Document:

EXHIBIT 10.2

                          CREDIT AND SECURITY AGREEMENT

         AGREEMENT made this 31st day of August, 2005, by RESISTANCE TECHNOLOGY,
INC., a Minnesota corporation ("Resistance"); and RTI ELECTRONICS, INC., a
Delaware corporation ("RTI"); herein Resistance and RTI are sometimes referred
to individually as a "Borrower" and collectively as the "Borrowers"), for the
benefit of Diversified Business Credit, Inc., a Minnesota Corporation (herein
with its participants, successors and assigns, called "Lender").

                                 R E C I T A L S

          The Lender has agreed to make loans to Borrowers from time to time, on
the terms and subject to the conditions herein set forth, and in connection
therewith, Borrowers have executed and delivered, and have caused IntriCon
Corporation, a Pennsylvania corporation (the "Guarantor") and certain other
parties to execute and deliver, for Lender's benefit various ancillary and
supplemental agreements and documents (as each may be amended from time to time
herein collectively called the "Security Documents" and together with this
Agreement, the "Loan Documents").

         Any term used in the Uniform Commercial Code ("UCC") and not otherwise
defined in this Agreement shall have the meaning given to the term in the UCC.

         ACCORDINGLY, to induce Lender to make one or more loans to Borrowers,
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrowers hereby jointly and severally represent,
warrant and agree for the benefit of Lender that:

         1. The Loans. Borrowers will comply with the following terms and
procedures in requesting loans from Lender:

                  (a) The Lender agrees, on the terms and subject to the
         conditions herein set forth, to make the following loan advances:

                           (i) The Lender shall make revolving advances (the
                  "Revolving Advances") to each Borrower from time to time from
                  the date all of the conditions set forth in Section 12(a) and
                  (c) are satisfied (the "Funding Date") to August 31, 2008 (the
                  "Termination Date") in an amount equal to such Borrower's
                  respective Borrowing Base (as defined below), subject further
                  to the limitation that the outstanding aggregate balance of
                  Revolving Advances to both Borrowers shall at no time exceed

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                  $5,500,000 (the "Maximum Line"). If the sum of the outstanding
                  principal balance of the Revolving Advances shall at any time
                  exceed the limitations set forth above, then upon any
                  Borrower's knowledge thereof or Lender's demand, whichever is
                  earlier, the Borrowers shall immediately prepay the Revolving
                  Advances to the extent necessary to eliminate such excess.
                  Within the limits set forth in this Section 1(a)(i), each
                  Borrower may borrow, prepay and reborrow.

                           (ii) As and when the Borrowers and the Lender shall
                  execute any Term Loan Supplement (as amended from time to
                  time, each hereinafter referred to as a "Term Loan
                  Supplement"), the Lender agrees to make a term loan advance or
                  advances ("Term Advances" and together with the Revolving
                  Advances, the "Advances") to a Borrower, subject to the
                  additional terms, limits and conditions set forth therein.

                  (b) Borrowers will request Advances from Lender in such manner
         as Lender may from time to time prescribe. Each request shall be orally
         or in writing (i) by an officer of any Borrower; or (ii) by a person
         designated by any Borrower or by an officer of any Borrower in a
         writing delivered to Lender; or (iii) by any person reasonably believed
         by Lender to be an officer of any Borrower or such a designated agent.
         Except as otherwise instructed in writing by such officer, agent or
         person, Lender may disburse loan proceeds by deposit with any bank to
         or for the account of any Borrower or to or for the account of any
         third party designated by such officer, agent, or person, or by an
         instrument payable to any Borrower or to any such third party delivered
         to any such officer, agent, or person or to any such third party, or in
         any other manner deemed appropriate by Lender. All principal of and
         interest on loans made by Lender shall be repayable at the offices of
         Lender in Minneapolis, Minnesota, unless Lender designates a different
         place of payment by written notice to Borrowers.

                  (c) "Borrowing Base" shall mean, subject to change from time
         to time in the Lender's sole discretion, the sum of 85% of Eligible
         Accounts plus 50% of Eligible Inventory, less the Borrowing Base
         Reserve.

                           "Borrowing Base Reserve" shall mean, as of any date
         of determination, such amounts (expressed as either a specified amount
         or as a percentage of a specified category or item) as the Lender may
         from time to time establish and adjust in reducing availability under
         the Borrowing Base (a) to reflect events, conditions, contingencies or
         risks which, as determined by the Lender, do or may affect (i) the
         Collateral or its value, (ii) the assets, business or prospects of the
         Borrower, or (iii) the security interests and other rights of the
         Lender in the Collateral (including the enforceability, perfection and
         priority thereof), or (b) to reflect the Lender's judgment that any
         collateral report or financial information furnished by or on behalf of
         the Borrower to the Lender is or may have been incomplete, inaccurate
         or misleading in any material respect, or (c) in respect of any state
         of facts that the Lender determines constitutes a Default or an Event
         of Default.

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                           "Eligible Accounts" shall mean all unpaid accounts
         receivable arising from the sale or lease of goods or the performance
         of services in the ordinary course of business, net of any credits (and
         net of any setoffs or claims of any account debtor as determined by
         Lender), but excluding any such Accounts having any of the following
         characteristics:

                           (i) Accounts receivable which are (A) disputed or
                  subject to claims or set offs or a contra account; or (B) owed
                  by an account debtor not located in the United States or
                  Canada and not secured by a bank letter of credit or credit
                  insurance, each satisfactory to Lender in its sole discretion;
                  or (C) owed by an account debtor which is the subject of any
                  bankruptcy or insolvency proceeding or is insolvent or has
                  made an assignment for the benefit of creditors or has failed
                  or suspended or gone out of business;

                           (ii) Accounts receivable not yet earned by the final
                  delivery of goods or rendition of services, as applicable, by
                  any Borrower to the customer, including progress billings, and
                  that portion of Accounts for which an invoice has not been
                  sent to the applicable account debtor;

                           (iii) Accounts receivable that not as warranted
                  herein or in the Security Documents;

                           (iv) Intentionally deleted;

                           (v) Accounts receivable not paid within ninety (90)
                  days after invoice or, if Lender in its discretion has
                  determined that a particular dated receivable is eligible for
                  advance, within thirty (30) days after the due date stated;

                           (vi) Accounts receivable owed to any Borrower by any
                  shareholder, subsidiary or affiliate of such Borrower or by
                  any person or company obligated to pay any receivable deemed
                  ineligible under clauses (i) through (v), if such ineligible
                  receivable is 25% or more of the total amount due from such
                  person or company;

                           (vii) Intentionally deleted;

                           (viii) Accounts receivable owed by any unit of
                  government, whether foreign or domestic (provided, however,
                  that there shall be included in Eligible Accounts that portion
                  of Accounts owed by such units of government for which any
                  Borrower has provided evidence satisfactory to the Lender that
                  (A) the Lender has a first priority perfected security
                  interest and (B) such Accounts may be enforced by the Lender
                  directly against such unit of government under all applicable
                  laws);

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                           (ix) That portion of Accounts receivable that has
                  been restructured, extended, amended or modified (unless such
                  modification relates to a credit or claim that has been
                  disclosed to Lender and has been deducted by Lender from the
                  available amount of such Account; and

                           (x) That portion of Accounts receivable that
                  constitutes advertising, finance charges, service charges or
                  sales or excise taxes.

                  "Eligible Inventory" means all Inventory of each Borrower, at
         the lower of cost or market value as determined in accordance with
         generally accepted accounting principles (provided inventory shall be
         calculated on a first-in, first-out basis); but excluding any Inventory
         having any of the following characteristics:

                           (i) Inventory that is: in-transit; located at any
                  warehouse, job site or other premises not approved by the
                  Lender in writing; located outside of the states, or
                  localities, as applicable, in which the Lender has filed
                  financing statements to perfect a first priority security
                  interest in such Inventory; covered by any negotiable or
                  non-negotiable warehouse receipt, bill of lading or other
                  document of title; on consignment from any Person; on
                  consignment to any Person or subject to any bailment unless
                  such consignee or bailee has executed an agreement with the
                  Lender;

                           (ii) Supplies, packaging, maintenance parts or sample
                  Inventory;

                           (iii) Work-in-process Inventory;

                           (iv) Inventory that is damaged, obsolete, slow moving
                  or not currently saleable in the normal course of the
                  Borrower's operations;

                           (v) Inventory that the Borrower has returned, has
                  attempted to return, is in the process of returning or intends
                  to return to the vendor thereof;

                           (vi) Inventory that is perishable or live;

                           (vii) Inventory manufactured by the Borrower pursuant
                  to a license unless the applicable licensor has agreed in
                  writing to permit the Lender to exercise its rights and
                  remedies against such Inventory; and

                           (viii) Inventory that is subject to a Lien in favor
                  of any Person other than the Lender.

         Notwithstanding any apportionment, exclusion or segregation of
         Collateral made by Lender for purposes of determining the amount or
         maximum amount of loans made to Borrowers, all rights and interests of
         Lender hereunder and under the Security Documents, and all other
         collateral rights, interests and properties available to Lender, shall
         secure and may be applied

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         to pay any or all indebtedness of Borrowers secured thereby, in any
         manner or order of application and without regard to any such
         apportionment, exclusion or segregation.

                  (d) Advances shall be funded as either "Floating Rate Loans"
         which accrue interest at the applicable Floating Rate (as hereinafter
         defined) or "LIBOR Rate Loans" which accrue interest at the applicable
         LIBOR Rate (as hereinafter defined), as any Borrower shall specify to
         the Lender (and in writing if so requested by the Lender), provided
         that during the continuance of any Event of Default, no LIBOR Rate
         Loans shall be made or continued except with the prior written consent
         of the Lender. Floating Rate Loans and LIBOR Rate Loans may be
         outstanding at the same time. So long as no Event of Default exists,
         any Borrower may convert an outstanding Floating Rate Loan to or
         request a LIBOR Rate Loan, or cause all or any part of any outstanding
         LIBOR Rate Loan to continue to bear interest at One-Month LIBOR,
         Three-Month LIBOR or Six-Month LIBOR after the end of the then
         applicable 30-day, 90-day or 180-day interest period (as applicable),
         by notifying the Lender not later than 11:00 a.m., Minneapolis,
         Minnesota time, on a banking day which is at least two (2) banking days
         prior to the first day of the new LIBOR Rate Loan or interest period.
         Each such notice shall be in writing (if requested by Lender), shall be
         effective when received by the Lender, and shall specify the first day
         of the applicable LIBOR Rate Loan or interest period, and if
         applicable, the amount of the expiring LIBOR Rate Loan to be continued.
         Each new LIBOR Rate Loan or interest period, as applicable shall begin
         on a banking day and provided further that LIBOR Rate Loans shall (i)
         at no time exceed $6,000,000 in the aggregate, (ii) be made in minimum
         increments of $500,000 and in integral multiples of $100,000 for
         amounts in excess thereof, (iii) no more than three (3) Libor Rate
         Loans shall be outstanding at any time, and (iv) upon the expiration of
         the applicable One-Month LIBOR, Three-Month LIBOR or Six-Month LIBOR
         rate associated with a LIBOR Rate Loan, such loan shall automatically
         convert to a Floating Rate Loan unless continued by any Borrower in
         accordance with the terms of this Agreement.

                  (e) Borrowers will jointly and severally pay interest on all
         Advances (computed on the basis of actual days elapsed in a 360-day
         year) at the greater of: (i) the rate of five and one quarter percent
         (5 1/4%) per annum, and (ii) one of the following rates as applicable:
         (aa) on all outstanding Floating Rate Loans under this Agreement, an
         annual floating rate (the "Floating Rate") which shall at all times be
         equal to one-half percent (.5%) (provided such margin shall be
         increased to three quarters of one percent (.75%) for any portion
         thereof that constitutes Term Advances) above the rate of interest
         publicly announced by M&I Marshall & Ilsley Bank from time to time as
         its prime rate (or any similar successor rate), each change in the
         interest rate shall take effect simultaneously with the corresponding
         change in the designated bank's prime rate or any similar successor
         rate; and (bb) on all LIBOR Rate Loans under this Agreement at the per
         annum rate (the "LIBOR Rate") which shall at all times be equal to
         One-Month LIBOR, Three-Month LIBOR or Six-Month LIBOR (as applicable
         and as defined below) plus three and one-quarter percent
         (3.25%)(provided such margin shall be increased to three and one-half
         percent (3.50%) for any portion thereof

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         that constitutes Term Advances), as such rate shall be in effect from
         time to time in accordance with the terms of this Agreement.

                  All interest shall accrue on the principal balance outstanding
         from time to time and shall be payable on the first day of the next
         month in which accrued and on the Termination Date. Borrowers agree
         that Lender may at any time or from time to time, without further
         request by any Borrower, make a loan to Borrowers, or apply the
         proceeds of any loans, for the purpose of paying all such interest
         promptly when due. In the computation of interest, Lender may allow two
         banking days for the collection of uncollected funds. Notwithstanding
         anything to the contrary stated herein, the interest charges payable on
         the Advances pursuant to this Paragraph 1(e) for each twelve month
         period shall never be less than $100,000. If for any twelve month
         period the interest pursuant to Paragraph 1(e) shall be less than
         $100,000, Borrowers shall pay on the anniversary date of this Agreement
         ending each twelve months the amount of the difference between $100,000
         and the interest charges for such twelve month period.

                  As used herein, "One-Month LIBOR", "Three-Month LIBOR" and
         "Six-Month LIBOR" mean the annual rate equal to the rate at which U.S.
         dollar deposits are offered for 30, 90 and 120-day periods,
         respectively, on the second banking day preceding the beginning of the
         applicable LIBOR Rate Loan or renewal date of any existing LIBOR Rate
         Loan (rounded upwards, if necessary, to the nearest 1/16 of 1%) as
         determined by the British Bankers Association ("BBA LIBOR") and
         reported by a major news service selected by Lender (such as Reuters,
         Bloomberg or Moneyline Telerate).

                  If BBA LIBOR for a one-month, three-month or six-month period
         is not provided or reported on the applicable banking day of a month
         because, for example, it is a holiday or for another reason, the
         One-Month LIBOR, Three-Month LIBOR or Six-Month LIBOR rate (as
         applicable) shall be established as of the preceding banking day on
         which a BBA LIBOR rate is provided for a one-month, three-month or
         six-month period and reported by the selected news service.

                  Notwithstanding any provision of this Agreement to the
         contrary, the Lender may fund and maintain all or any part of its LIBOR
         Rate Loans in any manner it deems fit, it being understood, however,
         that for the purposes of this Agreement all determinations hereunder
         shall be made as if the Lender had actually funded and maintained each
         LIBOR Rate Loan through the purchase of deposits bearing an interest
         rate equal to the appropriate One-Month LIBOR, Three-Month LIBOR or
         Six-Month LIBOR rate.

                  The Borrower shall compensate the Lender, upon its written
         request, for all losses, expenses and liabilities (including any
         interest paid by the Lender to lenders of funds borrowed by it to make
         or carry LIBOR Rate Loans to the extent not recovered by the Lender in
         connection with the re-employment of such funds and including loss of

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         anticipated profits) which the Lender may sustain: (i) if for any
         reason, other than a default by the Lender, a funding of a LIBOR Rate
         Loan does not occur on the date specified therefor in the Borrower's
         request or notice as to such Advance under this Agreement, or (ii) if,
         for whatever reason (including, but not limited to, acceleration of the
         maturity of Advances following an Event of Default), any repayment of a
         LIBOR Rate Loan, or a conversion pursuant to Section 2.16, occurs on
         any day other than the last day of the Interest Period applicable
         thereto. The Lender's request for compensation shall set forth the
         basis for the amount requested and shall be final, conclusive and
         binding, absent manifest error.

                  If the Lender determines at any time that its Return has been
         reduced as a result of any Rule Change, then the Lender shall promptly
         notify the Borrowers and (A) in the event of any occurrence described
         in clauses (v)(A) and (v)(B) below, the Borrowers shall enter into good
         faith negotiations with the Lender in order to determine an alternate
         method to determine the One-Month LIBOR, Three-Month LIBOR or Six-Month
         LIBOR rate (as applicable), and during the pendency of such
         negotiations with the Lender, the Lender shall be under no obligation
         to make any new LIBOR Rate Loans and (B) in the event of any occurrence
         described in clause (v)(C) below, for so long as such circumstances
         shall continue, the Lender shall be under no obligation to make any new
         LIBOR Rate Loans. For purposes of this provision:

                            (i) "Eurodollar Rule" means Regulation D of the
                  Board of Governors of the Federal Reserve System and any law,
                  rule, regulation, guideline, directive, requirement or request
                  regarding (A) taxes, duties or other charges, exemptions with
                  respect to LIBOR Rate Loans or the Lender's obligation to make
                  LIBOR Rate Loans, and (B) reserves imposed by the Board of
                  Governors of the Federal Reserve System (but excluding any
                  reserve included in the determination of the One-Month LIBOR,
                  Three-Month LIBOR or Six-Month LIBOR rates), special deposits
                  or similar requirements against assets of, deposits with or
                  for the account of, or credit extended by, any Related Lender,
                  and any other condition affecting the Lender's making,
                  maintaining or funding of LIBOR Rate Loans or its obligation
                  to make LIBOR Rate Loans, or the interpretation or
                  administration thereof by any governmental or regulatory
                  authority, central bank or comparable agency, whether or not
                  having the force of law, that applies to any Related Lender.

                            (ii) "Related Lender" includes (but is not limited
                  to) the Lender, any parent of the Lender, any assignee of any
                  interest of the Lender hereunder and any participant in the
                  Credit Facility.

                           (iii) "Return", for any period, means the percentage
                  determined by dividing (i) the sum of interest and ongoing
                  fees earned by the Lender under this Agreement during such
                  period, by (ii) the average capital such Lender is required to
                  maintain during such period as a result of its being a party
                  to this Agreement, as determined by such Lender based upon its
                  total capital requirements and a reasonable

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                  attribution formula that takes account of Eurodollar Rules
                  then in effect, costs of issuing or maintaining any loan and
                  amounts received or receivable under this Agreement with
                  respect to any loan. Return may be calculated for each
                  calendar quarter and for the shorter period between the end of
                  a calendar quarter and the date of termination in whole of
                  this Agreement.

                           (iv) "Rule Change" means any change in any Eurodollar
                  Rule occurring after the date of this Agreement, or any change
                  in the interpretation or administration thereof by any
                  governmental or regulatory authority, but the term does not
                  include any changes that at the Funding Date are scheduled to
                  take place under the existing Eurodollar Rules or any
                  increases in the capital that the Lender is required to
                  maintain to the extent that the increases are required due to
                  a regulatory authority's assessment of that Lender's financial
                  condition.

                           (v) Any One-Month LIBOR, Three-Month LIBOR or
                  Six-Month LIBOR rate shall be deemed inadequate or unfair if:

                                    (A) the Lender determines that deposits in
                           US dollars (in the applicable amounts) are not being
                           offered in the London interbank eurodollar market for
                           such thirty, sixty or ninty-day periods; or

                                    (B) the Lender otherwise determines that by
                           reason of circumstances affecting the London
                           interbank eurodollar market adequate and reasonable
                           means do not exist for ascertaining the One-Month
                           LIBOR, Three-Month LIBOR or Six-Month LIBOR rate; or

                                    (C) the One-Month LIBOR, Three-Month LIBOR
                           or Six-Month LIBOR rate will not adequately and
                           fairly reflect the cost to the Lender of funding any
                           LIBOR Rate Loans, or that the funding of LIBOR Rate
                           Loans has become impracticable as a result of an
                           event occurring after the date of this Agreement
                           which in the opinion of the Lender materially affects
                           such LIBOR Rate Loans;

                  If any Rule Change should make it or, in the good faith
         judgment of the Lender, shall raise a substantial question as to
         whether it is unlawful for the Lender to make, create, maintain or fund
         LIBOR Rate Loans, then (i) the Lender shall promptly notify the
         Borrowers, (ii) the obligation of the Lender to make, maintain or
         convert into LIBOR Rate Loans shall, upon the effectiveness of such
         event, be suspended for the duration of such unlawfulness, and (iii)
         for the duration of such unlawfulness, any notice by a Borrower
         requesting the Lender to make or continue making or convert into LIBOR
         Rate Loans shall be construed as a request to make or to continue
         making Floating Rate Loans.

                  (f) The Borrowers agree to pay to the Lender an unused line
         fee at the rate of one-quarter percent (0.25%) per annum on the average
         daily Unused Amount from the

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         date of this Agreement to and including the Termination Date, due and
         payable monthly in arrears on the first day of the month and on the
         Termination Date. "Unused Amount" means sum of (i) the Maximum Line,
         less (ii) the amount of outstanding Revolving Advances.

                  (g) In addition to any other amounts payable by Borrowers to
         Lender, Borrowers agree to pay to the Lender on the date of this
         Agreement and on each anniversary date of this Agreement, an annual fee
         equal to the greater of $27,500 or one-half percent (1/2%) of the
         Maximum Line.

                  (h) Lender may maintain from time to time, at its discretion,
         liability records as to any and all loans made or repaid and interest
         accrued or paid under this Agreement. All entries made on any such
         record shall be presumed correct until Borrowers establish the
         contrary. On demand by Lender, Borrowers will promptly admit and
         certify in writing the exact principal balance which Borrowers then
         assert to be outstanding to Lender for loans under this Agreement. Any
         billing statement or accounting rendered by Lender shall be conclusive
         and fully binding on Borrowers unless specific written notice of
         exception is given to Lender by Borrowers within thirty (30) days after
         its receipt by Borrowers.

                  (i) Borrowers' obligations with respect to all loans shall be
         fully binding and enforceable without any note or other evidence of
         indebtedness. Nevertheless, if Lender so requests, Borrowers will duly
         execute and deliver to Lender a promissory note in negotiable form
         payable to the order of Lender in a principal amount equal to the
         principal balance then outstanding to Lender for loans under this
         Agreement, together with interest as set forth in Paragraph 1(d).

                  (j) In requesting any loans under this Agreement, Borrowers
         shall be deemed to represent and warrant to Lender that, as of the date
         of the proposed loans, (i) all of the representations and warranties
         made in Paragraphs 3 and 4 will be true and correct except for changes
         caused by transactions permitted under this Agreement, and (ii) no
         breach or default under, and no Event of Default defined or described
         in, this Agreement or any of the Security Documents will exist.

                  (k) All obligations of the Borrowers hereunder and under the
         other Security Documents, whether now existing or hereafter incurred,
         shall be joint and several and neither Borrower is intended as an
         accommodation party of the other. Each Borrower hereby agrees to make
         payment upon the maturity of the Obligations, whether by acceleration
         or otherwise, and such obligation and liability on the part of each
         Borrower shall in no way be affected by (i) any act or omission of the
         Lender including, without limitation any extension, renewal or
         forbearance granted by the Lender to any Borrower or any guarantor or
         other party, (ii) any failure of the Lender to pursue or preserve its
         rights against any Borrower, guarantor or other party, (iii) the
         release by the Lender of any collateral now or hereafter given as
         security for all

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         or any part of such obligations; and each Borrower shall be and remain
         liable for any deficiency remaining after foreclosure of any mortgage
         or security interest securing any Obligations, whether or not the
         liability of either Borrower or any other obligor for such deficiency
         is discharged pursuant to statute or judicial decision.

         2. Affiliate. For the purposes of this Agreement, "Affiliate" refers to
the Guarantor, RTI Tech PTE Ltd.; Resistance Technology Gmbh, and any other
corporation, partnership, individual or other entity which now or hereafter
controls, is controlled by, or is under common control with any Borrower. Each
Borrower agrees that any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and Lender shall
constitute a breach of this Agreement and an Event of Default hereunder and
under the Security Documents. "Affiliated Corporation" shall refer to any entity
that is not a natural person.

         3.       Security Interest.

                  (a) Grant of Security Interest. Each Borrower hereby assigns
         to Lender and grants Lender a security interest (collectively referred
         to as the "Security Interests") in the property described below, as
         security for the payment and performance of each and every debt,
         liability and obligation of every type and description which any
         Borrower may now or at any time hereafter owe to Lender (whether such
         debt, liability or obligation now exists or is hereafter created or
         incurred, whether it arises in a transaction involving Lender alone or
         in a transaction involving other creditors of any Borrower, and whether
         it is direct or indirect, due or to become due, absolute or contingent,
         primary or secondary, liquidated or unliquidated, or sole, joint,
         several or joint and several, and including specifically, but not
         limited to, all indebtedness of Borrowers arising under this or any
         other present or future loan or credit agreement, promissory note,
         guaranty or other undertaking of any Borrower enforceable by Lender;
         all such debts, liabilities and obligations are herein collectively
         referred to as the "Obligations"). The Security Interests shall attach
         to all of the personal property and fixtures of each Borrower (the
         "Collateral"), including all proceeds and products thereof and,
         including, without limitation the following:

         INVENTORY: All inventory, as such term is defined in the UCC, of every
         type and description, now owned or hereafter acquired by such Borrower,
         including inventory consisting of whole goods, spare parts or
         components, supplies or materials and inventory acquired, held or
         furnished for sale, for lease or under service contracts or for
         manufacture or processing, or any other purpose, and wherever located.

         DOCUMENTS OF TITLE: All warehouse receipts, bills of lading and other
         documents of title of every type and description now owned or hereafter
         acquired by such Borrower.

         ACCOUNTS: All of such Borrower's accounts, as such term is defined in
         the UCC, now existing or hereafter arising, including each and every
         right of such Borrower to the payment

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         of money, whether such right to payment now exists or hereafter arises,
         whether such right to payment arises out of a sale, lease or other
         disposition of goods or other property, out of a rendering of services,
         out of a loan, out of the overpayment of taxes or other liabilities, or
         any other transaction or event, whether such right to payment is
         created, generated or earned by such Borrower or by some other person
         whose interest is subsequently transferred to such Borrower, whether
         such right to payment is or is not already earned by performance, and
         howsoever such right to payment may be evidenced, together with all
         other rights and interests (including all liens, security interests and
         guaranties) which such Borrower may at any time have by law or
         agreement against any account debtor or other person obligated to make
         any such payment or against any property of such account debtor or
         other person; all contract rights, chattel papers, bonds, notes and
         other debt instruments, and all loans and obligations receivable, tax
         refunds and other rights to payment in the nature of general
         intangibles; all checking accounts, savings accounts and other
         depository accounts and all savings certificates and certificates of
         deposit maintained with or issued by Lender or any other bank or other
         financial institution.

         EQUIPMENT AND FIXTURES: All equipment, as such term is defined in the
         UCC, now owned or hereafter acquired by such Borrower and all fixtures
         of every type and description now owned or hereafter acquired by such
         Borrower, including (without limitation) all present and future
         machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
         equipment, office and recordkeeping equipment, parts, tools, supplies
         and all other goods (except inventory) used or bought for use by such
         Borrower for any business or enterprise; including (without limitation)
         all goods that are or may be attached or affixed or otherwise become
         fixtures upon any real property; and including specifically (without
         limitation) the goods described in any equipment schedule or list
         herewith or hereafter furnished to Lender by such Borrower, all
         accessions attachments, parts and repairs now or hereafter attached or
         affixed or used in connection with equipment, all substitutions and
         replacements thereof, and all like or similar property now owned or
         hereafter acquired by such Borrower. (No such schedule or list need be
         furnished in order for the security interest granted herein to be valid
         as to all of such Borrower's equipment.)

         INVESTMENT PROPERTY: All investment property, as such term is defined
         in the UCC, whether now owned or hereafter acquired by such Borrower,
         including (without limitation) all securities, security entitlements,
         securities accounts, commodity contracts, commodity accounts, stocks,
         bonds, mutual fund shares, money market shares and U.S. Government
         securities.

         GENERAL INTANGIBLES: All general intangibles of every type and
         description now owned or hereafter acquired by such Borrower, including
         (without limitation) all present and future intellectual property,
         proprietary rights, foreign and domestic patents, patent applications,
         trademarks, trademark applications, service marks, service mark
         applications, trade dress, mask works, copyrights, trade names, trade
         secrets, shop drawings, engineering

                                       11

<PAGE>

         drawings, blueprints, specifications, parts lists, manuals, operating
         instructions, customer or supplier lists and contracts, licenses,
         permits, franchises, the right to use such Borrower's corporate name,
         and the goodwill of such Borrower's business.

         MISCELLANEOUS COLLATERAL: All instruments, chattel paper, deposit
         accounts, documents, goods, letter-of-credit rights, letters of credit,
         all sums on deposit in any collateral account, and any items in any
         lockbox, now existing or hereafter arising, and any money or other
         assets of the such Borrower that come into the possession, custody or
         control of the Lender.

                  (b) Representations, Warranties and Covenants. Borrowers
         represent, warrant and covenant as follows:

                           (1) Each Borrower has (or will have at the time it
                  acquires rights in Collateral hereafter arising) and will
                  maintain so long as the Security Interests may remain
                  outstanding, absolute title to each item of Collateral and all
                  proceeds thereof, free and clear of all interests, liens,
                  attachments, encumbrances and security interests except the
                  Security Interests and as provided herein and except as Lender
                  may otherwise agree in writing. Each Borrower will defend the
                  Collateral against all claims or demands of all persons (other
                  than Lender) claiming the Collateral or any interest therein.
                  Borrowers will not sell or otherwise dispose of the Collateral
                  or any interest therein, except the sale of inventory in the
                  ordinary course of such Borrower's business and except as set
                  forth in Section 6(d) hereof, without Lender's prior written
                  consent. Each Borrower's interest in the Collateral is freely
                  transferable to any person, without condition, limitation,
                  jurisdiction or restriction of governmental authority, or any
                  other qualification whatsoever.

                           (2) Each Borrower's exact legal name and federal
                  employer identification and organization identification
                  numbers are as set forth below and state of organization is as
                  set forth above. Each Borrower does business solely under its
                  own name and the trade names (if any) set forth below. The
                  places of business and chief executive office of each Borrower
                  are located at the address(es) set forth below, and all
                  tangible Collateral is located at such address(es). All of
                  each Borrower's records relating to its business or the
                  Collateral are kept at its chief executive office. Borrower
                  will not permit any tangible Collateral or any records
                  pertaining to Collateral to be located in any state or area in
                  which, in the event of such location, a financing statement
                  covering such Collateral would be required to be, but has not
                  in fact been, filed in order to perfect the Security
                  Interests. Borrowers will not change its name, articles of
                  incorporation or jurisdiction of organization without prior
                  written consent of Lender. Borrowers will not change its
                  identity or corporate structure or the location of its place
                  of business, without prior written notice to Lender.

                                       12

<PAGE>

                           (3) None of the Collateral is or will become a
                  fixture on real estate, unless a sufficient fixture filing is
                  in effect with respect thereto.

                           (4) Each account and other right to payment and each
                  instrument, document, chattel paper and other agreement
                  constituting or evidencing Collateral is (or, in the case of
                  all future Collateral, will be when arising or issued) the
                  valid, genuine and legally enforceable obligation, subject to
                  no defense, setoff or counterclaim (except for credits, claims
                  and allowances reported to the Lender in writing under Section
                  5(e) hereof), of the account debtor or other obligor named
                  therein or in each Borrower's records pertaining thereto as
                  being obligated to pay such obligation. Each Borrower will not
                  agree to modify, amend, subordinate, cancel or terminate the
                  obligation of any such account debtor or other obligor without
                  Lender's prior written consent except to provide standard and
                  customary credits in the ordinary course consistent with past
                  practices.

                           (5) Each Borrower will keep all tangible Collateral
                  in good repair, working order and condition, normal
                  depreciation, wear and tear excepted, and will, from time to
                  time, replace any worn, broken or defective parts.

                           (6) Each Borrower will promptly pay all taxes and
                  other governmental charges levied or assessed upon or against
                  any Collateral or upon or against the creation, perfection or
                  continuance of the Security Interests.

                           (7) Each Borrower will keep all Collateral free and
                  clear of all security interests, liens and encumbrances except
                  the Security Interests and as provided herein and except other
                  security interests herein or otherwise approved in writing by
                  Lender.

                           (8) Each Borrower will at all reasonable times permit
                  Lender or its representatives to examine or inspect any
                  Collateral, or any evidence of Collateral, wherever located.

                           (9) Each Borrower will promptly notify Lender of any
                  loss of or material damage to any Collateral or of any
                  substantial adverse change, known to such Borrower, in any
                  Collateral or the prospect of payment thereof.

                           (10) Upon request by Lender, whether such request is
                  made before or after the occurrence of any Event of Default,
                  each Borrower will promptly deliver to Lender in pledge all
                  instruments, documents and chattel papers constituting
                  Collateral, duly endorsed or assigned by such Borrower.

                           (11) Each Borrower will at all times keep all
                  tangible Collateral insured against risks of fire (including
                  so-called extended coverage), theft, collision (for

                                       13

<PAGE>

                  Collateral consisting of motor vehicles) and such other risks
                  and in such amounts as Lender may reasonably request, with any
                  loss payable to Lender to the extent of its interest. Prior to
                  any Default, each Borrower shall be permitted to settle and
                  receive insurance proceeds of any claims in the total
                  aggregate amount of $35,000 or less provided that prior
                  written notice thereof is given to Lender.

                           (12) Each Borrower will use and keep the Collateral,
                  and will require that others use and keep the Collateral, only
                  for lawful purposes, without violation of any federal, state
                  or local law, statute or ordinance.

                           (13) Each Borrower from time to time will execute and
                  deliver or endorse any and all instruments, documents,
                  conveyances, assignments, security agreements, financing
                  statements and other agreements and writings which Lender may
                  reasonably request in order to secure, protect, perfect or
                  enforce the Security Interests or the rights of Lender under
                  this Agreement (but any failure to request or assure that such
                  Borrower executes, delivers or endorses any such item shall
                  not affect or impair the validity, sufficiency or
                  enforceability of this Agreement and the Security Interests,
                  regardless of whether any such item was or was not executed,
                  delivered or endorsed in a similar context or on a prior
                  occasion).

                           (14) Promptly upon knowledge thereof, each Borrower
                  will deliver to Lender notice of any commercial tort claims it
                  may bring against any person, including the name and address
                  of each defendant, a summary of the facts, an estimate of such
                  Borrower's damages, copies of any complaint or demand letter
                  submitted by such Borrower, and such other information as the
                  Lender may request. Upon request by Lender, each Borrower will
                  grant the Lender a security interest in all commercial tort
                  claims it may have against any person.

                           (15) The proper place to file financing statements to
                  perfect the security interests granted by the Guarantor in the
                  Security Documents, other than in Collateral which are
                  fixtures, is the Office of Secretary of State of Pennsylvania
                  and the proper place to file a financing statement to perfect
                  such security interest in fixtures of the Guarantor is the
                  County Recorder of Ramsey County, Minnesota. When the
                  financing statements heretofore authorized by the Guarantor
                  are filed there, Lender will have valid and perfected security
                  interests in the "Collateral" described in the Security
                  Documents, subject to no prior security interest, assignment,
                  lien or encumbrance (except interests, if any, specifically
                  approved by Lender herein or otherwise in writing).

                           (16) The proper place to file financing statements to
                  perfect the Security Interests with respect to Resistance
                  other than in Collateral which are fixtures is the Office of
                  Secretary of State of Minnesota and the proper place to file a
                  financing

                                       14

<PAGE>

                  statement to perfect the Security Interest in Collateral which
                  are fixtures is the County Recorder of Ramsey County,
                  Minnesota. When the financing statements are filed there,
                  Lender will have valid and perfected Security Interests in the
                  Collateral, subject to no prior security interest, assignment,
                  lien or encumbrance (except interests, if any, specifically
                  approved by Lender herein or otherwise in writing).

                           (17) The proper place to file financing statements to
                  perfect the Security Interests with respect to RTI other than
                  in Collateral which are fixtures is the Office of Secretary of
                  State of Delaware and the proper place to file a financing
                  statement to perfect the Security Interest in Collateral which
                  are fixtures is the County Recorder of Orange County, CA. When
                  the financing statements are filed there, Lender will have
                  valid and perfected Security Interests in the Collateral,
                  subject to no prior security interest, assignment, lien or
                  encumbrance (except interests, if any, specifically approved
                  by Lender herein or otherwise in writing).

                                    If any Borrower at any time fails to perform
                  or observe any of the foregoing agreements, and if such
                  failure shall continue for a period of ten (10) calendar days
                  after Lender gives Borrowers written notice thereof (or in the
                  case of the agreements contained in Paragraphs 3(b)(7) and
                  3(b)(11) above, immediately upon the occurrence of such
                  failure, without notice or lapse of time), Lender may, but
                  need not, perform or observe such agreement on behalf and in
                  the name, place and stead of Borrowers (or, at Lender's
                  option, in the name of Lender) and may, but need not, take any
                  and all other actions which Lender may reasonably deem
                  necessary to cure or correct such failure (including, without
                  limitation, the payment of taxes, the satisfaction of security
                  interests, liens or encumbrances, the performance of
                  obligations owed to account debtors or other obligors, the
                  procurement and maintenance of insurance, the execution of
                  assignments, security agreements and financing statements, and
                  the endorsement of instruments); and Borrowers shall thereupon
                  pay to Lender on demand the amount of all monies expended and
                  all costs and expenses (including reasonable attorneys' fees
                  and legal expenses) incurred by Lender in connection with or
                  as a result of the performance or observance of such
                  agreements or the taking of such action by Lender, together
                  with interest thereon from the date expended or incurred at
                  the highest lawful rate then applicable to any of the
                  Obligations. To facilitate the performance or observance by
                  Lender of such agreements of Borrowers, each Borrower hereby
                  irrevocably appoints Lender, or the delegate of Lender, acting
                  alone, as the attorney-in-fact of such Borrower with the right
                  (but not the duty) from time to time to create, prepare,
                  complete, execute, deliver, endorse or file in the name and on
                  behalf of such Borrower any and all instruments, documents,
                  assignments, security agreements, financing statements,
                  applications for insurance and other agreements and writings
                  required to be obtained, executed, delivered or endorsed by
                  such Borrower under this Paragraph 3(b).

                                       15

<PAGE>

                  (c) Proceeds; Collateral Account. Each Borrower agrees to
         deliver to Lender, or, at Lender's option, to deposit in a Lockbox (as
         defined below), all proceeds of cash sales of inventory, all
         collections on accounts, contract rights, chattel paper and other
         rights to payment constituting Collateral, and all other cash proceeds
         of Collateral, immediately upon receipt thereof, in the form received,
         except for Borrower's endorsement when deemed necessary. As used
         herein, "Lockbox" shall mean a special collateral account in the name
         of the Lender or at the option of the Lender, that each Borrower shall
         create and maintain for Lender, at M&I Marshall & Ilsley Bank and which
         shall be subject to a Lockbox agreement in form and substance
         satisfactory to Lender. Each Borrower shall instruct all account
         debtors to pay all Accounts directly to the Lockbox. If,
         notwithstanding such instructions, any Borrower receives any payments
         on Accounts, the Borrower shall immediately deposit such payments into
         the Lockbox. Each Borrower shall also deposit all other cash proceeds
         of Collateral directly to the Lockbox. Amounts deposited to the Lockbox
         shall not bear interest and shall not be subject to withdrawal by
         Borrower, except after full payment and discharge of all Obligations.
         All such collections shall constitute proceeds of Collateral and shall
         not constitute payment of any Obligation. Until delivered to Lender or
         deposited in Lender's collateral account or Lockbox, all proceeds or
         collections of Collateral shall be held in trust by each Borrower for
         and as the property of Lender and shall not be commingled with any
         funds or property of either Borrower. Lender may deposit any and all
         collections received by it from Borrowers or out of any Lockbox in
         Lender's general account and may commingle such collections with other
         property of Lender or any other person. All items shall be delivered to
         Lender or deposited in any Lockbox subject to final payment. If any
         such item is returned uncollected, Borrowers will immediately pay
         Lender, or, for items deposited in a Lockbox, the bank maintaining such
         Lockbox, the amount of that item, or such bank in its discretion may
         charge any uncollected item to Borrower's commercial account or other
         account. Borrowers shall be liable as an endorser on all items
         deposited in any collateral account or Lockbox, whether or not in fact
         endorsed by Borrower. Lender from time to time at its discretion may
         apply funds on deposit in any collateral account to the payment of any
         or all Obligations, in any order or manner of application satisfactory
         to Lender; provided, however, that prior to any Default and except as
         otherwise directed by Borrower or provided under any Term Loan
         Supplement, all collateral account proceeds shall be used first to pay
         Revolving Advances unless such proceeds are proceeds from the sale of
         real estate or Equipment of any Borrower or insurance proceeds of any
         such collateral.

                  (d) Collection Rights of Lender. In addition to the rights of
         Lender under Paragraph 3(c), with respect to any and all rights to
         payment constituting Collateral, Lender may at any time after the
         occurrence of any Default notify any account debtor or other person
         obligated to pay the amount due that such right to payment has been
         assigned or transferred to Lender for security and shall be paid
         directly to Lender. Borrowers will join in giving such notice, if
         Lender so requests. At any time after Borrowers or Lender gives such
         notice to an account debtor or other obligor, Lender may, but need not,
         in Lender's name or in Borrower's name, (i) demand, sue for, collect or
         receive any money or property at any time

                                       16

<PAGE>

         payable or receivable on account of, or securing, any such right to
         payment, or grant any extension to, make any compromise or settlement
         with or otherwise agree to waive, modify, amend or change the
         obligations (including collateral obligations) of any such account
         debtor or other obligor; and (ii) as agent and attorney-in-fact of
         Borrowers notify the United States Postal Service to change the address
         for delivery of Borrower's mail to any address designated by Lender and
         otherwise intercept, receive, open and dispose of Borrower's mail,
         applying all Collateral as permitted under this Agreement and holding
         all other mail for Borrower's account or forwarding such mail to
         Borrower's last known address.

                  (e) Assignment of Insurance. As additional security for the
         payment and performance of the Obligations, each Borrower hereby
         assigns to Lender any and all monies (including, without limitation,
         proceeds of insurance and refunds of unearned premiums) due or to
         become due under, and all other rights of such Borrower with respect
         to, any and all policies of insurance now or at any time hereafter
         covering the Collateral or any evidence thereof or any business records
         or valuable papers pertaining thereto, and each Borrower hereby directs
         the issuer of any such policy to pay all such monies directly to
         Lender. At any time, whether before or after the occurrence of any
         Event of Default, Lender may (but need not), in Lender's name or in
         Borrower's name, execute and deliver proofs of claim, receive all such
         monies, endorse checks and other instruments representing payment of
         such monies, and adjust, litigate, compromise or release any claim
         against the issuer of any such policy. Notwithstanding the foregoing,
         prior to the occurrence of any Default, Borrowers shall be permitted to
         settle and receive insurance proceeds of any claims in the total
         aggregate amount of $35,000 or less provided that written notice is
         given to Lender.

                  (f) Filing of Financing Statements. Each Borrower authorizes
         Lender to file financing statements describing the Collateral and
         describing any other statutory liens held by Lender.

                  (g) Verification. At any time or from time to time, under its
         own name or under a trade name, Lender may (but shall not be obligated
         to) send to and discuss with Borrower's account debtors requests for
         verification of amounts owed to Borrower. If Lender so requests at any
         time, each Borrower will send requests for verification to its account
         debtors or join in any requests for verification sent by Lender.

                  (h) Surplus and Deficiency; Care of Collateral. This Agreement
         does not contemplate a sale of accounts, contract rights or chattel
         paper, and, as provided by law, each Borrower is entitled to any
         surplus and shall remain liable for any deficiency. Lender's duty of
         care with respect to Collateral in its possession (as imposed by law)
         shall be deemed fulfilled if it exercises reasonable care in physically
         keeping such Collateral, or in the case of Collateral in the custody or
         possession of a bailee or other third person, exercises reasonable care
         in the selection of the bailee or other third person, and Lender need
         not otherwise preserve, protect, insure or care for any Collateral.
         Lender shall not be obligated to preserve

                                       17

<PAGE>

         any rights any Borrower may have against prior parties, to realize on
         the Collateral at all or in any particular manner or order or to apply
         any cash proceeds of the Collateral in any particular order of
         application.

         4. Representations and Warranties. Each Borrower represents and
warrants to Lender that:

                  (a) The Guarantor is a corporation duly organized and existing
         in good standing under the laws of the State of Pennsylvania. It has
         the corporate power to own its property and to carry on its business as
         now conducted and is duly qualified to do business in all states in
         which such qualification is required. During its corporate existence,
         the Guarantor has done business solely under the name IntriCon
         Corporation and Selas Corporation. The Guarantor does not own any
         capital stock of any corporation or equity of any entity except
         Resistance Technology, Inc. and RTI Electronics, Inc., each wholly
         owned subsidiaries, and Proucare Medical, Inc. of which the Guarantor
         owns less than 1% of issued and outstanding voting stock, and hereafter
         except as otherwise disclosed to the Lender in writing.

                  (b) Resistance is a corporation duly organized and existing in
         good standing under the laws of the State of Minnesota. It has the
         corporate power to own its property and to carry on its business as now
         conducted and is duly qualified to do business in all states in which
         such qualification is required. During its corporate existence,
         Resistance has done business solely under the name Resistance
         Technology, Inc. Resistance does not own any capital stock of any
         corporation or equity of any entity except RTI Tech PTE LTD and
         Resistance Technology Gmbh.

                  (c) RTI is a corporation duly organized and existing in good
         standing under the laws of the State of Delaware. It has the corporate
         power to own its property and to carry on its business as now conducted
         and is duly qualified to do business in all states in which such
         qualification is required. During its corporate existence, RTI has done
         business solely under the name RTI Electronics, Inc. RTI does not own
         any capital stock of any corporation.

                  (d) Each Borrower is duly authorized and empowered to execute,
         deliver and perform the Loan Documents and to borrow money from Lender.

                  (e) The execution and delivery of the Loan Documents, and the
         performance by each Borrower of its obligations thereunder, do not and
         will not violate or conflict with any provision of law or the Articles
         of Incorporation or By-Laws of such Borrower and do not and will not
         violate or conflict with, or cause any default or event of default to
         occur under, any agreement binding upon such Borrower.

                  (f) The execution and delivery of the Loan Documents have been
         duly approved by all necessary action of the directors and shareholders
         of each Borrower; and the Loan

                                       18

<PAGE>

         Documents have in fact been duly executed and delivered by such
         Borrower and constitute its lawful and binding obligations, legally
         enforceable against it in accordance with their respective terms
         (subject to laws generally affecting the enforcement of creditors'
         rights).

                  (g) No litigation, tax claims or governmental proceedings are
         pending or are threatened against any Borrower, the Guarantor or any
         Affiliate and no judgment or order of any court or administrative
         agency is outstanding against any Borrower, the Guarantor or any
         Affiliate, except for (i) certain pending litigation involving
         asbestos-related claims that have been disclosed by the Guarantor in
         documents filed with the Securities and Exchange Commission and each of
         which are fully covered by insurance policies maintained by the
         Guarantor and/or the Borrowers, and (ii) except for other pending or
         threatened litigation arising from time to time disclosed to the Lender
         in writing and that, on a consolidated basis amongst the Borrowers, the
         Guarantor and their Affiliates, individually does not involve claims in
         excess of $35,000 or in the aggregate more than $100,000.

                  (h) The transactions contemplated by this Agreement and any
         supplement thereto do not violate any law pertaining to usury or the
         payment of interest on loans.

                  (i) The authorization, execution, delivery and performance of
         the Loan Documents are not and will not be subject to the jurisdiction,
         approval or consent of, or to any requirement of registration with or
         notification to, any federal, state or local regulatory body or
         administrative agency.

                  (j) The conduct of its business by each Borrower is not
         subject to registration with, notification to, or regulation,
         licensing, franchising, consent or approval by any state or federal
         governmental authority or administrative agency, except general laws
         and regulations which are not related or applicable particularly or
         uniquely to the type of business conducted by Borrower, which do not
         materially restrict or limit the business of such Borrower, and with
         which such Borrower is in full compliance. All registrations and
         notifications required to be made, and all licenses, franchises,
         permits, operating certificates, approvals and consents required to be
         issued, to enter into or conduct such business have been duly and
         lawfully made or obtained and issued, and all terms and conditions set
         forth therein or imposed thereby have been duly met and complied with.

                  (k) To the best knowledge of each Borrower based upon
         reasonable inquiry, no director, shareholder, officer, employee or
         agent of, or consultant to, any Borrower is prohibited by law, by
         regulation, by contract, or by the terms of any license, franchise,
         permit, certificate, approval or consent from participating in the
         business of any Borrower as director, shareholder, partner, officer,
         employee or agent of, or as consultant to, any Borrower, or is the
         subject of any pending or, to each Borrower's best knowledge,
         threatened proceeding which, if determined adversely, would or could
         result in such a prohibition.

                                       19

<PAGE>

                  (l) All assets of each Borrower and any Affiliate are free and
         clear of liens, security interests and encumbrances, except those
         permitted under Paragraph 6(b).

                  (m) All Borrowers and all Affiliates have filed all federal
         and state tax returns which are required to be filed, and all taxes
         shown as due thereon have been paid. Borrower and all Affiliates have
         paid or caused to be paid to the proper authorities when due all
         federal, state and local taxes required to be withheld by them.

                  (n) Borrowers have furnished to Lender the financial
         statements described below for the periods described below:

                                December 31, 2003
                                ------------------------------
                                December 31, 2004
                                ------------------------------
                                June 30, 2005
                                ------------------------------

         These statements were prepared in accordance with generally accepted
         accounting principles consistently maintained, present fairly the
         financial condition of the Guarantor and the Borrowers as at the dates
         thereof, and disclose fully all liabilities of the Guarantor and the
         Borrowers, whether or not contingent, with respect to any pension plan.
         Since the date of the most recent financial statement, there has been
         no material adverse change in the financial condition of any Borrower
         or the Guarantor.

                  (o) Each qualified retirement plan of Borrowers presently
         conforms in all material respects to and is administered in a manner
         consistent with the Employee Retirement Income Security Act of 1974.

                  (p) Borrowers will not request or maintain any credit for the
         purpose of purchasing or carrying any security, within the meaning of
         Regulations T X or U of the Board of Governors of the Federal Reserve
         System.

                  (q) Payment of the Obligations to Lender have been guaranteed
         by the Guarantor pursuant to one or more instruments of guaranty, which
         guaranty has been secured by a first (except as may be otherwise
         provided in Section 6(b)) perfected security interest in all of the
         Guarantor's personal property pursuant to a security agreement, each of
         which have been duly executed and delivered and legally enforceable by
         Lender, without further act and without condition, in accordance with
         the stated terms (subject to applicable bankruptcy, insolvency, or
         other laws generally affecting the enforcement of creditors' rights as
         well as general principles of equity).

         5. Affirmative Covenants. Each Borrower covenants and agrees that it
will:

                                       20

<PAGE>

                  (a) Use the proceeds of any and all loans made by Lender
         solely for lawful and proper corporate purposes of the Borrowers.

                  (b) Pay all taxes, assessments and governmental charges prior
         to the time when any penalties or interest accrue, unless contested in
         good faith with an adequate reserve for payment; and pay to the proper
         authorities when due all federal, state and local taxes required to be
         withheld by it.

                  (c) Continue the conduct of its business; maintain its
         corporate existence; maintain all rights, licenses and franchises; and
         comply in all material respects with all applicable laws and
         regulations.

                  (d) Maintain its property in good working order and condition
         and make all needful and proper repairs, replacements, additions and
         improvements thereto.

                  (e) Deliver to Lender:

                           (1) Within 90 days after the end of each fiscal year,
                  a statement of Guarantor's and each Borrower's financial
                  condition as at the end of such fiscal year and a statement of
                  earnings and retained earnings for such fiscal year, with
                  comparative figures for the preceding fiscal year, prepared on
                  a consolidating and consolidated basis to include any
                  Affiliated Corporation, certified without qualification by
                  independent certified public accountants acceptable to Lender,
                  together with any management letters, management reports or
                  other supplementary comments or reports to each Borrower and
                  Guarantor or its board of directors furnished by such
                  accountants and requested by the Lender; including a report
                  signed by such accountants stating that in making the
                  investigations necessary for said opinion they obtained no
                  knowledge, except as specifically stated, of any Event of
                  Default (or any event or circumstance which with the giving of
                  notice or the passage of time or both, would constitute an
                  Event of Default) and all relevant facts in reasonable detail
                  to evidence, and the computations as to, whether or not each
                  Borrower and the Guarantor is in compliance with the Financial
                  Covenants.

                           (2) Within 25 days after the end of each fiscal
                  month, a statement of Borrowers' and Guarantor's financial
                  condition and an operating statement and statement of earnings
                  and retained earnings of Borrowers and Guarantor for such
                  month, in each case with comparative figures for the same
                  month in the preceding fiscal year, prepared on a
                  consolidating and consolidated basis to include any Affiliated
                  Corporation, certified by an officer of Borrower.

                           (3) Together with the financial statements furnished
                  by the Borrower under Sections 5(e)(1) and 5(e)(2), a
                  certificate of the Borrower's and Guarantor's

                                       21

<PAGE>

                  chief financial officers stating (i) that such financial
                  statements have been prepared in accordance with generally
                  accepted accounting principles, consistently applied, and
                  fairly represent the Borrower's and Guarantor's combined,
                  consolidated and consolidating financial position and the
                  results of its operations for such period, (ii) whether or not
                  such officer has knowledge of the occurrence of any Event of
                  Default (or any event or circumstance which with the giving of
                  notice or the passage of time or both, would constitute an
                  Event of Default) not theretofore reported and remedied and,
                  if so, stating in reasonable detail the facts with respect
                  thereto, and (iii) all relevant facts and reasonable detail to
                  evidence, and the computations as to, whether or not the
                  Borrower and the Guarantor is in compliance with all financial
                  covenants set forth in this Agreement.

                           (4) Within 25 days after the end of each month, an
                  aging of each Borrower's accounts receivable as at the end of
                  such month.

                           (5) Within 25 days after the end of each month, an
                  inventory certification report as at the end of such month.

                           (6) Within 25 days after the end of each month, an
                  aging of each Borrower's accounts payable as at the end of
                  such month.

                           (7) Promptly after the sending or filing thereof, the
                  Borrowers will deliver to the Lender copies of all regular and
                  periodic reports which any Borrower or the Guarantor shall
                  file with the Securities and Exchange Commission or any
                  national securities exchange.

                           (8) From time to time, any and all receivables,
                  schedules, collection reports, equipment schedules, copies of
                  invoices to account debtors and shipment documents and
                  delivery receipts for goods sold, and other material, reports,
                  records or information of each Borrower and/or any Affiliated
                  Corporation required by Lender.

                  (f) Permit any officer, employee, attorney or accountant for
         Lender to audit, review, make extracts from, or copy any and all
         corporate and financial books, records and properties of each Borrower
         and/or any Affiliated Corporation at all times during ordinary business
         hours, to send and discuss with account debtors and other obligors'
         requests for verification of amounts owed to any Borrower, and to
         discuss the affairs of each Borrower and/or any Affiliated Corporation
         with any of its directors, officers, employees or agents.

                  (g) Maintain property, liability, business interruption,
         workman's compensation and other forms of insurance in reasonable
         amounts designated at any time or from time to time by Lender.

                                       22

<PAGE>

                  (h) Maintain, or cause to be maintained, the following
         financial covenants of the Borrowers and the Guarantor, each as
         determined on a consolidated basis in accordance with generally
         accepted accounting principles, consistently applied (except as
         otherwise provided below and provided that inventory shall be
         calculated on a first-in, first-out basis) and measured at the end of
         each fiscal quarter (collectively, the "Financial Covenants"):

                           (i) book net worth at and as of each period described
                  below of not less than the amount set forth opposite such
                  period:

                                                        Minimum
                  Period                             Book Net Worth
              -------------------                  ------------------
              December 31, 2005                       $13,300,000
              March 31, 2006                          $13,450,000
              June 30, 2006                           $13,625,000
              September 30, 2006                      $13,800,000
              December 31, 2006                       $14,000,000
              March 31, 2007                          $14,200,000
              June 30, 2007                           $14,425,000
              September 30, 2007                      $14,650,000
              December 31, 2007                       $14,900,000
              March 31, 2008                          $15,150,000
              June 30, 2008                           $15,425,000
              September 30, 2008                      $15,700,000

                           (ii) tangible net worth (excluding all Intangible
                  Assets as defined below) at and as of each period described
                  below of not less than the amount set forth opposite such
                  period:

                                                        Minimum
                  Period                           Tangible Net Worth
              -------------------                  ------------------
              December 31, 2005                        $6,300,000
              March 31, 2006                           $6,450,000
              June 30, 2006                            $6,625,000
              September 30, 2006                       $6,800,000
              December 31, 2006                        $7,000,000
              March 31, 2007                           $7,200,000

                                       23

<PAGE>

                                                        Minimum
                  Period                           Tangible Net Worth
              -------------------                  ------------------
              June 30, 2007                            $7,425,000
              September 30, 2007                       $7,650,000
              December 31, 2007                        $7,900,000
              March 31, 2008                           $8,150,000
              June 30, 2008                            $8,425,000
              September 30, 2008                       $8,700,000

                  As used herein, "Intangible Assets" shall include intangible
                  assets as defined under generally accepted accounting
                  principles, together with all goodwill, patents, trademarks
                  and other intellectual property, prepaid expenses and accounts
                  due from any Affiliate, officer, director or employee of any
                  Borrower or any Affiliate.

                           (iii) a ratio of (a) total liabilities to (b)
                  tangible net worth (excluding all Intangible Assets) at and as
                  of each period described below of not more than the ratio set
                  forth opposite such period:

                                                        Maximum
                                                     Liabilities to
                  Period                           Tangible Net Worth
              -------------------                  ------------------
              December 31, 2005                        2.70 to 1.00
              March 31, 2006                           2.70 to 1.00
              June 30, 2006                            2.70 to 1.00
              September 30, 2006                       2.70 to 1.00
              December 31, 2006                        2.70 to 1.00
              March 31, 2007                           2.50 to 1.00
              June 30, 2007                            2.50 to 1.00
              September 30, 2007                       2.50 to 1.00
              December 31, 2007                        2.50 to 1.00
              March 31, 2008                           2.50 to 1.00
              June 30, 2008                            2.50 to 1.00
              September 30, 2008                       2.50 to 1.00

                           (iv) achieve at the end of each period described
                  below and on a fiscal year-to-date basis, net income of not
                  less than the amount set forth opposite such period:

                                       24

<PAGE>

                                                         Minimum
                  Period                               Net Income
              -------------------                  ------------------
              December 31, 2005                         $150,000
              March 31, 2006                            $150,000
              June 30, 2006                             $325,000
              September 30, 2006                        $500,000
              December 31, 2006                         $700,000
              March 31, 2007                            $200,000
              June 30, 2007                             $425,000
              September 30, 2007                        $650,000
              December 31, 2007                         $900,000
              March 31, 2008                            $250,000
              June 30, 2008                             $525,000
              September 30, 2008                        $800,000

                           (v) a Fixed Charge Coverage Ratio at and as of each
                  period described below of not less than the ratio set forth
                  opposite such period:

                                                         Minimum
                  Period                        Fixed Charge Coverage Ratio
              -------------------                  ------------------
              December 31, 2005                        1.25 to 1.00
              March 31, 2006                           1.25 to 1.00
              June 30, 2006                            1.25 to 1.00
              September 30, 2006                       1.25 to 1.00
              December 31, 2006                        1.25 to 1.00
              March 31, 2007                           1.25 to 1.00
              June 30, 2007                            1.25 to 1.00
              September 30, 2007                       1.25 to 1.00
              December 31, 2007                        1.25 to 1.00
              March 31, 2008                           1.25 to 1.00
              June 30, 2008                            1.25 to 1.00
              September 30, 2008                       1.25 to 1.00

                                       25

<PAGE>

                  As used herein:

                           "Fixed Charge Coverage Ratio" shall mean and include,
                  as of a given date and for the fiscal year-to-date period
                  ending on such date, the ratio of (a) EBITDA minus
                  non-financed capital expenditures made during such period
                  (provided that the amount of such capital expenditures is not
                  less than zero) to (b) all Senior Debt Payments payable on a
                  current basis in such period, plus cash taxes, dividends and
                  distributions paid.

                           "EBITDA" shall mean and include with respect to any
                  period, net income plus interest, taxes, depreciation and
                  amortization.

                           "Senior Debt Payments" shall mean and include with
                  respect to any period all cash actually expended to make (a)
                  interest payments on any Advances hereunder in respect of such
                  period, plus (b) payments for all fees, commissions and
                  charges set forth herein and with respect to any Advances in
                  respect of such period (other than up-front fees and
                  reimbursement of Lenders' expenses), plus (c) scheduled
                  capitalized lease payments in respect of such period, plus (d)
                  scheduled principal payments and interest (other than interest
                  payable-in-kind) with respect to any other indebtedness for
                  borrowed money in respect of such period (other than up-front
                  fees and reimbursement of Lenders' expenses).

                  (i) Notify Lender promptly of (i) any disputes or claims by
         customers of any Borrower that individually or in the aggregate exceed
         $35,000; (ii) any goods returned to or recovered by any Borrower that
         individually or in the aggregate exceed $35,000; (iii) any change in
         the persons constituting the officers and directors of any Borrower or
         the occurrence of any Change in Control (as defined in Section 7(c)
         hereof); and (iv) the occurrence of any breach, default or event of
         default by or attributable to any Borrower or any Affiliate under this
         Agreement or any of the Loan Documents.

                  (j) The Borrower will (i) comply in all material respects with
         the requirements of applicable laws and regulations, the non-compliance
         with which would materially and adversely affect its business or its
         financial condition and (ii) use and keep the Collateral, and require
         that others use and keep the Collateral, only for lawful purposes,
         without violation in any material respect of any federal, state or
         local law, statute or ordinance.

         6. Negative Covenants. Each Borrower covenants and agrees that it will
not, and it will not permit the Guarantor, except with the prior written
approval of Lender:

                  (a) Become or remain liable in any manner in respect of any
         indebtedness or contractual liability (including, without limitation,
         notes, bonds, debentures, loans,

                                       26

<PAGE>

         guaranties, obligations of partnerships, and pension liabilities, in
         each case whether or not contingent and whether or not subordinated),
         except:

                           (1) Indebtedness arising under this Agreement;

                           (2) Unsecured indebtedness, other than for money
                  borrowed or for the purchase of a capital asset, incurred in
                  the ordinary course of its business, which becomes due and
                  must be fully satisfied within twelve months after the date on
                  which it is incurred;

                           (3) Indebtedness arising out of the lease or purchase
                  of goods constituting equipment and either unsecured or
                  secured by a purchase money security interest securing
                  purchase money indebtedness only if disclosed in Schedule
                  6(a)(3) hereto or if hereafter incurred only if such equipment
                  is acquired in compliance with Paragraph 6(c);

                           (4) Indebtedness permitted under Paragraph 6(h)
                  hereto; and

                           (5) Presently outstanding unsecured borrowings, if
                  any, disclosed in the financial statements referred to in
                  Paragraph 4(m), but not including any extensions or renewals
                  thereof.

                  (b) Create, incur or cause to exist any mortgage, security
         interest, encumbrance, lien or other charge of any kind upon any of its
         property or assets, whether now owned or hereafter acquired, except:

                           (1) The interests created by the Loan Documents;

                           (2) Liens for taxes or assessments not yet due or
                  contested in good faith by appropriate proceedings;

                           (3) A purchase money security interest or lessor's
                  interest securing indebtedness permitted to be outstanding or
                  incurred under Paragraph 6(a)(3) including those disclosed in
                  Schedule 6(a)(3) hereto;

                           (4) Security interests approved by Lender in writing;
                  and

                           (5) Other liens, charges and encumbrances incidental
                  to the conduct of its business or the ownership of its
                  property which were not incurred in connection with the
                  borrowing of money or the purchase of property on credit and
                  which do not in the aggregate materially detract from the
                  value of its property or materially impair the use thereof in
                  its business.

                                       27

<PAGE>

                  (c) Expend or contract to expend, in any one calendar year,
         with respect to Resistance and RTI collectively, more than Two Hundred
         Fifty Thousand Dollars ($250,000) in any one transaction; or in the
         annual aggregate amount of more than (i) Two Million Dollars
         ($2,000,000) during calendar years 2005 and 2006, (ii) Two Million Five
         Hundred Thousand Dollars ($2,500,000) during calendar year 2007, or
         (iii) Three Million Dollars ($3,000,000) during calendar year 2008, for
         the lease, purchase or other acquisition of any capital asset, or for
         the lease of any other asset, whether payable currently or in the
         future.

                  (d) Sell, lease or otherwise dispose of any "Collateral" (as
         defined herein or in the Security Documents) or all or any substantial
         part of its property, except as expressly permitted hereunder or under
         the Security Documents and excluding any Borrower's sale of worn out or
         obsolete equipment that do not in the aggregate exceed $35,000 in book
         value in any fiscal year.

                  (e) Consolidate or merge with any other corporation; or
         acquire any business; or acquire stock of any corporation; or enter
         into any other partnership or joint venture.

                  (f) Substantially alter the nature of the business in which it
         is engaged.

                  (g) Declare or pay any dividends (except dividends payable
         solely in its capital stock), or purchase or redeem any of its capital
         stock, or otherwise distribute any property on account of its capital
         stock; or enter into any agreement therefor; provided, however,
         Borrowers may declare and pay dividends to the Guarantor in an amount
         equal to income tax assessed against the Guarantor as a result of the
         income of Borrowers being directly charged to such entity upon Lender's
         receipt of evidence of such assessment satisfactory to Lender.

                  (h) Purchase stock or securities of, extend credit to or make
         investments in, become liable as surety for, or guarantee or endorse
         any obligation of, any person, firm or corporation (each a "Restricted
         Investment"), except

                           (1)      investments in direct obligations of the
                                    United States and commercial bank deposits;

                           (2)      extensions of credit reflected by trade
                                    accounts receivable arising for goods sold
                                    by Borrowers in the ordinary course of its
                                    business;

                           (3)      Resistance may make loans to RTI subject to
                                    the condition that the aggregate amount of
                                    such intercompany loans cannot at any time
                                    exceed the sum of: (i) an amount equal to
                                    RTI's Borrowing Base less the outstanding
                                    balance of Revolving Advances made to RTI,
                                    plus (ii) any additional amount to the
                                    extent that it would not cause

                                       28

<PAGE>

                                    Resistance's Excess Availability to be less
                                    than $500,000. As used herein, "Excess
                                    Availability" shall mean the sum of (xx)
                                    Resistance's Borrowing Base, less (yy) the
                                    outstanding balance of Revolving Advances
                                    made to Resistance, and less (zz) the amount
                                    of the additional intercompany loan made or
                                    to be made by Resistance to RTI; and

                           (4)      any other Restricted Investments of either
                                    Borrower and/or the Guarantor that on a
                                    consolidated basis do not at any time exceed
                                    $100,000 in the aggregate.

                  (i) After notice from Lender, grant any discount, credit or
         allowance to any customer of Borrowers or accept any return of goods
         sold; provided, however, that any Borrower shall be entitled to provide
         standard and customary credits in the ordinary course consistent with
         past practices.

                  (j) In any manner transfer any property without prior or
         present receipt of full and adequate consideration.

                  (k) Permit more than $5,000 in the aggregate to be owing to
         Borrowers and the Guarantor by the officers, directors or shareholders
         of any Borrower or any Affiliated Corporation, or members of their
         families, on account of any loan, travel advance, credit sale or other
         transaction or event, except (1) such additional amounts otherwise
         permitted by Section 6(h) above, and (2) up to $300,000 of intercompany
         accounts receivable due from RTI Tech PTE Ltd. to Resistance.

                  (l) Pay excessive or unreasonable salaries, bonuses,
         commissions, consultant fees, or other compensation; or increase the
         salary, bonus, commissions, consultant fees or other compensation of
         any director, officer, or consultant, or any member of their families,
         by more than twenty-five percent (25%) in any one year, either
         individually or for all such persons in the aggregate.

                  (m) Permit any breach, default or event of default to occur
         under any note, loan agreement, indenture, lease, mortgage, contract
         for deed, security agreement or other contractual obligation binding
         upon Borrowers.

                  (n) adopt any material change in accounting principles, other
         than as required by GAAP; or adopt, permit or consent to any change in
         its fiscal year.

                  (o) amend its certificate of incorporation, articles of
         incorporation, by-laws, certificate of formation, articles of
         organization, shareholder agreement or similar document

                                       29

<PAGE>

         or agreement governing such entity's existence, organization or
         management or concerning disposition of ownership interests of such
         entity or voting rights among such entity's owners.

                  7. Event of Default. "Default", wherever used herein, means
         any event that, with giving of notice or passage of time or both, would
         constitute an Event of Default. "Event of Default", wherever used
         herein, means any one of the following events:

                  (a) Default in the payment of any obligations hereunder when
         they become due and payable;

                  (b) Default in the performance, or breach, of any covenant or
         agreement of any Borrower contained in this Agreement or the Guarantor
         under any Guaranty or other Loan Documents; provided, however, that if
         such default shall consist of any Borrower's failure to perform any of
         the Affirmative Covenants listed in Section 5 hereof (excluding the
         Affirmative Covenants to set forth in Sections 5(f), (g) and (h)), such
         default shall not constitute an Event of Default unless Borrower fails
         to cure such default within 20 days after the receipt of written notice
         from Lender.

                  (c) A Change of Control shall occur. "Change of Control" means
         the occurrence of any of the following events:

                           (i) any Person or "group" (as such term is used in
                  Sections 13(d) and 14(d) of the Securities Exchange Act of
                  1934) is or becomes the "beneficial owner" (as defined in
                  Rules 13d-3 and 13d-5 under the Securities Exchange Act of
                  1934, except that a Person will be deemed to have "beneficial
                  ownership" of all securities that such Person has the right to
                  acquire, whether such right is exercisable immediately or only
                  after the passage of time), directly or indirectly, of more
                  than 35% percent of the voting power of all classes of voting
                  stock of the Guarantor;

                           (ii) the Guarantor shall fail to own, with the power
                  to vote, one hundred percent of all outstanding capital stock
                  of each Borrower;

                           (iii) During any consecutive two-year period,
                  individuals who at the beginning of such period constituted
                  the board of Directors of the Guarantor (together with any new
                  Directors whose election to such board of Directors, or whose
                  nomination for election by the owners of the Guarantor, was
                  approved by a vote of 66-2/3% of the Directors then still in
                  office who were either Directors at the beginning of such
                  period or whose election or nomination for election was
                  previously so approved) cease for any reason to constitute a
                  majority of the board of Directors of the Borrower then in
                  office.

                           (iv) the President or Chief Financial Officer of any
                  Borrower shall cease to

                                       30

<PAGE>

                  actively manage such Borrower's day-to-day business activities
                  and a qualified replacement thereof, as reasonably determined
                  by the Lender, has not been obtained within ninety (90) days
                  thereafter.

                  As used herein, "Person" means any individual, corporation,
                  partnership, joint venture, limited liability company,
                  association, joint-stock company, trust, unincorporated
                  organization or government or any agency or political
                  subdivision thereof.

                  (d) Any Financial Covenant shall become inapplicable due to
         the lapse of time and the failure to amend any such covenant to cover
         future periods;

                  (e) Any Borrower or any Guarantor shall be or become
         insolvent, or admit in writing its or his inability to pay its or his
         debts as they mature, or make an assignment for the benefit of
         creditors; or any Borrower or any Guarantor shall apply for or consent
         to the appointment of any receiver, trustee, or similar officer for it
         or him or for all or any substantial part of its or his property; or
         such receiver, trustee or similar officer shall be appointed without
         the application or consent of the Borrower or such Guarantor, as the
         case may be; or any Borrower or any Guarantor shall institute (by
         petition, application, answer, consent or otherwise) any bankruptcy,
         insolvency, reorganization, arrangement, readjustment of debt,
         dissolution, liquidation or similar proceeding relating to it or him
         under the laws of any jurisdiction; or any such proceeding shall be
         instituted (by petition, application or otherwise) against any such
         Borrower or any such Guarantor; or any judgment, writ, warrant of
         attachment or execution or similar process shall be issued or levied
         against a substantial part of the property of any Borrower or any
         Guarantor;

                  (f) A petition shall be filed by or against any Borrower or
         any Guarantor under the United States Bankruptcy Code naming the
         Borrower or such Guarantor as debtor and in the case of any involuntary
         bankruptcy proceeding, either (i) such proceeding shall continue
         without dismissal or stay for a period of sixty (60) consecutive days,
         or (ii) an order granting the relief requested in the proceeding
         (including, but not limited to, an order for relief under federal
         bankruptcy laws) shall be entered;

                  (g) Any representation or warranty made by any Borrower in
         this Agreement, by any Guarantor in any Loan Documents, or by any
         Borrower (or any of its officers) or any Guarantor (or any of its
         officers) in any agreement, certificate, instrument or financial
         statement or other statement contemplated by or made or delivered
         pursuant to or in connection with this Agreement or any such guaranty
         shall prove to have been incorrect in any material respect when deemed
         to be effective;

                  (h) The rendering against any Borrower or any Guarantor of an
         arbitration award, final judgment, decree or order for the payment of
         money in excess of $50,000

                                       31

<PAGE>

         and the continuance of such arbitration award, judgment, decree or
         order unsatisfied and in effect for any period of 30 consecutive days
         without a stay of execution;

                  (i) A default under any bond, debenture, note or other
         evidence of material indebtedness of any Borrower or Guarantor owed to
         any person or entity other than the Lender, or under any indenture or
         other instrument under which any such evidence of indebtedness has been
         issued or by which it is governed, or under any material lease or other
         contract, and the expiration of the applicable period of grace, if any,
         specified in such evidence of indebtedness, indenture, other
         instrument, lease or contract;

                  (j) Any reportable event under Employee Retirement Income
         Security Act of 1974 ("ERISA") which the Lender determines in good
         faith might constitute grounds for the termination of any pension plan
         or for the appointment by the appropriate United States District Court
         of a trustee to administer any pension plan, of any Borrower or the
         Guarantor shall have occurred and be continuing 30 days after written
         notice to such effect shall have been given to the Borrowers by the
         Lender; or a trustee shall have been appointed by an appropriate United
         States District Court to administer any pension plan; or the Pension
         Benefit Guaranty Corporation shall have instituted proceedings to
         terminate any Pension Plan or to appoint a trustee to administer any
         pension plan; or any Borrower, the Guarantor or any "ERISA Affiliate"
         (as hereinafter defined) shall have filed for a distress termination of
         any pension plan under Title IV of ERISA; or any Borrower, the
         Guarantor or any ERISA Affiliate shall have failed to make any
         quarterly contribution required with respect to any pension plan under
         Section 412(m) of the IRC, which the Lender determines in good faith
         may by itself, or in combination with any such failures that the Lender
         may determine are likely to occur in the future, result in the
         imposition of a lien on any Borrower's or the Guarantor's assets in
         favor of the pension plan; or any withdrawal, partial withdrawal,
         reorganization or other event occurs with respect to a Multiemployer
         Plan which results or could reasonably be expected to result in a
         material liability of any Borrower or the Guarantor to the
         Multiemployer Plan under Title IV of ERISA.

         As used herein, "ERISA Affiliate" means any trade or business (whether
         or not incorporated) that is a member of a group which includes any
         Borrower or the Guarantor and which is treated as a single employer
         under Section 414 of the IRC.

                  (k) An event of default shall occur under any Loan Document;

                  (l) Any Borrower or the Guarantor shall liquidate, dissolve,
         terminate or suspend its business operations or otherwise fail to
         operate its business in the ordinary course, or sell or attempt to sell
         all or substantially all of its assets, without the Lender's prior
         written consent;

                                       32

<PAGE>

                  (m) Default in the payment of any amount owed by any Borrower
         or the Guarantor to the Lender other than any indebtedness arising
         hereunder;

                  (n) Any Guarantor shall repudiate, purport to revoke or fail
         to perform his or its obligations under his or its guaranty or support
         agreement in favor of the Lender, any individual Guarantor shall die or
         any other Guarantor shall cease to exist;

                  (o) Any event shall occur, whether or not insured or
         insurable, as a result of which (a) a Borrower's Borrowing Base is
         reduced during any month by more than fifteen percent (15%) other than
         as result of sales of inventory and collections of accounts in the
         ordinary course, (b) contingent liabilities are incurred by the
         Borrowers and the Guarantor on a consolidated basis in excess of
         $1,000,000 which would be required to be reflected in the footnotes to
         a balance sheet prepared in accordance with generally accepted
         accounting principles, consistently applied, (c) operations of either
         Borrower are suspended or terminated for twenty (20) days or more at
         any facility of Borrower generating more than twenty percent (20%) of
         such Borrower's consolidated revenues for the preceding fiscal year; or
         (d) any customer or group of customers representing more than twenty
         percent (20%) of any Borrower's consolidated revenues for the preceding
         fiscal year terminate or suspend purchases of inventory from such
         Borrower; or

                  (p) Any breach, default or event of default by or attributable
         to any Affiliate under any agreement between such Affiliate and the
         Lender shall occur.

         8. Remedies upon Default. Upon the occurrence of any Event of Default,
and at any time thereafter unless and until such Event of Default is waived in
writing by Lender, Lender may exercise one or several or all of the following
rights and remedies:

                  (a) Lender may by notice to the Borrowers terminate this
         Agreement with immediate effectiveness and without notice or lapse of
         time. Notwithstanding such termination, all claims, rights and security
         interests of Lender and all debts, liabilities, obligations and duties
         of Borrowers shall remain in full force and effect. The Lender may, by
         notice to the Borrowers, declare the Borrowers' obligations hereunder
         to be forthwith due and payable, whereupon all such obligations shall
         become and be forthwith due and payable, without presentment, notice of
         dishonor, protest or further notice of any kind, all of which the
         Borrowers expressly waive.

                  (b) Lender may exercise and enforce any and all rights and
         remedies available upon default to a secured party under the Uniform
         Commercial Code, including, without limitation, the right to take
         possession of Collateral, or any evidence thereof, proceeding without
         judicial process (without a prior hearing or notice thereof, which
         Borrowers hereby expressly waives) and the right to sell, lease or
         otherwise dispose of any or all of the Collateral, and in connection
         therewith Borrowers will on demand assemble the Collateral

                                       33

<PAGE>

         and make it available to Lender at a place to be designated by Lender
         which is reasonably convenient to all parties. If notice to any
         Borrower of any intended disposition of Collateral or any other
         intended action is required by law in a particular instance, such
         notice shall be deemed commercially reasonable if given (in the manner
         specified in Paragraph 13(a) at least ten calendar days prior to the
         date of intended disposition or other action. For the purpose of
         enabling Lender to exercise such rights and remedies:

                           (1) Each Borrower hereby grants Lender (in addition
                  to Lender's security interest in general intangibles) a
                  nonexclusive license to use, sell or otherwise exploit in any
                  manner any and all trade names, trademarks, patents,
                  copyrights, licenses and other intangible properties
                  necessary, appropriate or useful in the enforcement of the
                  Security Interests; and

                           (2) Each Borrower hereby grants Lender the right to
                  possess and hold all premises owned, leased or held by any
                  Borrower upon which any Collateral is or may be located (the
                  "Premises"), subject to the following terms and conditions:

                                    (A) Lender may take possession of the
                           Premises upon the occurrence of an Event of Default.

                                    (B) Lender may use the Premises only to
                           hold, process, manufacture and sell or otherwise
                           dispose of goods which are inventory, or to provide
                           services under contracts for receivables, or to use,
                           operate, store, liquidate or realize upon goods which
                           are equipment or any other Collateral granted under
                           this Agreement and for other purposes which Lender
                           may in good faith deem to be related or incidental
                           purposes.

                                    (C) The right of Lender to hold the Premises
                           shall cease and terminate upon the earlier of (i)
                           payment in full and discharge of all Obligations;
                           (ii) final sale or disposition of all goods
                           constituting Collateral (including both inventory and
                           equipment) and delivery of all such goods to
                           purchasers.

                                    (D) Lender shall not be obligated to pay or
                           account for any rent or other compensation for this
                           grant or for the possession, occupancy or use of any
                           of the Premises.

                                    (E) Borrowers acknowledge and agree that the
                           breach of this grant is not fully compensable by
                           money damages, and that, accordingly, this grant may
                           be enforced by an action for specific performance.

                                       34

<PAGE>

                  (c) Upon the occurrence of any Default, the Lender shall have
         the right to suspend the making of any Advances, until such Default has
         been cured or waived.

                  (d) Lender may exercise or enforce any and all other rights or
         remedies available by law or agreement against the Collateral, against
         each Borrower, the Guarantor or against any other person or property.

         9. Acceleration Upon Bankruptcy. All of the Obligations shall be
immediately and automatically due and payable, without further act or condition,
if any case under the United States Bankruptcy Code is commenced voluntarily by
any Borrower or the Guarantor or involuntarily against any Borrower or the
Guarantor.

         10. Setoff. Borrowers agree that Lender may at any time or from time to
time, at its sole discretion and without demand and without notice to anyone,
set off any deposit or other liability owed to any Borrower by Lender, whether
or not due, against any indebtedness owed to Lender by any Borrower (for loans
under this Agreement or for any other transaction or event), whether or not due.
In addition, each person holding a participating interest in any loans made to
any Borrower by Lender shall have the right to appropriate or set off any
deposit or other liability then owed by such person to any or all Borrowers,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such person had lent directly to Borrowers the amount
of such participating interest.

         11. Termination by Borrowers. Borrowers may terminate this Agreement
and (subject to payment and performance of all outstanding secured obligations)
may obtain any release or termination of the Security Documents to which
Borrowers are otherwise entitled by law, effective only on the third or any
subsequent anniversary date of this Agreement, and then only if Lender receives
at least 30 days prior written notice of Borrower's intent to terminate this
Agreement effective on such anniversary date of this Agreement. If this
Agreement is terminated prior to the date that is three years from the date of
this Agreement, the Borrowers shall pay the Lender a prepayment fee equal to the
applicable following percent of the maximum credit line (inclusive of any then
outstanding Term Advances) as follows: (a) three percent (3.0%) of the maximum
credit line if terminated prior to the first anniversary hereof; (b) two percent
(2.0%) of the maximum credit line if terminated on or after the first
anniversary but before the second anniversary hereof; and (c) one percent (1.0%)
of the maximum credit line if terminated on or after the second anniversary
hereof; provided, however, that (i) if all or substantially all of the
outstanding secured obligations hereunder are refinanced by the Borrowers with
M&I Marshall and Illsley Bank on or after the second anniversary date of this
Agreement, or (ii) if this Agreement is terminated during the last two weeks
prior to the Termination Date, then such prepayment fee shall be waived. No such
termination shall be effective unless Borrowers provide Lender with at least
thirty (30) days prior written notice of Borrower's intent to terminate this
Agreement and the date on which such termination is to be effective. Upon any
such termination, all obligations of Borrowers under the Loan Documents shall
remain in full force and effect until all indebtedness arising under this

                                       35

<PAGE>

Agreement and all other debts, liabilities and obligations of Borrowers secured
hereby, or by the Security Documents or any other collateral security have been
fully paid and satisfied.

         12. Conditions of Lending.

                  (a) Conditions Precedent to the Initial Advance. The Lender's
obligation to make the initial Advance hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:

                  (i) This Agreement and all Security Documents, properly
         executed by the Borrowers, each Guarantor and any applicable third
         parties to the extent a party thereto.

                  (ii) A true and correct copy of any and all leases pursuant to
         which any Borrower is leasing its premises, together with a landlord's
         disclaimer and consent with respect to each such lease.

                   (iii) Current searches of appropriate filing offices showing
         that (i) no liens have been filed and remain in effect against any
         Borrower except liens permitted hereunder or liens held by persons who
         have agreed in writing that upon receipt of proceeds of the initial
         Advance, they will satisfy, release or terminate such liens in a manner
         satisfactory to the Lender, and (ii) the Lender has duly filed all
         financing statements necessary to perfect the Security Interest, to the
         extent the Security Interest is capable of being perfected by filing.

                  (iv) A certificate of each Borrower's Secretary or Assistant
         Secretary certifying that attached to such certificate are (i) the
         resolutions of the Borrower's Directors and, if required, Owners,
         authorizing the execution, delivery and performance of the Loan
         Documents, (ii) true, correct and complete copies of the Borrower's
         organizational documents, and (iii) examples of the signatures of the
         Borrower's officers or agents authorized to execute and deliver this
         Agreement and the Security Documents and other instruments, agreements
         and certificates, including advance requests, on the Borrower's behalf.

                  (v) A current certificate issued by Secretary of State of the
         state of each Borrower's organization certifying that such Borrower is
         in compliance with all applicable organizational requirements of such
         state.

                  (vi) Evidence that the Borrower is duly licensed or qualified
         to transact business in all jurisdictions where the character of the
         property owned or leased or the nature of the business transacted by it
         makes such licensing or qualification necessary.

                                       36

<PAGE>

                  (vii) A certificate of an Officer of the Borrower confirming,
         in his representative capacity, the representations and warranties set
         forth in paragraphs 3 and 4 above.

                  (viii) An opinion of counsel to the Borrowers and Guarantor,
         addressed to the Lender.

                  (ix) Certificates of the insurance required hereunder, with
         all hazard insurance containing a lender's loss payable endorsement in
         the Lender's favor and with all liability insurance naming the Lender
         as an additional insured.

                  (x) Without limiting the foregoing, a separate guaranty and
         security agreement providing for a broad form security interest,
         properly executed by each Guarantor, pursuant to which each Guarantor
         unconditionally guarantees and secures the full and prompt payment of
         all Obligations.

                  (xi) Payment of the fees and commissions due hereunder through
         the date of the initial Advance and expenses incurred by the Lender
         through such date and required to be paid by the Borrowers hereunder,
         including all legal expenses incurred through the date of this
         Agreement.

                  (xii) All collateral schedules, security interest
         subordination agreements, searches, abstracts, releases and termination
         statements which Lender may request adequately to assure and confirm
         the creation, perfection and priority of the security interests created
         hereunder or under the Security Documents.

                  (xiii) Such other documents as the Lender in its sole
         discretion may require.

                  (b) Conditions Precedent to Term Advances: The Lender's
         obligation to make any Term Advances shall further be subject to the
         terms set forth in the applicable Term Loan Supplement.

                  (c) Conditions Precedent to All Advances. The Lender's
         obligation to make any Advance shall be subject to the further
         conditions precedent that:

                  (i) the representations and warranties set forth herein are
         correct on the and as of the date of such Advance as though made on and
         as of such date, except to the extent that such representations and
         warranties relate solely to an earlier date; and

                  (ii) no event has occurred and in continuing, or would result
         from such Advance that constitutes an Event of Default.

                                       37

<PAGE>

         13. Miscellaneous. Each Borrower agrees that:

                  (a) This Agreement can be waived, amended, terminated or
         discharged, and the Security Interests can be released, only explicitly
         in a writing signed by Lender. A waiver so signed shall be effective
         only in the specific instance and for the specific purpose given. Mere
         delay or failure to act shall not preclude the exercise or enforcement
         of any rights and remedies available to Lender. All rights and remedies
         of Lender shall be cumulative and may be exercised singularly in any
         order or sequence, or concurrently, at Lender's option, and the
         exercise or enforcement of any such right or remedy shall neither be a
         condition to nor bar the exercise of enforcement of any other. All
         notices to be given to any Borrower shall be deemed sufficiently given
         if actually received by any officer of any Borrower or if delivered or
         mailed by registered, certified or ordinary mail, postage prepaid, to
         any Borrower at its address set forth below or at its most recent
         address shown on Lender's records.

                  (b) Intentionally deleted.

                  (c) On demand, Borrowers will pay or reimburse Lender for all
         expenses, including all reasonable fees and disbursements of legal
         counsel, incurred by Lender in connection with the preparation,
         negotiation, execution, performance or enforcement of this Agreement or
         the Security Documents, or any document contemplated thereby, or the
         perfection, protection, enforcement or foreclosure of the security
         interests created hereby or by the Security Documents, or in connection
         with the protection or enforcement of the interests and collateral
         security of Lender in any litigation or bankruptcy or insolvency
         proceeding or the prosecution or defense or any action or proceeding
         relating in any way to the transactions contemplated by this Agreement.

                  (d) Lender and its participants, if any, are not partners or
         joint venturers, and Lender shall have no liability or responsibility
         for any obligation, act or omission of its participants under or as to
         this Agreement.

                  (e) This Agreement shall be binding upon each Borrower and its
         successors and assigns and shall inure to the benefit of Lender and its
         participants, successors and assigns. This Agreement shall be effective
         when executed by each Borrower and delivered to Lender, whether or not
         this Agreement is executed by Lender. All rights and powers
         specifically conferred upon Lender may be transferred or delegated by
         Lender to any of its participants, successors or assigns. Except to the
         extent otherwise required by law, this Agreement and the transactions
         evidenced hereby shall be governed by the substantive laws of the State
         of Minnesota. If any provision or application of this Agreement is held
         unlawful or unenforceable in any respect, such illegality or
         unenforceability shall not affect other provisions or applications
         which can be given effect, and this Agreement shall be construed as if
         the unlawful or unenforceable provision or application had never been
         contained herein or prescribed hereby. All representations and
         warranties contained in this Agreement or in

                                       38

<PAGE>

         any other agreement between Borrower or Borrowers and Lender shall
         survive the execution, delivery and performance of this Agreement and
         the creation and payment of any indebtedness to Lender. Each Borrower
         waives notice of the acceptance of this Agreement by Lender.

         14. Interest Rate. Nothing herein contained nor any transaction related
hereto shall be construed or shall operate so as to require the Borrowers or any
person liable for repayment of loans made hereunder to pay interest in an amount
or at a rate greater than the maximum allowed, from time to time, by applicable
laws, if any. Should any interest or other charges, including any property,
tangible or intangible, or other items of value received by the Lender, imposed
against or paid by the Borrowers or any party liable for the payment of such
loans, result in a computation of earning of interest in excess of the maximum
legal rate of interest permitted under applicable law in effect while such
interest is being earned, then any and all of that excess shall be and is waived
by the Lender, and all of that excess shall be automatically credited against
and in reduction of the principal balance of such loans, without premium, with
the same force and effect as though the Borrowers had specifically designated
such extra sums to be so applied to principal and the Lender to accept such
extra payment(s) as a premium-free prepayment, and any portion of the excess
that exceeds the principal balance of loans made hereunder shall be paid by the
Lender to the Borrowers or to any party liable for the payment of such loans, as
applicable, it being the intent of the parties hereto that under no
circumstances shall the Borrowers or any party liable for the payment of the
indebtedness evidenced hereby be required to pay interest in excess of the
maximum rate allowed by any applicable laws. The provisions of this Agreement
are hereby modified to the extent necessary to conform with the limitations and
provisions of this Paragraph, and this Paragraph shall govern over all other
provisions in any document or agreement now or hereafter existing. This
Paragraph shall never be superseded or waived unless there is a written document
executed by the Lender and the Borrower, expressly declaring the usury
limitation of this Agreement to be null and void, and no other method or
language shall be effective to supersede or waive this Paragraph.

         15. Environmental Laws. Each Borrower is and will continue to be
throughout the term of this Agreement in full and complete compliance in all
material respects with all federal, state and local laws, rules and regulations
governing hazardous and toxic substances, waste or materials, any pollutants or
contaminants or any other similar substances, or pertaining to environmental
regulations, contamination or cleanup, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act, as amended,
or any other state lien or state super lien or environmental cleanup statute
(all such laws, rules and regulations being referred to collectively as
"Environmental Laws").

         Each Borrower indemnifies, defends and holds Lender and its officers,
directors, employees and agents, harmless from and against any liability, laws,
claims, damages or expense (including attorneys' fees and disbursements) arising
out of or based upon any violation or claim of violation of Environmental Laws
by any Borrower or with respect to any assets owned or used by any Borrower or
any properties leased or occupied by any Borrower. This indemnity shall be
continuing and

                                       39

<PAGE>

remain in full force and effect and shall survive the Loan
Documents or any exercise of any remedy by Lender even if all indebtedness and
other obligations to Lender have been satisfied in full.

         16. Indemnification. Borrowers shall pay, indemnify, defend and hold
the Lender, each affiliate of Lender, and each participant in the obligations
with Lender, and each of their respective officers, directors, employees,
agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings and damages, and all reasonable
attorneys' fees and disbursements and other costs and expenses actually incurred
in connection therewith (as and when they are incurred and irrespective of
whether suit is brought), at any time asserted against, imposed upon, or
incurred by any of them (a) in connection with or as a result of or related to
the execution, delivery, enforcement, performance, or administration of this
Agreement, any of the other Security Documents, or the transactions contemplated
hereby or thereby, and (b) with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Security Document, or the use of
the proceeds of the credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto (all the foregoing, collectively, the
"Indemnified Liabilities"). The foregoing to the contrary notwithstanding,
Borrowers shall have no obligation to any Indemnified Person under this
Paragraph 16 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the willful misconduct or
gross negligence of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

         17. Jurisdiction and Venue. EACH BORROWER HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN HENNEPIN OR
RAMSEY COUNTY, MINNESOTA AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS,
WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATED TO THIS
AGREEMENT, THE COLLATERAL, THE OBLIGATIONS, OR ANY OTHER SECURITY DOCUMENT, OR
ANY TRANSACTIONS ARISING THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY
OF THE FOREGOING. Nothing herein shall affect Lender's rights to serve process
in any manner permitted by law, or limit Lender's right to bring proceedings
against Borrower in the competent courts of any other jurisdiction or
jurisdictions.

                                       40

<PAGE>

         18. Waiver of Trial by Jury. EACH BORROWER HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE
COLLATERAL, THE OBLIGATIONS OR ANY OTHER SECURITY DOCUMENT OR TRANSACTIONS
BETWEEN BORROWERS AND LENDER.

                                       41

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the proper officers thereunto duly authorized on the day and year first above
written.

RESISTANCE TECHNOLOGY, INC.              RTI ELECTRONICS, INC.

By: /s/William J. Kullback               By: /s/William J. Kullback
    Chief Financial Officer & Secretary      Chief Financial Officer & Secretary

Federal Identification Number:_______    Federal Identification Number:_________
Organizational Number: 3A-94             Organizational Number: C2001241

                                       42

<PAGE>

TRADE NAMES OF BORROWER:            ADDRESS OF CHIEF EXECUTIVE OFFICES:
???      RTI
         RTI Plastics

                                     Resistance        1260 Red Fox Road
                                                       Arden Hills, MN  55112

                                     RTI               1800 E. Via Burton Street
                                                       Anaheim, CA 92806

COLLATERAL LOCATIONS:                OTHER ADDRESSES:

1260 Red Fox Road
Arden Hills, MN  55112

4400 McMenemy Street
St. Paul, MN 55127

1800 E. Via Burton Street
Anaheim, CA 92806

Accepted at Minneapolis, Minnesota
on _______________, 2005.

DIVERSIFIED BUSINESS CREDIT, INC.

By: _/s/_____________________________
Its: ______________________________

                                       43

<PAGE>

                                SCHEDULE 6(A)(3)

               PURCHASE MONEY INDEBTEDNESS AND SECURITY INTERESTS

1. [to be completed by Borrower]

                                Schedule 6(a)(3)EXHIBIT 10.3

                               SECURITY AGREEMENT

         AGREEMENT made this 31st day of August, 2005, between IntriCon
Corporation, a Pennsylvania corporation, as debtor (herein called the "Debtor")
and Diversified Business Credit, Inc. (herein, with its participants, successors
and assigns, called the "Lender"), as secured party.

         Any term used in the Uniform Commercial Code ("UCC") and not otherwise
defined in this Agreement shall have the meaning given to the term in the UCC.

         For good and valuable consideration, Debtor hereby agrees for the
benefit of the Lender as follows:

1.01     Debtor hereby grants the Lender a security interest (collectively
         referred to as the "Security Interests") in the property described
         below, as security for the payment and performance of each and every
         debt, liability and obligation of every type and description which
         Debtor may now or at any time hereafter owe to the Lender (whether such
         debt, liability or obligation now exists or is hereafter created or
         incurred, whether it arises in a transaction involving the Lender alone
         or in a transaction involving other creditors of Debtor, and whether it
         is direct or indirect, due or to become due, absolute or contingent,
         primary or secondary, liquidated or unliquidated, or sole, joint,
         several or joint and several, and including specifically, but not
         limited to, all indebtedness of Debtor arising under any loan or credit
         agreement or guaranty between Debtor and the Lender, whether now in
         effect or hereafter entered into; all such debts, liabilities and
         obligations are herein collectively referred to as the "Obligations").
         The Security Interests shall attach to the all of the personal property
         and fixtures of Debtor (the "Collateral"), including all proceeds and
         products thereof and, including, without limitation the following:

         INVENTORY: All inventory, as such term is defined in the UCC, of every
         type and description, now owned or hereafter acquired by Debtor,
         including inventory consisting of whole goods, spare parts or
         components, supplies or materials and inventory acquired, held or
         furnished for sale, for lease or under service contracts or for
         manufacture or processing, or any other purpose, and wherever located.

         DOCUMENTS OF TITLE: All warehouse receipts, bills of lading and other
         documents of title of every type and description now owned or hereafter
         acquired by Debtor.

         ACCOUNTS: All of Debtor's accounts, as such term in the UCC, now
         existing or hereafter arising, including each and every right of Debtor
         to the payment of money, whether such right to payment now exists or
         hereafter arises, whether such right to payment arises out of a sale,
         lease or other disposition of goods or other property, out of a
         rendering of services, out of a loan, out of the overpayment of taxes
         or other liabilities, or any other transaction or event, whether such
         right to payment is created, generated or earned by Debtor or by some
         other person whose interest is subsequently transferred to Debtor,
         whether such right to

<PAGE>

         payment is or is not already earned by performance, and howsoever such
         right to payment may be evidenced, together with all other rights and
         interests (including all liens, security interests and guaranties)
         which Debtor may at any time have by law or agreement against any
         account debtor or other person obligated to make any such payment or
         against any property of such account debtor or other person; all
         contract rights, chattel papers, bonds, notes and other debt
         instruments, and all loans and obligations receivable, tax refunds and
         other rights to payment in the nature of general intangibles; all
         checking accounts, savings accounts and other depository accounts and
         all savings certificates and certificates of deposit maintained with or
         issued by Lender or any other bank or other financial institution.

         EQUIPMENT AND FIXTURES: All equipment, as such term is defined in the
         UCC, now owned or hereafter acquired by Debtor and all fixtures of
         every type and description now owned or hereafter acquired by Debtor,
         including (without limitation) all present and future machinery,
         vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
         office and recordkeeping equipment, parts, tools, supplies and all
         other goods (except inventory) used or bought for use by Debtor for any
         business or enterprise; including (without limitation) all goods that
         are or may be attached or affixed or otherwise become fixtures upon any
         real property; and including specifically (without limitation) the
         goods described in any equipment schedule or list herewith or hereafter
         furnished to Lender by Debtor, all accessions attachments, parts and
         repairs now or hereafter attached or affixed or used in connection with
         equipment, all substitutions and replacements thereof, and all like or
         similar property now owned or hereafter acquired by Debtor. (No such
         schedule or list need be furnished in order for the security interest
         granted herein to be valid as to all of Debtor's equipment.)

         INVESTMENT PROPERTY: All investment property, as such term is defined
         in the UCC, whether now owned or hereafter acquired by Debtor,
         including (without limitation) all securities, security entitlements,
         securities accounts, commodity contracts, commodity accounts, stocks,
         bonds, mutual fund shares, money market shares and U.S. Government
         securities.

         GENERAL INTANGIBLES: All general intangibles of every type and
         description now owned or hereafter acquired by Debtor, including
         (without limitation) all present and future intellectual property,
         proprietary rights, foreign and domestic patents, patent applications,
         trademarks, trademark applications, service marks, service mark
         applications, trade dress, mask works, copyrights, trade names, trade
         secrets, shop drawings, engineering drawings, blueprints,
         specifications, parts lists, manuals, operating instructions, customer
         or supplier lists and contracts, licenses, permits, franchises, the
         right to use Debtor's corporate name, and the goodwill of Debtor's
         business.

         MISCELLANEOUS COLLATERAL: All instruments, chattel paper, deposit
         accounts, documents, goods, letter-of-credit rights, letters of credit,
         all sums on deposit in any collateral account, and any items in any
         lockbox, now existing or hereafter arising, and any

                                       2

<PAGE>

         money or other assets of the Debtor that come into the possession,
         custody or control of the Lender.

         1.02     Debtor represents, warrants and agrees that:

         (a) Debtor has (or will have at the time it acquires rights in
Collateral hereafter arising) and will maintain so long as the Security
Interests may remain outstanding, absolute title to each item of Collateral and
all proceeds thereof, free and clear of all interests, liens, attachments,
encumbrances and security interests except the Security Interests as provided
herein, and except as the Lender may otherwise agree in writing. Debtor will
defend the Collateral against all claims or demands of all persons (other than
the Lender) claiming the Collateral or any interest therein. Without the
Lender's prior written consent, Debtor will not sell or otherwise dispose of the
Collateral or any interest therein, except the sale of inventory in the ordinary
course of Debtor's business or as permitted by Section 6(d) of the Credit and
Security Agreement of even date herewith by and among, the Lender, Resisitance
Technology, Inc. and RTI Electronics, Inc. (as amended and supplemented from
time to time, the "Credit Agreement".

         (b) Debtor's exact legal name and federal employer and organizational
number are as set forth below and state of organization is as set forth above.
Debtor does business solely under its own name and the trade names (if any) set
forth below. The sole place of business and chief executive office of Debtor is
located at the address set forth below and all of Debtor's records relating to
its business or the Collateral are kept at that location. Debtor will not permit
any tangible Collateral or any records pertaining to Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interests. Debtor will not change its
identity, its name, its articles of organization or the location of its place of
business, without prior written notice to the Lender.

         (c) None of the Collateral is or will become a fixture on real estate,
unless a sufficient fixture filing is in effect with respect thereto.

         (d) Each right to payment and each instrument, document, chattel paper
and other agreement constituting or evidencing Collateral is (or, in the case of
all future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in Debtor's records
pertaining thereto as being obligated to pay such obligation. Debtor will not
agree to modify, amend, subordinate, cancel or terminate the obligation of any
such account debtor or other obligor, without the Lender's prior written consent
except for credits and discounts granted in the ordinary course and consistent
with past practices.

         (e) Debtor will keep all tangible Collateral in good repair, working
order and condition, normal depreciation excepted, and will, from time to time,
replace any worn, broken or defective parts.

                                       3

<PAGE>

         (f) Debtor will promptly pay all taxes and other governmental charges
levied or assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interests.

         (g) Debtor will keep all Collateral free and clear of all security
interests, liens and encumbrances except the Security Interests provided herein
and except other security interests approved in writing by the Lender, including
any security interests permitted by Section 6(b) of the Credit Agreement.

         (h) Debtor will at all reasonable times permit the Lender or its
representatives to examine or inspect any Collateral, or any evidence of
Collateral, wherever located, and Debtor will at any time and from time to time
send requests for verification of accounts or notices of assignment to account
debtors and other obligors.

         (i) Debtor will keep accurate and complete records pertaining to the
Collateral and pertaining to Debtor's business and financial condition, prepared
on the basis of generally accepted accounting principles consistently applied;
will submit to the Lender such weekly, monthly and other periodic reports
concerning the Collateral and Debtor's business and financial condition as the
Lender may from time to time request; and will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and copy any or all of
its records at any time during Debtor's business hours.

         (j) Debtor will promptly notify the Lender of any loss of or material
damage to any Collateral or of any substantial adverse change, known to Debtor,
in any Collateral or the prospect of payment thereof.

         (k) Upon request by the Lender, whether such request is made before or
after the occurrence of an Event of Default, Debtor will promptly deliver to the
Lender in pledge all instruments, documents and chattel papers constituting
Collateral, duly endorsed or assigned by Debtor.

         (l) Debtor will at all times keep all tangible Collateral insured
against risks of fire (including so-called extended coverage), theft, collision
(for Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest.

         (m) Debtor will pay or reimburse the Lender on demand for all costs of
collection of any of the Obligations and all other out-of-pocket expenses
(including in each case all reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interests or the
creation, continuance or enforcement of this Agreement or any or all of the
Obligations.

                                       4

<PAGE>

         (n) Debtor will use and keep the Collateral, and will require that
others use and keep the Collateral, only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance.

         (o) Debtor from time to time will execute and deliver or endorse any
and all instruments, documents, conveyances, assignments, security agreements,
financing statements and other agreements and writings which the Lender may
reasonably request in order to secure, protect, perfect or enforce the Security
Interests or the rights of the Lender under this Agreement (but any failure to
request or assure that Debtor executes, delivers or endorses any such item shall
not affect or impair the validity, sufficiency or enforceability of this
Agreement and the Security Interests, regardless of whether any such item was or
was not executed, delivered or endorsed in a similar context or on a prior
occasion).

         If Debtor at any time fails to perform or observe any of the foregoing
agreements, and if such failure shall continue for a period of ten calendar days
after the Lender gives Debtor written notice thereof (or in the case of the
agreements contained in clauses (g) and (1) above, immediately upon the
occurrence of such failure, without notice or lapse of time), the Lender may,
but need not, perform or observe such agreement on behalf and in the name, place
and stead of Debtor (or, at the Lender's option, in the Lender's name) and may,
but need not, take any and all other actions which the Lender may reasonably
deem necessary to cure or correct such failure (including, without limitation,
the payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments); and Debtor shall thereupon pay to the Lender on demand the
amount of all monies expended and all costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Lender in connection with or
as a result of the performance or observance of such agreements or the taking of
such action by the Lender, together with interest thereon from the date expended
or incurred at the highest lawful rate then applicable to any of the
Obligations. To facilitate the performance or observance by the Lender of such
agreements to Debtor, Debtor hereby irrevocably appoints the Lender, or the
delegate of the Lender, acting alone, as the attorney-in-fact of Debtor with the
right (but not the duty) from time to time after the occurrence of an Event of
Default to create, prepare, complete, execute, deliver, endorse or file in the
name and on behalf of Debtor any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by Debtor under this Section 1.02.

         1.03 Debtor agrees to deliver to the Lender, or, at the Lender's
option, to deposit in one or more accounts maintained for the Lender by any bank
reasonably satisfactory to the Lender, all collections on accounts, contract
rights, chattel paper and other rights to payment constituting Collateral, and
all other cash proceeds of Collateral, immediately upon receipt thereof, in the
form received, except for Debtor's endorsement when deemed necessary. Amounts
deposited in an account shall not be subject to withdrawal by Debtor, except
after full payment and discharge of all Obligations. All such collections shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation, provided however, all amounts received by the Lender representing

                                       5

<PAGE>

payments on accounts receivable comprising part of the Collateral, or other
payments directed to be applied to loans made by the Lender to Debtor, shall be
credited to the balance of such loans after allowing two (2) business days for
collection. Until delivered to the Lender or deposited in an account, all
proceeds or collections of Collateral shall be held in trust by Debtor for and
as the property of the Lender and shall not be commingled with any funds or
property of Debtor. The Lender may deposit any and all collections received by
it from Debtor or out of any collateral account in the Lender's general account
and may commingle such collections with other property of the Lender or any
other person. All items shall be delivered to the Lender or deposited in any
collateral account subject to final payment. If any such item is returned
uncollected, Debtor will immediately pay the Lender, or, for items deposited in
a collateral account, the bank maintaining such account, the amount of that
item, or such bank at its discretion may charge any uncollected item to Debtor's
commercial account or other account. Debtor shall be liable as an endorser on
all items deposited in any collateral account, whether or not in fact endorsed
by Debtor. The Lender from time to time at its discretion may apply funds on
deposit in any collateral account to the payment of any or all Obligations, in
any order or manner of application satisfactory to the Lender.

         1.04 In addition to the rights of the Lender under Section 1.03, with
respect to any or all rights to payment constituting Collateral the Lender may
at any time after the occurrence of an Event of Default under Section 1.06
notify any account debtor or other person obligated to pay the amount due that
such right to payment has been assigned or transferred to the Lender for
security and shall be paid directly to the Lender. Debtor will join in giving
such notice, if the Lender so requests. At any time after Debtor or the Lender
gives such notice to an account debtor or other obligor, the Lender may, but
need not, in the Lender's name or in Debtor's name, (i) demand, sue for, collect
or receive any money or property at any time payable or receivable on account
of, or securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (ii) as agent and attorney-in-fact of Debtor notify
the United States Postal Service to change the address for delivery of Debtor's
mail to any address designated by the Lender and otherwise intercept, receive,
open and dispose of Debtor's mail, applying all Collateral as permitted under
this Agreement and holding all other mail for Debtor's account or forwarding
such mail to Debtor's last known address.

         1.05 As additional security for the payment and performance of the
Obligations, Debtor hereby assigns to the Lender any and all monies (including,
without limitation, proceeds of insurance and refunds of unearned premiums) due
or to become due under, and all other rights of Debtor with respect to, any and
all policies of insurance now or at any time hereafter covering the Collateral
or any evidence thereof or any business records or valuable papers pertaining
thereto, and Debtor hereby directs the issuer of any such policy to pay all such
monies directly to the Lender, At any time, whether before or after the
occurrence of any Event of Default, the Lender may (but need not), in the
Lender's name or in Debtor's name, execute and deliver proof of claim, receive
all such monies, endorse checks and other instruments representing payment of
such monies, and adjust, litigate, compromise or release any claim against the
issuer of any such policy.

                                       6

<PAGE>

         1.06 Each of the following occurrences shall constitute an Event of
Default under this Agreement (herein called an "Event of Default"): (i) Debtor
shall fail to pay any or all of the Obligations when due or, if payable on
demand, on demand; or (ii) Debtor shall fail to observe or perform any covenant
or agreement binding on Debtor under this Agreement or under any other
assignment, conveyance, instrument or agreement now in effect or hereafter made
between Debtor and the Lender within any applicable grace period; or (iii) any
representation or warranty made by Debtor in this Agreement or in any such other
assignment, conveyance, instrument or agreement, or in any financial statements,
or reports or certificates heretofore or at any time hereafter submitted by or
on behalf of Debtor to the Lender, shall prove to have been false or materially
misleading when made; or (iv) payment of any substantial indebtedness of Debtor,
other than the Obligations, shall be demanded or the maturity of any such
indebtedness shall be accelerated, or any precondition or circumstance
permitting any creditor of Debtor, acting individually or with the consent of
other creditors, to accelerate the maturity of any such indebtedness shall have
occurred (for this purpose indebtedness shall be deemed substantial if it
exceeds $25,000); or (v) Debtor shall become insolvent or shall commit an act of
bankruptcy under the United States Bankruptcy Act, or shall file or have filed
against it, voluntarily or involuntarily, a petition in bankruptcy or for
reorganization or for the adoption of an arrangement or plan under the United
States Bankruptcy Code or shall procure or suffer the appointment of a receiver
for any substantial portion of its properties, or shall initiate or have
initiated against it, voluntarily or involuntarily, any act, process or
proceeding under any insolvency law or other statute or law providing for the
modification or adjustment of the rights of creditors; or (vi) the Lender shall
in good faith believe that the prospect of due and punctual payment of any or
all of the Obligations is impaired.

         1.07 Upon the occurrence of any Event of Default under Section 1.06 and
at any time thereafter, the Lender may exercise one or more of the following
rights and remedies: (i) declare all unmatured Obligations to be immediately due
and payable, and the same shall thereupon be immediately due and payable,
without presentment or other notice or demand (but the Lender expressly reserves
the right to demand payment of any Obligation payable on demand, at any time,
whether or not an Event of Default has occurred or is continuing); (ii) exercise
and enforce any and all rights and remedies available upon default to a secured
party under the Uniform Commercial Code, including, without limitation, the
right to take possession of Collateral, or any evidence thereof, proceeding
without judicial process or by judicial process (without a prior hearing or
notice thereof, which Debtor hereby expressly waives) and the right to sell,
lease or otherwise dispose of any or all of the Collateral, and in connection
therewith Debtor will on demand assemble the collateral and make it available to
the Lender at a place to be designated by the Lender which is reasonably
convenient to both parties and if notice to Debtor of any intended disposition
of Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in Section 1.09) at least ten (10) calendar days prior to the
date of intended disposition or other action; (iii) without notice or demand
offset any indebtedness the Lender or any of its participants, successors or
assigns then owes to Debtor, whether or not then due, against any Obligation
then owed to the Lender or any of its participants, successors or assigns by
Debtor, whether or not then due; and (iv) exercise or enforce any and all other
rights or remedies available by law or agreement against the Collateral, against
Debtor, or against any other person or property.

                                       7

<PAGE>

         1.08 This Agreement does not contemplate a sale of accounts, contract
rights or chattel paper, and, as provided by law, Debtor is entitled to any
surplus and shall remain liable for any deficiency. The Lender's duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled in the selection of the bailee or other third person, and the Lender
need not otherwise preserve, protect, insure or care for any Collateral. The
Lender shall not be obligated to preserve any rights Debtor may have against
prior parties, to realize on the Collateral at all or in any particular manner
in order or to apply any cash proceeds of the Collateral in any particular order
of application.

         1.09 This Agreement can be waived, modified, amended, terminated or
discharged, and the Security Interests can be released, only explicitly in a
writing signed by the Lender. A waiver so signed shall be effective only in the
specific instance and for the specific purpose given. Mere delay or failure to
act shall not preclude the exercise or enforcement of any rights or remedies
available to the Lender. All rights and remedies of the Lender shall be
cumulative and may be exercised singularly in any order or sequence, or
concurrently, at the Lender's option, and the exercise or enforcement of any
such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. All notices to be given to Debtor shall be deemed
sufficiently given if delivered or mailed by registered, certified or ordinary
mail, postage prepaid, to Debtor at its address set forth below or at its most
recent address shown on the Lender's records.

         1.10 The Lender and its participants, if any, are not partners or joint
venturers, and the Lender shall not have any liability or responsibility for any
obligation, act or omission of any of its participants.

         1.11 This Agreement, and the Security Interests granted hereby, shall
be binding upon Debtor, its successors and assigns, and shall inure to the
benefit of and be enforceable by the Lender and each and all of its
participants, successors and assigns, and shall be effective when executed by
Debtor and delivered to the Lender whether or not this Agreement is executed by
the Lender. All rights and powers specifically conferred upon the Lender may be
transferred or delegated to any of the participants, successors or assigns of
the Lender. Except to the extent otherwise required by law, this Agreement and
the transaction evidenced hereby shall be governed by the substantive laws of
the state in which this Agreement is accepted by the Lender. If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect, and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. All representations and warranties
contained in this Agreement or in any other agreement between Debtor and the
Lender shall survive the execution, delivery and performance of this Agreement
and the creation and payment of the Obligations. Debtor waives notice of the
acceptance of this Agreement by the Lender.

         1.12. DEBTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT SITUATED IN HENNEPIN OR RAMSEY COUNTY, MINNESOTA AND WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS,

                                       8

<PAGE>

WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATED TO THIS
AGREEMENT, THE COLLATERAL, THE OBLIGATIONS OR ANY OTHER AGREEMENTS OR
TRANSACTIONS BETWEEN DEBTOR AND LENDER, OR ENFORCEMENT AND/OR INTERPRETATION OF
ANY OF THE FOREGOING. Nothing herein shall affect Lender's right to serve
process in any manner permitted by law, or limit Lender's right to bring
proceedings against the undersigned in the competent courts of any other
jurisdiction or jurisdictions.

         1.13 DEBTOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF THIS AGREEMENT, THE OBLIGATIONS, THE COLLATERAL OR ANY
OTHER AGREEMENTS OR TRANSACTIONS BETWEEN DEBTOR AND LENDER.

                                       9

<PAGE>

         IN WITNESS WHEREOF, this Security Agreement has been duly executed and
delivered by the proper officers thereunto duly authorized on the day and year
first above written.

                                      INTRICON CORPORATION

                                      By:  /s/Mark S. Gorder
                                           -------------------------------------
                                           President

                                      By:  /s/William J. Kullback
                                           -------------------------------------
                                           Secretary

                                      Federal Identification Number:  23-1069060

                                      Organizational Number: 323408

TRADE NAMES:                                         INVENTORY LOCATIONS:

Accepted at Minneapolis, Minnesota
on August 31, 2005

Diversified Business Credit, Inc.

By /s/
   ------------------------------------
         Its
             --------------------------

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