Document:

Exhibit
        10.2

    

    

    June
      22,
      2007 

    

    Universal
      Security Instruments, Inc.

    7
      Gwynns
      Mill Court 

    Owings
      Mills , Maryland 21117 

     

    AMENDED
      AND RESTATED INVENTORY SECURITY AGREEMENT

    

    Ladies
      and Gentlemen:

    

    This
      Amended and Restated Inventory Security Agreement shall amend, replace and
      supersede in its entirety the Inventory and Security Agreement Supplement to
      Factoring Agreement executed by you in favor of us, dated February 28, 1995,
      as
      supplemented and amended. This
      agreement is being executed by you to induce us to enter into or continue a
      factoring or financing arrangement with you, and is executed in consideration
      of
      our doing or having done any of the foregoing.

    

    
      	
              1.

            	
              ADVANCES

            

    

    

    
      	
              1.1

            	
              We
                are considering making advances to you in our sole discretion and
                from
                time to time of up to 50% of the value of your Eligible Inventory
                (as
                hereinafter defined) calculated on the basis of the lower of cost
                or
                market, with cost calculated on a first in-first out basis. Eligible
                Inventory shall mean the gross amount of your Inventory (as hereinafter
                defined) that is subject to a valid, exclusive, first priority and
                fully
                perfected security interest in our favor and which Inventory at all
                times
                continues to be acceptable to us in our reasonable business judgement
                and
                less any a) work-in-process, b) supplies, other than raw material,
                c)
                Inventory not present in the United States of America, d) Inventory
                returned or rejected by your customers other than goods that are
                undamaged
                and resalable in the normal course of business, e) Inventory to be
                returned to your suppliers, f) Inventory in transit to third parties
                (other than your agents or warehouses), g) Inventory in possession
                of a
                warehouseman, bailee or other third party, unless such warehouseman,
                bailee or third party has executed a notice of security interest
                agreement
                (in form and substance satisfactory to us) and we have taken all
                other
                action required to perfect our security interest in such Inventory,
                and h)
                less any reserves required by us in our reasonable discretion, including
                for special order goods, discontinued, slow-moving and obsolete Inventory,
                market value declines, bill and hold (deferred shipment), consignment
                sales and shrinkage. 

            

    

    

    
      	
              1.2

            	
              The
                amount of the loans and advances made or to be made by us to you,
                and the
                period of time during which they are to remain outstanding shall
                at all
                times be in our sole discretion. The ratio of Eligible Inventory
                to such
                loans and advances and to the other Obligations (“as hereinafter defined”)
                referred to herein must be satisfactory to us at all times, and the
                valuation and acceptability of the Eligible Inventory is to be determined
                exclusively by us. We are to be at liberty, from time to time, without
                responsibility or liability to you, to revise any limit placed by
                us on
                loans and advances or other Obligations. Furthermore, all such advances
                remain payable to us on demand. 

            

    

    

    
      	
              1.3

            	
              Nothing
                contained herein shall be construed as limiting or modifying, in
                any way,
                our right to: (a) hold any reserve we deem necessary as security
                for
                payment and performance of your Obligations, and/or (b) change the
                aforementioned advance rate or entirely cease making
                advances.

            

    

    

    
      	
              2.

            	
              GRANT
                OF SECURITY INTEREST

            

    

    

    
      	
              2.1

            	
              As
                security for the prompt payment in full of all Obligations (as hereinafter
                defined) due by you from time to time to us, in conjunction with
                the
                factoring or accounts receivable financing agreement between us,
                as
                amended from time to time (herein the "Agreement"), you hereby pledge
                and
                grant to us a continuing general lien upon, and security interest
                in
                (herein "Security Interest"), the following described
                "Inventory":

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    All
      present and hereafter acquired merchandise, inventory and goods, and all
      additions, substitutions and replacements thereof, wherever located, together
      with all goods and materials used or usable in manufacturing, processing,
      packaging or shipping same; in all stages of production -- from raw materials
      through work-in-process to finished goods -- and all proceeds of whatever
      sort.

     

    
      	
              2.2

            	
              The
                Security Interest in the Inventory shall extend and attach
                to:

            

    

    

    
      	
              (a)

            	
              All
                Inventory which is presently in existence and which is owned by you
                or in
                which you have any ownership interest, and all Inventory which you
                may
                purchase or in which you may acquire any ownership interest at any
                time
                and from time to time in the future, whether such Inventory is in
                transit
                or in your or our constructive, actual or exclusive possession, or
                is held
                by others for your account;

            

    

    

    
      	
              (b)

            	
              All
                Inventory wherever located, including, without limitation, all Inventory
                which may be located on your premises or upon the premises of any
                carriers, forwarding agents, truckers, warehousemen, vendors, selling
                agents, finishers, converters, processors, or other third persons
                who may
                have possession of the Inventory;
                and

            

    

    

    
      	
              (c)

            	
              All
                Inventory and any portion thereof which may be returned, rejected,
                reclaimed or repossessed by either of us from your customers, as
                well as
                to all supplies, goods, incidentals, packaging materials, and any
                other
                items which contribute to the finished goods or products manufactured
                or
                processed by you, or to the sale, promotion or shipment
                thereof.

            

    

    

    
      	
              3.

            	
              OBLIGATIONS
                SECURED

            

    

    

    The
      Security Interest granted hereunder and any lien or security interest that
      we
      now or hereafter have in any of your other assets, collateral or property,
      secure the payment and performance of all of your now existing and future
      indebtedness and obligations to us, whether absolute or contingent, whether
      arising under the Agreement, this agreement or any other agreement or
      arrangement between us, by operation of law or otherwise including ledger debt
      (which is indebtedness for goods and services purchased by you from any party
      whose accounts receivable are factored or financed by us), and indebtedness
      arising under any guaranty, credit enhancement or other credit support granted
      by us in your favor, including any accommodation extended with respect to
      applications for letters of credit, our acceptance of drafts or our endorsement
      of notes or other instruments for your account and benefit (herein the
“Obligations”). Obligations shall also include, without limitation, all
      interest, commissions, financing and service charges, and expenses and fees
      chargeable to and due from you under this agreement, the Agreement or any other
      agreement or arrangement which may be now or hereafter entered into between
      us.

    

    
      	
              4.

            	
              REPRESENTATIONS,
                WARRANTIES AND COVENANTS

            

    

    

    
      	
              4.1

            	
              You
                agree to safeguard, protect and hold all Inventory for our account
                and
                make no disposition thereof except in the regular course of your
                business
                as herein provided. You represent and warrant that Inventory will
                be sold
                and shipped by you to your customers only in the ordinary course
                of your
                business and then only on open account and on terms not exceeding
                the
                terms currently being extended by you to your customers, provided
                that all
                proceeds of all sales (including cash, accounts receivable, checks,
                notes,
                instruments for the payment of money and similar proceeds) are forthwith
                transferred, assigned, endorsed, and turned over and delivered to
                us.
                Invoices covering sales of Inventory are to be assigned to us in
                accordance with the provisions of the Agreement, and the proceeds
                thereof
                (if collected by you) are to be turned over to us in accordance with
                the
                provisions of the Agreement. Cash sales of Inventory, or sales in
                which a
                lien upon or security interest in the Inventory is retained by you
                shall
                only be made by you with our written approval, and all proceeds of
                such
                sales shall not be commingled with your other property, but shall
                be
                segregated, held by you in trust for us as our exclusive property,
                and
                shall be delivered immediately by you to us in the identical form
                received
                by you. Upon the sale, exchange, or other disposition of the Inventory,
                as
                herein provided, the Security Interest provided for herein shall,
                without
                break in continuity and without further formality or act, continue
                in, and
                attach to, all proceeds, including any instruments for the payment
                of
                money, accounts receivable, contract rights, documents of title,
                shipping
                documents, chattel paper and all other cash and non-cash proceeds
                of such
                sale, exchange or disposition. As to any such sale, exchange or other
                disposition, we shall have all of the rights of an unpaid seller,
                including stopping in transit, replevin, rescission and
                reclamation.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
              4.2

            	
              You
                hereby warrant and represent that you are solvent; that this Security
                Interest constitutes and shall at all times constitute a first and
                only
                lien on the Inventory; that you are, or will be at the time additional
                Inventory is acquired by you, the absolute owner of the Inventory
                with
                full right to pledge, sell, consign, transfer and create a Security
                Interest therein, free and clear of any and all claims or liens in
                favor
                of others; that you will at your expense forever warrant and, at
                our
                request, defend the same from any and all claims and demands of any
                other
                person; and that you will not grant, create or permit to exist, any
                lien
                upon or security interest in the Inventory, or any proceeds, in favor
                of
                any other person.

            

    

    

    
      	
              4.3

            	
              You
                agree to comply with the requirements of all state and federal laws
                in
                order to grant to us a valid and perfected first Security Interest
                in the
                Inventory. We are hereby authorized by you to file any financing
                statements or amendments covering the Inventory whether or not your
                signature appears thereon. To the extent permitted by applicable
                law, you
                authorize us to sign your name, or to file financing statements or
                continuations or amendments without your signature, all in order
                to
                create, perfect or maintain our security interest in the Inventory.
                You
                agree to do whatever we may request, from time to time, by way of;
                leasing
                warehouses; filing notices of lien, financing statements, amendments,
                renewals and continuations thereof; cooperating with our agents and
                employees; keeping Inventory records; obtaining waivers from landlords
                and
                mortgagees; and performing such further acts as we may require in
                order to
                effect the purposes of this
                agreement.

            

    

     

    
      	
              4.4

            	
              You
                agree to maintain insurance on the Inventory under such policies
                of
                insurance, with such insurance companies, in such amounts and covering
                such risks as are at all times satisfactory to us. All policies covering
                the Inventory are to be made payable to us, in case of loss, under
                a
                standard non-contributory "mortgagee", "lender" or "secured party"
                clause
                and are to contain such other provisions as we may require to fully
                protect our interest in the Inventory and to any payments to be made
                under
                such policies. All original policies or true copies thereof are to
                be
                delivered to us, premium prepaid, with the loss payable endorsement
                in our
                favor, and shall provide for not less than thirty (30) days prior
                written
                notice to us of the exercise of any right of cancellation. At your
                request, or if you fail to maintain such insurance, we shall arrange
                for
                such insurance, but at your expense and without any responsibility
                on our
                part for: obtaining the insurance, the solvency of the insurance
                companies, the adequacy of the coverage, or the collection of claims.
                The
                insurance we purchase may not pay any claims made by you or against
                you in
                connection with your Inventory. You are responsible for the costs
                of this
                insurance, including interest and any other charges we may impose
                in
                connection with the purchase of this insurance. The costs of this
                insurance may be more than insurance you can buy on your own. You
                may
                still obtain insurance of your own choosing, subject to the terms
                and
                conditions of this paragraph 0, on the Inventory. If you provide
                us with
                proof that you have obtained adequate insurance on your Inventory,
                we will
                cancel the insurance that we purchased and refund or credit any unearned
                premiums to you. In the event that we purchase such insurance, we
                will
                notify you of said purchase within thirty (30) days after the date
                of such
                purchase. If, within thirty (30) days after the date notice was sent
                to
                you, you provide us with proof that you had adequate insurance on
                your
                Inventory as of the date we also purchased insurance and that you
                continue
                to have the insurance that you purchased yourself, we will cancel
                the
                insurance that we purchased without charging you any costs, interest,
                or
                other charges in connection with the insurance that we purchased.
                Unless
                we shall otherwise agree with you in writing, we shall have the sole
                right, in our name or yours, to file claims under any insurance policies,
                to receive, receipt and give acquittance for any payments that may
                be
                payable thereunder, and to execute any and all endorsements, receipts,
                releases, assignments, reassignments or other documents that may
                be
                necessary to effect the collection, compromise or settlement of any
                claims
                under any such insurance policies.

            

    

    

    
      	
              4.5

            	
              You
                agree to pay, when due, all taxes, assessments, claims and other
                charges
                (herein "taxes") lawfully levied or assessed upon the Inventory unless
                such taxes are being diligently contested in good faith by you by
                appropriate proceedings and adequate reserves are established in
                accordance with GAAP. Notwithstanding the foregoing, if such taxes
                remain
                unpaid after the date fixed for the payment thereof, and a lien therefor
                shall be claimed which in our opinion might create a valid obligation
                having priority over the rights granted to us herein, we may then,
                without
                notice to you, on your behalf, pay such taxes, and the amount thereof
                shall be an Obligation secured hereby and due to us on demand. “GAAP”
                shall mean generally accepted accounting principles in the United
                States
                of America as in effect from time to time and for the period as to
                which
                such accounting principles are to
                apply.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
              4.6

            	
              Any
                and all fees, costs and expenses, of whatever kind and nature, (including
                any taxes, attorneys' fees or costs for insurance of any kind), which
                we
                may incur in filing public notices; in preparing or filing documents,
                making title examinations; in protecting, maintaining, or preserving
                the
                Inventory; in enforcing or foreclosing the Security Interest hereunder,
                whether through judicial procedures or otherwise; or in defending
                or
                prosecuting any actions or proceedings arising out of or related
                to our
                transactions with you under this arrangement, shall be borne and
                paid by
                you. If same are not promptly paid by you, we may pay same on your
                behalf,
                and the amount thereof shall be an Obligation secured hereby and
                due to us
                on demand.

            

    

    

    
      	
              4.7

            	
              You
                agree to comply with all acts, rules, regulations, and orders of
                any
                legislative, administrative or judicial body or official, applicable
                to
                the Inventory or any part thereof, or to the operation of your business;
                provided that you may contest any acts, rules, regulations, orders
                and
                directions of such bodies or officials in any reasonable manner which
                will
                not, in our opinion, adversely affect our rights or priority in the
                Inventory hereunder.

            

    

    

    
      	
              5.

            	
              BOOKS
                AND RECORDS AND
                EXAMINATIONS

            

    

    

    
      	
              5.1

            	
              You
                agree to maintain Books and Records pertaining to the Inventory in
                such
                detail, form and scope as we shall reasonably require. “Books and Records”
                means your accounting and financial records (whether paper, computer
                or
                electronic), data, tapes, discs, or other media, and all programs,
                files,
                records and procedure manuals relating thereto, wherever
                located.

            

    

    

    
      	
              5.2

            	
              You
                agree that we or our agents may enter upon your premises at any time
                during normal business hours, and from time to time, for the purpose
                of
                inspecting the Inventory and any and all Books and Records pertaining
                thereto. You agree to notify us promptly of any change in your name,
                mailing address, principal place of business or the location of the
                Inventory. You are also to advise us promptly, in sufficient detail,
                of
                any substantial change relating to the type, quantity or quality
                of the
                Inventory, or any event which would have a material effect on the
                value of
                the Inventory or on the Security Interest granted to us
                herein.

            

    

    

    
      	
              5.3

            	
              You
                agree to: execute and deliver to us, from time to time, solely for
                our
                convenience in maintaining a record of the Inventory, such consignments
                or
                written statements as we may reasonably require, designating, identifying
                or describing the Inventory pledged to us hereunder. Your failure,
                however, to promptly give us such consignments, or other statements
                shall
                not affect, diminish, modify or otherwise limit our Security Interest
                in
                the Inventory.

            

    

     

    
      	
              6.

            	
              EVENTS
                OF DEFAULT AND REMEDIES UPON
                DEFAULT

            

    

    

    
      	
              6.1

            	
              It
                is an “Event of Default” under this agreement if an Event of Default
                occurs under the Agreement.

            

    

    

    
      	
              6.2

            	
              After
                the occurrence of an Event of Default which is not waived by us,
                we shall
                have the right, with or without notice to you, to foreclose the Security
                Interest created herein by any available judicial procedure, or to
                take
                possession of the Inventory without judicial process, and to enter
                any
                premises where the Inventory may be located for the purpose of taking
                possession of or removing the Inventory. We shall have the right,
                without
                notice or advertisement, to sell, lease, or otherwise dispose of
                all or
                any part of the Inventory, whether in its then condition or after
                further
                preparation or processing, in your name or in ours, or in the name
                of such
                party as we may designate, either at public or private sale or at
                any
                broker's board, in lots or in bulk, for cash or for credit, with
                or
                without warranties or representations, and upon such other terms
                and
                conditions as we in our sole discretion may deem advisable, and we
                shall
                have the right to purchase at any such sale. If notice of intended
                disposition of any said Inventory is required by law, five (5) days
                notice
                shall constitute reasonable notification. If any Inventory shall
                require
                maintenance, preparation, or is in process or other unfinished state,
                we
                shall have the right, at our option, to do such maintenance, preparation,
                processing or completion of manufacturing, for the purpose of putting
                the
                Inventory in such saleable form as we shall deem appropriate. You
                agree,
                at our request, to assemble the Inventory and to make it available
                to us
                at places which we shall select, whether at your premises or elsewhere,
                and to make available to us your premises and facilities for the
                purpose
                of our taking possession of, removing or putting the Inventory in
                saleable
                form. The proceeds of any such sale, lease or other disposition of
                the
                Inventory shall be applied first, to the expenses of taking, holding,
                storing, processing, preparing for sale, selling, and the like, and
                then
                to the satisfaction of your Obligations to us, application as to
                particular Obligations or as to principal or interest to be in our
                sole
                discretion. You shall be liable to us for, and shall pay to us on
                demand,
                any deficiency which may remain after such sale, lease or other
                disposition, and we in turn agree to remit to you, or your successors
                or
                assigns, any surplus resulting therefrom. The enumeration of the
                foregoing
                rights is not intended to be exhaustive and the exercise of any right
                shall not preclude the exercise of any other rights, all of which
                shall be
                cumulative.

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
              6.3

            	
              To
                the extent that your Obligations are now or hereafter secured by
                any
                assets or property other than the Inventory, or by the guarantee,
                endorsement, assets or property of any other person, then we shall
                have
                the right in our sole discretion to determine which rights, security,
                liens, security interests or remedies we shall at any time pursue,
                foreclose upon, relinquish, subordinate, modify or take any other
                action
                with respect to, without in any way modifying or affecting any of
                them, or
                of any of our rights hereunder.

            

    

    

    
      	
              7.

            	
              TERMINATION

            

    

    

    The
      rights and Security Interest granted to us hereunder are to continue in full
      force and effect, notwithstanding the fact that the account maintained in your
      name on our books may from time to time be temporarily in a credit position,
      until termination of the Agreement and the final payment in full of all
      Obligations due us by you. 

    

    
      	
              8.

            	
              MISCELLANEOUS
                PROVISIONS

            

    

    

    
      	
              8.1

            	
              This
                agreement and all attendant documentation, as the same may be amended
                from
                time to time, constitutes the entire agreement between us with regard
                to
                the subject matter hereof and supersedes any prior agreements or
                understandings. This agreement can be changed only by a writing signed
                by
                both of us and our failure or delay in exercising any of our rights
                hereunder will not constitute a waiver thereof, unless such waiver
                is in
                writing and signed by us, or bar us from exercising any of our rights
                at
                any time. No course of dealing between us shall change or modify
                this
                agreement. A waiver on any one occasion shall not be construed as
                a bar to
                or waiver of any right or remedy on any future occasion. The validity,
                interpretation and enforcement of this agreement shall be governed
                by the
                laws of the State of New York.

            

    

    

    
      	
              8.2

            	
              This
                agreement binds and benefits each of us and our respective successors
                and
                assigns, provided, however, that you may not assign this agreement
                or your
                rights hereunder without our prior written
                consent.

            

    

    

    
      	
              8.3

            	
              If
                any provision of this agreement is contrary to, prohibited by, or
                deemed
                invalid under, applicable laws or regulations, such provision will
                be
                inapplicable and deemed omitted to such extent, but the remainder
                will not
                be invalidated thereby and will be given effect so far as
                possible.

            

    

    

    
      	9.	
              JURY
                TRIAL WAIVER

            

    

    

    To
      the extent permitted by applicable law, we each hereby waive any right to a
      trial by jury in any action or proceeding arising directly or indirectly out
      of
      this agreement, or any other agreement or transaction between us or to which
      we
      are parties.

    

    If
      the
      foregoing is in accordance with your understanding, please so indicate by
      signing and returning to us the original and one copy of this agreement. The
      agreement shall take effect as of the date set forth above, after being accepted
      below by one of our officers after which we shall forward a fully executed
      copy
      to you for your files.

    

    Sincerely,

     

    
      	
              THE
                CIT GROUP/COMMERCIAL SERVICES, INC.

            	 	 	 
	
            	 	 	
            
	
              By:
                 /s/ 

            	 	 	 
	
              
                

              

              Name:

            	 	 	
            
	
              Title:

            	 	 	
            

    

     

    Read
      and
      Agreed to:

     

    
      	
              UNIVERSAL
                SECURITY INSTRUMENTS, INC.

            	 	 	 
	
            	 	 	
            
	
              By:
                 /s/ 

            	 	 	 
	
              
                

              

              Name:

            	 	 	
            
	
              Title:

            	 	 	
            

      
         

        Accepted
          at New York, New York

         

      

    

    
      	
              THE
                CIT GROUP/COMMERCIAL SERVICES, INC.

            	 	 	 
	
            	 	 	
            
	
              By:
                 /s/ 

            	 	 	 
	
              
                

              

              Name:

            	 	 	
            
	
              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        5Unassociated Document

    
       

      Exhibit
        10.3

    

    

    CREDIT
      AGREEMENT

    dated
      as
      of

    June
      22,
      2007

    among

    INTERNATIONAL
      CONDUITS LTD.

    as
      Borrower

    -
      and
      -

    UNIVERSAL
      SECURITY INSTRUMENTS, INC., 

    and 

    USI
      ELECTRIC, INC.

    as
      Guarantors

    -
      and
      -

    CIT
      FINANCIAL LTD.

    as
      Lender

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    CREDIT
      AGREEMENT

    

    THIS
      CREDIT AGREEMENT
      is dated
      as of June 22, 2007 and is entered into among International Conduits Ltd.,
      as
      Borrower, Universal Security Instruments, Inc. and USI Electric, Inc. as
      Guarantors, and CIT Financial Ltd., as Lender.

    

    RECITALS

    

    
      	
            	A.	
              The
                Lender has agreed to provide certain credit facilities to the
                Borrower.

            

    

    

    
      	 	
              B.

            	
              The
                Guarantors have agreed to guarantee the obligations of the Borrower
                in
                connection herewith.

            

    

    

    NOW
      THEREFORE, in consideration of the mutual conditions and agreements set forth
      in
      this Agreement and for good and valuable consideration, the receipt of which
      is
      hereby acknowledged, the parties hereto agree as follows:

    

    ARTICLE
      1

    DEFINITIONS

     

    1.1 Defined
      Terms. 
      As
      used
      in this Agreement, the following terms have the meanings specified
      below:

     

    “Accounts”
means,
      in respect of each Credit Party, all of such Credit Party’s now existing and
      future: (a) accounts (as defined in the PPSA), and any and all other
      receivables (whether or not specifically listed on schedules furnished to the
      Lender), including all accounts created by, or arising from, all of such Credit
      Party’s sales, leases, loans, rentals of goods or renditions of services to its
      customers, including those accounts arising under any of such Credit Party’s
      trade names or styles, or through any of such Credit Party’s divisions;
      (b) any and all instruments, documents, chattel paper (including electronic
      chattel paper) (all as defined in the PPSA); (c) unpaid seller’s or
      lessor’s rights (including rescission, replevin, reclamation, repossession and
      stoppage in transit) relating to the foregoing or arising therefrom;
      (d) rights to any goods represented by any of the foregoing, including
      rights to returned, reclaimed or repossessed goods; (e) reserves and credit
      balances arising in connection with or pursuant hereto; (f) guarantees,
      indemnification rights, supporting obligations, payment intangibles, tax refunds
      and letter of credit rights; (g) insurance policies or rights relating to
      any of the foregoing; (h) intangibles pertaining to any and all of the
      foregoing (including all rights to payment, including those arising in
      connection with bank and non-bank credit cards), and including books and records
      and any electronic media and software relating thereto; (i) notes, deposits
      or property of borrowers or other account debtors securing the obligations
      of
      any such borrowers or other account debtors to such Credit Party; (j) cash
      and non cash proceeds (as defined in the PPSA) of any and all of the foregoing;
      and (k) all monies and claims for monies now or hereafter due and payable in
      connection with any and all of the foregoing or otherwise.

     

    “Action
      Request” means
      any
      request received by any Credit Party or any of its Subsidiaries from any
      Governmental Authority under any Environmental Law whereby such Governmental
      Authority requests that it take action or steps or do acts or things in respect
      of any property or assets in its charge, management or control to remediate
      a
      matter which is not or is alleged not to be in compliance with all Environmental
      Laws.

     

    “Acquisition”
means
      any transaction, or any series of related transactions, consummated after the
      Effective Date, by which any Credit Party, directly or indirectly, by means
      of a
      take-over bid, tender offer, amalgamation, merger, purchase of assets or
      otherwise (a) acquires any business or all or substantially all of the
      assets of any Person engaged in any business, (b) acquires control of
      securities of a Person engaged in a business representing more than 50% of
      the
      ordinary voting power for the election of directors or other governing position
      if the business affairs of such Person are managed by a board of directors
      or
      other governing body, (c) acquires control of more than 50% of the
      ownership interest in any Person engaged in any business that is not managed
      by
      a board of directors or other governing body, or (d) otherwise acquires Control
      of a Person engaged in a business.

     

    “Adjusted
      Tangible Net Worth”
means,
      for the Credit Parties on a consolidated basis, the excess of total consolidated
      assets over total consolidated liabilities, as determined in accordance with
      GAAP on a consistent basis, provided,
      however,
      that
      the determination of total consolidated assets shall exclude (i) all
      goodwill, organizational expenses, research and development expenses, trade
      marks, trade mark applications, trade names, copyrights, patents, patent
      applications, licenses and rights in any thereof, and other similar intangibles,
      (ii) all prepaid expenses, deferred charges or unamortized debt discount
      and expense, (iii) all reserves carried and not deducted from consolidated
      assets, (iv) Equity Securities of, obligations or other securities of, or
      capital contributions to, or investments in, any Subsidiary, (v) securities
      which are not readily marketable, (vi) cash held in a sinking fund or other
      analogous fund established for the purpose of redemption, retirement or
      prepayment of Equity Securities or Indebtedness, (vii) any write-up in the
      book value of any asset resulting from a revaluation thereof after the
      acquisition thereof by the Borrower or a Restricted Subsidiary, as the case
      may
      be, and (viii) any items not included in clauses (i) through (vii) above
      which are treated as intangibles under GAAP.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Affiliate”
means,
      (a) any Person which, directly or indirectly, Controls, is Controlled by or
      is under common Control with any other Person; (b) any Person which
      beneficially owns or holds, directly or indirectly, 10% or more of any class
      of
      voting stock or equity interest (including partnership interests) of any other
      Person; (c) any Person, 10% or more of any class of the voting stock (or if
      such Person is not a corporation, 10% or more of the equity interest, including
      partnership interests) of which is beneficially owned or held, directly or
      indirectly, by any other Person; or (d) any Person related within the
      meaning of the ITA to any such Person and includes any “Affiliate” within the
      meaning specified in the Canada
      Business Corporations Act
      on the
      date hereof. The term control (including the terms “controlled by” and “under
      common control with”), means the possession, directly or indirectly, of the
      power to direct or cause the direction of the management and policies of the
      Person in question.

     

    “Agreement”
means
      this Credit Agreement, as it may be amended, modified, supplemented or restated
      from time to time.

     

    “Applicable
      Law”
means
      all federal, provincial, municipal, foreign and international statutes, acts,
      codes, ordinances, decrees, treaties, rules, regulations, municipal by-laws,
      judicial or arbitral or administrative or ministerial or departmental or
      regulatory judgments, orders, decisions, rulings or awards or any provisions
      of
      the foregoing, including general principles of common and civil law and equity,
      and all policies, practices and guidelines of any Governmental Authority binding
      on or affecting the Person referred to in the context in which such word is
      used
      (including, in the case of tax matters, any accepted practice or application
      or
      official interpretation of any relevant taxation authority).

     

    “Assignment
      and Assumption”
means
      an assignment and assumption entered into by the Lender and an assignee (with
      the consent of any party whose consent is required by Section 8.4), and accepted
      by the Lender. 

     

    “Availability
      Reserves”
means,
      as of any date of determination, such amounts as the Lender may from time to
      time establish and revise in its sole discretion reducing the Borrowing Base
      which would otherwise be available to the Borrower under the lending formulas
      provided for herein (a) to reflect criteria, events, conditions,
      contingencies or risks which, as determined by the Lender in its sole
      discretion, do or may affect either (i) any component of the Borrowing Base
      or its value, (ii) the assets, business, operations, industry, financial
      performance, financial condition or prospects of the Credit Parties, 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 customary practice or its reasonable belief
      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, or (c) in respect of any state of facts which the Lender
      determines constitutes a Default or an Event of Default. Without limiting the
      foregoing, the Lender, in its sole discretion, may establish and/or increase
      Availability Reserves in respect of: (a) (i) three months rental
      payments or similar charges for any of the Borrower’s leased premises or other
      collateral locations for which the Borrower has not delivered to the Lender
      a
      landlord’s waiver or bailee’s letter substantially in the form attached hereto
      as Exhibits C and D, respectively, plus (ii) three months estimated
      payments plus any other fees or charges owing by the Borrower to any applicable
      warehousemen or third party processor (as determined by the Lender in its
      reasonable business judgement), provided
      that any
      of the foregoing amounts shall be adjusted from time to time hereafter upon
      (x) delivery to the Lender of any such acceptable waiver, (y) the
      opening or closing of a collateral location and/or (z) any change in the
      amount of rental, storage or processor payments or similar charges; (b) any
      reserve established by the Lender on account of statutory claims, deemed trusts,
      or inventory subject to rights of suppliers under Section 81.1 of the BIA
      (generally known as the “30-day goods” rule), any amendments to the BIA to the
      extent such become Applicable Law and which have the effect of implementing
      any
      aspect of Bill C-55 as of the date hereof, or any other Applicable Law;
      (c) liabilities of any Credit Party under any Blocked Account Agreement, or
      swap, cap, floor, collar, futures contract or option designed to hedge against
      fluctuations in commodity prices, securities prices or other financial market
      conditions, (d) employee or employee benefit related liabilities,
      (e) any other claims which may have priority over the claims of the Lender,
      including Priority Payables; and (f) such other reserves as the Lender may
      at any time or times deem necessary in its reasonable judgment as a result
      of
      (x) negative forecasts and/or trends in the Borrower’s business,
      operations, industry, prospects, profits, operations or financial condition
      or
      assets or (y) other issues, circumstances or facts that could otherwise
      negatively impact the Borrower, its business, operations, industry, prospects,
      profits, operations or financial condition or assets.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    “Authorization”
means,
      with respect to any Person, any authorization, order, permit, approval, grant,
      licence, consent, right, franchise, privilege, certificate, judgment, writ,
      injunction, award, determination, direction, decree, by-law, rule or regulation
      of any Governmental Authority having jurisdiction over such Person, whether
      or
      not having the force of Law.

     

    “BIA”
      means
      the Bankruptcy
      and Insolvency Act
      (Canada).

     

    “Blocked
      Account Agreement”
      has the
      meaning set out in Section 2.14(d).

     

    “Blocked
      Accounts”
      has the
      meaning set out in Section 2.14(d).

     

    “Borrower”
      means
      International Conduits Ltd., an Ontario corporation.

     

    “Borrowing”
means
      any availment of the Credit, which includes a Loan.

     

    “Borrowing
      Base”
      means,
      at any time, the lesser at such time of (a) Maximum Revolving Line of Credit;
      and (b) an amount (which may not be less than zero) equal to the sum of
      (i) 85% of the aggregate amount of all Eligible Accounts of the Credit
      Parties, plus (ii) 50% of the appraised net orderly liquidation value of all
      Eligible Inventory of the Credit Parties, minus (iii) an amount equal to
      all Priority Payables, and minus (iv) an amount equal to all other
      Availability Reserves.

     

    “Borrowing
      Base Report”
means
      the report of the Borrower concerning the amount of the Borrowing Base, to
      be
      delivered pursuant to Section 4.2, substantially in the form attached as Exhibit
      A.

     

    “Borrowing
      Request”
means
      a
      request by the Borrower for a Borrowing substantially in the form of Exhibit
      B.

     

    “Business
      Day”
      means
      any day that is not a Saturday, Sunday or other day on which commercial banks
      in
      Toronto, Ontario or New York, New York are authorized or required by Applicable
      Law to remain closed.

     

    “Canadian
      Dollars”
and
      “Cdn.$”
refer
      to lawful money of Canada.

     

    “Canadian
      $ Equivalent”
means,
      on any day, the amount of Canadian Dollars that the Lender could purchase,
      in
      accordance with its normal practice, with a specified amount of U.S. Dollars
      based on the Bank of Canada noon spot rate on such date.

     

    “Canadian
      Prime Borrowing”
means
      a
      Borrowing comprised of one or more Canadian Prime Loans.

     

    “Canadian
      Prime Loan”
means
      a
      Loan denominated in Canadian Dollars made by the Lender to the Borrower
      hereunder pursuant to a drawdown of a Loan which bears interest at a rate based
      upon the Canadian Prime Rate.

     

    “Canadian
      Prime Rate”
shall
      mean a fluctuating interest rate per annum equal at all times to the rate of
      interest announced publicly from time to time by publication as the Bloomberg
      PRIMECAN Screen (base rate); provided, that such rate is not necessarily the
      best rate offered to its customers by the Lender, and, should the Lender be
      unable to determine such rate, such other indication of the prevailing prime
      rate of interest as may reasonably be chosen by the Lender; provided, further,
      that each change in the Canadian Prime Rate shall take effect simultaneously
      with the corresponding change in the Bloomberg PRIMECAN Screen (base rate)
      or
      the other reasonably chosen prevailing prime rate of interest.

     

    “Canadian
      Resident Lender”
means,
      in respect of a particular Loan, (i) a Lender which holds such Loan and which
      is
      resident in Canada for the purposes of the ITA, or (ii) a Lender which is an
      “authorized foreign bank”, as defined in section 2 of the Bank
      Act
      (Canada)
      and in section 248(1) of the ITA, and which holds the Loan as part of its
“Canadian banking business”, as defined in subsection 248(1) of the ITA.

     

    “Capital
      Expenditures”
means
      all payments due or accruing due (whether or not paid) during a Fiscal Year
      in
      respect of the cost (including expenditures on materials, contract labour and
      direct labour, but excluding expenditures properly chargeable to repairs and
      maintenance in accordance with GAAP) of any fixed asset or improvement, or
      replacement, substitution, or addition thereto, which have a useful life of
      more
      than one (1) year, including, without limitation, those arising in connection
      with the direct or indirect acquisition of such assets by way of increased
      product or service charges or offset items or in connection with Capital Leases
      all as required to be capitalized in accordance with GAAP.

     

    “Capital
      Lease Obligations”
of
      any
      Person means the obligations of such Person to pay rent or other amounts under
      any lease of (or other arrangement conveying the right to use) real or personal
      property, or a combination thereof, which obligations are required to be
      classified and accounted for as capital leases on a balance sheet of such Person
      under GAAP, and the amount of such obligations shall be the capitalized amount
      thereof determined in accordance with GAAP.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    “Change
      in Control”
means
      (a) the acquisition of ownership, directly or indirectly, beneficially or
      of record, by any Person or group of Persons acting jointly or otherwise in
      concert, other than Universal Security Instruments, Inc. or its Affiliates,
      of
      Equity Securities representing more than 50% of the aggregate ordinary voting
      power represented by the issued and outstanding Equity Securities of the
      Borrower; (b) the occupation of a majority of the seats (other than vacant
      seats) on the board of directors of the Borrower by Persons who were neither
      (i) nominated by the board of directors of the Borrower nor
      (ii) appointed by directors so nominated; or (c) the acquisition of
      direct or indirect Control of the Borrower by any Person or group of Persons
      acting jointly or otherwise in concert, other than Universal Security
      Instruments, Inc. or its Affiliates.

     

    “Change
      in Law”
means
      (i) the adoption of any new Applicable Law after the date of this
      Agreement, (ii) any change in any existing Applicable Law or in the
      interpretation or application thereof by any Governmental Authority after the
      date of this Agreement, or (iii) compliance by the Lender (or, for purposes
      of Section 2.10(b), by any lending office of the Lender or by the Lender’s
      holding company, if any) with any request, guideline or directive (whether
      or
      not having the force of law, but in the case of a request, guideline or
      directive not having the force of law, being a request, guideline or directive
      with which persons customarily comply) of any Governmental Authority made or
      issued after the date of this Agreement.

     

    “Collateral”
means
      the property described in and subject to the Liens, privileges, priorities
      and
      security interests purported to be created by any Security
      Document.

     

    “Consolidated
      Net Income”
means,
      for any period, the net income on a consolidated basis of the Borrower and
      its
      consolidated Subsidiaries in accordance with GAAP; provided,
      however, that Consolidated Net Income shall not include or take into
      account:

     

    
      	 	
              (i)

            	
              any
                net income (or loss) of any Unrestricted Subsidiary, except that
                (subject
                to the exclusions contained in clauses (iii) and  (iv) below), the
                Borrower’s equity in the net income of any such Person for such period
                shall be included in such Consolidated Net Income up to the aggregate
                amount of cash actually distributed by such Person during such period
                to
                the Borrower or a Restricted Subsidiary as a dividend or other
                distribution (subject, in the case of a dividend or other distribution
                paid to a Restricted Subsidiary, to the limitations contained in
                clause (ii) below);

            

      	 	 	 

    

    
      	 	
              (ii)

            	
              any
                net income of any Restricted Subsidiary which is subject to restrictions,
                directly or indirectly, on the payment of dividends or the making
                of
                distributions, directly or indirectly, to the Borrower, except that
                (A) subject to the exclusion contained in clauses (iii) and
                (iv) below,
                the Borrower’s equity in the net income of any such Restricted Subsidiary
                for such period shall be included in such Consolidated Net Income
                up to
                the aggregate amount of cash that could have been distributed by
                such
                Restricted Subsidiary consistent with such restriction during such
                period
                to the Borrower or another Restricted Subsidiary as a dividend or
                other
                distribution (subject, in the case of a dividend or other distribution
                paid to another Restricted Subsidiary, to the limitation contained
                in this
                clause), and (B) the Borrower’s equity in a net loss of any such
                Restricted Subsidiary for such period shall be included in determining
                such Consolidated Net Income;

            

      	 	 	 

    

    
      	 	
              (iii)

            	
              any
                gain (or loss) realized upon the sale or other disposition of any
                assets
                of the Borrower or any Subsidiary (including pursuant to any
                sale-and-leaseback arrangement) which is not sold or otherwise disposed
                of
                in the ordinary course of business and any gain (or loss) realized
                upon
                the sale or other disposition of any capital stock of any
                Person;

            

      	 	 	 

    

    
      	 	
              (iv)

            	
              extraordinary
                or nonrecurring gains or non-cash losses;
                and

            

      	 	 	 

    

    
      	 	
              (v)

            	
              the
                effect of a change in GAAP.

            

    

     

    “Control”
means,
      in respect of a particular Person, the possession, directly or indirectly,
      of
      the power to direct or cause the direction of the management or policies of
      such
      Person, whether through the ability to exercise voting power, by contract or
      otherwise. “Controlling”
and
      “Controlled”
have
      meanings correlative thereto.

     

    “Credit
      Party”
means
      the Borrower and each Restricted Subsidiary.

     

    “Credits”
means
      the Revolving Credit and the Term Credit.

     

    “Default”
means
      any event or condition which constitutes an Event of Default or which, upon
      notice, lapse of time or both, would, unless cured or waived, become an Event
      of
      Default.

     

    “Disclosed
      Matters”
means
      the actions, suits and proceedings and the environmental matters disclosed
      in
      Schedule A.

     

    “EDC”
means
      Export Development Corporation (Canada) and its successors and
      assigns.

     

    “Effective
      Date”
means
      the date on which all of the conditions specified in Section 4.1 are satisfied
      or waived in accordance with Section 8.2, as confirmed in a written notice
      from
      the Lender to the Borrower.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    “Eligible
      Account”
means,
      at any time, the invoice amount (which shall be the Canadian $ Equivalent at
      such time of any amount denominated in U.S.$) owing on each Account of a Credit
      Party (net of any credit balance, returns, trade discounts, contras unapplied
      cash, unbilled amounts, tax refunds that have not yet been received or retention
      or finance charges) which meet such standards of eligibility as the Lender
      shall
      establish from time to time in its reasonable discretion; provided
      that, in
      any event, no account shall be deemed an Eligible Account unless each of the
      following statements is accurate and complete (and by including such Account
      in
      any computation of the applicable Borrowing Base, the Borrower shall be deemed
      to represent and warrant to the Lender the accuracy and completeness of such
      statements and the compliance of each such Account with each such other
      eligibility standard established by the Lender):

     

    (1) Such
      Account is a binding and valid obligation of the obligor thereon and is in
      full
      force and effect;

     

    (2) Such
      Account is evidenced by an invoice and is payable in either Canadian Dollars
      or
      U.S. Dollars;

     

    (3) Such
      Account is genuine as appearing on its face or as represented in the books
      and
      records of the Borrower and the applicable Credit Party;

     

    (4) Such
      Account is free from claims regarding rescission, cancellation or avoidance,
      whether by operation of Applicable Law or otherwise;

     

    (5) Payment
      of such Account is less than 90 days past the original invoice date thereof
      and
      less than 60 days past the original due date thereof;

     

    (6) Such
      Account is net of concessions, offset, deduction, contras, returns, chargebacks
      or understandings with the obligor thereon that in any way could reasonably
      be
      expected to adversely affect the payment of, or the amount of, such
      Account;

     

    (7) The
      Lender, has a first-priority perfected Lien covering such Account and such
      Account is, and at all times will be, free and clear of all Liens other than
      Permitted Liens;

     

    (8) The
      obligor on such Account is not an Affiliate or a director, officer or employee
      of any Credit Party;

     

    (9) Such
      Account arose in the ordinary course of business of the Credit Party out of
      the
      sale of goods or services by the Credit Party;

     

    (10) Such
      Account is not payable by an obligor in respect of which 50% or more (by amount)
      of the total aggregate Accounts owed to the Credit Party by such obligor or
      any
      of its Affiliates are more than 90 days past the original invoice date thereof
      or more than 60 days past the original due date thereof;

     

    (11) All
      consents, licenses, approvals or authorizations of, or registrations or
      declarations with, any Governmental Authority required to be obtained, effected
      or given in connection with the execution, delivery and performance of such
      Account by each party obligated thereunder, or in connection with the
      enforcement and collection thereof by the Lender, have been duly obtained,
      effected or given and are in full force and effect;

     

    (12) The
      obligor on such Account is not an individual, and is not the subject of any
      bankruptcy or insolvency proceeding, does not have a trustee or receiver
      appointed for all or a substantial part of its property, has not made an
      assignment for the benefit of creditors, admitted its inability to pay its
      debts
      as they mature, suspended its business or initiated negotiations regarding
      a
      compromise of its debt with its creditors, and the Lender, in its reasonable
      discretion, is otherwise satisfied with the credit standing of such
      obligor;

     

    (13) The
      chief
      executive office of the obligor of such Account is located in the United States
      of America or Canada and the obligor of such Account is organized and existing
      under the laws of the United States of America or a state thereof or the federal
      laws of Canada, a province or territory thereof, or if the obligor is not so
      organized and existing, such Account is covered under letters of credit or
      export/import insurance provided by the EDC on terms and in a manner reasonably
      satisfactory to the Lender;

     

    (14) The
      obligor of such Account is not a Governmental Authority, if the enforceability
      or effectiveness against such Governmental Authority of an assignment of such
      Account is subject to any precondition which has not been
      fulfilled;

     

    (15) In
      the
      case of the sale of goods, the subject goods have been completed, sold and
      shipped, on a true sale basis on open account, or subject to contract, and
      not
      on consignment, on approval, on a “sale or return” basis, or on a “bill and
      hold” or “pre-sale” basis or subject to any other repurchase or return
      agreement; no material part of the subject goods has been returned, rejected,
      lost or damaged; and such Account is not evidenced by chattel paper or a
      promissory note or an instrument of any kind, unless such chattel paper,
      promissory note or other instrument has been delivered to the Lender and is
      subject to a Lien under the Security Documents;

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (16) Each
      of
      the representations and warranties set forth herein and in the Loan Documents
      with respect to such Account is true and correct on such date;

     

    (17) A
      cheque,
      promissory note, draft, trade acceptance or other instrument has not been
      received with respect to such Account (or with respect to any other account
      due
      from the same account debtor), presented for payment and returned uncollected
      for any reason;

     

    (18) Such
      Account is not in respect of a volume rebate; and 

     

    (19) The
      Lender does not believe, in the exercise of its reasonable discretion, that
      the
      prospect of collection of such Account is impaired or that the Account may
      not
      be paid because of the account debtor’s inability to pay;

     

    (20) Such
      Account is not a pre-billed account or an account arising from progress billing;
      and

     

    (21) The
      assignment (whether absolutely or by way of security) of such Account is not
      limited or restricted by the terms of the contract evidencing or relating to
      such Account or, if assignment of such Account is so restricted, such limitation
      or restriction has been complied with and the laws of the jurisdiction(s)
      governing the validity of such assignment do not provide that such limitation
      or
      restriction is ineffective as against the secured creditor with a security
      interest therein;

     

    (22) Such
      Account is not an Account which the Lender, in the exercise of its good faith
      credit discretion, determines to be ineligible for any other reasons deemed
      necessary by Lender in its reasonable business judgment, including those which
      are customary either in the commercial lending industry or in the lending
      practices of the Lender.

    provided
      that, if
      at any time the aggregate amount of all Eligible Accounts owed to a Credit
      Party
      by a particular obligor or its Affiliates exceeds 10% of the aggregate amount
      of
      all Eligible Accounts at such time owed to such Credit Party (determined without
      giving effect to any reduction in Eligible Accounts pursuant to this proviso),
      then, unless the Accounts of such obligors and its Affiliates are insured
      pursuant to credit insurance acceptable to the Lender which has been assigned
      to
      the Lender in form acceptable to the Lender, the amount of such Accounts in
      excess of 10% of such aggregate amount of all Eligible Accounts shall be
      excluded in determining the aggregate amount of all Eligible Accounts at such
      time. 

     

    “Eligible
      Assignee”
means
      (a) another Lender, (b) with respect to any Lender, any Affiliate of
      that Lender, (c) any commercial bank having total assets of $25,000,000,000
      or more, (d) any (i) trust company, savings bank, savings and loan
      association or similar financial institution, or (ii) insurance company
      engaged in the business of writing insurance which, in either case (A) has
      total assets of $25,000,000,000 or more, (B) is engaged in the business of
      lending money and extending credit under credit facilities substantially similar
      to those extended under this Agreement, (C) is operationally and
      procedurally able to meet the obligations of a Lender hereunder to the same
      degree as a commercial bank, and (e) any other financial institution
      (including a mutual fund or other fund) having total assets of $25,000,000,000
      or more which meets the requirements set forth in subclauses (B) and (C) of
      clause (d) above.

     

    “Eligible
      Inventory”
means,
      at any time with respect to a Credit Party, all Inventory of such Credit Party
      valued in Canadian Dollars on a lower of cost (on a first-in, first out basis
      and excluding any component of cost representing intercompany profit in the
      case
      of Inventory acquired from an Affiliate) or market basis in accordance with
      GAAP, with detailed calculations of lower of cost or market to occur on at
      least
      a monthly basis, which meets such standards of eligibility as the Lender shall
      establish from time to time in its reasonable discretion; provided
      that, in
      any event, no Inventory shall be deemed Eligible Inventory unless each of the
      following statements is accurate and complete (and by including such Inventory
      in any computation of the applicable Borrowing Base, the Borrower shall be
      deemed to represent and warrant to the Lender the accuracy and completeness
      of
      such statements and the compliance of such Inventory with each such other
      eligibility standard established by the Lender):

     

    (1) Such
      Inventory is in good condition, merchantable, meets all standards imposed by
      any
      Governmental Authority having regulatory authority over it or its use and/or
      sale and is not obsolete and is either currently usable or currently saleable
      in
      the normal course of business of a Credit Party;

     

    (2) Such
      Inventory is

     

    
      	 	
              (a)

            	
              in
                possession of such Credit Party and located on real property owned
                or
                leased by such Credit Party within the United States of America or
                Canada
                (provided
                that if such Inventory is located on real property leased by such
                Credit
                Party, the landlord of such real property shall have executed and
                delivered to the Lender a landlord waiver substantially in the form
                attached hereto as Exhibit C), or

            

    

    
    

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (b)

            	
              in
                the possession of a bailee within Canada and such bailee shall have
                executed and delivered to the Lender, a bailee letter substantially
                in the
                form attached hereto as Exhibit D, or

            

      	 	 	 

    

    
      	 	
              (c)

            	
              in
                transit within the United States of America or Canada and between
                Credit
                Parties, and upon arrival at its destination, will comply with either
                paragraph (a) or (b) above until title to such Inventory passes to
                purchaser;

            

    

     

    (3) Each
      of
      the representations and warranties set forth in the Loan Documents with respect
      to such Inventory is true and correct on such date;

     

    (4) The
      Lender has a first-priority perfected Lien covering such Inventory, and such
      Inventory is, and at all times will be, free and clear of all Liens other than
      Permitted Liens;

     

    (5) Such
      Inventory does not include goods (i) that are not owned by such Credit Party,
      (ii) that are held by such Credit Party pursuant to a consignment agreement,
      or
      (iii) that are special order goods or discontinued goods;

     

    (6) Such
      Inventory is not subject to repossession under the BIA except to the extent
      the
      applicable vendor has entered into an agreement with the Lender, in form and
      substance reasonably satisfactory to the Lender, waiving its right to
      repossession;

     

    (7) Such
      Inventory does not consist of work-in-process, store room materials, supplies,
      parts, samples, prototypes, or packing and shipping materials;

     

    (8) Such
      Inventory does not consist of goods that are discontinued, obsolete, slow-moving
      or returned or repossessed or used goods taken in trade;

     

    (9) Any
      portion of the value of such Inventory which results from a profit or gain
      resulting from an inter-company sale or other disposition of such inventory
      shall be excluded; 

     

    (10) Such
      Inventory is not evidenced by negotiable documents of title unless delivered
      to
      the Lender with endorsements;

     

    (11) Such
      Inventory does not constitute Hazardous Materials;

     

    (12) Such
      Inventory is covered by casualty insurance;

     

    (13) Such
      Inventory is located on real property where there is Inventory of such Credit
      Party in the aggregate amount of at least Cdn.$100,000;

     

    (14) Such
      Inventory is not Inventory which the Lender has determined in the exercise
      of
      its reasonable discretion that the Lender may not sell or otherwise dispose
      of
      in accordance with the terms of the applicable Security Documents without
      infringing upon the rights of another Person or violating any contract with
      any
      other Person; and

     

    (15) Such
      Inventory is not Inventory which the Lender, in the exercise of its good faith
      credit discretion, determines to be not acceptable for any other reasons,
      including those which are customary either in the commercial lending industry
      or
      in the lending practices of the Lender.

     

    “Environmental
      Laws”
means
      all Applicable Laws relating in any way to the environment, preservation or
      reclamation of natural resources, the generation, use, handling, collection,
      treatment, storage, transportation, recovery, recycling, release, threatened
      release or disposal of any Hazardous Material, or to health and safety
      matters.

     

    “Environmental
      Liability”
means
      any liability, contingent or otherwise (including any liability for damages,
      costs of environmental remediation, fines, penalties or indemnities), of any
      Credit Party directly or indirectly resulting from or based upon
      (a) violation of any Environmental Laws, (b) the generation, use,
      handling, collection, treatment, storage, transportation, recovery, recycling
      or
      disposal of any Hazardous Materials, (c) exposure to any Hazardous
      Materials, (d) the Release or threatened Release of any Hazardous Materials
      into the environment, or (d) any contract, agreement or other consensual
      arrangement pursuant to which liability is assumed or imposed with respect
      to
      any of the foregoing.

     

    “Equity
      Securities”
means,
      with respect to any Person, any and all shares, interests, participations,
      rights in, or other equivalents (however designated and whether voting and
      non-voting) of, such Person’s capital, whether outstanding on the date hereof or
      issued after the date hereof, including any interest in a partnership, limited
      partnership or other similar Person and any beneficial interest in a trust,
      and
      any and all rights, warrants, debt securities, options or other rights
      exchangeable for or convertible into any of the foregoing.

     

    “ETA”
      means
      Part IX of the Excise
      Tax Act
      (Canada).

     

    “Event
      of Default”
has
      the
      meaning set out in Section 7.1.

     

    “Excess
      Availability”
means,
      as of any date, the remainder of (a) the Borrowing Base as of such date,
      less (b) the aggregate outstanding balance of the Indebtedness of the
      Borrower hereunder as of such date and the aggregate face amount of undrawn
      Letters of Credit as of such date. Excess Availability shall always be
      determined on the basis that all debts and obligations shall be current, and
      all
      accounts payable shall be handled in the normal course of the Borrower’s
      business consistent with its past practices.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

       

    

    “Excluded
      Taxes”
means,
      with respect to the Lender or any other recipient of any payment to be made
      by
      or on account of any obligation of the Borrower hereunder, income or franchise
      Taxes imposed on (or measured by) its taxable income or capital Taxes imposed
      on
      (or measured by) its taxable capital, in each case by Canada, or by the
      jurisdiction under the Applicable Laws of which such recipient is organized,
      in
      which the recipient is resident for tax purposes or in which its principal
      office is located or in which it is otherwise deemed to be engaged in a trade
      or
      business for Tax purposes, or any subdivision thereof or therein, and any branch
      profits taxes imposed by Canada, the United States of America or any similar
      tax
      imposed by any jurisdiction on the recipient.

     

    “Exposure”
means,
      with respect to the Lender at any time, the sum of the outstanding principal
      amount of the Lender’s Revolving Loans at such time.

     

    “Financial
      Officer”
means
      the chief financial officer, principal accounting officer, treasurer or
      controller of the Borrower.

     

    “Fiscal
      Quarter”
means
      any fiscal quarter of the Borrower.

     

    “Fiscal
      Year”
means
      any fiscal year of the Borrower.

     

    “Foreign
      Lender”
means
      any Lender that is not a Canadian Resident Lender.

     

    “GAAP”
means
      at any particular time with respect to any Credit Party, generally accepted
      accounting principles as in effect at such time in Canada, consistently applied;
      provided, however, that, if employment of more than one principle shall be
      permissible at such time in respect of a particular accounting matter, “GAAP”
shall refer to the principle which is then employed by the applicable Credit
      Party with the concurrence of its independent public or chartered accountants,
      who are acceptable to the Lender provided further that, for the purposes of
      determining compliance with the financial covenants herein, “GAAP” means GAAP as
      at the date hereof.

     

    “Governmental
      Authority”
means
      the government of Canada, any other nation or any political subdivision thereof,
      whether provincial, state, territorial or local, and any agency, authority,
      instrumentality, regulatory body, court, central bank, fiscal or monetary
      authority or other authority regulating financial institutions, and any other
      entity exercising executive, legislative, judicial, taxing, regulatory or
      administrative powers or functions of or pertaining to government, including
      the
      Bank Committee on Banking Regulation and Supervisory Practices of the Bank
      of
      International Settlements.

     

    “GST”
      means
      all amounts payable under the ETA or any similar legislation in any other
      jurisdiction of Canada, including QST and HST.

     

    “Guarantee”
of
      or
      by any Person (in this definition, the “guarantor”)
      means
      any obligation, contingent or otherwise, of the guarantor guaranteeing or having
      the economic effect of guaranteeing any Indebtedness or other obligation of
      any
      other Person (in this definition, the “primary credit party”) in any manner,
      whether directly or indirectly, and including any obligation of the guarantor,
      direct or indirect, (a) to purchase or pay (or advance or supply funds for
      the purchase or payment of) such Indebtedness or other obligation or to purchase
      (or to advance or supply funds for the purchase of) any security for the payment
      thereof (whether in the form of a loan, advance, stock purchase, capital
      contribution or otherwise), (b) to purchase or lease property, securities
      or services for the purpose of assuring the owner of such Indebtedness or other
      obligation of the payment thereof, (c) to maintain working capital, equity
      capital solvency, or any other balance sheet, income statement or other
      financial statement condition or liquidity of the primary credit party so as
      to
      enable the primary credit party to pay such Indebtedness or other obligation,
      (d) as an account party in respect of any letter of credit or letter of
      guarantee issued to support such Indebtedness or other obligation, or
      (e) to purchase, sell or lease (as lessor or lessee) property, or to
      purchase or sell services, primarily for the purpose of enabling the debtor
      to
      make payment of such Indebtedness or to assure the holder of such Indebtedness
      against loss.

     

    “Guarantor”
means
      Universal Security Instruments, Inc. and USI Electric, Inc. and each other
      Person (other than a Credit Party) which has executed and delivered to the
      Lender, a guarantee of the obligations of the Borrower hereunder.

     

    “Hazardous
      Materials”
means
      any substance, product, liquid, waste, pollutant, chemical, contaminant,
      insecticide, pesticide, gaseous or solid matter, organic or inorganic matter,
      fuel, micro-organism, ray, odour, radiation, energy, vector, plasma, constituent
      or material which (a) is or becomes listed, regulated or addressed under
      any Environmental Laws, or (b) is, or is deemed to be, alone or in any
      combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious
      substance, a contaminant or a source of pollution or contamination under any
      Environmental Laws, including petroleum or petroleum distillates, asbestos
      or
      asbestos containing materials, polychlorinated biphenyls, radon gas, infectious
      or medical wastes and all other substances or wastes of any nature regulated
      pursuant to any Environmental Laws.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    “HST”
      means
      all amounts payable as harmonised sales tax in the Provinces of Nova Scotia,
      Newfoundland and New Brunswick under the ETA.

     

    “Indebtedness”
of
      any
      Person means, without duplication, (a) all obligations of such Person for
      borrowed money or with respect to deposits or advances of any kind, (b) all
      obligations of such Person evidenced by bonds, debentures, notes or similar
      instruments, (c) all obligations of such Person upon which interest charges
      are customarily paid, (d) all obligations of such Person under conditional
      sale or other title retention agreements relating to property acquired by such
      Person, (e) all obligations of such Person in respect of the deferred
      purchase price of property or services (excluding current accounts payable
      incurred in the ordinary course of business), (f) all Indebtedness of
      others secured by (or for which the holder of such Indebtedness has an existing
      right, contingent or otherwise, to be secured by) any Lien on property owned
      or
      acquired by such Person, whether or not the Indebtedness secured thereby has
      been assumed, (g) all Guarantees by such Person of Indebtedness of others,
      (h) all Capital Lease Obligations of such Person, (i) all obligations,
      contingent or otherwise, of such Person as an account party in respect of
      letters of credit and letters of guarantee, (j) all obligations, contingent
      or otherwise, of such Person in respect of bankers’ acceptances, (k) the
      net amount of obligations of such Person (determined on a mark-to-market basis)
      under Swap Agreements, and (l) all obligations of such Person to purchase,
      redeem, retire, defease or otherwise acquire for value (other than for other
      Equity Securities) any Equity Securities of such Person, valued, in the case
      of
      redeemable Equity Securities, at the greater of voluntary or involuntary
      liquidation preference, plus accrued and unpaid dividends. The Indebtedness
      of
      any Person shall include the Indebtedness of any other entity (including any
      partnership in which such Person is a general or limited partner) to the extent
      such Person is liable therefor as a result of such Person’s ownership interest
      in or other relationship with such entity, except to the extent the terms of
      such Indebtedness provide that such Person is not liable therefor.

     

    “Indemnified
      Taxes”
means
      all Taxes other than Excluded Taxes. 

     

    “Indemnitee”
has
      the
      meaning set out in Section 8.3(b).

     

    “Interest
      Payment Date”
means
      the first Business Day of each calendar month.

     

    “Inventory”
means,
      in respect of each Credit Party, all of such Credit Party’s present and
      hereafter acquired inventory (as defined in the PPSA) and including all
      merchandise, inventory and goods, and all additions, substitutions and
      replacements thereof, wherever located, together with all goods and materials
      used or usable in manufacturing, processing, packaging or shipping same in
      all
      stages of production from raw materials through work in process to finished
      goods, and all “stores” inventory or “operating and maintenance supplies”
inventory, and all proceeds of any thereof (of whatever sort).

     

    “Investment”
means,
      as applied to any Person (the “investor”),
      any
      direct or indirect purchase or other acquisition by the investor of, or a
      beneficial interest in, Equity Securities of any other Person, including any
      exchange of Equity Securities for Indebtedness, or any direct or indirect loan,
      advance (other than advances to employees for moving and travel expenses,
      drawing accounts and similar expenditures in the ordinary course of business)
      or
      capital contribution by the investor to any other Person, including all
      Indebtedness and Accounts owing to the investor from such other Person that
      did
      not arise from sales or services rendered to such other Person in the ordinary
      course of the investor’s business, or any direct or indirect purchase or other
      acquisition of bonds, notes, debentures or other debt securities of, any other
      Person. The amount of any Investment shall be the original cost of such
      Investment plus
      the cost
      of all additions thereto, without any adjustments for increases or decreases
      in
      value, or write-ups, write-downs or write-offs with respect to such Investment
      minus
      any
      amounts (a) realized upon the disposition of assets comprising an
      Investment (including the value of any liabilities assumed by any Person other
      than the Borrower or any Restricted Subsidiary in connection with such
      disposition), (b) constituting repayments of Investments that are loans or
      advances or (c) constituting cash returns of principal or capital thereon
      (including any dividend, redemption or repurchase of equity that is accounted
      for, in accordance with GAAP, as a return of principal or capital).

     

    “ITA”
means
      the Income
      Tax Act
      (Canada).

     

    “Lender”
means
      CIT Financial Ltd. and any other Person that shall have become a party hereto
      pursuant to an Assignment and Assumption, other than any such Person that ceases
      to be a party hereto pursuant to an Assignment and Assumption.

     

    “Lender
      Affiliate”
means,
      with respect to any Lender, an Affiliate of such Lender.

     

    “Lien”
means,
      (a) with respect to any asset, any mortgage, deed of trust, lien, pledge,
      hypothec, hypothecation, encumbrance, charge, security interest, royalty
      interest, adverse claim, defect of title or right of set off in, on or of such
      asset, (b) the interest of a vendor or a lessor under any conditional sale
      agreement, capital lease, title retention agreement or consignment agreement
      (or
      any financing lease having substantially the same economic effect as any of
      the
      foregoing) relating to any asset, (c) in the case of securities, any
      purchase option, call or similar right of a third party with respect to such
      securities, (d) any netting arrangement, defeasance arrangement or
      reciprocal fee arrangement, and (e) any other arrangement having the effect
      of providing security.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    “Loan”
means
      any loan made by the Lender to the Borrower pursuant to this Agreement,
      including the Revolving Loans and the Term Loan.

     

    “Loan
      Documents”
      means
      this Agreement, the Security Documents, the Blocked Account Agreement, the
      Borrowing Requests, and the Borrowing Base Reports, together with any other
      document, instrument or agreement (other than participation, agency or similar
      agreements among the Lender or between the Lender and any other bank or creditor
      with respect to any indebtedness or obligations of any Credit Party hereunder
      or
      thereunder) now or hereafter entered into in connection with this Agreement,
      as
      such documents, instruments or agreements may be amended, modified or
      supplemented from time to time.

     

    “Material
      Adverse Change”
means
      any event, development or circumstance that has had or could reasonably be
      expected to have a Material Adverse Effect.

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (a) the business, assets, operations, prospects
      or condition, financial or otherwise, of the Credit Parties, or (b) the
      validity or enforceability of any of the Loan Documents, the priority of the
      Liens created thereby or the rights and remedies of the Lender thereunder or
      (c) any Material Contract, or (d) the amount which the Lender would be
      likely to receive (after giving effect to delays in payment and costs of
      enforcement) upon the liquidation of the Collateral.

     

    “Material
      Contract”
      means
      (a) the contracts, licences and agreements listed and described on
      Schedule B, and
      (b) any other contract, licence or agreement (i) to which any Credit
      Party is a party or bound, (ii) which is material to, or necessary in, the
      operation of the business of any Credit Party, and (iii) which a Credit
      Party cannot promptly replace by an alternative and comparable contract with
      comparable commercial terms.

     

    “Material
      Indebtedness”
means
      (a) the obligations of Universal Security Instruments, Inc. to The CIT
      Group/Commercial Services Inc. pursuant to the amended and restated factoring
      agreement dated as of the date hereof between The CIT Group/Commercial Services
      Inc. and Universal Security Instruments, Inc. and all ancillary documents
      connected therewith, which obligations have been guaranteed by the Credit
      Parties, and (b) any Indebtedness of any one or more of the Credit Parties
      in an
      aggregate principal amount exceeding Cdn.$250,000. “Maturity
      Date”
means
      initially the first day following the third anniversary of the Effective Date
      (or, if such day is not a Business Day, the next Business Day thereafter),
      and
      thereafter such other date in the future as may be agreed to in accordance
      with
      Section 2.6.

     

    “Maximum
      Revolving Line of Credit”
means
      the Canadian $ Equivalent of US$7,000,000.

     

    “Obligations”
means
      all obligations, liabilities and indebtedness of the Borrower to the Lender
      with
      respect to the principal of and interest on the Loans and the payment or
      performance of all other obligations, liabilities and indebtedness of the
      Borrower to the Lender hereunder or arising under or pursuant to any one or
      more
      of the other Loan Documents or with respect to the Loans, including, without
      limitation, all reimbursement and indemnity obligations of the Borrower to
      the
      Lender hereunder.

     

    “Operating
      Account”
means
      the bank account maintained by the Borrower at a financial institution
      acceptable to the Lender, acting reasonably.

     

    “Out-of-Pocket
      Expenses”
means
      all of the Lender’s present and future expenses incurred relative to this
      Agreement or any other Loan Documents, whether incurred heretofore or hereafter,
      which expenses shall include, without being limited to: the reasonable cost
      of
      retaining external legal counsel, record searches, all costs and expenses
      incurred by the Lender in opening bank accounts, depositing cheques, receiving
      and transferring funds, and wire transfer charges, any charges imposed on the
      Lender due to returned items and “insufficient funds” of deposited cheques and
      the Lender’s standard fees relating thereto, reasonable travel, lodging and
      similar expenses of the Lender’s personnel (or any of its agents) in connection
      with inspecting and monitoring the Collateral from time to time at reasonable
      intervals hereunder, any applicable reasonable counsel fees and disbursements,
      fees and taxes relative to the filing of financing statements, and all expenses,
      costs and fees set forth incurred by or imposed on the Lender by reason of
      the
      exercise of any of its rights and remedies under this Agreement or any of the
      other Loan Documents.

     

    “Participant”
has
      the
      meaning set out in Section 8.4.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    “Payment
      Office”
means
      the Lender’s office located at 207 Queen’s Quay West, Toronto, Ontario, M5J 1A7,
      Attention: Chief Credit Officer (or such other office or individual as the
      Lender may hereafter designate in writing to the other parties
      hereto).

     

    “Pension
      Plan”
means
      any pension benefit plan within the meaning of the Pension
      Benefits Act
      (Ontario) in respect of which any Credit Party makes or has made contributions
      in respect of its employees. 

     

    “Permitted
      Investments”
      means:

     

    
      	 	
              (a)

            	
              direct
                obligations of, or obligations the principal of and interest on which
                are
                unconditionally guaranteed by, the Government of Canada or of any
                Canadian
                province (or by any agency thereof to the extent such obligations
                are
                backed by the full faith and credit of the Government of Canada or
                of such
                Canadian province), in each case maturing within one year from the
                date of
                acquisition thereof;

            

    

     

    
      	 	
              (b)

            	
              investments
                in commercial paper maturing within 270 days from the date of acquisition
                thereof and having, at such date of acquisition, the highest credit
                rating
                obtainable from any of Moody’s, S&P or
                DBRS;

            

    

     

    
      	 	
              (c)

            	
              investments
                in certificates of deposit, bankers’ acceptances and time deposits
                maturing within 180 days from the date of acquisition thereof issued
                or
                guaranteed by or placed with, and money market deposit accounts issued
                or
                offered by, any Schedule I bank under the Bank
                Act
                (Canada).

            

    

     

    “Permitted
      Liens”
      means:

     

    
      	 	
              (a)

            	
              Liens
                in favour of the Lender for the obligations of the Borrower or any
                other
                Credit Party under or pursuant to the Loan
                Documents;

            

    

     

    
      	 	
              (b)

            	
              Liens
                granted by a Credit Party in favour of another Credit Party in order
                to
                secure any of its indebtedness to such other Credit Party, provided
                that such Liens are subject to assignment and postponement arrangements
                satisfactory to the Lender;

            

    

     

    
      	 	
              (c)

            	
              Purchase
                Money Liens securing Indebtedness and Liens to secure Capital Lease
                Obligations, in each case only to the extent permitted by
                Section 6.1(e);

            

    

     

    
      	 	
              (d)

            	
              Liens
                imposed by any Governmental Authority for Taxes not yet due and delinquent
                or which are being contested in good faith in compliance with
                Section 5.3, and, during such period during which such Liens are
                being so contested, such Liens shall not be executed on or enforced
                against any of the assets of any Credit
                Party;

            

    

     

    
      	 	
              (e)

            	
              carrier’s,
                warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction and
                other like Liens arising by operation of Applicable Law, arising
                in the
                ordinary course of business, which are not overdue for a period of
                more
                than 30 days or which are being contested in good faith and by appropriate
                proceedings, and, during such period during which such Liens are
                being so
                contested, such Liens shall not be executed on or enforced against
                any of
                the assets of the Credit Party, provided
                that the Credit Party shall have set aside on its books reserves
                deemed
                adequate therefor and not resulting in qualification by
                auditors;

            

    

     

    
      	 	
              (f)

            	
              statutory
                Liens incurred or pledges or deposits made under employment standards,
                pension benefits, worker’s compensation, unemployment insurance and other
                social security legislation;

            

    

     

    
      	 	
              (g)

            	
              Liens
                or deposits to secure the performance of bids, tenders, trade contracts,
                leases, statutory obligations, surety and appeal bonds, performance
                bonds
                and other obligations of a like nature (other than for borrowed money)
                incurred in the ordinary course of
                business;

            

    

     

    
      	 	
              (h)

            	
              Liens
                of or resulting from any judgement or award, the time for the appeal
                or
                petition for rehearing of which shall not have expired, or in respect
                of
                which the Credit Parties shall at any time in good faith be prosecuting
                an
                appeal or proceeding for review and in respect of which a stay of
                execution pending such appeal or proceeding for review shall have
                been
                secured;

            

    

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (i)

            	
              undetermined
                or inchoate Liens and charges arising or potentially arising under
                statutory provisions which have not at the time been filed or registered
                in accordance with Applicable Law or of which written notice has
                not been
                duly given in accordance with Applicable Law or which although filed
                or
                registered, relate to obligations not due or
                delinquent;

            

    

     

    
      	 	
              (j)

            	
              statutory
                Liens incurred or pledges or deposits made in favour of a Governmental
                Authority to secure the performance of obligations of a Credit Party
                under
                Environmental Laws to which any assets of such Credit Party are subject,
                provided
                that no Default or Event of Default shall have occurred and be
                continuing;

            

    

     

    
      	 	
              (k)

            	
              a
                Lien granted by a Credit Party to a landlord to secure the payment
                of
                arrears of rent in respect of leased properties in the Province of
                Quebec
                leased from such landlord, provided
                that such Lien is limited to the assets located at or about such
                leased
                properties; 

            

    

     

    
      	 	
              (l)

            	
              any
                Lien on any owned real property of a Credit Party existing on the
                date
                hereof and set forth in Schedule
                3.9;

            

    

     

    
      	 	
              (m)

            	
              any
                Lien on any property or asset of a Credit Party existing on the date
                hereof and set forth in Schedule 3.10; provided
                that (i) such Lien shall not apply to any other property or asset
                of such
                Credit Party, and (ii) such Lien shall secure only those obligations
                which
                it secures on the date hereof; 

            

    

     

    
      	 	
              (n)

            	
              any
                Lien existing on any property or asset prior to the acquisition thereof
                by
                a Credit Party or existing on any property or asset of any Person
                that
                becomes a Credit Party after the date hereof prior to the time such
                Person
                becomes a Credit Party; provided
                that (i) such
                Lien is not created in contemplation of or in connection with such
                acquisition or such Person becoming a Credit Party, as the case may
                be,
                (ii)
                such
                Lien shall not apply to any other property or assets of such Credit
                Party,
                and (iii)
                such
                Lien shall secure only those obligations which it secures on the
                date of
                such acquisition or the date such Person becomes a Credit Party,
                as the
                case may be; and

            

    

     

    
      	 	
              (o)

            	
              any
                extension, renewal or replacement of any of the foregoing; provided,
                however, that the Liens permitted hereunder shall not be extended
                to cover
                any additional Indebtedness of the Credit Parties or their property
                (other
                than a substitution of like property), except Liens in respect of
                Capital
                Lease Obligations and Purchase Money Liens as permitted by (c)
                above.

            

    

     

    “Person”
      includes any natural person, corporation, company, limited liability company,
      trust, joint venture, association, incorporated organization, partnership,
      Governmental Authority or other entity.

     

    “PPSA”
means
      the Personal
      Property Security Act (Ontario),
      as amended from time to time.

     

    “Priority
      Payables”
means,
      with respect to any Person, any amount payable by such Person which is secured
      by a Lien in favour of a Governmental Authority which ranks or is capable of
      ranking prior to or pari passu with the Liens created by the Security Documents
      in respect of any Eligible Accounts or Eligible Inventory, including amounts
      owing for wages, vacation pay, severance pay, employee deductions, sales tax,
      excise tax, Tax payable pursuant to Part IX of the Excise
      Tax Act (Canada)
      (net of GST input credits), income tax, workers compensation, government
      royalties, pension fund obligations, and other statutory or other claims that
      have or may have priority over, or rank pari
      passu
      with,
      such Liens created by the Security Documents.

     

    “PST”
      means
      all taxes payable under the Retail
      Sales Tax Act
      (Ontario) or any similar statute of another jurisdiction of Canada.

     

    “Purchase
      Money Lien”
means
      a
      Lien taken or reserved in personal property to secure payment of all or part
      of
      its purchase price, provided
      that
      such Lien (i) secures an amount not exceeding the purchase price of such
      personal property, (ii) extends only to such personal property and its
      proceeds, and (iii) is granted prior to or within 30 days after the
      purchase of such personal property.

     

    “QST”
      means
      the Quebec sales tax imposed pursuant to an Act
      respecting the Québec sales tax.

     

    “Related
      Parties”
means,
      with respect to any Person, such Person’s Affiliates and the respective
      directors, officers, employees, agents and advisors of such Person and of such
      Person’s Affiliates.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    “Release”
      means an
      actual or potential discharge, deposit, spill, leak, pumping, pouring, emission,
      emptying, injection, escape, leaching, seepage or disposal of a Hazardous
      Materials which is in breach of any Environmental Laws.

     

    “Responsible
      Officer”
means,
      with respect to any Person, the chairman, the president, any vice president,
      the
      chief executive officer or the chief operating officer, and, in respect of
      financial or accounting matters, any Financial Officer of such Person; unless
      otherwise specified, all references herein to a Responsible Officer mean a
      Responsible Officer of the Borrower.

     

    “Restricted
      Payment”
shall
      mean, with respect to any Person, any payment by such Person (i) of any
      dividends on any of its Equity Securities, (ii) on account of, or for the
      purpose of setting apart any property for a sinking or other analogous fund
      for,
      the purchase, redemption, retirement or other acquisition of any of its Equity
      Securities or any warrants, options or rights to acquire any such shares, or
      the
      making by such Person of any other distribution in respect of any of its Equity
      Securities, (iii) of any principal of or interest or premium on or of any
      amount in respect of a sinking or analogous fund or defeasance fund for any
      Indebtedness of such Person ranking in right of payment subordinate to any
      liability of such Person under the Loan Documents, (iv) of
      any
      principal of or interest or premium on or of any amount in respect of a sinking
      or analogous fund or defeasance fund for any Indebtedness of such Person to
      a
      shareholder of such Person or to an Affiliate of a shareholder of such Person,
      (v) in respect of an Investment, or (vi) of any management, consulting
      or similar fee or any bonus payment or comparable payment, or by way of gift
      or
      other gratuity, to any Affiliate of such Person or to any director or officer
      thereof.

     

    “Restricted
      Subsidiary”
means
      each Subsidiary of the Borrower which is not an Unrestricted Subsidiary.

     

    “Revolving Credit”
means
      the revolving credit facility in the Canadian $ Equivalent of US$7,000,000
      established by the Lender pursuant to this Agreement.

     

    “Revolving
      Loan”
has
      the
      meaning set out in Section 2.1.

     

    “Rolling
      Period”
means,
      as at the end of any calendar month such calendar month taken together with
      the
      eleven immediately preceding calendar months.

     

    “Security
      Documents”
means
      the agreements, documents or instruments described or referred to in Section
      4.1(h) and Section 5.11 (including, to the extent such Section describes an
      amendment, the agreement, document or instrument amended thereby) and any and
      all other agreements, documents or instruments now or hereafter executed and
      delivered by any Credit Party or any other Person as security for the payment
      or
      performance of all or part of the obligations of the Borrower (or such Credit
      Party or other Person) hereunder or under any other Loan Documents, as any
      of
      the foregoing may have been, or may hereafter be, amended, modified or
      supplemented.

     

    “Subsidiary”
means,
      with respect to any Person (in this definition, the “parent”)
      at any
      date, any other Person the accounts of which would be consolidated with those
      of
      the parent in the parent’s consolidated financial statements if such financial
      statements were prepared in accordance with GAAP as of such date, as well as
      any
      other Person (a) of which securities or other ownership interests representing
      more than 50% of the equity or more than 50% of the ordinary voting power or,
      in
      the case of a partnership, more than 50% of the general partnership interests
      are, as of such date, owned, controlled or held, or (b) that is, as of such
      date, otherwise Controlled, by the parent or one or more Subsidiaries of the
      parent or by the parent and one or more Subsidiaries of the parent.

     

    “Taxes”
means
      all taxes, charges, fees, levies, imposts and other assessments, including
      all
      income, sales, use, goods and services, value added, capital, capital gains,
      alternative, net worth, transfer, profits, withholding, payroll, employer
      health, excise, real property and personal property taxes, and any other taxes,
      customs duties, fees, assessments, or similar charges in the nature of a tax,
      including Canada Pension Plan and provincial pension plan contributions,
      unemployment insurance payments and workers’ compensation premiums, together
      with any instalments with respect thereto, and any interest, fines and penalties
      with respect thereto, imposed by any Governmental Authority (including federal,
      state, provincial, municipal and foreign Governmental Authorities), and whether
      disputed or not.

     

    “Term
      Credit”
means
      the term loan credit facility in the Canadian $ Equivalent (as of June 20,
      2007)
      of US$3,000,000 (which is Canadian $3,207,330) established by the Lender
      pursuant to this Agreement.

     

    “Term
      Loan”
means
      a
      loan made pursuant to Section 2.1(b).

     

    “Termination
      Date”
means,
      with respect to any Credit, the date that such Credit is terminated, whether
      or
      not such date is the Maturity Date.

     

    “Transactions”
means
      the execution, delivery and performance by the Borrower of this Agreement and
      the other Loan Documents, the borrowing of Loans and the use of the proceeds
      thereof.

     

    “Unrestricted
      Subsidiary”
means
      any Subsidiary of the Borrower which, together with its Subsidiaries, represents
      less than 5% of the consolidated assets or consolidated gross revenues of the
      Borrower.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    “U.S.
      Dollars”
and
      “U.S.$”
refer
      to lawful money of the United States of America.

     

    “U.S.$
      Equivalent”
means,
      on any day, the amount of U.S. Dollars that the Lender could purchase, in
      accordance with its normal practice, with a specified amount of Canadian Dollars
      based on the Bank of Canada noon spot rate on such date.

     

    “Violation
      Notice”
means
      any notice received by any Obligor from any Governmental Authority under any
      Environmental Law that the applicable Obligor or any of its property and assets
      is not in compliance with the requirements of any Environmental
      Law.

     

    1.2 Terms
      Generally.
      The
      definitions of terms herein shall apply equally to the singular and plural
      forms
      of the terms defined. Whenever the context may require, any pronoun shall
      include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
      phrase “without limitation”. The word “will” shall be construed to have the same
      meaning and effect as the word ‘shall”. The word “or” is disjunctive; the word
“and” is conjunctive. The word “shall” is mandatory; the word “may” is
      permissive. The words “to the knowledge of” means, when modifying a
      representation, warranty or other statement of any Person, that the fact or
      situation described therein is known by the Person (or, in the case or a Person
      other than a natural Person, known by the Responsible Officer of that Person)
      making the representation, warranty or other statement, or with the exercise
      of
      reasonable due diligence under the circumstances (in accordance with the
      standard of what a reasonable Person in similar circumstances would have done)
      would have been known by the Person (or, in the case of a Person other than
      a
      natural Person, would have been known by such Responsible Officer of that
      Person). Unless the context requires otherwise (a) any definition of or
      reference to any agreement, instrument or other document herein shall be
      construed as referring to such agreement, instrument or other document as from
      time to time amended, supplemented or otherwise modified (subject to any
      restrictions on such amendments, supplements or modifications set forth herein),
      (b) any reference herein to any statute or any section thereof shall,
      unless otherwise expressly stated, be deemed to be a reference to such statute
      or section as amended, restated or re-enacted from time to time, (c) any
      reference herein to any Person shall be construed to include such Person’s
      successors and permitted assigns, (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
      Agreement in its entirety and not to any particular provision hereof,
      (e) all references herein to Articles, Sections, Exhibits and Schedules
      shall be construed to refer to Articles and Sections of, and Exhibits and
      Schedules to, this Agreement, and (f) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any
      and
      all tangible and intangible assets and properties, including cash, securities,
      accounts and contract rights. 

     

    1.3 Accounting
      Terms; GAAP.
      Any
      accounting term
      used
      in this Agreement shall have, unless otherwise specifically provided herein,
      the
      meaning customarily given in accordance with GAAP, and all financial
      computations hereunder shall be computed, unless otherwise specifically provided
      herein, in accordance with GAAP as consistently applied and using the same
      method for inventory valuation as used in the preparation of the Financial
      Statements.

     

    1.4 Time.
      All time
      references herein shall, unless otherwise specified, be references to local
      time
      in Toronto, Ontario. Time is of the essence of this Agreement and the other
      Loan
      Documents.

     

    1.5 Permitted
      Liens.
      Any
      reference in any of the Loan Documents to a Permitted Lien is not intended
      to
      subordinate or postpone, and shall not be interpreted as subordinating or
      postponing, or as any agreement to subordinate or postpone, any Lien created
      by
      any of the Loan Documents to any Permitted Lien.

     

    ARTICLE
      2

    THE
      CREDITS

     

    2.1 Credits. 

     

    (a) Subject
      to the terms and conditions set forth herein, the Lender agrees to make Loans
      (each such Loan made under this Section 2.1(a), a “Revolving
      Loan”)
      to the
      Borrower, solely in the Lender’s discretion and not on a committed basis, from
      time to time during the period commencing on the Effective Date and ending
      on
      the Termination Date in an aggregate principal amount no greater than the
      Maximum Revolving Line of Credit, provided that any Revolving Loan made by
      the
      Lender as requested by the Borrower will not result in the Lender’s Exposure
      exceeding the Borrowing Base. Within the foregoing limit and subject to the
      terms and conditions set forth herein, the Borrower may borrow, repay and
      reborrow Revolving Loans.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (b) Subject
      to the terms and conditions set forth herein, the Lender commits to make a
      Loan
      (such Loan made under this Section 2.1(b), the “Term
      Loan”)
      to the
      Borrower in a single Borrowing on the Effective Date in a principal amount
      equal
      to the Canadian $ Equivalent of US$3,000,000.

     

    2.2 Loans
      and Borrowings. 

     

    Subject
      to the Borrowing Base limitations and the other limitations on Loans and
      Borrowings as provided in this Agreement, each Borrowing shall be comprised
      entirely of Canadian Prime Loans, as the Borrower may request in accordance
      herewith. 

     

    2.3 Requests
      for Borrowings.

     

    (a) To
      request a Borrowing of a Revolving Loan, the Borrower shall notify the Lender
      of
      such request by written Borrowing Request not later than 10:00 a.m., Toronto
      time, on the date of the proposed Borrowing. The Lender is entitled to rely
      and
      act upon any written Borrowing Request given or purportedly given by the
      Borrower, and the Borrower hereby waives the right to dispute the authenticity
      and validity of any such request or resulting transaction once the Lender has
      advanced funds based on such written Borrowing Request. Each such written
      Borrowing Request shall be substantially in the form of Exhibit B and shall
      specify the following information:

     

    
      	 	
              (i)

            	
              the
                aggregate amount of the requested
                Borrowing;

            

    

     

    
      	 	
              (ii)

            	
              the
                date of such Borrowing, which shall be a Business Day;
                and

            

    

     

    
      	 	
              (iii)

            	
              the
                location and number of the Borrower’s account to which funds are to be
                disbursed, which shall comply with the requirements of this
                Agreement.

            

    

     

    (b) Each
      Borrowing shall be denominated in Canadian dollars.

     

    (c) The
      Term
      Loan shall be made in one advance on the Effective Date.

     

    2.4 Funding
      of Borrowings.

     

    The
      Lender shall make each Loan to be made by it hereunder on the proposed date
      thereof by wire transfer of immediately available funds by 12:00 noon, Toronto
      time, to the account of the Borrower designated by the Borrower in the
      applicable Borrowing Request.

     

    2.5 Interest.

     

    (a) The
      Loans
      comprising each Canadian Prime Borrowing shall bear interest (computed on the
      basis of the actual number of days elapsed over a year of 365 days or 366 days,
      as the case may be) at a rate per annum equal to the Canadian Prime Rate from
      time to time in effect. 

     

    (b) If
      there
      is a Default or an Event of Default has occurred and is continuing, all amounts
      outstanding hereunder shall bear interest, after as well as before judgment,
      at
      a rate per annum equal to 2% plus the rate otherwise applicable to such Loan
      or,
      in the case of any amount not constituting principal or interest on a Loan,
      at a
      rate equal to 2% plus the rate otherwise applicable to Canadian Prime Loans.
      

     

    (c) Accrued
      interest on each Loan shall be payable in arrears on the earlier of (i) each
      Interest Payment Date, and (ii) the date of termination of the Credits. In
      addition, in the event of any repayment or prepayment of any Loan, accrued
      interest on the principal amount repaid or prepaid shall be payable on the
      date
      of such repayment or prepayment. 

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    (d) All
      interest hereunder shall be payable for the actual number of days elapsed
      (including the first day but excluding the last day). Any Loan that is repaid
      on
      the same day on which it is made shall bear interest for one day. The Canadian
      Prime Rate shall be determined by the Lender, and such determination shall
      be
      conclusive absent manifest error.

     

    (e) For
      the
      purposes of the Interest
      Act (Canada)
      and disclosure thereunder, whenever any interest or any fee to be paid hereunder
      or in connection herewith is to be calculated on the basis of a 365-day or
      366-day year, the yearly rate of interest to which the rate used in such
      calculation is equivalent is the rate so used multiplied by the actual number
      of
      days in the calendar year in which the same is to be ascertained and divided
      by
      365 or 366, as applicable. The rates of interest under this Agreement are
      nominal rates, and not effective rates or yields. The principle of deemed
      reinvestment of interest does not apply to any interest calculation under this
      Agreement.

     

    (f) If
      any
      provision of this Agreement would oblige the Borrower to make any payment of
      interest or other amount payable to the Lender in an amount or calculated at
      a
      rate which would be prohibited by any Applicable Law or would result in a
      receipt by that Lender of “interest” at a “criminal rate” (as such terms are
      construed under the Criminal
      Code (Canada)),
      then, notwithstanding such provision, such amount or rate shall be deemed to
      have been adjusted with retroactive effect to the maximum amount or rate of
      interest, as the case may be, as would not be so prohibited by Applicable Law
      or
      so result in a receipt by the Lender of “interest” at a “criminal rate”, such
      adjustment to be effected, to the extent permitted by Applicable Laws, as
      follows:

     

    
      	 	
              (i)

            	
              first,
                by reducing the amount or rate of interest required to be paid to
                the
                affected Lender under Section 2.5;
                and

            

    

     

    
      	 	
              (ii)

            	
              thereafter,
                by reducing any fees, commissions, costs, expenses, premiums and
                other
                amounts required to be paid to the Lender which would constitute
                interest
                for purposes of section 347 of the Criminal
                Code (Canada).

            

    

     

    2.6 Termination
      and Reduction of Credits.

     

    Unless
      previously terminated, the Credits shall terminate on the Maturity Date. The
      Revolving Loan Credit may be terminated at any time by the Lender upon sixty
      (60) days prior written notice to the Borrower. The Credit Facility is an
      extendible credit for the period (the “Initial
      Period”)
      from
      the Effective Date to the Maturity Date. The Initial Period may, but need not,
      be extended from time to time for a period not exceeding 364 days at the option
      of the Lender provided a written request for such an extension is made by the
      Borrower to the Lender not more than 60 days and not less than 30 days prior
      to
      the Maturity Date and, with respect to each 364 day period after the Maturity
      Date not more than 60 days and not less than 30 days prior to the end of each
      such 364 day period. If the Lender has not responded to a request made by the
      Borrower under this Section prior to the 10th day before the end of the
      applicable 364 day period, the request shall, in the absence of a written
      agreement between the Lender and the Borrower to the contrary, be deemed to
      have
      been denied. If the request is granted by the Lender, the Initial Period shall
      be extended from the Maturity Date to the day 364 days after the Maturity Date
      with respect to the first extension and, to the day 364 days after the end
      of
      the first extension, with respect to the second extension and in each subsequent
      year with respect to further extensions, to the day 364 days after the end
      of
      the immediately previous period.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    2.7 Repayment
      of Loans.
      The
      Borrower hereby unconditionally promises to pay to the Lender the then unpaid
      principal amount of each Loan and all interest thereon on the earlier of the
      Maturity Date and the applicable Termination Date.

     

    2.8 Evidence
      of Debt.

     

    (a) The
      Lender shall maintain in accordance with its usual practice an account or
      accounts evidencing the Indebtedness of the Borrower to the Lender resulting
      from each Borrowing made by the Lender hereunder, including the amounts of
      principal and interest payable and paid to the Lender from time to time
      hereunder.

     

    (b) The
      Lender shall maintain accounts in which it shall record (i) the amount of
      each Borrowing made hereunder, (ii) the amount of any principal or interest
      due and payable or to become due and payable from the Borrower to the Lender
      hereunder, and (iii) the amount of any sum received by the Lender
      hereunder.

     

    (c) The
      entries made in the accounts maintained pursuant to Sections 2.8(a) and (b)
      shall be conclusive evidence (absent manifest error) of the existence and
      amounts of the obligations recorded therein; provided
      that the
      failure of the Lender to maintain such accounts or any error therein shall
      not
      in any manner affect the obligation of the Borrower to repay the Borrowings
      in
      accordance with the terms of this Agreement.

     

    (d) The
      Lender may request that Loans made by it be evidenced by a promissory note.
      In
      such event, the Borrower shall prepare, execute and deliver to the Lender a
      promissory note payable to the order of the Lender (or, if requested by such
      Lender, to such Lender and its registered assigns) and in a form approved by
      the
      Lender. Thereafter, the Loans evidenced by such promissory note and interest
      thereon shall at all times be represented by one or more promissory notes in
      such form payable to the order of the payee named therein (or, if such
      promissory note is a registered note, to such payee and its registered assigns).
      

     

    2.9 Prepayments.

     

    (a) Mandatory
      Borrowing Base Prepayments.
      If at
      any time the aggregate Exposure of the Lender is in excess of the Borrowing
      Base, the Borrower shall immediately pay to the Lender, the amount of such
      excess to be applied as a prepayment of the Revolving Loans.

     

    (b) Currency
      Fluctuations.
      If, at
      any time, the US $ Equivalent of the Exposure exceeds US$7,000,000, or the
      US $
      Equivalent of the outstanding Term Loan exceeds US$3,000,000 (any such excess
      being referred to in this Section as an “Excess
      Amount”),
      then
      the Borrower will repay to the Lender, an amount equal to the Excess Amount.
      If
      the amount of any Excess Amount is equal to or greater than 3% of the applicable
      Credit, then the repayment of the Excess Amount to the Lender shall be made
      by
      the Borrower within one Business Day after the Lender requests such repayment.
      If the amount of any Excess Amount is less than 3% of the applicable Credit,
      then the repayment of the Excess Amount to the Lender shall be made on the
      next
      Interest Payment Date. As of June 20, 2007, the Canadian $ Equivalent is agreed
      to be 1.06911. 

     

    (c) Voluntary
      Prepayment.
      The
      Borrower may, upon delivery of written notice to the Lender (delivered in
      accordance with the notice periods applicable to delivery of a Borrowing Request
      under Section 2.3(a)), prepay all or any part of a Canadian Prime Borrowing.
      Each notice delivered pursuant to this Section 2.9(c) shall be irrevocable.
      No
      prepayment under this Section 2.9(c) shall permanently reduce or terminate
      any
      of the Revolving Credit, but prepayment of a Term Loan shall permanently reduce
      the Term Credit which may not be re-borrowed.

     

    (d) Mandatory
      Term Loan Principal Payments.
      The
      principal amount of the Borrowing under the Term Loan shall be repaid by the
      Borrower in equal monthly instalments of the Canadian $ Equivalent as at the
      Effective Dateof U.S.$83,333.33 (i.e., Canadian $ $89,092.50) on each Interest
      Payment Date, commencing on the first Interest Payment Date following the
      Effective Date, with any unpaid amount paid in accordance with Section
      2.7.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    2.10 Increased
      Costs; Illegality.

     

    (a) If
      any
      Change in Law shall impose, modify or deem applicable any reserve, special
      deposit or similar requirement against assets of, deposits with or for the
      account of, or credit extended by, the Lender, and the result of any of the
      foregoing shall be to increase the cost to the Lender of making or maintaining
      any Loan (or of maintaining its obligation to make any such Loan) or to increase
      the cost to the Lender of participating in, issuing or maintaining any Letter
      of
      Credit or any Loan or to reduce the amount of any sum received or receivable
      by
      the Lender hereunder (whether of principal, interest or otherwise), then the
      Borrower will pay to the Lender, such additional amount or amounts as will
      compensate the Lender, for such additional costs incurred or reduction
      suffered.

     

    (b) If
      the
      Lender determines that any Change in Law regarding capital requirements has
      or
      would have the effect of reducing the rate of return on the Lender’s capital or
      on the capital of the Lender’s, if any, as a consequence of this Agreement or
      the Loans made hereby, to a level below that which the Lender or the Lender’s
      holding company could have achieved but for such Change in Law (taking into
      consideration the Lender’s policies and the policies of the Lender’s holding
      company with respect to capital adequacy) and the Lender’s desired return on
      capital, then from time to time the Borrower will pay to the Lender, such
      additional amount or amounts as will compensate the Lender or the Lender’s
      holding company for any such reduction suffered.

     

    (c) A
      certificate of the Lender setting forth amount or amounts necessary to
      compensate the Lender as specified in Sections 2.10(a) or (b), together with
      a
      brief description of the Change of Law, shall be delivered to the Borrower,
      and
      shall be conclusive absent manifest error. In preparing any such certificate,
      the Lender shall be entitled to use averages and to make reasonable estimates,
      and shall not be required to “match contracts” or to isolate particular
      transactions. The Borrower shall pay the Lender the amount shown as due on
      any
      such certificate within 10 days after receipt thereof.

     

    (d) Failure
      or delay on the part of the Lender to demand compensation pursuant to this
      Section 2.10 shall not constitute a waiver of the Lender’s right to demand such
      compensation.

     

    (e) In
      the
      event that the Lender shall have determined (which determination shall be
      reasonably exercised and shall, absent manifest error, be final, conclusive
      and
      binding upon all parties) at any time that the current or reasonably expected
      foreign currency markets are unusually unstable or that the making or
      continuance of any Loan denominated in a currency other than Canadian Dollars
      has become unlawful or materially restricted as a result of compliance by the
      Lender in good faith with any Applicable Law, or by any applicable guideline
      or
      order (whether or not having the force of law and whether or not failure to
      comply therewith would be unlawful), then, in any such event, the Lender shall
      give prompt notice (by telephone and confirmed in writing) to the Borrower
      of
      such determination. Upon the giving of the notice to the Borrower referred
      to in
      this Section 2.10(e), the Borrower’s right to request (by continuation,
      conversion or otherwise), and the Lender’s obligation to make, Loans denominated
      in a currency other than Canadian Dollars shall be immediately suspended, and
      thereafter any requested Borrowing of Loans denominated in a currency other
      than
      Canadian Dollars shall be deemed to be a request for a Canadian Prime Loan,
      and
      if the affected Loan or Loans are then outstanding, the Borrower shall
      immediately, or if permitted by Applicable Law, no later than the date permitted
      thereby, upon at least one Business Day prior written notice to the Lender,
      convert each such Loan denominated in a currency other than Canadian Dollars
      into a Canadian Prime Loan.

     

    2.11 Taxes.
      

     

    (a) Any
      and
      all payments by or on account of any obligation of the Borrower hereunder shall
      be made free and clear of and without deduction or withholding for any
      Indemnified Taxes; provided
      that if
      the Borrower shall be required to deduct or withhold any Indemnified Taxes
      from
      such payments, then (i) the sum payable shall be increased as necessary so
      that, after making all required deductions or withholdings (including deductions
      or withholdings applicable to additional sums payable under this Section 2.11),
      the Lender receives an amount equal to the sum it would have received had no
      such deduction or withholding been made, (ii) the Borrower shall make such
      deduction or withholding, and (iii) the Borrower shall pay to the relevant
      Governmental Authority in accordance with Applicable Law the full amount
      deducted or withheld.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    (b) In
      addition to the payments by the Borrower required by Section 2.11(a), the
      Borrower shall pay any and all present or future stamp or documentary Taxes
      or
      any other excise or property Taxes, charges or similar levies arising from
      any
      payment made hereunder or from the execution, delivery or enforcement of, or
      otherwise with respect to, this Agreement to the relevant Governmental Authority
      in accordance with Applicable Law.

     

    (c) The
      Borrower shall indemnify the Lender, within 10 days after written demand
      therefor, for the full amount of any Indemnified Taxes paid by the Lender on
      or
      with respect to any payment by or on account of any obligation of the Borrower
      hereunder (including Indemnified Taxes imposed or asserted on or attributable
      to
      amounts payable under this Section 2.11) and any penalties, interest and
      reasonable expenses arising therefrom or with respect thereto, whether or not
      such Indemnified Taxes were correctly or legally imposed or asserted by the
      relevant Governmental Authority. A certificate as to the amount of such payment
      or liability delivered to the Borrower by the Lender shall be conclusive absent
      manifest error.

     

    (d) As
      soon
      as practicable after any payment of Indemnified Taxes by the Borrower to a
      Governmental Authority, the Borrower shall deliver to the Lender the original
      or
      a certified copy of a receipt issued by such Governmental Authority evidencing
      such payment, a copy of the return reporting such payment or other evidence
      of
      such payment reasonably satisfactory to the Lender.

     

    (e) If
      the
      Lender determines, in its sole discretion, that it has received a refund of
      any
      Taxes as to which it has been indemnified by the Borrower or with respect to
      which the Borrower has paid additional amounts pursuant to this Section 2.11
      and, in the Lender’s opinion, such refund amount is both reasonably identifiable
      and quantifiable by it without involving it in an unacceptable administrative
      burden, it shall pay over such refund amount to the Borrower (but only to the
      extent of indemnity payments made, or additional amounts paid, by the Borrower
      under this Section 2.11 with respect to the Taxes giving rise to such refund,
      and only to the extent that the Lender is satisfied that it may do so without
      prejudice to its right, as against the relevant Governmental Authority, to
      retain such refund), net of all out-of-pocket expenses of the Lender and without
      interest (other than any interest paid by the relevant Governmental Authority
      with respect to such refund); provided, that the Borrower, upon the request
      of
      the Lender, agrees to repay the amount paid over to the Borrower (plus any
      penalties, interest or other charges imposed by the relevant Governmental
      Authority) to the Lender if the Lender is required to repay such refund to
      such
      Governmental Authority. Nothing herein contained shall (i) interfere with the
      right of the Lender to arrange its affairs in whatever manner it thinks fit
      and,
      in particular, the Lender shall not be under any obligation to claim relief
      for
      tax purposes on its corporate profits or otherwise, or to claim such relief
      in
      priority to any other claims, reliefs, credits or deductions available to it,
      or
      (ii) require the Lender to make available its tax returns (or any other
      information relating to its Taxes which it deems confidential) to the Borrower
      or any other Person.

     

    2.12 Payments
      Generally .

     

    The
      Borrower shall make each payment required to be made by it hereunder (whether
      of
      principal, interest, fees or amounts payable in respect of Reimbursement
      Obligations, amounts payable under any of Sections 2.10, or 2.11, or amounts
      otherwise payable hereunder) prior to 12:00 noon, Toronto time, on the date
      when
      due, in immediately available funds, without set-off or counterclaim. Any
      amounts received after such time on any date may, in the discretion of the
      Lender, be deemed to have been received on the next succeeding Business Day
      for
      purposes of calculating interest thereon. All such payments shall be made to
      the
      Lender at the Payment Office, except that payments pursuant to any indemnities
      contained herein shall be made directly to the Persons entitled thereto. The
      Lender shall distribute any such payments received by it for the account of
      any
      other Person to the appropriate recipient promptly following receipt thereof.
      If
      any payment hereunder shall be due on a day that is not a Business Day, the
      date
      for payment shall be extended to the next succeeding Business Day, and, in
      the
      case of any payment accruing interest, interest thereon shall be payable for
      the
      period of such extension. All payments under this Section 2.12 shall be made
      in
      Canadian dollars.

     

    2.13 Currency
      Indemnity.
      If, for
      the purposes of obtaining judgment in any court in any jurisdiction with respect
      to this Agreement or any other Loan Document, it becomes necessary to convert
      into a particular currency (the “Judgment
      Currency”)
      any
      amount due under this Agreement or under any other Loan Document in any currency
      other than the Judgment Currency (the “Currency
      Due”),
      then
      conversion shall be made at the rate of exchange prevailing on the Business
      Day
      before the day on which judgment is given. For this purpose “rate of exchange”
means the rate at which the Lender is able, on the relevant date, to purchase
      the Currency Due with the Judgment Currency in accordance with its normal
      practice at its head office in Toronto, Ontario. In the event that there is
      a
      change in the rate of exchange prevailing between the Business Day before the
      day on which the judgment is given and the date of receipt by the Lender of
      the
      amount due, the Borrower will, on the date of receipt by the Lender, pay such
      additional amounts, if any, or be entitled to receive reimbursement of such
      amount, if any, as may be necessary to ensure that the amount received by the
      Lender on such date is the amount in the Judgment Currency which when converted
      at the rate of exchange prevailing on the date of receipt by the Lender is
      the
      amount then due under this Agreement or such other Loan Document in the Currency
      Due. If the amount of the Currency Due which the Lender is so able to purchase
      is less than the amount of the Currency Due originally due to it, the Borrower
      shall indemnify and save the Lender harmless from and against all loss or damage
      arising as a result of such deficiency. This indemnity shall constitute an
      obligation separate and independent from the other obligations contained in
      this
      Agreement and the other Loan Documents, shall give rise to a separate and
      independent cause of action, shall apply irrespective of any indulgence granted
      by the Lender from time to time and shall continue in full force and effect
      notwithstanding any judgment or order for a liquidated sum in respect of an
      amount due under this Agreement or any other Loan Document or under any judgment
      or order.

     

    
      
        
        

      

      
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    2.14 Collection
      of Accounts.

     

    (a) The
      Borrower shall, and shall cause each other Credit Party to, at its expense,
      enforce, collect and receive all amounts owing on its Accounts in the ordinary
      course of its business and any proceeds it so receives shall be subject to
      the
      terms hereof. Any proceeds received by a Credit Party in respect of Accounts,
      and any cheques, cash, credit card sales and receipts, notes or other
      instruments or property received by a Credit Party with respect to any
      Collateral, shall be held by such Credit Party in trust for the Lender, separate
      from such Credit Party’s own property and funds, and promptly turned over to the
      Lender with proper assignments or endorsements by deposit to the Blocked
      Accounts.

     

    (b) The
      Borrower shall, and shall cause each other Credit Party to: (i) irrevocably
      authorize and direct any bank which maintains any Credit Party’s initial receipt
      of cash, cheques and other items to promptly wire transfer all available funds
      to a Blocked Account; and (ii) advise all such banks of the Lender’s
      security interest in such funds. The Borrower shall, and shall cause each other
      Credit Party to, provide the Lender with prior written notice of any and all
      deposit accounts opened or to be opened subsequent to the Effective Date. All
      amounts received by the Lender in payment of Accounts will be credited to the
      Operating Account when the Lender is advised by its bank of its receipt of
      “collected funds” at the Lender’s bank account in Toronto, Ontario on the
      Business Day of such advise if advised no later than 12:00 noon, Toronto time,
      or on the next succeeding Business Day if so advised after 12:00 noon, Toronto
      time. Amounts received in U.S. Dollars will be converted into Canadian Dollars
      by the Lender and the Canadian $ Equivalent shall be credited against
      outstanding Loans. No cheques, drafts or other instrument received by the Lender
      shall constitute final payment to the Lender unless and until such instruments
      have actually been collected.

     

    (c) The
      Borrower shall, and shall cause each Credit Party to: (i) indicate on all of
      its
      invoices that funds should be delivered to and deposited in a lock box or a
      Blocked Account, as applicable; and (ii) direct all of its account debotors
      to
      deposit any and all proceeds of Collateral into the lock boxes or the Blocked
      Accounts, as applicable.

     

    (d) The
      Borrower shall, and shall cause each other Credit Party to, establish and
      maintain, in its own respective name and at its expense, deposit accounts and
      lock boxes with such banks as are acceptable to the Lender (the “Blocked
      Accounts”)
      into
      which the Borrower shall promptly cause to be deposited: (i) all proceeds
      of Collateral received by any Credit Party, including all amounts payable to
      any
      Credit Party from credit card issuers and credit card processors, and
      (ii) all amounts on deposit in deposit accounts used by any Credit Party at
      each of its locations, all as further provided in Section 2.14(b). The banks
      at
      which the Blocked Accounts are established and the applicable Credit Parties
      shall enter into three-party agreements, in form and substance satisfactory
      to
      the Lender (the “Blocked
      Account Agreements”),
      providing that, among other things, all cash, cheques and items received or
      deposited in the Blocked Accounts are subject to Liens in favour of the Lender,
      that the depository bank has no Lien upon, or right of set off against, the
      Blocked Accounts and any cash, cheques, items, wires or other funds from time
      to
      time on deposit therein, except as otherwise provided in the Blocked Account
      Agreements, and that on a daily basis the depository bank will wire, or
      otherwise transfer, in immediately available funds, all funds received or
      deposited into the Blocked Accounts to such bank account as the Lender may
      from
      time to time designate for such purpose. The Borrower hereby confirms and agrees
      that all amounts deposited in such Blocked Accounts and any other funds received
      and collected by the Lender, whether as proceeds of Inventory or other
      Collateral or otherwise, shall be subject to the Liens in favour of the
      Lender.

     

    
      
        
        

      

      
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    ARTICLE
      3

    REPRESENTATIONS
      AND WARRANTIES

     

    In
      order
      to induce the Lender to enter into this Agreement, to make any Loans hereunder
      and to issue any Letters of Credit hereunder, each Credit Party hereby
      represents and warrants to the Lender that each statement set forth in this
      Article 3 is true and correct on the date hereof, and will be true and
      correct on the date of each Borrowing (except where such representation or
      warranty refers to a different date):

     

    3.1 Organization;
      Powers.
      The
      Borrower and each other Credit Party is duly organized, validly existing and
      in
      good standing under the laws of the jurisdiction of its organization, has all
      requisite power and authority to carry on its business as now and formerly
      conducted and, except where the failure to do so, individually or in the
      aggregate, could not reasonably be expected to result in a Material Adverse
      Effect, is qualified to do business in, and is in good standing in, every
      jurisdiction where such qualification is required.

     

    3.2 Authorization;
      Enforceability.
      The
      Transactions are within each Credit Party’s corporate powers and have been duly
      authorized by all necessary corporate and, if required, shareholder action.
      This
      Agreement and the other Loan Documents have been duly executed and delivered
      by
      the Borrower and each other Credit Party party thereto and constitute legal,
      valid and binding obligations of the Borrower and each other Credit Party party
      thereto, enforceable in accordance with their terms, subject to applicable
      bankruptcy, insolvency, reorganisation, moratorium or other Applicable Laws
      affecting creditors’ rights generally and subject to general principles of
      equity, regardless of whether considered in a proceeding in equity or at
      law.

     

    3.3 Governmental
      Approvals; No Conflicts.
      The
      Transactions (a) do
      not
      require any consent or approval of, registration or filing with, or any other
      action by, any Governmental Authority, except as disclosed in Schedule 3.3,
      (b) will
      not
      violate any Applicable Law or the charter, by-laws or other organizational
      documents of the Borrower or any other Credit Party or any order of any
      Governmental Authority, (c) will
      not
      violate or result in a default under any indenture, agreement or other
      instrument binding upon the Borrower or any other Credit Party or their
      respective assets, or give rise to a right thereunder to require any payment
      to
      be made by the Borrower or any other Credit Party, and (d) will
      not
      result in the creation or imposition of any Lien on any asset of the Borrower
      or
      any other Credit Party, except for any Lien arising in favour of the Lender
      under the Loan Documents.

     

    3.4 Financial
      Condition; No Material Adverse Effect.

     

    (a) Universal
      Security Instruments, Inc. has furnished to the Lender its consolidated balance
      sheets and statements of income, retained earnings and changes in financial
      position (i) as
      of and
      for its fiscal years ended March 31, 2005, March 31, 2006 and March 31, 2007,
      reported on by its auditors. Such financial statements present fairly, in all
      material respects, the consolidated financial position and results of operations
      and cash flows of the Borrower as of such dates and for such periods in
      accordance with GAAP, subject to year end audit adjustments and the absence
      of
      footnotes in the case of the statements referred to in clause (ii) above. The
      Borrower has furnished to the Lender its 12 month projection of monthly balance
      sheets, income statements and cash flow projections in respect of the 12 month
      period following the Effective Date.

     

    (b) Since
      March 31, 2007, there has been no event, development or circumstance that has
      had or could reasonably be expected to have a Material Adverse
      Effect.

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    (c) All
      information (including that disclosed in all financial statements) pertaining
      to
      the Borrower and its Subsidiaries (other than projections) (in this Section
      3.4(c), the “Information”)
      that
      has been or will be made available to the Lender by the Borrower or any
      representative of the Borrower and the other Credit Parties, taken as a whole,
      is or will be, when furnished, complete and correct in all material respects
      and
      does not or will not, when furnished, contain any untrue statement of a material
      fact or omit to state a material fact necessary in order to make the statements
      contained therein not materially misleading in light of the circumstances under
      which such statements are made. The projections that have been or will be made
      available to the Lender by the Borrower or any representative of the Borrower
      have been or will be prepared in good faith based upon reasonable assumptions.
      

     

    3.5 Litigation.
      

     

    (a) Except
      as
      disclosed in Schedule 3.5, there are no actions, suits, counterclaims or
      proceedings (including any Tax-related matter) by any Person or investigation
      by
      any Governmental Authority pending against or, to the knowledge of the Borrower,
      threatened against or affecting the Borrower or any of the other Credit Parties
      (i) as
      to
      which there is a reasonable possibility of an adverse determination and that,
      if
      adversely determined, could reasonably be expected, individually or in the
      aggregate, to result in a Material Adverse Effect (other than the Disclosed
      Matters), or (ii) that
      involve this Agreement, any other Loan Document, or the
      Transactions.

     

    (b) Since
      the
      date of this Agreement, there has been no change in the status of the Disclosed
      Matters that, individually or in the aggregate, has resulted in, or materially
      increased the likelihood of, a Material Adverse Effect.

     

    3.6 Compliance
      with Applicable Laws and Agreements.
      The
      Borrower and each other Credit Party is in compliance with all Applicable Laws
      applicable to it or its property and all indentures, agreements and other
      instruments binding upon it or its property, except where the failure to do
      so,
      individually or in the aggregate, could not reasonably be expected to result
      in
      a Material Adverse Effect. Neither the Borrower nor any other Credit Party
      has
      violated or failed to obtain any Authorization necessary to the ownership of
      any
      of its property or assets or the conduct of its business, which violation or
      failure could reasonably be expected to have (in the event that such a violation
      or failure were asserted by any Person through appropriate action) a Material
      Adverse Effect.

     

    3.7 Ownership.
      As at
      the Effective Date, the registered and beneficial holders of all of the Equity
      Securities of the Borrower are as set out on Schedule 3.7. 

     

    3.8 Taxes.
      The
      Borrower and each other Credit Party has timely filed or caused to be filed
      all
      Tax returns and reports required to have been filed and has paid or caused
      to be
      paid all Taxes required to have been paid by it (including all instalments
      with
      respect to the current period) and has made adequate provision for Taxes for
      the
      current period, except Taxes that are being contested in good faith by
      appropriate proceedings and for which the Borrower or such other Credit Party,
      as applicable, has set aside on its books adequate reserves.

     

    3.9 Titles
      to Real Property.
      The
      Borrower and each other Credit Party have indefeasible fee simple title to
      their
      respective owned real properties (or in Quebec, immoveable properties), and
      with
      respect to leased real properties, indefeasible title to the leasehold estate
      with respect thereto, pursuant to valid and enforceable leases, free and clear
      of all Liens except Permitted
      Liens,
      including the Permitted Liens disclosed in Schedule 3.9.

     

    3.10 Titles
      to Personal Property.
      The
      Borrower and each other Credit Party have title to their respective owned
      personal properties (or, in Quebec, moveable properties), and with respect
      to
      leased personal properties, title to the leasehold estate with respect thereto,
      pursuant to valid and enforceable leases, free and clear of all Liens except
      Permitted
      Liens,
      including the Permitted Liens disclosed in Schedule 3.10.

     

    3.11 Pension
      Plans.
      The
      Pension Plans are duly registered under the ITA and
      any
      other Applicable Laws which require registration, have been administered in
      accordance with the ITA and such other Applicable Laws and no event has occurred
      which could reasonably be expected to cause the loss of such registered status,
      except to the extent that any failure to do so could not reasonably be expected
      to have a Material Adverse Effect. All material obligations of the Borrower
      and
      each other Credit Party (including fiduciary, funding, investment and
      administration obligations) required to be performed in connection with the
      Pension Plans and the funding agreements therefor have been performed on a
      timely basis, except to the extent that any failure to do so could not
      reasonably be expected to have a Material Adverse Effect. No promises of benefit
      improvements under the Pension Plans or any benefit plans have been made except
      where such improvement could not reasonably be expected to have a Material
      Adverse Effect. All contributions or premiums required to be made or paid by
      the
      Borrower and each other Credit Party to the Pension Plans have been made on
      a
      timely basis in accordance with the terms of such plans and all Applicable
      Laws.
      There have been no improper withdrawals or applications of the assets of the
      Pension Plans or any benefit plans. Any assessments owed to the Pension Benefits
      Guarantee Fund established under the Pension Benefits Act (Ontario), or other
      assessments or payments required under similar legislation in any other
      jurisdiction, have been paid when due. Except as disclosed in
      Schedule 3.11,
      as of
      the date hereof, each of the Pension Plans is fully funded on a solvency basis
      and going concern basis (using actuarial methods and assumptions which are
      consistent with the valuations last filed with the applicable Governmental
      Authorities. 

     

    
      
        
        

      

      
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    3.12 Disclosure.
      The
      Borrower has disclosed to the Lender all agreements, instruments and corporate
      or other restrictions to which it or any other Credit Party is subject, and
      all
      other matters known to it, that, individually or in the aggregate, could
      reasonably be expected to result in a Material Adverse Effect. 

     

    3.13 [Intentionally
      Deleted.]. 

     

    3.14 Casualties;
      Taking of Properties.
      Since
      March 31, 2007, neither the business nor the properties of the Borrower or
      any
      other Credit Party have been affected in a manner that has had, or could
      reasonably be expected to have, a Material Adverse Effect as a result of any
      fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
      other labour disturbance, embargo, requisition or taking of property or
      cancellation of contracts, permits or concessions by any domestic or foreign
      Governmental Authority, riot, activities of armed forces, or acts of God or
      of
      any public enemy. 

     

    3.15 Subsidiaries.
      As of
      the Effective Date, Schedule 3.15 correctly sets forth the (i) names,
      (ii) form
      of
      legal entity, (iii) Equity
      Securities issued and outstanding, (iv) Equity
      Securities owned by the Borrower or a Subsidiary of the Borrower (and specifying
      such owner), and (v) jurisdictions
      of organization of all Subsidiaries of the Borrower. Except as described in
      Schedule 3.15, as of the Effective Date, the Borrower does not own any Equity
      Securities or debt security which is convertible, or exchangeable, for Equity
      Securities of any other Person. Unless otherwise indicated in Schedule 3.15,
      as
      of the Effective Date, all of the outstanding Equity Securities of each
      Restricted Subsidiary
      is owned of record and beneficially by the Borrower, there are no outstanding
      options, warrants or other rights to purchase Equity Securities of any such
      Restricted Subsidiary,
      and all such Equity Securities so owned are duly authorized, validly issued,
      fully paid and non-assessable, and were issued in compliance with all applicable
      federal, provincial or foreign securities and other Applicable Laws, and are
      free and clear of all Liens, except for Permitted Liens.

     

    3.16 Insurance.
      All
      policies of fire, liability, workers’ compensation, casualty, flood, business
      interruption and other forms of insurance owned or held by the Borrower or
      any
      other Credit Party are (a) sufficient
      for compliance with all requirements of Applicable Law and of all agreements
      to
      which the Borrower or any other Credit Party is a party, (b) are
      valid, outstanding and enforceable policies, (c) provide
      adequate insurance coverage in at least such amounts and against at least such
      risks (but including in any event public liability) as are usually insured
      against in the same general area by Persons engaged in the same or a similar
      business to the assets and operations of the Borrower and each other Credit
      Party, and (d) will
      not
      in any way be adversely affected by, or terminate or lapse by reason of, the
      Transactions. All such material policies are in full force and effect, all
      premiums with respect thereto have been paid in accordance with their respective
      terms, and no notice of cancellation or termination has been received with
      respect to any such policy. Neither the Borrower nor any other Credit Party
      maintains any formalized self-insurance program with respect to its assets
      or
      operations or material risks with respect thereto. The certificate of insurance
      delivered to the Lender pursuant to Section 4.1(e) contains an accurate and
      complete description of all material policies of insurance owned or held by
      the
      Borrower and each other Credit Party on the Effective Date. 

     

    3.17 Solvency.
      Neither
      the Borrower nor any other Credit Party is an “insolvent person” within the
      meaning of the BIA.

     

    
      
        
        

      

      
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    3.18 Material
      Contracts.
      Schedule
      B sets out all Material Contracts as of the Effective Date. A true and complete
      copy of each Material Contract has been delivered to the Lender as of the
      Effective Date. Each of the Material Contracts is in full force and effect.
      Neither the Borrower nor any Restricted Subsidiary
      is in default under or in breach of any term or condition of any Material
      Contract that would have, either individually or in the aggregate, a Material
      Adverse Effect, nor is the Borrower or any Restricted Subsidiary
      aware of any default under or breach of any term or condition of any Material
      Contract by any other party thereto that would have a Material Adverse Effect,
      except as disclosed to the Lender in Schedule 3.13.

     

    3.19 Environmental
      Matters.
      Except
      as disclosed to the Lenders in the Disclosed Matters:

     

    (a) Environmental
      Laws.
      Neither
      any property of the Borrower or its Subsidiaries nor the operations conducted
      thereon violate any applicable order of any court or Governmental Authority
      or
      any Environmental Laws, which violation could reasonably be expected to result
      in remedial obligations having a Material Adverse Effect, assuming disclosure
      to
      the applicable Governmental Authority of all material relevant facts, conditions
      and circumstances, if any, pertaining to the relevant property.

     

    (b) Notices
      and Permits.
      All
      notices, permits, licenses or similar authorizations, if any, required to be
      obtained or filed by the Borrower or its Subsidiaries in connection with the
      operation or use of any and all property of the Borrower or its Subsidiaries
      ,
      including but not limited to past or present treatment, transportation, storage,
      disposal or Release of Hazardous Materials into the environment, have been
      duly
      obtained or filed, except to the extent the failure to obtain or file such
      notices, permits, licenses or similar authorizations could not reasonably be
      expected to have a Material Adverse Effect, or which could not reasonably be
      expected to result in remedial obligations having a Material Adverse Effect,
      assuming disclosure to the applicable Governmental Authority of all material
      relevant facts, conditions and circumstances, if any, pertaining to the relevant
      property.

     

    (c) Hazardous
      Substances Carriers.
      All
      Hazardous Materials generated at any and all property of the Borrower or its
      Subsidiaries have been treated, transported, stored and disposed of only in
      accordance with all Environmental Laws applicable to them, except to the extent
      the failure to have such Hazardous Materials transported, treated or disposed
      by
      such carriers could not reasonably be expected to have a Material Adverse
      Effect, and only at treatment, storage and disposal facilities maintaining
      valid
      permits under applicable Environmental Laws, which carriers and facilities,
      to
      the knowledge of the Borrower, have been and are operating in compliance with
      such permits, except to the extent the failure to have such Hazardous Materials
      treated, transported, stored or disposed at such facilities could not reasonably
      be expected to have a Material Adverse Effect or which could not reasonably
      be
      expected to result in remedial obligations having a Material Adverse Effect,
      assuming disclosure to the applicable Governmental Authority of all material
      relevant facts, conditions and circumstances, if any, pertaining to the relevant
      property.

     

    (d) Hazardous
      Materials Disposal.
      The
      Borrower and its Subsidiaries have taken all reasonable steps necessary to
      determine and have determined that no Hazardous Materials have been disposed
      of
      or otherwise released and there has been no threatened Release of any Hazardous
      Materials on or to any property of the Borrower or its Subsidiaries other than
      in compliance with Environmental Laws, except to the extent the failure to
      do so
      could not reasonably be expected to have a Material Adverse Effect or which
      could not reasonably be expected to result in remedial obligations having a
      Material Adverse Effect, assuming disclosure to the applicable Governmental
      Authority of all material relevant facts, conditions and circumstances, if
      any,
      pertaining to the relevant property. 

     

    (e) No
      Contingent Liability.
      The
      Borrower and its Subsidiaries have no material contingent liability in
      connection with any Release or threatened Release of any Hazardous Materials
      into the environment which could reasonably be expected to result in remedial
      obligations having a Material Adverse Effect, assuming disclosure to the
      applicable Governmental Authority of all relevant facts, conditions and
      circumstances, if any, pertaining to such Release or threatened
      Release.

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    3.20 Employee
      Matters.

     

    (a) Except
      as
      set forth on Schedule 3.20 as of the Effective Date, none of the Borrower or
      any
      of the other Credit Parties, nor any of their respective employees, is subject
      to any collective bargaining agreement. There are no strikes, slowdowns or
      work
      stoppages pending or, to the best knowledge of the Borrower, threatened against
      the Borrower or any other Credit Party, which could reasonably be expected
      to
      have, either individually or in the aggregate, a Material Adverse Effect. Except
      as set forth in Schedule 3.20 as of the Effective Date, none of the Borrower
      nor
      any other Credit Party is subject to an employment contract providing for a
      fixed term of employment or providing for payments other than severance in
      respect of termination of employment.

     

    (b) Each
      of
      the Borrower and the other Credit Parties has withheld from each payment to
      each
      of their respective officers, directors and employees the amount of all Taxes,
      including income tax, Canada pension plan, employment insurance and other
      payments and deductions required to be withheld therefrom, and has paid the
      same
      to the proper taxation or other receiving authority in accordance with
      Applicable Law. None of the Borrower nor any other Credit Party is subject
      to
      any claim by or liability to any of their respective officers, directors or
      employees for salary (including vacation pay) or benefits which would rank
      in
      whole or in part pari
      passu
      with or
      prior to the Liens created by the Security Documents, other than Permitted
      Liens
      to the extent reserved for as Priority Payables. 

     

    
      (c) Neither
        the Borrower nor any Restricted Subsidiary is subject to the United
        States Employee Retirement Income Security Act
        of 1974,
        as amended.

       

    

    3.21 Fiscal
      Year.
      The
      Fiscal Year of the Borrower ends on March 31 of each calendar year.

     

    3.22 Intellectual
      Property Rights.
      The
      Borrower and each Restricted Subsidiary
      is the registered and beneficial owner of, with good and marketable title,
      free
      of all licenses, franchises and Liens other than Permitted Liens, to all
      patents, patent applications, trade marks, trade mark applications, trade names,
      service marks, copyrights, industrial designs, integrated circuit topographies,
      or other rights with respect to the foregoing and other similar property, used
      in or necessary for the present and planned future conduct of its business,
      without any conflict with the rights of any other Person, other than as listed
      on Schedule 3.22, or other than for such conflicts as could not reasonably
      be
      expected to have a Material Adverse Effect. All material patents, trade marks,
      trade names, service marks, copyrights, industrial designs, integrated circuit
      topographies, and other similar rights owned or licensed by the Borrower or
      any
      Restricted Subsidiary,
      and all rights of the Borrower and each Restricted Subsidiary
      to the use of any patents, trade marks, trade names, service marks, copyrights,
      industrial designs, integrated circuit topographies, or other similar rights,
      are described in Schedule 3.22 (collectively, the “Intellectual
      Property Rights”).
      Except as set forth in Schedule 3.22, no material claim has been asserted and
      is
      pending by any Person with respect to the use by the Borrower or any
      Restricted Subsidiary
      of any intellectual property or challenging or questioning the validity,
      enforceability or effectiveness of any intellectual property necessary for
      the
      conduct of the business of the Borrower or any Restricted Subsidiary.
      Except as disclosed in Schedule 3.22 or except as could not reasonably be
      expected to have a Material Adverse Effect, (i) the
      Borrower and each Restricted Subsidiary
      has the exclusive right to use the intellectual property which the Borrower
      (or
      each Restricted Subsidiary)
      owns, (ii) all
      applications and registrations for such intellectual property are current,
      and
      (iii) to
      the
      knowledge of the Borrower, the conduct of the Borrower’s and each
      Restricted Subsidiary’s
      business does not infringe the intellectual property rights of any other
      Person.

     

    3.23 Residency
      of Borrower for Tax Purposes.
      The
      Borrower is a resident of Canada for tax purposes.

     

    3.24 Distributions.
      From
      and after the Effective Date, no Distribution has been declared, paid, or made
      upon or in respect of Equity Securities in any Credit Party except as expressly
      permitted hereby.

     

    3.25 Debt.
      None of
      the Credit Parties nor any of their Subsidiaries has any Indebtedness except
      (a) the Obligations, (b) the Indebtedness set forth in the most recent
      financial statements delivered to the Lender, or the notes thereto, (c) Tax
      obligations (including deferred Taxes), trade payables and other contractual
      obligations arising in the ordinary course of business as carried on by the
      Credit Parties and their Subsidiaries since the date of such financial
      statements, and (d) Indebtedness created in accordance with Section
      6.1.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    3.26 Workers’
      Compensation.
      None of
      the Credit Parties has any unpaid workers’ compensation or like obligations
      except as are being incurred, and paid on a current basis in the ordinary course
      of business, and there are no proceedings, claims, actions, orders or
      investigations of any Governmental Authority relating to workers’ compensation
      outstanding, pending or, to their knowledge, threatened relating to them or
      any
      of their employees or former employees which could reasonably be expected to
      have a Material Adverse Effect.

     

    3.27 Bank
      Accounts.
      Schedule 3.27 contains as of the Effective Date a complete and accurate list
      of
      all bank accounts maintained by the Credit Parties with any bank or other
      financial institution.

     

    3.28 Real
      Property and Leases.
      Schedule 3.28 hereto is a correct and complete list, of all real property owned
      by each Credit Party, all leases and subleases of real property or movable
      or
      personal property by any Credit Party, as lessee or sublessee, and all leases
      and subleases of real property or movable or personal property by any Credit
      Party, as lessor or sublessor. Each of such leases and subleases is valid and
      enforceable in accordance with its terms and is in full force and effect, and
      no
      default by any party to any such lease or sublease exists which could reasonably
      be expected to have a Material Adverse Effect. 

     

    3.29 Further
      Real Property Matters.

     

    (a) Except
      as
      advised in writing to the Lender, no investigation or proceeding of any
      Governmental Authority is pending in respect of real property owned by any
      of
      the Credit Parties. No part of any such real property has been condemned, taken
      or expropriated by any Governmental Authority, federal, state, provincial,
      municipal or any other competent authority.

     

    (b) Except
      as
      advised in writing to the Lender, all present uses in respect of any real
      property of the Credit Parties may lawfully be continued and all permitted
      uses
      are satisfactory for the Credit Parties’ current and intended purposes;
      and

     

    (c) No
      Inventory is located at any leased real property of the Credit Parties except
      as
      indicated in Schedule 3.28.

     

    3.30 Jurisdictions
      of Credit Parties.
      Schedule 3.30 sets out the various jurisdictions in which the Borrower and
      each
      other Credit Party carries on business or has tangible assets having an
      aggregate value in excess of Cdn.$100,000.

     

    ARTICLE
      4

    CONDITIONS

     

    4.1 Effective
      Date.
      The
      right of the Borrower to request Borrowings hereunder shall not become effective
      until the date on which each of the following conditions is satisfied (or waived
      in accordance with Section 8.2):

     

    (a) Credit
      Agreement.
      The
      Lender (or its counsel) shall have received from each party hereto either
      (i) a
      counterpart of this Agreement signed on behalf of each party hereto, or
      (ii) written
      evidence satisfactory to the Lender (which may include facsimile or other
      electronic transmission of a signed signature page of this Agreement) that
      each
      such party has signed a counterpart of this Agreement.

     

    (b) Legal
      Opinions.
      The
      Lender shall have received a favourable written opinion of counsel to the
      Borrower covering such matters relating to the Borrower, the Credit Parties,
      this Agreement, the other Loan Documents, or the Transactions as the Lender
      shall reasonably request (together with copies of all factual certificates
      and
      legal opinions delivered to such counsel in connection with such opinion upon
      which counsel has relied). All opinions and certificates referred to in this
      Section 4.1(b) shall be addressed to the Lender and dated the Effective
      Date.

     

    (c) Corporate
      Certificates.
      The
      Lender shall have received:

    
       

      
        	 	
                (i)

              	
                certified
                  copies of the resolutions of the Board of Directors of the Borrower,
                  and
                  any other Credit Party which is a party to any Loan Document, dated
                  as of
                  the Effective Date, and approving, as appropriate, the Loans, this
                  Agreement and the other Loan Documents, and all other documents,
                  if any,
                  to which the Borrower or such other Credit Party is a party and
                  evidencing
                  corporate authorization with respect to such documents;
                  and

              

      

       

    

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

       

    

    
      	 	
              (ii)

            	
              a
                certificate of an officer of the Borrower, and any other Credit Party
                which is a party to any Loan Document, dated as of the Effective
                Date, and
                certifying (A) the
                name, title and true signature of each officer of such Person authorized
                to execute this Agreement and the other Loan Documents to which it
                is a
                party, (B) the
                name, title and true signature of each officer of such Person authorized
                to provide the certifications required pursuant to this Agreement,
                including certifications required pursuant to Section 5.1 and Borrowing
                Requests, and (C) that
                attached thereto is a true and complete copy of the articles of
                incorporation and bylaws of the Borrower, and any other Credit Party
                which
                is a party to any Loan Document, as amended to date, and a recent
                certificate of status, certificate of compliance, good standing
                certificate or analogous
                certificate.

            

    

     

    (d) Fees.
      The
      Lender shall have received all fees and other amounts due and payable on or
      prior to the Effective Date, including, to the extent invoiced, reimbursement
      or
      payment of all legal fees and other Out-of-Pocket Expenses required to be
      reimbursed or paid by the Borrower hereunder or under any other Loan
      Document.

     

    (e) Insurance.
      The
      Lender shall have received a certificate of insurance coverage, naming the
      Lender, as first loss payee dated not more than 30 days prior to the Effective
      Date, evidencing that the Borrower and its Restricted Subsidiaries are carrying
      insurance in accordance with Section 5.9 hereof. 

     

    (f) Inventory
      Control Systems; Appraisal; Field Audit; Opening Availability.
      The
      Lender shall have reviewed and be satisfied with the Collateral, the inventory
      control systems, the books and records and the reporting capability of the
      Credit Parties. In addition, the Lender shall have received the results of
      an
      updated field audit, and the Borrowing Base on the Effective Date shall be
      sufficient in value, as determined by Lender, to provide Borrower with a
      Borrowing Base, after giving effect to the extensions of credit to be made
      hereunder on the Effective Date, in an amount satisfactory to Lender in its
      sole
      discretion.

     

    (g) Execution
      and Delivery of Documentation.
      The
      Borrower and any other Credit Party which is a party to any Loan Document shall
      have duly authorized, executed and delivered all documents, including Loan
      Documents, required hereunder, all in form and substance satisfactory to the
      Lender, acting reasonably, and all of the Security Documents shall have been
      registered in all offices in which, in the opinion of the Lender or its counsel,
      registration is necessary or of advantage to preserve the priority of the Liens
      intended to be created thereby, and duplicate copies of such Security Documents
      bearing or accompanied by appropriate endorsements or certificates of
      registration shall have been delivered to the Lender. The Lender shall have
      received and be satisfied with the results of all personal property, pending
      litigation, judgment, bankruptcy, execution and other searches conducted by
      the
      Lender and its counsel with respect to the Borrower and any other Credit Party
      in all jurisdictions selected by the Lender and its counsel.

     

    (h) Security
      Documents.
      The
      Lender shall have received:

     

    
      	 	
              (i)

            	
              a
                guarantee executed by each Guarantor in favour of the Lender dated
                as of
                the Effective Date; and

            

    

     

    
      	 	
              (ii)

            	
              a
                general security agreement executed by each Credit Party in favour
                of the
                Lender dated as of the Effective Date, constituting a first-priority
                Lien
                on all property from time to time of each Credit Party, subject only
                to
                Permitted Liens;

            

    

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    provided
      that if
      any of the foregoing documents are not suitable for use in any jurisdiction,
      the
      applicable Credit Party shall provide to the Lender alternative documents with
      substantially equivalent substantive effect and which are suitable for use
      in
      such jurisdiction.

     

    (i) Landlord
      Waivers; Bailee Letters.
      The
      Lender shall have received (i) executed copies of a landlord waiver, in form
      and
      substance satisfactory to the Lender, acting reasonably, from each landlord
      of
      Real Property where any Collateral of any of the Credit Parties is located
      and
      (ii) bailee letters, in form and substance reasonably satisfactory to the
      Lender, from each bailee who is in possession of any Collateral of any of the
      Credit Parties.

     

    (j) Regulatory
      Approval; Consents; Waivers.
      The
      Lender shall be satisfied, acting reasonably, that all material Authorizations
      required in connection with the Transactions contemplated hereby have been
      obtained and are in full force and effect (including all approvals listed in
      Schedule 3.3), and that all consents and waivers required to consummate the
      Transactions have been obtained, to the extent that consummation of the
      Transactions would otherwise be restricted or prohibited under the terms of
      any
      Material Contract to which the Borrower or any other Credit Party is a party,
      or
      by which it is bound, in each case without the imposition of any burdensome
      provisions.

     

    (k) Delivery
      of Financial Statements.
      The
      Lender shall have received and be satisfied with the financial statements
      described in Section 3.4(a) and unaudited consolidated and consolidating balance
      sheets of the Borrower and its Subsidiaries (pro
      forma
      as of
      the Effective Date).

     

    (l) No
      Material Adverse Change.
      The
      Lender shall be satisfied that, since March
      31,
      2007, there has not been a Material Adverse Change.

     

    (m) Indebtedness.
      The
      Transactions contemplated in this Agreement and the other Loan Documents shall
      not have caused any event or condition to occur which has resulted, or which
      will result, in any Material Indebtedness becoming due prior to its scheduled
      maturity or that permits (with or without the giving of notice, the lapse of
      time, or both) the holder or holders of any Material Indebtedness or any trustee
      or Lender on its or their behalf to cause any Material Indebtedness to become
      due, or to require the prepayment, repurchase, redemption or defeasance thereof,
      prior to its scheduled maturity, or which will result in the creation of any
      Liens under any Indebtedness.

     

    (n) Blocked
      Account/Cash Management Systems.
      The
      Lender shall have received evidence satisfactory to the Lender that, as of
      the
      Effective Date, blocked account and cash management systems complying with
      Section 2.14 have been established and are currently being maintained in the
      manner set forth in such Section 2.14, and the Lender shall have received copies
      of duly executed tri-party blocked account, lockbox and other control agreements
      satisfactory to the Lender, acting reasonably.

     

    (o) Material
      Contracts.
      The
      Lender shall be satisfied with the terms and conditions of each of the Material
      Contracts. 

     

    (p) Cancellation
      of Existing Credit Lines.
      The
      Borrower shall have repaid all amounts outstanding under its existing credit
      lines with HSBC Bank Canada, and all such existing credit lines shall have
      been
      cancelled permanently.

     

    (q) Capitalization
      Arrangement.
      The
      Lender shall be satisfied with the capital structure of the Borrower, that
      the
      Borrower is solvent, and that the Borrower has sufficient working capital to
      pay
      its debts as they become due.

     

    (r) Background
      Checks.
      The
      Lender shall have received and be satisfied with the results of the background
      checks conducted on the key senior management and principals of the Credit
      Parties.

     

    (s) Other
      Documentation.
      The
      Lender shall have received such other documents and instruments as are customary
      for transactions of this type or as they may reasonably request.

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

     

    The
      right
      of the Borrower to request a borrowing hereunder shall not become effective
      unless each of the foregoing conditions is satisfied (or waived pursuant to
      Section 8.2) at or prior to 3:00 p.m., Toronto time,
      on
      July
      15, 2007 (and, in the event such conditions are not so satisfied or waived
      by
      such time, the such right shall terminate at such time).

     

    4.2 Each
      Credit Event.
      The
      right of the Borrower to request a Borrowing, (including on the occasions of
      the
      initial Borrowings hereunder), is subject to the satisfaction of the following
      conditions:

     

    (a) the
      representations and warranties of the Borrower set forth in this Agreement
      shall
      be true and correct on and as of the date of each such Borrowing as if made
      on
      such date (except where such representation or warranty refers to a different
      date);

     

    (b) at
      the
      time of and immediately after giving effect to such Borrowing, no Default shall
      have occurred and be continuing; 

     

    (c) the
      Lender shall have received a Borrowing Request in the manner and within the
      time
      period required by Section 2.3; 

     

    (d) the
      Lender shall have received a Borrowing Base Report dated one day prior to the
      date of the requested Borrowing; and

     

    (e) except
      as
      may be otherwise agreed to from time to time by the Lender and the Borrower
      in
      writing, after giving effect to the extension of credit requested to be made
      by
      the Borrower on such date, the aggregate Exposure will not exceed the lesser
      of
      (i) the Maximum Revolving Line of Credit, or (ii) an amount equal to
      the Borrowing Base.

     

    Each
      Borrowing, shall be deemed to constitute a representation and warranty by the
      Borrower on the date thereof as to the accuracy of the matters specified in
      paragraphs (a) and (b) above. This requirement does not apply on the conversion
      or rollover of an existing Borrowing provided
      that the
      aggregate outstanding Borrowings will not be increased as a consequence
      thereof.

     

    ARTICLE
      5

    AFFIRMATIVE
      COVENANTS

     

    From
      (and
      including) the Effective Date until the Credits have expired or been terminated
      and the principal of and interest on each Loan and all fees payable hereunder
      shall have been paid in full, the Borrower and each other Credit Party covenants
      and agrees with the Lender that:

     

    5.1 Financial
      Statements and Other Information.
      The
      Borrower will furnish to the Lender:

     

    (a) as
      soon
      as available and in any event within 90 days after the end of each Fiscal Year
      of the Borrower, its reviewed consolidated balance sheet and related statements
      of income, retained earnings and changes in financial position as of the end
      of
      and for such Fiscal Year, setting forth in each case in comparative form the
      figures for the previous Fiscal Year all reported on by Segal LLP or
      other
      independent auditors of recognized national standing to the effect that such
      consolidated financial statements present fairly in all material respects the
      financial condition and results of operations of the Borrower and its
      Subsidiaries on a consolidated basis in accordance with GAAP consistently
      applied;

     

    (b) as
      soon
      as available and in any event within  30 days after the end of each six
      month period, its unaudited consolidated balance sheet and related statements
      of
      income, retained earnings and changes in financial position as of the end of
      such month and the then elapsed portion of the Fiscal Year which includes such
      calendar month, setting forth in each case in comparative form the figures
      for
      the corresponding period or periods of (or, in the case of the balance sheet,
      as
      of the end of) the previous Fiscal Year, all certified by a Responsible Officer
      as presenting fairly in all material respects the financial condition and
      results of operations of the Borrower and its Subsidiaries on a consolidated
      basis in accordance with GAAP consistently applied, subject to normal year-end
      audit adjustments; 

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    (c) concurrently
      with the financial statements required pursuant to Sections 5.1(a) and (b)
      above, a certificate of the Borrower substantially in the form of Exhibit E,
      signed by a Responsible Officer (i) stating
      that a review of such financial statements during the period covered thereby
      and
      of the activities of the Borrower and the Subsidiaries has been made under
      such
      Responsible Officer’s supervision with a view to determining whether the
      Borrower and the Subsidiaries have fulfilled all of their obligations under
      this
      Agreement and the other Loan Documents, (ii) stating
      that the Borrower and the Subsidiaries have fulfilled their obligations under
      this Agreement and the other Loan Documents and that all representations made
      in
      this Agreement continue to be true and correct as if made on the date of such
      certification (or specifying the nature of any change), except where such
      representation or warranty refers to a different date, or, if there shall be
      a
      Default or Event of Default, specifying the nature and status thereof and the
      Borrower’s proposed response thereto, and (iii)
      containing or accompanied by such financial or other details, information and
      material as the Lender may reasonably request to evidence such
      compliance;

     

    (d) promptly
      upon the request of the Lender, and in any event no less frequently than the
      15th
      Business
      Day of each calendar month (together with a copy of all or any part of the
      following reports (requested by the Lender in writing after the Effective Date),
      a Borrowing Base Report as of the last day of the immediately preceding calendar
      month accompanied by such supporting detail and documentation as shall be
      requested by the Lender it is reasonable discretion including but not limited
      to: 

     

    
      	 	
              (i)

            	
              an
                accounts receivable aging (including both summary and detail format)
                showing Accounts outstanding aged from invoice date as follows: 1
                to 30
                days past due, 31 to 60 days past due, 61 to 90 days past due, and
                91 days
                or more past due, accompanied by such supporting detail and documentation
                as shall be requested by the Lender in its reasonable discretion,
                including the ledger for disputed/legal accounts;
                

            

    

     

    
      	 	
              (ii)

            	
              a
                copy of the internally generated month end cash receipts and collections
                journal;

            

    

     

    
      	 	
              (iii)

            	
              a
                detailed, monthly, Inventory listing of the Borrower and each Restricted
                Subsidiary by location, type and product group with a supporting
                perpetual
                Inventory report, in each case, accompanied by such supporting detail
                and
                documentation as shall be requested by the Lender in its reasonable
                discretion; such summaries and reports shall include the dollar value
                thereof both at cost, determined on a first in, first out basis,
                and at
                fair market value;
                and

            

    

     

    
      	 	
              (iv)

            	
              detailed
                monthly accounts payable aging.

            

    

     

    (e) such
      other reports designating, identifying and describing the Accounts and Inventory
      as required by the Lender and on a more frequent basis as the Lender may
      reasonably request in its reasonable credit discretion.

     

    (f) the
      results of each physical verification, if any, that the Borrower may have made,
      or caused any other Person to have made on its behalf, of all or any portion
      of
      its Inventory, within 10 Business Days of completion of any such physical
      verification (and, if a Default or an Event of Default has occurred and be
      continuing, the Borrower shall, upon the request of the Lender, conduct, and
      deliver the results of, such physical verifications as the Lender may
      require);

     

    (g) promptly
      after the Borrower learns of the receipt or occurrence of any of the following,
      a certificate of the Borrower, signed by a Responsible Officer, specifying
      (i) any
      official notice of any violation, possible violation, non-compliance or possible
      non-compliance, or claim made by any Governmental Authority pertaining to all
      or
      any part of the properties of the Borrower or any of the Subsidiaries which
      could reasonably be expected to have a Material Adverse Effect, (ii) any
      event
      which constitutes a Default or Event of Default, together with a detailed
      statement specifying the nature thereof and the steps being taken to cure such
      Default or Event of Default, (iii) the
      receipt of any notice from, or the taking of any other action by, the holder
      of
      any promissory note, debenture or other evidence of Indebtedness of the Borrower
      or any of the Subsidiaries in an amount in excess of Cdn.$100,000 with respect
      to an actual or alleged default, together with a detailed statement specifying
      the notice given or other action taken by such holder and the nature of the
      claimed default and what action the Borrower or the relevant Subsidiary is
      taking or proposes to take with respect thereto, (iv) any
      default or non-compliance of any party to any of the Loan Documents with any
      of
      the terms and conditions thereof or any notice of termination or other
      proceedings or actions which could reasonably be expected to adversely affect
      any of the Loan Documents, (v) the
      creation, dissolution, merger or acquisition of any Restricted Subsidiary,
      (vi) any
      event
      or condition not previously disclosed to the Lender, which violates any
      Environmental Law and which could potentially, in the Borrower’s reasonable
      judgment, have a Material Adverse Effect, (vii) any
      material amendment to, termination of, or material default under a Material
      Contract or any execution of, or material amendment to, termination of, or
      material default under, any material collective bargaining agreement, and
      (viii) any
      other
      event, development or condition which may reasonably be expected to have a
      Material Adverse Effect;

     

    
      
        
        

      

      
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    (h) promptly
      after the occurrence thereof, notice of the institution of or any material
      adverse development in any action, suit or proceeding or any governmental
      investigation or any arbitration before any court or arbitrator or any
      Governmental Authority or official against the Borrower or any Restricted
      Subsidiary or any material property of any thereof which could reasonably be
      expected to have a Material Adverse Effect;

     

    (i) promptly
      after the filing thereof with any Governmental Authority (if requested by the
      Lender), copies of each annual and other report (including applicable schedules)
      with respect to each Pension Plan of the Borrower or any Restricted
      Subsidiary or
      any
      trust created thereunder;

     

    (j) at
      the
      cost of the Borrower, a report or reports of an independent collateral field
      examiner (which collateral field examiner may be the Lender or an Affiliate
      thereof) approved (i) by
      the
      Borrower, whose approval shall not be unreasonably withheld, and (ii) by
      the
      Lender with respect to the Eligible Accounts and Eligible Inventory components
      included in the Borrowing Base. The Lender may request such reports or
      additional reports as it shall reasonably deem necessary.
      Fees
      for such examinations shall be limited to US$25,000,00 in any year on a combined
      basis for the Credit Parties and the Guarantors;

     

    (k) upon
      request by the Lender, a summary of the insurance coverages of the Borrower
      and
      the other Credit Parties, in form and substance reasonably satisfactory to
      the
      Lender, and upon renewal of any insurance policy, a copy of an insurance
      certificate summarizing the terms of such policy, and upon request by the
      Lender, copies of the applicable policies;

     

    (l) on
      or
      before the earlier of the 10th
      day
      after approval by the Board of Directors of the Borrower and the 30th
      day
      before each Fiscal Year end, an annual budget of the Borrower and each
      Restricted Subsidiary
      (consolidating on the basis of principal lines of business of the Borrower
      and
      its Subsidiaries ), approved by the Board of Directors of the Borrower, setting
      forth in reasonable detail and on a monthly basis the
      projected revenues and expenses of the Borrower for the following Fiscal Year,
      it being recognized by the Lender that projections as to future results are
      not
      to be viewed as fact and that the actual results for the period or periods
      covered by such projections may differ from the projected results;
      and

     

    (m) concurrently
      with any delivery of financial statements under Section 5.1 (a) or (b) above,
      a
      certificate of a Responsible Officer of the Borrower (i) stating whether
      any change in GAAP or in the application thereof has occurred since the date
      of
      the audited financial statements referred to in Section 5.1(a) and, if any
      such
      change has occurred, specifying the effect of such change on the financial
      statements accompanying such certificate, (ii) identifying all its
      Subsidiaries existing on the date of such certificate and indicating, for each
      such Subsidiary, whether such Subsidiary is a Restricted Subsidiary and
      whether such Subsidiary was formed or acquired since the end of the previous
      calendar month, (iii) identifying any parcels of real property or
      improvements thereto that have been acquired by any Credit Party since the
      end
      of the previous calendar month, and (iv) identifying any Permitted
      Acquisitions that have been completed since the end of the previous calendar
      month, including the date on which each such Permitted Acquisition was completed
      and the consideration therefor.

     

    5.2 Existence;
      Conduct of Business. 
      The Borrower will, and will cause each Restricted Subsidiary
      to, do or cause to be done all things necessary to preserve, renew and keep
      in
      full force and effect its legal existence (subject only to Section 6.3), and
      obtain, preserve, renew and keep in full force and effect any and all rights,
      licenses, permits, privileges and franchises material to the conduct of its
      business.

     

    
      
        
        

      

      
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    5.3 Payment
      of Obligations. 
      The
      Borrower will, and will cause each Restricted Subsidiary to, pay its
      obligations, including Tax liabilities, that, if not paid, could result in
      a
      Material Adverse Effect before the same shall become delinquent or in default,
      except where (a) the
      validity or amount thereof is being contested in good faith by appropriate
      proceedings, (b) the
      Borrower or such Restricted Subsidiary has set aside on its books adequate
      reserves with respect thereto in accordance with GAAP, and (c) the
      failure to make payment pending such contest could not reasonably be expected
      to
      result in a Material Adverse Effect.

     

    5.4 Maintenance
      of Properties. 
      The Borrower will, and will cause each Restricted Subsidiary to, keep and
      maintain all property material to the conduct of its business in good working
      order and condition, ordinary wear and tear excepted, except to the extent
      that
      the failure to do so could not reasonably be expected to have a Material Adverse
      Effect.

     

    5.5 Books
      and Records; Inspection Rights. 
      The Borrower will, and will cause Restricted Subsidiary to, keep proper books
      of
      record and account in which full, true and correct entries are made of all
      dealings and transactions in relation to its business and activities. The
      Borrower will, and will cause each Restricted Subsidiary to, permit any
      representatives designated by the Lender, upon reasonable prior notice, to
      visit
      and inspect its properties, to examine and make extracts from its books and
      records, and to discuss its affairs, finances and condition with its officers
      and independent accountants, all at such reasonable times and as often as
      reasonably requested.

     

    5.6 Compliance
      with Applicable Laws and Material Contracts.
      The
      Borrower will, and will cause each Restricted Subsidiary to, comply with all
      Applicable Laws and orders of any Governmental Authority applicable to it or
      its
      property and with all of its material contractual obligations, except where
      the
      failure to do so, individually or in the aggregate, could not reasonably be
      expected to result in a Material Adverse Effect. The Borrower shall not modify,
      amend or alter its certificate or articles of incorporation other than in a
      manner which does not adversely affect the rights of the Lender.

     

    5.7 Use
      of Proceeds.
      The
      proceeds of the Revolving Loans will be used for working capital and other
      general corporate purposes of the Borrower.
      The
      proceeds of the Term Loan will be used to repay existing Indebtedness of the
      Borrower owing to 2113824 Ontario Inc. in the amount of US$1,912,533 and owing
      to Universal Security Instruments, Inc. in the amount of
      US$1,087,467.

     

    5.8 Further
      Assurances.
      The
      Borrower will and will cause each other Credit Party to cure promptly any
      defects in the execution and delivery of the Loan Documents, including this
      Agreement. Upon request, the Borrower will, at its expense, as promptly as
      practical, execute and deliver to the Lender, all such other and further
      documents, agreements and instruments (and cause each other Credit Party to
      take
      such action) in compliance with or performance of the covenants and agreements
      of the Borrower or any other Credit Party in any of the Loan Documents,
      including this Agreement, or to further evidence and more fully describe the
      Collateral, or to correct any omissions in any of the Loan Documents, or more
      fully to state the security obligations set out herein or in any of the Loan
      Documents, or to perfect, protect or preserve any Liens created pursuant to
      any
      of the Loan Documents, or to make any recordings, to file any notices, or obtain
      any consents, all as may be necessary or appropriate in connection therewith,
      in
      the judgment of the Lender, acting reasonably. 

     

    
      
        
        

      

      
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    5.9 Insurance. 
      The Borrower shall, and shall cause each other Credit Party to, maintain
      insurance on its property and assets under such policies of insurance, with
      such
      insurance companies, in such reasonable amounts and covering such insurable
      risks as are at all times reasonably satisfactory to the Lender. All such
      policies are subject to the rights of any holders of Permitted Liens holding
      claims senior to the Lender, to be made payable to the Lender, to the extent
      required herein, in case of loss, under a standard non contributory “mortgagee”,
“lender” or “secured party” clause and are to contain such other provisions as
      the Lender may require to fully protect the Lender’s interest in the property
      and assets subject to the Liens in favour of the Lender and to any payments
      to
      be made under such policies. All original policies or true copies thereof are
      to
      be delivered to the Lender, premium prepaid, with the loss payable endorsement
      in the Lender’s favour, and shall provide for not less than thirty (30) days
      prior written notice to the Lender of the exercise of any right of cancellation.
      Upon the occurrence and continuance of an Event of Default which is not waived
      in writing by the Lender, the Lender shall, subject to the rights of any holders
      of Permitted Liens holding claims senior to the Lender, have the sole right,
      in
      the name of the Lender, the Borrower or any other applicable Credit Party,
      to
      file claims under any insurance policies, to receive, receipt and give
      acquittance for any payments that may be payable thereunder, and to execute
      any
      and all endorsements, receipts, releases, assignments, reassignments or other
      documents that may be necessary to effect the collection, compromise or
      settlement of any claims under any such insurance policies. If any part of
      the
      Collateral is lost or damaged by fire or other casualty and the insurance
      proceeds for such loss or damage is less than or equal to $100,000, such
      insurance proceeds shall be paid to the applicable Credit Party. Notwithstanding
      the foregoing, to the extent such insurance proceeds are received by the Lender,
      the Lender shall promptly, and in any event within one (1) Business Day of
      receipt, remit such insurance proceeds to the applicable Credit Party. If any
      part of the Collateral is lost or damaged by fire or other casualty and the
      insurance proceeds for such loss or damage is greater than $100,000, such
      insurance proceeds shall be paid to the Borrower, the Borrower may irrevocably
      elect (by delivering written notice to the Lender) to replace, repair or restore
      such Collateral to substantially the equivalent condition prior to such fire
      or
      other casualty as set forth herein. If such election is not made by the
      Borrower, insurance proceeds shall be used by the Borrower to repay outstanding
      Revolving Loans. Notwithstanding the foregoing, to the extent that such
      insurance proceeds are received by the Lender, the Lender shall promptly, and
      in
      any event within one (1) Business Day of receipt, remit such insurance proceeds
      to the Borrower to be applied in accordance with this Section 5.9. If the
      Borrower does not, or cannot, elect to use the insurance proceeds as set forth
      above, or if the Lender believes that the applicable Credit Party will not
      be
      able to timely replace, repair or restore such Collateral to substantially
      the
      equivalent condition prior to such fire or other casualty, the Lender may,
      subject to the rights of any holders of Permitted Liens holding claims senior
      to
      the Lender in respect of such insurance proceeds, (i) if no Event of
      Default has occurred and is continuing, apply the insurance proceeds to the
      payment of any Revolving Loans until paid in full and (b) if an Event of
      Default has occurred and is continuing, apply the insurance proceeds to the
      Obligations in such manner and in such order as the Lender may reasonably elect.
      Upon the occurrence and during the continuance of an Event of Default, all
      insurance proceeds in respect of any Collateral shall be paid to the Lender.
      The
      Lender may apply such insurance proceeds to the Obligations in such manner
      as it
      may deem advisable in its sole discretion. In the event the Borrower fails
      to
      provide the Lender with timely evidence, acceptable to the Lender, of the
      maintenance of insurance coverage required pursuant to this Section 5.9, or
      in
      the event that any Credit Party fails to maintain such insurance, the Lender
      may
      purchase or otherwise arrange for such insurance, but at the Borrower’s expense
      and without any responsibility on the Lender’s part for: (i) obtaining the
      insurance; (ii) the solvency of the insurance companies; (iii) the
      adequacy of the coverage; or (iv) the collection of claims. The insurance
      acquired by the Lender may, but need not, protect the Borrower’s or any other
      Credit Party’s interest in the Collateral, and therefore such insurance may not
      pay claims which the Borrower may have with respect to the Collateral or pay
      any
      claim which may be made against the Borrower in connection with the Collateral.
      In the event the Lender purchases, obtains or acquires insurance covering all
      or
      any portion of the Collateral, the Borrower shall be responsible for all of
      the
      applicable costs of such insurance, including premiums, interest (at the
      applicable interest rate for Revolving Loans set forth in Section 2.5), fees
      and
      any other charges with respect thereto, until the effective date of the
      cancellation or the expiration of such insurance. The Lender may charge all
      of
      such premiums, fees, costs, interest and other charges to the Borrower’s
      Operating Account. The Borrower hereby acknowledges that the costs of the
      premiums of any insurance acquired by the Lender may exceed the costs of
      insurance which the Borrower may be able to purchase on its own. In the event
      that the Lender purchases such insurance, the Lender will promptly, and in
      any
      event within fifteen (15) days, notify the Borrower of said
      purchase.

     

    5.10 Operation
      and Maintenance of Property. 
      The Borrower will, and will cause each other Credit Party to, manage and operate
      its business or cause its business to be managed and operated (i) in
      accordance with prudent industry practice in all material respects and in
      compliance in all material respects with the terms and provisions of all
      applicable licenses, leases, contracts and agreements, and (ii) in
      compliance with all Applicable Laws of the jurisdiction in which such businesses
      are carried on, and all Applicable Laws of every other Governmental Authority
      from time to time constituted to regulate the ownership, management and
      operation of such businesses, except where a failure to so manage and operate
      would not have a Material Adverse Effect.

     

    
      
        
        

      

      
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    ARTICLE
      6

    NEGATIVE
      COVENANTS

     

    From
      (and
      including) the Effective Date until the Credits have expired or been terminated
      and the principal of and interest on each Loan and all fees payable hereunder
      shall have been paid in full, the Borrower and each Credit Party covenants
      and
      agrees with the Lender that:

     

    6.1 Indebtedness.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, create, incur, assume or permit to exist any Indebtedness,
      except:

     

    (a) any
      Indebtedness created hereunder;

     

    (b) any
      Indebtedness existing on the date hereof and set forth in Schedule 6.1
      (including, any extensions or renewals of any such Indebtedness but excluding
      any replacements of any such Indebtedness);

     

    (c) any
      Indebtedness of one Credit Party to another Credit Party;

     

    (d) any
      Guarantee by a Credit Party of Indebtedness of any other Credit
      Party;

     

    (e) any
      Indebtedness of the Credit Parties incurred under Purchase Money Liens or to
      Capital Lease Obligations in an aggregate amount not exceeding Cdn.$250,000
      for
      all Credit Parties;

     

    (f) any
      Indebtedness of any Person that becomes a Credit Party after the date hereof,
      provided
      that
      (i) such
      Indebtedness exists at the time such Person becomes a Credit Party and is not
      created in contemplation of or in connection with such Person becoming a Credit
      Party, and (ii) the
      aggregate principal amount of Indebtedness permitted by this clause (f) shall
      not exceed Cdn.$250,000 at any time outstanding; and 

     

    (g) any
      Indebtedness in respect of trade letters of credit.

     

    6.2 Liens.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, create, incur, assume or permit to exist any Lien on any property or asset
      now owned or hereafter acquired by the Credit Party or any
      Restricted Subsidiary,
      or assign or sell any income or revenues (including Receivables) or rights
      in
      respect of any thereof, except Permitted Liens.

     

    6.3 Fundamental
      Changes.

     

    (a) No
      Credit
      Party will, and no Credit Party will permit any Restricted Subsidiary
      to, merge into or amalgamate or consolidate with any other Person, or permit
      any
      other Person to merge into or amalgamate or consolidate with it, or sell,
      transfer, lease or otherwise dispose of (in one transaction or in a series
      of
      transactions) all or substantially all of its assets, or all or any of the
      Equity Securities of any of its Subsidiaries (in each case, whether now owned
      or
      hereafter acquired), or liquidate or dissolve, except that, if at the time
      thereof and immediately after giving effect thereto no Default shall have
      occurred and be continuing, (i) any
      Restricted Subsidiary
      may amalgamate with the Borrower, (ii) any
      Restricted Subsidiary
      may amalgamate with any other Restricted Subsidiary,
      (iii) any
      Restricted Subsidiary
      may sell, transfer, lease or otherwise dispose of its assets to the Borrower
      or
      to another Restricted Subsidiary,
      and (iv) any
      Restricted Subsidiary
      may liquidate or dissolve if the Borrower determines in good faith that such
      liquidation or dissolution is in the best interests of the Borrower and the
      Lender determines that such liquidation or dissolution is not disadvantageous
      to
      the Lender; provided
      that any
      amalgamation pursuant to Sections 6.3(a)(i) or (ii) shall not be permitted
      unless permitted by Section 6.4 and unless the amalgamated corporation confirms
      to the Lender in writing that the amalgamated corporation is liable, by
      operation of law or otherwise, for the obligations of the Borrower under this
      Agreement.

     

    (b) No
      Credit
      Party will, and no Credit Party will permit any Restricted Subsidiary
      to, engage to any material extent in any material business other than businesses
      of the type conducted by the Credit Party on the date of execution of this
      Agreement and businesses reasonably related thereto.

     

    
      
        
        

      

      
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    6.4 Investments,
      Loans, Advances, Guarantees and Acquisitions.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, purchase, hold or acquire (including pursuant to any amalgamation with
      any
      Person that was not a wholly-owned Restricted Subsidiary
      prior to such amalgamation) any Equity Securities, evidences of indebtedness
      or
      other securities (including any option, warrant or other right to acquire any
      of
      the foregoing) of, make or permit to exist any loans or advances to, Guarantee
      any obligations of, or make or permit to exist any investment or any other
      interest in, any other Person, or purchase or otherwise acquire (in one
      transaction or a series of transactions) any assets of any other Person or
      otherwise make an Acquisition, except:

     

    (a) investments
      by a Credit Party in the Equity Securities of any other Credit
      Party;

     

    (b) loans
      or
      advances made by one Credit Party to any other Credit Party;

     

    (c) Guarantees
      constituting Indebtedness permitted by Section 6.1; and

     

    (d) Permitted
      Investments.

     

    6.5 Restricted
      Payments.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, declare, pay or make, or agree to pay or make, directly or indirectly,
      any
      Restricted Payment, except (a) the
      Borrower may declare and pay dividends with respect to its Equity Securities
      payable solely in additional Equity Securities, (b) any
      Restricted Subsidiary
      may declare and pay dividends to the Borrower or any wholly-owned
      Restricted Subsidiary
      and any wholly-owned Restricted Subsidiary
      may redeem or repurchase its own Equity Securities, (c) the
      Borrower may make Restricted Payments pursuant to and in accordance with stock
      option plans, profit sharing plans and/or other benefit plans for management
      or
      employees of the Borrower and its Subsidiaries , provided
      that the
      aggregate amount of cash payments made by the Borrower and the Subsidiaries
      in
      any Fiscal Year pursuant to all such stock option plans, profit sharing plans
      and other compensation benefit plans shall not exceed Cdn.$100,000.  

     

    6.6 Transactions
      with Affiliates.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, sell, lease or otherwise transfer any property or assets to, or purchase,
      lease or otherwise acquire any property or assets from, or otherwise engage
      in
      any other transactions with, any of its Affiliates, except (a) in the
      ordinary course of business at prices and on terms and conditions not less
      favourable to the Credit Party than could be obtained on an arm’s-length basis
      from unrelated third parties, (b) transactions between or among the Credit
      Parties not involving any other Affiliate and (c) any Restricted Payment
      permitted by Section 6.5. The foregoing restrictions shall not apply to:
      (i) the payment of reasonable and customary fees to directors of the Credit
      Party, (ii) any other transaction with any employee, officer or director of
      a Credit Party pursuant to employee profit sharing and/or benefit plans and
      compensation and non-competition arrangements in amounts customary for
      corporations similarly situated to the Credit Party and entered into in the
      ordinary course of business and approved by the board of directors of the Credit
      Party, or (iii) any reimbursement of reasonable out-of-pocket costs
      incurred by an Affiliate of the Credit Party on behalf of or for the account
      of
      the Credit Party.

     

    6.7 Repayment
      of Debt.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, repay, prepay, redeem, repurchase, defease or otherwise make any payment
      on
      account of any Indebtedness for borrowed money except for (a) payment on
      account of Indebtedness owing to the Lender or the Lenders under this Agreement,
      (b) any payment consented to in writing by the Required Lenders, and
      (c) payment on account of Indebtedness for borrowed money permitted by
      Section 6.1.

     

    6.8 Restrictive
      Agreements.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, directly or indirectly, enter into, incur or permit to exist any agreement
      or other arrangement that prohibits, restricts or imposes any condition upon
      (a) the ability of the Borrower or any Restricted Subsidiary
      to create, incur or permit to exist any Lien upon any of its property or assets,
      (b) the ability of any Restricted Subsidiary
      to pay dividends or other distributions with respect to any Equity Securities
      or
      with respect to, or measured by, its profits or to make or repay loans or
      advances to the Borrower or any Restricted Subsidiary
      or to provide a Guarantee of any Indebtedness of the Borrower or any
      Restricted Subsidiary,
      (c) the ability of the Borrower or any Restricted Subsidiary
      to make any loan or advance to the Borrower or any of the Subsidiaries , or
      (d) the ability of the Borrower or any Restricted Subsidiary
      to sell, lease or transfer any of its property to the Borrower or any of the
      Subsidiaries; provided
      that
      (i) the foregoing shall not apply to restrictions and conditions imposed by
      Applicable Law or by this Agreement, (ii) the foregoing shall not apply to
      restrictions and condition existing on the date hereof identified on Schedule
      6.8 (but shall apply to any extension or renewal of, or any amendment or
      modification expanding the scope of, any such restriction or condition),
      (iii) the foregoing shall not apply to customary restrictions and
      conditions contained in agreements relating to the sale of an
      Restricted Subsidiary
      pending such sale, provided
      such
      restrictions and conditions apply only to the Restricted Subsidiary
      that is to be sold and such sale is permitted hereunder, (iv) clause (a) of
      the foregoing shall not apply to restrictions or conditions imposed by any
      agreement relating to secured Indebtedness permitted by this Agreement if such
      restrictions or conditions apply only to the property or assets securing such
      Indebtedness, and (v) clause (a) of the foregoing shall not apply to
      customary provisions in leases and other ordinary course contracts restricting
      the assignment thereof.

     

    
      
        
        

      

      
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    6.9 Capital
      Lease Obligations.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, create, incur, assume or suffer to exist, any Capital Lease Obligations,
      whether directly or as a guarantor, if, after giving effect thereto, the
      aggregate amount of all payments required to be made by the Credit Parties
      on a
      consolidated basis pursuant to such Capital Lease Obligations would exceed
      Cdn.$250,000 in any Fiscal Year.

     

    6.10 Sales
      and Leasebacks.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, enter into any arrangement, directly or indirectly, with any Person whereby
      the Credit Party or any such Restricted Subsidiary
      shall sell or transfer any property, whether now owned or hereafter acquired,
      and whereby the Credit Party or any such Restricted Subsidiary
      shall then or thereafter rent or lease as lessee such property or any part
      thereof or other property which the Credit Party or any such
      Restricted Subsidiary
      intends to use for substantially the same purpose or purposes as the property
      sold or transferred.

     

    6.11 Pension
      Plan Compliance.
      No
      Credit Party will (a) terminate, or permit any Restricted Subsidiary
      to terminate, any Pension Plan in a manner, or take any other action with
      respect to any Pension Plan, which could reasonably be expected to result in
      any
      Material Adverse Effect, (b) fail to make, or permit any
      Restricted Subsidiary
      to fail to make, full payment when due of all amounts which, under the
      provisions of any Pension Plan, agreement relating thereto or Applicable Law,
      the Credit Party or any Restricted Subsidiary
      is required to pay as contributions thereto, except where the failure to make
      such payments could not reasonably be expected to have a Material Adverse
      Effect, (c) permit to exist, or allow any Restricted Subsidiary
      to permit to exist, a going-concern or solvency deficiency, with respect to
      any
      Pension Plan in an amount which could reasonably be expected to cause a Material
      Adverse Effect.

     

    6.12 Sale
      or Discount of Receivables.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to,
      discount or sell (with or without recourse) any of its or the Restricted
      Subsidiaries’ Accounts.

     

    6.13 Unconditional
      Purchase Obligations.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to,
      enter into or be a party to, any material contract for the purchase of
      materials, supplies or other property or services, if such contract requires
      that payment be made by it regardless of whether or not delivery of such
      materials, supplies or other property or services is ever made, provided that
      this Section 6.13 shall not restrict the ability of any Credit Party or any
      Restricted Subsidiary
      to enter into any such contract in the ordinary course of its business to the
      extent that the materials, supplies or other property or services which are
      the
      subject matter of such contract are reasonably expected to be used by the
      applicable Credit Party in the ordinary course of its business.

     

    6.14 No
      Amendments to Material Contracts.
      No
      Credit Party will, and no Credit Party will permit any Restricted Subsidiary
      to, amend, modify or terminate (or waive any provision of or provide any consent
      under), any Material Contract in a manner which may reasonably be expected
      to
      have a Material Adverse Effect.

     

    6.15 Environmental
      Laws. Each
      of
      the Credit Parties shall conduct its business in compliance in all material
      respects with all Environmental Laws applicable to it or them, including,
      without limitation, those relating to the Credit Parties’ generation, handling,
      use, storage and disposal of Hazardous Materials. The Credit Parties shall
      take
      prompt and appropriate action to respond to any non-compliance or alleged
      non-compliance with Environmental Laws, and shall regularly report to the Lender
      on any response which relates to any non-compliance or alleged non-compliance
      which could reasonably be expected to result in a Material Adverse Effect.
      Without limiting the generality of the foregoing, whenever any Credit Party
      gives notice to the Lender pursuant to 5.1(l)(vi) and the Lender so requests,
      the Credit Parties shall, at the applicable Credit Party’s expense:

    
       

      
        	 	
                (i)

              	
                Cause
                  an independent environmental engineer acceptable to the Lender
                  in its
                  reasonable discretion to conduct such tests of the site where the
                  non-compliance or alleged non-compliance with Environmental Laws
                  has
                  occurred, and prepare and deliver to the Lender a report setting
                  forth the
                  results of such tests, a proposed plan for responding to any environmental
                  problems described therein, and an estimate of the costs thereof;
                  and

              

      

       

    

    
      
        
        

      

      
        -36-

        
          

        

      

      
        
        

      

       

    

    
      	 	
              (ii)

            	
              Provide
                to the Lender a supplemental report of such engineer whenever the
                scope of
                the environmental problems, or the Credit Party’s, and any other Person’s
                response thereto or the estimated costs thereof, shall change. Such
                reports shall also be addressed to the Lender and the Lenders and
                shall,
                as requested by the Lender, set out the results of such engineers’ review
                of, inter
                alia:

            

    

     

    
      	 	
              A.

            	
              progress
                of compliance satisfaction, capital expenditures required to effect
                remedial steps and compliance
                deficiencies;

            

    

     

    
      	 	
              B.

            	
              all
                other environmental audit reports which the Credit Parties or any
                predecessor has commissioned in the normal conduct of its business;
                and

            

    

     

    
      	 	
              C.

            	
              all
                environmental reports which have been commissioned by or made available
                to
                a Credit Party in connection with new acquisitions, and the engineers’
                report and recommendations on results of tests performed or samples
                taken
                by it during the course of its review, irregularities or steps which
                may
                be taken to ensure continued compliance, as well as such other matters
                as
                the Borrower and/or the Lender may reasonably request from time to
                time.

            

    

     

    ARTICLE
      7

    EVENTS
      OF DEFAULT

     

    7.1 Events
      of Default.
      If any
      of the following events (“Events
      of Default”)
      shall
      occur:

     

    (a) the
      Borrower shall fail to pay any principal of any Loan when and as the same shall
      become due and payable, whether at the due date thereof or at a date fixed
      for
      prepayment thereof or otherwise;

     

    (b) the
      Borrower shall fail to pay any interest on any Loan or any fee or any other
      amount (other than an amount referred to in clause (a) above) payable under
      this
      Agreement, when and as the same shall become due and payable;

     

    (c) any
      representation or warranty made or deemed made by or on behalf of any Credit
      Party in or in connection with any Loan Document or any amendment or
      modification thereof or waiver thereunder, or in any report, certificate,
      financial statement or other document furnished pursuant to or in connection
      with any Loan Document or any amendment or modification thereof or waiver
      thereunder, shall prove to have been materially incorrect when made or deemed
      to
      be made and, if the circumstances giving rise to the incorrect representation
      or
      warranty are capable of modification or rectification (such that, thereafter
      the
      representation or warranty would be correct), the representation or warranty
      remains uncorrected for a period of 10 days;

     

    (d) any
      Credit Party shall fail to observe or perform any covenant, condition or
      agreement contained in Section 5.1(g)(ii) (notices of Defaults or Events of
      Default), 5.2 (with respect to the Credit Party’s existence), 5.7, or in Article
      6 (or in any comparable provision of any other Loan Document);

     

    
      
        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

     

    (e) any
      Credit Party shall fail to observe or perform any covenant, condition or
      agreement contained in this Agreement (other than those specified in clauses
      (a), (b) or (d) above) or any other Loan Document, and such failure shall
      continue unremedied for a period of 30 days after notice thereof from the Lender
      to the Borrower;

     

    (f) any
      Credit Party or Guarantor shall fail to make any payment whether of principal
      or
      interest, and regardless of amount, in respect of any Material Indebtedness,
      when and as the same shall become due and payable;

     

    (g) any
      event
      or condition occurs that results in any Material Indebtedness becoming due
      prior
      to its scheduled maturity or that enables or permits (with or without the giving
      of notice, the lapse of time or both) the holder or holders of any Material
      Indebtedness or any trustee or Lender on its or their behalf to cause any
      Material Indebtedness to become due, or to require the prepayment, repurchase,
      redemption or defeasance thereof, prior to its scheduled maturity; provided
      that
      this Section 7.1(g) shall not apply to secured Indebtedness that becomes due
      as
      a result of the voluntary sale or transfer of the property or assets securing
      such Indebtedness so long as the proceeds of such sale or transfer are
      sufficient to, and are applied to, reduce such secured Indebtedness to
      nil;

     

    (h) any
      Credit Party or Guarantor:

     

    
      	 	
              (i)

            	
              becomes
                insolvent, or generally does not or becomes unable to pay its debts or
                meet its liabilities as the same become due, or admits in writing
                its
                inability to pay its debts generally, or declares any general moratorium
                on its indebtedness, or proposes a compromise or arrangement between
                it
                and any class of its creditors;

            

    

     

    
      	 	
              (ii)

            	
              commits
                an act of bankruptcy under the BIA, or makes an assignment of its
                property
                for the general benefit of its creditors under the BIA, or makes
                a
                proposal (or files a notice of its intention to do so) under the
                BIA;

            

    

     

    
      	 	
              (iii)

            	
              institutes
                any proceeding seeking to adjudicate it an insolvent, or seeking
                liquidation, dissolution, winding-up, reorganization, compromise,
                arrangement, adjustment, protection, moratorium, relief, stay of
                proceedings of creditors generally (or any class of creditors), or
                composition of it or its debts or any other relief, under any federal,
                provincial or foreign Applicable Law now or hereafter in effect relating
                to bankruptcy, winding-up, insolvency, reorganization, receivership,
                plans
                of arrangement or relief or protection of debtors (including the
                BIA, the
                Companies’
                Creditors Arrangement Act
                (Canada), the
                United States Bankruptcy Code
                and any applicable corporations legislation) or at common law or
                in
                equity, or files an answer admitting the material allegations of
                a
                petition filed against it in any such
                proceeding;

            

    

     

    
      	 	
              (iv)

            	
              applies
                for the appointment of, or the taking of possession by, a receiver,
                interim receiver, receiver/manager, sequestrator, conservator, custodian,
                administrator, trustee, liquidator or other similar official for
                it or any
                substantial part of its property;
                or

            

    

     

    
      	 	
              (v)

            	
              threatens
                to do any of the foregoing, or takes any action, corporate or otherwise,
                to approve, effect, consent to or authorize any of the actions described
                in this Section 7.1(h) or in Section 7.1(i), or otherwise acts in
                furtherance thereof or fails to act in a timely and appropriate manner
                in
                defense thereof,

            

    

     

    (i) any
      petition is filed, application made or other proceeding instituted against
      or in
      respect of any Credit Party or Guarantor:

     

    
      	 	
              (i)

            	
              seeking
                to adjudicate it an insolvent;

            

    

     

    
      	 	
              (ii)

            	
              seeking
                a receiving order against it under the
                BIA;

            

    

     

    
      
        
        

      

      
        -38-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (iii)

            	
              seeking
                liquidation, dissolution, winding-up, reorganization, compromise,
                arrangement, adjustment, protection, moratorium, relief, stay of
                proceedings of creditors generally (or any class of creditors), or
                composition of it or its debts or any other relief under any federal,
                provincial or foreign Applicable Law now or hereafter in effect relating
                to bankruptcy, winding-up, insolvency, reorganization, receivership,
                plans
                of arrangement or relief or protection of debtors (including the
                BIA, the
                Companies’
                Creditors Arrangement Act
                (Canada) or the United
                States Bankruptcy Code
                and any applicable corporations legislation) or at common law or
                in
                equity; or

            

    

     

    
      	 	
              (iv)

            	
              seeking
                the entry of an order for relief or the appointment of, or the taking
                of
                possession by, a receiver, interim receiver, receiver/manager,
                sequestrator, conservator, custodian, administrator, trustee, liquidator
                or other similar official for it or any substantial part of its
                property;

            

    

     

    and
      such
      petition, application or proceeding continues undismissed, or unstayed and
      in
      effect, for a period of 30 days after the institution thereof, provided
      that if
      an order, decree or judgment is granted or entered (whether or not entered
      or
      subject to appeal) against the Credit Party thereunder in the interim, such
      grace period will cease to apply, and provided further
      that if
      the Credit Party files an answer admitting the material allegations of a
      petition filed against it in any such proceeding, such grace period will cease
      to apply;

    (j) any
      other
      event occurs which, under the Applicable Laws of any applicable jurisdiction,
      has an effect equivalent to any of the events referred to in either of Sections
      7.1(h) or (i);

     

    (k) one
      or
      more judgments for the payment of money in a cumulative amount in excess of
      Cdn.$50,000 (or its then equivalent in any other currency) in the aggregate
      is
      rendered against the Borrower, any other Credit Party or any combination thereof
      and the Borrower or the other Credit Party has not (i) provided for its
      discharge in accordance with its terms within 30 days from the date of entry
      thereof, or (ii) procured a stay of execution thereof within 30 days from
      the date of entry thereof and within such period, or such longer period during
      which execution of such judgment has not been stayed, appealed such judgment
      and
      caused the execution thereof to be stayed during such appeal, provided
      that if
      enforcement and/or realization proceedings are lawfully commenced in respect
      thereof in the interim, such grace period will cease to apply;

     

    (l) any
      property of any Credit Party having a fair market value in excess of Cdn.$50,000
      (or its then equivalent in any other currency) in the aggregate is seized
      (including by way of execution, attachment, garnishment, levy or distraint),
      or
      any Lien thereon securing Indebtedness in excess of Cdn.$50,000 (or its then
      equivalent in any other currency) is enforced, or such property has become
      subject to any charging order or equitable execution of a Governmental
      Authority, or any writ of execution or distress warrant exists in respect of
      the
      Borrower, any other Credit Party or the property of any of them, or any sheriff
      or other Person becomes lawfully entitled by operation of law or otherwise
      to
      seize or distrain upon such property and in any case such seizure, enforcement,
      execution, attachment, garnishment, distraint, charging order or equitable
      execution, or other seizure or right, continues in effect and is not released
      or
      discharged for more than 45 days or such longer period during which entitlement
      to the use of such property continues with the Credit Party (as the case may
      be), and the Credit Party (as the case may be) is contesting the same in good
      faith and by appropriate proceedings, provided
      that if
      the property is removed from the use of the Credit Party (as the case may be),
      or is sold, in the interim, such grace period will cease to apply;

     

    (m) one
      or
      more final judgments, not involving the payment of money and not otherwise
      specified in this Section 7.1(m), has been rendered against any Credit Party,
      the result of which could reasonably be expected to result in a Material Adverse
      Effect, so long as the Credit Party (as the case may be) has not
      (i) provided for its discharge in accordance with its terms within 30 days
      from the date of entry thereof, or (ii) procured a stay of execution
      thereof within 30 days from the date of entry thereof and within such period,
      or
      such longer period during which execution of such judgment has been stayed,
      appealed such judgment and caused the execution thereof to be stayed during
      such
      appeal, provided
      that if
      enforcement and/or realization proceedings are lawfully commenced in respect
      thereof in the interim, such grace period will cease to apply;

     

    
      
        
        

      

      
        -39-

        
          

        

      

      
        
        

      

    

     

    (n) this
      Agreement, any other Loan Document or any material obligation or other provision
      hereof or thereof at any time for any reason terminates or ceases to be in
      full
      force and effect and a legally valid, binding and enforceable obligation of
      any
      Credit Party, is declared to be void or voidable or is repudiated, or the
      validity, binding effect, legality or enforceability hereof or thereof is at
      any
      time contested by any Credit Party, or any Credit Party denies that it has
      any
      or any further liability or obligation hereunder or thereunder or any action
      or
      proceeding is commenced to enjoin or restrain the performance or observance
      by
      any Credit Party of any material terms hereof or thereof or to question the
      validity or enforceability hereof or thereof, or at any time it is unlawful
      or
      impossible for any Credit Party to perform any of its material obligations
      hereunder or thereunder;

     

    (o) any
      Lien
      purported to be created by any Security Document shall cease to be, or shall
      be
      asserted by any Credit Party not to be, a valid, perfected, first priority
      (except as otherwise expressly provided in this Agreement or such Security
      Document) Lien in Collateral with a fair market value or book value (whichever
      is greater) in excess, individually or in the aggregate, of
      $1,000,000;

     

    (p) a
      Material Adverse Change shall occur;

     

    (q) a
      Change
      in Control shall occur;

     

    (r) if
      any
      Credit Party or any of its Subsidiaries violates any Environmental Law which
      results in an Action Request, Violation Notice or other notice or control order
      or cancellation of any license or certificate or approval, that could reasonably
      be expected to have a Material Adverse Effect; 

     

    (s) any
      event
      or condition shall occur or exist with respect to a Pension Plan that could
      reasonably be expected to subject any Credit Party to any tax, penalty or other
      liabilities under the Pension
      Benefits Act (Ontario)
      or any
      other Applicable Laws which could reasonably be expected to give rise to a
      Material Adverse Effect;

     

    then,
      and
      in every such event, and at any time thereafter during the continuance of such
      event or any other such event, the Lender may by notice to the Borrower, take
      any or all of the following actions, at the same or different times:
      (i) terminate the Credits, and thereupon the Credits shall terminate
      immediately, (ii) declare the Loans then outstanding to be due and payable
      in whole (or in part, in which case any principal not so declared to be due
      and
      payable may thereafter be declared to be due and payable), and thereupon the
      principal of the Loans so declared to be due and payable, together with accrued
      interest thereon and all fees and other obligations of the Borrower accrued
      hereunder, shall become due and payable immediately, without presentment,
      demand, protest or other notice of any kind except as set forth earlier in
      this
      paragraph, all of which are hereby waived by the Borrower, (iii) apply any
      amounts outstanding to the credit of the Borrower to repayment of all amounts
      outstanding under this Agreement, and (iv) declare any or all of the Security
      Documents to be immediately enforceable.

     

    ARTICLE
      8

    MISCELLANEOUS

     

    8.1 Notices. 
      (a) Except in the case of notices and other communications expressly permitted
      to be given by telephone (and subject to paragraph (b) below), all notices
      and
      other communications provided for herein shall be in writing and shall be
      delivered by hand or overnight courier service, mailed by certified or
      registered mail or sent by facsimile in each case to the addressee, as
      follows:

     

    (i)           
      if
      to the
      Borrower or any other Credit Party:

     

    209
      Brunel Road

    Mississauga,
      Ontario

    L4Z
      1X3

     

    Attention:
      Steven G. Kempf, President

    Fax:
      905-
      501-9904

    

    (ii)          
      with a copy to:

    

    Universal
      Security Instruments, Inc.

    7A
      Gwynns
      Mill Crt.

    Owings
      Mill

    Maryland,
      MD

    21117

    Attention:
      James B. Huff, Chief Financial Officer

    Fax:
      410-363-2218

     

    
      
        
        

      

      
        -40-

        
          

        

      

      
        
        

      

    

     

    (ii)          
      if
      to the
      Lender:

     

    CIT
      FINANCIAL LTD.

    207
      Queen’s Quay West, 

    Toronto,
      Ontario M5J 1A7

    Attention: Legal
      Department

    Facsimile: 
      (416)
      507-5223

     

    (b) The
      Lender or the Borrower may, in its discretion, agree to accept notices and
      other
      communication to it hereunder by electronic communications pursuant to
      procedures approved by it; provided
      that
      approval of such procedures may be limited to particular notices or
      communications.

     

    (c) Any
      party
      hereto may change its address or facsimile number for notices and other
      communications hereunder by notice to the other parties hereto. All notices
      and
      other communications given to any party hereto in accordance with the provisions
      of this Agreement shall be deemed to have been given on the date of
      receipt.

     

    8.2 Waivers;
      Amendments.

     

    (a) No
      failure or delay by the Lender in exercising any right or power hereunder shall
      operate as a waiver thereof, nor shall any single or partial exercise of any
      such right or power, or any abandonment or discontinuance of steps to enforce
      such a right or power, preclude any other or further exercise thereof or the
      exercise of any other right or power. The rights and remedies of the Lender
      hereunder are cumulative and are not exclusive of any rights or remedies that
      they would otherwise have. No waiver of any provision of this Agreement or
      consent to any departure by the Borrower therefrom shall in any event be
      effective unless the same shall be permitted by Section 8.2(b), and then such
      waiver or consent shall be effective only in the specific instance and for
      the
      purpose for which given. Without limiting the generality of the foregoing,
      the
      making of a Loan or issuance of a Letter of Credit shall not be construed as
      a
      waiver of any Default, regardless of whether the Lender may have had notice
      or
      knowledge of such Default at the time.

     

    (b) Neither
      this Agreement nor any other Loan Document (or any provision hereof or thereof)
      may be waived, amended or modified except pursuant to an agreement or agreements
      in writing entered into by the Borrower and the Lender (and for greater
      certainty, any such waiver, amendment or modification shall not require any
      consent or other agreement of any Credit Party other than the Borrower,
      notwithstanding that any such Credit Party may be a party to this Agreement
      or
      any other Loan Document).

     

    8.3 Expenses;
      Indemnity; Damage Waiver.

     

    (a) The
      Borrower shall pay (i) all reasonable Out-of-Pocket Expenses incurred by
      the Lender and its Affiliates, including the reasonable fees, charges and
      disbursements of counsel for the Lender and all applicable Taxes, in connection
      with the syndication of the credit facilities provided for herein and the
      preparation and administration of this Agreement and the other Loan Documents,
      (ii) all reasonable Out-of-Pocket Expenses incurred by the Lender and its
      Affiliates, including the reasonable fees, charges and disbursements of counsel
      for the Lender and applicable Taxes, in connection with any amendments,
      modifications or waivers of the provisions hereof or of any of the other Loan
      Documents, (whether or not the transactions contemplated hereby or thereby
      shall
      be consummated), and (iii) all Out-of-Pocket Expenses incurred by the
      Lender, including the fees, charges and disbursements of any counsel for the
      Lender and all applicable Taxes, in connection with the enforcement or
      protection of their rights in connection with this Agreement, including its
      rights under this Section, or in connection with the Loans made hereunder,
      including all such Out-of-Pocket Expenses incurred during any workout,
      restructuring or negotiations in respect of such Loans.

     

    
      
        
        

      

      
        -41-

        
          

        

      

      
        
        

      

    

     

    (b) The
      Borrower shall indemnify the Lender, as well as each Related Party and each
      assignee of any of the foregoing Persons (each such Person and each such
      assignee being called an “Indemnitee”)
      against, and hold each Indemnitee harmless from, any and all losses, claims,
      cost recovery actions, damages, expenses and liabilities of whatsoever nature
      or
      kind and all Out-of-Pocket Expenses and all applicable Taxes to which any
      Indemnitee may become subject arising out of or in connection with (i) the
      execution or delivery of the Loan Documents or any agreement or instrument
      contemplated thereby, the performance by the parties thereto of their respective
      obligations thereunder, and the consummation of the Transactions or any other
      transactions thereunder, (ii) any Loan or any actual or proposed use of the
      proceeds therefrom, (iii) any presence or release of Hazardous Materials on
      or from any property owned or operated by the Borrower or any of its
      Subsidiaries, or any Environmental Liability related in any way to the Borrower
      or any of its Subsidiaries, (iv) any actual claim, litigation,
      investigation or proceeding relating to any of the foregoing, whether based
      on
      contract, tort or any other theory and regardless of whether any Indemnitee
      is a
      party thereto, (v) any other aspect of this Agreement and the other Loan
      Documents, or (vi) the enforcement of any Indemnitee’s rights hereunder and
      any related investigation, defence, preparation of defence, litigation and
      enquiries, in each case regardless of whether or not the Acquisition is
      consummated; provided
      that
      such indemnity shall not, as to any Indemnitee, be available to the extent
      that
      such losses, claims, damages, liabilities or related expenses are determined
      by
      a court of competent jurisdiction by final and nonappealable judgment to have
      resulted from the gross negligence (it being acknowledged that ordinary
      negligence does not necessarily constitute gross negligence) or wilful
      misconduct of or material breach of this Agreement by such
      Indemnitee.

     

    (c) The
      Borrower shall not assert, and hereby waives (to the fullest extent permitted
      by
      applicable Law), any claim against any Indemnitee, on any theory of liability,
      for special, indirect, consequential or punitive damages (as opposed to direct
      or actual damages) arising out of, in connection with, or as a result of, any
      Loan Document, or any agreement or instrument contemplated thereby, the
      Transactions, any Loan or Letter of Credit or the use of the proceeds
      thereof.

     

    (d) Any
      inspection of any property of the Borrower or any of its Subsidiaries made
      by or
      through the Lender is for purposes of administration of the Credits only, and
      neither the Borrower nor any of its Subsidiaries is entitled to rely upon the
      same (whether or not such inspections are at the expense of the
      Borrower).

     

    (e) By
      accepting or approving anything required to be observed, performed, fulfilled
      or
      given to the Lender pursuant to the Loan Documents, the Lender shall not be
      deemed to have warranted or represented the sufficiency, legality, effectiveness
      or legal effect of the same, or of any term, provision or condition thereof,
      and
      such acceptance or approval thereof shall not constitute a warranty or
      representation to anyone with respect thereto by the Lender.

     

    (f) The
      relationship between the Borrower and the Lender is, and shall at all times
      remain, solely that of borrowers and lender. The Lender shall not under any
      circumstance be construed to be partners or joint venturers of the Borrower
      or
      its Affiliates. The Lender shall not under any circumstance be deemed to be
      in a
      relationship of confidence or trust or a fiduciary relationship with the
      Borrower or its Affiliates, or to owe any fiduciary duty to the Borrower or
      its
      Affiliates. The Lender does not undertake or assume any responsibility or duty
      to the Borrower or its Affiliates to select, review, inspect, supervise, pass
      judgment upon or inform the Borrower or its Affiliates of any matter in
      connection with their property or the operations of the Borrower or its
      Affiliates. The Borrower and its Affiliates shall rely entirely upon their
      own
      judgment with respect to such matters, and any review, inspection, supervision,
      exercise of judgment or supply of information undertaken or assumed by the
      Lender in connection with such matters is solely for the protection of the
      Lender, and neither the Borrower nor any other Person is entitled to rely
      thereon.

     

    (g) The
      Lender shall not be responsible or liable to any Person for any loss, damage,
      liability or claim of any kind relating to injury or death to Persons or damage
      to Property caused by the actions, inaction or negligence of the Borrower or
      any
      Subsidiary and/or their Affiliates and the Borrower hereby indemnifies and
      holds
      the Lender harmless from any such loss, damage, liability or claim.

     

    
      
        
        

      

      
        -42-

        
          

        

      

      
        
        

      

    

     

    (h) This
      Agreement is made for the purpose of defining and setting forth certain
      obligations, rights and duties of the Borrower and the Lender in connection
      with
      the Loans, and is made for the sole benefit of the Borrower and the Lender,
      and
      the Lender’s successors and assigns. Except as provided in Sections 8.3(b) and
      8.4, no other Person shall have any rights of any nature hereunder or by reason
      hereof.

     

    (i) All
      amounts due under this Section 8.3 shall be payable not later than three
      Business Days after written demand therefor.

     

    8.4 Successors
      and Assigns.

     

    (a) The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the parties hereto and their respective successors and assigns permitted hereby,
      except that (i) the Borrower may not assign or otherwise transfer any of its
      rights or obligations hereunder without the prior written consent of the Lender
      (and any attempted assignment or transfer by the Borrower without such consent
      shall be null and void), and (ii) the Lender may not assign or otherwise
      transfer its rights or obligations hereunder except in accordance with this
      Section. Nothing in this Agreement, expressed or implied, shall be construed
      to
      confer upon any Person (other than the parties hereto, their respective
      successors and assigns permitted hereby and, to the extent expressly
      contemplated hereby, the Related Parties of each of the Lender) any legal or
      equitable right, remedy or claim under or by reason of this
      Agreement.

     

    (b) The
      Lender may assign to one or more Eligible Assignees (treating any fund that
      invests in bank loans and any other fund that invests in bank loans and is
      managed by the same investment advisor of such fund or by an Affiliate of such
      investment advisor as a single assignee) all or a portion of its rights and
      obligations under this Agreement and the other Loan Documents (including all
      or
      a portion of its Credits and the Loans at the time owing to it); provided
      that (i)
      Borrower must give its prior written consent to such assignment (which consent
      shall not be unreasonably withheld or delayed); and provided further
      that
      (ii) the Borrower’s consent shall not be required with respect to any assignment
      made at any time after the occurrence and during the continuance of an Event
      of
      Default, (iii) each partial assignment in respect of a Credit and the related
      Loans shall be made as an assignment of a proportionate part of all the
      assigning Lender’s rights and obligations under this Agreement in respect of
      such Credit and the related Loans, (iv) the parties to each assignment
      shall execute and deliver to the Lender an Assignment and Assumption, together
      with (except in the case of an assignment to a Lender or a Lender Affiliate)
      a
      processing and recordation fee of Cdn.$3,500, payable by the assigning Lender,
      and (v) in the case of an assignment to a Foreign Lender prior to the
      occurrence of an Event of Default, such Foreign Lender shall not be entitled
      to
      require any payment under Section 2.11(a)(b) or (c) as a result of any
      withholding tax exigible in respect of any payment by the Borrower to such
      Foreign Lender hereunder. From and after the effective date specified in each
      Assignment and Assumption, the assignee thereunder shall be a party hereto
      and,
      to the extent of the interest assigned by such Assignment and Assumption, shall
      have all of the rights and obligations of a Lender under this Agreement, and
      the
      assigning Lender thereunder shall, to the extent of the interest assigned by
      such Assignment and Assumption, be released from its obligations under this
      Agreement (and, in the case of an Assignment and Assumption covering all of
      the
      assigning Lender’s rights and obligations under this Agreement, such Lender
      shall cease to be a party hereto but shall continue to be entitled to the
      benefits of Sections 2.10, and 2.11 and 8.3). Any assignment or transfer by
      a
      Lender of rights or obligations under this Agreement that does not comply with
      this Section 8.4 shall be treated for purposes of this Agreement as a sale
      by
      such Lender of a participation in such rights and obligations.

     

    (c) The
      Lender may, without notice to the Borrower or the consent of the Borrower,
      sell
      participations to one or more Persons (a “Participant”)
      in all
      or a portion of the Lender’s rights and obligations under this Agreement and the
      other Loan Documents (including all or a portion of its Commitment and the
      Loans
      owing to it); provided
      that
      (i) the Lender’s obligations under this Agreement shall remain unchanged,
      (ii) the Lender shall remain solely responsible to the other parties hereto
      for the performance of such obligations, and (iii) the Borrower shall
      continue to deal solely and directly with the Lender in connection with the
      Lender’s rights and obligations under this Agreement. Any agreement or
      instrument pursuant to which the Lender sells such a participation shall provide
      that the Lender shall retain the sole right to enforce this Agreement and to
      approve any amendment, modification or waiver of any provision of this
      Agreement; provided
      that
      such agreement or instrument may provide that the Lender will not, without
      the
      consent of the Participant, agree to any amendment, modification or waiver
      described in the first proviso to Section 8.2(b) that affects such Participant.
      Subject to Section 8.4(d), the Borrower agrees that each Participant shall
      be
      entitled to the benefits of Sections 2.10 and 2.11 to the same extent as if
      it
      were a Lender and had acquired its interest by assignment pursuant to Section
      8.4(b). To the extent permitted by Applicable Law, each Participant also shall
      be entitled to the benefits of Section 8.8 as though it were a
      Lender.

     

    
      
        
        

      

      
        -43-

        
          

        

      

      
        
        

      

    

     

    (d) A
      Participant shall not be entitled to receive any greater payment under Section
      2.11 than the applicable Lender would have been entitled to receive with respect
      to the participation sold to such Participant, unless the sale of the
      participation to such Participant is made with the Borrower’s prior written
      consent. A Participant that would be a Foreign Lender if it were a Lender shall
      not be entitled to the benefits of Section 2.11.

     

    8.5 Survival.
      All
      covenants, agreements, representations and warranties made by the Borrower
      herein and in the certificates or other instruments delivered in connection
      with
      or pursuant to this Agreement shall be considered to have been relied upon
      by
      the other parties hereto and shall survive the execution and delivery of this
      Agreement and the making of any Loans and issuance of any Letters of Credit,
      regardless of any investigation made by any such other party or on its behalf
      and notwithstanding that the Lender or any Lender may have had notice or
      knowledge of any Default or incorrect representation or warranty at the time
      any
      credit is extended hereunder, and shall continue in full force and effect as
      long as the principal of or any accrued interest on any Loan or any fee or
      any
      other amount payable under this Agreement is outstanding and unpaid and so
      long
      as the Credits have not expired or terminated. Sections 2.10, 2.11 and
8.3
      shall
      survive and remain in full force and effect, regardless of the consummation
      of
      the Transactions, the repayment of the Loans, the expiration or termination
      of
      the Letters of Credit and the Credits or the termination of this Agreement
      or
      any provision hereof.

     

    8.6 Counterparts;
      Integration; Effectiveness.
      This
      Agreement may be executed in counterparts (and by different parties hereto
      on
      different counterparts), each of which shall constitute an original, but all
      of
      which when taken together shall constitute a single contract. This Agreement,
      the other Loan Documents and any separate letter agreements with respect to
      fees
      payable to the Lender, constitute the entire contract among the parties relating
      to the subject matter hereof and supersede any and all previous agreements
      and
      understandings, oral or written, relating to the subject matter hereof. Except
      as provided in Section 4.1, this Agreement shall become effective when it shall
      have been executed by the Lender and when the Lender shall have received
      counterparts hereof which, when taken together, bear the signatures of each
      of
      the other parties hereto, and thereafter shall be binding upon and inure to
      the
      benefit of the parties hereto and their respective successors and assigns.
      Delivery of an executed original counterpart of a signature page of this
      Agreement by facsimile or other electronically scanned method of delivery shall
      be as effective as delivery of a manually executed original counterpart of
      this
      Agreement.

     

    8.7 Severability.
      Any
      provision of this Agreement held to be invalid, illegal or unenforceable in
      any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such invalidity, illegality or unenforceability without affecting the validity,
      legality and enforceability of the remaining provisions hereof, and the
      invalidity of a particular provision in a particular jurisdiction shall not
      invalidate such provision in any other jurisdiction.

     

    8.8 Right
      of Set-Off.
      If an
      Event of Default shall have occurred and be continuing, the Lender and each
      of
      its Affiliates is hereby authorized at any time and from time to time, to the
      fullest extent permitted by Applicable Law, to set off and apply any and all
      deposits (general or special, time or demand, provisional or final) at any
      time
      held and other obligations at any time owing by the Lender or Affiliate to
      or
      for the credit or the account of the Borrower against any of and all of the
      obligations of the Borrower now or hereafter existing under this Agreement
      held
      by the Lender, irrespective of whether or not the Lender shall have made any
      demand under this Agreement and although such obligations may be unmatured.
      The
      rights of each Lender under this Section are in addition to other rights and
      remedies (including other rights of set off) which such Lender may
      have.

     

    
      
        
        

      

      
        -44-

        
          

        

      

      
        
        

      

    

     

    8.9 Governing
      Law; Jurisdiction; Consent to Service of Process.

     

    (a) This
      Agreement shall be construed in accordance with and governed by the Laws of
      the
      Province of Ontario.

     

    (b) The
      Borrower hereby irrevocably and unconditionally submits, for itself and its
      property, to the non-exclusive jurisdiction of the Courts of the Province of
      Ontario, and any appellate court thereof, in any action or proceeding arising
      out of or relating to this Agreement, or any other Loan Document or for
      recognition or enforcement of any judgment, and each of the parties hereto
      hereby irrevocably and unconditionally agrees that all claims in respect of
      any
      such action or proceeding may be heard and determined in Ontario. Each of the
      parties hereto agrees that a final judgment in any such action or proceeding
      shall be conclusive and may be enforced in other jurisdictions by suit on the
      judgment or in any other manner provided by Applicable Law. Nothing in this
      Agreement shall affect any right that the Lender or any Lender may otherwise
      have to bring any action or proceeding relating to this Agreement or any other
      Loan Document against the Borrower or its properties in the courts of any other
      jurisdiction.

     

    (c) The
      Borrower hereby irrevocably and unconditionally waives, to the fullest extent
      it
      may legally and effectively do so, any objection which it may now or hereafter
      have to the laying of venue of any suit, action or proceeding arising out of
      or
      relating to this Agreement in any court referred to in this Section 8.9. Each
      of
      the parties hereto hereby irrevocably waives, to the fullest extent permitted
      by
      Applicable Law, any forum
      non conveniens
      defence
      to the maintenance of such action or proceeding in any such court.

     

    (d) Each
      party to this Agreement irrevocably consents to service of process in the manner
      provided for notices in Section 8.1. Nothing in this Agreement will affect
      the
      right of any party to this Agreement to serve process in any other manner
      permitted by Applicable Law.

     

    8.10 WAIVER
      OF JURY TRIAL.
      EACH
      PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
      ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
      INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
      DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
      ON
      CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT
      NO REPRESENTATIVE, LENDER OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
      EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
      LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
      IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
      BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
      SECTION.

     

    8.11 Headings.
      Article
      and Section headings and the Table of Contents used herein are for convenience
      of reference only, are not part of this Agreement and shall not affect the
      construction of, or be taken into consideration in interpreting, this
      Agreement.

     

    8.12 Confidentiality.
      The
      Lender agrees to maintain the confidentiality of the Information (as defined
      below), except that Information may be disclosed (a) to each of its, and
      each of its Affiliates’, directors, officers, employees, Lenders and advisors,
      including accountants, legal counsel and other advisors (it being understood
      that the Persons to whom such disclosure is made will be informed of the
      confidential nature of such Information and instructed to keep such Information
      confidential), (b) to
      the
      extent requested by any rating agency, regulatory authority or other
      Governmental Authority, or their legal counsel, (c) to
      the
      extent required by applicable laws or regulations or by any subpoena or similar
      legal process, (d) to
      any
      other party to this Agreement, (e) in
      connection with the exercise of any remedies under any Loan Document or any
      suit, action or proceeding relating to any Loan Document or the enforcement
      of
      rights thereunder, (f) subject
      to an agreement containing provisions substantially the same as those of this
      Section, to (i) any
      actual or prospective assignee of or Participant (or such assignee’s or
      Participant’s advisors) in any of its rights or obligations under this
      Agreement, or (ii) any
      actual or prospective counterparty (or its advisors) to any swap or derivative
      transaction relating to the Borrower and its obligations, (g) any
      financial institution, credit reporting agency or credit bureau, or
      (h) with
      the
      consent of the Borrower. For the purposes of this Section, “Information”
means
      all information received from the Borrower or any Credit Party relating to
      the
      Borrower, any of the Credit Parties, or their respective business, other than
      Information that is (i) is or becomes publicly available other than as a
      result of a breach of this Section, (ii) any such information that is or
      becomes available to the Lender on a non-confidential basis prior to disclosure
      by the Borrower, or (iii) was already in the possession of the Lender,
      prior to its disclosure by the Borrower; provided
      that, in
      the case of information received from the Borrower after the date hereof, such
      information is clearly identified as confidential in writing at the time of
      delivery. Any Person required to maintain the confidentiality of Information
      as
      provided in this Section shall be considered to have complied with its
      obligation to do so if such Person has exercised the same degree of care to
      maintain the confidentiality of such Information as such Person would accord
      to
      its own confidential information.

     

    
      
        
        

      

      
        -45-

        
          

        

      

      
        
        

      

    

     

    8.13 Press
      Releases and Related Materials. 
      Each
      Credit Party agrees that neither it nor its Affiliates will in the future issue
      any press releases or other public disclosure using the name of the Lender
      or
      referring to this Agreement, or the other Loan Documents without at least two
      (2) Business Days’ prior notice to the Lender unless (and only to the extent
      that) such Credit Party or Affiliate is required to do so under law and then,
      in
      any event, such Credit Party or Affiliate will consult with the Lender before
      issuing such press release or other public disclosure. Each Credit Party
      consents to the publication by the Lender of advertising material relating
      to
      the financing transactions contemplated by this Agreement using its name,
      product photographs, logo or trademark. The Lender reserves the right to provide
      to industry trade organizations information necessary and customary for
      inclusion in league table measurements.

     

    8.14 No
      Strict Construction.
      The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Agreement. In the event an ambiguity or question of intent or interpretation
      arises, this Agreement shall be construed as if drafted jointly by the parties
      hereto and no presumption or burden of proof shall arise favoring or disfavoring
      any party by virtue of the authorship of any provisions of this
      Agreement.

     

    8.15 Paramountcy.
      In
      the
      event of any inconsistency between the provisions of this Agreement and the
      provisions of any other Loan Document, the provisions of this Agreement shall
      prevail.

     

    8.16 Withholding
      Tax.

     

    (a) The
      Lender represents and warrants to the Borrower that it is a Canadian Resident
      Lender at all times and that no payments made to it by the Borrower are subject
      to any deduction or reduction on account of withholding or other
      taxes;
      and

     

    (b) Notwithstanding
      paragraph (a) of this Section, subject to Article 8, the Lender may assign
      or
      transfer its Loan to a Foreign Lender, provided that the provisions of Section
      2.11 shall not apply to Indemnified Taxes which arise solely as a result of
      the
      fact such assignee or transferee is not a Canadian Resident Lender.

     

    [Remainder
      of this page intentionally left blank. Signature pages
      follow.]

     

    
      
        
        

      

      
        -46-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Agreement to be duly executed by their
      respective authorized officers as of the day and year first above written.
      

     

    
      	 	 	 
	 	
              INTERNATIONAL
                CONDUITS LTD.

            
	 
 	 
 	 
 
	 	By: 
              	
            
	 	
              

              Name:

            
	 	Title:

    

     

    SIGNATURE
      PAGE TO CREDIT AGREEMENT DATED AS OF  JUNE
      22,
      2007 BETWEEN
      CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.

     

    
      
        
        

      

      
        S-1

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              UNIVERSAL
                SECURITY INSTRUMENTS, INC.

            
	 
 	 
 	 
 
	 	By:  	
            
	 	
              
Name:
	 	Title: 

    

     

    SIGNATURE
      PAGE TO CREDIT AGREEMENT DATED AS OF  JUNE
      22,
      2007 BETWEEN
      CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.

     

    
      
        
        

      

      
        S-2

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              USI
                ELECTRIC, INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	Title:

    

     

    SIGNATURE
      PAGE TO CREDIT AGREEMENT DATED AS OF  JUNE
      22,
      2007 BETWEEN
      CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.

     

    
      
        
        

      

      
        S-3

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	CIT
              FINANCIAL LTD., as
              Lender
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:

    

    
      	 	 	 
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:

    

     

    SIGNATURE
      PAGE TO CREDIT AGREEMENT DATED AS OF  JUNE
      22,
      2007 BETWEEN
      CIT FINANCIAL LTD. AND INTERNATIONAL CONDUITS LTD.

     

    
      
        
        

      

      
        S-4

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      A

    DISCLOSURE
      MATTERS

    

    Nil.

     

    SCHEDULE
      B

    MATERIAL
      CONTRACTS

    

     

    Nil.

     

    SCHEDULE
      3.3

    APPROVALS

    

    None.

     

    SCHEDULE
      3.5

    LITIGATION

    

    None.

    

    SCHEDULE
      3.7

    OWNERSHIP
      OF BORROWER

    

    
      	
              SHAREHOLDER:

            	
              NUMBER
                OF SHARES:

            
	
              2113824
                Ontario Inc.

              Steven
                G. Kempf

            	
              22
                Common Shares

              11
                Common Shares

            

    

     

    SCHEDULE
      3.9

    LIENS
      ON REAL PROPERTY

    

    Nil

    

    SCHEDULE
      3.10

    LIENS
      ON PERSONAL PROPERTY

     

    SCHEDULE
      3.11

    PENSION
      PLANS

    

    Not
      applicable. Pension Plans are government sponsored.

     

    SCHEDULE
      3.13

    DEFAULTS

    

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      3.15

    SUBSIDIARIES

    

    None.

    

    SCHEDULE
      3.20

    EMPLOYEE
      MATTERS

    

    Employment
      Contract - Steven G. Kempf

     

    SCHEDULE
      3.22

    INTELLECTUAL
      PROPERTY MATTERS

    

    None.

     

    SCHEDULE
      3.28

    REAL
      PROPERTY AND LEASES

    

    Operating
      lease for premises located at 209 Brunel Road, Mississauga, Ontario between
      the
      Borrower and Philip Sherwood Developments Limited for 40,080 sq. ft., expiring
      January 31, 2010.

     

    Substantially
      all of the Inventory is located at 209 Brunel Road, however small amounts of
      Inventory may, from time to tome, be located with sales representatives
      throughout Canada and possibly the U.S.

     

    SCHEDULE
      3.30

    JURISDICTIONS
      

    

    Ontario
      *

    

    *At
      this
      time all assets are located in Ontario. Small amounts of Inventory may, from
      time to time, be located with sales representatives throughout Canada and
      possibly the U.S.

     

    SCHEDULE
      6.1

    EXISTING
      INDEBTEDNESS 

    

    Indebtedness
      owing the Borrower to 2113824 Ontario Inc. in the amount of
      U.S.$1,912,533.

     

    Indebtedness
      owing by the Borrower to Universal Security Instruments, Inc. in the amount
      of
      U.S.$1,087,467.

     

    Indebtedness
      owing by each of Jill O’Neil, Michael O’Neil and Stephen Kleynhans. See attached
      amortization schedules.

     

    See
      Schedule 3.10.

     

    SCHEDULE
      6.8

    RESTRICTIVE
      AGREEMENTS

    

    Nil

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    FORM
      OF

    BORROWING
      BASE REPORT

     

    [Please
      see attached CIT form of report]

     

    EXHIBIT
      B

    Form
      of Notice of Borrowing

     

    (Letter
      to be typed on Borrower's Letterhead)

    

     [•],
      200__

    

    CIT
      FINANCIAL LTD.

    207
      Queens Quay West, 

    Toronto,
      Ontario, M5J 1A7

    

    Attention:     Collateral
      Analyst

    FAX:     (416)
      507-5223

    

    BORROWING
      NOTICE

    Gentlemen:

    

    We
      refer
      to the credit agreement dated as of [•], 200__
      (as amended, restated, supplemented, replaced or otherwise modified from time
      to
      time the “Credit
      Agreement”;
      capitalized terms used herein but not otherwise defined shall have the meanings
      set forth in the Credit Agreement), between International Conduits Ltd., as
      borrower (the “Borrower”)
      and
      CIT Financial Ltd. (the “Lender”).

    

    We
      hereby
      instruct and authorize the Lender to make advances to our disbursement
      account(s), subject to and in accordance with the terms and provisions of the
      Credit Agreement to the account numbers specified below and to charge the
      Borrower’s loan account as Revolving Loans with each such
      advance(s).

    

    The
      Borrower hereby requests an advance (the “Advance”)
      be
      made under the Revolving Credit Facility as follows:

    

    
      	
              A.

            	
              the
                Borrowing Amount :

            

    

    

    Prime
      Rate Loan (Cdn$): _______________

    

    B. the
      Drawdown Date: 

    

    Notice
      requirements as stated in the Credit Agreement are:

     

    
      	 	
              -

            	
              10:00
                AM (Toronto time) on the requested Drawdown Date for Prime Rate Loans
                

            

    

    

    Proceeds
      of the Advance are to be directed as follows:

    

    Bank
      Name:               _______________

    Account
      Name:        _______________

    Branch
      #:                  
_______________

    Account
      Number:     CAD#

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Borrower hereby acknowledges that the Lender will make payments strictly on
      the
      basis of the account number furnished herein even if such account number
      identifies a party other than the name of the account listed above. In the
      event
      the above account number is incorrect, we hereby agree to be fully liable for
      any and all losses, costs, and expenses arising therefrom.

    

    The
      Borrower hereby confirms as follows:

    

    
      	
              (a)

            	
              Each
                of the representations and warranties made by the Borrower in or
                pursuant
                to the Credit Agreement and the other Loan Documents are true and
                correct
                in all material respects on and as of the date hereof as if made
                on and as
                of such date, except as the Borrower and the Lender have otherwise
                agreed
                herein or in a separate writing.

            

    

    

    
      	
              (b)

            	
              No
                Default or Event of Default has occurred and is continuing on the
                date
                hereof or will occur after the making of the Advance(s) requested
                hereunder.

            

    

    

    
      
        
          	(c)	
                  Except
                    as may have been otherwise agreed to from time to time by the
                    Lender and
                    the Borrower in writing, after making the Advance(s) requested
                    to be made
                    by the Borrower hereunder, the aggregate outstanding balance
                    of the
                    Revolving Loans will not exceed the lesser of (i) the Maximum
                    Revolving
                    Credit Line, and (ii) the Borrowing
                    Base.

                

        

      

    

     

    
      	DATED this ___
              day of _______,
              200_	 	 	 
	 	 	 	 
	Yours truly,	 	 	 
	 	 	 	 
	
              INTERNATIONAL
                CONDUITS LTD.

            	 	 	 
	 	 	 	 
	 	 	 	 
	By:  	 	 	 
	
              
                
Name:

            	 	 	
            
	
              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      C

    FORM
      OF

    LANDLORD
      WAIVER

     

    The
      undersigned is the owner of the premises known as
      _____________________________________________________________________________ (the
      “Premises”),
      which
      Premises are leased by the undersigned to [NAME
      OF CREDIT PARTY],
      a
[JURISDICTION]
      corporation, or one of its affiliates (collectively, the “Obligors”)
      pursuant to a lease agreement dated as of _________________________________
      (as
      it may be amended, restated, supplemented, replaced or otherwise modified from
      time to time, the “Lease”).
      The
      undersigned understands that the Obligors will enter (or have entered) into
      a
      credit facility with CIT Financial Ltd., in its capacity as Lender (the
“Lender”)
      for
      certain lenders (the “Lenders”),
      pursuant to which (a) the Lenders may make loans to certain of the Obligors
      from
      time to time, and (b) the Obligors will grant (or have granted) to the Lender,
      a
      security interest on all of the Obligors' present and after-acquired accounts
      receivable, Inventory, general intangibles (including, without limitation,
      trademarks and intellectual property rights), capital assets, documents of
      title, collateral proceeds accounts and capital stock (collectively, the
“Collateral”).

    

    1. The
      undersigned hereby waives and relinquishes in favour of the Lender any
      landlord's lien, all rights of levy or distraint, security interest or other
      interest that the undersigned may now or hereafter have, whether by statute,
      contract (including the Lease) or by common law, in any of the Collateral (the
      “Landlord's
      Liens”),
      whether for rent or otherwise, and agrees that the Lender's security interests
      and liens in the Collateral, now existing or hereafter arising, shall have
      priority over and rank senior to any and all of the Landlord’s Liens. The
      undersigned disclaims any interest in the Collateral and agrees not to assert
      any claim to the Collateral while the Obligors are indebted to the
      Lenders.

    

    2. In
      order
      to exercise any rights as a secured party holding a security interest in the
      Collateral, the Lender is expressly authorized and privileged at any time to
      enter the Premises and inspect, remove or repossess the Collateral and may
      advertise and conduct a public auction or private sale of the Collateral;
      provided, however, that the Lender will repair, or pay the reasonable cost
      to
      repair, any injury to the realty resulting from such inspection, removal,
      repossession, auction or sale.

    

    3. If
      the
      Lease is terminated by the undersigned whether by reason of any default by
      the
      Obligors or otherwise, or if the Obligors default under any of their agreements
      with the Lender or any Lender, and in any such case the Lender, on behalf of
      itself or the Lenders, desires to exercise its rights as a secured party holding
      a security interest in any of the Collateral, then the Lender may thereafter
      at
      its option occupy the Premises for up to 90 days and may keep thereon such
      property as it determines appropriate, provided that the Lender shall pay rent
      for its period of occupancy (pro-rated on a daily basis and computed on the
      basis of a 30-day month) at the rate provided in the Lease based on the rate
      in
      effect just prior to such termination or default, without incurring any other
      obligations of the Obligors. 

    

    4. The
      undersigned hereby consents to the acquisition by the Lender, at the Lender’s
      option, of the absolute ownership of the Obligors' interest in the Lease and
      agrees that if the Lender, at its option, takes possession of the Obligors’
leasehold estate in the Premises, the Lender will thereupon, be recognized
      as
      the tenant under the Lease. If the Lender shall become the tenant under the
      Lease, it may, on behalf of the Lenders, sublease or assign the Lease for any
      lawful purpose with the express written consent of the undersigned and the
      assignment of the Lease shall release and relieve the Lender of all obligations
      thereunder. The undersigned agrees to give notice within 5 days of any default
      by any Obligor of any of the provisions of the Lease, such notice to be provided
      to:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    CIT
      Financial Ltd.

    207
      Queens Quay West, 

    Toronto,
      Ontario

    M5J
      1A7

    Attn:
      Credit Manager

    

    5. All
      of
      the Lender's rights and privileges hereunder shall inure to the benefit of
      its
      successors and assigns and shall bind the undersigned's successors or
      assigns. 

     

    IN
      WITNESS WHEREOF, the undersigned has caused this instrument to be executed
      this
      _____ day of _________________, 200_.

     

    
      	 	 	 
	 	
              [NAME
                OF LANDLORD]

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      D

    

    FORM
      OF

    BAILEE
      LETTER

     

    ___________
      ____, 200_

     

    [NAME
      OF BAILEE]

    [ADDRESS
      OF BAILEE]

    _______________________

    _______________________

     

    Re: [NAME
      OF CREDIT PARTY]
      (the
“Bailor”)

     

    Ladies
      and Gentlemen:

     

    This
      letter (the “Letter”)
      is to
      advise _________________ (the “Bailee”)
      that
      the Bailor executed and delivered to CIT Financial Ltd., in its capacity as
      Lender for certain lenders (the “Lender”)
      a
      Credit Agreement (as may be modified, amended, renewed, extended, restated,
      or
      replaced from time to time, the “Credit
      Agreement”),
      pursuant to which the Bailor granted to the Lender a security interest in,
      among
      other things, all inventory of the Bailor, some of which is in possession of
      the
      Bailee from time to time (the “Controlled
      Inventory”).
      By
      executing this Letter, the Bailee acknowledges that from time to time the Bailee
      is in possession of Controlled Inventory and that, because of the Lender’s
      interest in the Controlled Inventory, the instructions contained in this Letter
      are irrevocable and cannot be altered or amended without the prior written
      consent of the Lender. The Bailor’s execution of this Letter is conclusive
      evidence to the Bailee of its confirmation of and agreement to the foregoing
      and
      of its agreement to be bound by all terms of this Letter on which the Bailee
      is
      entitled to rely for all purposes until written notice of termination of this
      Letter is given to the Bailee by the Lender.

     

    The
      Bailee recognizes the Lender’s continuing security interest in the Controlled
      Inventory and in the proceeds thereof. The Bailee covenants and agrees that
      the
      Controlled Inventory is and shall remain owned by the Bailor, and that the
      Lender may at any time and from time to time inspect, remove and/or repossess
      the Controlled Inventory while in possession of the Bailee without
      accountability to the Bailee therefor and free of any lien, security interest,
      right or claim which the Bailee may now or hereafter have, such right of the
      Lender being independent of any other right or remedy the Lender may have.
      The
      Bailee hereby authorizes and empowers the Lender to access the premises where
      the Controlled Inventory is located for the purposes of guarding and maintaining
      the Controlled Inventory, preparing and showing the same for sale and/or
      conducting a sale thereof. The Bailee hereby waives and releases, for the
      benefit of the Lender, its successors and assigns, any and all liens, security
      interests, rights and claims of every kind, whether statutory, contractual
      or by
      law, which the Bailee may now or hereafter have with respect to the Controlled
      Inventory, including, without limitation, any rights to seize, hold, restrain,
      levy upon, take possession of, sell or otherwise transfer or dispose of the
      Controlled Inventory and the Bailee further acknowledges and agrees that no
      negotiable warehouse receipts or documents of title will be issued covering
      the
      Controlled Inventory.

     

    So
      long
      as no Default Period (hereinafter defined) is continuing, the Bailor may control
      the Controlled Inventory. From the date on which the Lender notifies the Bailee
      that an “Event
      of Default”
(as
      defined in the Credit Agreement) has occurred and thereafter until the Bailee
      receives notice from the Lender that such Event of Default is no longer
      continuing and that no other Event of Default is continuing (such period being
      referred to herein as a “Default
      Period”),
      the
      Bailee, the Bailor and the Lender agree that the Lender shall have the exclusive
      right to direct the Bailee as to control of the Controlled Inventory, which
      includes, without limitation, the right to dispose of, repossess or remove
      the
      Controlled Inventory, and the Bailee shall not comply in any respect with any
      request or direction by the Bailor in connection with the Controlled Inventory,
      unless consented to in writing by the Lender.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    At
      any
      time when the Bailee has possession of the Controlled Inventory, the Bailee
      agrees to prevent the commingling of the Controlled Inventory in its possession
      with other Inventory, goods or items in the Bailee’s possession by clearly
      separating, dividing or otherwise isolating the Controlled Inventory from all
      such other items in the Bailee’s possession. The Bailee will also clearly
      identify the Controlled Inventory as belonging to the Bailor, through the use
      of
      labels, tags, or other similar coding methods.

     

    The
      Bailee will from time to time deliver to the Lender, upon the written request
      of
      the Lender (which request may be by facsimile transmission) and at the Bailor’s
      cost and expense, such information regarding the Controlled Inventory as may
      be
      reasonably requested by the Lender, and the Bailee will notify the Lender
      promptly if the Bailee acquires knowledge that the Controlled Inventory shall
      become subject to any injunction, writ or warrant of attachment or garnishment,
      judgment, levy and execution, or similar process. The Bailee confirms in favour
      of the Lender that it has not, prior to the date hereof, executed in favour
      of
      any third party any document, instrument or agreement pursuant to which (a)
      the
      Bailee has acknowledged a security interest in the Controlled Inventory in
      favour of such third party, or (b) the Bailee has agreed to follow the
      instructions of such third party in respect of the Controlled
      Inventory.

     

    The
      Bailor agrees that the Bailee shall be fully protected in acting on any notice
      or direction by the Lender relating to the Controlled Inventory without making
      any inquiry whatsoever as to the Lender’s right or authority to give such notice
      or direction. Further, the Bailee shall have no liabilities to the Bailor or
      the
      Lender other than those imposed upon it by law for its own lack of good faith,
      gross negligence or wilful misconduct. The Bailee shall not be liable for
      consequential, indirect or special damages, even if the Bailee has been advised
      of the possibility of such damages. The Bailee shall not be liable for any
      failure or delay in performing any service under this Letter in the event and
      to
      the extent that such failure arises out of causes beyond the Bailee’s control,
      including but not limited to war, civil commotion, an Act of God, fire, flood,
      explosion, sabotage, failure or interruption of electrical or other power
      supplies or of transportation services, compliance with governmental laws,
      regulations or orders, and strikes and lockouts.

     

    The
      Bailor agrees to pay the Bailee’s costs and expenses, including reasonable legal
      fees, in connection with the execution, delivery and administration of this
      Letter.

     

    The
      Bailor and the Lender, jointly and severally, hereby agree to indemnify and
      save
      the Bailee harmless from and against any and all losses, costs and expenses
      arising out of the compliance by the Bailee with the terms of the instructions
      contained herein.

     

    If
      the
      Bailor is unable to fulfill its obligations to the Bailee in respect of
      warehouse fees and other expenses payable by the Bailor to the Bailee in
      connection with the storage, handling and delivery of the Controlled Inventory
      (collectively, the “Storage
      Fees”),
      the
      Lender agrees that, as a condition to the Lender’s rights of access to the
      Controlled Inventory and the Lender’s rights of inspection, removal and/or
      repossession of the Controlled Inventory provided for in this Letter, it will
      pay to the Bailee all Storage Fees which remain unpaid as at the commencement
      of
      any Default Period together with any Storage Fees incurred during the
      continuance of a Default Period.

     

    The
      Bailor acknowledges and agrees that (a) any amounts paid by the Lender to the
      Bailee hereunder shall constitute “Obligations”
of
      the
      Bailor for purposes of the Credit Agreement, and (b) that this Letter is a
      “Loan
      Document”
as
      such
      term is defined in the Credit Agreement dated ______________________ between
      the
      Lender and the Bailor, as borrower.

     

    This
      Letter may only be terminated by the Lender upon written notice to the
      Bailee.

     

    This
      Letter may be execute in one or more counterparts by facsimile transmission,
      each of which shall be deemed to be an original and all of which, when taken
      together, shall constitute one and the same agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    If
      the
      foregoing instructions, terms and agreements are acceptable to the Bailee,
      please indicate the Bailee’s acceptance by signing this letter in the space
      provided below and returning it to the Bailor.

     

    
      	 	Sincerely,
	 	 	 
	 	
              [NAME
                OF CREDIT PARTY]

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name: 
	 	Title:

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    AGREED
      AND ACCEPTED:

     

    
      	CIT FINANCIAL LTD.	 	 	Address
              for Notice:
	 	 	 	 
	By: 	 	 	207
              Queens Quay
              West,
	
              
                

              

              Name:

            	 	 	
              Toronto, Ontario

              M5J 1A7

            
	
              Title: 

            	 	 	Attention: Credit
              Manager

    

     

     

    
      	[BAILEE]	 	 	 
	 	 	 	 
	By:	 	 	 
	
              
                

              

              Name:

            	 	 	
            
	
              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      E

     

    FORM
      OF RESPONSIBLE OFFICER’S CERTIFICATE

     

    
      	
              TO:

            	
              CIT
                Financial Ltd., as Lender

            

    

    

    The
      undersigned, ____________________ [TITLE
      of AUTHORIZED SIGNING OFFICER],
      of
l
      (the
“Borrower”),
      pursuant to Section 5.1 of the credit agreement dated as of May
•,
      2007, between, amongst others, CIT Financial Ltd., as Lender, and the Borrower
      (as amended, restated, supplemented, replaced or otherwise modified from time
      to
      time the “Credit
      Agreement”),
      DOES
      HEREBY CERTIFY
      in
      [his/her] capacity as an authorized signing officer of the Borrower and not
      in
[his/her]
      personal
      capacity that:

    1. The
      financial statements attached hereto fairly and accurately represent the
      Borrower’s financial condition at the end of the particular accounting period
      set out in such financial statements, as well as the Borrower’s and its
      Subsidiaries’ operating results during such accounting period, subject to
      year-end audit adjustments; 

    

    2. A
      review
      of such financial statements and
      of
      the activities of the Borrower and its
      Subsidiaries during
      the period covered by
      such
      financial statements has been made under my supervision has been
      made
      with a
      view to determining whether the Borrower and the Subsidiaries
      have
      fulfilled all of their obligations;

    

    3. During
      the accounting period set out in such financial statements:

    

    (a) each
      of
      the Borrower and the Subsidiaries have fulfilled each of its respective
      obligations under each of the Loan Documents to which it is a
      party;

    

    (b) there
      has
      been no
      Default
      or Event of Default
      under
      the Credit Agreement,

    

    (c) the
      Borrower is not aware of any event or circumstance which could reasonably have
      or could reasonably have had a Material Adverse Effect (as such term is defined
      in the Credit Agreement);

    

    (d) the
      representation and warranties contained in the Credit Agreement and the other
      Loan Documents are correct in all material respects on and as of the date hereof
      as though made on and as of such date, other than any such representation or
      warranty which relates to a specified prior date and except to the extent that
      the Lender has been notified in writing by the Borrower that any representation
      or warranty is not correct and the Lenders have explicitly waived in writing
      compliance with such representation or warranty;

    

    (e) the
      Borrower has been in full compliance with all covenants set out in the Credit
      Agreement;

    

    (f) Annex
      B
      hereto sets out all Subsidiaries and indicates, for each such Subsidiary,
      whether such Subsidiary is a Restricted Subsidiary and the date of the formation
      or acquisition of each Subsidiary was formed or acquired since the end of the
      previous calendar month;

    

    (g) no
      change
      in GAAP or in the application thereof has occurred since the date of the most
      recent audited annual financial statements of the Borrower delivered to the
      Lender [Note
      to Draft: - If a change has occurred, specify the details of the change and
      its
      effect on the accompanying financial statements];
      and

    

    (h) the
      Borrower and the other Credit Parties have been in compliance with Section
      6.4
      of the Credit Agreement and Annex C hereto sets out details of all transactions
      contemplated by Section 6.4 of the Credit Agreement and the details of such
      compliance.

     

    [Note
      to Draft: if any of the foregoing is incorrect, revise wording accordingly
      to
      include particulars of any variation.]

    

    4. Capitalized
      terms used herein and not otherwise defined shall have the meanings given to
      such terms in the Credit Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      undersigned has executed this Responsible Officer’s certificate on behalf of the
      Borrower as of the _______ day of ________________, 20l.

     

    
      	 	 	 
	 	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ANNEX
      1

     

    
      
        	
                ARTICLE
                  1

              	 	
                DEFINITIONS

              	 	
                1

              
	
                1.1

              	 	
                Defined
                  Terms

              	 	
                1

              
	
                1.2

              	 	
                Terms
                  Generally

              	 	
                21

              
	
                1.3

              	 	
                Accounting
                  Terms; GAAP

              	 	
                22

              
	
                1.4

              	 	
                Time

              	 	
                22

              
	
                1.5

              	 	
                Permitted
                  Liens

              	 	
                22

              
	
                ARTICLE
                  2

              	 	
                THE
                  CREDITS

              	 	
                22

              
	
                2.1

              	 	
                Credits

              	 	
                22

              
	
                2.2

              	 	
                Loans
                  and Borrowings

              	 	
                23

              
	
                2.3

              	 	
                Requests
                  for Borrowings

              	 	
                23

              
	
                2.4

              	 	
                Funding
                  of Borrowings

              	 	
                23

              
	
                2.5

              	 	
                Interest

              	 	
                24

              
	
                2.6

              	 	
                Termination
                  and Reduction of Credits

              	 	
                25

              
	
                2.7

              	 	
                Repayment
                  of Loans

              	 	
                25

              
	
                2.8

              	 	
                Evidence
                  of Debt

              	 	
                25

              
	
                2.9

              	 	
                Prepayments

              	 	
                26

              
	
                2.10

              	 	
                Increased
                  Costs; Illegality

              	 	
                27

              
	
                2.11

              	 	
                Taxes

              	 	
                28

              
	
                2.12

              	 	
                Payments
                  Generally 

              	 	
                29

              
	
                2.13

              	 	
                Currency
                  Indemnity

              	 	
                29

              
	
                2.14

              	 	
                Collection
                  of Accounts

              	 	
                30

              
	
                ARTICLE
                  3

              	 	
                REPRESENTATIONS
                  AND WARRANTIES

              	 	
                31

              
	
                3.1

              	 	
                Organization;
                  Powers

              	 	
                31

              
	
                3.2

              	 	
                Authorization;
                  Enforceability

              	 	
                31

              
	
                3.3

              	 	
                Governmental
                  Approvals; No Conflicts

              	 	
                31

              
	
                3.4

              	 	
                Financial
                  Condition; No Material Adverse Effect

              	 	
                32

              
	
                3.5

              	 	
                Litigation

              	 	
                32

              
	
                3.6

              	 	
                Compliance
                  with Applicable Laws and Agreements

              	 	
                32

              
	
                3.7

              	 	
                Ownership

              	 	
                33

              
	
                3.8

              	 	
                Taxes

              	 	
                33

              
	
                3.9

              	 	
                Titles
                  to Real Property

              	 	
                33

              
	
                3.10

              	 	
                Titles
                  to Personal Property

              	 	
                33

              
	
                3.11

              	 	
                Pension
                  Plans

              	 	
                33

              
	
                3.12

              	 	
                Disclosure

              	 	
                34

              
	
                3.13

              	 	
                [Intentionally
                  Deleted.]

              	 	
                34

              
	
                3.14

              	 	
                Casualties;
                  Taking of Properties

              	 	
                34

              
	
                3.15

              	 	
                Subsidiaries

              	 	
                34

              
	
                3.16

              	 	
                Insurance

              	 	
                34

              
	
                3.17

              	 	
                Solvency

              	 	
                35

              
	
                3.18

              	 	
                Material
                  Contracts

              	 	
                35

              
	
                3.19

              	 	
                Environmental
                  Matters

              	 	
                35

              
	
                3.20

              	 	
                Employee
                  Matters

              	 	
                36

              
	
                3.21

              	 	
                Fiscal
                  Year

              	 	
                36

              
	
                3.22

              	 	
                Intellectual
                  Property Rights

              	 	
                37

              
	
                3.23

              	 	
                Residency
                  of Borrower for Tax Purposes

              	 	
                37

              
	
                3.24

              	 	
                Distributions

              	 	
                37

              
	
                3.25

              	 	
                Debt

              	 	
                37

              
	
                3.26

              	 	
                Workers’
                  Compensation

              	 	
                37

              
	
                3.27

              	 	
                Bank
                  Accounts

              	 	
                38

              
	
                3.28

              	 	
                Real
                  Property and Leases

              	 	
                38

              
	
                3.29

              	 	
                Further
                  Real Property Matters

              	 	
                38

              
	
                3.30

              	 	
                Jurisdictions
                  of Credit Parties

              	 	
                38

              
	
                ARTICLE
                  4

              	 	
                CONDITIONS

              	 	
                38

              
	
                4.1

              	 	
                Effective
                  Date

              	 	
                38

              
	
                4.2

              	 	
                Each
                  Credit Event

              	 	
                42

              
	
                ARTICLE
                  5

              	 	
                AFFIRMATIVE
                  COVENANTS

              	 	
                42

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                5.1

              	 	
                Financial
                  Statements and Other Information

              	 	
                42

              
	
                5.2

              	 	
                Existence;
                  Conduct of Business

              	 	
                47

              
	
                5.3

              	 	
                Payment
                  of Obligations

              	 	
                47

              
	
                5.4

              	 	
                Maintenance
                  of Properties

              	 	
                47

              
	
                5.5

              	 	
                Books
                  and Records; Inspection Rights

              	 	
                47

              
	
                5.6

              	 	
                Compliance
                  with Applicable Laws and Material Contracts

              	 	
                47

              
	
                5.7

              	 	
                Use
                  of Proceeds

              	 	
                48

              
	
                5.8

              	 	
                Further
                  Assurances

              	 	
                48

              
	
                5.9

              	 	
                Insurance

              	 	
                48

              
	
                5.10

              	 	
                Operation
                  and Maintenance of Property

              	 	
                49

              
	
                5.11

              	 	
                Additional
                  Subsidiaries; Additional Liens

              	 	
                50

              
	
                ARTICLE
                  6

              	 	
                NEGATIVE
                  COVENANTS

              	 	
                50

              
	
                6.1
                  

              	 	
                Indebtedness

              	 	
                50

              
	
                6.2

              	 	
                Liens

              	 	
                51

              
	
                6.3

              	 	
                Fundamental
                  Changes

              	 	
                51

              
	
                6.4

              	 	
                Investments,
                  Loans, Advances, Guarantees and Acquisitions

              	 	
                52

              
	
                6.5

              	 	
                Restricted
                  Payments

              	 	
                52

              
	
                6.6

              	 	
                Transactions
                  with Affiliates

              	 	
                52

              
	
                6.7

              	 	
                Repayment
                  of Debt

              	 	
                53

              
	
                6.8

              	 	
                Restrictive
                  Agreements

              	 	
                53

              
	
                6.9

              	 	
                Capital
                  Lease Obligations

              	 	
                53

              
	
                6.10

              	 	
                Sales
                  and Leasebacks

              	 	
                53

              
	
                6.11

              	 	
                Pension
                  Plan Compliance

              	 	
                54

              
	
                6.12

              	 	
                Sale
                  or Discount of Receivables

              	 	
                54

              
	
                6.13

              	 	
                Unconditional
                  Purchase Obligations

              	 	
                54

              
	
                6.14

              	 	
                No
                  Amendments to Material Contracts

              	 	
                54

              
	
                6.15

              	 	
                Environmental
                  Laws

              	 	
                54

              
	
                ARTICLE
                  7

              	 	
                EVENTS
                  OF DEFAULT

              	 	
                55

              
	
                7.1

              	 	
                Events
                  of Default

              	 	
                55

              
	
                ARTICLE
                  8

              	 	
                MISCELLANEOUS

              	 	
                59

              
	
                8.1

              	 	
                Notices

              	 	
                59

              
	
                8.2

              	 	
                Waivers;
                  Amendments

              	 	
                60

              
	
                8.3

              	 	
                Expenses;
                  Indemnity; Damage Waiver

              	 	
                61

              
	
                8.4

              	 	
                Successors
                  and Assigns

              	 	
                63

              
	
                8.5

              	 	
                Survival

              	 	
                64

              
	
                8.6

              	 	
                Counterparts;
                  Integration; Effectiveness

              	 	
                64

              
	
                8.7

              	 	
                Severability

              	 	
                65

              
	
                8.8

              	 	
                Right
                  of Set-Off

              	 	
                65

              
	
                8.9

              	 	
                Governing
                  Law; Jurisdiction; Consent to Service of Process

              	 	
                65

              
	
                8.10

              	 	
                WAIVER
                  OF JURY TRIAL

              	 	
                66

              
	
                8.11

              	 	
                Headings

              	 	
                66

              
	
                8.12

              	 	
                Confidentiality

              	 	
                66

              
	
                8.13

              	 	
                Press
                  Releases and Related Materials

              	 	
                67

              
	
                8.14

              	 	
                No
                  Strict Construction

              	 	
                67

              
	
                8.15

              	 	
                Paramountcy

              	 	
                67

              
	
                8.16

              	 	
                Withholding
                  Tax.

              	 	
                67

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]