Document:

SUBLEASE
      AGREEMENT

     

    This
      Sublease Agreement (“Sublease”) is made as of the 11th day of September, 2006,
      by and between BERGMAN & DACEY, INC., a California corporation
      (“Sublandlord”), and INNOVATIVE CARD TECHNOLOGIES, INC., a Delaware Corporation
      (“Subtenant”).

     

    RECITALS

     

    This
      Sublease is made with regard to the following facts:

     

    A. Sublandlord
      is the tenant under that certain Office Lease dated January 31, 1994, which
      was
      amended by a First Amendment dated March 24, 1999, and by a Second Amendment
      dated April 15, 2003 (collectively the “Master Lease”), with CA-10880 Wilshire
      Limited Partnership, a Delaware limited partnership (as successor in interest
      to
      10880 Property Corporation, a Delaware corporation) (the “Master Landlord”). A
      copy of that Master Lease is attached to this Sublease as Exhibit A and
      incorporated herein by this reference. Under the Master Lease, Sublandlord
      leases approximately 19,182 rentable square feet of office space (the
“Premises”) located on the 9th floor of the building (the “Building”) located at
      10880 Wilshire Boulevard, Los Angeles, California 90024.

     

    B. Subtenant
      desires to sublease from Sublandlord a portion of the Premises (the “Subleased
      Premises”), as detailed on Exhibit “B” attached hereto and incorporated herein
      by this reference. Sublandlord has agreed to sublease the Subleased Premises
      to
      Subtenant on the terms, covenants and conditions stated in this Sublease. The
      Subleased Premises shall be known as Suite 950.

     

    C. NOW,
      THEREFORE, in consideration of the mutual covenants contained in this Sublease,
      and for valuable consideration, the receipt and sufficiency of which are
      acknowledged by the parties, the parties agree as follows:

     

    1. Sublease.
      Sublandlord subleases to Subtenant and Subtenant subleases from Sublandlord
      the
      Subleased Premises, subject to the terms, covenants, and conditions contained
      in
      this Sublease. Sublandlord and Subtenant agree that the Subleased Premises
      contain 6,218 rentable square feet of space. If either party discovers that
      the
      rentable square feet is different than stated above it shall have no effect
      on
      the rent due hereunder.

     

    2. Term.
      Subject
      to the condition set forth in Section 13.6 below, the terms and provisions
      of this Sublease shall be effective between Sublandlord and Subtenant as of
      the
      date of this Sublease. The term of this Sublease will commence on
      October 1, 2006 (the “Commencement Date”), and will expire, unless sooner
      terminated on July 31, 2009 (the “Expiration Date”). Should Subtenant fail to
      surrender and vacate the Subleased Premises by the Expiration Date, Subtenant
      shall be subject to the applicable terms of the Master Lease, including, without
      limitation, Article 16 (Holding Over) thereof. Any occupancy by Subtenant prior
      to the Commencement Date shall be subject to all terms of this Sublease, except
      the payment of monthly rent; provided, however, Subtenant shall be responsible
      for all other charges incurred by Subtenant pursuant to this Sublease,
      including, but not limited to, Sections 8.8 and 13.10 hereof,
      below.

     

    
      
         

      

      
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    3. Rent.

     

    3.1 Payment
      of Rent; Late Charges.
      Subtenant will pay the rent addressed to Sublandlord at Bergman & Dacey,
      Inc., 10880 Wilshire Boulevard, Suite 900, Los Angeles, California 90024,
      Attention: Gregory M. Bergman, Esq.. The rent will be due on the first (1st)
      day
      of each month during the term of this Sublease. If any installment of base
      rent
      is not received by Sublandlord on or before the fifth (5th) day of the month,
      a
      late fee of five percent (5%) of the amount of base rent then delinquent shall
      be charged to Subtenant. This late fee amount constitutes a fair and reasonably
      estimate of the cost and expense Sublandlord will incur as a result of
      Subtenant’s delinquent payment, the exact amount of which would be extremely
      difficult to ascertain. In addition, delinquent rent shall accrue interest,
      chargeable beginning on the first (1st) day of the month, at a rate of ten
      percent (10%) per annum. Furthermore, in the event that the term of this
      Sublease begins or ends on a date that is not the first day of the month, base
      rent will be prorated as of that date. Concurrent with Subtenant’s execution of
      this Sublease, Subtenant will deliver to the Sublandlord the first month’s base
      rent in the amount of $16,788.60. During the period commencing on the
      Commencement Date through and including September 30, 2007, base rent shall
      be
      $16,788.60 per month. During the period commencing on October 1, 2007 through
      and including September 30, 2008, base rent shall be $17,292.25. During the
      period commencing on October 1, 2008 through and including July 31, 2009, base
      rent shall be $17,811.00. If Subtenant fails to pay base rent or other rent
      or
      charges due hereunder, or a default (as defined in the Master Lease) occurs,
      Sublandlord may use, apply or retain all or any portion of the Security Deposit
      (as defined in Section 3.2 below) for the payment of any amount due Sublandlord
      or to reimburse or compensate Sublandlord for any liability, cost, expense,
      loss
      or damage (including attorney’s fees) which Sublandlord may suffer or incur by
      reason thereof. In the event that Subtenant has never been in default under
      the
      terms of this Sublease or the Master Lease, the rent due for the 25th
      month of
      this Sublease shall be applied from the security deposit (as defined below).
      In
      the event that Subtenant has never been in default under the terms of this
      Sublease or the Master Lease, the rent due for the last month of this Sublease
      shall be applied from the security deposit (as defined below). 

     

    3.2 Security
      Deposit.
      Concurrent with Subtenant’s execution of this Sublease, Subtenant will deliver
      to the Sublandlord the security deposit (“Security Deposit”) in the amount of
      $71,244.00. The Security
      Deposit shall be held by Sublandlord as security for the faithful performance
      by
      Subtenant of all the terms, covenants and conditions of the Sublease to be
      kept
      and performed by Subtenant during the entirety of the Sublease Term. If
      Subtenant defaults with respect to any provision of this Sublease (including,
      but not limited to, the provisions relating to the payment of rent, Sublandlord
      may, but shall not be required to, use, apply or retain all or any part of
      the
      Security Deposit (a) for the payment of any rent or any other sum in default,
      (b) for the payment of any other amount which Sublandlord may spend or become
      obligated to spend by reason of Subtenant's default, and/or (c) to compensate
      Sublandlord for any loss or damage which Sublandlord may suffer by reason of
      Subtenant's default. If any portion of the Security Deposit is so used or
      applied, Subtenant shall, within five (5) days after demand therefor, deposit
      cash with Sublandlord in an amount sufficient to restore the Security Deposit
      to
      its original amount. Failure on the part of Subtenant to so restore the Security
      Deposit shall be a default under the terms of this Sublease. Subtenant
      understands that Sublandlord shall not be required to keep the Security Deposit
      separate from its general funds and Subtenant shall not be entitled to interest
      on such Security Deposit at the end of the Sublease Term. If Subtenant shall
      fully and faithfully perform every provision of this Sublease to be performed
      by
      it, the Security Deposit or any balance thereof shall be returned to Subtenant
      within thirty (30) days after the expiration of the Sublease Term.

     

    
      
         

      

      
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    4. Additional
      Rent.
      Subtenant acknowledges that pursuant to the terms of the Master Lease,
      Sublandlord is obligated to pay Additional Rent, which includes Sublandlord’s
      estimated share of common area operating expenses, taxes and insurance
      (“Sublandlord’s Share”). Subtenant agrees that in addition to the base rent due
      under Section 3.1 above, Subtenant shall pay to Sublandlord thirty two and
      one-half percent (32.5%) of Sublandlord’s Share of Additional Rent (“Subtenant’s
      Share”) for any increase in such Additional Rent in excess of the amount due for
      calendar year 2006. Subtenant shall pay Subtenant’s Share to Sublandlord at
      least five (5) days prior to the date Sublandlord must pay its share of
      Additional Rent to Master Landlord pursuant to the terms of the Master Lease.
      Notwithstanding the foregoing, for purposes of this Sublease, the Base Year
      shall mean calendar year 2006.

     

    5. Use.
      Subtenant agrees to use the Subleased Premises for general office space in
      accordance with the provisions of the Master Lease and this Sublease, and for
      no
      other purpose.

     

    6. Master
      Lease.
      As
      applied to this Sublease, the words “Landlord” and “Tenant” in the Master Lease
      will be deemed to refer to Sublandlord and Subtenant, respectively, under this
      Sublease.

     

    Except
      as
      otherwise expressly provided in Section 8 of this Sublease, the covenants,
      agreements, provisions, and conditions of the Master Lease to the extent that
      they relate to the Subleased Premises and to the extent that they are not
      inconsistent with the terms of this Sublease are made a part of and incorporated
      into this Sublease as if recited in full in this Sublease.

     

    The
      rights and obligations of the Master Landlord and the Tenant under the Master
      Lease will be deemed the rights and obligations of Sublandlord and Subtenant,
      respectively, under this Sublease, and will inure to the benefit of, and be
      binding on, Sublandlord and Subtenant, respectively. As between the parties
      to
      this Sublease only, in the event of a conflict between the terms of the Master
      Lease and the terms of this Sublease, the terms of this Sublease will
      control.

     

    7. Performance
      by Sublandlord; Status of Master Lease

     

    7.1 Sublandlord’s
      Performance Conditioned on Master Landlord’s Performance.
      Subtenant recognizes that Sublandlord is not in a position to render any of
      the
      services or to perform any of the obligations required of Master Landlord by
      the
      terms of the Master Lease. Therefore, despite anything to the contrary in this
      Sublease, Subtenant agrees that performance by Sublandlord of its obligations
      under this Sublease is conditioned on performance by the Master Landlord of
      its
      corresponding obligations under the Master Lease, and Sublandlord will not
      be
      liable to Subtenant for any default of the Master Landlord under the Master
      Lease. 

     

    Subtenant
      will not have any claim against Sublandlord based on the Master Landlord’s
      failure or refusal to comply with any of the provisions of the Master Lease
      unless that failure or refusal is a result of Sublandlord’s act or failure to
      act. Despite the Master Landlord’s failure or refusal to comply with any of
      those provisions of the Master Lease, this Sublease will remain in full force
      and effect and Subtenant will pay the base rent and additional rent and all
      other charges provided for in this Sublease without any abatement, deduction
      or
      setoff. Except as expressly provided in this Sublease, Subtenant agrees to
      be
      subject to, and bound by, all of the covenants, agreements, terms, provisions,
      and conditions of the Master Lease, as though Subtenant was the Tenant under
      the
      Master Lease.

     

    
      
         

      

      
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    7.2 Preservation
      of Master Lease.
      Subtenant will refrain from any act or omission that would result in the failure
      or breach of any of the covenants, provisions, or conditions of the Master
      Lease
      on the part of the Tenant under the Master Lease.

     

    8. Variations
      from Master Lease.
      As
      between Sublandlord and Subtenant, the terms and conditions of the Master Lease
      are modified as stated below in this Section 8:

     

    8.1 Base
      Rent; Term.
      Despite
      anything to the contrary stated in the Master Lease, the term of this Sublease,
      base rent and additional rent payable under this Sublease are as stated in
      Sections 2, 3 and 4 above.

     

    8.2 Brokers.
      The
      parties to this Sublease warrant to each other that neither party dealt with
      any
      broker or finder in connection with the consummation of this Sublease other
      than
      First Property Realty Corporation (“FPRC”), which exclusively represents
      Sublandlord, and Stone Miller (“SM”), which exclusively represents Subtenant and
      each party agrees to protect, defend, indemnify and hold the other party
      harmless from and against any and all claims or liabilities for brokerage
      commissions or finder’s fees arising out of that party’s acts in connection with
      this Sublease to anyone other than FPRC and SM. The provisions of this
      Section 8.2 will survive the expiration or earlier termination of this
      Sublease. The commission or fees payable to FPRC and SM will be paid by
      Sublandlord under the terms of separately executed agreements.

     

    8.3 Insurance
      and Condemnation Proceeds.
      Despite
      anything contained in the Master Lease to the contrary, as between Sublandlord
      and Subtenant only, in the event of damage to or condemnation of the Subleased
      Premises, (i) all insurance proceeds received by or available to Sublandord
      pursuant to its insurance policies covering the Subleased Premises (or initially
      received by or available to Master Landlord pursuant to its insurance policies
      covering the Subleased Premises and thereafter delivered to Sublandlord for
      reimbursement of the damage to the Subleased Premises repaired by Sublandlord),
      and (ii) all condemnation awards received by Sublandlord under the Master Lease
      will be deemed to be the property of Sublandlord.  Notwithstanding the
      receipt or availability of insurance proceeds and/or condemnation
      awards, Sublandlord shall have no obligation to rebuild or restore the
      Subleased Premises or any portion thereof affected by damage, destruction,
      or
      condemnation. Subtenant shall maintain during the term hereof liability and
      property damage insurance in such amounts and coverages and in such form as
      are
      required of Sublandlord under the terms of the Master Lease, but only for the
      Subleased Premises. All such insurance shall specifically name Master Lessor
      and
      Sublandlord (together with any other party or parties as required under the
      terms of the Master Lease) as parties insured thereunder. Such insurance shall
      not be subject to cancellation, termination or change with respect to Master
      Lessor, Sublandlord or such other parties without thirty (30) days’ prior
      written notice. A duplicate original of the policy or a certificate of such
      insurance shall be delivered to each of Master Lessor and
      Sublandlord
      prior to
      the commencement of the Sublease 

     

    
      
         

      

      
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    8.4 Notices.
      Any
      notice that may or must be given by either party under this Sublease will be
      delivered (i) personally, (ii) by certified mail, return receipt
      requested, or (iii) by a nationally recognized overnight courier, addressed
      to the party to whom it is intended. Any notice given to Sublandlord or
      Subtenant shall be sent to the respective address set forth on the signature
      page below, or to such other address as that party may designate for service
      of
      notice by a notice given in accordance with the provisions of this
      Section 8.4. A notice sent pursuant to the terms of this Section 8.4
      shall be deemed delivered (A) when delivery is attempted, if delivered
      personally, (B) three (3) business days after deposit into the United
      States mail, or (C) the day following deposit with a nationally recognized
      overnight courier.

     

    8.5 Amounts
      Payable.
      All
      amounts payable under this Sublease by Subtenant are payable directly to
      Sublandlord.

     

    8.6 Provisions
      of Master Lease Not Applicable.
      All
      provisions of the Master Lease apply to this Sublease, except for the following
      provisions: the Master Lease Sections 21.2, 29.26, 29.28, Exhibit D, Exhibit
      H,
      the First Amendment to the Master Lease Sections III, VI, and VIII, and the
      Second Amendment to the Master Lease Sections VIII. F, and VIII H through J.
      

     

    8.7 “As-Is.”
      Sublandlord will deliver to Subtenant, and Subtenant hereby accepts from
      Sublandlord, the Subleased Premises in their current “as is” condition;
      provided, however, following the execution of this Sublease, Sublandlord, shall,
      at its cost, construct a reception area and demising wall in accordance with
      the
      space plan attached hereto as Exhibit “C” and incorporated herein by this
      reference. Any other improvements not designated on said plan shall be at the
      sole cost and expense of Subtenant and done only after the approval of
      Sublandlord and pursuant to the terms of the Master Lease. Subtenant
      acknowledges that the work to be performed by Sublandlord shall be performed
      during the term of this Sublease, and that such work shall not result in any
      abatement of rent and shall not be deemed to constitute a constructive eviction
      of Subtenant from the Subleased Premises. Sublandlord
      and Subtenant acknowledge that the Sublease Premises contain certain equipment,
      furniture and other non-fixed improvements as listed in the Furniture Inventory
      included on Exhibit “D” attached hereto and incorporated herein by this
      reference (collectively, the "Furniture"). In consideration for the rents to
      be
      paid by Subtenant hereunder, Sublandlord hereby grants to Subtenant the right
      to
      use such Furniture throughout the Sublease Term; however, all actual ownership
      rights to such Furniture shall belong to Sublandlord. In the event that any
      of
      such Furniture is damaged, lost or stolen during the Sublease Term (with
      reasonable wear and tear expected), for whatever reason, all costs of repair
      or
      replacement of such Furniture shall be borne solely by Subtenant. In the event
      that Subtenant has failed to repair or replace such Furniture on or before
      the
      termination of the Sublease Term, Sublandlord shall give written notice of
      such
      failure to Subtenant within fifteen (15) days after the termination of the
      Sublease Term to Subtenant. If Subtenant fails to repair or replace such
      Furniture within thirty (30) days of Sublandlord's notice, Sublandlord may
      thereafter repair or replace such damaged, lost or stolen Furniture in its
      reasonable discretion and Subtenant shall be obligated to reimburse 110% of
      Sublandlord's actual costs for such repair and/or replacement; such obligation,
      shall survive the Sublease Term. The election whether to repair or to replace
      any lost, damaged or stolen Furniture shall be Sublandlord's election to be
      exercised in its reasonable discretion.
      

     

    
      
         

      

      
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    8.8 Parking.
      Sublandlord
      shall provide up to nineteen (19) unreserved parking spaces from Sublandlord's
      lease allocation in the parking structure. All parking spaces will be at the
      then prevailing building rates, which charges shall be paid directly to the
      parking operator by Subtenant.

     

    9. Indemnity.
      Subtenant agrees to protect, defend, indemnify, and hold Sublandlord harmless
      from and against any and all liabilities, claims, expenses, losses and damages
      (including reasonable attorney fees and costs), that may at any time be asserted
      against Sublandlord by (a) the Master Landlord for failure of Subtenant to
      perform any of the covenants, agreements, terms, provisions, or conditions
      contained in the Master Lease that Subtenant is obligated to perform under
      the
      provisions of this Sublease; or (b) any person as a result of Subtenant’s
      use or occupancy of the Subleased Premises, except to the extent any of the
      foregoing is caused by the negligence or willful misconduct of Sublandlord.
      The
      provisions of this Section 9 will survive the expiration or earlier
      termination of the Master Lease or this Sublease. Sublandlord shall not be
      responsible or liable to Subtenant for any and all liabilities, claims,
      expenses, losses and damages (including reasonable attorney fees and costs)
      due
      to any action or inaction on the part of Master Landlord relating to the
      Building or the Subleased Premises.

     

    10. Cancellation
      of Master Lease.
      In the
      event the Master Lease is canceled or terminated for any reason, or
      involuntarily surrendered by operation of law before the expiration date of
      this
      Sublease, Subtenant agrees, at the sole option of the Master Landlord, to attorn
      to the Master Landlord for the balance of the term of this Sublease and on
      the
      then executory terms of this Sublease. 

     

    That
      attornment will be evidenced by an agreement in form and substance reasonably
      satisfactory to the Master Landlord. Subtenant agrees to execute and deliver
      such an agreement at any time within ten (10) business days after request by
      the
      Master Landlord. Subtenant waives the provisions of any law now or later in
      effect that may provide Subtenant any right to terminate this Sublease or to
      surrender possession of the Subleased Premises in the event any proceeding
      is
      brought by the Master Landlord to terminate the Master Lease.

     

    11. Certificates.
      Each
      party to this Sublease will, from time to time as requested by the other party,
      on not less than ten (10) days prior written notice, execute, acknowledge,
      and
      deliver to the other party a statement in writing certifying that this Sublease
      is unmodified and in full force and effect (or if there have been modifications
      that this Sublease is in full force and effect as modified and stating the
      modifications). That statement will certify the dates to which base rent,
      additional rent, and any other charges have been paid. That statement will
      also
      state whether, to the knowledge of the person signing the certificate, the
      other
      party is in default beyond any applicable grace period provided in this Sublease
      in the performance of any of its obligations under this Sublease. If the other
      party is in default beyond any applicable grace period, the statement will
      specify each default of which the signer then has knowledge. It is intended
      that
      this statement may be relied on by others with whom the party requesting that
      certificate may be dealing.

     

    
      
         

      

      
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    12. Assignment
      or Subleasing.
      Subject
      to the rights of the Master Landlord and the restrictions contained in the
      Master Lease in connection with an assignment or subletting, Subtenant is not
      entitled to assign this Sublease or to sublet all or any portion of the
      Subleased Premises without the prior written consent of Sublandlord, which
      consent shall not be unreasonably withheld. Subtenant shall provide Sublessor
      with notice (“Notice”) of Subtenant’s desire to assign or sublease all or a
      portion of the Subleased Premises. The Notice shall include the name of the
      assignee or sublessee, contact information for such party, and relevant
      financial information to allow the Master Landlord and Sublandlord to make
      their
      decision to consent or not consent. Sublandlord shall be entitled to retain
      fifty percent (50%) of all amounts received in connection with any such sublease
      or assignment in excess of Subtenant’s rent obligation under this Sublease.
      Notwithstanding the foregoing, in the event Subtenant wants to sublease or
      assign more than twenty five percent (25%) of the Subleased Premises,
      Sublandlord shall have the right to recapture such space by providing Subtenant
      notice of such desire within thirty (30) days of receipt of the
      Notice.

     

    13. General
      Provisions

     

    13.1 Severability.
      If any
      provision of this Sublease or the application of any provision of this Sublease
      to any person or circumstance is, to any extent, held to be invalid or
      unenforceable, the remainder of this Sublease or the application of that
      provision to persons or circumstances other than those as to which it is held
      invalid or unenforceable, will not be affected, and each provision of this
      Sublease will be valid and be enforced to the fullest extent permitted by
      law.

     

    13.2 Entire
      Agreement; Waiver.
      This
      Sublease constitutes the final, complete and exclusive statement between the
      parties to this Sublease pertaining to the Subleased Premises, supersedes all
      prior and contemporaneous understandings or agreements of the parties, and
      is
      binding on and inures to the benefit of their respective heirs, representatives,
      successors, and assigns. No party has been induced to enter into this Sublease
      by, nor is any party relying on, any representation or warranty outside those
      expressly set forth in this Sublease. Any agreement made after the date of
      this
      Sublease is ineffective to modify, waive, release, terminate, or effect an
      abandonment of this Sublease, in whole or in part, unless that agreement is
      in
      writing, is signed by the parties to this Sublease, and specifically states
      that
      that agreement modifies this Sublease.

     

    13.3 Captions.
      Captions to the sections in this Sublease are included for convenience only
      and
      do not modify any of the terms of this Sublease.

     

    13.4 Further
      Assurances.
      Each
      party to this Sublease will at its own cost and expense execute and deliver
      such
      further documents and instruments and will take such other actions as may be
      reasonably required or appropriate to evidence or carry out the intent and
      purposes of this Sublease.

     

    13.5 Governing
      Law.
      This
      Sublease will be governed by and in all respects construed in accordance with
      the laws of the State of California.

     

    
      
         

      

      
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    13.6 Consent
      of Landlord.
      The
      Master Landlord’s written consent to this Sublease in accordance with the terms
      of Article 14 of the Master Lease is a condition subsequent to the validity
      of
      this Sublease. If the Master Landlord’s consent has not been obtained and a copy
      of that consent delivered to Subtenant by the eleventh (11th) business day
      following the date the Transfer Notice (as such term is defined in Section
      14.2
      of the Master Lease) is delivered to Master Landlord, Subtenant shall thereafter
      have the ongoing right, subject to the terms of this Section 13.6, to
      terminate this Sublease pursuant to a notice (the “Termination Notice”) so
      stating delivered to Sublandlord. If Sublandlord fails to deliver to Subtenant
      the consent of Master Landlord to this Sublease within ten (10) days following
      receipt of the Termination Notice (the “Termination Date”), this Sublease shall
      automatically terminate and the parties shall be released from any further
      obligations under this Sublease. If, however, Sublandlord delivers to Subtenant
      the consent of Master Landlord on or before the Termination Date, the condition
      subsequent set forth in this Section 13.6 shall be satisfied and this
      Sublease shall continue in full force and effect.

     

    13.7 Capitalized
      Terms.
      All
      terms spelled with initial capital letters in this Sublease that are not
      expressly defined in this Sublease will have the respective meanings given
      such
      terms in the Master Lease.

     

    13.8 Word
      Usage.
      Unless
      the context clearly requires otherwise, (a) the plural and singular numbers
      will each be deemed to include the other; (b) the masculine, feminine, and
      neuter genders will each be deemed to include the others; (c) “shall,”
“will,” “must,” “agrees,” and “covenants” are each mandatory; (d) “may” is
      permissive; (e) “or” is not exclusive; and (f) “includes” and
“including” are not limiting.

     

    13.9 Form
      W-9.
      Concurrently with the execution and delivery of this Sublease to Sublandlord,
      Subtenant shall deliver to Sublandlord a copy of its Form W-9 Request for
      Taxpayer Identification Number and Certification.

     

    13.10 Building
      Services.
      Pursuant to the Master Lease, Master Landlord shall (i) furnish standard office
      heating, ventilating and air conditioning (HVAC) during the standard hours
      which
      are currently 8:00 a.m. to 6:00 p.m., Monday through Friday, and 9:00 a.m.
      to
      1:00 p.m. Saturdays, excluding holidays, (ii) clean the Subleased Premises
      five
      (5) days per week, excluding holidays, and (c) furnish to the Subleased Premises
      electricity for standard office lighting fixtures and equipment and accessories
      customary for office space. Sublandlord shall not be responsible or liable
      to
      Subtenant for any and all liabilities, claims, expenses, losses and damages
      (including reasonable attorney fees and costs) due to any change in the above
      services or for any failure on the part of Master Landlord to deliver such
      services to the Subleased Premises. Subtenant shall be responsible for directly
      paying Master Landlord for all extra services required by Subtenant, including,
      but not limited to, (i) extra cleaning requirement, (ii) after hours HVAC usage,
      (iii) additional utility needs, and (iv) replacement of non-building standard
      light bulbs such as those located in the conference room.

     

    
      
         

      

      
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      remainder of this page is intentionally left blank.]

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    The
      parties have executed this Sublease as of the date specified above.

     

    
      	 	“SUBLANDLORD”:
	 	 	 
	 	
              BERGMAN
                & DACEY, INC.,

              a
                California corporation 

            
	
            	
            	
            
	 	 	 
	 	
              By:

              
                

              

               

            
	
               

            	
              Name:

              
                

              

               

            
	 	
              Title:

              
                

              

                

            

    
      
        	 	 	 
	 	“SUBTENANT”:
	 	 
	 	
                INNOVATIVE
                  CARD TECHNOLOGIES, INC.

                a
                  Delaware corporation

              
	
              	
              	
              
	 	 	 
	 	
                By:

                
                  

                

                 

              
	
                 

              	
                Name:

                
                  

                

                 

              
	 	
                Title:

                
                  

                

                  

              

      
        
          	 	 
	 	 	 
	 	
                  By:

                  
                    

                  

                   

                
	
                   

                	
                  Name:

                  
                    

                  

                   

                
	 	
                  Title:EXHIBIT
                10.1

              Credit
                Agreement

            

    

    

    This
      agreement dated as of October 31, 2006 between JPMorgan Chase Bank, N.A.
      (together with its successors and assigns, the "Bank"), whose address is 500
      East Border Street, Arlington, TX 76010, and Mace Security International, Inc.
      (whether one or more, and if more than one, individually and collectively,
      the
      "Borrower"), whose address is 1000 Crawford Place, Suite 400, Mt. Laurel, NJ
      08054. The provisions of this agreement are effective on September 30,
      2006.

    

    
      	
              1.

            	
              Credit
                Facilities.

            

    

    

    
      	 	
              1.1

            	
              Scope.
                This agreement, unless otherwise agreed to in writing by the Bank
                and the
                Borrower or prohibited by applicable law, governs the Credit Facilities
                as
                defined below. Advances under the Credit Facilities shall be subject
                to
                the procedures established from time to time by the Bank. Any procedures
                agreed to by the Bank with respect to obtaining advances including
                automatic loan sweeps shall not vary the terms or conditions of this
                agreement or the Related Documents regarding the Credit
                Facilities.

            

    

    

    
      	
              2.

            	
              Definitions.
                As
                used in this agreement, the following terms have the following respective
                meanings:

            

    

    

    
      	 	
              2.1

            	
              "Credit
                Facilities" means all extensions of credit from the Bank to the Borrower,
                whether now existing or hereafter arising, including but not limited
                to
                those described in Section 1 if any, and those extended contemporaneously
                with this agreement.

            

    

    

    
      	 	
              2.2

            	
              "Liabilities"
                means all debts, obligations, indebtedness and liabilities of every
                kind
                and character of the Borrower whether individual, joint and several,
                contingent or otherwise, now or hereafter existing in favor of the
                Bank,
                including, without limitation, all liabilities, interest, costs and
                fees,
                arising under or from any note, open account, overdraft, credit card,
                lease, Rate Management Transaction, letter of credit application,
                endorsement, surety agreement, guaranty, acceptance, foreign exchange
                contract or depository service contract, whether payable to the Bank
                or to
                a third party and subsequently acquired by the Bank, any monetary
                obligations (including interest) incurred or accrued during the pendency
                of any bankruptcy, insolvency, receivership or other similar proceedings,
                regardless of whether allowed or allowable in such proceeding, and
                all
                renewals, extensions, modifications, consolidations, rearrangements,
                restatements, replacements or substitutions of any of the foregoing.
                The
                term "Rate Management Transaction" in this agreement means any transaction
                (including an agreement with respect thereto) that is a rate swap,
                basis
                swap, forward rate transaction, commodity swap, commodity option,
                equity
                or equity index swap, equity or equity index option, bond option,
                interest
                rate option, foreign exchange transaction, cap transaction, floor
                transaction, collar transaction, forward transaction, currency swap
                transaction, cross-currency rate swap transaction, currency option,
                derivative transaction or any other similar transaction (including
                any
                option with respect to any of these transactions) or any combination
                thereof, whether linked to one or more interest rates, foreign currencies,
                commodity prices, equity prices or other financial
                measures.

            

    

    

    
      	 	
              2.3

            	
              "Notes"
                means
                all promissory notes, instruments and/or contracts evidencing the
                terms
                and conditions of any of the Credit Facilities.

            

    

    

    
      	 	
              2.4

            	
              "Affiliate"
                means any person, corporation or other entity directly or indirectly
                controlling, controlled by or under common control with the Borrower
                and
                any director or officer of the Borrower or any Subsidiary of the
                Borrower.

            

    

    

    
      	 	
              2.5

            	
              "Intangible
                Assets" means the aggregate amount of: (1) all
                assets classified as intangible assets under generally accepted accounting
                principles, including, without limitation, goodwill, trademarks,
                patents,
                copyrights, organization expenses, franchises, licenses, trade names,
                brand names, mailing lists, catalogs, excess of cost over book value
                of
                assets acquired, and bond discount and underwriting expenses;
                and (2) loans or advances to, investments in, or receivables from
                (i)
                Affiliates, officers, directors, employees or shareholders of the
                Borrower
                or (ii) any person or entity if such loan, advance, investment or
                receivable is outside the Borrower's normal course of
                business.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              2.6

            	
              "Subordinated
                Debt" means debt subordinated to the Bank in manner and by agreement
                satisfactory to the Bank.

            

    

    

    
      	 	
              2.7

            	
              "Subsidiary"
                means, as to a particular person, any entity of which fifty (50%)
                or more
                of the indicia of equity rights is at the time of determination directly
                or indirectly owned by the person or by one or more persons controlled
                by,
                controlling or under common control with the
                person.

            

    

    

    
      	 	
              2.8

            	
              "Tangible
                Capital Funds" means Tangible Net Worth plus Subordinated
                Debt.

            

    

    

    
      	 	
              2.9

            	
              "Tangible
                Net Worth" means total assets less the sum of Intangible Assets and
                total
                liabilities.

            

    

    

    
      	 	
              2.10

            	
              "Related
                Documents" means the Notes, Letters of Credit, all loan agreements,
                credit
                agreements, reimbursement agreements, security agreements, mortgages,
                deeds of trust, pledge agreements, assignments, guaranties, and any
                other
                instrument or document executed in connection with this agreement
                or in
                connection with any of the
                Liabilities.

            

    

    

    
      	
              3.

            	
              Conditions
                Precedent to Extensions of
                Credit.

            

    

    

    
      	 	
              3.1

            	
              Conditions
                Precedent to Initial Extension of Credit under each of the Credit
                Facilities.
                Before the first extension of credit governed by this agreement,
                whether
                by disbursement of a loan, issuance of a letter of credit, or otherwise,
                the Borrower shall deliver to the Bank, in form and substance satisfactory
                to the Bank:

            

    

    

    A. Loan
      Documents.
      The
      Notes, and as applicable, the letter of credit applications, reimbursement
      agreements, the security agreements, the pledge agreements, financing
      statements, mortgages or deeds of trust, the guaranties, the subordination
      agreements, and any other documents which the Bank may reasonably require to
      give effect to the transactions described in this agreement or the other Related
      Documents;

    

    B. Evidence
      of Due Organization and Good Standing.
      Evidence, satisfactory to the Bank, of the due organization, valid existence
      and
      good standing of the Borrower and every other business entity that is a party
      to
      this agreement or any other Related Document; and

    

    C. Evidence
      of Authority to Enter into Loan Documents.
      Evidence
      that (i) each party to this agreement and any other document required by this
      agreement is authorized to enter into the transactions described in this
      agreement and the other Related Documents, and (ii) the person signing on behalf
      of each party is authorized to do so.

    

    
      	 	
              3.2

            	
              Conditions
                Precedent to Each Extension of Credit.
                Before any extension of credit governed by this agreement, whether
                by
                disbursement of a loan, issuance of a letter of credit or otherwise,
                the
                following conditions must be
                satisfied:

            

    

    

    A. Representations.
      The
      representations of the Borrower are true on and as of the date of the request
      for and funding of the extension of credit;

    

    B. No
      Event of Default.
      No
      default has occurred in any provision of this agreement, the Notes or any other
      Related Documents and is continuing or would result from the extension of
      credit, and no event has occurred which would constitute the occurrence of
      any
      default but for the lapse of time until the end of any grace or cure
      period;

    

    C. Additional
      Approvals, Opinions, and Documents.
      The Bank
      has received any other approvals, opinions and documents as it may reasonably
      request; and

    

    D. No
      Prohibition or Onerous Conditions.
      The
      making of the extension of credit is not prohibited by or subjects the Bank
      to
      any penalty or onerous condition under any law, ordinance, decree, requirement,
      order, judgment, rule, regulation (or interpretation of any of the foregoing),
      foreign governmental authority, the United States of America, any state thereof
      and any political subdivision of any of the foregoing and any agency,
      department, commission, board, bureau, court or other tribunal having
      jurisdiction over the Bank or the Borrower, or any Subsidiary of the Borrower
      or
      their respective properties.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
              4.

            	
              Affirmative
                Covenants. The
                Borrower agrees to do, and cause each of its Subsidiaries to do,
                each of
                the following:

            

    

    

    
      	 	
              4.1

            	
              Insurance.
                Maintain insurance with financially sound and reputable insurers,
                with
                such insurance and insurers to be acceptable to the Bank, covering
                its
                properties and business against those casualties and contingencies
                and in
                the types and amounts as are in accordance with sound business and
                industry practices.

            

    

    

    
      	 	
              4.2

            	
              Existence.
                Maintain its existence and business operations as presently in effect
                in
                accordance with all applicable laws and regulations, pay its debts
                and
                obligations when due under normal terms, and pay on or before their
                due
                date, all taxes, assessments, fees and other governmental monetary
                obligations, except as they may be contested in good faith if they
                have
                been properly reflected on its books and, at the Bank's request,
                adequate
                funds or security has been pledged to insure
                payment.

            

    

    

    
      	 	
              4.3

            	
              Financial
                Records.
                Maintain proper books and records of account, in accordance with
                generally
                accepted accounting principles, and consistent with financial statements
                previously submitted to the Bank.

            

    

    

    
      	 	
              4.4

            	
              Inspection.
                Permit the Bank to inspect and copy the Borrower’s business records at
                such times and at such intervals as the Bank may reasonably require,
                and
                to discuss the Borrower’s business, operations, and financial condition
                with the Borrower's officers and accountants.

            

    

    

    
      	 	
              4.5

            	
              Financial
                Reports.
                Furnish to the Bank whatever information, books and records the Bank
                may
                from time to time reasonably request, including at a minimum: 

            

    

    

    A. Via
      either the EDGAR System or its Home Page, within sixty (60) days after the
      filing of its Quarterly Report on Form 10-Q for the fiscal quarter then ended
      with the Securities and Exchange Commission, copies of the financial statements
      for such fiscal quarter as contained in such Quarterly Report on Form 10Q,
      and
      as soon as it shall become available, a quarterly report to shareholders of
      the
      Borrower for the fiscal quarter then ended.

    

    B. Via
      either the EDGAR System or its Home Page, within one hundred and twenty (120)
      days after the filing of its Annual Report on Form 10-K for the fiscal year
      then
      ended with the Securities and Exchange Commission, the financial statements
      for
      such fiscal year as contained in such Annual Report on Form 10K and, as soon
      as
      it shall become available, the annual report to shareholders of the Borrower
      for
      the fiscal year then ended.

    

    C. Via
      either the EDGAR System or its Home Page, promptly after the same become
      publicly available, copies of all periodic and other reports, proxy statements
      and other materials filed by the Borrower or any subsidiary with the Securities
      and Exchange Commission or any governmental authority succeeding to any or
      all
      of the functions of said Commission.

    

    If
      for
      any reason the EDGAR System and/or its Home Page are not available to the
      Borrower as is required for making available the financial statements or reports
      referred to above, the Borrower shall then furnish a copy of such financial
      statements or reports to the Bank.

    

    For
      the
      purposes of this section, “EDGAR System” means the Electronic Data Gathering
      Analysis and Retrieval System owned and operated by the United States Securities
      and Exchange Commission or any replacement system, and “Home Page” means the
      Borrower’s corporate home page on the World Wide Web accessible through the
      Internet via the universal resource locator (URL) identified as www.sec.gov/edgar/searchedgar/webusers.htm
      or such
      other universal resource locator that the Borrower shall designate in writing
      to
      the Bank as its corporate home page on the World Wide Web.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	 	
              4.6

            	
              Notices
                of Claims, Litigation, Defaults, etc.
                Promptly inform the Bank in writing of (1) all existing and all threatened
                litigation, claims, investigations, administrative proceedings and
                similar
                actions affecting the Borrower which could materially affect its
                business, assets, affairs, prospects or
                financial condition of the Borrower or its Subsidiaries; (2) the
                occurrence of any event which gives rise to the Bank's option to
                terminate
                the Credit Facilities; (3) the institution of steps by the Borrower
                to
                withdraw from, or the institution of any steps to terminate, any
                employee
                benefit plan as to which the Borrower may have liability; (4) any
                reportable event or any prohibited transaction in connection with
                any
                employee benefit plan; (5) any additions to or changes in the locations
                of
                the Borrower's or any of the Borrower's or Subsidiary's businesses;
                and
                (6) any alleged breach of any provision of this agreement or of any
                other
                agreement related to the Credit Facilities by the
                Bank.

            

    

    

    
      	 	
              4.7

            	
              Additional
                Information.
                Furnish such additional information and statements, as the Bank may
                request, from time to time.

            

    

    

    
      	 	
              4.8

            	
              Insurance
                Reports.
                Furnish to the Bank, upon request of the Bank, reports on each existing
                insurance policy showing such information as the Bank may reasonably
                request.

            

    

    

    
      	 	
              4.9

            	
              Other
                Agreements.
                Comply with all terms and conditions of all other agreements, whether
                now
                or hereafter existing, between the Borrower and any other
                party.

            

    

    

    
      	 	
              4.10

            	
              Title
                to Assets and Property.
                Maintain good and marketable title to all of the Borrower's assets
                and
                properties.

            

    

    

    
      	 	
              4.11

            	
              Additional
                Assurances.
                Promptly make, execute and deliver any and all agreements, documents,
                instruments and other records that the Bank may request to evidence
                any of
                the Credit Facilities, cure any defect in the execution and delivery
                of
                any of the Related Documents, perfect any lien, comply with legal
                requirements applicable to the Bank or the Credit Facilities or more
                fully
                to describe particular aspects of the agreements set forth or intended
                to
                be set forth in any of the Related
                Documents.

            

    

    

    
      	 	
              4.12

            	
              Employee
                Benefit Plans.
                Maintain each employee benefit plan as to which the Borrower may
                have any
                liability, in compliance with all applicable requirements of law
                and
                regulations.

            

    

    

    
      	 	
              4.13

            	
              Banking
                Relationship.
                Establish and maintain its primary banking depository and disbursement
                relationship with the Bank. 

            

    

    

    
      	 	
              4.14

            	
              Compliance
                Certificates.
                Provide the Bank, within one hundred and twenty (120) days after
                the end
                of each fiscal year and sixty (60) days after the end of each fiscal
                quarter, with a certificate executed by the Borrower's chief financial
                officer, or other officer or a person acceptable to the Bank, certifying
                that, as of the date of the certificate, no default exists under
                any
                provision of this agreement.

            

    

    

    
      	
              5.

            	
              Negative
                Covenants.

            

    

    

    
      	 	
              5.1

            	
              Unless
                otherwise noted, the financial requirements set forth in this section
                will
                be computed in accordance with generally accepted accounting principles
                applied on a basis consistent with financial statements previously
                submitted by the Borrower to the
                Bank.

            

    

    

    
      	 	
              5.2

            	
              Without
                the written consent of the Bank, the Borrower will
                not:

            

    

    

    A. Dividends.
      Acquire
      or retire any of its shares of capital stock, or, other than dividends in its
      capital stock, declare or pay dividends or make any other distributions upon
      any
      of its shares of capital stock where such action would create a default of
      another provision of this agreement; provided, however, that following any
      fiscal year with respect to which the Borrower maintained status as an "S"
      corporation under the Internal Revenue Code, if there is no existing default
      under this agreement or any agreement related to the Liabilities and to do
      so
      will not cause a default under any of such agreements, the Borrower may pay
      dividends to its shareholders sufficient in amount to pay their income tax
      obligation attributable to the Borrower's taxable income.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    B. Sale
      of Shares.
      Issue,
      sell or otherwise dispose of any shares of its capital stock or other
      securities, or rights, warrants or options to purchase or acquire those shares
      or securities.

    

    C. Debt.
      Incur,
      contract for, assume, or permit to remain outstanding, indebtedness for borrowed
      money, installment obligations, or obligations under capital leases or operating
      leases, other than (1) unsecured trade debt incurred in the ordinary course
      of
      business, (2) indebtedness owing to the Bank, (3) indebtedness reflected in
      the
      latest financial statement of the Borrower furnished to the Bank prior to
      execution of this agreement and that is not to be paid with proceeds of
      borrowings under the Credit Facilities, and (4) indebtedness outstanding as
      of
      the date hereof that has been disclosed to the Bank in writing and that is
      not
      to be paid with proceeds of borrowings under the Credit Facilities.

    

    D. Guaranties.
      Guarantee or otherwise become or remain secondarily liable on the undertaking
      of
      another, except for endorsement of drafts for deposit and collection in the
      ordinary course of business.

    

    E. Liens.
      Create
      or permit to exist any lien on any of its property, real or personal, except:
      existing liens known to the Bank; liens to the Bank; liens incurred in the
      ordinary course of business securing current non-delinquent liabilities for
      taxes, worker’s compensation, unemployment insurance, social security and
      pension liabilities.

    

    F. Use
      of Proceeds.
      Use, or
      permit any proceeds of the Credit Facilities to be used, directly or indirectly,
      for the purpose of "purchasing or carrying any margin stock" within the meaning
      of Federal Reserve Board Regulation U. At the Bank's request, the Borrower
      will
      furnish a completed Federal Reserve Board Form U-1.

    

    G. Continuity
      of Operations.
      (1)
      Engage in any business activities substantially different from those in which
      the Borrower is presently engaged; (2) cease operations, liquidate, merge,
      transfer, acquire or consolidate with any other entity, change its name,
      dissolve, or sell any material assets out of the ordinary course of business;
      or
      (3) enter into any arrangement with any person providing for the leasing by
      the
      Borrower or any Subsidiary of real or personal property which has been sold
      or
      transferred by the Borrower or Subsidiary to such person.

    

    H. Limitation
      on Negative Pledge Clauses.
      Enter
      into any agreement with any person other than the Bank which prohibits or limits
      the ability of the Borrower or any of its subsidiaries to create or permit
      to
      exist any lien on any of its property, assets or revenues, whether now owned
      or
      hereafter acquired.

    

    I. Conflicting
      Agreements.
      Enter
      into any agreement containing any provision which would be violated or breached
      by the performance of the Borrower's obligations under this agreement or any
      of
      the other Related Documents.

    

    J. Transfer
      of Ownership.
      Permit
      any pledge of any ownership interest in the Borrower, or any sale or other
      transfer of any ownership interest in the Borrower.

    

    K. Loans,
      Advances to and Investments in Others and Receivables from
      Others.
      Make any
      loans or advances to, investments in, or incur any receivables from any person,
      except (A) loans, advances, investments or receivables, made or incurred in
      the
      ordinary course of business, to, in or from any person that is not (i) an
      Affiliate, (ii) an employee of the Borrower, or (iii) an equity holder of the
      Borrower, and (B) loans, advances, investments and receivables existing as
      of
      the date of this agreement that have been disclosed to the Bank in writing
      and
      that are not to be paid with proceeds of borrowings under the Credit
      Facilities.

    

    L. Leverage
      Ratio.
      Permit
      at any time, its ratio of total liabilities less Subordinated Debt to Tangible
      Capital Funds to be greater than 2.00 to 1.00. 

    

    M. Capital
      Expenditures.
      Acquire,
      whether by purchase or capital lease, fixed assets if the aggregate purchase
      price of such assets to
      the
      Borrower,
      and all
      Subsidiaries if any,
      shall
      exceed $1,000,000.00 in the aggregate in any one fiscal year.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    N. Liquidity.
      Permit
      at any time its total of unencumbered cash and marketable securities, to be
      less
      than $5,000,000.00.

    

    O. Government
      Regulation.
      (1) Be
      or become subject at any time to any law, regulation, or list of any government
      agency (including, without limitation, the U.S. Office of Foreign Asset Control
      list) that prohibits or limits Bank from making any advance or extension of
      credit to Borrower or from otherwise conducting business with Borrower, or
      (2)
      fail to provide documentary and other evidence of Borrower's identity as may
      be
      requested by Bank at any time to enable Bank to verify Borrower's identity
      or to
      comply with any applicable law or regulation, including, without limitation,
      Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

    

    P. Subsidiaries.
      Form,
      create or acquire any Subsidiary without prior consent of the Bank.

    

    
      	
              6.

            	
              Representations
                and Warranties by the Borrower.
                To
                induce the Bank to enter into this agreement and to extend credit
                or other
                financial accommodations under the Credit Facilities,
                the Borrower represents and warrants as of the date of this
                agreement and
                as of the date of each request for credit under the Credit Facilities
                that each of the following statements is and shall remain true and
                correct
                throughout the term of this agreement and until all Credit Facilities
                and
                all amounts owing under the Notes and other Related Documents are
                paid in
                full. The Borrower represents that: (a) the execution and delivery
                of this
                agreement and the Notes, and the performance of the obligations they
                impose, do not violate any law, conflict with any agreement by which
                it is
                bound, or require the consent or approval of any governmental authority
                or
                other third party, (b) this agreement and the Notes are valid and
                binding
                agreements, enforceable according to their terms, (c) all balance
                sheets,
                profit and loss statements, and other financial statements and other
                information furnished to the Bank in connection with the Liabilities
                are
                accurate and fairly reflect the financial condition of the organizations
                and persons to which they apply on their effective dates, including
                contingent liabilities of every type, which financial condition has
                not
                changed materially and adversely since those dates, (d) no litigation,
                claim, investigation, administrative proceeding or similar action
                (including those for unpaid taxes) against the Borrower is pending
                or
                threatened, and no other event has occurred which may in any one
                case or
                in the aggregate materially adversely affect the Borrower's financial
                condition and properties, other than litigation, claims, or other
                events,
                if any, that have been disclosed to and acknowledged by the Bank
                in
                writing and as disclosed in the Borrower’s Form 10-Q and 10-K filings, (e)
                all of the Borrower's tax returns and reports that are or were required
                to
                be filed, have been filed, and all taxes, assessments and other
                governmental charges have been paid in full, except those presently
                being
                contested by the Borrower in good faith and for which adequate reserves
                have been provided, (f) the Borrower is not an "investment company"
                or a
                company "controlled" by an "investment company", within the meaning
                of the
                Investment Company Act of 1940, as amended, (g) the Borrower is not
                a
                "holding company", or a "subsidiary company" of a "holding company"
                or an
                "affiliate" of a "holding company" or of a "subsidiary company" of
                a
                "holding company" within the meaning of the Public Utility Holding
                Company
                Act of 1935, as amended, (h) there are no defenses or counterclaims,
                offsets or adverse claims, demands or actions of any kind, personal
                or
                otherwise, that the Borrower could assert with respect to this agreement
                or the Credit Facilities, (i) the Borrower owns, or is licensed to
                use,
                all trademarks, trade names, copyrights, technology, know-how and
                processes necessary for the conduct of its business as currently
                conducted, and (j) no part of the proceeds of the Credit Facilities
                will
                be used for "purchasing" or "carrying" any "margin stock" within
                the
                respective meanings of each of the quoted terms under Regulation
                U of the
                Board of Governors of the Federal Reserve System of the United States
                (the
                "Board") as now and from time to time hereafter in effect or for
                any
                purpose which violates the provisions of any regulations of the Board.
                The
                Borrower, other than a natural person, further represents that: (a)
                it is
                duly organized and validly existing under the laws of the state where
                it
                is organized and is in good standing in its state of organization
                and each
                state where it is doing business, and (b) the execution and delivery
                of
                this agreement and the Notes and the performance of the obligations
                they
                impose (i) are within its powers, (ii) have been duly authorized
                by all
                necessary action of its governing body, and (iii) do not contravene
                the
                terms of its articles of incorporation or organization, its by-laws,
                or
                any partnership, operating or other agreement governing its
                affairs.

            

    

    

    
      	
              7.

            	
              Default/Remedies.
                If
                any of the Credit Facilities are not paid at maturity, whether by
                acceleration or otherwise, or if a default by anyone occurs under
                the
                terms of this agreement, the Notes or any other Related Documents,
                then
                the Bank shall have all of the rights and remedies provided by any
                law,
                equity
                or
                agreement. 

            

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      	
              8.

            	
              Miscellaneous.

            

    

    

    
      	 	
              8.1

            	
              Notice.
                Any notices and demands under or related to this document shall be
                in
                writing and delivered to the intended party at its address stated
                herein,
                and if to the Bank, at its main office if no other address of the
                Bank is
                specified herein, by one of the following means: (a) by hand, (b)
                by a
                nationally recognized overnight courier service, or (c) by certified
                mail,
                postage prepaid, with return receipt requested. Notice shall be deemed
                given: (a) upon receipt if delivered by hand, (b) on the Delivery
                Day
                after the day of deposit with a nationally recognized courier service,
                or
                (c) on the third Delivery Day after the notice is deposited in the
                mail.
                "Delivery Day" means a day other than a Saturday, a Sunday or any
                other
                day on which national banking associations are authorized to be closed.
                Any party may change its address for purposes of the receipt of notices
                and demands by giving notice of such change in the manner provided
                in this
                provision.

            

    

    

    
      	 	
              8.2

            	
              No
                Waiver.
                No
                delay on the part of the Bank in the exercise of any right or remedy
                waives that right or remedy. No single or partial exercise by the
                Bank of
                any right or remedy precludes any other future exercise of it or
                the
                exercise of any other right or remedy. No waiver or indulgence by
                the Bank
                of any default is effective unless it is in writing and signed by
                the
                Bank, nor shall a waiver on one occasion bar or waive that right
                on any
                future occasion.

            

    

    

    
      	 	
              8.3

            	
              Integration.
                This agreement, the Notes, and the
                other Related Documents
                to
                the Credit Facilities embody the entire agreement and understanding
                between the Borrower and the Bank and supersede all prior agreements
                and
                understandings relating to their subject matter. If any one or more
                of the
                obligations of the Borrower under this agreement or the Notes is
                invalid,
                illegal or unenforceable in any jurisdiction, the validity, legality
                and
                enforceability of the remaining obligations of the Borrower shall
                not in
                any way be affected or impaired, and the invalidity, illegality or
                unenforceability in one jurisdiction shall not affect the validity,
                legality or enforceability of the obligations of the Borrower under
                this agreement, the Notes and the other Related Documents
                in
                any other jurisdiction.

            

    

    

    
      	 	
              8.4

            	
              Joint
                and Several Liability.
                Each party executing this agreement as the Borrower is individually,
                jointly and severally liable under this agreement.
                

            

    

    

    
      	 	
              8.5

            	
              Governing
                Law and Venue.
                This agreement shall be governed by and construed in accordance with
                the
                laws of the State of Texas (without giving effect to its laws of
                conflicts). The Borrower agrees that any legal action or proceeding
                with
                respect to any of its obligations under this agreement may be brought
                by
                the Bank in any state or federal court located in the State of Texas,
                as
                the Bank in its sole discretion may elect. By the execution and delivery
                of this agreement, the Borrower submits to and accepts, for itself
                and in
                respect of its property, generally and unconditionally, the non-exclusive
                jurisdiction of those courts. The Borrower waives any claim that
                the State
                of Texas is not a convenient forum or the proper venue for any such
                suit,
                action or proceeding. 

            

    

    

    
      	 	
              8.6

            	
              Captions.
                Section headings are for convenience of reference only and do not
                affect
                the interpretation of this
                agreement.

            

    

    

    
      	 	
              8.7

            	
              Survival
                of Representations and Warranties.
                The Borrower understands and agrees that in extending the Credit
                Facilities, the Bank is relying on all representations, warranties,
                and
                covenants made by the Borrower in this agreement or in any certificate
                or
                other instrument delivered by the Borrower to the Bank under this
                agreement. The Borrower further agrees that regardless of any
                investigation made by the Bank, all such representations, warranties
                and
                covenants will survive the making of the Credit Facilities and delivery
                to
                the Bank of this agreement, shall be continuing in nature, and shall
                remain in full force and effect until such time as the Borrower's
                indebtedness to the Bank shall be paid in
                full.

            

    

    

    
      	 	
              8.8

            	
              Non-Liability
                of the Bank.
                The relationship between the Borrower and the Bank created by this
                agreement is strictly a debtor and creditor relationship and not
                fiduciary
                in nature, nor is the relationship to be construed as creating any
                partnership or joint venture between the Bank and the Borrower. The
                Borrower is exercising the Borrower's own judgement with respect
                to the
                Borrower's business. All information supplied to the Bank is for
                the
                Bank's protection only and no other party is entitled to rely on
                such
                information. There is no duty for Bank to review, inspect, supervise
                or
                inform the Borrower of any matter with respect to the Borrower's
                business.
                The Bank and the Borrower intend that the Bank may reasonably rely
                on all
                information supplied by the Borrower to the Bank, together with all
                representations and warranties given by the Borrower to the Bank,
                without
                investigation or confirmation by the Bank and that any investigation
                or
                failure to investigate will not diminish the Bank's right to so rely.
                

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	 	
              8.9

            	
              Indemnification
                of the Bank.
                The Borrower agrees to indemnify, defend and hold the Bank, its parent
                companies, subsidiaries, affiliates, their respective successors
                and
                assigns and each of their respective shareholders, directors, officers,
                employees and agents (collectively, the "Indemnified Persons") harmless
                from any and against any and all loss, liability, obligation, damage,
                penalty, judgment, claim, deficiency, expense, interest, penalties,
                attorneys' fees (including the fees and expenses of attorneys engaged
                by
                the Indemnified Person at the Indemnified Person's reasonable discretion)
                and amounts paid in settlement ("Claims") to which any Indemnified
                Person
                may become subject arising
                out of or relating to this agreement or the Collateral,
                including
                any Claims resulting from any Indemnified Person’s own
                negligence,
                except to the limited extent that the Claims are proximately caused
                by the
                Indemnified Person's
                gross negligence or willful misconduct.
                The indemnification provided for in this paragraph shall survive
                the
                termination of this agreement and shall not be affected by the presence,
                absence or amount of or the payment or nonpayment of any claim under,
                any
                insurance.

            

    

    

    
      	 	
              8.10

            	
              Counterparts.
                This agreement may be executed in multiple counterparts, each of
                which,
                when so executed, shall be deemed an original, but all such counterparts,
                taken together, shall constitute one and the same
                agreement.

            

    

    

    
      	 	
              8.11

            	
              Sole
                Discretion of the Bank.
                Whenever the Bank's consent or approval is required under this agreement,
                the decision as to whether or not to consent or approve shall be
                in the
                sole and exclusive discretion of the Bank and the Bank's decision
                shall be
                final and conclusive.

            

    

    

    
      	 	
              8.12

            	
              Advice
                of Counsel.
                The Borrower acknowledges that it has been advised by counsel, or
                had the
                opportunity to be advised by counsel, in the negotiation, execution
                and
                delivery of this agreement and any Related
                Documents.

            

    

    

    
      	 	
              8.13

            	
              Recovery
                of Additional Costs. If
                the imposition of or any change in any law, rule, regulation, or
                guideline, or the interpretation or application of any thereof by
                any
                court or administrative or governmental authority (including any
                request
                or policy not having the force of law) shall impose, modify, or make
                applicable any taxes (except federal, state, or local income or franchise
                taxes imposed on the Bank), reserve requirements, capital adequacy
                requirements, or other obligations which would (A) increase the cost
                to
                the Bank for extending or maintaining the Credit Facilities, (B)
                reduce
                the amounts payable to the Bank under the Credit Facilities, or (C)
                reduce
                the rate of return on the Bank's capital as a consequence of the
                Bank's
                obligations with respect to the Credit Facilities, then the Borrower
                agrees to pay the Bank such additional amounts as will compensate
                the Bank
                therefor, within five (5) days after the Bank's written demand for
                such
                payment. The Bank's demand shall be accompanied by an explanation
                of such
                imposition or charge and a calculation in reasonable detail of the
                additional amounts payable by the Borrower, which explanation and
                calculations shall be conclusive in the absence of manifest
                error.

            

    

    

    
      	 	
              8.14

            	
              Conflicting
                Terms.
                If
                this agreement is inconsistent with any provision in any other Related
                Documents, the Bank shall determine, in the Bank's sole and absolute
                discretion, which of the provisions shall control any such
                inconsistency.

            

    

    

    
      	
            	8.15	
              Expenses.
                The Borrower agrees to pay or reimburse the Bank for all its out-of-pocket
                costs and expenses and reasonable attorneys' fees incurred in connection
                with the development, preparation and execution of, and in connection
                with
                the enforcement or preservation of any rights under, this agreement,
                any
                amendment, supplement, or modification thereto, and any other documents
                prepared in connection herewith or therewith. These costs and expenses
                include without limitation any costs or expenses incurred by the
                Bank in
                any bankruptcy, reorganization, insolvency or other similar proceeding.
                

            

    

    

    
      	
              9.

            	
              USA
                PATRIOT ACT NOTIFICATION.
                The following notification is provided to Borrower pursuant to Section
                326
                of the USA Patriot Act of 2001, 31 U.S.C. Section
                5318:

            

    

    

    IMPORTANT
      INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government
      fight the funding of terrorism and money laundering activities, Federal law
      requires all financial institutions to obtain, verify, and record information
      that identifies each person or entity that opens an account, including any
      deposit account, treasury management account, loan, other extension of credit,
      or other financial services product. What this means for Borrower: When Borrower
      opens an account, if Borrower is an individual Bank will ask for Borrower's
      name, taxpayer identification number, residential address, date of birth, and
      other information that will allow Bank to identify Borrower, and if Borrower
      is
      not an individual Bank will ask for Borrower's name, taxpayer identification
      number, business address, and other information that will allow Bank to identify
      Borrower. Bank may also ask, if Borrower is an individual to see Borrower's
      driver’s license or other identifying documents, and if Borrower is not an
      individual to see Borrower's legal organizational documents or other identifying
      documents.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              10.

            	
              WAIVER
                OF SPECIAL DAMAGES.
                THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
                ANY
                RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK
                IN ANY
                LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
                CONSEQUENTIAL DAMAGES. 

            

    

    

    
      	
              11.

            	
              JURY
                WAIVER.
                THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY
                AND
                UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
                ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN
                THE
                BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS
                DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
                PROVIDE
                THE FINANCING DESCRIBED HEREIN. 

            

    

    

    THIS
      AGREEMENT AND THE OTHER WRITTEN RELATED DOCUMENTS REPRESENT THE FINAL AGREEMENT
      BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
      PARTIES.

     

    THERE
      ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

    

    

    
      	
              Address(es)
                for Notices:

            	
              Borrower:

            
	 	 	 
	
              1000
                Crawford Place, Suite 400

              Mt.
                Laurel, NJ 08054

            	 	
              Mace
                Security International, Inc.

            
	 	 	 	 	 
	
              Attn:

            	 	 	
              By:

            	
              /s/
                Gregory M. Krzemien

            
	 	 	 	 	 	 
	 	 	 	 	
              Gregory
                M. Krzemien

            	
              Treasurer

            
	 	 	 	 	
              Printed
                Name

            	
              Title

            
	 	 	 	 	 	 
	 	 	 	
              Date
                Signed: 11/8/06

            	 

    

     

    
      	
              Address
                for Notices:

            	 	
              Bank:

            
	 	 	 
	
              500
                East Border Street

              Arlington,
                TX 76010

            	 	
              JPMorgan
                Chase Bank, N.A.

            
	 	 	 	 	 
	
              Attn:

            	 	 	
              By:

            	
              /s/
                Mark W. Warren

            
	 	 	 	 	 	 
	 	 	 	 	
              Mark
                W. Warren

            	
              Sr.
                Vice President

            
	 	 	 	 	
              Printed
                Name

            	
              Title

            
	 	 	 	 	 	 
	 	 	 	
              Date
                Signed: 11/03/06

            	 

    

     

    
      
         

      

      
        9

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