Exhibit 10.12
 
SECURITY AGREEMENT

To:  ROYAL BANK OF CANADA

Ladies and Gentlemen:

1.  Security Interest.  As security for the Obligations (as hereinafter
defined), we pledge and assign to you, and grant to you a continuing security
interest in, all of our right, title and interest (whether now existing or
hereafter created or acquired by us) in: (a) our accounts receivable and other
personal property that constitutes accounts as such term is defined in the
Uniform Commercial Code as in effect on the date hereof or as it may be in
effect hereafter (collectively, our “Accounts”); (b) our inventory, including
goods, merchandise, raw materials, goods in process, finished goods and other
tangible personal property that constitutes inventory as such term is defined in
the Uniform Commercial Code as in effect on the date hereof or as it may be in
effect hereafter but excluding consigned goods and merchandise (collectively,
our “Inventory”); (c) our equipment, including all substitutes, replacements,
accessions and additions thereto, all tools, parts, accessories and attachments
used in connection therewith and all other tangible personal property that
constitutes equipment as such term is defined in the Uniform Commercial Code as
in effect on the date hereof or as it may be in effect hereafter, but excluding
fixtures (other than trade fixtures) (collectively, our “Equipment”); (d) our
other tangible personal property that constitutes goods as such term is defined
in the Uniform Commercial Code as in effect on the date hereof or as it may be
in effect hereafter; (e) our intellectual property, goodwill, trademarks, trade
names, servicemarks, copyrights, permits and licenses; (f) all instruments,
documents, chattel paper and general intangibles relating to any and all of the
foregoing or arising therefrom; and (g) all cash and noncash proceeds and
products thereof (all of the foregoing is called the “Collateral”).

2.  Obligations Secured.  The security interest granted by this Agreement is to
secure the payment and performance of any and all of our present or future
indebtedness and/or liabilities to you of every kind, nature and description,
direct or indirect, secured or unsecured, joint and several, absolute or
contingent, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument and whether or not
evidenced by any agreement or instrument, and all obligations to perform acts or
refrain from taking any action, including, without limitation, any obligations
owing to you under a certain loan agreement dated the ______ day of June, 2012
(the “Loan Agreement”) between 2314505 Ontario Inc., as borrower, and Royal Bank
of Canada (the “Lender”), as lender, and under a certain guaranty and
subordination agreement granted by us to you dated the ______ day of June,
2012 (collectively, the “Obligations”).

3.  Unconditional Grant of Security Interest.  (a) We agree that this Agreement
shall be binding upon us and that our grant of the security interest in the
Collateral shall be irrevocable and unconditional, irrespective of the validity,
legality or enforceability of the Obligations, the absence of any action to
enforce the same, any waiver or consent by you with respect to any provisions
thereof, the recovery of any judgment against us or any action to enforce the
same or any other similar circumstances.  Our obligations and liabilities
hereunder shall not be conditioned or contingent upon your pursuit at any time
of any right or remedy against any other person or entity that may be or become
liable in respect of all or any part of the Obligations or against any
collateral security or guaranty therefor or right of offset with respect
thereto.  We hereby waive diligence, presentment, demand of payment, filing of
claims with a court in the event of our merger or bankruptcy, protest or notice
with respect to any notes evidencing the Obligations and all demands whatsoever,
and we agree that this Agreement will remain in full force and effect so long as
any Obligation remains unpaid or unperformed.

(b)  Subject to licensing rights existing on the date hereof and licenses to
which you give your consent, for the purpose of enabling you to exercise rights
and remedies under sections 7 and 8, only at such time as you, without regard to
this paragraph (b), shall be lawfully entitled to exercise such rights and
remedies and for no other purpose, we hereby grant to you an irrevocable,
exclusive license, exercisable at the time of and in accordance with the
exercise of such rights and remedies and without present or future payment of
royalty or other compensation to us, to use, assign, license or sublicense any
of the trademarks or other licenses now owned or hereafter acquired by us and
wherever the same may be located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.

(c)  We agree that without notice to or further assent by us, the liability of
any other party for or upon any of the Obligations may, from time to time, in
whole or in part, be renewed, extended, modified, accelerated, compromised or
released by you as you may deem advisable, and that the Collateral or any other
collateral or liens for any of the Obligations may, from time to time, in whole
or in part, be exchanged, sold or surrendered by you, as you may deem advisable,
all without impairing, abridging, affecting or diminishing this Agreement or
your rights hereunder or with respect to the Collateral.

4.  Representations, Covenants and Warranties.  We hereby make the following
representations, covenants and warranties, which shall be deemed to be repeated
and confirmed upon the creation or acquisition by us of each item of Collateral
and upon the creation of any Obligation:
 
 
 
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(a)  We are a corporation, duly organized, validly existing and in good standing
under the laws of the State of Delaware, have the corporate power to own our
properties and to carry on our business as now being conducted, are qualified to
engage in business and are in good standing in each jurisdiction in which the
character of our properties, the transaction of our business or the collection
of any of our Accounts make such qualification necessary and have the corporate
power to execute, deliver and perform this Agreement.

(b)  Our execution, delivery and performance of this Agreement and our granting
of the security interest in the Collateral (i) have been duly authorized by all
requisite corporate action; (ii) will not: (A) violate any provision of law, any
order of any court, tribunal or agency of government or our certificate of
incorporation, bylaws or other charter documents; (B) violate, be in conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any indenture, license, sublicense, agreement or other
instrument to which we are a party or by which we or any of our properties are
bound; (C) violate any governmental or agency rule or regulation (including, but
not limited to, Regulations U and X of the Board of Governors of the Federal
Reserve System); or (D) result in the creation or imposition of any lien, charge
or encumbrance whatsoever upon any of the Collateral, except for the security
interest created by this Agreement; and (iii) do not require any filing or
registration with, any permit, license, consent or approval of, or any exemption
by, any governmental or regulatory authority, except filings of Uniform
Commercial Code financing statements in the public offices listed on Exhibit “B”
hereto.

(c)  This Agreement has been duly executed and delivered by us and is our legal,
valid and binding obligation, enforceable against us in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or affecting the
enforceability of rights of creditors generally and to general equitable
principles that may limit the right to obtain equitable remedies.  This
Agreement creates in your favor a valid and, upon the filing of the appropriate
Uniform Commercial Code financing statements in the public offices listed on
Exhibit “B” hereto, perfected (to the extent perfection is obtained by the
filing of such financing statements) lien on and security interest in the
Collateral, enforceable against us and all third parties and superior in right
to all other security interests, liens, encumbrances or charges, existing or
future, except as set out in the Loan Agreement or any other document delivered
in connection thereto.  Upon such filings or recordings, no filing or recording
of any other financing statements or other instruments and no recording, filing
or indexing of this Agreement is necessary in order to preserve and protect your
security interest in the Collateral as a legal, valid and enforceable, perfected
(to such extent) security interest in the Collateral, except filing of
appropriate continuation statements with respect to Uniform Commercial Code
financing statements.  No person or entity from which we lease any of our
premises has filed any UCC financing statement with respect to any contractual
lien that would have priority over your security interest in the Collateral.

(d)  On the date hereof and at any time during the term of this Agreement during
which a security interest in your favor in the Collateral exists, no financing
statement (or similar statement or instrument of registration under the laws of
any jurisdiction) is or will be on file or registered in any public office
covering any interest of any kind with respect to the Collateral, or intended so
to be, other than those relating to the security interest created by this
Agreement and those related to Permitted Encumbrances (as defined in the Loan
Agreement) and/or as approved by the Lender in writing from time to time, and we
will be the lawful owner of the Collateral (other than inventory consigned to
us) and will have good right to grant you a security interest therein.  Except
to the extent that the aggregate value of the Collateral or your ability to
enforce your rights under this Agreement would not be materially affected
thereby:  all documents and agreements held by us with respect to the Collateral
will be true and correct and in all respects what they purport to be; all
signatures and endorsements that appear thereon will be genuine and such
signatories and endorsers will have the full capacity to contract; none of the
transactions underlying or giving rise to the Collateral nor any operation or
use of any of the Collateral will violate any applicable state or federal law or
regulation; and all documents relating to the Collateral will be legally
sufficient under such laws and regulations and will be legally enforceable in
accordance with their terms.  None of the Collateral is or will be affixed to
real estate unless we have furnished to you such consents, waivers or
disclaimers as are necessary to make your security interest in such of the
Collateral valid against persons or entities holding an interest in such real
estate.  We will defend the Collateral against all claims and demands of all
other parties claiming the same or an interest therein, and none of the
Collateral will be: (i) sold, assigned or transferred to any person or entity
other than you except, with respect to Inventory, in the ordinary course of our
business or (ii) in any way pledged, mortgaged or otherwise encumbered except to
you or by any of the following liens:

(A)  liens for current taxes, assessments or other governmental charges or
levies (including local real estate taxes and assessments) that are not
delinquent or that are being contested in good faith by appropriate action if we
have set aside on our books adequate reserves with respect thereto and such
contest does not and is not likely to subject any Collateral to the risk of loss
or forfeiture or impair your security interest therein or, if such contest does
subject any Collateral to any such risk or impairment, we have either (a)
deposited with you as security for the payment thereof cash in an amount equal
to such contested taxes, assessments, governmental charges or levies and all
related interest and late charges or (b) furnished to you alternative collateral
satisfactory in form and amount to you;

(B)  carrier’s, warehousemen’s, materialmen’s, mechanics’, workmen’s,
employees’, repairmen’s and like liens arising in the ordinary course of
business that are not delinquent or that have not remained undischarged or
unbonded for more than 30 days or the enforcement of which has been suspended or
that are being contested in good faith by appropriate proceedings if we have set
aside on our books adequate reserves with respect thereto and such contest does
not and is not likely to subject any Collateral to the risk of loss or
forfeiture or impair your security interest therein;

(C)  deposits or pledges to secure statutory obligations, surety or appeal
bonds, bonds for release of attachment, stay of execution or injunctions,
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases in the ordinary course of business or product
liability insurance; and

(D)  liens in respect of judgments or awards with respect to which an appeal or
appropriate proceeding for review is being prosecuted in good faith and a stay
of execution pending such appeal or review is in effect.

(e)  (i) Except to the extent that the aggregate value of the Collateral or your
ability to enforce your rights under this Agreement would not be materially
adversely affected thereby, each of our accounts receivable: (A) is on the date
hereof and will be at all times during the term of this Agreement a good and
valid account receivable representing an undisputed bona fide right to payment
from the account debtor with respect thereto for merchandise held subject to
delivery or theretofore shipped or delivered pursuant to a contract of sale, for
services theretofore performed by us, for property sold, leased, licensed,
assigned or otherwise disposed of or arising out of the use of a credit or
charge card or information contained on or for use with the card; (B) will not
be subject to any defense, offset, counterclaim, holdback, discount or
allowance, except as stated in a statement delivered to you pursuant to this
paragraph (e); (C) will not have been made with an account debtor under an
agreement pursuant to which any reduction or discount may be claimed except as
indicated in a statement or invoice furnished to you with reference thereto; and
(D) will be an account receivable of which we are the lawful owner and have the
right to subject the same to your security interest; and (ii) no action has been
or will be taken by us which has or will have the effect of giving to an account
debtor any defense, setoff, claim or counterclaim against us that may be
asserted against you, whether in any proceeding to enforce the Collateral or
otherwise.  Any variance from the representations set forth in this paragraph
(e) with respect to any account receivable will be noted on any report or
statement of accounts receivable delivered to you or will otherwise be reported
in writing to you promptly upon our becoming aware of such variance.  No account
receivable will have been or hereafter will be sold, assigned or transferred to
any person or entity other than you or in any way encumbered except to you.

(f)  To the best of our knowledge, except to the extent that the aggregate value
of the Collateral or your ability to enforce your rights under this Agreement
would not be materially adversely affected thereby, each account debtor or
guarantor or endorser of an account receivable or other party obligated under an
Account that at any time is or becomes subject to a security interest in your
favor is and will continue to be solvent and fully able to pay and perform in
full when due all Accounts under which such person or entity is obligated, and
we will take all steps necessary to preserve the liability of each account
debtor, guarantor, endorser, obligor or secondary party whose obligations are
part of the Collateral.

(g)  We will perform all of the terms, covenants and conditions on our part to
be observed or performed under licenses related to the trademarks and other
licenses referred to in subsection 4(m) and under the contracts giving rise to
our accounts receivable and other Accounts and take all steps necessary to keep
such licenses and contracts in full force and effect.  Without your prior
consent, except to the extent that the aggregate value of the Collateral or your
ability to enforce your rights under this Agreement would not be materially
adversely affected thereby, we will not compromise, adjust, amend, modify or
alter any of the terms, covenants or conditions of any of our accounts
receivable or other Accounts (or extend the time for payment thereof) or grant
any additional discounts, allowances or credits thereon.

(h)  We will promptly notify you if any account receivable becomes evidenced by
an instrument, and, upon your request, promptly deliver said instrument to you,
appropriately endorsed in your favor to be held as Collateral hereunder.

(i)  We will furnish to you at such times as you may request statements, in form
and substance satisfactory to you, of all of our accounts receivable, itemized
by account debtor, and of the location and aggregate value at each such location
of all our Inventory and a statement showing opening Inventory, Inventory
acquired, Inventory sold and held for future delivery, Inventory returned or
repossessed, Inventory used or consumed in our business and closing Inventory,
each such statement to be certified by our chief financial officer, and,
promptly from time to time, such other information as you may reasonably request
regarding the Collateral and our operations, business, affairs and financial
condition.

(j)  We will, promptly upon learning thereof, report to you: (i) any material,
adverse change in the information contained herein relating to us, our business
or the Collateral; (ii) the details of any material, adverse claim or litigation
affecting us or the Collateral; (iii) any material loss of or damage to the
Collateral; (iv) any reclamation, return or repossession of any material portion
of the Collateral, all material delays in performance, notices of default,
claims made or disputes asserted by any account debtor or other obligor and any
other matters materially, adversely affecting the value, enforceability or
collectibility of any of the Collateral; and (v) any use by any person or entity
of any term or design likely to cause confusion with any trademark or other
license referred to in subsection 4(m) and of any use by any person or entity of
any other process or product that infringes upon any such trademark or other
license.

(k)  We will conduct and carry on our business in a proper and efficient manner
so as to protect and preserve the Collateral and maintain, in accordance with
generally accepted accounting principles, consistently applied, accurate books
and records pertaining to the Collateral and, if so requested by you, we will
mark each of our ledger cards, books of account and other records relating to
the Collateral with appropriate notations, satisfactory to you, disclosing that
such Collateral has been assigned and/or transferred to you and that we have
granted to you a security interest therein.

(l)  All Inventory now owned by us is kept at the locations indicated on Exhibit
“A” hereto, and we have not at any time during the past five years kept any of
our Inventory at any other location except as indicated on Exhibit “A”
hereto.  The location of our principal office and chief executive office and the
location where the originals of our records pertaining to our Accounts are kept
are now, and at all times during the past five years have been, at the
address(es) indicated beneath our signature hereto.  Our name set forth as our
signature hereto is our correct legal name, and we have not within the past five
years had any other legal name, nor have we done within such five years nor are
we now doing business under any other name, except as set forth on Exhibit “A”
to this Agreement.  We will not change our legal name, use any other name nor
change the form or jurisdiction of our organization without giving you 20 days’
prior written notice thereof.  Our correct United States tax identification
number and corporate identification number, if any, are set forth below our
signature hereto.

(m)  Exhibit “C” hereto accurately and completely lists all trademarks and
patents owned or used by or licensed or assigned to us.  We will maintain the
quality of any and all products in connection with which our trademarks and
patents are used, consistent with the quality of said products as of the date
hereof.  We will not enter into any agreement (for example, a license agreement)
that is inconsistent with our obligations under this Agreement.  If, before the
Obligations have been satisfied in full, we obtain rights to any new trademark
or patent, or become entitled to the benefit of any trademark, trade name,
service mark, patent or license not existing on the date hereof, the provisions
of section 1 hereof shall automatically apply thereto and we will give you
prompt notice thereof in writing.  We authorize you to modify this Agreement by
amending Exhibit “C” hereto to include any future trademarks, license
agreements, trademark applications and registrations, trade names and patents
that are included in the Collateral.

(n) We will do or cause to be done all recordings, filings and giving of public
notice under any applicable law or ordinance necessary to comply fully with such
law or ordinance, including any notices to the United States government under
the Federal Assignment of Claims Act, and we will from time to time do whatever
you may request by way of obtaining, executing, delivering and/or filing
financing statements, landlord’s or mortgagee’s lien waivers and other notices
of any kind, and amendments and renewals thereto, and will take any and all
steps and will observe such formalities as you may request, all in order to
create and maintain your valid, first priority security interest in any and all
of the Collateral.  We will pay all costs for searches and filings in connection
therewith.  We agree to execute such financing statements, security agreements
or other instruments with respect to any of the Collateral as you may request
and authorize you to execute and file at any time such financing statements
(including, but not limited to, a financing statement in lieu of continuation
statement in the jurisdiction of our organization) without our signature and, if
upon request we fail to do so, to execute such security agreements or other
instruments on our behalf.  You may describe the Collateral on any financing
statement as “all assets”, “all personal property” or similar generic
descriptions.  You may file a photocopy or other reproduction of this Agreement
as a financing statement.

(o)  We will deliver, or cause to be delivered, to you from time to time
promptly upon your request: (i) any documents of title, instruments and chattel
paper (and you have been granted a direct security interest in all our chattel
paper and your claim thereon is not merely as proceeds of Inventory)
constituting, representing or relating to the Collateral; (ii) all books of
account, records, ledgers, reports, correspondence, schedules, documents,
statements, lists and other writings relating to the Collateral for the purpose
of inspecting, auditing or copying the same; (iii) all financial statements
prepared by or for us regarding our business; (iv) copies of all policies and
certificates of insurance relating to the Collateral; and (v) such information
concerning the Collateral and our business and affairs as you may reasonably
request.

(p)  We will at our own expense maintain insurance with insurance companies
satisfactory to you on such of our assets, in such amounts and against such
risks as is customarily maintained by similar businesses, provided that, with
respect to insurance regarding the Collateral, all such insurance policies shall
contain loss payable clauses satisfactory to you naming you as a loss payee.

(q)  We will take adequate care of the Collateral and pay all costs necessary to
preserve the Collateral, including (but not limited to) all taxes, rates,
levies, assessments and other charges of every nature that may be lawfully
levied, assessed or imposed against or in respect of us or the Collateral as and
when they  become due and payable.

5.  Custody, Inspection, Collateral and Handling of Collateral and
Records.  (a)  Subject to compliance with the covenants contained herein, we
may, until we are in default hereunder, possess, operate, collect, use and enjoy
and deal with the Collateral in the ordinary course of our business in any
manner not inconsistent with the provisions hereof; provided always that you
shall have the right at any time and from time to time to verify the existence
and state of the Collateral in any manner you may consider appropriate (provided
that you may not contact our account debtors before the occurrence and
continuance of a default hereunder), and we agree to furnish all assistance and
information and to perform all such acts as you may reasonably request in
connection therewith and for such purpose to grant to you or your agents access
to all places where Collateral may be located and to all premises occupied by
our business (provided that any such inspection before the occurrence and
continuance of a default hereunder shall be during normal business hours and
upon reasonable notice).  You shall be privileged at any time and from time to
time after we are in default hereunder to hire and maintain on any of our
premises a custodian or independent contractor selected by you who shall have
full authority to do all acts necessary to protect your interests and to report
to you thereon.  We agree to cooperate with any such person or entity and to do
whatever you may reasonably request by way of leasing warehouses or otherwise
preserving the Collateral.  All expenses incurred by you by reason of the
employment of any such person or entity shall be charged to our account, shall
be part of the Obligations and shall be secured by the Collateral.
 
 
 
 
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(b)  If the Collateral at any time includes securities, we authorize you to
transfer the same or any part thereof into your own name or that of your
nominee(s) so that you or your nominee(s) may appear of record as the sole owner
thereof; provided that, until the occurrence and continuance of a default
hereunder, you shall deliver promptly to us all notices or other communications
received by you or your nominee(s) as such registered owner and, upon demand and
receipt of payment of any necessary expenses thereof, shall issue to us or our
order a proxy vote and take all action with respect to such securities.  After
the occurrence and continuance of a default hereunder, we waive all rights to
receive any notices or communications received by you or your nominee(s) as such
registered owner and agree that no proxy issued by you to us or our order as
aforesaid shall thereafter be effective.

(c)  Until the occurrence and continuance of a default under this Agreement, we
reserve the right to receive any moneys constituting income from or interest on
the Collateral, and if you receive any such moneys before the occurrence and
continuance of a default, you shall either credit such moneys to our account or
pay them promptly to us.  After the occurrence and continuance of a default, we
will not request or receive any moneys constituting income from or interest on
the Collateral, and if we receive any such moneys without any request by us, we
will pay them promptly to you.

(d)  Whether or not upon the occurrence and continuance of a default under this
Agreement, we authorize you:  (i) to receive any increase in or profits on the
Collateral (other than money) and to hold them as part of the Collateral (money
so received shall be treated as income for the purposes of paragraph (c) of this
section 5 and dealt with accordingly); and (ii) to receive any payment or
distribution upon redemption or retirement or upon dissolution and liquidation
of the account debtor of any of the Collateral, to surrender such Collateral in
exchange for such payment or distribution and to hold any such payment or
distribution as part of the Collateral.  If we receive any such increase or
profits (other than money) or payments or distributions, we will deliver them
promptly to you to be held by you as provided in this Agreement.

(e)  We will, promptly upon your request, at any time or from time to time, and
you may in your sole discretion upon a default by us under this Agreement,
notify our account debtors that payment of all Accounts shall be made to us at
such address or addresses as you may from time to time specify.  Upon such
notification, you shall have the right to receive, or your agents or independent
contractors shall have the right to receive on your behalf, the proceeds of, and
all documents, instruments or papers in connection with, our Accounts at such
address or addresses and to receive, endorse, assign or deliver in your name or
our name any and all checks, drafts and other instruments for the payment of
money relating to our Accounts, and we waive notice of presentment, protest and
nonpayment of any instrument so endorsed.  We acknowledge that any payments on,
or other proceeds of, the Collateral received by us from account debtors,
whether before or after notification to account debtors of the security interest
granted by this Agreement and whether before or after our being in default under
this Agreement, shall be received and held by us in trust for you and shall be
turned over to you upon your request to be subject to the provisions of this
Agreement.  Proceeds of Accounts so received by you or on your behalf shall be
credited, subject to collection, to our account with you, subject to your right
to withhold credit pending the final collection and settlement of any item and
your further right to apply all or part of such proceeds to the then outstanding
Obligations.  We constitute you or your designee as our attorney-in-fact with
power after we are in default hereunder: to endorse our name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral that may come into your possession; to sign our name on any invoice
or bill of lading relating to our Accounts, drafts against account debtors,
assignments and verifications of our Accounts and notices to account debtors; to
send verifications of Accounts to any of our account debtors; to notify the
postal authorities to change the address for delivery of mail addressed to us to
such address as you may designate; and to do all other acts and things necessary
to carry out this Agreement.  All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of omission or commission nor for any error of judgment or mistake of fact
or law.  This power being coupled with an interest is irrevocable as long as any
Obligation remains unpaid or unperformed.

(f)  After the occurrence and continuance of a default hereunder, you may,
without notice to or consent from us, sue upon or otherwise collect, extend the
time of payment of or compromise or settle for cash, credit or otherwise upon
any terms any of our Accounts or any securities, instruments or insurance
applicable thereto and/or release the obligor thereon.  You are authorized and
empowered in your sole discretion to accept the return of the goods represented
by any of our Accounts without notice to or consent by us, all without
discharging or in any way affecting our liability under this Agreement.

(g)  Nothing herein contained shall be construed to constitute you as our agent
for any purpose whatsoever except for the limited purposes of receiving proceeds
of Accounts as provided in this Agreement and forwarding to us the original or
copies of papers or documents received with such proceeds, and you shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever it may be located and regardless of the
cause thereof.  You shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of our Accounts or any
instrument received in payment thereof or for any damage resulting
therefrom.  You may, without notice to or consent from us, sue upon or otherwise
collect, extend the time of payment of or compromise or settle for cash, credit
or otherwise upon any terms any of our Accounts or any securities, instruments
or insurance applicable thereto and/or release the obligor thereon.  You are
authorized and empowered in your sole discretion to accept the return of the
goods represented by any of our Accounts without notice to or consent by us, all
without discharging or in any way affecting our liability under this
Agreement.  You do not, by this Agreement or any assignment or otherwise, assume
any of our obligations under any contract or agreement assigned to you and shall
not be responsible in any way for our performance of any of the terms and
conditions thereof.  Neither you nor any of your directors, officers, agents or
employees shall be liable to any person or entity for any action taken or
omitted by you or them under or with respect to any transaction contemplated by
this Agreement, except for your or their own gross negligence or willful
misconduct.
 
 
 
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6.  Default.  Subject to any applicable remedial periods set out in the Loan
Agreement, if we default in the payment or performance of any Obligation when
due, if any representation, warranty, report or certificate made in this
Agreement or otherwise furnished in writing by us to you in connection with this
Agreement proves to have been false or misleading in any material respect when
made or deemed made, if we default in the due observance or performance of any
other covenant, condition or agreement to be observed or performed pursuant to
the terms of this Agreement or if we become involved as the debtor in any
bankruptcy or insolvency proceedings, then we will be in default under this
Agreement.

7.  Rights and Remedies Upon Default.  (a) Upon the occurrence and continuance
of a default under this Agreement, and at any time thereafter, you may, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, declare any or all of the Obligations to be immediately due
and payable.

(b)  Upon the occurrence and continuance of a default under this Agreement, you
shall also have the right, without notice to or assent by us, and without
affecting the Obligations, in our name or in your name or otherwise, to: (i) ask
for, demand, collect, receive, compound and give acquittance for the Accounts or
any part thereof; (ii) extend the time of payment of, compromise or settle for
cash, credit or otherwise, and upon any terms and conditions, any of the
Accounts; (iii) endorse our name on any checks, drafts or other orders or
instruments for the payment of moneys payable to us issued in respect of any
Accounts or other Collateral; (iv) file any claims and commence, maintain or
discontinue any actions, suits, or other proceedings deemed by you to be
necessary or advisable for the purpose of collecting or enforcing payment of any
Accounts; (v) execute any instrument and do any and all other things necessary
and proper to protect and preserve and realize upon the Accounts or other
Collateral and the other rights contemplated by this Agreement; (vi) notify any
or all account debtors under any or all of the Accounts to make payment thereof
directly to you for our account and to require us promptly to give similar
notice to the account debtors; and/or (vii) require us promptly to account for
and transmit to you in the same form as received all proceeds (other than
physical property) of collection of Accounts received by us and, until so
transmitted to you, to hold such proceeds in trust for you and not commingle
them with any other of our funds.

(c)  Upon the occurrence and continuance of a default under this Agreement you
shall also have the right, without notice to or assent by us (except as provided
in clause (i) of this paragraph (c)), and without affecting the Obligations, in
our name or in your name or otherwise, to: (i) upon notice to such effect,
require us to deliver, at our expense, any or all of the Collateral and all
books of account, records, ledgers, reports, correspondence, schedules,
documents, statements, lists and other writings relating to the Collateral to
you at a place designated by you (and after delivery thereof we will have no
further claim to or interest in such Collateral); (ii) take possession of any or
all of the Collateral and all books of account, records, ledgers, reports,
correspondence, schedules, documents, statements, lists and other writings
relating to the Collateral and, for that purpose, to enter, with the aid and
assistance of any person or entity, any premises where the Collateral or any
part thereof is or may be placed or assembled, and to remove any of such
Collateral and documents; (iii) execute any instrument and do all other things
necessary and proper to protect and preserve and realize upon the Collateral and
the other rights contemplated by this Agreement; and/or (iv) without obligation
to resort to other security, at any time and from time to time, sell, re-sell,
assign and deliver all or any of the Collateral, in one or more parcels at the
same or different times, and all right, title and interest, claim and demand
therein and right of redemption thereof, at public or private sale, for cash,
upon credit or for future delivery, and at such price or prices and on such
terms as you may determine, with the amounts realized from any such sale to be
applied in the manner provided in section 9 of this Agreement.

(d)  In addition to any rights and remedies contained in this Agreement or now
or hereafter granted under applicable law and not by way of limitation of any
such rights and remedies, you shall have all the rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any applicable
jurisdiction.  You may take legal proceedings for the appointment of a receiver
or receivers (to which you shall be entitled as a matter of right) to take
possession of the Collateral pending the sale thereof pursuant either to the
power of sale granted by this Agreement or to a judgment, order or decree made
in any judicial proceeding for the foreclosure or involving the enforcement of
this Agreement.

(e)  We agree that all of the foregoing rights and actions specified in
paragraphs (a), (b), (c) and (d) of this section 7 may be executed or effected
without demand, advertisement or notice (except as required by clause (i) of
paragraph (c) of this section 7, by section 8 hereof or by law), all of which
(to the extent permitted by law) are hereby expressly waived.  You shall not be
obligated to do any of the acts authorized in this Agreement, but if you elect
to do any such act, you will not be responsible to us except for your own gross
negligence or willful misconduct.

(f)  You shall have the right in your sole discretion to determine which rights,
security, liens, guarantees, security interests or remedies you will retain,
pursue, release, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any other of them or any of your
rights under this Agreement.  Any of our moneys, deposits, Accounts, balances or
other property that may come into your possession at any time or in any manner
may in your sole discretion be retained by you and applied to any of the
Obligations.  Notwithstanding any other rights you may have under applicable law
and under this Agreement, we agree that upon the occurrence and continuance of a
default at any time under this Agreement, you shall have the right to apply
(including, but not limited to, by way of setoff) any of our property held by
you (including, but not limited to, deposit account balances) to a reduction of
the Obligations.  You shall be deemed to have exercised such right of setoff
immediately at the time of making your decision to do so even though any charge
for such setoff is made or entered on your records subsequent to such time.
 
 
 
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8.  Sale of Collateral.  Upon any sale of any of the Collateral, whether made
under the power of sale given by this Agreement or under judgment, order or
decree in any judicial proceeding for foreclosure or involving the enforcement
of this Agreement: (a) you may bid for the property being sold and, upon
compliance with the terms of sale, may hold, retain and possess and dispose of
such property in your own absolute right without further accountability and may,
in paying the purchase price for such property, deliver any notes evidencing the
Obligations or claims for interest thereon in lieu of cash in payment of the
amount equal to the unpaid amount of such notes or claims; (b) you may make and
deliver to the purchaser or purchasers a good and sufficient deed, bill of sale
and instrument of assignment and transfer of the property sold; (c) you are
irrevocably appointed our true and lawful attorney-in-fact in our name and stead
to make all necessary deeds, bills of sale and instruments of assignment and
transfer of the property thus sold and for such other purposes as are necessary
or desirable to effectuate the provisions of this Agreement, and for that
purpose you may execute and deliver all necessary deeds, bills of sale and
instruments of assignment and transfer, and may substitute one or more persons
or entities with like power, and we ratify and confirm all that our said
attorney, or such substitute or substitutes, shall lawfully do by virtue of this
appointment, but if so requested by you or by any purchaser we will ratify and
confirm any such sale or transfer by executing and delivering to you or to such
purchaser all deeds, bills of sale, instruments of assignment and transfer and
releases as may be designated in any such request; (d) all our right, title,
interest, claim and demand whatsoever, either at law or in equity or otherwise,
in and to the property so sold shall be divested, such sale shall be a perpetual
bar both at law and in equity against us, our successors and assigns and against
any and all persons or entities claiming or who may claim the property sold or
any part thereof from, through or under us or our successors or assigns; (e) we
will terminate and cease forthwith all use of the property so sold; (f) your
receipt or a receipt of the officer making such sale shall be a sufficient
discharge to the purchaser or purchasers at such sale for the purchase money,
and such purchaser or purchasers, and such purchaser's or purchasers' assigns or
personal representatives, shall not, after paying such purchase money and
receiving such receipt, be obligated to see to the application of such purchase
money or be in any way  answerable for any loss, misapplication or
non-application thereof; and (g) to the extent that we may lawfully do so, we
agree that we will not at any time insist upon or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law or any law permitting us to direct
the order in which the Collateral or any part thereof shall be sold, now or at
any time hereafter in force, that may delay, prevent or otherwise affect the
performance or enforcement of this Agreement or the Obligations, and we
expressly waive all benefit or advantage of any such law and agree that we will
not hinder, delay or impede the execution of any power granted or delegated to
you in this Agreement, but will suffer and permit the execution of every such
power as though no such law were in force.  In the event of any sale of
Collateral, you shall, at least ten days before such sale, give us written
notice of your intention to sell, except that, if you determine in your sole
discretion that any of the Collateral is perishable or threatens to decline
speedily in value, any such sale may be made on three days' written notice to
us.

9.  Application of Moneys.  Except as otherwise provided in this Agreement, all
moneys you receive in accordance with the provisions of this Agreement shall be
applied in the following manner:  First, to the payment of all costs and
expenses incurred in connection with the administration and enforcement of, or
the preservation of any rights under, this Agreement and the realization on the
Collateral (including, but not limited to, the fees and disbursements of your
counsel (including counsel who are your employees) and agents); and Second, to
the payment of all other Obligations in such order as you may choose.  Any
surplus shall be accounted for as required by law.

10.  Waivers, Amendments, Required Notices.  We waive notice of acceptance of
this Agreement, notice of nonpayment of any of our Accounts, demand,
presentment, protest and notice thereof with respect to any and all instruments,
notice of Collateral received or delivered or any other action taken in reliance
on this Agreement and all other demands and notices of any description, except
such as are expressly provided for in this Agreement or which by applicable law
may not be waived on the date of this Agreement.  No failure on your part to
exercise, and no delay in exercising, any right, power or remedy under this
Agreement shall operate as a waiver thereof or of any default by us under this
Agreement, nor shall any single or partial exercise by you of any right, power
or remedy under this Agreement preclude any other or future exercise thereof or
the exercise of any other right, power or remedy.  No amendment or modification
of this Agreement nor any waiver of any provision of this Agreement or consent
to any departure by us therefrom shall be effective unless it is in writing and
signed by you, and then any such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.  No notice to or
demand on us in any case shall, of itself, entitle us to any other or further
notice or demand in similar or other circumstances.  Except as otherwise
provided in this Agreement, if notice, whether before or after we are in default
under this Agreement, is required by law to be given by you to us, we agree that
five days' notice given in the manner provided in section 12 hereof will be
reasonable notice.

11.  Cumulative Rights and Remedies.  This Agreement and the security interest
granted by this Agreement are in addition to and not in substitution for any
other security interest now or hereafter held by you, and this Agreement is, and
is intended to be, a continuing agreement and shall not operate as a merger of
any contract debt or suspend the fulfillment of or affect your rights, remedies
or powers in respect of any obligation or other security held by you for the
fulfillment thereof.  The remedies provided in this Agreement are cumulative and
are not exclusive of any remedy provided by law.

12.  Notices.  Any notice given under this Agreement shall be given in writing
(including teletransmissions) and mailed, teletransmitted or delivered by the
party giving such notice to the other party at the address, if to you, indicated
at the foot of this Agreement or, if to us, indicated beneath our signature line
hereto or, as to each party, at such other address as may be designated by such
party by notice complying with the terms of this section 12.  All notices under
this Agreement shall be deemed given when deposited in the mails or delivered or
teletransmitted, addressed as provided in this section 12.

13.  Costs and Expenses.  We agree to pay, on demand, whether or not we are in
default under this Agreement and whether or not any proceeding to enforce this
Agreement or the Obligations has been commenced, all of your costs and expenses,
including (but not limited to) all fees and disbursements of your legal counsel
(including counsel who are your employees), incurred in connection with the
preparation and enforcement of this Agreement, the security interest granted by
this Agreement, the receipt of proceeds of our Accounts or other Collateral
under this Agreement, the care and preservation of the Collateral or the
preparation of any requested amendments to this Agreement, modifications of this
Agreement or waivers or consents in connection with this Agreement.  Any such
expenses so incurred by you shall be charged to our account, shall be part of
the Obligations and shall be secured by the Collateral.

If any tax, assessment, charge or claim is claimed or made with respect to the
Collateral that in your opinion may possibly create a valid obligation having
priority over the security interest granted to you by this Agreement, you may,
in your sole discretion and without notice to us, pay such taxes, assessments,
charges or claims, and the amount thereof shall be charged to our account, shall
be part of the Obligations and shall be secured by the Collateral.

Upon our failure to perform any of our duties under this Agreement, you may, but
shall not be obligated to, perform any or all of such duties, and we will pay to
you on your written demand an amount equal to the cash or out-of-pocket expense
incurred by you in so doing plus interest thereon from the date such expense is
incurred until it is paid at a rate per annum equal to the highest rate of
interest payable by us from time to time on the Obligations.

14.  Successors and Assigns, Governing Law, Survival and Severability.  This
Agreement, which shall inure to the benefit of and shall be binding upon each of
us and our respective successors and assigns, shall be governed by and construed
in accordance with the laws of the State of New York.  All covenants,
agreements, representations and warranties made by us in this Agreement shall
survive the execution and delivery of this Agreement and shall continue in full
force and effect so long as any Obligation remains unpaid or unperformed.  If
any part of this Agreement is contrary to, prohibited by or deemed invalid under
applicable law or regulations, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but the remainder of
this Agreement shall not be invalidated and shall be given full force and effect
so far as possible, and any such prohibition or invalidity in any jurisdiction
shall not invalidate such provision or render it unenforceable in any other
jurisdiction.

15.  Other Currencies.  If for the purpose of obtaining or enforcing judgment or
realizing upon the Collateral in any court it is necessary to convert any amount
received or payable in a currency (“Second Currency”) other than the currency in
which the Obligations are payable (“Primary Currency”) into Primary Currency,
the rate of exchange that shall be applied shall be that at which in accordance
with your normal banking procedures you could purchase Primary Currency with the
Second Currency on the business day preceding the day on which final judgment is
given.  If payment of any amount of the Obligations is made to or received by
you in a Second Currency, whether by judicial judgment (and notwithstanding the
rate of exchange actually applied in giving such judgment), from the proceeds of
the sale or other disposition of Collateral or otherwise, the Obligations shall
be discharged only to the extent of the net amount of Primary Currency that you
are able in accordance with your normal banking procedures lawfully to purchase
with such amount of Second Currency.  To the extent that you are not able to
purchase with such amount of Second Currency sufficient Primary Currency to
discharge the Primary Currency amount of the Obligations, the Obligations shall
not be discharged with respect to such difference, and any such undischarged
amount will be due as a separate debt and shall not be affected by payment of,
or judgment being obtained for, any other sums under or in respect of this
Agreement or the Obligations.  To the extent that you are able to purchase
Primary Currency in an amount in excess of the amount necessary to discharge the
Primary Currency amount of the Obligations, you shall promptly remit such excess
to us or as a court of competent jurisdiction may direct.

16.  No Assumptions of Duties; Limitation on Liabilities.  (a)  Nothing in this
Agreement shall be construed to constitute you as our agent for any purpose
whatsoever except for the limited purposes of receiving proceeds of the
Collateral as provided in this Agreement and forwarding to us the originals or
copies of papers or documents received with such proceeds.  You do not, by this
Agreement or any assignment or otherwise, assume any of our obligations under
any Collateral or any license, contract or agreement relating to any Collateral,
and you shall not be responsible in any way for performance of any of the terms
and conditions thereof.

(b)  Neither you nor any of your directors, officers, agents or employees shall
be liable to any person or entity for any action taken or omitted by you or any
of your directors, officers, agents or employees under this Agreement or with
respect to any transaction contemplated by this Agreement, except for your or
such director's, officer's, agent's or employee's own gross negligence or
willful misconduct.  Without limiting the generality of the foregoing, you shall
not be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral, wherever it may be located and
regardless of the cause thereof, unless due to your own gross negligence or
willful misconduct.  You shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of our Accounts or any
instrument received in payment thereof or for any damage resulting
therefrom.  We assume all responsibility and liability arising from the use of
the Collateral and will pay, and indemnify and hold you harmless from and
against, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to our right, title and interest in, to and under
the Collateral, including (without limitation) claims of trademark infringement.
 
 
 
 
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17.  Amendments, Modifications and Waivers with Respect to Obligations.  We
hereby consent that, without the necessity of any reservation of rights against
us and without notice to or further assent by us, the liability of any other
person or entity on or for any part of the Obligations, or any collateral
security or guaranty  therefor or right of offset with respect thereto, may from
time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released and any other
collateral security document or guaranty or document delivered in connection
therewith to which we are not a party may be amended, modified, supplemented,
restated or terminated, in whole or in part, as you may deem advisable from time
to time, and any collateral security or guaranty or right of offset at any time
held for payment of the Obligations may be sold, waived, surrendered or
released, all without the necessity of any reservation of rights against us and
without notice to or further assent by us, and we will remain bound hereunder
notwithstanding any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, restatement, termination, sale, exchange,
waiver, surrender or release.  We waive any and all notice of or proof of
reliance by you on this Agreement, and the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Agreement, and all dealings between you and us shall likewise be
conclusively presumed to have been had or consummated in reliance on this
Agreement.  We waive (to the fullest extent permitted by applicable law)
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or on us with respect to the Obligations.

18.  No Subrogation. Notwithstanding any payment or payments made by us
hereunder, the receipt of any amounts by you with respect to the Collateral or
any setoff or application of our funds by you, we shall not be entitled to be
subrogated to any of your rights against any collateral security or guaranty or
right of offset held by you for the payment of the Obligations, nor shall we
seek any reimbursement from 2314505 Ontario Inc. in respect of payments made by
us hereunder, until the Obligations have been paid in full.

19.   Headings; Construction.  The headings used in this Agreement are for
convenience only and are not to be considered a part of this Agreement and do
not in any way limit or amplify the terms and provisions of this
Agreement.  When the context so requires, the singular number shall be read as
if the plural were expressed and the provisions of this Agreement shall be read
with all grammatical changes necessary dependent upon the person or entity
referred to being a male, female, firm or corporation.

20.  Submission to Jurisdiction.  We expressly submit to the jurisdiction of all
federal and state courts located in the State of New York, and consent that any
order, process, notice of motion or other application to any of said courts or a
judge thereof may be served upon us within or without such court's jurisdiction
by registered mail or by personal service at the address specified pursuant to
section 12 hereof, provided a reasonable time for appearance is allowed.  We
irrevocably waive any objection we may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in any such court and further irrevocably waive any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.  Nothing contained in this Agreement shall affect your
right to serve legal process in any other manner permitted by law or to bring
any action or proceeding against us or our property in the courts of other
jurisdictions.

21.  Defeasance.  Upon indefeasible satisfaction in full of the Obligations,
this Agreement shall terminate and be of no further force and
effect.  Notwithstanding the preceding sentence, the indemnity agreement
contained in section 16(b) of this Agreement shall survive the termination of
this Agreement.
 
 
22.  Waiver of Jury Trial.  WE AND, BY YOUR ACCEPTANCE OF THIS AGREEMENT, YOU
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED
BY APPLICABLE LAW) ANY RIGHT WE OR YOU MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREE THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

[Remainder of page intentionally left blank. Signature page follows.]
 
 
 
 
 
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Dated: June 4, 2012
 
Very truly yours,

 
 

Address for Notices:
                          DECISIONPOINT SYSTEMS, INC.                  
19655 Descartes
                     
Foothill Ranch, California 92610
                          By /s/ Nicholas Toms                  
Fax:  (949) 215-9642
  Name: Nicholas Toms                  
Attention:  Nicholas Toms, CEO
 
Title:  Chief Executive Officer
                                                                 
with a copy to:
                                             
McMillan LLP
                     
Bookfield Place, 181 Bay Street
                     
Suite 4400
                     
Toronto, Ontario M5J 2T3
                                             
Fax:  (416) 865-7048
                     
Attention:  Wayne D. Gray
                                                                               
             
Lender’s Address for Notices:
                                             
Royal Bank of Canada
                     
Commercial Financial Services
                     
30 Duke Street West – 8th Floor
                     
Kitchener, Ontario
                     
N2H 3W5
                                             
Fax:  (519) 575-2248
                     
Attention:  Account Manager re: Apex Systems Integrators Inc.
                                             
with a copy to:
                                             
Wildeboer Dellelce LLP
                     
Suite 800, 365 Bay Street
                     
Toronto, Ontario M5H 2V1
                                             
Fax:  (519) 741-9576
                     
Attention:  Christopher A.J. Partridge
                     

 
 
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EXHIBIT “A”

Current Location(s) of Collateral (include county)

19655 Descartes, Foothill Ranch, California 92610

4 Armstrong Road, 2nd Floor, Shelton, Connecticut 06484

254 Fernwood Avenue, Edison, New Jersey 08818-7815

11625 Rainwater Drive, Alpharetta, Georgia 30009

Blding 200 at Windward Chase, 1225 Old Alpharetta Road, #250, Alpharetta,
Georgia 30009

Other Location(s) of Inventory within past 5 years (include county)

None

Other legal name and/or trade names

Comamtech Inc.
Copernic Inc.
Canusa Capital Corp.
 
 
 
 
8

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EXHIBIT “B”

UCC Filing Offices

State of Delaware
 
 
 
 
 
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EXHIBIT “C”

TRADEMARK/SERVICE MARK/PATENT

 

Mark  Jurisdiction   Registration/Application No.    Date             None  

 
                                                                                                                          
TRADEMARK/SERVICE MARK/PATENT LICENSES

None

 
 
 
10