insolvency Professionals”); (II) object to or support the fees and expenses of Insolvency Professionals; (III) object to or support the approval of settlements and compromises of claims of parties (other than Senior Lien Agent and the Senior Lien Lenders); (IV) object to motions for relief from the automatic stay (other than any such motion filed by Senior Lien Agent and/or the Senior Lien Lenders); (V) object to or support motions to assume or reject or compel assumption or rejection of executory contracts and leases of non-residential real property; (VI) seek to terminate any exclusive periods for filing or soliciting acceptances to a plan or plans of reorganization; and (VII) take actions similar to the actions described in the clauses (I) through (VI) of this sentence.

     h. Other Waivers by Senior Lien Agent. Until the Discharge of Junior Lien Indebtedness has occurred, Senior Lien, on behalf of itself and the Senior Lien Lenders, agrees that it shall not without Junior Lien Agent’s written consent to the contrary, take any action or vote in any way so as to directly or indirectly challenge or contest (A) the validity or the enforceability of the Junior Lien Credit Agreement, the other Junior Lien Loan Documents or the liens and security interests granted to Junior Lien Agent and the Junior Lien Lenders with respect to the Junior Lien Indebtedness, (B) the rights and duties of Junior Lien Agent and the Junior Lien Lenders established in the Junior Lien Credit Agreement or any other Junior Lien Loan Document to the extent that such rights and duties are not and/or have not been exercised in contravention of this Agreement, or (C) the validity or enforceability of this Agreement.

     i. Rights of Junior Lien Agent and Junior Lien Lenders to Adequate Protection. Senior Lien Agent, on behalf of itself and the Senior Lien Lenders, agrees that it will raise no objection to a request for adequate protection by Junior Lien Agent and the Junior Lien Lenders in the form of (i) payment of interest on the Junior Lien Indebtedness during the pendency of an Insolvency Proceeding so long as (A) the rate of interest so requested by Junior Lien Agent and the Junior Lien Lenders does not exceed the default rate of interest applicable to the Junior Lien Indebtedness immediately prior to the commencement of such Insolvency Proceeding and (B) the Senior Lien Agent and the Senior Lien Lenders receive adequate protection in the form of payment of interest on the Senior Lien Indebtedness during the pendency of such Insolvency Proceeding at a rate at least equal to the greater of (x) the non-default contractual rate of interest applicable to the Senior Lien Indebtedness immediately prior to the commencement of such Insolvency Proceeding and (y) the rate of interest so requested by the Junior Lien Agent and the Junior Lien Lenders (“Permitted Interest Payments”), (ii) Adequate Protection Liens and (iii) a replacement lien on post-petition assets to the same extent granted to Senior Lien Agent, with the same priority as existed prior to the commencement of the case under applicable law (a “Permitted Replacement Lien”).

          6. Modifications of Indebtedness.

     a. Senior Lien Indebtedness. All Senior Lien Indebtedness at any time incurred by any Obligor shall be deemed to have been incurred, and all Senior Lien Indebtedness held by any Senior Lien Lender or other holder of Senior Lien Indebtedness shall be deemed to have been extended, acquired or obtained, as applicable, in reliance upon this Agreement, and, to the extent not otherwise required herein, Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby waives (i) notice of acceptance, or proof of reliance, by Senior Lien Agent, the Senior Lien Lenders or any other holder of Senior Lien Indebtedness of this Agreement, and (ii) notice of the existence, renewal, extension, accrual, creation, or non-payment of all or any part of the Senior Lien Indebtedness. Nothing contained in this Agreement shall preclude Senior Lien Agent, Senior Lien Lenders or any other holder of Senior Lien Indebtedness from discontinuing the extension of credit to any Obligor (whether under the Senior Secured Credit

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Agreement or otherwise). Anything in the Junior Lien Loan Documents to the contrary notwithstanding, Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby agrees that Senior Lien shall have the right, at any time and from time to time, in its sole discretion without the consent of or notice to Junior Lien Agent or any Junior Lien Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to Junior Lien Agent or any Junior Lien Lender amend, restate, waive, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify (collectively, any “Senior Lien Modification”) the Senior Lien Loan Documents, in any manner whatsoever, including any renewals, extensions or shortening of time of payments (even if such shortening causes any Senior Lien Indebtedness to be due on demand or except to the extent any such Senior Lien Modification increases the principal amount of the Senior Lien Loans to an amount in excess of the Senior Lien Amount), and Junior Lien Agent, on behalf of itself and each Junior Lien Lender, consents and agrees to any such Senior Lien Modification. Junior Lien Agent, on behalf of itself and each Junior Lien Lender, waives notice of any such Senior Lien Modification, and agrees that no such Senior Lien Modification shall affect, release, or impair the subordinations or any other obligations of Junior Lien Agent or any Junior Lien Lender contained herein.

     b. Junior Lien Indebtedness. Anything in the Senior Lien Loan Documents to the contrary notwithstanding, Junior Lien Agent shall not amend, restate, waive, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify the Junior Lien Loan Documents in any manner whatsoever without the prior written consent of the Senior Lien Agent (acting upon the direction of the requisite Senior Lien Lenders).

     c. Notice of Acceptance and Other Waivers.

               (1) To the fullest extent permitted by applicable law, Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby waives: (i) notice of acceptance hereof; (ii) notice of any loans or other financial accommodations made or extended under the Senior Secured Credit Agreement, or the creation or existence of any Senior Lien Indebtedness; (iii) notice of the amount of the Senior Lien Indebtedness; (iv) notice of any adverse change in the financial condition of any Obligor or of any other fact that might increase such Junior Lien Agent’s or such Junior Lien Lender’s risk hereunder; (v) notice of presentment for payment, demand, protest, and notice thereof as to any instrument among the Senior Lien Loan Documents; (vi) notice of any Default or Event of Default under the Senior Lien Loan Documents or otherwise relating to the Senior Lien Indebtedness; and (vii) all other notices (except if such notice is specifically required to be given to Junior Lien Agent under this Agreement) and demands to which Junior Lien Agent or any Junior Lien Lender might otherwise be entitled. To the fullest extent permitted by applicable law, Junior Lien Agent, on behalf of itself and each Junior Lien Lender, waives the right by statute or otherwise to require Senior Lien Agent or any holder of Senior Lien Indebtedness to institute suit against any Obligor or to exhaust any rights and remedies which Senior Lien Agent, any Senior Lien Lender or any holder of Senior Lien Indebtedness has or may have against any Obligor. Junior Lien Agent, on behalf of itself and each Junior Lien Lender, further waives any defense arising by reason of any disability or other defense of any Obligor or by reason of the cessation from any cause whatsoever of the liability of such Obligor in respect thereof.

               (2) To the fullest extent permitted by applicable law, Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby waives: (i) any rights to assert against Senior Lien Agent, the Senior Lien Lenders or any other holder of Senior Lien Indebtedness any defense (legal or equitable), set-off, counterclaim, or claim which such Junior Lien Agent or any Junior Lien Lender may now or at any time hereafter have against any Obligor; (ii) except as otherwise set forth in this Agreement, any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of any Senior Lien Indebtedness, any

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Junior Lien Indebtedness or any security for either; and (iii) the benefit of any statute of limitations affecting Junior Lien Agent’s or any Junior Lien Lender’s obligations hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Senior Lien Indebtedness shall similarly operate to defer or delay the operation of such statute of limitations applicable to such Junior Lien Agent’s or any such Junior Lien Lender’s obligations hereunder.

               (3) Until such time as the Discharge of Senior Lien Indebtedness shall have occurred, Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby postpones any right of subrogation Junior Lien Agent or any Junior Lien Lender has or may have as against any Obligor with respect to any Senior Lien Indebtedness.

               (4) None of Senior Lien Agent, any Senior Lien Lender or any other holder of Senior Lien Indebtedness or any of their respective affiliates, directors, officers, employees, or agents shall be liable for failure to demand, collect, or realize upon any of the Collateral or any Proceeds or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof. If Senior Lien Agent or any Senior Lien Lender honors (or fails to honor) a request by the Borrowers for an extension of credit pursuant to the Senior Secured Credit Agreement or any of the other Senior Lien Loan Documents, whether Senior Lien Agent or any Senior Lien Lender has knowledge that the honoring of (or failure to honor) any such request would constitute a default under the terms of the Junior Lien Loan Documents or an act, condition, or event that, with the giving of notice or the passage of time, or both, would constitute such a default, or if Senior Lien Agent or any Senior Lien Lender otherwise should exercise any of its contractual rights or remedies under the Senior Lien Loan Documents (subject to the express terms and conditions hereof), neither Senior Lien Agent nor any Senior Lien Lender shall have any liability whatsoever to Junior Lien Agent or any Junior Lien Lender as a result of such action, omission, or exercise. Senior Lien Agent and each Senior Lien Lender will be entitled to manage and supervise its loans and extensions of credit under the Senior Lien Loan Documents as Senior Lien Agent and Senior Lien Lenders may, in their sole discretion, deem appropriate, and Senior Lien Agent, each Senior Lien Lender and each other holder of Senior Lien Indebtedness may manage their loans and extensions of credit without regard to any rights or interests that Junior Lien Agent or any Junior Lien Lender may have in the Collateral or otherwise except as otherwise expressly set forth in this Agreement. Junior Lien Agent, on behalf of itself and each Junior Lien Lender, agrees that none of Senior Lien Agent, any Senior Lien Lender or any other holder of Senior Lien Indebtedness shall incur any liability as a result of a sale, lease, license, application or other disposition of all or any portion of the Collateral or any part or Proceeds thereof conducted in accordance with applicable law and the terms hereof. Subject to the express terms and conditions of this Agreement, Senior Lien Agent, each Senior Lien Lender and each other holder of Senior Lien Indebtedness may, from time to time, enter into agreements and settlements with Obligors as it may determine in its sole discretion without impairing any of the subordinations, priorities, rights or obligations of the parties under this Agreement, including substituting Collateral, releasing any Lien and releasing any Obligor. Junior Lien Agent, on behalf of itself and each Junior Lien Lender, waives any and all rights it may have to require Senior Lien Agent, any Senior Lien Lender or any holder of Senior Lien Indebtedness to marshal assets, to exercise rights or remedies in a particular manner, or to forbear from exercising such rights and remedies in any particular manner or order.

          7. Indebtedness Owed Only to Lenders. The entire Junior Lien Indebtedness is owing only to the Junior Lien Agent and the Junior Lien Lenders. None of Junior Lien Agent nor the Junior Lien Lenders may sell or assign or otherwise transfer any part of its interest in the Junior Lien Indebtedness or the Collateral, other than (a) assignments to entities that are Junior Lien Lenders prior to such assignment

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and (b) participations in accordance with the Junior Lien Credit Agreement, unless, in each case, the transferee executes and delivers to Senior Lien Agent a written acknowledgment in which the transferee acknowledges in writing its agreement to be bound by the terms hereof. Any assignment in violation of the immediately preceding sentence shall be null and void (it being understood and agreed that if Junior Lien Agent resigns and no successor Agent is appointed in accordance with Section 12.9 of the Junior Lien Credit Agreement, such resignation shall be effective so long as such resignation is effective under the Junior Lien Credit Agreement and the resigning Junior Lien Agent shall have no further obligation hereunder (other than its obligations pursuant to the last sentence of Section 2.h hereof, after this Agreement has been reinstated pursuant to Section 5.c hereof, to deliver possession, or transfer or assign control, as the case may be, of any Cash Collateral or Control Collateral then held or controlled by the resigning Junior Lien Agent in respect of the resigning Junior Lien Agent’s obligation to continue to hold any collateral security held by the resigning Junior Lien Agent on behalf of the Junior Lien Lenders under any Junior Lien Loan Document until such time as a successor Agent under the Junior Lien Credit Agreement is appointed), provided that, if at any subsequent time, any person is appointed as successor Agent under the Junior Lien Credit Agreement or any other Junior Lien Loan Document, such appointment shall not be effective unless and until such successor Agent acknowledges in writing its agreement to be bound by the terms hereof; provided that such acknowledgment shall not be required to the extent the Required Lenders (as defined in the Junior Lien Credit Agreement) serve as successor Junior Lien Agent under the Junior Lien Credit Agreement; provided, however, that, notwithstanding anything to the contrary contained in this Agreement, if at any time such Required Lenders under the Junior Lien Credit Agreement serve as successor Junior Lien Agent, then, during such period, the term “Junior Lien Agent” used throughout this Agreement shall mean, and shall include, for all purposes, such Required Lenders under the Junior Lien Credit Agreement). Junior Lien Agent under any Junior Lien Credit Agreement that replaces or refinances the Junior Lien Credit Agreement shall not be entitled to any of the benefits of this Agreement unless and until such Junior Lien Agent acknowledges its agreement to be bound by the terms hereof, but shall be subject to the burdens and obligations, including, without limitation, the lien subordination, provided for herein.

          8. Payments Received by Junior Lien Agent or the Junior Lien Lenders. If at any time prior to the date upon which the Discharge of Senior Lien Indebtedness shall have occurred, Junior Lien Agent or any Junior Lien Lender receives any payment or distribution of any kind or character, whether as a result of an Exercise of Any Secured Creditor Remedies or otherwise, whether in cash, property or securities, from or of any assets of any Obligor (or any Obligor’s Subsidiaries), irrespective of whether such payment or distribution was of Collateral or of Proceeds thereof, in each case, in contravention of the express terms of this Agreement, Junior Lien Agent or such Junior Lien Lender shall be deemed to receive and hold the same in trust as trustee for the benefit of Senior Lien Agent and the Senior Lien Lenders and shall forthwith deliver such payment, distribution, or proceeds to Senior Lien Agent in precisely the form received (except for the endorsement or assignment by Junior Lien Agent or such Junior Lien Lender where necessary), for application on any of the Senior Lien Indebtedness, whether then due or yet to become due. In the event of the failure of Junior Lien Agent or any Junior Lien Lender to make any such endorsement or assignment to Senior Lien Agent within five (5) Business Days after receipt of written request therefor from Senior Lien Agent, Senior Lien Agent and any of its respective officers or agents are hereby irrevocably authorized to make such endorsement or assignment and Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby irrevocably appoints Senior Lien Agent as the lawful attorney in fact of Junior Lien Agent and Junior Lien Lenders solely for the purpose of enabling Senior Lien Agent to make such endorsement or assignment in the name of Junior Lien Agent or any Junior Lien Lender.

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          9. Application of Proceeds. All Collateral and all Proceeds, received by any of Senior Lien Agent, Senior Lien Lenders, Junior Lien Agent or Junior Lien Lenders in connection with any Exercise of Secured Creditor Remedies shall be applied:

first, to the payment of costs and expenses of Senior Lien Agent in connection with such Exercise of Secured Creditor Remedies,

second, to the payment of the Senior Lien Indebtedness in accordance with the Senior Lien Loan Documents, together with the concurrent permanent reduction of any credit commitment thereunder in an amount equal to the amount of such payment, and

third, to the payment of the Junior Lien Indebtedness in accordance with the Junior Lien Loan Documents.

          10. Junior Lien Lender Purchase Option.

     a. Upon (i) receipt by Junior Lien Agent of a notice (a “Trigger Notice”) by Senior Lien Agent of the intent of Senior Lien Agent and the Senior Lien Lenders to Exercise Any Secured Creditor Remedies, (ii) the commencement of an Insolvency Proceeding with respect to any Obligor, or (iii) receipt by Junior Lien Agent of a Standstill Notice (each a “Trigger Event”), Junior Lien Agent and the Junior Lien Lenders shall have the option, exercised by delivery of written notice by Junior Lien Agent to Senior Lien Agent (a “Purchase Notice”), to purchase all (but not less than all) of the Senior Lien Indebtedness from Senior Lien Agent and the Senior Lien Lenders. The Purchase Notice shall be irrevocable.

     b. Senior Lien Agent shall deliver to Junior Lien Agent any Trigger Notice referred to in Section 10.a(i) above (i) in the absence of an Exigent Circumstance (defined below), not less than 5 Business Days prior to the taking of the actions described in Section 10.a(i) or (ii) if Exigent Circumstances exist, as soon as practicable and in any event contemporaneously with the taking of such action. Junior Lien Agent may send to Senior Lien Agent a Purchase Notice within 5 Business Days of the occurrence of a Trigger Event, in which event, Senior Lien Agent and the Senior Lien Lenders shall not Exercise Any Secured Creditor Remedies, to the extent such action has not been taken, provided, that, the purchase and sale with respect to the Senior Lien Indebtedness provided for in this Section 10 shall have closed within 5 Business Days after receipt by Senior Lien Agent of the Purchase Notice and Senior Lien Agent (on behalf of itself and the Senior Lien Lenders) shall have received payment in full of the Senior Lien Indebtedness as provided for herein within such 5 Business Day period. As used herein, “Exigent Circumstance” shall mean an event or circumstance that materially and imminently threatens the ability of Senior Lien Agent to realize upon all or a material part of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction (other than to the extent covered by insurance) or material waste thereof, or the failure of any Obligor after reasonable demand to maintain or reinstate adequate casualty insurance coverage with respect thereto.

     c. On the date specified by Junior Lien Agent in the Purchase Notice (which shall not be more than 5 Business Days after the receipt by Senior Lien Agent of the Purchase Notice), Senior Lien Agent and the Senior Lien Lenders shall sell to the Junior Lien Lenders, and the Junior Lien Lenders shall purchase from Senior Lien Agent and the Senior Lien Lenders, the Senior Lien Indebtedness.

     d. Upon the date of such purchase and sale, the Junior Lien Lenders shall (i) pay to Senior Lien Agent and the Senior Lien Lenders as the purchase price therefor the full amount of all the Senior Lien Indebtedness then outstanding and unpaid, (ii) furnish cash collateral to Senior Lien Agent and the Senior

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Lien Lenders in such amounts as Senior Lien Agent determines is reasonably necessary to secure Senior Lien Agent and the Senior Lien Lenders in connection with any issued and outstanding letters of credit provided by Senior Lien Agent or any Senior Lien Lender (or letters of credit that Senior Lien Agent or any Senior Lien Lender has arranged to be provided by third parties pursuant to the Senior Lien Loan Documents) to any Obligor (but not in any event in an amount greater than 105% of the aggregate undrawn face amount of such letters of credit), and (iii) agree to reimburse Senior Lien Agent and the Senior Lien Lenders for all expenses to the extent earned or due and payable in accordance with the Senior Lien Loan Documents (including the reimbursement of extraordinary expenses, financial examination expenses and appraisal fees), including principal, interest and fees thereon and costs and expense of collection thereof (including reasonable attorneys’ fees and legal expenses). Such purchase price and cash collateral shall be remitted by wire transfer in federal funds to such bank account of Senior Lien Agent as Senior Lien Agent may designate in writing to Junior Lien Agent for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by Junior Lien Agent and the Junior Lien Lenders to the bank account designated by Senior Lien Agent are received in such bank account prior to 2:00 p.m., New York City time, and interest shall be calculated to and including such Business Day if the amounts so paid by Junior Lien Agent and the Junior Lien Lenders to the bank account designated by Senior Lien Agent are received in such bank account later than 2:00 p.m., New York City time.

     e. Such purchase shall be expressly made without representation or warranty of any kind by Senior Lien Agent and the Senior Lien Lenders as to the Senior Lien Indebtedness so purchased or otherwise and without recourse to Senior Lien Agent or any Senior Lien Lender, except that each Senior Lien Lender shall represent and warrant: (i) the amount of the Senior Lien Indebtedness being purchased from it, (ii) that such Senior Lien Lender owns its portion of the Senior Lien Indebtedness so purchased free and clear of any Liens or encumbrances and (iii) such Senior Lien Lender has the right to assign such Senior Lien Indebtedness and the assignment is duly authorized by such Senior Lien Lender.

          11. Representations. Senior Lien Agent represents and warrants to Junior Lien Agent that it has the requisite power and authority to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the Senior Lien Lenders. Junior Lien Agent represents and warrants that it has the requisite power and authority to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the Junior Lien Lenders.

          12. Additional Remedies. If Junior Lien Agent or any Junior Lien Lender violates any of the terms of this Agreement, in addition to any remedies in law, equity, or otherwise, Senior Lien Agent may restrain such violation in any court of law and may, in its own or in any Obligor’s name, interpose this Agreement as a defense in any action by Junior Lien Agent or any Junior Lien Lender. Upon Senior Lien Agent’s written request and at the sole expense of Borrowers, Junior Lien Agent and the Junior Lien Lenders will promptly take all actions reasonably requested by Senior Lien Agent, as the case may be, to carry out the purposes and provisions of this Agreement.

          13. Amendments. No amendment or waiver of any provision of this Agreement nor consent to any departure by any party hereto shall be effective unless it is in a written agreement executed by Junior Lien Agent and Senior Lien Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

          14. Instrument Legends. Junior Lien Agent agrees that the Junior Lien Credit Agreement, the face of each promissory note evidencing the Junior Lien Indebtedness or any portion thereof and any agreement purporting to grant any security therefor, shall be inscribed with a legend (or otherwise contain a provision) conspicuously indicating that such Junior Lien Credit Agreement, promissory note or

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security agreement is subject to the terms of this Agreement. Any promissory note evidencing any of the Junior Lien Indebtedness or any portion thereof, and any agreement granting any security therefor, which is hereafter executed will, on the date thereof, be inscribed with a similar legend (or otherwise contain a similar provision). The Junior Lien Credit Agreement shall provide that each Junior Lien Lender shall be required to execute a writing, which may include the Junior Lien Credit Agreement, agreeing to be bound by the terms hereof, and providing that any assignment or transfer of any or all of the Junior Lien Indebtedness to any other Person without such other Person’s written agreement to be bound hereby shall be null and void.

          15. Information Concerning Financial Condition. Each of Junior Lien Agent and each Junior Lien Lender hereby assumes responsibility for keeping itself informed of the financial condition of Obligors and of all other circumstances bearing upon the risk of nonpayment of the Junior Lien Indebtedness, and agrees that Senior Lien Agent and the Senior Lien Lenders have and shall have no duty to advise Junior Lien Agent or any Junior Lien Lender of information known to Senior Lien Agent or any Senior Lien Lender regarding such condition or any such circumstances. In the event Senior Lien Agent or any Senior Lien Lender, in their sole discretion, undertake, at any time or from time to time, to provide any such information to Junior Lien Agent or the Junior Lien Lenders, none of Senior Lien Agent or the Senior Lien Lenders shall be under any obligation (i) to provide any such information to Junior Lien Agent or Junior Lien Lenders on any subsequent occasion, (ii) to undertake any investigation, or (iii) to disclose any information which, pursuant to its commercial finance practices, Senior Lien Agent or any Senior Lien Lender wishes to maintain confidential. Junior Lien Agent, on behalf of itself and the Junior Lien Lenders, acknowledges and agrees that none of Senior Lien Agent or any Senior Lien Lender has made any warranties or representations with respect to the legality, validity, enforceability, collectability or perfection of the Senior Lien Indebtedness or any liens or security interests held in connection therewith.

          16. Third Party Beneficiaries. This Agreement is solely for the benefit of Senior Lien Agent, Senior Lien Lenders, Junior Lien Agent, and the Junior Lien Lenders, and their respective successors and assigns, and neither any Obligor nor any other Persons are intended to be a third party beneficiary hereunder or to have any right, benefit, priority or interest under, or because of the existence of, or to have any right to enforce, this Agreement. Nothing in this Agreement is intended to or shall be deemed to amend or modify the terms and conditions of the Senior Lien Loan Documents or the Junior Lien Loan Documents. Senior Lien Agent and Junior Lien Agent shall have the right to modify or terminate this Agreement at any time without notice to or approval of any Obligor or any other Person. The Obligors and the Junior Lien Agent, on behalf of itself and each Junior Lien Lender, hereby agree that Senior Lien Agent and the Senior Lien Lenders are entitled to rely on and are intended beneficiaries of each of Section 7.28 and Section 9.3 of the Junior Lien Credit Agreement and shall have the right to enforce such provisions against the Obligors, Junior Lien Agent and the Junior Lien Lenders.

          17. No Impairment. Nothing in this Agreement is intended to or shall impair, as between Obligors and Junior Lien Agent and the Junior Lien Lenders, the obligation of Obligors, which is absolute and unconditional, to pay the Junior Lien Indebtedness as and when the same shall become due and payable in accordance with its terms, or affect the relative rights of Junior Lien Agent and the Junior Lien Lenders and creditors of Obligors other than Senior Lien Agent and the Senior Lien Lenders.

          18. Subrogation. Solely after the Discharge of Senior Lien Indebtedness shall have occurred, Junior Lien Agent and the Junior Lien Lenders shall be subrogated to the rights of Senior Lien Agent and the Senior Lien Lenders to the extent that distributions otherwise payable to Junior Lien Agent or any Junior Lien Lender have been applied to the payment of the Senior Lien Indebtedness in accordance with the provisions of this Agreement. Senior Lien Agent and the Senior Lien Lenders shall have no

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obligation or duty to protect Junior Lien Agent and the Junior Lien Lenders’ rights of subrogation arising pursuant to this Agreement or under any applicable law, nor shall Senior Lien Agent, Senior Lien Lenders or any other holder of Senior Lien Indebtedness be liable for any loss to, or impairment of, any subrogation rights held by Junior Lien Agent or any Junior Lien Lender.

          19. Notices. All demands, notices, and other communications provided for hereunder shall be in writing and, if to Junior Lien Agent, mailed or sent by telecopy or delivered to it, addressed to it as follows:

THE BANK OF NEW YORK
600 E. Las Colinas Blvd.
Suite 1300
Irving, Texas 75039
Attn: Administrative Agent Services
Fax No. (972) 401-8551

With a copy to:

HAYNES AND BOONE, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Attn: Laurie G. Lang
Fax No. (214) 200-0667

and if to Senior Lien Agent, mailed, sent or delivered thereto, addressed to it as follows:

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
c/o Harbinger Capital Partners Offshore Manager, L.L.C.
One Riverchase Parkway
South Parmingham, Alabama 35244
Attn: General Counsel

With a copy to:

PAUL WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, New York 10019
Attn: Eric Goodison
Fax No. (212) 757-3990

               or as to any party at such other address as shall be designated by such party in a written notice to the other parties complying as to delivery with the terms of this Section 19. All such demands, notices and other communications shall be effective, when mailed, three Business Days after deposit in the mails, postage prepaid, when sent by telecopy, when receipt is acknowledged by the receiving telecopy equipment (or at the opening of the next Business Day if receipt is after normal business hours), or when delivered, as the case may be, addressed as aforesaid.

          20. Costs and Attorneys Fees. In the event it becomes necessary for Senior Lien Agent, any Senior Lien Lender, Junior Lien Agent, or any Junior Lien Lender to commence or become a party to any

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proceeding or action to enforce the provisions of this Agreement, the court or body before which the same shall be tried shall award to the prevailing party all costs and expenses thereof, including reasonable attorneys’ fees, the usual and customary and lawfully recoverable court costs, and all other expenses in connection therewith.

          21. Consent to Jurisdiction; Waiver of Jury Trial and Other Waivers. Junior Lien Agent and Senior Lien Agent each consent to the jurisdiction of any state or federal court located within the County of New York, State of New York. Each Agent waives personal service of any and all process upon it, and consents that all service of process be made in the manner set forth in Section 19 of this Agreement for notices. Each Agent waives, to the fullest extent each may effectively do so, any defense or objection based upon forum non conveniens and any defense or objection to venue of any action instituted within the County of New York, State of New York. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT.

          22. Governing Law. This Agreement has been delivered and accepted at and shall be deemed to have been made in the State of New York, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the laws of the State of New York.

          23. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns, subject to the provisions hereof.

          24. Integrated Agreement. This Agreement sets forth the entire understanding of the parties with respect to the within matters and may not be modified or amended except upon a writing signed by all parties.

          25. Authority. Each of the parties hereto certifies that such party has all necessary authority to execute this Agreement.

          26. Counterparts. This Agreement may be executed in one or more counterparts, each one of which when so executed shall be deemed to be an , and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally as effective as delivery of an executed counterpart.

          27. Headings. The headings contained in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

          28. Severability. Any provision of this Agreement that is prohibited by law or unenforceable shall be ineffective to the extent of such prohibition or unenforceability, without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision. To the extent permissible, the parties waive any law that prohibits any provision of this Agreement or renders any provision hereof unenforceable.

          29. Conflicts. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Senior Lien Loan Document or any Junior Lien Loan Document, on the other hand, this Agreement shall control and prevail. The foregoing to the contrary notwithstanding, a covenant in the Senior Lien Loan Documents prohibiting the Obligors from voluntarily prepaying the Junior Lien Indebtedness shall not be deemed to be in conflict with or inconsistent with the terms of this Agreement.

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          30. Intercreditor Agreement. The Senior Lien Agent, the Senior Lien Lenders, the Junior Lien Agent and the Junior Lien Lenders acknowledge and agree that this Junior Liens Intercreditor Agreement is subject to the terms and provisions of the Intercreditor Agreement. Notwithstanding anything to the contrary in this Agreement, this Agreement, the rights of the Senior Lien Agent, the Senior Lien Lenders, the Junior Lien Agent and the Junior Lien Lenders hereunder and the enforcement of the Senior Lien Agent’s, the Senior Lien Lenders’, the Junior Lien Agent’s and the Junior Lien Lenders’ remedies hereunder, are subject to the terms and provisions of the Intercreditor Agreement

          31. Termination. This Agreement shall continue in full force and effect until the Discharge of Senior Lien Indebtedness shall have occurred and shall thereafter be revived to the extent provided for in Section 5.c.

          32. Separate Grants of Security and Separate Classification.

     a. Each of the Senior Lien Agent and the Junior Lien Agent, for itself and on behalf of the Senior Lien Lenders, and each of the Junior Lien Agent, for itself and on behalf of the Junior Lien Lenders for which it is agent, acknowledges and agrees that the Liens securing the Senior Lien Indebtedness and the Liens securing the Junior Lien Indebtedness are intended to be and are separate and distinct grants of Liens, and because of, among other things, their differing rights in the Collateral, the Senior Lien Indebtedness is fundamentally different from the Junior Lien Indebtedness and must be separately classified in any plan of reorganization proposed or adopted in any Insolvency Proceeding. In furtherance of the foregoing, the Senior Lien Agent, for itself and on behalf of the Senior Lien Lenders, and the Junior Lien Agent, for itself and on behalf of the Junior Lien Lenders for which it is agent, agrees that as between the Senior Lien Lenders and the Junior Lien Lenders, the Junior Lien Lenders and the Senior Lien Lenders will vote as separate classes in connection with any plan of reorganization or any other transaction in any Insolvency Proceeding and that none of the Senior Lien Agent and any Senior Lien Lender, on the one hand, and the Junior Lien Agent and Junior Lien Lender, on the other hand, will seek to vote with the other as a single class in connection with any plan of reorganization or any other transaction in any Insolvency Proceeding.

     b. To further effectuate the intent of the parties as provided in this Section 32, if it is held that the claims of the Senior Lien Agent and the Senior Lien Lenders, on the one hand and the Junior Lien Agent and the Junior Lien Lenders or any of them, on the other hand, constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the Senior Lien Agent for itself and on behalf of the Senior Lien Lenders, and each of the Junior Lien Agent, for itself and on behalf of the Junior Lien Lenders for which it is agent, hereby acknowledges and agrees that all distributions shall be made as if there were separate classes of senior and junior secured claims (with the effect being that, to the extent that the aggregate value of the Collateral is sufficient (for this purpose ignoring all claims relating to the Junior Lien Indebtedness), the Senior Lien Agent shall be entitled to receive, for the benefit of the Senior Lien Lenders, in addition to amounts distributed to them in respect of Senior Lien Indebtedness, all amounts owing in respect of post petition interest and claims, including any additional interest payable pursuant to the Senior Lien Loan Documents, arising from or related to a default, which is disallowed as a claim in any Insolvency Proceeding) before any distribution is made in respect of the claims held by any of the Junior Lien Agent or the Junior Lien Lenders and each further agrees to turn over to the Senior Lien Agent for the benefit of the Senior Lien Lenders, amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence.

[Remainder of page left intentionally blank]

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          IN WITNESS WHEREOF, Senior Lien Agent, for and on behalf of itself and the Senior Lien Lenders, and Junior Lien Agent, for and on behalf of itself and the Junior Lien Lenders, have caused this Agreement to be duly executed and delivered as of the date first above written.

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD., as Senior Lien Agent
By:	Harbinger Capital Partners Offshore Manager, L.L.C., its Investment Manager
	By:	/s/ William R. Lucas, Jr.
	Name: William R. Lucas, Jr.
	Title: Executive Vice President – General Counsel & Secretary

Signature page — Intercreditor Agreement

S-1

THE BANK OF NEW YORK.
a New York corporation, as Junior Lien Agent

By:

Its:

Signature page — Intercreditor Agreement

S-2

ACKNOWLEDGMENT

          Each Borrower and each Guarantor hereby acknowledges that it has received a copy of the foregoing Junior Liens Intercreditor Agreement, consents thereto and agrees to recognize all rights granted thereby to Senior Lien Agent, the Senior Lien Lenders, Junior Lien Agent, and the Junior Lien Lenders and will not do any act or perform any obligation which is not in accordance with the agreements set forth therein. Each Borrower and each Guarantor further acknowledge and agree that they are not an intended beneficiary or third party beneficiary under this Agreement.

ACKNOWLEDGED AS OF THE DATE FIRST WRITTEN ABOVE:		SONEX INTERNATIONAL CORPORATION, a Delaware corporation
BORROWERS:
		By:	/s/ William Lutz
SALTON, INC., a Delaware corporation		Name: William Lutz
		Title: Executive Vice President
By:	/s/ William Lutz
Name: William Lutz		ICEBOX, LLC, an Illinois limited liability company
Title: Executive Vice President
		By:	/s/ William Lutz
TOASTMASTER INC., a Missouri corporation		Name: William Lutz
		Title: Executive Vice President
By:	/s/ William Lutz
Name: William Lutz		FAMILY PRODUCTS INC., a Delaware
Title: Executive Vice President		corporation
SALTON TOASTMASTER LOGISTICS LLC, a		By:	/s/ William Lutz
Delaware limited liability company		Name: William Lutz
		Title: Executive Vice President
By:	/s/ William Lutz
Name: William Lutz		SALTON HOLDINGS, INC., a Delaware corporation
Title: Executive Vice President
GUARANTORS:		By:	/s/ William Lutz
		Name: William Lutz
HOME CREATIONS DIRECT, LTD., a Delaware corporation		Title: Executive Vice President
By:	/s/ William Lutz
Name: William Lutz
Title: Executive Vice President

Signature page — Acknowledgement — Intercreditor Agreement

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EX-99.15

Exhibit 99.15

ANNEX A

THIRD AMENDMENT TO RIGHTS AGREEMENT

     THIS THIRD AMENDMENT to the Rights Agreement dated as of June 28, 2004, between Salton, Inc., a Delaware corporation (the “Company”), and UMB Bank, N.A., as Rights Agent (the “Rights Agent”), as amended by Amendment No. 1 thereto dated as of June 7, 2006 and Amendment No. 2 thereto dated as of February 7, 2007 (as amended, the “Rights Agreement”), is dated as of the 1st day of October 2007.

     WHEREAS, the Company intends to enter into an Agreement and Plan of Merger, dated as of October 1, 2007, among the Company, SFP Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“MergerSub”), and APN Holding Company, Inc., a Delaware corporation (“Apple Holdco”) (as it may be amended from time to time, the “Merger Agreement”);

     WHEREAS, subject to the terms and conditions of the Merger Agreement, MergerSub will be merged with and into Apple Holdco, with Apple Holdco surviving as a wholly-owned subsidiary of the Company (the “Merger”) and, by virtue of the Merger, all of the issued and outstanding shares of common stock, par value $0.01 per share, of Apple Holdco (“Apple Holdco Common Stock”) will be converted into the right to receive fully paid and non assessable Common Shares of the Company;

     WHEREAS, the Company’s board of directors intends to approve (upon the unanimous recommendation of the Special Committee) and resolve to recommend to the Company’s stockholders that they approve the Common Share Issuance and the Preferred Share Issuance (as such terms are defined in the Merger Agreement);

     WHEREAS, concurrently with the execution of the Merger Agreement, it is contemplated that each of the holders of record of Apple Holdco Common Stock (the “Apple Holdco Stockholders”) will enter into a commitment agreement with the Company in the form attached as Exhibit C to the Merger Agreement;

     WHEREAS, the Board of Directors of the Company believes that it is advisable and in the best interests of the Company and its stockholders that the Merger and other transactions contemplated by the Merger Agreement be consummated on the terms set forth in the Merger Agreement and the ancillary agreements contemplated thereby;

     WHEREAS, the Board of Directors of the Company believes that it is advisable and in the best interests of the Company and its stockholders that the Rights Agreement be amended as set forth herein; and

     WHEREAS, Section 27 of the Rights Agreement authorizes the Company to adopt the proposed amendment without the approval of the Company’s stockholders;

     NOW, THEREFORE, in consideration of the recitals (which are deemed to be a part of this Amendment) and agreements contained herein, the parties hereto agree to amend the Rights Agreement as follows:

     1. Section 1(a) of the Rights Agreement is hereby modified and amended by deleting the last two sentences of such Section 1(a) (added in Amendment No. 2) and substituting the following therefor:

“Notwithstanding anything in this Section 1(a) to the contrary, none of the Apple Holdco Stockholders nor any of their Affiliates (including, without limitation, APN Holding Company, Inc., a Delaware corporation (“Apple Holdco”), and Applica Incorporated, a Florida corporation and a wholly-owned subsidiary of Apple Holdco) shall be, or shall be deemed to be, an Acquiring Person by virtue of or as a result of (A) the approval, execution or delivery of the Merger Agreement or the Commitment Agreement; (B) the approval of the Merger, the Share Issuances, the Series A Amendment, the Series C Amendment or the Strawberry Charter Amendment; (C) the announcement or consummation of the Merger, the Share Issuances, the Series A Amendment, the Series C Amendment or the Strawberry Charter Amendment; or (D) the consummation of the other transactions contemplated by the Merger Agreement, the Series A Amendment, the Series C Amendment or the Commitment Agreement in accordance with the terms and conditions thereof. Each event described in subclauses (A), (B), (C) and (D) is referred to herein as an “Exempted Transaction”.”

     2. Section 1 of the Rights Agreement is hereby modified and amended by deleting clauses (bb) through (ii) thereof, inclusive (added in Amendment No. 2), and substituting the following therefor:

     “(bb) “Apple Holdco Stockholders” shall have the meaning set forth in the Merger Agreement.

     (cc) “Commitment Agreement” shall have the meaning set forth in the Merger Agreement.

     (dd) “Effective Time” shall have the meaning set forth in the Merger Agreement.

     (ee) “Merger” shall have the meaning set forth in the Merger Agreement.

     (ff) “Merger Agreement” shall mean the Agreement and Plan of Merger, dated, dated as of October 1, 2007, among the Company, SFP Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, and APN Holding Company, Inc., a Delaware corporation, as such agreement may be amended from time to time.

     (gg) “Series A Amendment” shall have the meaning set forth in the Merger Agreement.

     (hh) “Series C Amendment” shall have the meaning set forth in the Merger Agreement.

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     (ii) “Share Issuances” shall have the meaning set forth in the Merger Agreement.

     (jj) “Strawberry Charter Amendment” shall have the meaning set forth in the Merger Agreement.

     3. Capitalized terms used but not defined herein shall have the meaning assigned to such terms in the Rights Agreement.

     4. Except as expressly amended hereby, the Rights Agreement remains in full force and effect.

     5. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware, and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and performed entirely within such State.

     6. This Amendment to the Rights Agreement shall be effective as of the date hereof, and all references to the Rights Agreement shall, from and after such time, be deemed to be references to the Rights Agreement as amended hereby.

     7. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

[This space intentionally left blank]

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     IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed as of the day and year first above written.

SALTON, INC.
By:	/s/ William Lutz
	Name:	William Lutz
	Title:	Interim Chief Executive Officer and Chief Financial Officer
ACKNOWLEDGEMENT OF RECEIPT: UMB BANK, N.A., as Rights Agent
By:
	Name:
	Title:

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EX-99.16

Exhibit 99.16

Exhibit A

FORM OF

CERTIFICATE OF AMENDMENT

OF

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

(PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)

     SALTON, INC., a corporation organized and existing and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), DOES HEREBY CERTIFY:

     1. This Amendment to the Second Amended and Restated Certificate of Incorporation hereby amends the first paragraph of Article Fourth of the Second Amended and Restated Certificate of Incorporation of the corporation as set forth herein.

     2. The first paragraph of Article Fourth is hereby deleted in its entirety and the following first paragraph of Article Fourth shall be inserted herein:

FOURTH: the total number of shares of capital stock which the corporation shall have authority to issue in the aggregate is One Billion and Two Million (1,002,000,000), of which One Billion (1,000,000,000) shares shall be common stock with a par value of $0.01 per share, and Two Million (2,000,000) shares shall be preferred stock with a par value of $0.01 per share.

     3. This Amendment to the Second Amended and Restated Certificate of Incorporation has been duly adopted in accordance with Section 242 of the DGCL.

     IN WITNESS WHEREOF, this Certificate has been duly executed on this ___day of                                         .

SALTON, INC.
By:
	Name:
	Title:

EX-99.17

Exhibit 99.17

SALTON, INC. ENTERS INTO DEFINITIVE
MERGER AGREEMENT WITH APN HOLDING COMPANY, INC.

LAKE FOREST, IL, October 2, 2007 — Salton, Inc. (Pink Sheets:SFPI) today announced that it has entered into a definitive merger agreement with APN Holding Company, Inc., the parent company of Applica Incorporated, pursuant to which Applica will become a wholly-owned subsidiary of Salton. APN Holding Company is owned by Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P., (collectively, “Harbinger Capital Partners”). As a result of the proposed merger and the related transactions described below, Harbinger Capital Partners will beneficially own 92% of the outstanding common stock of Salton, and existing holders of Salton’s Series A Voting Convertible Preferred Stock (excluding Harbinger Capital Partners), Series C Nonconvertible (NonVoting) Preferred Stock (excluding Harbinger Capital Partners) and common stock (excluding Harbinger Capital Partners) would own approximately 3%, 3% and 2%, respectively, of the outstanding common stock of Salton immediately following the merger and related transactions.

In addition to the merger, the definitive merger agreement contemplates the consummation of the following transactions simultaneously with the closing of the merger: (1) the mandatory conversion of all outstanding shares of Salton’s Series A Voting Convertible Preferred Stock, including those held by Harbinger Capital Partners, into shares of Salton’s common stock; (2) the mandatory conversion of all outstanding shares of Salton’s Series C Nonconvertible (NonVoting) Preferred Stock, including those held by Harbinger Capital Partners, into shares of Salton’s common stock; and (3) the exchange by Harbinger Capital Partners of approximately $90 million principal amount of Salton’s second lien notes and approximately $15 million principal amount of Salton’s 2008 senior subordinates notes, for shares of a new series of non-convertible (non voting) preferred stock of Salton, bearing a 16% cumulative preferred dividend.

The combination of Salton and Applica is expected to create one of the largest U.S. public companies focused on the household small appliance industry, with the scale and customer relationships to provide category leadership and efficiencies. The combined company will have a broad portfolio of well recognized brand names such as Salton^®, George Foreman^®, Black & Decker^®, Westinghouse™, Toastmaster^®, Melitta^®, Russell Hobbs^®, Windmere^®, LitterMaid^® and Farberware^®. Salton and its subsidiaries after the merger will continue to design, service, market and distribute a wide range of products under these brand names, including small kitchen and home appliances, electronics for home, lighting products, and personal care and wellness products.

The combination of Salton and Applica is expected to provide enhanced scale which should enable the combined company to reduce costs; attract new and expand existing customer

relationships; capitalize on organic and external growth opportunities more effectively than either company could have on a stand alone basis; improve cost of goods through larger volume purchasing; and benefit from improved capital structure flexibility. In addition, Salton and Applica have complementary geographic strengths that can be utilized to enhance the distribution of each company’s products outside the United States. In particular, Salton’s business is well established in Europe, Australia and Brazil (with additional distribution in Southeast Asia, Middle East and South Africa), while Applica’s business is well established in Mexico, South America and Canada.

The executive leadership of the combined companies after the merger is expected to consist of members of both Salton’s and Applica’s existing management teams as well as new management personnel.

Commenting on the transaction, William Lutz, Interim Chief Executive Officer of Salton, said “We believe that this transaction is the best strategic alternative available to enhance stockholder value. The combination of Salton and Applica is expected to create the opportunity for significant future value enhancement for Salton stockholders, as well as benefit customers and suppliers, as a result of the expanded brand portfolios, strengthened international presence and improved capital structure flexibility of the combined companies. The combined company can operate more efficiently than either Applica or Salton on a stand alone basis, and will benefit significantly from cost and revenue synergies.”

Terry Polistina, Chief Operating Officer and Chief Financial Officer of Applica, added, “The combined company will be well positioned as a leading provider of quality, innovative consumer appliances around the world. The company will be able to leverage brands, products and geographies, as well as provide the scale to drive organic growth. In addition, we believe the combined company will be a compelling platform for future expansion in our industry.”

The companies intend to complete this transaction within the next three to four months. The consummation of the merger and related transactions is subject to various conditions, including the approval by the Company’s stockholders and the absence of legal impediments. The merger and related transactions are not subject to any financing condition.

Houlihan Lokey Howard & Zukin acted as financial advisor and Sonnenschein Nath & Rosenthal LLP acted as legal advisor to Salton. Lazard Freres & Co. LLC acted as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisor to Harbinger Capital Partners and APN Holding Company.

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About Salton, Inc.

Salton, Inc. is a leading designer, marketer and distributor of branded, high-quality small appliances, home decor and personal care products. Its product mix includes a broad range of small kitchen and home appliances, electronics for the home, lighting products and personal care and wellness products. The Company sells its products under a portfolio of well recognized brand names such as Salton^®, George Foreman^®, Westinghouse ™, Toastmaster^®, Melitta^®, Russell Hobbs^® and Farberware^®. It believes its strong market position results from its well-known brand names, high-quality and innovative products, strong relationships with its customer base and its focused outsourcing strategy.

About Applica

Applica and its subsidiaries are marketers and distributors of a broad range of branded and private-label small household appliances. Applica markets and distributes kitchen products, home products, pest control products and pet care products. Applica markets products under licensed brand names, such as Black & Decker ^®; its own brand names, such as Windmere^®, LitterMaid^® and Applica^®; and other private-label brand names. Applica’s customers include mass merchandisers, specialty retailers and appliance distributors primarily in North America, Mexico, Latin America and the Caribbean. Additional information about Applica is available at www.applicainc.com.

The statements contained in the news release that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salton undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) the failure to obtain approval of the merger from Salton stockholders, (2) the ability of the two businesses to be integrated successfully, (3) the ability of the new company to fully realize the cost savings and any synergies from the proposed transaction within the proposed time frame, (4) disruption from the merger making it more difficult to maintain relationships with customers, employees or suppliers, (5) customer acceptance of the new combined entity, (6) changes in the sales prices, product mix or levels of consumer purchases of kitchenware and small electric household appliances, economic conditions and the retail environment, (7) bankruptcy of or loss of major retail customers or suppliers, (8) changes in costs including transportation costs, of raw materials, key component parts or sourced products, (9) delays in delivery or the unavailability

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of raw materials, key component parts or sourced products, (10) changes in suppliers, (11) exchange rate fluctuations, changes in the foreign import tariffs and monetary policies, and other changes in the regulatory climate in the foreign countries in which Salton and Applica buy, operate and/or sell products, (12) product liability, regulatory actions or other litigation, warranty claims or returns of products, (13) customer acceptance of changes in costs of, or delays in the development of new products, (14) delays in or increased costs of restructuring programs and (15) increased competition, including consolidation within the industry; as well as other risks and uncertainties detailed from time to time in Salton’s Securities and Exchange Commission filings.

Investors and security holders are urged to read the proxy statement when it becomes available and any other relevant documents to be filed with the SEC in connection with the proposed transaction because it will contain important information about Salton, Applica Incorporated and the proposed transaction.

Investors and security holders may obtain free copies of these documents when they become available through the website maintained by the SEC at www.sec.gov. In addition, the documents filed with the SEC by Salton may be obtained free of charge by directing such requests to Salton, Inc., 1955 W. Field Court, Lake Forest, Illinois 60045, Attention: Corporate Secretary, Telephone (847) 803-4600, or from Salton’s website at www.salton.com. Salton and certain of its directors, executive officers and other members of management may be deemed to be participants in the solicitation of proxies from Salton stockholders with respect to the proposed transaction. Information regarding the interests of these officers and directors in the proposed transaction will be included in the proxy statement. In addition, information about Salton’s directors, executive officers and members of management is contained in Salton’s most recent proxy statement, which is available on Salton’s website and at www.sec.gov. Additional information regarding the interests of such potential participants will be included in the proxy statement and other relevant documents filed with the SEC.

Black & Decker^® is a trademark of The Black & Decker Corporation, Towson, Maryland.

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