Document:

EXECUTION VERSION

                                   Exhibit 4.1
                                   -----------

                            SECURED PROMISSORY NOTE

$2,600,000                                                      October 25, 2004

        FOR VALUE RECEIVED, each of INNAPHARMA, INC., a Delaware corporation,
and TETRAGENEX PHARMACEUTICALS, INC., a Delaware corporation, (each a "BORROWER"
and, collectively, the "BORROWERS") hereby jointly and severally promises to pay
to the order of KBC BANK N.V. as administrative agent (in such capacity the
"ADMINISTRATIVE AGENT") for itself and EACH OF THE OTHER LENDERS PARTY HERETO
FROM TIME TO TIME (each, including KBC Bank N.V., a "LENDER" and, collectively,
the "LENDERS") the principal sum of TWO MILLION SIX HUNDRED THOUSAND DOLLARS
($2,600,000), together with interest thereon under this secured promissory note
(as amended, restated, supplemented or otherwise modified from time to time,
this "NOTE") from July 24, 2004 until paid in full. Each Borrower is jointly and
severably liable to the Administrative Agent and the Lenders for all obligations
arising hereunder and in connection herewith.

        The principal outstanding on this Note, together with accrued interest
to date, shall be due and payable on the date that is 53 months after the
Effective Date (the "MATURITY DATE"). The outstanding principal balance of this
Note shall bear interest (computed on the basis of a 365-day year) from July 24,
2004 until paid in full, at a rate per annum equal to the lesser of 3% or the
maximum rate of interest permitted under applicable law. Notwithstanding the
foregoing, from and after the Maturity Date, or such earlier date as all amounts
owing under this Note become due and payable by acceleration or otherwise
(including as a result of any Event of Default), the outstanding amounts under
this Note shall bear simple interest until paid in full at a default rate per
annum (computed on the basis of a 365-day year) equal to the lesser of 7% or the
maximum rate of interest permitted under applicable law.

        All payments shall be made in lawful money of the United States of
America to the Administrative Agent for the benefit of the Lenders. Any payment
on this Note shall be credited first to default interest (if any), next to
accrued interest then due and payable and the remainder applied to principal,
PROVIDED, HOWEVER, that in the event that the Administrative Agent or any Lender
receives any payment from either Borrower other than the Administrative Fee,
prior to the payment in full by the Borrowers of the Cash Payments, such payment
shall be applied as part of the Cash Payments and shall not reduce the amount
due hereunder until the Cash Payments have been made in full. Upon receipt of
any monies from either Borrower, the Administrative Agent shall pay such monies
to each Lender in proportion to the amount owed by the Borrowers to such Lender
as set forth on Schedule 1 hereto.

        1.      DEFINITIONS AND RULES OF INTERPRETATION.

                (a)     DEFINITIONS. Unless the context otherwise requires, the
following capitalized terms when used in this Note shall have the following
meanings:
<PAGE>

        "ADMINISTRATIVE AGENT" has the meaning provided in the preamble hereto.

        "AFFILIATE" means, with respect to a specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person specified, or who holds
or beneficially owns 5% or more of any class of voting securities of the Person
specified.

        "BORROWER" and "BORROWERS" have the meaning provided in the preamble
hereto.

        "CASH PAYMENTS" means the Initial Cash Payment and the Second Cash
Payment. For the sake of clarity, no payment of the Cash Payments shall reduce
the amount of principal, interest or default interest owed hereunder.

        "CODE" means the United States Internal Revenue Code of 1986, as amended
from time to time.

        "COLLATERAL" has the meaning provided in SECTION 7 hereto.

        "CONVERSION PRICE" has the meaning provided in SECTION 8 hereto.

        "CONVERSION RIGHT" has the meaning provided in SECTION 8 hereto.

        "CONVERSION SHARES" has the meaning provided in SECTION 8 hereto.

        "EFFECTIVE DATE" means the date on which the Plan becomes effective.

        "EVENT OF DEFAULT" has the meaning provided in SECTION 5 hereto.

        "GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

        "INITIAL CASH PAYMENT" means a $600,000 payment required under the Plan
to be made by the Borrowers to the Lenders on or prior to the Effective Date.

        "ISSUED PATENTS" has the meaning provided in the Security Agreement.

        "KBC" or "KBC PARTIES" means Keijser Securities N.V., formerly known as
KBC Securities Nederland N.V.; KBC Securities N.V.; KBC Bank N.V.; KBC
Verzekeringen N.V.; Fidea N.V.; KBC Private Equity Fund Biotech N.V.; and KBC
Equity Fund N.V., together with each of their predecessors, successors and
assigns.

        "KBC INDEMNIFIED PARTIES" means the KBC Parties together with each of
the KBC Parties' respective officers, directors, employees, affiliates,
predecessors, successors and assigns.

        "LENDER" and "LENDERS" have the meaning provided in the preamble hereto.

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<PAGE>

        "LIEN" means, with respect to any asset, any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge, security interest or similar
encumbrance in, on or of such asset, whether or not filed, recorded or otherwise
perfected as or effective under applicable law, as well as the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.

        "LOAN DOCUMENTS" means this Note, the Security Agreement and any other
agreement or instrument granting a Lien on the property of either Borrower in
favor of the Administrative Agent for the benefit of the Lenders, and any
financing statements, notices and the like filed, recorded or delivered in
connection with the foregoing. "Loan Document" means any one of the Loan
Documents.

        "MANDATORY PREPAYMENT" means any payment required to be made to the
Lenders or the Administrative Agent pursuant to clause (r) of SECTION 4.

        "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, prospects, assets or financial condition of the Borrower, (b) the
rights or interest of the Lenders under the Loan Documents or on any security
interest granted pursuant thereto or the value thereof, or (c) the ability of
the Borrowers to comply with their obligations hereunder.

        "MATURITY DATE" has the meaning provided in the preamble hereto.

        "MERGER AGREEMENT" means the Agreement and Plan of Merger, to be dated
on or about the Effective Date, by and between Innapharma, Inc. and Tetragenex
Pharmaceuticals, Inc.

        "MILESTONE PAYMENTS" means any and all consideration received by either
Borrower on account of or with respect to the Collateral, including
consideration realized in respect of any license or encumbrance of the
Collateral (or grant of a license or freedom of use with respect to the
Collateral).

        "NOTE" has the meaning provided in the preamble hereto.

        "PATENT APPLICATION" has the meaning provided in the Security Agreement.

        "PATENT LICENSE" has the meaning provided in the Security Agreement.

        "PATENT RIGHTS" has the meaning provided in the Security Agreement.

        "PERFECTED COLLATERAL" means all Collateral of the Borrowers located in
or subject to the laws of the United States, Canada, Germany, France and the
United Kingdom or any Governmental Authority related to any of the foregoing.

        "PERSON" means and includes an individual, corporation, limited
liability company, partnership, trust or trustee thereof, estate or executor
thereof, unincorporated organization or joint venture, court or governmental
unit or any agency or subdivision thereof, or any other legally recognizable
entity.

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<PAGE>

        "PLAN" means the Modified Third Amended Plan of Reorganization of
Innapharma, Inc., dated February 19, 2004, under Chapter 11 of the Bankruptcy
Code.

        "PTO" means the United States Patent and Trademark Office or with
respect ot any non-U.S. patents, a similar office under applicable law.

        "SECOND CASH PAYMENT" means a $600,000 payment required under the Plan
to be made by the Borrowers to the Lenders on or before the date that is 365
days after the Effective Date.

        "SECURITY AGREEMENT" means that certain patent security agreement, dated
as of the date hereof, made by the Borrowers in favor of KBC Bank N.V. as the
administrative agent for the benefit of itself and each of the Lenders.

        "UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York, PROVIDED, HOWEVER, in the event
that, by reason of mandatory provisions of law, any or all of the perfection or
priority of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term "UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or priority and for purposes of definitions related to such provisions.

        "TAXES" means any and all present or future taxes, levies, imposts,
duties, deductions, charges, withholdings or fees of any nature (including
interest, penalties and additions thereto) imposed by any Governmental
Authority.

        RULES OF INTERPRETATION. The following rules of interpretation apply to
this Note and the Security Agreement:

                        (i)     The singular includes the plural and the plural
        includes the singular.

                        (ii)    "or" is not exclusive.

                        (iii)   A reference to a Governmental Rule includes any
        amendment or modification to such Governmental Rule, and all
        regulations, rulings and other Governmental Rules promulgated under such
        Governmental Rule.

                        (iv)    A reference to a Person includes its permitted
        successors and permitted assigns.

                        (v)     Accounting terms have the meanings assigned to
        them by GAAP, as applied by the accounting entity to which they refer.

                        (vi)    The words "include", "includes" and "including"
        are not limiting.

                        (vii)   A reference to a Section, Exhibit, Schedule or
        Annex is to the Section, Exhibit, Schedule or Annex of such document
        unless otherwise indicated. Exhibits, Schedules or Annexes to any
        document shall be deemed incorporated by

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<PAGE>

        reference in such document. A reference to any Exhibit, Schedule or
        Annex of a document shall mean such Exhibit, Schedule or Annex as,
        amended, modified or supplemented from time to time in accordance with
        the terms of this Note or the Security Agreement, as applicable.

                        (viii)  References to any document, instrument or
        agreement (i) shall include all exhibits, schedules and other
        attachments thereto, (ii) shall include all documents, instruments or
        agreements issued or executed in replacement thereof, and (iii) shall
        mean such document, instrument or agreement, or replacement or
        predecessor thereto, as amended, amended and restated, supplemented or
        otherwise modified from time to time and in effect at any given time.

                        (ix)    The words "hereof", "herein" and "hereunder" and
        words of similar import when used in this Note or any other Loan
        Document shall refer to such document as a whole and not to any
        particular provision of such document.

        2.      CONDITIONS PRECEDENT. The obligation of the Lenders to extend
credit to the Borrowers as provided for hereunder is subject to the satisfaction
or waiver by the Administrative Agent of each of the following conditions
precedent:

                (a)     Innapharma, Inc., together with each of its respective
officers, directors, employees, shareholders, affiliates, predecessors,
successors and assigns, shall have dismissed with prejudice the complaint
against KBC, Ruth Devenyns and Samer Mansour (filed as Adversary Proceeding No.
8-04-08204-sb in the chapter 11 case of Innapharma, Inc., and referred to in
this clause (b) as the "ADVERSARY PROCEEDING"), and shall have released and
forever discharged the aforementioned parties from any and all claims, actions,
causes of action, suits, debts, damages, losses, obligations, demands,
attorneys' fees and liabilities, whether known or unknown, billed or unbilled,
whether sounding in tort, contract or otherwise, whether anticipated or
unanticipated, both in law and in equity, including such claims or causes of
action arising from or relating to the Adversary Proceeding, the Plan, and the
Note and all other Loan Documents;

                (b)     Neither Borrower shall have transferred, disposed of,
licensed or granted any license or freedom of use with respect to the
Collateral, or otherwise encumbered in any way any of the Collateral in
existence as of April 15, 2003, other than (i) pursuant to this Note and the
other Loan Documents and (ii) any immaterial patent application which was
abandoned after such date;

                (c)     The Debtor shall have paid: (i) to the Lenders, and each
Lender shall have received in proportion to such Lender's percentage interest as
provided in SCHEDULE 1 hereto, $600,000 less the amount paid to the
Administrative Agent pursuant to SECTION 10; PROVIDED, that, for the sake of
clarity, such payment shall not constitute payment of any amount owed under this
Note and (ii) to the Administrative Agent, all amounts due and payable pursuant
to SECTION 10;

                (d)     Any and all existing Liens on the Collateral shall have
been released by any and all parties holding such Liens;

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<PAGE>

                (e)     The Borrowers shall have delivered valid and perfected
first priority liens on the Collateral to the Administrative Agent for the
benefit of the Lenders;

                (f)     The Administrative Agent shall have received, in form
and substance satisfactory to the Administrative Agent, the Security Agreement
and the Assignment of Patents (as defined in the Security Agreement) duly
executed by the Borrowers (with as many duplicate originals as may be required,
or expected to be required, for filing purposes), together with: (i) Uniform
Commercial Code financing statements authorized by Borrower to be filed in all
jurisdictions that the Administrative Agent may deem necessary or desirable in
order to perfect the security interests created by the Security Agreement, (ii)
a SCHEDULE A to the Security Agreement with a detailed list of all patents held
by either Borrower (whether held in the United States or any other country)
which shall be subject to the lien thereunder, and (iii) such other agreements
or instruments duly executed by the Borrowers and any other party thereto that
the Administrative Agent may deem necessary or desirable in order to perfect the
first priority security interests created by the Security Agreement, including
any agreements and documents for filing and recording with the PTO or any other
patent office in any country or jurisdiction and powers-of-attorney related
thereto;

                (g)     The Administrative Agent shall have received, in form
and substance satisfactory to the Administrative Agent, a certificate of the
Secretary or an Assistant Secretary of each Borrower certifying the names and
true signatures of the officers of such Borrower authorized to sign this Note,
the Security Agreement and each Loan Document to which it is a party and the
other documents to be delivered hereunder; and

                (h)     The Administrative Agent shall have received, in form
and substance satisfactory to the Administrative Agent, such other agreements,
instruments, documents and certificates duly executed or otherwise authorized by
Borrower as may be reasonably requested by Lender.

        3.      REPRESENTATIONS AND WARRANTIES. To induce the Administrative
Agent and each Lender to enter into this Note, each Borrower hereby represents
and warrants to the Administrative Agent and each Lender that:

                (a)     Such Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now
conducted, and is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to qualify would have a material adverse
effect on its business or operations; Borrower is not organized under the laws
of any other jurisdiction;

                (b)     Borrower's chief executive office is, and has since
January, 2000, been, located at 1 Maynard Drive, Park Ridge, New Jersey. Prior
thereto, the Borrower's office was located at 400 Rella Boulevard, Suffern, New
York 10901 for a period in excess of one year;

                (c)     Such Borrower has taken all corporate action necessary
for the authorization, execution and delivery of this Note and the other Loan
Documents, and the performance of all obligations of such Borrower hereunder and
thereunder;

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<PAGE>

                (d)     The execution, delivery and performance of this Note and
the other Loan Documents will not violate, conflict with, contravene, or
constitute a default under or result in a Lien upon assets of such Borrower
pursuant to, (i) any applicable law or regulation, (ii) any charter document of
such Borrower, or (iii) any contract, agreement, judgment, order, decree, or
other instrument binding upon or affecting such Borrower or its properties;

                (e)     After giving effect to the transactions contemplated by
the Merger Agreement, the authorized capital stock of Tetragenex
Pharmaceuticals, Inc. will be (i) 5,000,000 shares of "blank check" preferred
stock, $0.01 par value per share, none of which will be issued or outstanding,
and (ii) 50,000,000 shares of common stock, $0.01 par value per share, of which
at least 381,000 shares will have been duly reserved for issuance upon any
Conversion;

                (f)     The Borrowers have good and marketable title to the
Collateral, free of all Liens and other encumbrances (other than the Liens
created by the Loan Documents);

                (g)     All filings, recordings and other actions required to
provide the Administrative Agent, for the benefit of the Lenders, with a valid
and perfected first priority security interest in the Perfected Collateral in
existence as of the date hereof, subject to no Liens, have been taken;

                (h)     Such Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to have a material
adverse effect on the business or property of such Borrower or on the
Collateral;

                (i)     There are no actions or proceedings pending, or to the
best knowledge of such Borrower, threatened by or against such Borrower;

                (j)     This Note and the other Loan Documents constitute the
valid and legally binding obligations of such Borrower enforceable in accordance
with their respective terms;

                (k)     The board of directors of each Borrower has approved the
Plan; this Note, the Security Agreement and any other agreement, contract,
instrument or document executed or otherwise authorized (or to be executed or
otherwise authorized) in connection with this Note or the Security Agreement;
and

                (l)     Each condition precedent to the effectiveness of this
Note set forth in SECTION 2 hereto (A) has been satisfied or (B) has been waived
in writing by the Administrative Agent.

        4.      COVENANTS. So long as any part of the indebtedness contemplated
by this Note remains unpaid or any other obligation under this Note or any other
Loan Document remains outstanding, each Borrower shall comply with the following
covenants:

                (a)     Such Borrower shall not create, incur, assume or permit
to exist any Lien on any of the Collateral other than (i) the Liens in favor of
the Administrative Agent pursuant to this Note and the other Loan Documents, or
(ii) such Liens as shall be expressly junior to the Liens grated to or for the
benefit of the Lenders pursuant to the Loan Documents;

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<PAGE>

                (b)     Such Borrower shall comply with all obligations of such
Borrower in favor of the Administrative Agent and each Lender under the Plan,
including making the Cash Payments when due;

                (c)     Such Borrower shall comply with the requirements of all
applicable laws, rules, regulations and orders (including, without limitation,
the Internal Revenue Code and all regulations promulgated in connection
therewith) of any Governmental Authority as now in effect and which may be
imposed in the future in all jurisdictions in which such Borrower is now doing
business or may hereafter be doing business, except any thereof that could not
reasonably be expected (in the aggregate) to have a Material Adverse Effect;

                (d)     Such Borrower shall at all times preserve and keep in
full force and effect its corporate existence, except that Innapharma, Inc. may
merge with and into Tetragenex Pharmaceuticals, Inc. pursuant to the Merger
Agreement;

                (e)     Such Borrower will not make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of the Borrower unless (i) such
transaction is on terms that are no less favorable to the Borrower than those
that would have been obtained in an arm's-length transaction by the Borrower
with an unrelated Person and (ii) if such transaction relates to the Collateral,
the Administrative Agent provides its prior written approval of such
transaction;

                (f)     Such Borrower shall not take any action or do any thing
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect;

                (g)     Such Borrower shall promptly, upon any officer of such
Borrower obtaining knowledge of (i) the institution or threatened institution of
any action, suit, proceeding, governmental investigation or arbitration against
or affecting such Borrower or any property of such Borrower not previously
disclosed by such Borrower to the Administrative Agent, or (ii) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting the Borrower or any
property of such Borrower, give notice thereof to the Administrative Agent and
provide such other information as may be reasonably available to such Borrower
to enable the Administrative Agent and its counsel to evaluate such matter;

                (h)     Such Borrower shall maintain accurate books and records
in accordance with generally accepted accounting principles and permit the
Administrative Agent, upon reasonable notice given, to inspect such books and
records;

                (i)     Such Borrower shall deliver to the Administrative Agent
(i) quarterly financial statements of such Borrower and any subsidiaries of such
Borrower that such Borrower has filed with the Securities and Exchange
Commission pursuant to the reporting requirements of the Securities Exchange Act
of 1934, as amended, which financial statements (if any) shall include (A)
statements of income and cash flows and (B) balance sheets, in each case within
60

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<PAGE>

days of the end of each fiscal quarter of such Borrower, (ii) all financial
statements, reports, certificates and other information provided to the
shareholders of such Borrower and (iii) with reasonable promptness, such other
information and data with respect to any of the Collateral as from time to time
may be reasonably requested by the Administrative Agent to enable the
Administrative Agent to confirm compliance by such Borrower with the covenants
contained herein;

                (j)     Such Borrower shall pay all liens, taxes, assessments
and other governmental charges, PROVIDED, HOWEVER, that nothing herein contained
shall require such Borrower to pay any tax or other lien so long as its validity
is being contested in good faith and by appropriate proceedings and for which
adequate reserves have been provided in accordance with generally accepted
accounting principles;

                (k)     Such Borrower has such insurance policies relating to
property, casualty, fire, public liability insurance, and insurance covering
intellectual property infringement or misappropriation as are listed on Schedule
2 hereto, will maintain in full force and effect all such policies during the
term of this Note, and upon reasonable request, promptly deliver to the
Administrative Agent copies of such policies;

                (l)     Such Borrower shall furnish to the Administrative Agent
evidence of each payment of any Cash Payment made pursuant to the Plan by such
Borrower to any Lender;

                (m)     Such Borrower shall take all steps as may be necessary
or desirable to preserve and protect the value of the Collateral;

                (n)     Such Borrower shall from time to time, execute,
acknowledge, record, register, deliver and/or file all such notices, statements,
instruments and other documents (including any, financing statement,
continuation statement, or estoppel certificate), relating to this Note, stating
the interest and charges then due and any known defaults, and take such other
steps as may be necessary or advisable to render fully valid and enforceable
under all applicable laws the rights, Liens and priorities of the Administrative
Agent and the Lenders with respect to all Collateral furnished under this Note
and the other Loan Documents or intended to be so furnished, in each case in
such form and at such times as shall be reasonably satisfactory to the
Administrative Agent;

                (o)     Such Borrower shall refrain from entering into any sale,
licensing agreement or similar arrangement without the prior written consent of
the Administrative Agent unless such licensing agreement or similar arrangement
shall result in an immediate Mandatory Prepayment to the Administrative Agent of
not less than the remaining principal amount and all other amounts due,
including accrued interest and default interest, if any, under this Note (after
giving effect to the requirement that any amounts paid to any Lender or the
Administrative Agent shall be applied to the Cash Payments until such payments
are paid in full) PROVIDED that the Administrative Agent shall not withhold its
consent to any such proposed sale, licensing agreement or similar arrangement in
the event that (i) the agreement will result in Mandatory Payments to the
Administrative Agent during the term of this Note of not less than all amounts
due hereunder and (ii) the Borrowers, not less than 15 days prior to the
execution date of any such proposed agreement (or term sheet related to such
proposed agreement), provide evidence

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<PAGE>

to the Administrative Agent, including financial statements and related
documents in form and substance satisfactory to the Administrative Agent, of the
creditworthiness and financial security of any proposed licensee, transferee, or
other counterparty under such proposed agreement;

                (p)     Such Borrower shall, upon receipt (whether actual or
constructive) of any Milestone Payment or licensing fee, pay in cash 50% of the
amount received (i) if the Cash Payments have not been made in full, to the
holders of the Class 6 Interests (as defined in, and in accordance with, the
Plan), to be applied toward the Cash Payments and (ii) if all Cash Payments have
been made in full, to the Administrative Agent to be applied toward payment of
amounts due under this Note and the other Loan Documents;

                (q)     Such Borrower (either itself or through licensees) will
not do any act, or omit to do any act, whereby any Issued Patent, Patent
Application or other Patent Right may become (or is reasonably likely to become)
forfeited, abandoned or dedicated to the public or whereby the validity, grant
or enforceability of the security interests granted to the Secured Parties
therein could be adversely affected in any material respect;

                (r)     Such Borrower will notify the Administrative Agent
promptly if it knows, or has reason to know, that any Patent Application or
registration relating to any Patent Right may become forfeited, abandoned,
dedicated to the public or invalid or unenforceable, or subject to any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the PTO or any court,
tribunal or agency in any country) regarding such Borrower's ownership of, use
of, or the validity of, any Patent Application or any Patent Right or such
Borrower's right to register the same or to own and maintain the same;

                (s)     Such Borrower will take all commercially reasonable
steps, including in any proceeding before the PTO or any similar office or
agency in any other country or group of countries or any political subdivision
of any of the foregoing, to maintain and pursue each material Patent Application
(and to obtain the relevant registration) and to maintain each registration of
the material Issued Patents which are now or shall become included within the
Collateral, including, in each case, those items on SCHEDULE A to the Security
Agreement, and the filing of all material applications for renewal, affidavits
of use and affidavits of incontestability;

                (t)     In the event that any Issued Patent, Patent Application
or Patent Right is infringed, misappropriated or diluted by a third party, such
Borrower shall (i) promptly take all actions necessary to stop such
infringement, misappropriation or dilution and to protect its rights in such
Issued Patent, Patent Application or Patent Right, (ii) promptly notify the
Administrative Agent after it learns of such infringement, misappropriation or
dilution and (iii) seek injunctive relief where appropriate and sue to recover
any and all damages for such infringement, misappropriation or dilution;

                (u)     Each Borrower shall (i) report to the Administrative
Agent at least 15 days prior to the date of any of the following actions: (A)
the filing of any Patent Application with the PTO, or any state registry or
foreign counterpart of the foregoing (whether such application is filed by such
Borrower or through any agent, employee, licensor, licensee, or designee
thereof), (B) to the extent pertaining to any compound or other technology
developed by the Grantor as of

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<PAGE>

the date hereof, the registration of any patent by any such office, and (C) to
the extent pertaining to any compound or other technology developed by the
Grantor as of the date hereof, the acquisition of any application or
registration and (ii) in each case, concurrently with such report to the
Administrative Agent, authorize, execute and deliver to the Administrative Agent
any documentation necessary or desirable to establish, preserve or protect the
Administrative Agent's first priority security interest in the Collateral
including an updated version of SCHEDULE A to the Security Agreement;

                (v)     With respect to the Collateral, no Borrower shall
execute, and there will not be on file in any public office, any financing
statement or other document or instrument, except (i) financing statements or
other documents or instruments filed or to be filed in favor of the
Administrative Agent in connection with the Loan Documents and (ii) financing
statements or other documents or instruments filed or to be filed in connection
with Liens which are expressly junior to the Liens granted to or for the benefit
of the Lenders pursuant to the Loan Documents PROVIDED that no such filing shall
be made in any jurisdiction in which the first priority Liens granted to or for
the benefit of the Lenders pursuant to the Loan Documents have not been
perfected or if such filing will in any way impair the first priority interest
of the Liens granted to or for the benefit of the Lenders pursuant to the Loan
Documents;

                (w)     Such Borrower shall promptly notify the Administrative
Agent and each Lender in writing of the occurrence of any Event of Default or of
any Material Adverse Effect; and

                (x)     Such Borrower shall, upon the request of the
Administrative Agent, promptly take any and all actions necessary to enable the
Administrative Agent, for the benefit of the Lenders, to obtain a valid and
perfected first priority security interest in any Collateral in existence as of
the date of such request, in each case to the extent such security interest is
available under the laws of any relevant jurisdiction.

        5.      EVENTS OF DEFAULT. Any and each of the following shall
constitute an "Event of Default":

                (a)     The Borrowers fail to make, or cause to be made, the
full amount of the Second Cash Payment on or before the date which is 365 days
after the date Effective Date;

                (b)     The Borrowers fail to make, or cause to be made, (i) on
or before November 25, 2004, the Initial Cash Payment or (ii) any payment of
principal or interest or any other sum when due under this Note or any other
Loan Document (other than payments specified in clause (a) of this SECTION 5)
including any Mandatory Prepayments due under clause (p) of SECTION 4;

                (c)     Either Borrower fails to observe or perform any material
term or provision of this Note, the Security Agreement or any other Loan
Document (other than any failure described in clause (a) or (b) of this SECTION
5) and such failure shall continue unremedied for a period of 30 days from the
earliest of (i) either Borrower becoming aware of such failure or (ii) the
Administrative Agent or any Lender providing either Borrower with notice of such
failure;

                                       11
<PAGE>

                (d)     Any representation or warranty or statement made or
furnished by either Borrower in or in connection with any Loan Document is
misleading, inaccurate or incomplete in any material respect;

                (e)     On or after the Effective Date, (i) either Borrower
fails to pay its debts generally as they become due (other than any debt the
validity of which is being disputed in good faith as provided in Section 4(j)),
or admits in writing its inability to pay its debts as they become due, or such
Borrower becomes insolvent, or either Borrower files any petition or action for
relief under any bankruptcy, insolvency, reorganization, moratorium, creditor
composition law, or any other law for the relief of or relating to Borrowers;
(ii) an involuntary petition is filed under any bankruptcy law against either
Borrower (and such petition is not dismissed within 60 days), or a custodian,
receiver, trustee, assignee for the benefit or creditors, or other similar
official, is appointed to take possession, custody or control of the properties
of either Borrower; or (iii) either Borrower is dissolved or its business
terminated other than as provided in the Merger Agreement;

                (f)     The happening of any event under any agreement involving
the borrowing of money by, or advance of credit to, either Borrower (other than
any agreement which is not material to the business of such Borrower and
pursuant to which such Borrower's liabilities do not exceed $7,500), which event
gives to the holder of such obligation the right to accelerate the maturity of
such obligation, whether or not such right is exercised, unless such debt is
being disputed in good faith by the Borrower and neither such debt nor dispute
could reasonably be expected to have a Material Adverse Effect;

                (g)     Any material change occurs in the corporate or legal
structure of any Borrower (other than pursuant to the Merger Agreement) in any
manner that negatively affects the Lenders without the prior written approval of
the Administrative Agent;

                (h)     The Merger Agreement is amended, supplemented or
otherwise modified in any manner that materially affects the Lenders (including
with respect to the Lenders' conversion rights hereunder) other than with the
prior written approval of the Administrative Agent;

                (i)     Any judgment in excess of $50,000 is entered against
either Borrower, or any involuntary Lien of any kind or character attaches to
any assets or property of either Borrower, any of which, in the judgment of the
Administrative Agent, may have a Material Adverse Effect, PROVIDED that for
purposes of this clause (i), no Lien arising from a judgment shall be considered
to have a Material Adverse Effect so long as an appeal or proceeding for review
is being prosecuted in good faith and adequate reserves, bonds, insurance or
other security reasonably acceptable to the Administrative Agent has been
provided with respect to such Lien;

                (j)     The Security Agreement or any auxiliary instrument or
agreement for any reason ceases to create a valid security interest in the
Collateral, or, with respect to any Perfected Collateral or any other Collateral
upon which the Administrative Agent at any time perfects its first priority
security interest, such security interest shall for any reason cease to be a
perfected and first priority security interest;

                                       12
<PAGE>

                (k)     Borrower has failed to file, within 30 months of the
Effective Date, appropriate documentation in form and substance reasonably
satisfactory to the Administrative Agent with the United States Food and Drug
Administration (the "FDA") requesting that the FDA hold on drug development
efforts with respect to the Collateral be lifted;

                (l)     The FDA hold on drug development efforts with respect to
the Collateral shall not have been lifted by the date which is 3 years after the
Effective Date;

                (m)     The Borrowers have abandoned their efforts to develop
and bring to market a drug product; and

                (n)     Any Cash Payment or any payment made to the
Administrative Agent or any Lender under any Loan Document has been rescinded
for any reason and, if such rescission is not the fault of either Borrower, the
Borrowers have not reimbursed the Administrative Agent for such rescission
within 5 business days thereof.

        6.      REMEDIES. If any Event of Default shall occur, at the
Administrative Agent's option, all obligations of the Borrowers to the
Administrative Agent and the Lenders under or in respect of this Note and the
other Loan Documents will become immediately due and payable, all without notice
of any kind to any Borrower, except that in the case of an Event of Default of
the type described in clause (e) of SECTION 5, such acceleration shall be
automatic and not optional. In addition, the Administrative Agent and the
Lenders shall have all rights and remedies provided in the Loan Documents or
available at law, in equity or otherwise. All rights and remedies of the
Administrative Agent and the Lenders shall be cumulative and may be exercised
singularly or concurrently. Any election by the Administrative Agent or any
Lender to pursue any remedy shall not exclude or be deemed a waiver of the right
to pursue any other remedy, and an election to make expenditures or to take
action to perform an obligation of Borrower shall not affect the right of the
Administrative Agent or any Lender to declare a default and to exercise its
rights and remedies. Notwithstanding the forgoing, if an Event of Default as
described in clause (a) of SECTION 5 has occurred (and no other Event of Default
has occurred), the Administrative Agent shall not exercise its right to
liquidate the Collateral until the date that is 30 days after the occurrence of
such Event of Default, PROVIDED, HOWEVER, that (a) the Administrative Agent
shall have the right to exercise all other remedies available under this Note,
any other Loan Document, or at law and (b) the Administrative Agent may take
actions and begin proceedings which will result in the liquidation of the
Collateral so long as such liquidation does not occur prior to the expiration of
the 30 day period.

        7.      GRANT OF SECURITY INTEREST. To secure the obligations of the
Borrowers under this Note, each Borrower hereby assigns, pledges and grants to
the Administrative Agent for the benefit of the Lenders a security interest in
all of such Borrower's right, title and interest in and to all patents and
related rights held by such Borrower whether now held or, to the extent
pertaining to any compound or other technology developed by the Grantor on or
prior to the date hereof, hereafter acquired and all proceeds and products
thereof (collectively, and as more specifically defined in the Security
Agreement, the "COLLATERAL"). Concurrent herewith, the Borrowers have entered
into the Security Agreement to further evidence such grant of security interest.
Each Borrower shall execute and deliver such further documents and instruments
and shall take such other further actions as may be required or appropriate, in
the judgment of the

                                       13
<PAGE>

Administrative Agent, to carry out the intent and purposes of this Section and
hereby authorizes the Administrative Agent to prepare and file without the
signature of either Borrower such financing statements or other documents as may
be necessary or advisable and containing such description of collateral as the
Administrative Agent shall determine in its sole discretion.

        8.      CONVERSION RIGHT.

                (a)     Each Lender may, at any time subsequent to the
consummation of the Merger Agreement, regardless of whether or not any Event of
Default shall have occurred, exchange all of the amount owed to such Lender
hereunder for common shares of Tetragenex Pharmaceuticals, Inc. at the
Conversion Price (such right a "CONVERSION RIGHT" and such shares received, the
"CONVERSION SHARES").

                        (i)     Any Lender that desires to exercise its
        Conversion Right shall provide written notice to the Administrative
        Agent and to each of the Borrowers stating that such Lender is
        exercising such right and stating the amount owed to such Lender which
        is to be converted to Conversion Shares. As promptly as practical after,
        and in any case within 5 days of, receipt of such notice from any
        Lender, Tetragenex Pharmaceuticals, Inc. shall issue and deliver to such
        Lender a certificate or certificates for the number of Conversion Shares
        issuable upon such conversion (rounding up if any fractional shares
        would otherwise be due), based upon the Conversion Price.

                        (ii)    The "Conversion Price" shall initially be $5.25
        per Conversion Share and shall be adjusted to account for any and all
        stock splits, reverse stock splits, and recapitalizations (it being
        agreed that no sales of securities by either Borrower shall constitute a
        "recapitalization" for purposes of this SECTION 8) such that any Lender
        exercising its Conversion Right shall receive Conversion Shares
        representing the same percentage of total shares outstanding as such
        Lender would have been entitled to were such Lender to have exercised
        its Conversion Right immediately upon the effectiveness of the Merger
        Agreement.

                        (iii)   Upon issuance of any Conversion Shares,
        Tetragenex Pharmaceuticals, Inc. shall provide written notice of such
        issuance to the Administrative Agent, together with a written
        acknowledgement of receipt of such Conversion Shares by the applicable
        Lender. Upon receipt of such notice (together with such
        acknowledgement), (A) the amount owed under this Note shall be reduced
        by the amount converted pursuant to the applicable Lender's request and
        (B) SCHEDULE 1 hereto shall be automatically amended to reflect the
        reduction in the amount owed to such Lender, and the reduction in such
        Lender's proportionate share of the amounts owed hereunder.

                (b)     For so long this Note or any Conversion Shares remain
outstanding, (a) on each occasion that Tetragenex Pharmaceuticals, Inc.
registers under the Securities Act of 1933, as amended (the "Securities Act"),
any shares of its common stock (other than any registration on Form S-8)
Tetragenex Pharmaceuticals, Inc. shall include in such registration any and all
Conversion Shares then outstanding that have previously not been so registered,
and (b) Tetragenex Pharmaceuticals, Inc. shall use all commercially reasonable
efforts to cause to become effective a shelf registration statement under the
Securities Act with respect to the resale

                                       14
<PAGE>

of any and all Conversion Shares previously not so registered no later than the
first anniversary of the date on which Tetragenex Pharmaceuticals, Inc. first
registered any of its securities under the Securities Act, provided that if the
Conversion Shares of each Lender holding Conversion Shares are eligible for sale
under Rule 144(k) of the Securities Act, the Lenders shall not have registration
rights at such time. This clause (b) shall survive termination of this Note.

                (c)     Any Conversion Shares issued hereunder shall be subject
to a voting proxy in favor of Tetragenex Pharmaceuticals, Inc.

                (d)     Each certificate for Conversion Shares issued upon
exercise by any Lender of its conversion right hereunder, unless at the time of
exercise such Conversion Shares are registered under the Securities Act, shall
bear the following legend (or a substantively equivalent legend):

                "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE
        SECURITIES LAWS AND NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT
        (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
        THE RULES AND REGULATIONS THEREUNDER AND OF ALL APPLICABLE STATE
        SECURITIES OR "BLUE SKY" LAWS, OR (B) PURSUANT TO AN EXEMPTION THEREFROM
        UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS."

        9.      ADMINISTRATIVE AGENT.

                (a)     Each Lender hereby appoints and authorizes the
Administrative Agent to act as its agent hereunder and under the other Loan
Documents (including as collateral agent under the Security Agreement) with such
powers as are expressly delegated to the Administrative Agent by the terms of
this Note and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. The Administrative Agent shall not have any
duties or responsibilities except those expressly set forth in this Note or in
any other Loan Document, or be a trustee or a fiduciary for any Lender.
Notwithstanding anything to the contrary contained herein, the Administrative
Agent shall not be required to take any action which is contrary to this Note or
any other Loan Documents or any law, rule, regulation, ordinance, order, treaty,
judgment, or similar form of decision of any governmental authority or which
conflicts with the governing documents of the Administrative Agent or exposes
the Administrative Agent to any liability. None of the Administrative Agent, the
Lenders or any of their respective affiliates shall be responsible to any other
Lender for any recitals, statements, representations or warranties made by any
Borrower contained in this Note, the other Loan Documents or in any certificate
or other document referred to or provided for in, or received by the
Administrative Agent, or any Lender under this Note or any other Loan Document,
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Note, the other Loan Documents, or any other document
referred to or provided for herein or for any failure by any Borrower to perform
their respective obligations hereunder or thereunder. The Administrative Agent
may employ agents and attorneys-in-fact and shall not be responsible for

                                       15
<PAGE>

the negligence or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care.

                (b)     The Administrative Agent shall receive all payments for
each Lender and shall distribute such payments to each of the Lenders on a pro
rata basis in proportion to such Lender's interest in the amount owed hereunder
as provided on Schedule 1 hereto, as such schedule may be updated from time to
time. Payments shall be made at the principal office of each Lender as set forth
beneath such Lender's name on the signature page hereto, or at such other place
as such Lender may from time to time designate in writing to the Administrative
Agent.

                (c)     To the extent required by any applicable law, the
Administrative Agent may withhold from any interest payment to any Lender an
amount equivalent to any applicable withholding tax. If any Governmental
Authority asserts a claim that the Administrative Agent did not properly
withhold tax from amounts paid to or for the account of any Lender because the
appropriate form was not delivered or was not properly executed or because such
Lender failed to notify the Administrative Agent of a change in circumstance
which rendered the exemption from, or reduction of, withholding tax ineffective
or for any other reason, such Lender shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including any penalties or interest and together with all
expenses (including legal expenses, allocated internal costs and out-of-pocket
expenses) incurred.

        10.     ADMINISTRATIVE FEES AND EXPENSES.

                (a)     On or before the Effective Date, the Borrowers shall pay
an origination and servicing fee of 3% of the face value of this Note to the
Administrative Agent. The Borrowers shall also reimburse or pay the
Administrative Agent and the other KBC Parties for any and all expenses incurred
or expected to be incurred by such party in relation to the Plan, this Note and
the Security Agreement. All fees and expenses, including the origination and
servicing fee, referenced in this SECTION 10, to the extent incurred on or prior
to the Effective Date or included as estimated future expenses, shall be paid by
the Borrowers to the Administrative Agent from the Initial Cash Payment and
shall reduce the Initial Cash Payment made to each holder of Class 6 Interests
(as defined in the Plan) in proportion to such holder's Pro Rata (as defined in
the Plan) share of the Initial Cash Payment.

                (b)     The Borrower shall also reimburse or pay the
Administrative Agent and the other KBC Parties for any and all expenses incurred
or expected to be incurred by such party (to the extent not previously paid or
reimbursed) in relation to the Plan, this Note and the Security Agreement after
the Effective Date and such amounts shall be paid by the Borrowers to the
Administrative Agent from the Second Cash Payment and shall reduce the Second
Cash Payment made to each holder of Class 6 Interests (as defined in the Plan)
in proportion to such holder's Pro Rata (as defined in the Plan) share of the
Second Cash Payment.

                (c)     In the event that, after payment in full in cash to the
Lenders of all amounts due under this Note, payments of fees and expenses made
hereunder exceed the actual fees and expenses incurred by the Administrative
Agent, the Administrative Agent shall refund

                                       16
<PAGE>

any excess payments to the holder of Class 6 Interests (as defined in the Plan)
in proportion to their Pro Rata share of the Cash Payments.

                (d)     Notwithstanding anything to the contrary herein, any and
all fees, costs and expenses of whatever kind or nature, including attorneys'
fees and expenses, incurred by the Administrative Agent in connection with the
enforcement of the Administrative Agent's or any Lender's rights under this
Note, the Security Agreement or any other Loan Document (including the
Administrative Agent's rights under SECTION 7 of the Security Agreement as well
as the costs of any action taken by Administrative Agent upon the occurrence and
during the continuance of any Event of Default). Such fees and expenses shall
not result in the reduction of the amount of any Cash Payments.

        11.     INDEMNIFICATION.

                (a)     Each Borrower, together with its affiliates, successors
and assigns, hereby agrees to indemnify and hold harmless the KBC Parties,
including the Administrative Agent, together with the KBC Indemnified Parties,
from any and all claims, actions, causes of action , suits, debts, damages,
losses, obligations, demands, attorneys' fees and liabilities, whether known or
unknown, billed or unbilled, whether resounding in tort, contract, or otherwise,
whether anticipated or unanticipated, whether past or present, both in law and
in equity (including acts or omissions constituting ordinary negligence),
arising from or relating to this Note and the other Loan Documents and such KBC
Indemnified Parties' administration thereof, except to the extent that such acts
or omissions are finally judicially determined to result solely from such KBC
Indemnified Parties' gross negligence or willful misconduct.

                (b)     Each Lender hereby releases the KBC Parties, including
the Administrative Agent, from any liability arising from or relating to its
role in the negotiation, documentation, and/or administration of this Note and
any other Loan Document, except to the extent that such acts or omissions are
finally judicially determined to result solely from such KBC Indemnified
Parties' gross negligence or willful misconduct.

        12.     ASSIGNMENT. Any Lender may assign all of its interest under this
Note to any other Person, PROVIDED that such Lender obtains the prior written
consent of the Administrative Agent, which consent is not to be unreasonably
withheld, and PROVIDED FURTHER that:

                (a)     it shall be reasonable for the Administrative Agent to
withhold its consent to any assignment if such assignment (alone or in
conjunction with any other assignment or assignments) will increase the
administrative burden borne by the Administrative Agent; and

                (b)     such assignment shall not be effective unless and until
the Administrative Agent receives written documentation of such assignment in
form and substance reasonably satisfactory to the Administrative Agent.

Upon such assignment, (1) the assignee shall be deemed to be a "Lender" under
this Note and the other Loan Documents, (2) the assigning Lender shall no longer
be a "Lender" under this Note or any other Loan Document; PROVIDED, HOWEVER, the
obligations of such assigning Lender under clause (b) of SECTION 11 in respect
of any period prior to such assignment shall survive such assignment, and (3)
Schedule 1 shall be automatically updated to reflect such assignment.

                                       17
<PAGE>

        13.     MISCELLANEOUS.

                (a)     This Note and the other Loan Documents shall be binding
upon and inure to the benefit of the Administrative Agent, each Lender and each
Borrower and, in each case, the respective successors and assigns of such party.
Notwithstanding the foregoing, no Borrower may assign this Note or any other
Loan Document in whole or in part without the prior written consent of the
Administrative Agent and each Lender.

                (b)     This Note shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of New York, without
regard to conflicts of laws provisions (other than Section 5-1401 of the New
York General Obligations Law).

                (c)     THE PARTIES HERETO HERBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS TO ACCEPT THIS NOTE IN
PARTIAL SATISFACTION OF THE OBLIGATIONS OWED BY THE BORROWERS TO THE LENDERS.

                (d)     The section headings and subheadings used in this Note
are used for convenience only and are not to be considered in construing or
interpreting this Note.

                (e)     Unless otherwise provided, any notice or other
communication required or permitted under this Note shall be given in writing
and shall be deemed effectively given upon personal delivery to the party to be
notified or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and properly addressed to such party at (i) in
the case of any Lender, at the address set forth under such Lender's signature
on the signature page attached hereto or (ii) in the case of the Administrative
Agent or any Borrower, at the address set forth below, or, in any case, at such
other address as such party may designate by 10 days' advance written notice to
the other parties.

        If to the Administrative
        Agent,

        addressed to:        KBC Bank N.V.
                             c/o KBC Investco NV
                             Havenlaan 12 Avenue du Port - SIV 8034
                             B-1080 Brussels
                             Attention: Ruth Devenyns, Senior Investment Manager

        With a copy to:      Latham & Watkins LLP
                             885 Third Avenue, Suite 1000
                             New York, New York 10022
                             United States of America
                             Attention: Mitchell A. Seider and John W. Weiss

                                       18
<PAGE>

        If to either or both
        of the Borrowers,
        addressed to:        Tetragenex Pharmaceuticals, Inc.
                             1 Maynard Drive, Suite 205
                             Park Ridge, New Jersey  07656
                             United States of America
                             Attention: Martin F. Schacker
                             Telephone:  (201) 505-1300
                             Facsimile:  (201) 505-1503

                             and

                             Innapharma, Inc.
                             1 Maynard Drive, Suite 205
                             Park Ridge, New Jersey  07656
                             United States of America
                             Attention: Martin F. Schacker
                             Telephone:  (201) 505-1300
                             Facsimile:  (201) 505-1503

        With a copy to:      Silverman Perlstein & Acampora LLP
                             100 Jericho Quadrangle, Suite 300
                             Jericho, New York 11753
                             United States of America
                             Attention:  Gerard R. Luckman
                             Telephone:  (516) 479-6300

                             and

                             Gersten, Savage, Kaplowitz, Wolf & Marcus, LLP
                             101 East 52nd Street, 9th Floor
                             New York, New York 10022
                             United States of America
                             Attention: Jay M. Kaplowitz, Esq.
                             Telephone:  (212) 752-9700
                             Facsimile:  (212) 980-5192

                (f)     This Note and the other Loan Documents constitute the
full and entire understanding and agreement among the Borrowers, the
Administrative Agent and the Lenders with regard to the subjects hereof and
thereof and supersede all prior agreements and understandings among or between
the Borrowers, the Administrative Agent and the Lenders relating to the subjects
hereof and thereof. This Note and the other Loan Documents may not be amended,
modified, altered or supplemented and the observance of any term hereof or
thereof may not be waived (either generally or in a particular instance and
either retroactively or prospectively) other than by means of a written
instrument duly executed and delivered on behalf of the Administrative Agent.

                                       19
<PAGE>

                (g)     This Note is subject to modification only by a writing
signed by the Administrative Agent and the Borrowers. No party hereto shall be
deemed to have waived any right hereunder unless such waiver shall be in writing
and signed by the waiving party. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion. No failure
or delay on the part of the Administrative Agent or any Lender in exercising any
power, right or privilege under this Note or any other Loan Document shall
operate as a waiver thereof, and no single or partial exercise of any such
power, right or privilege shall preclude any further exercise thereof or the
exercise of any other power, right or privilege.

                (h)     If any term of this Note shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Note shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein.

                (i)     Upon effectiveness of the Merger Plan, all references to
the "Borrowers" or "Grantors" herein and in the other Loan Documents shall be
construed as references to Tetragenex Pharmaceuticals, Inc.

                (j)     This Note may be executed in any number of counterparts
(including by facsimile), each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.

        14.     ADJUSTMENT. If the Administrative Agent receives, at least 3
business days prior to the Effective Date, (i) written notice from any Lender
hereunder that such Lender has reached an agreement with the Borrowers whereby
such Lender shall no longer be party to this Note and (ii) a written release by
such Lender, in form and substance satisfactory to the Administrative Agent, of
all of its rights hereunder, then the principal amount of this Note shall be
reduced by the principal amount owed to such Lender as set forth on Schedule 1
and Schedule 1 shall be automatically adjusted to reflect such reduction
(including the deletion of such Lender).

                            [SIGNATURE PAGES FOLLOW.]

                                       20
<PAGE>

        Each Borrower, for itself and its permitted successors and assigns,
hereby expressly waives presentment, demand for payment, dishonor, notice of
dishonor, protest, notice of protest, and any other formality.

                                        TETRAGENEX PHARMACEUTICALS,
                                        INC., as a Borrower

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        INNAPHARMA, INC., as a Borrower

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

ACKNOWLEDGED AND AGREED
KBC BANK N.V., as the Administrative Agent and as a Lender

By:
    ----------------------------------------
    Name:
    Title:

                                      S-1
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

KBC VERZEKERINGEN NV, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        KBC Verzekeringen
        c/o KBC Investco NV
        Havenlaan 12 Avenue du Port - SIV 8034
        B-1080 Brussels
        Attention:  Ruth Devenyns, Senior Investment Manager

                                      S-2
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

FIDEA NV, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        Fidea NV
        c/o KBC Investco NV
        Havenlaan 12 Avenue du Port - SIV 8034
        B-1080 Brussels
        Attention:  Ruth Devenyns, Senior Investment Manager

                                      S-3
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

KBC PRIVATE EQUITY FUND BIOTECH NV, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        KBC Private Equity Fund Biotch NV
        c/o KBC Investco NV
        Havenlaan 12 Avenue du Port - SIV 8034
        B-1080 Brussels
        Attention:  Ruth Devenyns, Senior Investment Manager

                                      S-4
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

KBC EQUITY FUND NV, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        KBC Equity Fund NV
        c/o KBC Investco NV
        Havenlaan 12 Avenue du Port - SIV 8034
        B-1080 Brussels
        Attention:  Ruth Devenyns, Senior Investment Manager

                                      S-5
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

CFH BETILIGUNGSGESELLSCHAFT MBH, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        CFH Betiligungsgesellschaft mbH
        Loehrstrasse 16
        D-04105 Leipzig, Germany
        Attention:  Joerg Mueller

                                      S-6
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

EUROPEAN DEVELOPMENT CAPITAL CORPORATION NV, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        European Development Capital Corporation NV
        Castorweg 22-24
        Willemstad, Curacao
        Netherlands Antilles
        Attention:  Mr. R. J. Huyzen

                                      S-7
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

STICHTING RUISCHEND LOOF, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        Stichting Ruischend Loof
        Herengracht 468
        1017 CA Amsterdam
        The Netherlands
        Attention:  Ms. P.B. Schellens

                                      S-8
                   [Secured Promissory Note - Signature Page]
<PAGE>

ACKNOWLEDGED AND AGREED

DR. NANCY CHANG, as a Lender

By:
    ----------------------------------------
    Name:
    Title:

        Tanox, Inc.
        10301 Stella Link
        Houston, Texas 77025-5497
        Attention:  Dr Nancy Chang

                                      S-9
                   [Secured Promissory Note - Signature Page]
<PAGE>

                        SCHEDULE 1: LENDERS AND INTERESTS

                                  PRINCIPAL AMOUNT OWED      PERCENTAGE OF TOTAL
        NAME OF LENDER                  TO LENDER              OWED TO LENDER

KBC Bank N.V.                           $430,344.83                16.55%

KBC Verzekeringen NV                    $236,689.66                 9.10%

Fidea NV                                 $50,206.90                 1.93%

KBC Private Equity Fund
Biotech NV                              $717,241.38                27.59%

KBC Equity Fund NV                      $358,620.69                13.79%

CFH Beteiligungsgesellschaft mbH        $358,620.69                13.79%

European Development Capital
Corporation  NV                         $179,310.34                 6.90%

Stichting Ruischend Loof                $179,310.34                 6.90%

Dr. Nancy Chang (c/o Tanox, Inc.)        $89,655.17                 3.45%

TOTAL                                    $2,600,000                  100%

<PAGE>

                              SCHEDULE 2: INSURANCE

        [BORROWERS TO PROVIDE]SECURITY AND PURCHASE AGREEMENT

                            LAURUS MASTER FUND, LTD.

                        RELIANT HOME WARRANTY CORPORATION

                            Dated as of June 8, 2006

<PAGE>

<TABLE>
<CAPTION>

                                                 TABLE OF CONTENTS

                                                                                                               Page
                                                                                                               ----

<S>     <C>                                                                                                      <C>

1.       General Definitions and Terms; Rules of Construction.....................................................1

2.       Agreement to Sell and Purchase...........................................................................2

3.       Closing, Delivery and Payment............................................................................3

4.       Secured Revolving Loan Facility..........................................................................3

5.       Repayment of the Loans...................................................................................5

6.       Procedure for Loans......................................................................................5

7.       Interest and Payments....................................................................................5

8.       Security Interest........................................................................................8

9.       Conditions Precedent to All Advances.....................................................................8

10.      Conditions Precedent to First Advance....................................................................9

11.      Representations and Warranties of  Company and Eligible Subsidiary......................................10

12.      Representations, Warranties and Covenants Concerning the Collateral.....................................14

13.      Payment of Accounts.....................................................................................16

14.      Letter of Credit........................................................................................17

15.      Collection and Maintenance of Collateral................................................................17

16.      Inspections and Appraisals..............................................................................18

17.      Financial Reporting.....................................................................................18

18.      Additional Representations and Warranties...............................................................19

19.      Company's Representations and Warranties................................................................28

20.      Covenants...............................................................................................29

21.      Company's Covenants.....................................................................................33

22.      Further Assurances......................................................................................35

23.      Representations, Warranties and Covenants of Laurus.....................................................35

24.      Power of Attorney.......................................................................................38

25.      Term of Agreement.......................................................................................39

26.      Termination of Lien.....................................................................................39

27.      Discharge...............................................................................................39

28.      Events of Default.......................................................................................39

29.      Remedies................................................................................................42

30.      Waivers.................................................................................................42

31.      Expenses................................................................................................42

                                                           i
<PAGE>

32.      Assignment By Laurus....................................................................................43

33.      No Waiver; Cumulative Remedies..........................................................................43

34.      Application of Payments.................................................................................43

35.      Indemnity...............................................................................................43

36.      Revival.................................................................................................44

37.      Notices.................................................................................................44

38.      Governing Law, Jurisdiction and Waiver of Jury Trial....................................................45

39.      Judgment Currency.......................................................................................46

40.      Limitation of Liability.................................................................................47

41.      Entire Understanding; Maximum Interest..................................................................47

42.      Severability............................................................................................47

43.      Survival................................................................................................47

44.      Captions................................................................................................48

45.      Counterparts; Telecopier Signatures.....................................................................48

46.      Construction............................................................................................48

47.      Publicity...............................................................................................48

48.      Joinder.................................................................................................48

49.      Legends.................................................................................................48

</TABLE>
                                                             ii
<PAGE>

                         SECURITY AND PURCHASE AGREEMENT

         This Security and Purchase  Agreement is made as of June 8, 2006 by and
among Laurus Master Fund,  Ltd., a Cayman Islands  corporation  ("Laurus"),  and
Reliant Home Warranty Corporation,  a corporation incorporated under the laws of
the State of Florida (the  "Company"),  as borrower,  and Reliant Home  Mortgage
Canada Inc., a corporation  incorporated  under the laws of Canada, as guarantor
("Reliant Canada").

                                   BACKGROUND
                                   ----------

         The Company has  authorized  the sale to Laurus of a Secured  Revolving
Note in the aggregate  principal amount of Twenty Five Million Dollars in lawful
money  of  the  United  States  (US$   25,000,000)  (as  amended,   modified  or
supplemented from time to time, the "Secured Revolving Note").

         The  Company  wishes to issue a warrant  to  Laurus to  purchase  up to
36,128,286  shares of the Company's  Common Stock  (subject to adjustment as set
forth therein) (the "Warrant") in connection  with the  Purchaser's  purchase of
the Secured Revolving Note;

         The Company  desires to issue and sell the Secured  Revolving  Note and
the Warrant.

                                    AGREEMENT
                                    ---------

         NOW,   THEREFORE,   in   consideration  of  the  mutual  covenants  and
undertakings and the terms and conditions  contained herein,  the parties hereto
agree as follows:

1.       General Definitions and Terms; Rules of Construction.

         (a)  General  Definitions.  Capitalized  terms  used in this  Agreement
              shall have the meanings assigned to them in Annex A.

         (b)  Accounting  Terms.  Any  accounting  terms used in this  Agreement
              which  are  not  specifically  defined  shall  have  the  meanings
              customarily  given them in accordance with GAAP, and all financial
              computations  shall  be  computed,  unless  specifically  provided
              herein, in accordance with GAAP, consistently applied.

         (c)  Rules  of  Construction.   All  Schedules,  Addenda,  Annexes  and
              Exhibits  hereto or expressly  identified to - this  Agreement are
              incorporated  herein by  reference  and taken  together  with this
              Agreement  constitute but a single agreement.  The words "herein",
              "hereof" and "hereunder" or other words of similar import refer to
              this  Agreement  as a  whole,  including  the  Exhibits,  Addenda,
              Annexes  and  Schedules  thereto,  as the same may be from time to
              time amended, modified,  restated or supplemented,  and not to any
              particular  section,   subsection  or  clause  contained  in  this
              Agreement.  Wherever from the context it appears appropriate, each
              term  stated in either the  singular or plural  shall  include the
              singular  and the plural,  and pronouns  stated in the  masculine,
              feminine  or  neuter  gender  shall  include  the  masculine,  the
              feminine and the neuter. The term "or" is not exclusive.  The term
              "including"  (or  any  form  thereof)  shall  not be  limiting  or
              exclusive.  All  references  to statutes  and related  regulations
              shall include any  amendments  of same and any successor  statutes

<PAGE>

              and  regulations.  All  references  in  this  Agreement  or in the
              Schedules,  Addenda,  Annexes and  Exhibits to this  Agreement  to
              sections,   schedules,   disclosure   schedules,   exhibits,   and
              attachments shall refer to the corresponding sections,  schedules,
              disclosure  schedules,  exhibits,  and  attachments  of or to this
              Agreement.  All  references  to  any  instruments  or  agreements,
              including  references  to any of this  Agreement or the  Ancillary
              Agreements  shall include any and all  modifications or amendments
              thereto and any and all extensions or renewals thereof.

         (d)  Currency.  All  principal,  interest and other amounts owing under
              this Agreement and any Ancillary  Agreements,  that, in accordance
              with  their  terms,  are to be paid in  cash  shall  be paid in US
              dollars.  All amounts  denominated  in other  currencies  shall be
              converted in the US dollar  equivalent  amount in accordance  with
              the  Exchange  Rate on the date of  calculation.  "Exchange  Rate"
              means,  in relation to any amount of currency to be converted into
              US  dollars   pursuant  to  this   Agreement   and  any  Ancillary
              Agreements,  the US dollar  exchange rate as published in the Wall
              Street Journal on the relevant date of calculation.

2.       Agreement to Sell and Purchase.
         -------------------------------

         (a)  Pursuant to the terms and conditions set forth in this  Agreement,
              on the  Closing  Date the  Company  agrees to sell to Laurus,  and
              Laurus hereby  agrees to purchase from the Company,  (i) a note in
              the  aggregate  principal  amount of  US$25,000,000  evidencing  a
              revolving  facility  in  accordance  with the terms of the Secured
              Revolving  Note and this  Agreement.  The  purchase of the Secured
              Revolving  Note  on  the  Closing  Date  shall  be  known  as  the
              "Offering". A form of the Secured Revolving Note is annexed hereto
              as Exhibit  "A".  The  Secured  Revolving  Note will mature on the
              Maturity  Date  (as  defined  in  each  Secured  Revolving  Note).
              Collectively,  (a) the Warrant, (b) the Common Stock issuable upon
              exercise of the Warrant  and (c) the  Secured  Revolving  Note are
              referred to collectively as the "Securities".

         (b)  The Company  hereby  acknowledges  and agrees that the advance and
              availability of the revolving loan of  US$25,000,000  by Laurus to
              the  Company  pursuant  to the  Secured  Revolving  Note  shall be
              subject  to the  conditions  precedent  set  forth in the  Secured
              Revolving Note and herein having been met to the  satisfaction  of
              Laurus in its sole discretion.

         (c)  On the Closing  Date,  the Company  will also issue and deliver to
              Laurus a warrant to  purchase  up to  36,128,286  shares of Common
              Stock in  connection  with the Offering  (as amended,  modified or
              supplemented from time to time, the "Warrant") pursuant to Section
              2 hereof.  A form of Warrant is annexed hereto as Exhibit "B". All
              the   representations,    covenants,   warranties,   undertakings,
              indemnification  and other  rights  made or  granted to or for the
              benefit of Laurus by the  Company are hereby also made and granted
              in respect of the Warrant and shares of the Company's Common Stock
              issuable upon exercise of the Warrant (the "Warrant Shares").

                                      -2-
<PAGE>

3.       Closing, Delivery and Payment.
         ------------------------------

         (a)  Closing.  Subject to the terms and conditions  herein, the closing
              of the transactions  contemplated  hereby (the  "Closing"),  shall
              take  place  on the  date  hereof,  at such  time or  place as the
              Company and Laurus may  mutually  agree (such date is  hereinafter
              referred to as the "Closing Date").

         (b)  Delivery. On the Closing Date, the Company will deliver to Laurus,
              among other things, a Secured  Revolving Note in the form attached
              as Exhibit "A" representing a maximum  aggregate  principal amount
              of US$25,000,000 and a Warrant in the form attached as Exhibit "B"
              in Laurus'  name  representing  the right to acquire  the  Warrant
              Shares.  Pursuant to the Escrow  Agreement,  on the Closing  Date,
              Laurus will deliver to the Company an overadvance set forth in the
              Disbursement  Letter  by  certified  funds or wire  transfer  in a
              principal  amount  not to  exceed  US$1,056,767.61  (the  "Initial
              Overadvance").  On the First Advance Date,  Laurus will deliver to
              the Company the amount set forth in the First Advance Disbursement
              Letter by certified funds or wire transfer.

4.       Secured Revolving Loan Facility.

         (a)   Loans.

               (i)    In connection with the Secured  Revolving Note and subject
                      to the terms and  conditions  set forth  herein and in the
                      Ancillary Agreements,  Laurus may make loans (the "Loans")
                      to the  Company  from time to time  during the period from
                      the First Advance Date up to the Maturity Date (as defined
                      in the Secured  Revolving  Note)(the "Term") which, in the
                      aggregate  at any time  outstanding,  will not  exceed the
                      lesser of (x) (I) the Capital  Availability  Amount  minus
                      (II)  such  reserves  as  Laurus  may in its  commercially
                      reasonable  good faith  judgment deem proper and necessary
                      from  time  to  time,  including,  without  limitation,  a
                      reserve  in an  amount  determined  by  Laurus in its sole
                      discretion,  to  insure  against  the  pending  litigation
                      against  the Company  (formerly,  Dialex  Minerals,  Inc.)
                      with,  among  others  Boardwalk   Creation  Ltd.,  Douglas
                      Budden,  Gordon  Leliever,  Better  North and Frank Puskas
                      (the  "Reserves")  and  (y) an  amount  equal  to (I)  the
                      Mortgage Availability minus (II) the Reserves.  The amount
                      derived  at any  time  from  Section  4(a)(i)(y)(I)  minus
                      4(a)(i)(y)(II)  shall  be  referred  to  as  the  "Formula
                      Amount".  The Company  shall execute and deliver to Laurus
                      on the Closing Date, the Secured Revolving Note evidencing
                      the aggregate principal amount of the Capital Availability
                      Amount.

               (ii)   Notwithstanding  the foregoing,  the Company  acknowledges
                      that with the  exception of the Initial  Overadvance,  the
                      Loans  described  above  shall  not be made  available  by
                      Laurus to the  Company  until such time as the Company has
                      satisfied  the  conditions  precedent set out in Section 9
                      hereto and in the Secured Revolving Note.

                                      -3-
<PAGE>

               (iii)  Notwithstanding   the  limitations  set  forth  above,  if
                      requested by the Company, Laurus retains the right to lend
                      to the Company from time to time such amounts in excess of
                      such  limitations  as  Laurus  may  determine  in its sole
                      discretion.

               (iv)   The  Company  acknowledges  that the  exercise  of Laurus'
                      discretionary  rights hereunder may result during the Term
                      in one or  more  increases  or  decreases  in the  advance
                      percentages used in determining Mortgage  Availability and
                      the  Company  hereby  consents  to any such  increases  or
                      decreases which may limit or restrict  advances  requested
                      by the Company.

               (v)    Subject to applicable  laws, if any interest,  fees, costs
                      or charges  payable to Laurus  hereunder are not paid when
                      due,  the  Company   shall   thereby  be  deemed  to  have
                      requested,   and  Laurus  is  hereby   authorized  at  its
                      discretion to make and charge to the Company's  account, a
                      Loan as of such  date in an  amount  equal to such  unpaid
                      interest, fees, costs or charges.

               (vi)   If the Company and/or any of the Eligible  Subsidiaries at
                      any time fails to perform or observe any of the  covenants
                      contained in this  Agreement or any  Ancillary  Agreement,
                      Laurus may, but need not, perform or observe such covenant
                      on behalf and in the name,  place and stead of the Company
                      and/or any of the  Eligible  Subsidiaries  (or, at Laurus'
                      option,  in Laurus'  name) and may, but need not, take any
                      and all other actions  which Laurus may deem  necessary to
                      cure or correct  such  failure  (including  the payment of
                      taxes,  the  satisfaction  of Liens,  the  performance  of
                      obligations owed to Consumer  Borrowers,  lessors or other
                      obligors,  the  procurement  and maintenance of insurance,
                      the  execution of  assignments,  security  agreements  and
                      financing statements, and the endorsement of instruments).
                      The  amount  of all  monies  expended  and all  costs  and
                      expenses  (including  attorneys'  fees and legal expenses)
                      incurred  by Laurus in  connection  with or as a result of
                      the  performance  or observance of such  agreements or the
                      taking of such  action by Laurus  shall be  charged to the
                      Company's  account as a Loan and added to the Obligations.
                      To facilitate  Laurus'  performance  or observance of such
                      covenants  by the  Company  and/or  any  of  the  Eligible
                      Subsidiaries,  the  Company and each  Eligible  Subsidiary
                      hereby  irrevocably  appoints Laurus, or Laurus' delegate,
                      acting   alone,   as  the   Company's  and  each  Eligible
                      Subsidiary's   attorney  in  fact  (which  appointment  is
                      coupled  with an  interest)  with the  right  (but not the
                      duty)  from  time to time to  create,  prepare,  complete,
                      execute,  deliver,  endorse  or  file in the  name  and on
                      behalf of the Company and/or each Eligible  Subsidiary any
                      and  all  instruments,  documents,  assignments,  security
                      agreements,   financing   statements,   applications   for
                      insurance and other agreements and writings required to be
                      obtained,  executed,  delivered or endorsed by the Company
                      and/or each Eligible Subsidiary.

                                      -4-
<PAGE>

               (vii)  Laurus  will  account  to  the  Company   monthly  with  a
                      statement  of all Loans and other  advances,  charges  and
                      payments made pursuant to this Agreement, and such account
                      rendered  by Laurus  shall be deemed  final,  binding  and
                      conclusive  unless  Laurus is  notified  by the Company in
                      writing to the  contrary  within  thirty  (30) days of the
                      date each  account  was  rendered  specifying  the item or
                      items to which objection is made.

               (viii) During the Term,  the Company may borrow and prepay  Loans
                      in accordance with the terms and conditions hereof and the
                      Secured  Revolving  Note. The Initial  Overadvance  may be
                      prepaid but may not be re-borrowed.

5.       Repayment of the Loans.
         -----------------------

         The  Company  (a)  may  prepay  the  Obligations  from  time to time in
accordance  with the terms and  provisions  of the Secured  Revolving  Note (and
Section 25 hereof if such prepayment is due to a termination of this Agreement);
(b) shall repay the principal  amount of the Initial  Overadvance  in accordance
with the Amortization  Schedule attached as Schedule "A", (c) shall repay on the
Maturity Date (as defined in the Secured  Revolving Note) (i) the then aggregate
outstanding  principal  balance of the Loans  together  with  accrued and unpaid
interest, fees and charges; and (ii) all other amounts owed to Laurus under this
Agreement and the Ancillary  Agreements;  and (d) subject to Section  4(a)(iii),
shall repay on any day on which the then aggregate outstanding principle balance
of the Loans is in excess of the Formula Amount at such time, Loans in an amount
equal to such excess.  Any payments of  principal,  interest,  fees or any other
amounts payable  hereunder or under any Ancillary  Agreement shall be made prior
to 12:00 noon (New York time) on the due date thereof in  immediately  available
funds.

6.       Procedure for Loans.
         --------------------

         The Company may by written notice request a borrowing of Loans prior to
12:00 noon (New York time) on the Business  Day of its request to incur,  on the
next  Business  Day, a Loan.  Together  with each request for a Loan (or at such
other  intervals  as Laurus  may  request),  Company  shall  deliver to Laurus a
Borrowing  Base  Certificate in the form of Exhibit "C" attached  hereto,  which
shall be certified as true and correct by the Chief  Executive  Officer or Chief
Financial Officer of Company together with all supporting documentation relating
thereto.  All Loans  shall be  disbursed  from  whichever  office or other place
Laurus may  designate  from time to time and shall be  charged to the  Company's
account on Laurus' books. The proceeds of each Loan made by Laurus shall be made
available  to the Company on the  Business  Day  following  the  Business Day so
requested in accordance with the terms of this Section 6 by way of credit to the
applicable  Company's operating account maintained with such bank as the Company
designated to Laurus.  Any and all  Obligations  due and owing  hereunder may be
charged to the Company's account and shall constitute Loans.

                                      -5-
<PAGE>

7.       Interest and Payments.
         ----------------------

         (a)   Interest.

               (i)    Except as modified by Section 7(a)(iii) below, the Company
                      shall pay  interest  at the  Contract  Rate on the  unpaid
                      principal  balance  of each Loan  until  such time as such
                      Loan is  collected in full in good funds in dollars of the
                      United States of America.

               (ii)   Interest  and  payments  shall be computed on the basis of
                      actual  days  elapsed  in a year of 360 days.  At  Laurus'
                      option,  Laurus may charge the Company's  account for said
                      interest in accordance with the Secured Revolving Note.

               (iii)  Effective  upon the occurrence of any Event of Default and
                      for so long as any Event of Default  shall be  continuing,
                      the Contract Rate shall  automatically be increased as set
                      forth in the Secured  Revolving Note (such increased rate,
                      the  "Default  Rate"),  and all  outstanding  Obligations,
                      including  unpaid  interest,   shall  continue  to  accrue
                      interest  from the date of such  Event of  Default  at the
                      Default Rate applicable to such Obligations.

               (iv)   In no event shall the aggregate interest payable hereunder
                      exceed the maximum rate permitted under any applicable law
                      or  regulation,  as in  effect  from  time  to  time  (the
                      "Maximum  Legal  Rate"),  and if  any  provision  of  this
                      Agreement or any Ancillary  Agreement is in  contravention
                      of any such law or regulation, interest payable under this
                      Agreement and each Ancillary  Agreement  shall be computed
                      on the  basis of the  Maximum  Legal  Rate  (so that  such
                      interest will not exceed the Maximum Legal Rate).

               (v)    The Company  shall pay  principal,  interest and all other
                      amounts   payable   hereunder,   or  under  any  Ancillary
                      Agreement, without any deduction whatsoever, including any
                      deduction for any set-off or counterclaim.

         (b)    Taxes
                -----

               (i)    Any and all payments by the Company  hereunder,  including
                      any  amounts   received  on   redemption  of  the  Secured
                      Revolving  Note and any  amounts on account of interest or
                      deemed  interest,  shall  be made  free  and  clear of and
                      without deduction for any and all present or future taxes,
                      levies, imposts, deductions,  charges or withholdings, and
                      all  liabilities  with respect  thereto,  excluding  taxes
                      imposed on net income or franchise  taxes of Laurus by the
                      jurisdiction  in which such person is organized or has its
                      principal  office (all such  non-excluded  taxes,  levies,
                      imposts, deductions, charges withholdings and liabilities,
                      collectively  or  individually,  "Taxes").  If the Company
                      shall be  required  to deduct any Taxes from or in respect
                      of any  sum  payable  hereunder  to  Laurus,  (i)  the sum
                      payable  shall be increased by the amount (an  "additional
                      amount")  necessary  so that  after  making  all  required
                      deductions  (including deductions applicable to additional
                      sums payable under this Section 7) Laurus shall receive an
                      amount equal to the sum it would have received had no such
                      deductions  been made,  (ii) the  Company  shall make such
                      deductions and (iii) the Company shall pay the full amount
                      deducted  to  the  relevant   governmental   authority  in
                      accordance with applicable law.

                                      -6-
<PAGE>

               (ii)   In  addition,  the Company  agrees to pay to the  relevant
                      governmental  authority in accordance  with applicable law
                      any present or future  stamp or  documentary  taxes or any
                      other excise or property taxes,  charges or similar levies
                      that arise from any  payment  made  hereunder  or from the
                      execution,  delivery or registration of, or otherwise with
                      respect to, this Loan ("Other  Taxes").  The Company shall
                      deliver to Laurus official receipts, if any, in respect of
                      any Taxes or Other Taxes payable hereunder  promptly after
                      payment of such Taxes or Other Taxes or other  evidence of
                      payment reasonably acceptable to Laurus.

               (iii)  The  obligations  of the Company  under this  Section 7(b)
                      shall survive the  termination  of this  Agreement and the
                      payment  of the  Secured  Revolving  Note  and  all  other
                      amounts payable hereunder.

      (c)      Payments; Certain Closing Conditions.
               -------------------------------------

               (i)    Subject  to the  terms  of  Section  7(c)(ii)  below,  the
                      Company shall pay to Laurus Capital  Management,  LLC, the
                      investment   manager   of   the   Purchaser   ("LCM"),   a
                      non-refundable  servicing  payment  in an amount  equal to
                      3.6% of the  aggregate  principal  amount  of the  Secured
                      Revolving  Note.  The  foregoing  payment is  referred  to
                      herein as the "Servicing Payment." The parties acknowledge
                      that the Servicing Payment is a reasonable estimate of the
                      expenses that LCM will incur in  monitoring  and servicing
                      the Secured  Revolving Note, and the Servicing  Payment is
                      intended to enable LCM to defray such expenses.

               (ii)   The  Company   shall   reimburse  the  Purchaser  for  its
                      reasonable  expenses  (including  legal fees and expenses)
                      incurred  in  connection  with the  entering  into of this
                      Agreement  and  the  Ancillary  Agreements,  and  expenses
                      incurred in connection  with the Purchaser's due diligence
                      review of the Company and its Subsidiaries and all related
                      matters.  Amounts  required to be paid under this  Section
                      7(c)  will  be paid  on the  Closing  Date  and  shall  be
                      [$_________] for such expenses referred to in this Section
                      7(c).

               (iii)  The Servicing  Payment and the expenses referred to in the
                      preceding clause (ii) (net of deposits  previously paid by
                      the  Company)  shall be paid at closing  out of funds held
                      pursuant  to the  Escrow  Agreement  and the  Disbursement
                      Letter.

               (iv)   Overadvance  Payment.  Without  affecting  Laurus'  rights
                      hereunder in the event the Loans exceed the Formula Amount
                      (each   such   event,   an   "Overadvance"),    all   such
                      Overadvances,  including  the Initial  Overadvance,  shall
                      bear  interest at an annual rate equal to two percent (2%)
                      of the  amount  of such  Overadvances  for  each  month or
                      portion  thereof such amounts shall be outstanding  and in
                      excess of the Formula Amount.

                                      -7-
<PAGE>

               (v)    Financial  Information Default.  Without affecting Laurus'
                      other rights and remedies,  in the event the Company fails
                      to deliver the financial  information  required by Section
                      17 on or before the date required by this  Agreement,  the
                      Company shall pay Laurus an aggregate fee in the amount of
                      US$500.00  per week (or  portion  thereof)  for each  such
                      failure   until   such   failure   is  cured  to   Laurus'
                      satisfaction  or waived in  writing  by  Laurus.  Such fee
                      shall  be  charged  to  the  Company's  account  upon  the
                      occurrence of each such failure.

               (vi)   The Company  shall pay all costs and  expenses  (including
                      legal fees and expenses)  incurred in connection  with the
                      preparation  and  delivery of (x) the Closing  Certificate
                      and (y) the Risk Management Certificate.

8.       Security Interest.
         ------------------

         (a)      To secure  the  prompt  payment  to Laurus of the  Obligations
                  relating to the Secured  Revolving  Note,  each of the Company
                  and the  Eligible  Subsidiaries  promises  to assign,  pledge,
                  hypothecate and grant to Laurus a continuing security interest
                  in and  Lien  upon all of the  Collateral.  All of each of the
                  Company's  and the  Eligible  Subsidiaries'  Books and Records
                  relating  to  the  Collateral  shall,  until  delivered  to or
                  removed  by  Laurus,  be kept by each of the  Company  and the
                  Eligible   Subsidiaries   in  trust  for   Laurus   until  all
                  Obligations  relating to the Secured  Revolving Note have been
                  paid in full. Each confirmatory  assignment  schedule or other
                  form of assignment  hereafter  executed by the Company and the
                  Eligible Subsidiaries,  or any one of them, shall be deemed to
                  include the foregoing  grant,  whether or not the same appears
                  therein.

         (b)      Each of the Company and the Eligible  Subsidiaries  hereby (i)
                  authorizes   Laurus   to  file   any   financing   statements,
                  continuation  statements or  amendments  thereto and any other
                  documents necessary to perfect the security.

         (c)      Each of the  Company  and  the  Eligible  Subsidiaries  hereby
                  grants  to  Laurus  an  irrevocable,   non-exclusive   license
                  (exercisable  upon the termination of this Agreement due to an
                  occurrence  and during the  continuance of an Event of Default
                  without  payment  of  royalty  or  other  compensation  to the
                  Company)  to  use,   transfer,   license  or  sublicense   any
                  Intellectual  Property  now owned,  licensed  to, or hereafter
                  acquired by the Company or by an Eligible  Subsidiary,  as the
                  case  may be,  and  wherever  the  same  may be  located,  and
                  including in such license  access to all media in which any of
                  the  licensed  items  may be  recorded  or  stored  and to all
                  computer and  automatic  machinery  software and programs used
                  for the  compilation  or  printout  thereof,  and  represents,
                  promises and agrees that any such license or sublicense is not
                  and will not be in conflict with the contractual or commercial
                  rights of any third Person;  provided,  that such license will
                  terminate on the termination of this Agreement and the payment
                  in full of all Obligations under the Secured Revolving Note.

                                      -8-
<PAGE>

9.       Conditions Precedent to All Advances.
         ------------------------------------

         The following  conditions precedent shall be met by the Company in form
and substance  satisfactory to Laurus, in its sole discretion,  prior to any and
all Advances:

         (a)      The Company  shall post a letter of credit in favour of Laurus
                  in an amount  equal to 3% of the amount of such  Advance to be
                  drawn upon by Laurus in accordance with Section 14 hereof.

         (b)      receipt  by  Laurus  of the  closing  certificate  in the form
                  attached hereto as Exhibit "E" (the "Closing Certificate");

         (c)      receipt by Laurus of the risk  management  certificate  in the
                  form  attached  hereto as Exhibit  "F" (the  "Risk  Management
                  Certificate");

         (d)      receipt  by Laurus of the bring down  certificate  in the form
                  attached hereto as Exhibit "G" (the "Bring Down Certificate");

         (e)      evidence  of  mortgage  insurance  for each  Mortgage  showing
                  Laurus as first loss payee from Brit Insurance  Holdings,  Plc
                  (or such other insurer accepted by Laurus in writing as may be
                  selected  by the  Company)  in the  form of  Exhibit  "H" (the
                  "Mortgage Insurance").

         (f)      Reliant  Canada  shall  deliver  the  following  to  Laurus in
                  connection with each Mortgage Loan:

                  (i)    a beneficial  assignment  of Mortgage and Mortgage Loan
                         Documents  given by the Reliant Canada to Laurus in the
                         form   attached   as  Exhibit   "I"  (the   "Beneficial
                         Assignment"); and

                  (ii)   an   acknowledgment   and  direction   re:   Beneficial
                         Assignment  executed by the Trustee and Reliant  Canada
                         in  the  form  attached  hereto  as  Exhibit  "J"  (the
                         "Acknowledgement and Direction")

and upon delivery or confirmation thereof, as the case may be, Laurus shall make
the First Advance available to the Company.

10.      Conditions Precedent to First Advance.
         --------------------------------------

The  following  conditions  precedent  shall be met by the  Company  in form and
substance  satisfactory to Laurus,  in its sole  discretion,  prior to the First
Advance Date:

         (a)      Laurus shall have received in form and substance  satisfactory
                  to  Laurus,  confirmation  that  Laurus  has a first  priority
                  security interest over all of the personal property and assets
                  of the  Company  and  each  of the  Eligible  Subsidiaries  in
                  respect  of  which  Laurus  shall  take  a  security  interest
                  pursuant to Section 8 hereof;

                                      -9-
<PAGE>

         (b)      All  Ancillary   Agreements   shall  have  been  executed  and
                  delivered by the Company, the Eligible  Subsidiaries and Kevin
                  Hamilton to Laurus dated as of the date hereof;

         (c)      Laurus shall have received confirmation that there has been no
                  Material  Adverse  Effect in  respect of the  Company  and the
                  Eligible Subsidiaries as of the date hereof;

         (d)      Laurus  shall  have  received   confirmation  that  any  other
                  conditions of advance set forth herein have been  satisfied by
                  the Company and the Eligible Subsidiaries;

         (e)      Laurus  shall  have  received  confirmation  that no  Event of
                  Default has occurred or is continuing.

11.       Representations and Warranties of Company and Eligible Subsidiary
          -----------------------------------------------------------------

         Each of the Company and each of the  Eligible  Subsidiaries  represents
and warrants (each of which such  representations and warranties shall be deemed
repeated  upon the making of each  request for a Loan and made as of the time of
each and every  Advance  hereunder).  On the date of each Advance and,  upon the
date of each Advance, the Company and Eligible Subsidiaries shall provide Laurus
with a Bring Down  Certificate  confirming the truth and accuracy as at the date
of such Advance of such representations and warranties:

         (a)      All  representations  and  warranties  in  Sections  12 and 18
                  continue to be true and correct and the  conditions  precedent
                  in Sections 10(a) through (d) continue to be met.

         (b)      Ownership  of  Mortgage  Loan.  Reliant  Canada  has  good and
                  marketable  beneficial  title to,  and is the sole  beneficial
                  owner  of,  the  Mortgage  Loan.  The  Trustee  has  good  and
                  marketable  registered  title  to and is the  sole  registered
                  owner of the  Mortgage  Loan.  Reliant  Canada has full right,
                  power and authority to assign its  beneficial  interest in the
                  Mortgage  Loan  to  Laurus  free  and  clear  of any  and  all
                  Encumbrances.  Upon  completion of the  Beneficial  Assignment
                  contemplated  herein,  Reliant  Canada  will have  validly and
                  effectively  conveyed,  transferred and assigned to Laurus all
                  of its  beneficial  interest in and to the Mortgage  Loan free
                  and clear of any Encumbrance. The Beneficial Assignment (i) is
                  not  prohibited  by either the Mortgage or the  Mortgage  Loan
                  Documents and (ii) does not require  Reliant  Canada to obtain
                  any approval or consent from a Governmental Authority that has
                  not been obtained.

         (c)      Lien;  Valid  Assignment.  The Mortgage  constitutes  a valid,
                  binding and,  subject to the exceptions set forth in paragraph
                  (e) below,  enforceable  first  priority lien upon the related
                  Mortgaged Property,  prior to all other  Encumbrances,  except
                  for:  (i) liens for real  property  taxes only if same are not
                  yet due or payable; (ii) registered easements,  rights of way,
                  restrictive  covenants and servitudes and other similar rights
                  in land  granted  to,  reserved  or taken by any  Governmental
                  Authority or public utility, or any registered  subdivision or
                  development,  servicing,  site plan or other similar agreement
                  with any  Governmental  Authority or public  utility,  none of
                  which materially  interferes with the security  intended to be

                                      -10-
<PAGE>

                  provided by the  Mortgage,  the current  principal  use of the
                  related  Mortgaged  Property  or the  value  of the  Mortgaged
                  Property;  (iii) any minor  title  defects or  irregularities,
                  none of which materially interferes with the security intended
                  to be provided by the Mortgage,  the current  principal use of
                  the related  Mortgaged  Property or the value of the Mortgaged
                  Property;  (iv)  any  subsisting  reservations,   limitations,
                  provisos,  conditions  or  exceptions,   including  royalties,
                  contained in the  original  grant of the lands from the Crown,
                  none of which materially interferes with the security intended
                  to be provided by such Mortgage,  the current principal use of
                  the related  Mortgaged  Property or the value of the Mortgaged
                  Property;  (v) such other Encumbrances  (general and specific)
                  permitted by the related Mortgage Loan documents or identified
                  as exceptions and exclusions in the applicable title insurance
                  policy  (or,  if not yet  issued,  referred  to in a pro forma
                  title  policy  or   commitment,   none  of  which   materially
                  interferes  with the security  intended to be provided by such
                  Mortgage,  the current  principal use of the related Mortgaged
                  Property or the value of the Mortgaged Property (the foregoing
                  terms  (i)  through  (v)  being  herein  referred  to  as  the
                  "Permitted  Encumbrances".  The  Beneficial  Assignment  is  a
                  valid,  binding and,  subject to the  exceptions  set forth in
                  paragraph  (e)  below,  enforceable  assignment  thereof  from
                  Reliant  Canada  and  the  beneficial  acknowledgement  by the
                  Trustee of such assignment is a valid, binding and, subject to
                  the exceptions  set forth in paragraph (e) below,  enforceable
                  beneficial acknowledgement.

         (d)      Title  Insurance.  The  Mortgaged  Property  is  covered  by a
                  lender's  title  insurance  policy  substantially  in the form
                  attached  hereto as Exhibit  "D" (the  "Title  Policy") in the
                  original  principal  amount of the Mortgage  insuring that the
                  Mortgage  is a valid  first  priority  lien on such  Mortgaged
                  Property,  subject  only to Permitted  Encumbrances  (or a pro
                  forma title policy or commitment on which the required premium
                  has been paid which  evidences  that such Title Policy will be
                  issued).  Such Title  Policy  (or, if it has yet to be issued,
                  the  coverage  to be  provided  thereby)  is in full force and
                  effect and all premiums thereon have been paid. The Trustee is
                  named as the  insured  on the Title  Policy.  No holder of the
                  related  Mortgage has done, by act or omission,  anything that
                  would materially  impair the coverage under such Title Policy.
                  The  Title   Policy   contains   no   exclusion   for,  or  it
                  affirmatively  insures, (i) access to a public road, (ii) that
                  there  are  no  material  encroachments  of  any  part  of the
                  improvements on the Mortgaged  Property over easements,  which
                  encroachments  could  reasonably  be  expected  to  materially
                  interfere with the use of the Mortgaged Property or materially
                  impair the value of the Mortgaged Property (unless the related
                  Mortgaged  Property  is located in a  jurisdiction  where such
                  affirmative  insurance is not  available),  and (iii) that the
                  Mortgaged Property complies with applicable zoning by-laws and
                  ordinances  or  constitutes  a  legal  non-conforming  use  or
                  structure. The Title Insurance Policy materially complies with
                  the form of title  insurance  policy  attached to the Security
                  and Purchase Agreement as Exhibit "D".

         (e)      Loan  Document  Status.  The Mortgage  and the  Mortgage  Loan
                  Documents  executed by or on behalf of the Consumer  Borrower,
                  Reliant Canada and/or the Trustee are legal, valid and binding
                  obligations  of the maker  thereof,  enforceable in accordance

                                      -11-
<PAGE>

                  with its terms,  subject to the following  qualifications  and
                  reservations:  (i)  the  enforceability  of the  Mortgage  and
                  Mortgage  Loan   Documents  may  be  limited  by   bankruptcy,
                  insolvency, reorganization or other similar laws affecting the
                  enforcement  of creditors'  rights  generally,  and by general
                  principles  of  equity,   and  there  is  no  valid   defense,
                  counterclaim or right of offset or recission  available to the
                  related  Reliant Canada with respect to such Mortgage or other
                  agreements;  and (ii) no representation or warranty is made as
                  to the  validity or  enforceability  of any  provision  of any
                  document  requiring  payment  of a  prepayment  premium in any
                  circumstances  where  the  mortgagee  has  taken  any steps to
                  accelerate  payment  of  a  Mortgage  Loan  or  has  otherwise
                  resorted to its security.

         (f)      Taxes  and  Assessments.  There  are no  delinquent  taxes  or
                  assessments  or  other   outstanding   charges  affecting  the
                  Mortgaged Property.

         (g)      Bankruptcy.  The Consumer Borrower is not, to Reliant Canada's
                  knowledge,   a  debtor  in  any   bankruptcy   or   insolvency
                  proceeding.

         (h)      Equity Interest. No Mortgage Loan is automatically convertible
                  into an equity  ownership  interest in the  related  Mortgaged
                  Property or the related Consumer Borrower.

         (i)      No Equity  Participation or Contingent  Interest.  No Mortgage
                  Loan contains any equity participation.

         (j)      Legal Proceedings. To Reliant Canada's knowledge, there are no
                  pending  actions,  suits or proceedings by or before any court
                  or  Governmental  Authority  against or affecting the Consumer
                  Borrower under the Mortgage Loan or the Mortgaged Property. To
                  Reliant  Canada's  knowledge,  neither  Reliant Canada nor the
                  Trustee  has  received   any  notice  from  any   Governmental
                  Authority of any material  violation of any  Applicable  Laws,
                  licenses or permits which would have a material adverse effect
                  on the Mortgaged Property.

         (k)      Other  Mortgage  Liens.  No Mortgage  Loan permits the related
                  Mortgaged Property to be encumbered by any subordinate secured
                  financing.  As  of  origination  of  the  Mortgage  Loan,  the
                  Mortgaged   Property  was  not  encumbered  by  any  liens  or
                  financing that were subordinate to the liens of the Mortgage.

         (l)      No  Mechanic's  Liens.  As of the date of  origination  of the
                  Mortgage Loan,  (i) the Mortgaged  Property was free and clear
                  of any and all construction,  mechanic's and/or  materialmen's
                  liens registered on title to the related  Mortgaged  Property,
                  and  (ii)  to  Reliant  Canada's  knowledge,   no  rights  are
                  outstanding that under law could give rise to any such lien.

         (m)      Compliance  with Usury Laws.  The Mortgage  Loan complies with
                  all Applicable Laws and other requirements pertaining to usury
                  in  effect at its date of  origination.  To  Reliant  Canada's
                  knowledge,  the Mortgage Loan is in material  compliance  with
                  all   other   Applicable   Laws  in  effect  at  its  date  of
                  origination.

                                      -12-
<PAGE>

         (n)      Licenses and Permits.  The Consumer  Borrower is in possession
                  of all material licenses,  permits and authorizations required
                  by  Applicable  Laws for the  ownership  and  operation of the
                  related Mortgaged Property.

         (o)      Cross-collateralization.    The    Mortgage    Loan   is   not
                  cross-collateralized or cross-defaulted.

         (p)      Fixed Rate Loans.  The Mortgage Loan bears  interest at a rate
                  that  remains  fixed  throughout  the  remaining  term  of the
                  Mortgage  Loan and is  repayable  in  blended  instalments  of
                  principal and interest based on the amortization  described in
                  the Mortgage Loan Documents.

         (q)      Default. Pursuant to the terms of the Mortgage, no party other
                  than  the   Trustee  may  declare  any  event  of  default  or
                  accelerate the related indebtedness under such Mortgage.

         (r)      Delivery of Mortgage  File.  Reliant  Canada has  delivered or
                  shall  deliver  within  2  Business  Days of the  Advance  the
                  registered  Mortgage and all of the Mortgage Loan Documents to
                  the Trustee.

         (s)      Insurance.  As at the  origination  of the Mortgage  Loan, all
                  improvements  upon  the  Mortgaged  Property  ----------  were
                  insured  by  a  fire  and  extended  perils  insurance  policy
                  containing either a stated amount co-insurance  endorsement or
                  a waiver of any  co-insurance  provisions,  so as to avoid the
                  application of co-insurance.  At origination, the policy named
                  the  Trustee as first loss  payee,  and  contained a mortgagee
                  endorsement  in the form approved by the  Insurance  Bureau of
                  Canada.  At origination  of the Mortgage Loan,  Reliant Canada
                  had the policy of insurance  placed by the  Consumer  Borrower
                  reviewed by an experienced,  independent third party insurance
                  consultant, whose report confirmed that insurance was in place
                  to  meet  all  material  requirements  of  the  Mortgage.  The
                  Consumer  Borrower has  covenanted  in the Mortgage and in the
                  Mortgage Loan Documents that it will,  during the  continuance
                  of the Mortgage, keep the Mortgaged Property so insured. Under
                  the terms of the Mortgage, any related insurance proceeds will
                  be applied  either (i) to the repair or  restoration of all or
                  part of the  related  Mortgaged  Property,  with  the  Trustee
                  appointed  by it having  the right to hold and  disburse  such
                  proceeds as the repair or restoration  progresses,  or (ii) to
                  the  payment  of  the  outstanding  principal  balance  of the
                  Mortgage Loan together with any accrued interest thereon.

         (t)      No Fraud in Origination. To Reliant Canada's knowledge, in the
                  origination of the Mortgage Loan,  neither  Reliant Canada nor
                  any employee of Reliant  Canada or any parent or subsidiary of
                  Reliant Canada or entity related to Reliant Canada, engaged in
                  any  fraud  or  intentional  material  misrepresentation  with
                  respect to the Mortgage Loan or the Mortgaged  Property or any
                  guarantor of a Mortgage Loan.

         (u)      Compliance with Underwriting  Guidelines.  With respect to the
                  Mortgage  Loan,  the  underwriting  practices  and  guidelines
                  utilized by Reliant  Canada  comply in all  material  respects

                                      -13-
<PAGE>

                  with the underwriting  guidelines of Brit Insurance  Holdings,
                  PLC and Servicer in effect at the time of the  origination  of
                  the Mortgage Loan.

         (v)      Compliance with Sample Closing  Documents.  The Mortgage shall
                  be for a term of no greater  than 5 years and the Mortgage and
                  the  Mortgage  Loan  Documents  are in all  material  respects
                  identical  to the sample  closing  documents  attached  to the
                  Security  and  Purchase  Agreements  as Exhibit "K" (as may be
                  amended  from time to time by  Laurus  in its sole  discretion
                  upon notice to the Company, the "Sample Closing Documents").

12.       Representations, Warranties and Covenants Concerning the Collateral.
          --------------------------------------------------------------------

         Each of the Company and each of the Eligible  Subsidiaries  represents,
warrants  (each of which such  representations  and  warranties  shall be deemed
repeated  upon the making of each  request for a Loan and made as of the time of
each and every Advance hereunder) and covenants as follows:

         (a)      all of the Collateral (i) is owned by it free and clear of all
                  Liens (including any claims of  infringement)  except those in
                  Laurus' favour and Permitted  Liens and (ii) is not subject to
                  any agreement  prohibiting the granting of a Lien or requiring
                  notice of or consent to the granting of a Lien.

         (b)      it shall not encumber,  mortgage,  pledge, assign or grant any
                  Lien in any  Collateral  or any other  assets to anyone  other
                  than Laurus and except for Permitted Liens.

         (c)      the Liens granted pursuant to this Agreement,  upon completion
                  of the filings  and other  actions  listed on  Schedule  12(c)
                  (which,  in  the  case  of all  filings  and  other  documents
                  referred to in said Schedule, have been delivered to Laurus in
                  duly  executed  form)  constitute  valid  perfected   security
                  interests  in all of the  Collateral  in  favour  of Laurus as
                  security for the prompt and complete  payment and  performance
                  of the  Obligations,  enforceable in accordance with the terms
                  hereof against any and all of its creditors and purchasers and
                  such  security  interest  is  prior  to  all  other  Liens  in
                  existence on the date hereof.

         (d)      no  effective  security  agreement,  mortgage,  deed of trust,
                  financing  statement,   hypothec,   prior  claim,   equivalent
                  security or Lien instrument or continuation statement covering
                  all or any part of the  Collateral is or will be on file or of
                  record  in  any  public  office,   except  those  relating  to
                  Permitted Liens.

         (e)      it shall not dispose of any of the Collateral whether by sale,
                  lease or  otherwise  except for the sale of  Inventory  in the
                  ordinary  course  of  business  and  for  the  disposition  or
                  transfer in the ordinary  course of business during any fiscal
                  year of obsolete  and worn-out  Equipment  having an aggregate
                  fair market value of not more than  US$25,000  and only to the
                  extent that (i) the proceeds of any such  disposition are used
                  to acquire  replacement  Equipment which is subject to Laurus'
                  first priority security interest or are used to repay Loans or
                  to pay  general  corporate  expenses,  or (ii)  following  the
                  occurrence of an Event of Default which continues to exist the
                  proceeds  of which are  remitted  to Laurus to be held as cash
                  collateral for the Obligations.

                                      -14-
<PAGE>

         (f)      it shall not  transfer any of the  Collateral  to Reliant Home
                  Mortgage Solutions (Canada) Inc. ("Reliant  Solutions") and it
                  shall  not allow  Reliant  Solutions  to  conduct  any  active
                  business or possess any material assets or property.

         (g)      it shall place notations upon its Books and Records and any of
                  its  financial  statements  to  disclose  Laurus'  Lien in the
                  Collateral.

         (h)      if it retains  possession  of any Chattel  Paper or Instrument
                  with Laurus' consent,  upon Laurus' request such Chattel Paper
                  and  Instruments  shall be marked with the  following  legend:
                  "This writing and obligations  evidenced or secured hereby are
                  subject to the security interest of Laurus Master Fund, Ltd.".
                  Notwithstanding the foregoing,  upon the reasonable request of
                  Laurus,  such Chattel Paper and Instruments shall be delivered
                  to Laurus.

         (i)      it  shall  perform  in  a  reasonable  time  all  other  steps
                  requested by Laurus to create and maintain in Laurus' favour a
                  valid perfected  first Lien in all Collateral  subject only to
                  Permitted  Liens.

         (j)      it shall notify Laurus  promptly and in any event within three
                  (3) Business Days after obtaining knowledge thereof (i) of any
                  event or  circumstance  that,  to its  knowledge,  would cause
                  Laurus to  consider  any then  existing  Mortgage as no longer
                  constituting an Eligible Mortgage;  (ii) of any material delay
                  in its  performance  of any of its  obligations to any Account
                  Debtor;  (iii) of any  assertion by any Account  Debtor of any
                  material  claims,  offsets  or  counterclaims;   (iv)  of  any
                  allowances, credits and/or monies granted by it to any Account
                  Debtor;  (v) of all material adverse  information  relating to
                  the  financial  condition  of an Account  Debtor;  (vi) of any
                  material  return of goods;  and  (vii) of any  material  loss,
                  damage or destruction of any of the Collateral.

         (k)      all  Eligible  Mortgages  (i)  represent  complete  bona  fide
                  transactions   which   require  no   further   act  under  any
                  circumstances  on its part to make such  Mortgages  payable by
                  the  Account  Debtors,  (ii) are not  subject to any  present,
                  future contingent  offsets or counterclaims,  and (iii) do not
                  represent bill and hold sales,  consignment sales,  guaranteed
                  sales,  sale or  return  or other  similar  understandings  or
                  obligations  of any  Affiliate or Subsidiary of the Company or
                  of the Eligible Subsidiaries,  as the case may be. If the then
                  aggregate  outstanding  principle  balance  of the Loans is in
                  excess of the Formula  Amount it will not make,  any agreement
                  with any  Account  Debtor  for any  extension  of time for the
                  payment of any Account,  any compromise or settlement for less
                  than the full  amount  thereof,  any  release  of any  Account
                  Debtor from  liability  therefor,  or any deduction  therefrom
                  except a discount  or  allowance  for prompt or early  payment
                  allowed  by  it  in  the  ordinary   course  of  its  business
                  consistent   with   historical   practice  and  as  previously
                  disclosed to Laurus in writing.

         (l)      it shall keep and  maintain its  Equipment  in good  operating
                  condition,  except for ordinary wear and tear,  and shall make
                  all  necessary  repairs and  replacements  thereof so that the

                                      -15-
<PAGE>

                  value  and  operating   efficiency   shall  at  all  times  be
                  maintained  and  preserved.   It  shall,   using  commercially
                  reasonable  efforts,  not  permit  any such  items to become a
                  Fixture to real estate or accessions to other personal.

         (m)      it  shall  maintain  and  keep all of its  Books  and  Records
                  concerning the  Collateral at its executive  offices listed in
                  Schedule "M".

         (n)      it shall  maintain  and keep the  tangible  Collateral  at the
                  addresses listed in Schedule "M", provided, that it may change
                  such  locations  or  open a new  location,  provided  that  it
                  provides Laurus at least thirty (30) days prior written notice
                  of such  changes or new location and (ii) prior to such change
                  or opening of a new location where  Collateral  having a value
                  of more  than  US$50,000  will be  located,  it  executes  and
                  delivers to Laurus such agreements deemed reasonably necessary
                  or prudent  by  Laurus,  including  mortgagee  agreements  and
                  warehouse agreements,  each in form and substance satisfactory
                  to Laurus, to adequately protect and maintain Laurus' security
                  interest in such Collateral.

         (o)      Schedule "B" lists all banks and other financial  institutions
                  at which it maintains deposits and/or other accounts, and such
                  Schedule correctly  identifies the name, address and telephone
                  number of each such depository,  the name in which the account
                  is held, a description of the purpose of the account,  and the
                  complete account number. It shall not establish any depository
                  or other bank account with any  financial  institution  (other
                  than the accounts set forth on Schedule  "B") without  Laurus'
                  prior written consent.

         (p)      Upon a default or event of default pursuant to the Mortgage or
                  any of the  Mortgage  Loan  Documents  which  continues  for a
                  period of 5 calendar days, it shall enforce such Mortgage (the
                  "Delinquent  Mortgage")  and such Mortgage Loan  Documents and
                  proceed with all remedies  thereunder and under all Applicable
                  Laws as would a prudent mortgagee.

         (q)      It shall not transfer  any of its assets to Reliant  Insurance
                  SCC.

         (r)      The aggregate value of the Mortgaged  Properties  shall not be
                  less than 95% of the  aggregate  amount of the Mortgage  Loans
                  outstanding.

         (s)      The  aggregate  amount of the monthly  payments  due under the
                  outstanding  Mortgage  Loans shall be equal to or greater than
                  the monthly  interest  payments due to Laurus  pursuant to the
                  Secured Revolving Note.

13.      Payment of Accounts.
         --------------------

         (a)      The  Company and each  Eligible  Subsidiary  will  irrevocably
                  direct all of its present and future  Consumer  Borrowers  and
                  other  Persons   obligated  to  make   payments   constituting
                  Collateral  to make such  payments  directly to the  lockboxes
                  maintained by the Company and the Eligible  Subsidiaries  (the
                  "Lockboxes")  with  The  Bank of  Nova  Scotia  or such  other
                  financial  institution accepted by Laurus in writing as may be
                  selected by the Company (the "Lockbox  Bank")  pursuant to the

                                      -16-
<PAGE>

                  terms  of the  certain  agreements  among  one or  more of the
                  Company, the Eligible Subsidiaries,  Laurus and/or the Lockbox
                  Bank dated as of May 31, 2006 (or on such later date as may be
                  determined  by Laurus in its sole  discretion).  Any  proceeds
                  obtained in connection  with the  enforcement  of any Mortgage
                  Loan  and  any  proceeds  payable  pursuant  to  the  Mortgage
                  Insurance  shall be deposited  in the Lockbox.  On or prior to
                  the  Closing  Date,  the  Company  shall and  shall  cause the
                  Lockbox Bank to enter into all such  documentation  acceptable
                  to Laurus pursuant to which,  among other things,  the Lockbox
                  Bank  agrees  to: (a) sweep the  Lockbox on a daily  basis and
                  deposit all checks received  therein to an account  designated
                  by Laurus in writing and (b) comply only with the instructions
                  or other directions of Laurus  concerning the Lockbox.  All of
                  the Company's and the Eligible Subsidiaries' invoices, account
                  statements and other written or oral communications directing,
                  instructing, demanding or requesting payment of any Account of
                  the  Company or an  Eligible  Subsidiary  or any other  amount
                  constituting  Collateral shall  conspicuously  direct that all
                  payments  be made to the  Lockbox  or such  other  address  as
                  Laurus  may  direct  in  writing.   If,   notwithstanding  the
                  instructions  to  Consumer  Borrowers,,   the  Company  or  an
                  Eligible Subsidiary  receives any payments,  the Company or an
                  Eligible  Subsidiary shall  immediately remit such payments to
                  Laurus in their original form with all necessary endorsements.
                  Until so remitted, the Company or an Eligible Subsidiary shall
                  hold all such  payments  in trust for and as the  property  of
                  Laurus and shall not  commingle  such payments with any of its
                  other funds or property.

         (b)      On or prior to the Closing Date, the Company and each Eligible
                  Subsidiary  shall and shall  cause the  Lockbox  Bank to enter
                  into  a  blocked  account  agreement  in  form  and  substance
                  satisfactory  to Laurus,  with respect to each  operating bank
                  account set out on Schedule B hereto.

         (c)      At Laurus'  election,  following the occurrence of an Event of
                  Default which is  continuing,  Laurus may notify the Company's
                  and/or  the  Eligible   Subsidiaries'  Consumer  Borrowers  of
                  Laurus'  security  interest  in the  Mortgages,  collect  them
                  directly and charge the collection  costs and expenses thereof
                  to Company's account.

14.      Letter of Credit.
         -----------------

         The Company  shall post a letter of credit in an amount  equal to three
percent (3%) of the face value of each Mortgage in favour of Laurus (the "Letter
of  Credit").  In the  event  that  Servicer  fails  to  securitize  one or more
Mortgages  at less than 100% of the face value of the  Mortgages on an aggregate
basis,  Laurus  shall be  entitled  to draw on the Letter of Credit in an amount
equal to the difference  between 100% of the face value of the Mortgages and the
dollar value received by Servicer upon the sale of such Mortgages.

15.      Collection and Maintenance of Collateral.
         -----------------------------------------

         (a)      Laurus may verify the Company's and the Eligible Subsidiaries'
                  Mortgage Loans from time to time, but not more often than once
                  every  three  (3)  months,  unless  an  Event of  Default  has

                                      -17-
<PAGE>

                  occurred and is continuing, utilizing an audit control company
                  or any other agent of Laurus.

         (b)      Payment pursuant to the Mortgage Loans received by Laurus will
                  be deemed  received on the Business Day after Laurus'  receipt
                  of such proceeds in good funds in dollars of the United States
                  of  America  to an account  designated  by Laurus.  Any amount
                  received  by Laurus  after  12:00  noon (New York time) on any
                  Business  Day shall be deemed  received  on the next  Business
                  Day.

         (c)      As Laurus  receives the proceeds of such Mortgage Loans of the
                  Company and the Eligible Subsidiaries, it shall (i) apply such
                  proceeds,  as  required,  to  amounts  outstanding  under  the
                  Secured  Revolving  Note,  and (ii)  remit all such  remaining
                  proceeds (net of interest, fees and other amounts then due and
                  owing to Laurus  hereunder) to the Company (for the benefit of
                  the  Company)  upon  request  (but no more  often than twice a
                  week). Notwithstanding the foregoing, following the occurrence
                  and during the continuance of an Event of Default, Laurus, may
                  apply such proceeds to the Obligations in such order as Laurus
                  shall elect.

16.      Inspections and Appraisals.
         ---------------------------

         At all times during normal business hours, Laurus,  and/or any agent of
Laurus  shall  have the right at the  Company's  expense  and  accompanied  by a
representative  of the Company to (a) have access to,  visit,  inspect,  review,
evaluate and make physical  verification and appraisals of the Company's and the
Eligible  Subsidiaries'  properties and the Collateral,  (b) inspect,  audit and
copy (or take  originals if necessary)  and make extracts from the Company's and
the Eligible  Subsidiaries'  Books and  Records,  including  management  letters
prepared by the Accountants, and (c) discuss with the Company's and the Eligible
Subsidiaries' directors,  principal officers, and independent  accountants,  the
Company's  business,  assets,  liabilities,   financial  condition,  results  of
operations  and business  prospects.  The Company and the Eligible  Subsidiaries
will deliver to Laurus any  instrument  necessary  for Laurus to obtain  records
from any service  bureau  maintaining  records for the Company and the  Eligible
Subsidiaries.  If any internally prepared financial information,  including that
required under this Section is  unsatisfactory  in any manner to Laurus,  Laurus
may request that the Accountants review the same.

17.      Financial Reporting.
         --------------------

         The Company will deliver,  or cause to be delivered,  to Laurus each of
the following, which shall be in form and detail acceptable to Laurus:

         (a)      As soon as available, and in any event within ninety (90) days
                  after  the  end  of  each  fiscal  year  of the  Company,  the
                  Company's  audited  financial  statements with a report of its
                  auditors,  SF  Partnership,  LLP  or  such  other  independent
                  certified public  accountants of recognized  standing selected
                  by the Company and  acceptable to Laurus (the  "Accountants"),
                  which   annual   financial   statements   shall   be   without
                  qualification,  except as set out in Schedule  "C",  and shall
                  include  the  Company's  balance  sheet  as at the end of such
                  fiscal  year  and  the  related  statements  of the  Company's
                  income,  retained  earnings and cash flows for the fiscal year
                  then ended,  prepared,  on a  consolidating  and  consolidated

                                      -18-
<PAGE>

                  basis  to  include  all  Affiliates  and  Subsidiaries  of the
                  Company   including,    without   limitation,   the   Eligible
                  Subsidiaries,   all  in  reasonable  detail  and  prepared  in
                  accordance with GAAP, together with (i) if and when available,
                  copies of any management  letters prepared by the Accountants;
                  and  (ii) a  certificate  of the  Company's  President,  Chief
                  Executive Officer or Chief Financial Officer stating that such
                  financial  statements  have been prepared in  accordance  with
                  GAAP  and  whether  or not  such  officer  to the  best of his
                  knowledge or belief of the  occurrence of any Default or Event
                  of Default  hereunder and, if so, stating in reasonable detail
                  the facts with respect thereto;

         (b)      As soon as  available  and in any event within forty five (45)
                  days  after  the end of each  quarter,  an  unaudited/internal
                  balance sheet and statements of income,  retained earnings and
                  cash  flows  of the  Company  as at the  end of and  for  such
                  quarter and for the year to date period then ended,  prepared,
                  on a  consolidating  and  consolidated  basis to  include  all
                  Affiliates and Subsidiaries of the Company,  including without
                  limitation,  the Eligible  Subsidiaries,  in reasonable detail
                  and   stating  in   comparative   form  the  figures  for  the
                  corresponding  date and  periods  in the  previous  year,  all
                  prepared  in  accordance   with  GAAP,   subject  to  year-end
                  adjustments  and accompanied by a certificate of the Company's
                  President, Chief Executive Officer or Chief Financial Officer,
                  stating (i) that such financial  statements have been prepared
                  in   accordance   with  GAAP,   subject  to   year-end   audit
                  adjustments,   and  (ii)  whether  or  not  such  officer  has
                  knowledge of the occurrence of any Default or Event of Default
                  hereunder  not  theretofore  reported and remedied and, if so,
                  stating in reasonable detail the facts with respect thereto;

         (c)      Within  thirty  (30) days after the end of each month (or more
                  frequently if Laurus so requests), agings of the Company's and
                  the Eligible  Subsidiaries'  Mortgages Loans,  unaudited trial
                  balances and their  accounts  payable and a calculation of the
                  Company's  and  the  Eligible   Subsidiaries'   Accounts,  and
                  Eligible  Mortgages  provided,  however,  that if Laurus shall
                  request the foregoing information more often than as set forth
                  in the immediately  preceding  clause,  the Company shall have
                  thirty (30) days from each such request to comply with Laurus'
                  demand; and

         (d)      Promptly after (i) the filing thereof, copies of the Company's
                  quarterly  and  annual  filings  with  the  SEC,  and (ii) the
                  issuance thereof, copies of such financial statements, reports
                  and  proxy  statements  as  the  Company  shall  send  to  its
                  stockholders.

18.      Additional Representations and Warranties.
         ------------------------------------------

         Each of the Company and the Eligible Subsidiaries hereby represents and
warrants to Laurus as follows:

         (a)      Organization,  Good Standing and Qualification. It and each of
                  its  Subsidiaries  is a  corporation,  partnership  or limited
                  liability company, as the case may be, duly organized, validly
                  existing  and  in  good   standing   under  the  laws  of  its
                  jurisdiction of organization.  It and each of its Subsidiaries
                  has the corporate,  limited  liability company or partnership,
                  as the case may be, power and authority to own and operate its

                                      -19-
<PAGE>

                  properties  and  assets  and,  insofar  as it is or shall be a
                  party  thereto,  to (i) execute and deliver this Agreement and
                  the Ancillary Agreements,  (ii) to issue the Secured Revolving
                  Note (with  respect to the Company  only),  (iii) to issue the
                  Warrant and the Warrant  Shares  (with  respect to the Company
                  only),  and to (iv) carry out the provisions of this Agreement
                  and the Ancillary  Agreements  and to carry on its business as
                  presently  conducted.  It and each of its Subsidiaries is duly
                  qualified  and is  authorized  to do  business  and is in good
                  standing  as a foreign  corporation,  partnership  or  limited
                  liability company, as the case may be, in all jurisdictions in
                  which the  nature or  location  of its  activities  and of its
                  properties  (both owned and leased)  makes such  qualification
                  necessary,  except for those jurisdictions in which failure to
                  do so has not had,  or could not  reasonably  be  expected  to
                  have,  individually  or in the aggregate,  a Material  Adverse
                  Effect.

         (b)      Subsidiaries.  Each of its direct and  indirect  Subsidiaries,
                  the  direct  owner  of  such  Subsidiary  and  its  percentage
                  ownership thereof, is set forth in Schedule "D".

         (c)      Capitalization; Voting Rights.

                  (i)    The authorized  capital of the Company,  as of the date
                         hereof, consists of 100,000,000 Common Shares, of which
                         86,019,782 are issued and  outstanding.  The authorized
                         capital  of  Reliant  Canada,  as of the  date  hereof,
                         consists of an unlimited number common shares, of which
                         76,000,000 are issued and outstanding.

                  (ii)   Except as disclosed on Schedule  "E",  other than:  (i)
                         the shares reserved for issuance under its stock option
                         plans;  and (ii) shares which may be issued pursuant to
                         this Agreement and the Ancillary Agreements,  there are
                         no outstanding  options,  warrants,  rights  (including
                         conversion  or  pre-emptive  rights and rights of first
                         refusal),   proxy   or   stockholder   agreements,   or
                         arrangements or agreements of any kind for the purchase
                         or acquisition from it of any of its securities. Except
                         as disclosed on Schedule  "E", the offer or issuance of
                         the  Warrant,  or the  issuance  of any of the  Warrant
                         Shares,   nor  the   consummation  of  any  transaction
                         contemplated  hereby  will  result  in a change  in the
                         price  or  number  of any  securities  of  the  Company
                         outstanding,   under  anti-dilution  or  other  similar
                         provisions   contained   in  or   affecting   any  such
                         securities.

                  (iii)  All of its issued and outstanding shares: (i) have been
                         duly  authorized  and validly issued and are fully paid
                         and non-assessable;  and (ii) were issued in compliance
                         with all applicable  state and federal laws  concerning
                         the issuance of securities.

                  (iv)   The rights, preferences, privileges and restrictions of
                         its   shares   are  as  stated  in  its   Articles   of
                         Incorporation (the "Articles"). The Warrant Shares have
                         been  duly and  validly  reserved  for  issuance.  When
                         issued  in  compliance  with  the  provisions  of  this
                         Agreement and the Company's  Articles,  the  Securities

                                      -20-
<PAGE>

                         will be validly issued,  fully paid and non-assessable,
                         and  will  be  free  of  any  liens  or   encumbrances;
                         provided,  however,  that the Securities may be subject
                         to restrictions on transfer under applicable securities
                         laws as set forth  herein or as  otherwise  required by
                         such laws at the time a transfer is proposed.

         (d)      Authorization;   Binding  Obligations.  All  corporate  action
                  (including their respective officers and directors)  necessary
                  for the  authorization  of this  Agreement  and the  Ancillary
                  Agreements,   the   performance  of  all  of  its  obligations
                  hereunder  and under the  Ancillary  Agreements on the Closing
                  Date and,  the  authorization,  issuance  and  delivery of the
                  Secured  Revolving Note and the Warrant has been taken or will
                  be taken prior to the Closing  Date.  This  Agreement  and the
                  Ancillary  Agreements,  when executed and delivered and to the
                  extent it is a party  thereto,  will be its valid and  binding
                  obligations enforceable against each such Person in accordance
                  with their terms, except:

                  (i)    as  limited  by  applicable   bankruptcy,   insolvency,
                         reorganization,  moratorium  or other  laws of  general
                         application affecting enforcement of creditors' rights;
                         and

                  (ii)   general   principles   of  equity  that   restrict  the
                         availability of equitable or legal remedies.

                  The issuance of the Secured Revolving Note is not and will not
                  be  subject  to any  pre-emptive  rights  or  rights  of first
                  refusal that have not been properly  waived or complied  with.
                  The issuance of the Warrant and the subsequent exercise of the
                  Warrant for Warrant  Shares are not and will not be subject to
                  any  pre-emptive  rights or rights of first  refusal that have
                  not been properly waived or complied with.

         (e)      Liabilities. It does not have any liabilities,  except current
                  liabilities  incurred in the  ordinary  course of business and
                  liabilities disclosed in any Exchange Act Filings.

         (f)      Agreements; Action. Except as set forth on Schedule "F", or as
                  disclosed in any Exchange Act Filings:

                  (i)    There are no agreements,  understandings,  instruments,
                         contracts,  proposed transactions,  judgments,  orders,
                         writs  or  decrees  to  which  it is a party  or to its
                         knowledge by which it is bound which may  involve:  (i)
                         obligations  (contingent  or otherwise) of, or payments
                         to,  it or any  in  excess  of  US$50,000  (other  than
                         obligations   of,  or  payments  to,  it  arising  from
                         purchase  or  sale  agreements   entered  into  in  the
                         ordinary  course of business,  or payments by it to its
                         employees, lawyers, officers, and accountants); or (ii)
                         the transfer or license of any patent, copyright, trade
                         secret or other  proprietary right to or from it (other
                         than  licenses  arising  from the  purchase of "off the
                         shelf" or other standard products); or (iii) provisions
                         restricting    the    development,    manufacture    or

                                      -21-
<PAGE>

                         distribution  of its  products  or  services;  or  (iv)
                         indemnification  by it with respect to infringements of
                         proprietary rights.

                  (ii)   Since March 31, 2006 (the "Balance Sheet Date"), it has
                         not: (i) declared or paid any dividends,  or authorized
                         or made any  distribution  upon or with  respect to any
                         class or series of its capital stock; (ii) incurred any
                         indebtedness   for   money   borrowed   or  any   other
                         liabilities  (other than ordinary  course  obligations)
                         individually  in excess of US$50,000 or, in the case of
                         indebtedness and/or liabilities  individually less than
                         US$50,000,  in excess of US$100,000  in the  aggregate;
                         (iii) made any loans or  advances  to any Person not in
                         excess,   individually   or  in   the   aggregate,   of
                         US$100,000,  other than  ordinary  advances  for travel
                         expenses; or (iv) sold, exchanged or otherwise disposed
                         of any of its assets or rights,  other than the sale of
                         its Inventory in the ordinary course of business.

                  (iii)  For the  purposes of  subsections  (i) and (ii) of this
                         Section   18(f),   all    indebtedness,    liabilities,
                         agreements, understandings,  instruments, contracts and
                         proposed   transactions   involving   the  same  Person
                         (including   Persons  it  has  reason  to  believe  are
                         affiliated  therewith  thereof) shall be aggregated for
                         the purpose of meeting the  individual  minimum  dollar
                         amounts of such subsections.

                  (iv)   It makes and keeps books, records, and accounts,  that,
                         in reasonable detail, accurately and fairly reflect the
                         transactions  and   dispositions  of  its  assets.   It
                         maintains  internal  control over  financial  reporting
                         ("Financial  Reporting Controls") designed by, or under
                         the  supervision   of,  its  principal   executive  and
                         principal financial officers, and effected by its board
                         of  directors,  management,  and  other  personnel,  to
                         provide reasonable  assurance regarding the reliability
                         of financial reporting and the preparation of financial
                         statements  for external  purposes in  accordance  with
                         GAAP, including that:

                         (1)    transactions  are  executed in  accordance  with
                                management's general or specific authorization;

                         (2)    unauthorized acquisition, use, or disposition of
                                the its assets that could have a material effect
                                on the  financial  statements  are  prevented or
                                timely detected;

                         (3)    transactions are recorded as necessary to permit
                                preparation    of   financial    statements   in
                                accordance  with GAAP, and that its receipts and
                                expenditures  are being made only in  accordance
                                with  authorizations  of the its  management and
                                board of directors;

                         (4)    transactions   are   recorded  as  necessary  to
                                maintain accountability for assets; and

                                      -22-
<PAGE>

                         (5)    the  recorded   accountability   for  assets  is
                                compared with the existing  assets at reasonable
                                intervals,  and appropriate action is taken with
                                respect to any differences.

                  (g)    Obligations to Related Parties.  Except as set forth on
                         Schedule  "G", it has no  obligations  to its officers,
                         directors, stockholders or employees other than:

                         (i)    for payment of salary for services  rendered and
                                for bonus payments;

                         (ii)   reimbursement  for reasonable  expenses incurred
                                on its behalf;

                         (iii)  for  other  standard   employee   benefits  made
                                generally available to all employees  (including
                                stock option  agreements  outstanding  under any
                                stock  option  plan  approved  by its  Board  of
                                Directors); and

                         (iv)   obligations  listed in its financial  statements
                                or disclosed in any of its Exchange Act Filings.

         Except as  described  above or set forth on Schedule  "G",  none of its
         officers,  directors or, to the best of its knowledge, key employees or
         stockholders or any members of their immediate  families,  are indebted
         to it, individually or in the aggregate, in excess of US$50,000 or have
         any direct or indirect  ownership  interest in any Person with which it
         is affiliated or with which it or any has a business  relationship,  or
         any Person which  competes with it, other than passive  investments  in
         publicly traded companies  (representing  less than one percent (1%) of
         such  company)  which may compete with it.  Except as described  above,
         none of its officers, directors or stockholders, or any member of their
         immediate  families,  is,  directly or  indirectly,  interested  in any
         material contract with it and no agreements, understandings or proposed
         transactions are contemplated between it and any such Person. Except as
         set forth on Schedule  "G", it is not a guarantor or  indemnitor of any
         indebtedness of any other Person.

         (h)      Changes.  Since the Balance Sheet Date, except as disclosed in
                  any  Schedule  to this  Agreement  or to any of the  Ancillary
                  Agreements, there has not been:

                         (i)    any change in its business, assets, liabilities,
                                condition (financial or otherwise),  properties,
                                operations or prospects,  which, individually or
                                in the aggregate,  has had, or could  reasonably
                                be expected to have, a Material Adverse Effect;

                         (ii)   any  resignation  or  termination  of any of its
                                officers, key employees or groups of employees;

                         (iii)  any  material  change,  except  in the  ordinary
                                course   of   business,    in   its   contingent
                                obligations  by  way of  guaranty,  endorsement,
                                indemnity, warranty or otherwise;

                                      -23-
<PAGE>

                         (iv)   any damage,  destruction or loss, whether or not
                                covered by  insurance,  which has had,  or could
                                reasonably be expected to have,  individually or
                                in the aggregate, a Material Adverse Effect;

                         (v)    any  waiver  by it of a  valuable  right or of a
                                material debt owed to it;

                         (vi)   any direct or indirect material loans made by it
                                to any of its stockholders,  employees, officers
                                or  directors,  other than  advances made in the
                                ordinary course of business;

                         (vii)  any   material   change   in  any   compensation
                                arrangement  or  agreement  with  any  employee,
                                officer, director or stockholder;

                         (viii) any  declaration  or payment of any  dividend or
                                other distribution of its assets;

                         (ix)   any labour organization activity related to it;

                         (x)    any  debt,  obligation  or  liability  incurred,
                                assumed or  guaranteed  by it,  except those for
                                immaterial  amounts and for current  liabilities
                                incurred in the ordinary course of business;

                         (xi)   any  sale,   assignment   or   transfer  of  any
                                Intellectual   Property   or  other   intangible
                                assets;

                         (xii)  any change in any material agreement to which it
                                is a party or by which either it is bound which,
                                either  individually  or in the  aggregate,  has
                                had,  or could  reasonably  be expected to have,
                                individually  or in the  aggregate,  a  Material
                                Adverse Effect;

                         (xiii) any other event or  condition  of any  character
                                that,  either  individually or in the aggregate,
                                has had,  or could  reasonably  be  expected  to
                                have,   individually  or  in  the  aggregate,  a
                                Material Adverse Effect; or

                         (xiv)  any arrangement or commitment by it to do any of
                                the acts  described  in  subsection  (i) through
                                (xiii) of this Section 18(h).

                  (i)    Title to Properties and Assets;  Liens,  Etc. Except as
                         set forth on Schedule  "H", it has good and  marketable
                         title to its respective properties and assets, and good
                         title to its leasehold interests,  in each case subject
                         to no Lien, other than Permitted Liens. All facilities,
                         Equipment,  vehicles and other properties owned, leased
                         or  used  by it are in  good  operating  condition  and
                         repair  and  are  reasonably  fit  and  usable  for the
                         purposes  for which they are being used.  Except as set
                         forth on  Schedule  "H", it is in  compliance  with all
                         material  terms of each lease to which it is a party or
                         is otherwise bound.

                                      -24-
<PAGE>

                  (j)    Intellectual Property.

                         (i)    It owns or possesses  sufficient legal rights to
                                all  Intellectual  Property  necessary for their
                                respective  businesses as now conducted  and, to
                                its  knowledge  as  presently   proposed  to  be
                                conducted, without any known infringement of the
                                rights  of  others.  There  are  no  outstanding
                                options,  licenses  or  agreements  of any  kind
                                relating to its Intellectual Property, nor is it
                                bound by or a party to any options,  licenses or
                                agreements  of  any  kind  with  respect  to the
                                Intellectual  Property of any other Person other
                                than such  licenses or  agreements  arising from
                                the  purchase  of "off the  shelf"  or  standard
                                products.

                         (ii)   It has not received any communications  alleging
                                that  it has  violated  any of the  Intellectual
                                Property  or  other  proprietary  rights  of any
                                other  Person,  nor is it  aware  of  any  basis
                                therefor.

                         (iii)  It does not  believe it is or will be  necessary
                                to  utilize  any  inventions,  trade  secrets or
                                proprietary  information of any of its employees
                                made prior to their employment by it, except for
                                inventions,   trade   secrets   or   proprietary
                                information  that have been rightfully  assigned
                                to it.

                  (k)    Compliance  with  Other  Instruments.   It  is  not  in
                         violation or default of (x) any term of its Articles or
                         Bylaws,  or (y)  any  provision  of  any  indebtedness,
                         mortgage, indenture,  contract, agreement or instrument
                         to  which it is party or by which it is bound or of any
                         judgment,  decree,  order or writ,  which  violation or
                         default,  in the case of this clause  (y),  has had, or
                         could   reasonably   be   expected   to  have,   either
                         individually  or in the aggregate,  a Material  Adverse
                         Effect. The execution,  delivery and performance of and
                         compliance   with  this  Agreement  and  the  Ancillary
                         Agreements to which it is a party,  and the issuance of
                         the  Secured  Revolving  Note and the other  Securities
                         each  pursuant  hereto and thereto (with respect to the
                         Company only), will not, with or without the passage of
                         time or giving of notice,  result in any such  material
                         violation,  or be in  conflict  with  or  constitute  a
                         default under any such term or provision,  or result in
                         the creation of any Lien upon any of its  properties or
                         assets  or  the  suspension,   revocation,  impairment,
                         forfeiture  or  non-renewal  of  any  permit,  license,
                         authorization   or  approval   applicable  to  it,  its
                         businesses  or  operations  or any of their  assets  or
                         properties.

                  (l)    Litigation.  Except as set forth on Schedule "I", there
                         is no action, suit, proceeding or investigation pending
                         or, to its knowledge,  currently  threatened against it
                         that prevents it from  entering into this  Agreement or
                         the  Ancillary  Agreements,  or from  consummating  the
                         transactions  contemplated  hereby or thereby, or which
                         has  had,  or could  reasonably  be  expected  to have,
                         either  individually  or in the  aggregate,  a Material
                         Adverse  Effect,  or could  result in any change in its
                         current equity ownership, nor is it aware that there is
                         any basis to assert any of the  foregoing.  It is not a
                         party to or  subject  to the  provisions  of any order,
                         writ,  injunction,  judgment  or decree of any court or
                         government  agency  or  instrumentality.  There  is  no
                         action,   suit,   proceeding  or  investigation  by  it
                         currently pending or which it intends to initiate.

                                      -25-
<PAGE>

                  (m)    Tax Returns and  Payments.  It has timely filed all tax
                         returns (federal, provincial, state and local) required
                         to be  filed  by it.  All  taxes  shown  to be due  and
                         payable on such returns,  any assessments  imposed, and
                         all other  taxes due and payable by it on or before the
                         Closing  Date,  have been paid or will be paid prior to
                         the time they become delinquent. Except as set forth on
                         Schedule "J", it has not been advised:

                         (i)    that any of its  returns,  federal,  provincial,
                                state,  provincial  or  other,  have been or are
                                being audited as of the date hereof; or

                         (ii)   of any  adjustment,  deficiency,  assessment  or
                                court   decision  in  respect  of  its  federal,
                                provincial, state or other taxes.

                         It has  no  knowledge of any liability of any tax to be
                         imposed  upon  its  properties or assets as of the date
                         of this  Agreement  that  is  not  adequately  provided
                         for.

                  (n)    Employees.  Except as set forth on Schedule  "K" it has
                         not any collective  bargaining  agreements  with any of
                         its  employees.  There is no  labour  union  organizing
                         activity pending or, to its knowledge,  threatened with
                         respect to it.  Except as  disclosed on Schedule "K" it
                         is a not party to or bound by any  currently  effective
                         employment contract, deferred compensation arrangement,
                         bonus  plan,   incentive  plan,  profit  sharing  plan,
                         retirement  agreement  or other  employee  compensation
                         plan  or  agreement.  To  its  knowledge,  none  of its
                         employees,   nor  any  consultant   with  whom  it  has
                         contracted,   is  in  violation  of  any  term  of  any
                         employment contract,  proprietary information agreement
                         or any  other  agreement  relating  to the right of any
                         such individual to be employed by, or to contract with,
                         it  because  of  the  nature  of  the  business  to  be
                         conducted  by it; and to its  knowledge  the  continued
                         employment  by it of its  present  employees,  and  the
                         performance  of  its  contracts  with  its  independent
                         contractors,  will not result in any such violation. It
                         is not aware  that any of its  employees  is  obligated
                         under any contract  (including  licenses,  covenants or
                         commitments  of any  nature)  or  other  agreement,  or
                         subject to any  judgment,  decree or order of any court
                         or  administrative  agency  that would  interfere  with
                         their  duties to it.  It has not  received  any  notice
                         alleging that any such  violation has occurred.  Except
                         for employees who have a current  effective  employment
                         agreement  with  it,  none of its  employees  has  been
                         granted the right to continued  employment  by it or to
                         any  material  compensation  following  termination  of
                         employment with it. Except as set forth on Schedule "K"
                         it is not aware that any officer, key employee or group
                         of  employees  intends to  terminate  his, her or their
                         employment   with  it,  nor  does  it  have  a  present
                         intention to terminate  the  employment of any officer,
                         key employee or group of employees.

                  (o)    Compliance with Laws;  Permits.  It is not in violation
                         of any  applicable  corporate  governance  law or any -
                         other  regulatory  guidance of the SEC or any by-law or
                         rule of the  Principal  Market or any other  applicable
                         statute, rule, regulation,  order or restriction of any

                                      -26-
<PAGE>

                         domestic or foreign  government or any  instrumentality
                         or agency  thereof  in  respect  of the  conduct of its
                         business or the ownership of its  properties  which has
                         had, or could  reasonably  be expected to have,  either
                         individually  or in the aggregate,  a Material  Adverse
                         Effect. No governmental orders, permissions,  consents,
                         approvals or authorizations are required to be obtained
                         and no registrations or declarations are required to be
                         filed in connection  with the execution and delivery of
                         this  Agreement  or any  Ancillary  Agreement  and  the
                         issuance of any of the Securities,  except such as have
                         been  duly  and  validly  obtained  or  filed,  or with
                         respect  to any  filings  that  must be made  after the
                         Closing Date, as will be filed in a timely  manner.  It
                         has all material franchises,  permits, licenses and any
                         similar  authority  necessary  for the  conduct  of its
                         business  as now  being  conducted  by it,  the lack of
                         which could,  either  individually or in the aggregate,
                         reasonably  be  expected  to  have a  Material  Adverse
                         Effect.

                  (p)    Environmental  and Safety Laws.  It is not in violation
                         of any applicable  statute,  law or regulation relating
                         to the environment or  occupational  health and safety,
                         and to its knowledge,  no material  expenditures are or
                         will be  required  in  order  to  comply  with any such
                         existing  statute,  law or  regulation.  Except  as set
                         forth on  Schedule  "L",  no  Hazardous  Materials  (as
                         defined below) are used or have been used,  stored,  or
                         disposed  of by it or, to its  knowledge,  by any other
                         Person on any property owned, leased or used by it. For
                         the  purposes  of the  preceding  sentence,  "Hazardous
                         Materials" shall mean:

                         (i)    materials which are listed or otherwise  defined
                                as  "hazardous"  or "toxic" under any applicable
                                local, provincial, state, federal and/or foreign
                                laws and  regulations  that govern the existence
                                and/or remedy of contamination on property,  the
                                protection    of    the     environment     from
                                contamination,  the control of hazardous wastes,
                                or   other   activities    involving   hazardous
                                substances, including building materials; and

                         (ii)   any  petroleum   products  (other  than  in  the
                                ordinary   course  of   business)   or   nuclear
                                materials.

                  (q)    Full  Disclosure.  It  has  provided  Laurus  with  all
                         information  requested  by  Laurus in  connection  with
                         Laurus' decision to enter into this Agreement.  Neither
                         this  Agreement,   the  Ancillary  Agreements  nor  the
                         exhibits and schedules hereto and thereto nor any other
                         document  delivered by it to Laurus or its attorneys or
                         agents in connection  herewith or therewith or with the
                         transactions  contemplated  hereby or thereby,  contain
                         any untrue  statement  of a  material  fact nor omit to
                         state a material  fact  necessary  in order to make the
                         statements contained herein or therein, in light of the
                         circumstances  in which they are made, not  misleading.
                         Any financial  projections and other estimates provided
                         to Laurus  by it were  based on its  experience  in the
                         industry and on  assumptions  of fact and opinion as to
                         future  events which it, at the date of the issuance of
                         such   projections   or   estimates,   believed  to  be
                         reasonable.

                  (r)    Insurance.   It   has   general   commercial,   product
                         liability,  fire and casualty  insurance  policies with
                         coverages which it believes are customary for companies
                         similarly  situated  to  it  in  the  same  or  similar
                         business.

                                      -27-
<PAGE>

                  (s)    Patriot  Act.  It  certifies  that,  to the best of its
                         knowledge, it has not been designated,  nor is or shall
                         be owned or controlled,  by a "suspected  terrorist" as
                         defined   in   Executive   Order   13224.   It   hereby
                         acknowledges  that  Laurus  seeks  to  comply  with all
                         applicable laws concerning money laundering and related
                         activities.  In furtherance of those efforts, it hereby
                         represents,  warrants and covenants  that:  (i) none of
                         the  cash  or  property   that  it  will  pay  or  will
                         contribute to Laurus has been or shall be derived from,
                         or related  to, any  activity  that is deemed  criminal
                         under United  States law; and (ii) no  contribution  or
                         payment  by it to Laurus,  to the extent  that they are
                         within  its  control   shall  cause  Laurus  to  be  in
                         violation  of the United  States Bank  Secrecy Act, the
                         United States  International  Money Laundering  Control
                         Act of 1986 or the United  States  International  Money
                         Laundering  Abatement and Anti-Terrorist  Financing Act
                         of 2001,  or the  Canadian  Proceeds  of  Crime  (Money
                         Laundering)  and  Terrorist  Financing  Act.  It  shall
                         promptly notify Laurus if any of these representations,
                         warranties and covenants ceases to be true and accurate
                         regarding  it.  It  shall   provide   Laurus  with  any
                         additional information regarding it thereof that Laurus
                         deems necessary or convenient to ensure compliance with
                         all applicable  laws  concerning  money  laundering and
                         similar  activities.  It understands and agrees that if
                         at any time it is discovered  that any of the foregoing
                         representations,    warranties    and   covenants   are
                         incorrect,  or if otherwise  required by applicable law
                         or  regulation  related to money  laundering or similar
                         activities, Laurus may undertake appropriate actions to
                         ensure  compliance  with  applicable law or regulation,
                         including  but  not  limited  to   segregation   and/or
                         redemption  of  Laurus'  investment  in it. It  further
                         understands   that  Laurus  may  release   confidential
                         information about it and, if applicable, any underlying
                         beneficial  owners, to proper authorities if Laurus, in
                         its sole discretion,  determines that it is in the best
                         interests  of  Laurus  in light of  relevant  rules and
                         regulations under the laws set forth in subsection (ii)
                         above.

                  (t)    Company  Name;   Locations  of  Offices,   Records  and
                         Collateral.  Schedule "M" sets forth its complete  name
                         as it  appears  in  official  filings  in the  state or
                         province of its  organization,  as the case may be, the
                         type of entity it is, the organizational identification
                         number issued by its state or province of organization,
                         as the case may be, or a statement  that no such number
                         has been issued, its state or province of organization,
                         and  the  location  of  its  chief  executive   office,
                         corporate  offices,   warehouses,  other  locations  of
                         Collateral and locations  where records with respect to
                         Collateral are kept  (including in each case the county
                         of such  locations)  and,  except  as set forth in such
                         Schedule "M", such  locations  have not changed  during
                         the preceding  twelve  months.  As of the Closing Date,
                         during  the prior  five  years,  except as set forth in
                         Schedule  "M",  it has not been  known as or  conducted
                         business in any other name (including trade names).  It
                         has only one  province  or  state of  organization,  as
                         applicable.

                  (u)    It does not  maintain  or  contribute  to any  Canadian
                         Pension Plan.

19.      Company's Representations and Warranties

         The Company hereby represents and warrants to Laurus as follows:

                                      -28-
<PAGE>

                  (a)    Registration  Rights and Voting  Rights.  Except as set
                         forth on Schedule  "N" as disclosed in any Exchange Act
                         Filing  and  as  contemplated  under  the  Registration
                         Rights  Agreement,   it  is  not  presently  under  any
                         obligation,  and it has  not  granted  any  rights,  to
                         register or otherwise  qualify for  distribution to the
                         public any of its presently  outstanding  securities or
                         any of its  securities  that may  hereafter  be issued.
                         Except  as set  forth on  Schedule  "N" and  except  as
                         disclosed in Exchange Act  Filings,  to its  knowledge,
                         none of its stockholders has entered into any agreement
                         with respect to its voting of equity securities.

                  (b)    Valid Offering.  Upon the applicable registration being
                         declared effective by the SEC, assuming the accuracy of
                         the  representations and warranties of Laurus contained
                         in  this  Agreement,  the  offer  and  issuance  of the
                         Securities  will be  exempt  from  the  prospectus  and
                         registration  requirements  of  the  Securities  Act of
                         1933, as amended (the "U.S.  Securities Act"), and will
                         have been  registered  or qualified (or are exempt from
                         registration and qualification) under the registration,
                         permit or qualification  requirements of all applicable
                         state securities laws.

                  (c)    SEC Reports  and  Financial  Statements.  Except as set
                         forth  on   Schedule   "O",  it  has  filed  all  proxy
                         statements,  reports and other documents required to be
                         filed by it under the  Exchange  Act.  The  Company has
                         furnished  Laurus with copies of: (i) its annual report
                         for its fiscal year ended  December 31, 2006,  (ii) its
                         interim  financial  statements  for the  quarter  ended
                         March 31, 2006 and (iii) the  material  change  reports
                         which  it has  filed  during  its  fiscal  year to date
                         (collectively,  the "SEC Reports"). Except as set forth
                         on  Schedule  "O",  each SEC Report was, at the time of
                         its  filing,   in  substantial   compliance   with  the
                         requirements of its respective form and none of the SEC
                         Reports , nor the financial  statements  (and the notes
                         thereto)  included  in the  SEC  Reports,  as of  their
                         respective filing dates, contained any untrue statement
                         of a material  fact or omitted to state a material fact
                         required to be stated  therein or necessary to make the
                         statements therein, in light of the circumstances under
                         which they were made,  not  misleading.  Such financial
                         statements  have been prepared in accordance  with GAAP
                         applied  on  a  consistent  basis  during  the  periods
                         involved  (except (i) as may be otherwise  indicated in
                         such financial  statements or the notes thereto or (ii)
                         in the case of  unaudited  interim  statements,  to the
                         extent  they  may  not  include  footnotes  or  may  be
                         condensed) and fairly present in all material  respects
                         the financial condition,  the results of operations and
                         cash flows of the Company,  on a consolidated basis, as
                         of, and for,  the  periods  presented  in each such SEC
                         Report.

                  (d)    Quotation.  The Company's Common Stock is quoted on the
                         Principal Market and satisfies all requirements for the
                         continuation of such listing,  and the Company shall do
                         all  things  necessary  for  the  continuation  of such
                         listing.  The Company has not  received any notice that
                         its Common  Stock will be delisted  from the  Principal
                         Market  or that  its  Common  Stock  does  not meet all
                         requirements for such listing.

                                      -29-
<PAGE>

                  (e)    Stop   Transfer.   The   Securities   are   subject  to
                         restrictions  on  transfer  as  of  the  date  of  this
                         Agreement. It will not issue any stop transfer order or
                         other order  impeding  the sale and  delivery of any of
                         the  Securities at such time as the  Securities  become
                         freely  tradeable or an exemption  from the  prospectus
                         registration  or equivalent  requirements of applicable
                         securities  laws in respect of such sale or delivery is
                         available,  except as required by applicable securities
                         laws.

                  (f)    Dilution.   Subject  to  any  maximum   conversion   or
                         restrictions  contained  in  this  Agreement  or in any
                         Ancillary Agreement specifically  acknowledges that the
                         Company's  obligation  to issue  the  shares  of Common
                         Stock upon  exercise of the Warrant is binding upon the
                         Company and enforceable regardless of the dilution such
                         issuance may have on the  ownership  interests of other
                         shareholders of the Company.

20.      Covenants.

         The Company and each Eligible  Subsidiary (where applicable)  covenants
and agrees with Laurus as follows:

                  (a)    Use of Funds.  It shall use the  proceeds  of the Loans
                         solely  for  the  purpose  of  funding   the   Eligible
                         Mortgages.

                  (b)    Taxes. It shall promptly pay and discharge, or cause to
                         be paid  and  discharged,  when  due and  payable,  all
                         lawful taxes,  assessments and governmental  charges or
                         levies  imposed  upon it income,  profits,  property or
                         business,  as the case may be; provided,  however, that
                         any such  tax,  assessment,  charge or levy need not be
                         paid  currently  if  (i)  the  validity  thereof  shall
                         currently and  diligently be contested in good faith by
                         appropriate  proceedings,  (ii) such  tax,  assessment,
                         charge  or  levy  shall  have  no  effect  on the  Lien
                         priority of Laurus in the  Collateral,  and (iii) if it
                         shall  have set  aside on its books  adequate  reserves
                         with  respect  thereto in  accordance  with  GAAP;  and
                         provided,  further,  that it shall pay all such  taxes,
                         assessments,  charges  or  levies  forthwith  upon  the
                         commencement of proceedings to foreclose any lien which
                         may have attached as security therefor.

                  (c)    Insurance. It shall bear the full risk of loss from any
                         loss  of any  nature  whatsoever  with  respect  to the
                         Collateral.  It shall keep its  assets  which are of an
                         insurable  character  insured by financially  sound and
                         reputable  insurers  against  loss or  damage  by fire,
                         explosion and other risks  customarily  insured against
                         by companies in similar business  similarly situated as
                         it;  it shall  maintain,  with  financially  sound  and
                         reputable insurers, insurance against other hazards and
                         risks and  liability  to persons  and  property  to the
                         extent  and in the manner  which it thereof  reasonably
                         believes is customary for companies in similar business
                         similarly situated as it and to the extent available on
                         commercially  reasonable  terms.  The  Company  and the
                         Eligible  Subsidiaries will cause Laurus to be named as
                         first  loss payee or  additional  insured on all of the
                         policies of insurance relating to the assets pledged to
                         Laurus as security for its  obligations  hereunder  and
                         under the Ancillary Agreements,  other than policies of
                         insurance directly related to real property. At its own
                         cost  and   expense  in  amounts   and  with   carriers

                                      -30-
<PAGE>

                         reasonably  acceptable to Laurus, it shall (i) keep all
                         their insurable properties and properties in which they
                         have an interest  insured  against the hazards of fire,
                         flood,  sprinkler  leakage,  those  hazards  covered by
                         extended coverage insurance and such other hazards, and
                         for  such  amounts,  as is  customary  in the  case  of
                         companies engaged in businesses similar to it including
                         business interruption  insurance;  (ii) maintain a bond
                         in  such  amounts  as  is  customary  in  the  case  of
                         companies engaged in businesses  similar to it insuring
                         against   larceny,   embezzlement   or  other  criminal
                         misappropriation  of insured's  officers and  employees
                         who may  either  singly or jointly  with  others at any
                         time have access to its assets or funds either directly
                         or  through  governmental  authority  to draw upon such
                         funds or to direct  generally the  disposition  of such
                         assets;  (iii)  maintain  public and product  liability
                         insurance against claims for personal injury,  death or
                         property damage  suffered by others;  (iv) maintain all
                         such worker's  compensation or similar insurance as may
                         be  required   under  the  laws  of  any   province  or
                         jurisdiction  in which it is engaged in  business;  and
                         (v) furnish  Laurus with (x) copies of all policies and
                         evidence of the  maintenance  of such policies at least
                         thirty  (30)  days  before  any  expiration  date,  (y)
                         excepting    its    workers'    compensation    policy,
                         endorsements   to  such   policies   naming  Laurus  as
                         "co-insured"  or "additional  insured" and  appropriate
                         loss  payable   endorsements   in  form  and  substance
                         satisfactory  to Laurus,  naming Laurus as lenders loss
                         payee, and (z) evidence that as to Laurus the insurance
                         coverage  shall not be impaired or  invalidated  by any
                         act or  neglect  of the  Company  and/or  any  Eligible
                         Subsidiary  and the insurer will provide Laurus with at
                         least thirty (30) days notice prior to cancellation. It
                         shall instruct the insurance carriers that in the event
                         of any loss thereunder, the carriers shall make payment
                         for such loss to Laurus and not to the  Company  and/or
                         the Eligible  Subsidiaries,  as applicable,  and Laurus
                         jointly.  If any  insurance  losses  are paid by check,
                         draft  or  other  instrument  payable  to  the  Company
                         and/and  Laurus   jointly,   Laurus  may  endorse,   as
                         applicable,   the   Company's   and/or   the   Eligible
                         Subsidiaries'  name thereon and do such other things as
                         Laurus may deem  advisable  to reduce the same to cash.
                         Laurus is hereby  authorized  to adjust and  compromise
                         claims. All loss recoveries received by Laurus upon any
                         such  insurance may be applied to the  Obligations,  in
                         such  order  as  Laurus  in its sole  discretion  shall
                         determine  or shall  otherwise  be delivered to Company
                         and/or the Eligible  Subsidiaries,  as applicable,  for
                         the  benefit  of  the  Company   and/or  the   Eligible
                         Subsidiaries,  as applicable. Any surplus shall be paid
                         by Laurus to Company and/or the Eligible  Subsidiaries,
                         as  applicable,  for the benefit of the Company  and/or
                         the Eligible Subsidiaries, as applicable, or applied as
                         may  be  otherwise  required  by  law.  Any  deficiency
                         thereon  shall be paid by  Company  and to  Laurus,  on
                         demand.

                  (d)    Intellectual  Property. It shall maintain in full force
                         and  effect  its   corporate   existence,   rights  and
                         franchises  and all  licenses  and other  rights to use
                         Intellectual  Property  owned  or  possessed  by it and
                         reasonably deemed to be necessary to the conduct of its
                         business.

                  (e)    Properties.  It  shall  keep  its  properties  in  good
                         repair,  working order and condition,  reasonable  wear
                         and  tear  excepted,  and  from  time to time  make all
                         needful  and proper  repairs,  renewals,  replacements,
                         additions and improvements thereto; and it shall at all
                         times comply with each provision of all leases to which

                                      -31-
<PAGE>

                         it is a party or under  which it  occupies  property if
                         the  breach  of  such  provision  could  reasonably  be
                         expected to have a Material Adverse Effect.

                  (f)    Confidentiality.  It shall not  disclose,  and will not
                         include in any public announcement, the name of Laurus,
                         unless  expressly  agreed to by  Laurus  or unless  and
                         until such  disclosure is required by law or applicable
                         regulation,  and  then  only  to  the  extent  of  such
                         requirement. Notwithstanding the foregoing, the Company
                         may  disclose  Laurus'  identity  and the terms of this
                         Agreement  to its  current  and  prospective  debt  and
                         equity financing sources.

                  (g)    Required  Approvals.  It shall  not  without  the prior
                         written  consent of Laurus,  which consent shall not be
                         unreasonably  withheld  (i) sell or  assign  any of the
                         Mortgages;  (ii)  create,  incur,  assume  or suffer to
                         exist  any  indebtedness   (exclusive  of  trade  debt)
                         whether  secured or unsecured  other than the Company's
                         indebtedness to Laurus and as set forth on Schedule "P"
                         attached  hereto and made a part  hereof;  (iii) cancel
                         any debt  owing to it in  excess  of  US$50,000  in the
                         aggregate  during  any 12 month  period;  (iv)  assume,
                         guarantee,  endorse or  otherwise  become  directly  or
                         contingently  liable in connection with any obligations
                         of  any  other  Person,   except  the   endorsement  of
                         negotiable  instruments by it for deposit or collection
                         or  similar  transactions  in the  ordinary  course  of
                         business;  (v) directly or indirectly  declare,  pay or
                         make any dividend or  distribution  on any class of its
                         Stock or apply any of its funds,  property or assets to
                         the purchase,  redemption or other retirement of any of
                         its or its Stock  outstanding  on the date  hereof,  or
                         issue  any  preferred  stock;  (vi)  purchase  or  hold
                         beneficially any Stock or other securities or evidences
                         of  indebtedness  of, make or permit to exist any loans
                         or advances to, or make any  investment  or acquire any
                         interest whatsoever in, any other Person, including any
                         partnership  or  joint   venture,   except  (x)  travel
                         advances,  and (y) loans to its officers and  employees
                         not   exceeding   at  any  one  time  an  aggregate  of
                         US$10,000;   (vii)   create  or  permit  to  exist  any
                         Subsidiary,   unless   such   new   Subsidiary   is   a
                         wholly-owned  Subsidiary and is designated by Laurus as
                         either a  co-borrower  or guarantor  hereunder and such
                         Subsidiary   shall   have   entered   into   all   such
                         documentation  required by Laurus,  including,  without
                         limitation,   to  grant  to  Laurus  a  first  priority
                         perfected  security  interest in  substantially  all of
                         such  Subsidiary's  assets to secure  the  Obligations;
                         (viii) directly or indirectly,  prepay any indebtedness
                         (other  than to Laurus  and in the  ordinary  course of
                         business),  or repurchase,  redeem, retire or otherwise
                         acquire any  indebtedness  (other than to Laurus and in
                         the  ordinary  course  of  business)   except  to  make
                         scheduled  payments of principal and interest  thereof;
                         (ix)  enter  into any  merger,  consolidation  or other
                         reorganization with or into any other Person or acquire
                         all or a portion  of the  assets or Stock of any Person
                         or permit any other Person to consolidate with or merge
                         with it,  unless (1) the Company or any of the Eligible
                         Subsidiaries is the surviving  entity of such merger or
                         consolidation,  (2) no Event  of  Default  shall  exist
                         immediately  prior to and after  giving  effect to such
                         merger or  consolidation,  (3) the  Company  and/or the
                         Eligible Subsidiaries shall have provided Laurus copies
                         of  all  documentation   relating  to  such  merger  or
                         consolidation  and (4) the Company  and/or the Eligible
                         Subsidiaries  shall have provided  Laurus with at least
                         thirty (30) days' prior  written  notice of such merger
                         or  consolidation;  (x) materially change the nature of

                                      -32-
<PAGE>

                         the  business in which it is  presently  engaged;  (xi)
                         become subject to (including,  without  limitation,  by
                         way of amendment to or  modification  of) any agreement
                         or  instrument  which by its  terms  would  (under  any
                         circumstances)   restrict  its  right  to  perform  the
                         provisions  of this  Agreement or any of the  Ancillary
                         Agreements;  (xii)  change its fiscal  year or make any
                         changes in accounting treatment and reporting practices
                         without  prior  written  notice  to  Laurus  except  as
                         required by GAAP or in the tax  reporting  treatment or
                         except  as  required  by law;  (xiii)  enter  into  any
                         transaction  with any employee,  director or Affiliate,
                         except in the ordinary course on arms-length  terms; or
                         (xiv) bill  Accounts  under any name except the present
                         name of the Company and the Eligible Subsidiaries, (xv)
                         sell,  lease,  transfer or otherwise  dispose of any of
                         its  properties or assets,  or any of the properties or
                         assets  of its  Subsidiaries,  except  for  (1)  sales,
                         leases,  transfer or dispositions by the Company to any
                         Eligible  Subsidiary,  (2) the sale of Inventory in the
                         ordinary  course of business and (3) the disposition or
                         transfer in the ordinary  course of business during any
                         fiscal year of obsolete and worn-out Equipment and only
                         to the  extent  that  (x)  the  proceeds  of  any  such
                         disposition are used to acquire  replacement  Equipment
                         which is  subject to Laurus'  first  priority  security
                         interest  or are used to repay  Loans or to pay general
                         corporate expenses,  or (y) following the occurrence of
                         an Event of  Default  which  continues  to  exist,  the
                         proceeds of which are  remitted to Laurus to be held as
                         cash collateral for the Obligations.

                  (h)    Opinion.  On the  Closing  Date,  it shall  deliver  to
                         Laurus an  opinion  with  respect  to,  inter  alia (i)
                         corporate   authority,   execution  and  delivery  (ii)
                         enforceability  of this  Agreement  and  the  Ancillary
                         Agreements  and  (iii)  enforceability  of  the  Sample
                         Closing  Documents,  the Beneficial  Assignment and the
                         Acknowledgement  and  Direction,  acceptable  to Laurus
                         from the  Company's  legal  counsel.  The Company  will
                         provide,  at the  Company's  expense,  such other legal
                         opinions in the future as are reasonably  necessary for
                         the exercise of the Warrant.

                  (i)    Legal Name, etc. It shall not, without providing Laurus
                         with 30 days prior written notice,  change (i) its name
                         as  it   appears  in  the   official   filings  in  the
                         jurisdiction  of its  organization,  (ii)  the  type of
                         legal   entity   it   is,   (iii)   its    organization
                         identification  number,  if any, issued by its province
                         of organization, (iv) its jurisdiction of organization,
                         or (v) amend its certificate of incorporation,  by-laws
                         or other organizational document.

                  (j)    Compliance  with Laws. The operation of its business is
                         and shall  continue to be in compliance in all material
                         respects with all applicable federal, provincial, state
                         and local laws, rules and ordinances,  including to all
                         laws, rules,  regulations and orders relating to taxes,
                         payment and withholding of payroll taxes,  employer and
                         employee  contributions and similar items,  securities,
                         employee  retirement  and  welfare  benefits,  employee
                         health and safety and environmental matters.

                  (k)    Notices. It shall promptly inform Laurus in writing of:
                         (i)   the   commencement   of   all   proceedings   and
                         investigations  by or before  and/or the receipt of any
                         notices from, any governmental or nongovernmental  body
                         and all actions and  proceedings in any court or before
                         any  arbitrator  against or in any way  concerning  any
                         event which could reasonably be expected to have singly

                                      -33-
<PAGE>

                         or in the aggregate,  a Material  Adverse Effect;  (ii)
                         any  change  which  has  had,  or could  reasonably  be
                         expected to have, a Material Adverse Effect;  (iii) any
                         Event of Default which is  continuing,  or any Default;
                         and  (iv)  any  default  or any  event  which  with the
                         passage  of time or  giving  of  notice  or both  would
                         constitute  a  default  under  any  agreement  for  the
                         payment  of money to which it is a party or by which it
                         or any of its  properties  may be bound  the  breach of
                         which would have a Material Adverse Effect.

21.      Company's Covenants

         The Company hereby covenants to Laurus as follows:

                  (a)    Cease Trade  Orders.  It shall advise  Laurus  promptly
                         after it receives  notice of issuance by the SEC or any
                         other regulatory  authority of any cease trade order or
                         of any order  preventing or suspending  any offering of
                         any securities of the Company,  or of the suspension of
                         the  qualification  of the Common  Stock of the Company
                         for  offering  or  sale  in  any  jurisdiction,  or the
                         initiation of any proceeding for any such purpose.

                  (b)    Listing.  It shall promptly  secure,  but no later than
                         one  hundred  and  twenty  calendar  days   immediately
                         following   the   Filing   Date  (as   defined  in  the
                         Registration   Rights   Agreement)   the   listing   or
                         quotation, as applicable, of the shares of Common Stock
                         issuable upon exercise of the Warrants on the Principal
                         Market upon which  shares of Common Stock are listed or
                         quoted,  as applicable  (subject to notice of issuance)
                         and  shall  maintain  such  listing  or  quotation,  as
                         applicable, so long as any other shares of Common Stock
                         shall  be  so  listed  or  quoted.  The  Company  shall
                         maintain  the  quotation  of its  Common  Stock  on the
                         Principal  Market,  and  will  comply  in all  material
                         respects with the Company's reporting, filing and other
                         obligations  under the bylaws or rules of the  National
                         Association  of  Securities  Dealers  ("NASD")  of such
                         exchange.

                  (c)    Market  Regulations.  It  shall  notify  the  SEC,  the
                         Principal Market and applicable state  authorities,  in
                         accordance with their requirements, of the transactions
                         contemplated  by this  Agreement,  and  shall  take all
                         other  necessary  action  and  proceedings  as  may  be
                         required and  permitted  by  applicable  law,  rule and
                         regulation,  for the legal and  valid  issuance  of the
                         Securities  to  Laurus  and  promptly   provide  copies
                         thereof to Laurus. (d) Reporting Requirements. It shall
                         timely  file with the SEC all  reports  required  to be
                         filed  pursuant  to the US  Securities  Act and refrain
                         from  terminating  its status as an issuer  required by
                         the US Securities Act to file reports  thereunder  even
                         if the US  Securities  Act or the rules or  regulations
                         thereunder would permit such termination.

                  (e)    Reissuance  of  Securities.  The Company  shall reissue
                         certificates  representing  the Securities  without the
                         legends  set forth in  Section 49 below at such time as
                         the  holder  thereof  is  permitted  to dispose of such
                         Securities  pursuant  to Rule  144(d)  or 144(k) of the

                                      -34-
<PAGE>

                         U.S. Securities Act, as applicable.  The Company agrees
                         to cooperate with Laurus in connection with all resales
                         pursuant  to Rule  144(d) or Rule  144(k)  and  provide
                         legal   opinions   necessary   to  allow  such  resales
                         provided,   the  Company   and  its   counsel   receive
                         reasonably  requested  representations  from Laurus and
                         broker, if any.

                  (f)    Offering  Restrictions.  Except as previously disclosed
                         in the SEC  Reports or in the  Exchange  Act Filings or
                         pursuant to stock or stock options granted to employees
                         or directors  of the  Company,  neither the Company nor
                         any  of  its  Subsidiaries  will,  prior  to  the  full
                         repayment of the Secured  Revolving Note (together with
                         all  accrued  and  unpaid  interest  thereon  and other
                         amounts accrued,  deemed payable or owing  thereunder),
                         (i)  issue or enter  into any  agreement  to issue  any
                         freely tradeable securities with exercise or conversion
                         rates or pricing terms  subject to downward  adjustment
                         from time to time following  issuance upon a decline in
                         the market price of the Company's  Common  Shares;  and
                         (ii)  issue or enter  into any  agreement  to issue any
                         freely tradeable securities with exercise or conversion
                         rates  or  pricing  terms  corresponding  or  otherwise
                         determined  with  reference  to the market price of the
                         Company's  Common  Shares  from time to time  following
                         issuance,  (it  being  understood  and  agreed  that  a
                         security  which could,  by exercise or  conversion,  by
                         prospectus  qualification  or otherwise,  become freely
                         tradeable   will  be  considered  a  freely   tradeable
                         security for the purposes hereof).

                  (g)    Authorization  and  Reservation of Shares.  The Company
                         shall at all  times  have  authorized  and  reserved  a
                         sufficient  number of shares of Common Stock to provide
                         for the exercise of the Warrant in full.

                  (h)    Financing Right of First Refusal.

                         (i)    It  hereby  grants  to  Laurus  a right of first
                                refusal to provide any Additional  Financing (as
                                defined  below) to be issued by the Company (the
                                "Additional Financing Parties"),  subject to the
                                following terms and  conditions.  From and after
                                the date hereof,  prior to the incurrence of any
                                additional   indebtedness  and/or  the  sale  or
                                issuance   of  any  equity   interests   of  the
                                Additional  Financing  Parties  (an  "Additional
                                Financing"), Company shall notify Laurus of such
                                Additional  Financing.  In connection therewith,
                                Company shall submit a fully executed term sheet
                                (a  "Proposed  Term  Sheet")  to Laurus  setting
                                forth the terms,  conditions  and pricing of any
                                such Additional  Financing (such financing to be
                                negotiated on "arm's length" terms and the terms
                                thereof to be negotiated in good faith) proposed
                                to be entered into by the  Additional  Financing
                                Parties.  Laurus  shall have the right,  but not
                                the  obligation,  to deliver to Company  its own
                                proposed  term sheet (the  "Laurus  Term Sheet")
                                setting  forth  the terms  and  conditions  upon
                                which  Laurus  would be willing to provide  such
                                Additional Financing to the Additional Financing
                                Parties.  The Laurus  Term Sheet  shall  contain
                                terms  no  less  favourable  to  the  Additional
                                Financing   Parties   than  those   outlined  in
                                Proposed  Term Sheet.  Laurus  shall  deliver to
                                Company  the  Laurus   Term  Sheet   within  ten
                                Business  Days of receipt of each such  Proposed

                                      -35-
<PAGE>

                                Term Sheet. If the provisions of the Laurus Term
                                Sheet  are  at  least  as   favourable   to  the
                                Additional  Financing  Parties as the provisions
                                of  the  Proposed  Term  Sheet,  the  Additional
                                Financing   Parties   shall   enter   into   and
                                consummate the Additional Financing  transaction
                                outlined in the Laurus Term Sheet.

                         (ii)   It shall not agree,  directly or indirectly,  to
                                any restriction with any Person which limits the
                                ability of Laurus to  consummate  an  Additional
                                Financing with it.

22.      Further Assurances.
         -------------------

         At any time and from time to time,  upon the written  request of Laurus
and at the  sole  expense  of  Company,  each of the  Company  and the  Eligible
Subsidiaries  shall  promptly  and duly  execute  and  deliver  any and all such
further  instruments  and documents  and take such further  action as Laurus may
request (a) to obtain the full  benefits  of this  Agreement  and the  Ancillary
Agreements,  (b)  to  protect,  preserve  and  maintain  Laurus'  rights  in the
Collateral  and under this Agreement or any Ancillary  Agreement,  and/or (c) to
enable Laurus to exercise all or any of the rights and powers herein  granted or
any Ancillary Agreement.

23.      Representations, Warranties and Covenants of Laurus.
         ----------------------------------------------------

         Laurus  hereby  represents,  warrants  and  covenants to the Company as
follows:

                  (a)    Requisite Power and Authority. Laurus has all necessary
                         power and authority under all applicable  provisions of
                         law to  execute  and  deliver  this  Agreement  and the
                         Ancillary Agreements and to carry out their provisions.
                         All  corporate  action on Laurus' part required for the
                         lawful execution and delivery of this Agreement and the
                         Ancillary  Agreements  have been or will be effectively
                         taken prior to the Closing Date.  Upon their  execution
                         and   delivery,   this   Agreement  and  the  Ancillary
                         Agreements  shall be valid and binding  obligations  of
                         Laurus,  enforceable  in  accordance  with their terms,
                         except  (a)  as  limited  by   applicable   bankruptcy,
                         insolvency, reorganization, moratorium or other laws of
                         general application affecting enforcement of creditors'
                         rights,  and (b) as limited by  general  principles  of
                         equity that restrict the  availability of equitable and
                         legal remedies.

                  (b)    Investment Representations and Covenants.
                         -----------------------------------------

                         (i)    Laurus is  resident in the  jurisdiction  of the
                                Cayman Islands.

                         (ii)   Laurus   is   acquiring   the   Securities   for
                                investment only and not with a view to resale or
                                distribution  in  violation  of  any  securities
                                laws.

                         (iii)  Laurus is not a party to,  and is not  acting in
                                concert  with a person  who is party to:  (A) an
                                agreement   to   transfer   Laurus'   legal   or
                                beneficial interest in the Securities; or (B) an
                                agreement to grant a  participating  interest in
                                the Securities.

                                      -36-
<PAGE>

                         (iv)   As  the  Securities   purchased   hereunder  are
                                subject  to  resale  restrictions  under  the US
                                Securities  Act,  Laurus  shall  comply with all
                                securities  laws  concerning  any  resale of the
                                Securities purchased hereunder and shall consult
                                with  his,  her or its own legal  advisors  with
                                respect to such compliance.

                         (v)    If  required  by  applicable   securities  laws,
                                Laurus will execute, deliver, file and otherwise
                                assist  the  Company  in  filing  such  reports,
                                undertakings and other documents with respect to
                                the  issuance  of  the   Securities  as  may  be
                                required.

                         (vi)   Laurus is purchasing the Securities as principal
                                for its own  account  and  not as a  nominee  or
                                agent.

                         (vii)  Laurus  is an  accredited  investor  within  the
                                meaning of  Regulation D under the US Securities
                                Act.

                         (viii) Laurus understands that the Securities are being
                                offered and sold  pursuant to an exemption  from
                                registration  contained in the US Securities Act
                                based  in  part  upon  Laurus'   representations
                                contained in this Agreement,  including, without
                                limitation,   that  Laurus  is  an   "accredited
                                investor"  within the  meaning of  Regulation  D
                                under the US Securities Act.

                         (ix)   Laurus  confirms that it has received or has had
                                full access to all the  information it considers
                                necessary  or  appropriate  to make an  informed
                                investment  decision with respect to the Secured
                                Revolving  Note and the Warrant to be  purchased
                                by it  under  this  Agreement  and  the  Warrant
                                Shares  acquired by it upon the  exercise of the
                                Warrant. Laurus further confirms that it has had
                                an  opportunity  to ask  questions  and  receive
                                answers from the Company regarding the Company's
                                and its Subsidiaries'  business,  management and
                                financial  affairs and the terms and  conditions
                                of this Agreement,  the Secured  Revolving Note,
                                the  Warrant  and the  Securities  and to obtain
                                additional   information   (to  the  extent  the
                                Company  possessed  such  information  or  could
                                acquire  it  without   unreasonable   effort  or
                                expense)  necessary  to verify  any  information
                                furnished  to  Laurus  or to  which  Laurus  had
                                access.

                         (x)    Laurus  understands that the Securities have not
                                been  and will not be  registered  under  the US
                                Securities   Act   or   any   applicable   state
                                securities  laws and that the sale  contemplated
                                hereby is being made in reliance on an exemption
                                from registration therefrom.

                         (xi)   Laurus   acknowledges   that   Laurus   has  not
                                purchased  the  Securities  as a  result  of any
                                general  solicitation or general advertising (as
                                those terms are used in Regulation D), including
                                advertisements,   articles,   notices  or  other

                                      -37-
<PAGE>

                                communications   published  in  any   newspaper,
                                magazine or similar  media,  or  broadcast  over
                                radio,    television    or   other    forms   of
                                telecommunication,  including electronic display
                                (such  as  the  Internet),  or  any  seminar  or
                                meeting  whose  attendees  have been  invited by
                                general solicitation or general advertising.

                         (xii)  Laurus has substantial  experience in evaluating
                                and investing in private placement  transactions
                                of  securities  in  companies   similar  to  the
                                Company so that it is capable of evaluating  the
                                merits  and  risks  of  its  investment  in  the
                                Company and has the  capacity to protect its own
                                interests. Laurus must bear the economic risk of
                                this investment until the Securities are sold.

                         (xiii) By  reason  of  its,  or  of  its   management's
                                business and  financial  experience,  Laurus has
                                the capacity to evaluate the merits and risks of
                                its  investment in the Secured  Revolving  Note,
                                the Warrant,  and the  Securities and to protect
                                its  own  interests  in   connection   with  the
                                transactions  contemplated in this Agreement and
                                the Related Agreements.

                         (xiv)  In the event that Laurus becomes an "insider" or
                                "control  person"  of the  Company  (within  the
                                meaning of applicable securities laws) or in the
                                event  that  a  nominee  of  Laurus   becomes  a
                                director or officer of the Company or any of its
                                Subsidiaries,  Laurus shall notify the Principal
                                Market thereof and shall file with the Principal
                                Market any personal  information  forms required
                                by reason thereof.

                  (c)    Shorting.  Neither  Laurus nor any of its Affiliates or
                         investment  partners  has,  will,  or  will  cause  any
                         Person,  to  directly  engage in  "short  sales" of the
                         Company's Common Stock as long as the Secured Revolving
                         Note shall be outstanding.

                  (d)    Patriot  Act.  Laurus  certifies  that,  to the best of
                         Laurus' knowledge,  Laurus has not been designated, and
                         is not owned or controlled,  by a "suspected terrorist"
                         as defined in Executive  Order  13224.  Laurus seeks to
                         comply  with  all  applicable  laws  concerning   money
                         laundering  and related  activities.  In furtherance of
                         those efforts,  Laurus hereby represents,  warrants and
                         covenants  that:  (i) none of the cash or property that
                         Laurus  will use to make the Loans has been or shall be
                         derived  from,  or  related  to, any  activity  that is
                         deemed  criminal  under United  States law; and (ii) no
                         disbursement  by Laurus to the  Company  to the  extent
                         within  Laurus'  control,  shall cause  Laurus to be in
                         violation  of the United  States Bank  Secrecy Act, the
                         United States  International  Money Laundering  Control
                         Act of 1986 or the United  States  International  Money
                         Laundering  Abatement and Anti-Terrorist  Financing Act
                         of  2001  or the  Canadian  Proceeds  of  Crime  (Money
                         Laundering and Terrorist  Financing  Act.  Laurus shall
                         promptly   notify   the   Company   if  any  of   these
                         representations   ceases   to  be  true  and   accurate
                         regarding Laurus.  Laurus agrees to provide the Company
                         any additional  information  regarding  Laurus that the
                         Company   deems   necessary  or  convenient  to  ensure
                         compliance with all applicable  laws  concerning  money
                         laundering and similar  activities.  Laurus understands
                         and agrees  that if at any time it is  discovered  that
                         any of the foregoing  representations are incorrect, or
                         if otherwise  required by applicable  law or regulation
                         related to money laundering similar activities,  Laurus

                                      -38-
<PAGE>

                         may undertake  appropriate actions to ensure compliance
                         with  applicable law or  regulation,  including but not
                         limited to  segregation  and/or  redemption  of Laurus'
                         investment in the Company.  Laurus further  understands
                         that the Company may release  information  about Laurus
                         and, if applicable,  any underlying  beneficial owners,
                         to  proper  authorities  if the  Company,  in its  sole
                         discretion, determines that it is in the best interests
                         of  the  Company  in  light  of   relevant   rules  and
                         regulations under the laws set forth in subsection (ii)
                         above.

24.      Power of Attorney.
         ------------------

         In the event of an Event of Default  which is  continuing,  each of the
Company and the  Eligible  Subsidiaries  hereby  appoints  Laurus,  or any other
Person whom Laurus may designate as the Company's and the Eligible  Subsidiary's
attorney,  with  power  to:  (i)  endorse  the  Company's  and/or  the  Eligible
Subsidiary's name on any checks,  notes,  acceptances,  money orders,  drafts or
other forms of payment or security that may come into Laurus'  possession;  (ii)
sign the  Company's  and/or the  Eligible  Subsidiary's  name on any  invoice or
statement  of  account  relating  to  any  Eligible   Mortgage,   schedules  and
assignments of Eligible Mortgages,  notices of assignment,  financing statements
and other  public  records,  and notices to or from  Consumer  Borrowers;  (iii)
verify the validity, amount or any other matter relating to any Account by mail,
telephone,  telegraph or otherwise with Consumer  Borrowers;  (iv) do all things
necessary to carry out this Agreement,  any Ancillary  Agreement and all related
documents;  and (v) on or after the occurrence and during the continuation of an
Event of Default,  notify the post office  authorities to change the address for
delivery of the Company's  and/or the Eligible  Subsidiary's  mail to an address
designated by Laurus, and to receive,  open and dispose of all mail addressed to
the  Company  and/or the  Eligible  Subsidiary.  The  Company  and the  Eligible
Subsidiary  hereby  ratifies  and  approves  all acts of the  attorney.  Neither
Laurus,  nor the  attorney  will be liable for any acts or  omissions or for any
error of  judgment  or mistake of fact or law,  except for gross  negligence  or
wilful misconduct. This power, being coupled with an interest, is irrevocable so
long as Laurus has a security interest and until the Obligations have been fully
satisfied.

25.      Term of Agreement.
         ------------------

         Laurus'  agreement  to make Loans and extend  financial  accommodations
under  and in  accordance  with the  terms of this  Agreement  or any  Ancillary
Agreement  shall  continue in full force and effect until the  expiration of the
Term. At Laurus' election  following the occurrence of an Event of Default which
is  continuing,  Laurus may terminate  this  Agreement.  The  termination of the
Agreement  shall not affect any of Laurus'  rights  hereunder  or any  Ancillary
Agreement  and the  provisions  hereof and  thereof  shall  continue to be fully
operative until all transactions  entered into,  rights or interests created and
the  Obligations  have been  irrevocably  disposed of,  concluded or liquidated.
Notwithstanding  the foregoing,  Laurus shall release its security  interests at
any time after  thirty (30) days notice  upon  irrevocable  payment to it of all
Obligations if the Company shall have provided  Laurus with an executed  release
of any and all claims which the Company may have or  thereafter  have under this
Agreement and all Ancillary Agreements.

26.      Termination of Lien.
         --------------------

         The Liens and rights  granted  to Laurus  hereunder  and any  Ancillary
Agreements  and  the  financing  statements  filed  in  connection  herewith  or
therewith  shall  continue  in  full  force  and  effect,   notwithstanding  the

                                      -39-
<PAGE>

termination  of this  Agreement or the fact that the Company's  account may from
time to time be  temporarily  in a zero or  credit  position,  until  all of the
Obligations  have been paid or performed in full after the  termination  of this
Agreement.  Laurus shall not be required to send  termination  statements to the
Company, or to file them with any filing office, unless and until this Agreement
and the Ancillary Agreements shall have been terminated in accordance with their
terms and all  Obligations  indefeasibly  paid in full in immediately  available
funds.

27.      Discharge
         ---------

         Upon the entire  repayment  of an Advance and the  satisfaction  of all
Obligations  of the Borrower and the Eligible  Subsidiaries  in connection  with
such Advance, Laurus shall execute and deliver a re-assignment of the Beneficial
Assignment  to the party so  directed  by  Reliant  Canada in the form  attached
hereto as Exhibit "L" (the "Re-Assignment").

28.      Events of Default.
         ------------------

         The  occurrence of any of the following  shall  constitute an "Event of
Default":

                  (a)    failure to make payment of any of the Obligations  when
                         required hereunder, and, in any such case, such failure
                         shall continue for a period of three (3) days following
                         the date upon which any such payment was due;

                  (b)    failure  by  the   Company  or  any  of  the   Eligible
                         Subsidiaries  to pay any Material Taxes when due unless
                         such Material  Taxes are being  contested in good faith
                         by  appropriate  proceedings  and with respect to which
                         adequate  reserves  have been provided on the Company's
                         or the Eligible Subsidiaries' books;

                  (c)    failure to perform under,  and/or committing any breach
                         of, in any  material  respect,  this  Agreement,  which
                         failure or breach shall  continue  without remedy for a
                         period  of  fifteen  (15)  days  after  the  occurrence
                         thereof;

                  (d)    any  representation,  warranty or statement made by the
                         Company and/or the Eligible  Subsidiary  hereunder,  in
                         any Ancillary Agreement, any certificate,  statement or
                         document  delivered pursuant to the terms hereof, or in
                         connection with the  transactions  contemplated by this
                         Agreement should prove to be false or misleading in any
                         material respect on the date as of which made or deemed
                         made;

                  (e)    the  occurrence  of any default (or similar term) under
                         any  indebtedness in the aggregate of US$50,000  beyond
                         the period of grace, if any, provided in any instrument
                         or agreement under which such  indebtedness was created
                         of the Company;

                  (f)    attachments  or levies in excess of  US$100,000  in the
                         aggregate  are  made  upon  the  Company's  and/or  the
                         Eligible Subsidiaries' assets or a judgment is rendered
                         against the Company's and/or the Eligible Subsidiaries'
                         property  involving a liability of more than US$100,000
                         which shall not have been vacated,  discharged,  stayed
                         or  bonded  within  thirty  (30)  days  from the  entry
                         thereof;

                                      -40-
<PAGE>

                  (g)    any  change  in  the  Company's   and/or  the  Eligible
                         Subsidiaries'   condition  or  affairs   (financial  or
                         otherwise)  which in  Laurus'  reasonable,  good  faith
                         opinion,   could  reasonably  be  expected  to  have  a
                         Material Adverse Effect;

                  (h)    any  Lien  created  hereunder  or under  any  Ancillary
                         Agreement for any reason ceases to be or is not a valid
                         and perfected Lien having a first priority interest, as
                         long as such  invalidity or  imperfection  has not been
                         caused by Laurus;

                  (i)    the Company or any of its Subsidiaries  shall (i) apply
                         for,  consent to or suffer to exist the appointment of,
                         or the taking of possession by, a receiver,  custodian,
                         trustee  or  liquidator  of  itself  or  of  all  or  a
                         substantial  part of its property,  (ii) make a general
                         assignment for the benefit of creditors, (iii) commence
                         a voluntary case under the Canadian federal  bankruptcy
                         laws (as now or  hereafter in effect) or the US federal
                         bankruptcy  laws,  (as now or hereafter in effect) (iv)
                         be  adjudicated  a bankrupt  or  insolvent,  (v) file a
                         petition  seeking  to take  advantage  of any other law
                         providing for the relief of debtors,  (vi) acquiesce to
                         without  challenge  within  ten (10) days of the filing
                         thereof,  or failure to have  dismissed  within  thirty
                         (30)  days,  any  petition  filed  against  it  in  any
                         involuntary  case under such bankruptcy  laws, or (vii)
                         take any action for the purpose of effecting any of the
                         foregoing;

                  (j)    the  Company  and/or any of the  Eligible  Subsidiaries
                         shall admit in writing its  inability,  or be generally
                         unable,  to pay its debts as they  become  due or cease
                         operations of its present business;

                  (k)    the  Company  and/or any of the  Eligible  Subsidiaries
                         directly  or  indirectly  sells,  assigns,   transfers,
                         conveys,  or  suffers  or  permits  to occur  any sale,
                         assignment, transfer or conveyance of any assets of the
                         Company and/or the Eligible  Subsidiary or any interest
                         therein, except as permitted herein;

                  (l)    the  occurrence  of a Change of Control with respect to
                         the Company,  unless Laurus has expressly  consented to
                         such Change of Control in writing.

                  (m)    the indictment or threatened  indictment of the Company
                         and/or the Eligible Subsidiary or any executive officer
                         of the Company and/or the Eligible Subsidiary under any
                         criminal   statute,   or   commencement  or  threatened
                         commencement  of criminal or civil  proceeding  against
                         the  Company  and/or  the  Eligible  Subsidiary  or any
                         executive  officer of the Company  and/or the  Eligible
                         Subsidiary  pursuant  to which  statute  or  proceeding
                         penalties  or  remedies  sought  or  available  include
                         forfeiture of any of the property of the Company;

                  (n)    an Event of Default shall occur under and as defined in
                         the Secured  Revolving  Note or in any other  Ancillary
                         Agreement;

                  (o)    the Company and/or the Eligible Subsidiary shall breach
                         any term or  provision  of any  Ancillary  Agreement to
                         which it is a party,  in any material  respect which is
                         not cured  within any  applicable  cure or grace period
                         provided in respect thereof (if any);

                                      -41-
<PAGE>

                  (p)    the Company and/or the Eligible  Subsidiary attempts to
                         terminate or challenge  the validity of this  Agreement
                         or any Ancillary Agreement,  or any proceeding shall be
                         brought to challenge  the validity,  binding  effect of
                         any  Ancillary  Agreement  or any  Ancillary  Agreement
                         ceases  to  be  a  valid,   binding   and   enforceable
                         obligation   of  the   Company   and/or  the   Eligible
                         Subsidiary  (to the  extent  such  Persons  are a party
                         thereto);

                  (q)    an SEC cease trade order or  Principal  Market  trading
                         suspension  of the Common  Stock shall be in effect for
                         five (5)  consecutive  days or five  (5) days  during a
                         period of ten (10) consecutive  days,  excluding in all
                         cases  a  suspension  of  all  trading  on a  Principal
                         Market,  provided  that the Company shall not have been
                         able to cure such trading suspension within thirty (30)
                         days of the notice  thereof or list the Common Stock on
                         another Principal Market within sixty (60) days of such
                         notice; or

                  (r)    Servicer fails to securitize any Mortgage for an amount
                         less than ninety-seven  percent (97%) of the face value
                         of the Mortgage;

                  (s)    Servicer fails to securitize any Mortgage  within three
                         (3) calendar months from the First Advance Date;

                  (t)    5% of the Mortgages are Delinquent Mortgages; or

                  (u)    The Delinquent Mortgages total $500,000 or more.

29.      Remedies.
         ---------

         Following the  occurrence  of an Event of Default which is  continuing,
Laurus  shall  have the right to demand  repayment  in full of all  Obligations,
whether  or not  otherwise  due.  Until  all  Obligations  have  been  fully and
indefeasibly satisfied,  Laurus shall retain its Lien in all Collateral.  Laurus
shall  have,  in  addition  to all  other  rights  provided  herein  and in each
Ancillary Agreement,  all of the rights and remedies of a secured creditor under
the PPSA and the UCC,  and any  remedies as a secured  creditor  under any other
applicable law, and all other legal and equitable  rights to which Laurus may be
entitled.

30.      Waivers.
         --------

         To the full extent  permitted by  applicable  law, the Company and each
Eligible  Subsidiary  hereby  waives (a)  presentment,  demand and protest,  and
notice of presentment,  dishonour, intent to accelerate,  acceleration, protest,
default, non-payment,  maturity, release, compromise,  settlement,  extension or
renewal of any or all of this  Agreement  and the  Ancillary  Agreements  or any
other notes, commercial paper, Accounts, contracts,  Documents and guaranties at
any time held by Laurus on which the Company and/or the Eligible  Subsidiary may
in any way be liable, and hereby ratifies and confirms whatever Laurus may do in
this  regard;  (b) all  rights to notice and a hearing  prior to Laurus'  taking
possession or control of, or to Laurus'  replevy,  attachment or levy upon,  any
Collateral  or any bond or security that might be required by any court prior to
allowing  Laurus to  exercise  any of its  remedies;  and (c) the benefit of all
valuation, appraisal and exemption laws. The Company and the Eligible Subsidiary

                                      -42-
<PAGE>

acknowledge  that it has been  advised by counsel of its choices  and  decisions
with respect to this Agreement,  the Ancillary  Agreements and the  transactions
evidenced hereby and thereby.

31.      Expenses.
         ---------

         The  Company  shall  pay  all  of  Laurus'  reasonable  and  documented
out-of-pocket costs and expenses, including reasonable fees and disbursements of
in-house or outside counsel and appraisers,  in connection with the preparation,
execution and delivery of this  Agreement and the Ancillary  Agreements,  and in
connection with the prosecution or defense of any action, contest, dispute, suit
or  proceeding  concerning  any matter in any way arising out of,  related to or
connected with this Agreement or any Ancillary Agreement. The Company shall also
pay all of Laurus' reasonable fees,  charges,  out-of-pocket costs and expenses,
including fees and  disbursements of counsel and appraisers,  in connection with
(a) the preparation, execution and delivery of any waiver, any amendment thereto
or consent proposed or executed in connection with the transactions contemplated
by this Agreement or the Ancillary Agreements, (b) Laurus' obtaining performance
of the Obligations under this Agreement and any Ancillary Agreements, including,
but not limited to, the  enforcement or defense of Laurus'  security  interests,
assignments of rights and Liens hereunder as valid perfected security interests,
(c) any  attempt to  inspect,  verify,  protect,  collect,  sell,  liquidate  or
otherwise  dispose of any Collateral,  (d) any appraisals or reappraisals of any
property (real or personal)  pledged to Laurus by the Company as Collateral for,
or any other Person as security for, the  Obligations  hereunder,  (e) all costs
associated with the Re-assignment and anything in relation to the Re-assignment,
and (f) any  consultations in connection with any of the foregoing.  The Company
shall also pay Laurus'  customary bank charges for all bank services  (including
wire transfers) performed or caused to be performed by Laurus for the Company at
the  Company's  request or in connection  with the  Company's  loan account with
Laurus.  All such costs and expenses  together  with all filing,  recording  and
search  fees,  taxes and  interest  payable by the  Company  to Laurus  shall be
payable  on demand and shall be  secured  by the  Collateral.  If any tax by any
Governmental Authority is or may be imposed on or as a result of any transaction
between  the Company  and Laurus on the other  hand,  which  Laurus is or may be
required to withhold or pay, the Company  indemnifies  and holds Laurus harmless
in respect of such taxes, and the Company will repay to Laurus the amount of any
such  taxes  which  shall be  charged to the  Company's  account;  and until the
Company  shall  furnish  Laurus with  indemnity  therefor (or supply Laurus with
evidence  satisfactory to it that due provision for the payment thereof has been
made),  Laurus may hold without  interest any balance  standing to the Company's
credit and Laurus shall retain its Liens in any and all Collateral.

32.      Assignment By Laurus.
         ---------------------

         Laurus may assign any or all of the  Obligations  together  with any or
all of the security therefor to any Person,  without  restriction,  and any such
transferee  shall succeed to all of Laurus'  rights with respect  thereto.  Upon
such  transfer,  Laurus  shall  be  released  from  all  responsibility  for the
Collateral  to the extent same is assigned  to any  transferee.  Laurus may from
time to time sell or otherwise  grant  participations  in any of the Obligations
and the  holder of any such  participation  shall,  subject  to the terms of any
agreement  between  Laurus and such holder,  be entitled to the same benefits as
Laurus with respect to any security for the  Obligations in which such holder is
a participant. The Company agrees that each such holder may exercise any and all
rights  of  banker's  lien,   set-off  and  counterclaim  with  respect  to  its
participation  in the  Obligations  as fully as though the Company were directly
indebted to such holder in the amount of such participation.

                                      -43-
<PAGE>

33.      No Waiver; Cumulative Remedies.
         -------------------------------

         Failure by Laurus to exercise  any right,  remedy or option  under this
Agreement,  any Ancillary  Agreement or any supplement  hereto or thereto or any
other  agreement  between or among the  Company and Laurus or delay by Laurus in
exercising the same,  will not operate as a waiver;  no waiver by Laurus will be
effective  unless  it is in  writing  and then only to the  extent  specifically
stated.  Laurus'  rights and remedies  under this  Agreement  and the  Ancillary
Agreements  will be  cumulative  and not  exclusive of any other right or remedy
which Laurus may have.

34.      Application of Payments.
         ------------------------

         The Company  irrevocably  waives the right to direct the application of
any and all payments at any time or times  hereafter  received by Laurus from or
on the Company's  behalf and the Company hereby  irrevocably  agrees that Laurus
shall  have the  continuing  exclusive  right to apply and  reapply  any and all
payments  received  at any  time or  times  hereafter  against  the  Obligations
hereunder in such  reasonably  appropriate  manner as Laurus may deem  advisable
notwithstanding any entry by Laurus upon any of Laurus' books and records.

35.      Indemnity.
         ----------

         The Company  hereby  indemnifies  and holds Laurus,  and its respective
affiliates,  employees,  attorneys and agents (each, an  "Indemnified  Person"),
harmless  from and  against  any and all suits,  actions,  proceedings,  claims,
damages,  losses,  liabilities  and  expenses  of any kind or nature  whatsoever
(including  legal fees and  disbursements  and other costs of  investigation  or
defense,  including  those  incurred upon any appeal) which may be instituted or
asserted  against or  incurred by any such  Indemnified  Person as the result of
credit having been extended, suspended or terminated under this Agreement or any
of  the  Ancillary  Agreements  or  with  respect  to the  execution,  delivery,
enforcement,  performance and administration of, or in any other way arising out
of or  relating  to,  this  Agreement,  the  Ancillary  Agreements  or any other
documents or  transactions  contemplated by or referred to herein or therein and
any actions or failures to act with respect to any of the  foregoing,  except to
the extent that any such indemnified  liability is finally determined by a court
of competent jurisdiction to have resulted solely from such Indemnified Person's
gross  negligence  or  wilful   misconduct.   NO  INDEMNIFIED  PERSON  SHALL  BE
RESPONSIBLE  OR LIABLE TO ANY COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
ASSIGNEE  OR THIRD  PARTY  BENEFICIARY  OR ANY  OTHER  PERSON  ASSERTING  CLAIMS
DERIVATIVELY   THROUGH  SUCH  PARTY,  FOR  INDIRECT,   PUNITIVE,   EXEMPLARY  OR
CONSEQUENTIAL  DAMAGES  WHICH MAY BE ALLEGED AS A RESULT OF CREDIT  HAVING  BEEN
EXTENDED,  SUSPENDED  OR  TERMINATED  UNDER  THIS  AGREEMENT  OR  ANY  ANCILLARY
AGREEMENT  OR AS A RESULT OF ANY OTHER  TRANSACTION  CONTEMPLATED  HEREUNDER  OR
THEREUNDER.

                                      -44-
<PAGE>

36.      Revival.
         --------

         The  Company  further  agrees  that to the extent the  Company  makes a
payment or payments to Laurus, which payment or payments or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy act, state, provincial or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made.

37.      Notices.
         --------

         Any notice or request  hereunder  may be given to the Company or Laurus
at the respective  addresses set forth below or as may hereafter be specified in
a notice  designated as a change of address  under this  Section.  Any notice or
request hereunder shall be given by registered or certified mail, return receipt
requested,  hand  delivery,  overnight  mail or  telecopy  (confirmed  by mail).
Notices and requests shall be, in the case of those by hand delivery,  deemed to
have  been  given  when  delivered  to any  officer  of the  party to whom it is
addressed,  in the case of those by mail or overnight mail,  deemed to have been
given three (3) Business Days after the date when  deposited in the mail or with
the overnight mail carrier, and, in the case of a telecopy, when confirmed.

         Notices shall be provided as follows:

             If to Laurus:       Laurus Master Fund, Ltd.
                                 c/o Laurus Capital Management, LLC
                                 825 Third Avenue 14th Fl.
                                 New York, New York 10022
                                 Attention:        John E. Tucker, Esq.
                                 Telephone:        (212) 541-4434
                                 Telecopier:       (212) 541-5800

             With a copy to:     John E. Tucker, Esq.
                                 825 Third Avenue
                                 14th Floor
                                 New York, NY  10022
                                 Facsimile:        (212) 541-4434

             If to the Company:  Reliant Home Warranty Corporation
                                 350 Bay Street
                                 Suite 250
                                 Toronto, Ontario
                                 M5H 2S6
                                 Attention: Kevin Hamilton

or such other address as may be  designated  in writing  hereafter in accordance
with this Section 37 by such Person.

                                      -45-
<PAGE>

38.      Governing Law, Jurisdiction and Waiver of Jury Trial.
         -----------------------------------------------------

                  (a)    THIS  AGREEMENT AND THE ANCILLARY  AGREEMENTS  SHALL BE
                         GOVERNED BY AND  CONSTRUED  AND ENFORCED IN  ACCORDANCE
                         WITH THE LAWS OF THE  STATE OF NEW YORK  APPLICABLE  TO
                         CONTRACTS  MADE AND  PERFORMED  IN SUCH STATE,  WITHOUT
                         REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                  (b)    THE  COMPANY  AND  EACH  ELIGIBLE   SUBSIDIARY   HEREBY
                         CONSENTS  AND AGREES  THAT THE STATE OR FEDERAL  COURTS
                         LOCATED  IN THE  COUNTY OF NEW YORK,  STATE OF NEW YORK
                         SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
                         ANY CLAIMS OR DISPUTES  BETWEEN THE COMPANY  AND/OR THE
                         ELIGIBLE SUBSIDIARIES,  ON THE ONE HAND, AND LAURUS, ON
                         THE OTHER HAND,  PERTAINING TO THIS AGREEMENT OR ANY OF
                         THE ANCILLARY  AGREEMENTS OR TO ANY MATTER  ARISING OUT
                         OF OR RELATED TO THIS AGREEMENT OR ANY OF THE ANCILLARY
                         AGREEMENTS;  PROVIDED,  THAT LAURUS AND THE COMPANY AND
                         EACH ELIGIBLE  SUBSIDIARY  ACKNOWLEDGE THAT ANY APPEALS
                         FROM  THOSE  COURTS  MAY  HAVE TO BE  HEARD  BY A COURT
                         LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW
                         YORK;  AND  FURTHER  PROVIDED,  THAT  NOTHING  IN  THIS
                         AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS
                         FROM  BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
                         OTHER  JURISDICTION  TO  COLLECT  THE  OBLIGATIONS,  TO
                         REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
                         OBLIGATIONS,  OR TO ENFORCE A JUDGMENT  OR OTHER  COURT
                         ORDER  IN  FAVOUR  OF  LAURUS.  THE  COMPANY  AND  EACH
                         ELIGIBLE  SUBSIDIARY  EXPRESSLY SUBMITS AND CONSENTS IN
                         ADVANCE  TO SUCH  JURISDICTION  IN ANY  ACTION  OR SUIT
                         COMMENCED  IN ANY SUCH COURT,  AND THE COMPANY AND EACH
                         ELIGIBLE  SUBSIDIARY  HEREBY WAIVES ANY OBJECTION WHICH
                         IT MAY HAVE BASED UPON LACK OF  PERSONAL  JURISDICTION,
                         IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY AND
                         EACH ELIGIBLE SUBSIDIARY HEREBY WAIVES PERSONAL SERVICE
                         OF THE SUMMONS,  COMPLAINT AND OTHER PROCESS  ISSUED IN
                         ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
                         SUMMONS,  COMPLAINT  AND OTHER  PROCESS  MAY BE MADE BY
                         REGISTERED  OR CERTIFIED  MAIL  ADDRESSED TO COMPANY AT
                         THE ADDRESS SET FORTH IN SECTION 37 AND THAT SERVICE SO
                         MADE  SHALL BE DEEMED  COMPLETED  UPON THE  EARLIER  OF
                         COMPANY'S  ACTUAL  RECEIPT  THEREOF  OR THREE  (3) DAYS
                         AFTER  DEPOSIT  IN  THE  U.S.  MAILS,   PROPER  POSTAGE
                         PREPAID.

                  (c)    THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
                         JUDGE  APPLYING SUCH  APPLICABLE  LAWS.  THEREFORE,  TO
                         ACHIEVE  THE BEST  COMBINATION  OF THE  BENEFITS OF THE
                         JUDICIAL SYSTEM AND OF ARBITRATION,  THE PARTIES HERETO

                                      -46-
<PAGE>

                         WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,  SUIT,
                         OR PROCEEDING  BROUGHT TO RESOLVE ANY DISPUTE,  WHETHER
                         ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS,
                         AND/OR ANY  COMPANY  ARISING  OUT OF,  CONNECTED  WITH,
                         RELATED OR INCIDENTAL TO THE  RELATIONSHIP  ESTABLISHED
                         BETWEEN THEM IN  CONNECTION  WITH THIS  AGREEMENT,  ANY
                         ANCILLARY AGREEMENT OR THE TRANSACTIONS  RELATED HERETO
                         OR THERETO.

39.      Judgment Currency.
         ------------------

         If, for the purpose of  obtaining  or  enforcing  judgment  against the
Company in any court in any  jurisdiction,  it becomes necessary to convert into
any other  currency  (such other  currency  being  hereinafter  in this  section
referred  to as the  "Judgment  Currency")  an amount  due under  this  Security
Agreement in any currency (the  "Obligation  Currency")  other than the Judgment
Currency, the conversion shall be made at the rate of exchange prevailing on the
business day immediately  preceding (a) the date of actual payment of the amount
due, in the case of any proceeding in the courts of New York or in the courts of
any other  jurisdiction  that will give effect to such conversion  being made on
such date, or (b) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other  jurisdiction  (the applicable date as
of which such  conversion is made pursuant to this section being  hereinafter in
this section referred to as the "Judgment Conversion Date").

         If,  in the case of any  proceeding  in the  court of any  jurisdiction
referred  to in the  preceding  paragraph,  there  is a  change  in the  rate of
exchange  prevailing between the Judgment Conversion Date and the date of actual
receipt of the amount due in immediately  available funds, the Company shall pay
such additional  amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment  Currency,
when converted at the rate of exchange  prevailing on the date of payment,  will
produce the amount of the  Obligation  Currency  which could have been purchased
with the amount of the Judgment Currency  stipulated in the judgment or judicial
order at the rate of exchange  prevailing on the Judgment  Conversion  Date. Any
amount due from the Company  under this section  shall be due as a separate debt
and shall not be affected by judgment  being  obtained for any other amounts due
under or in respect of this Security Agreement.

40.      Limitation of Liability.
         ------------------------

         The  Company  acknowledges  and  understands  that in order  to  assure
repayment of the  Obligations  hereunder  Laurus may be required to exercise any
and all of Laurus'  rights and remedies  hereunder  and agrees  that,  except as
limited by applicable  law,  neither  Laurus nor any of Laurus'  agents shall be
liable for acts taken or  omissions  made in  connection  herewith or  therewith
except for actual bad faith, gross negligence or wilful misconduct.

41.      Entire Understanding; Maximum Interest.
         ---------------------------------------

         This  Agreement  and  the  Ancillary   Agreements  contain  the  entire
understanding  among the Company and Laurus as to the subject  matter hereof and
thereof and any promises,  representations,  warranties or guarantees not herein
contained  shall  have no force  and  effect  unless in  writing,  signed by the
Company's and Laurus' respective officers. Neither this Agreement, the Ancillary

                                      -47-
<PAGE>

Agreements,  nor any portion or  provisions  thereof  may be changed,  modified,
amended, waived, supplemented,  discharged, cancelled or terminated orally or by
any course of dealing,  or in any manner  other than by an agreement in writing,
signed by the party to be charged.  Nothing  contained  in this  Agreement,  any
Ancillary  Agreement  or in any  document  referred  to herein or  delivered  in
connection  herewith  shall be deemed to  establish  or require the payment of a
rate of interest or other  charges in excess of the maximum  rate  permitted  by
applicable law. In the event that the rate of interest or dividends  required to
be paid or other  charges  hereunder  exceed the maximum rate  permitted by such
law, any payments in excess of such maximum  shall be credited  against  amounts
owed by the Company to Laurus and thus refunded to the Company.

42.      Severability.
         -------------

         Wherever  possible  each  provision of this  Agreement or the Ancillary
Agreements  shall be  interpreted  in such manner as to be  effective  and valid
under  applicable  law, but if any provision of this  Agreement or the Ancillary
Agreements shall be prohibited by or invalid under applicable law such provision
shall be  ineffective to the extent of such  prohibition or invalidity,  without
invalidating  the  remainder  of  such  provision  or the  remaining  provisions
thereof.

43.      Survival.
         ---------

         The representations,  warranties,  covenants and agreements made herein
shall  survive  any  investigation  made  by  Laurus  and  the  closing  of  the
transactions  contemplated hereby to the extent provided therein. All statements
as to factual matters contained in any certificate or other instrument delivered
by  or on  behalf  of  the  Company  pursuant  hereto  in  connection  with  the
transactions  contemplated  hereby  shall be  deemed to be  representations  and
warranties by the Company hereunder solely as of the date of such certificate or
instrument.  All  indemnities  set forth  herein  shall  survive the  execution,
delivery and termination of this Agreement and the Ancillary  Agreements and the
making and repaying of the Obligations.

44.      Captions.
         ---------

         All captions are and shall be without substantive meaning or content of
any kind whatsoever.

45.      Counterparts; Telecopier Signatures.
         ------------------------------------

         This  Agreement  may be executed in one or more  counterparts,  each of
which  shall  constitute  an  original  and all of which  taken  together  shall
constitute one and the same  agreement.  Any signature  delivered by a party via
telecopier transmission shall be deemed to be any original signature hereto.

46.      Construction.
         -------------

         The parties  acknowledge  that each party and its counsel have reviewed
this Agreement and that the normal rule of  construction  to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.

                                      -48-
<PAGE>

47.      Publicity.
         ----------

         The Company hereby authorizes Laurus to make appropriate  announcements
of the financial  arrangement  entered into by and among the Company and Laurus,
including,  without  limitation,  announcements  which  are  commonly  known  as
tombstones, in such publications and to such selected parties as Laurus shall in
its sole and absolute discretion deem appropriate,  or as required by applicable
law.

48.      Joinder.
         --------

         It is  understood  and agreed that any Person that  desires to become a
party hereunder, or is required to execute a counterpart of this Agreement after
the date hereof pursuant to the  requirements of this Agreement or any Ancillary
Agreement,  shall become a party hereunder by (a) executing a Joinder  Agreement
in form and substance satisfactory to Laurus, (b) delivering supplements to such
exhibits and annexes to this  Agreement and the  Ancillary  Agreements as Laurus
shall  reasonably  request,  and (c) taking all  actions  as  specified  in this
Agreement as would have been taken by the Company and the Eligible  Subsidiaries
had it been an original party to this Agreement, in each case with all documents
required  above to be  delivered  to Laurus and with all  documents  and actions
required above to be taken to the reasonable satisfaction of Laurus.

49.      Legends.
         --------

                  (a)    The Secured Revolving Note shall bear substantially the
                         following legend:

                  THIS NOTE HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF
                  1933, AS AMENDED,  OR ANY STATE SECURITIES LAWS. THIS NOTE MAY
                  NOT BE SOLD,  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
                  ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
                  UNDER SAID ACT AND ANY APPLICABLE  STATE SECURITIES LAWS OR AN
                  OPINION OF COUNSEL  REASONABLY  SATISFACTORY  TO RELIANT  HOME
                  WARRANTY CORPORATION.

                  (b)    The Warrants  shall bear  substantially  the  following
                         legend:

                  THIS  WARRANT  AND THE SHARES OF COMMON  STOCK  ISSUABLE  UPON
                  EXERCISE OF THIS  WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE
                  SECURITIES  ACT OF 1933, AS AMENDED,  OR ANY STATE  SECURITIES
                  LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
                  OF THIS WARRANT MAY NOT BE SOLD,  OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
                  STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
                  STATE  SECURITIES  LAWS OR AN OPINION  OF  COUNSEL  REASONABLY
                  SATISFACTORY  TO RELIANT HOME WARRANTY  CORPORATION  THAT SUCH
                  REGISTRATION IS NOT REQUIRED.

                  [Balance  of page  intentionally  left blank;  signature  page
follows.]

                                      -49-
<PAGE>

         IN WITNESS  WHEREOF,  the  parties  have  executed  this  Security  and
Purchase Agreement as of the date first written above.

                               RELIANT HOME WARRANTY CORPORATION
                                  By:
                                       -----------------------------------------
                                       Name:
                                       Title:
                                  By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                               RELIANT HOME MORTGAGE CANADA INC.
                                  By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                               LAURUS MASTER FUND, LTD
                                  By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                      -50-
<PAGE>

                                     Annex A
                                   Definitions
                                   -----------

 "Accountants" has the meaning given to such term in Section 17(a).

"Acknowledgement  and  Direction"  has the meaning given to such term in Section
9(f).

"Advance"  means a Loan made  available  to the Company by Laurus in  accordance
with Section 4 hereof and upon  satisfaction  of the  conditions  precedent  set
forth in Section 9 hereof;

"Advance Date" means a date upon which an Advance is made.

"Affiliate"  means, with respect to any Person, (a) any other Person (other than
a Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under  common  control  with such Person or (b) any other  Person who is a
director or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person  described  in clause (a) above.  For the  purposes  of this
definition,  control of a Person  shall mean the power  (direct or  indirect) to
direct or cause the  direction  of the  management  and  policies of such Person
whether by contract or otherwise.

"Ancillary  Agreements"  means the Secured  Revolving  Note,  the  Warrant,  the
Subsidiary  Guarantee,  the  Hamilton  Guarantee,  the Security  Documents,  the
Registration  Rights Agreement,  the Escrow Agreement,  the First Advance Escrow
Agreement,  the Overadvance Side Letter, the  Re-assignment,  the Sample Closing
Documents and all other agreements,  instruments, documents, mortgages, pledges,
powers  of  attorney,  consents,   assignments,   contracts,  notices,  security
agreements, trust agreements and guarantees whether heretofore, concurrently, or
hereafter executed by or on behalf of the Company and/or the Eligible Subsidiary
or any other Person or delivered to Laurus, relating to this Agreement or to the
transactions  contemplated  by  this  Agreement  or  otherwise  relating  to the
relationship between or among the Company and Laurus, as each of the same may be
amended, supplemented, restated or otherwise modified from time to time.

"Applicable Laws" means all applicable  federal,  provincial and municipal laws,
statutes,  regulations,  rules, by-laws (including zoning by-laws), policies and
guidelines, and all applicable common law or equitable principles whether now or
hereafter in force and effect.

"Articles" has the meaning given to such term in Section 18(c)(iv).

"Balance Sheet Date" has the meaning given to such term in Section 18(f)(ii).

"Beneficial Assignment" has the meaning given to such term in Section 9(f).

"Books  and  Records"  means  all  books,  records,  board  minutes,  contracts,
licenses,  insurance  policies,  environmental  audits,  business plans,  files,
computer  files,  computer  discs and other data and software  storage and media

                                      -1-
<PAGE>

devices,  accounting  books and records,  financial  statements  (actual and pro
forma),  filings  with  Governmental  Authorities  and any and all  records  and
instruments  relating to the Collateral or otherwise necessary or helpful in the
collection thereof or the realization thereupon.

"Bring Down Certificate" has the meaning given to such term in Section 9(d).

"Business  Day" means a day on which Laurus is open for business and that is not
a Saturday, a Sunday or other day on which banks are required or permitted to be
closed in the State of New York.

"Canadian Pension Plan" means any plan,  program or arrangement  (other than the
Canada  Pension Plan or the Quebec  Pension Plan) that is a pension plan for the
purposes  of any  applicable  pension  benefits  legislation  or any tax laws of
Canada or a province  thereof,  whether or not  registered  under any such laws,
which is  maintained  or  contributed  to by, or to which  there is or may be an
obligation to contribute  by, the Company in respect of any Person's  employment
in Canada with the Company.

"Capital Availability Amount" means US$25,000,000.

 "Change of Control"  means any event or  circumstance  as a result of which (i)
any  "Person" or "group" (as such terms are defined in Sections  13(d) and 14(d)
of the Exchange Act, as in effect on the date hereof),  other than Laurus, is or
becomes the  "beneficial  owner" (as defined in Rules  13(d)-3 and 13(d)-5 under
the Exchange  Act),  directly or  indirectly,  of 35% or more on a fully diluted
basis of the then outstanding  voting equity interest of the Company (other than
a "Person" or "group"  that  beneficially  owns 35% or more of such  outstanding
voting equity  interests of the Company on the date  hereof),  (ii) the board of
directors of the Company  shall cease to consist of a majority of the  Company's
board of directors on the date hereof (or  directors  appointed by a majority of
the board of  directors in effect  immediately  prior to such  appointment),  or
(iii) the Company or any of its  Subsidiaries  merges or  consolidates  with, or
sells all or substantially all of its assets to, any other Person or entity.

"Closing Certificate" has the meaning given to such term in Section 9(b).

"Closing  Date" means the date hereof on which the Company  shall first  receive
proceeds of the Initial Overadvance.

"Collateral"  means all of the Company's and each of its Subsidiaries'  property
and assets,  whether real or personal,  tangible or intangible,  and whether now
owned or hereafter acquired, or in which it now has or at any time in the future
may  acquire  any  right,  title or  interests  including  all of the  following
property in which it now has or at any time in the future may acquire any right,
title or interest:

                  (a)    all Inventory;

                  (b)    all Equipment;

                  (c)    all General Intangibles;

                                      -2-
<PAGE>

                  (d)    all Accounts;

                  (e)    all Deposit Accounts, other bank accounts and all funds
                         on deposit therein;

                  (f)    all Stock;

                  (g)    all Letter-of-Credit Rights;

                  (h)    all Books and Records;

                  (i)    all Intellectual Property;

                  (j)    (i) all money, cash and cash equivalents,  and (ii) all
                         cash  held  as  cash   collateral  to  the  extent  not
                         otherwise  constituting  Collateral,  all other cash or
                         property at any time on deposit  with or held by Laurus
                         for  the   account   of  the   Company   (whether   for
                         safekeeping,    custody,   pledge,    transmission   or
                         otherwise);

                  (k)    all  products  and  Proceeds  of  all  or  any  of  the
                         foregoing,  tort  claims  and  all  claims,  rights  of
                         action,  and other  rights  to  payment  including  (i)
                         insurance  claims  against  third  parties for loss of,
                         damage to, or destruction of, the foregoing  Collateral
                         and (ii)  payments  due or to become due under  leases,
                         rentals  and hires of any or all of the  foregoing  and
                         Proceeds  payable  under,  or  unearned  premiums  with
                         respect to policies of insurance in whatever form;

                  (l)    all Mortgages; and

                  (m)    all Mortgage Loan Documents.

"Common Stock" means the shares of stock  representing the Company common equity
interests.

"Contract  Rate" has the  meaning  given to such term in the  Secured  Revolving
Note.

"Consumer  Borrower" means the borrower under the Mortgage Loan and the owner of
the Mortgage Property against which the Mortgage is registered.

"Default" means any act or event which,  with the giving of notice or passage of
time or both, would constitute an Event of Default.

"Deposit  Accounts" means all deposit accounts now or hereafter held in the name
of any Person, including, without limitation, the Lockboxes.

"Disbursement Letter" means the disbursement letter dated as of the Closing Date
among the Company and Laurus.

"Documents" means all documents of title,  whether negotiable or non-negotiable,
including,  without limitation, all promissory notes, bills of exchange, drafts,
cheques,  warehouse  receipts  and bills of lading which now are or which may at

                                      -3-
<PAGE>

any time in the future be owned by the Company and each of its  Subsidiaries and
all of the right,  title and interest in any of the foregoing  which the Company
now or at any time in the future has or may have.

"Eligible  Mortgage"  means each  Mortgage  Loan  granted  by the  Company or an
Eligible Subsidiary which conforms to the following  criteria:  (a) the Mortgage
Loan  Documents  are   substantially  in  accordance  with  the  Sample  Closing
Documents;  (b) the  Mortgage  has been  registered  on  title  to the  relevant
Mortgage  Property;  (c) a Bring Down Certificate  relating to the Mortgage Loan
shall have been issued and  delivered to Laurus;  (d) a Closing  Certificate  in
relation to the  Mortgage  Loan shall have been issued and  delivered to Laurus;
and (e) a Risk  Management  Certificate  in relation to the Mortgage  Loan shall
have been issued and delivered to Laurus.

"Eligible Subsidiary" means Reliant Canada

"Encumbrances" means any security interest, mortgage, charge, debenture, pledge,
hypothec, lien, assignment by way of security, hypothecation, statutory right of
set-off or other encumbrance or adverse claim,  including,  without  limitation,
any  agreement to give any of the foregoing  and any  conditional  sale or other
title retention agreement or similar financing arrangement.

"Equipment" means all corporeal movable property now owned or hereafter acquired
by any Person,  wherever  located,  including any and all machinery,  apparatus,
equipment,  fittings, furniture,  leasehold improvements,  motor vehicles, fixed
assets and other tangible  movable property (other than Inventory) of every kind
and description that may be now or hereafter used in such Person's operations or
that are owned by such Person or in which such Person may have an interest,  and
all parts, accessories and accessions thereto and substitutions and replacements
therefor.

"Escrow Agent" means Loeb & Loeb LLP;

"Event  of  Default"  means the  occurrence  of any of the  events  set forth in
Section 28.

"Escrow Agreement" means the escrow agreement dated as of the Closing Date among
the Company, Laurus and the escrow agent referred to therein.

"Exchange Act" means the Securities Exchange Act of 1934, as amended;

"Exchange Act Filings" means the Company  filings under the Securities  Exchange
Act of 1934;

"Financial  Reporting  Controls"  has the meaning  given to such term in Section
18(f)(iv).

"First  Advance  Date"  means the date upon which all  conditions  precedent  in
Section 9 and  Section 10 hereof  and in the  Secured  Revolving  Note have been
satisfied by the Company and the loans  pursuant to the Secured  Revolving  Note
have been advanced by Laurus to the Company.

"First Advance  Disbursement  Letter" means the disbursement  letter dated as of
the First Advance Date among the Company and Laurus

"First  Advance Escrow  Agreement"  means the escrow  agreement  dated as of the
First  Advance Date among the Company,  Laurus and the escrow agent  referred to
therein.

 "Fixtures"  means all  "fixtures" as such term is defined in the UCC, now owned
or hereafter acquired by any Person.

"Formula Amount" has the meaning given such term in Section 4(a)(i).

"GAAP" means generally accepted accounting principles,  practices and procedures
in effect from time to time in the GAAP.

"General  Intangibles"  means  all  incorporeal  movable  property  now owned or
hereafter  acquired by any Person  including all right,  title and interest that
such Person may now or hereafter have therein (other than  Accounts),  including
customer lists,  Licenses,  Intellectual  Property,  interests in  partnerships,
joint  ventures  and  other  business  associations,   permits,  proprietary  or
confidential  information,  inventions  (whether or not patented or patentable),
technical information,  procedures, designs, knowledge, know-how, Software, data
bases,  data,  skill,  expertise,   experience,   processes,  models,  drawings,
materials,  Books and Records,  Goodwill (including the Goodwill associated with
any Intellectual Property), all rights and claims in or under insurance policies
(including  insurance for fire,  damage,  loss, and casualty,  whether  covering
personal  property,  real property,  tangible rights or intangible  rights,  all
liability,  life,  key-person,  and  business  interruption  insurance,  and all
unearned  premiums),   uncertificated  securities,  choses  in  action,  deposit
accounts,  rights to receive tax refunds and other payments,  rights to received
dividends,  distributions, cash, Instruments and other property in respect of or
in exchange for pledged Stock and rights of indemnification.

"Goodwill"  means all  goodwill,  trade  secrets,  proprietary  or  confidential
information,  technical  information,   procedures,  formulae,  quality  control
standards,   designs,  operating  and  training  manuals,  customer  lists,  and
distribution agreements now owned or hereafter acquired by any Person.

"Governmental Authority" means any federal, provincial,  municipal or other form
of  government  or  agency   thereof  and  any  body  or  authority   exercising
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government, including any courts.

"Hamilton  Guarantee"  means that  certain  personal  guarantee  dated as of the
Closing  Date made by Kevin  Hamilton  in favour of  Laurus,  as the same may be
amended, restated, modified and/or supplemented from time to time.

                                      -4-
<PAGE>

"Intellectual  Property" means any and all patents,  trademarks,  service marks,
trade  names,   copyrights,   trade  secrets,   industrial  designs,   Licenses,
information and other proprietary rights and processes.

"Inventory"  means all  goods,  wares  and  merchandise,  property  in stock and
inventory  now owned or  hereafter  acquired  by any Person,  wherever  located,
including all inventory,  merchandise, goods and other movable property that are
held by or on behalf of such Person for sale or lease or are furnished or are to
be furnished under a contract of service or that constitute raw materials,  work
in process,  finished  goods,  returned  goods,  or materials or supplies of any
kind,  nature or description  used or consumed or to be used or consumed in such
Person's  business  or in  the  processing,  production,  packaging,  promotion,
delivery or shipping of the same, including all supplies and embedded software.

"Letter-of-Credit  Rights" means letter-of-credit  rights now owned or hereafter
acquired  by any  Person,  including  rights to payment or  performance  under a
letter of credit, whether or not such Person, as beneficiary, has demanded or is
entitled to demand payment or performance.

"License" means any rights under any written agreement now or hereafter acquired
by any Person to use any trademark, trademark registration, copyright, copyright
registration or invention for which a patent is in existence or other license of
rights or interests now held or hereafter acquired by any Person.

"Lien" means any  mortgage,  security  deed,  deed of trust,  pledge,  hypothec,
assignment,  security interest,  lien (whether statutory or otherwise),  charge,
claim or  encumbrance,  or preference,  priority or other security  agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature  whatsoever  including  any  conditional  sale or other  title  retention
agreement, any lease having substantially the same economic effect as any of the
foregoing,  and the filing of, or agreement  to give,  any  financing  statement
under the law of any jurisdiction in which the Collateral is located.

"Loans" has the meaning given to such term in Section  4(a)(i) and shall include
all other extensions of credit hereunder and under any Ancillary Agreement.

"Lockboxes" has the meaning given to such term in Section 13(a).

"Material  Adverse Effect" means a material  adverse effect on (a) the business,
assets, liabilities,  condition (financial or otherwise), properties, operations
or prospects of the Company and the Eligible  Subsidiary (taken individually and
as a whole),  (b) the  Company's  ability to pay or perform the  Obligations  in
accordance  with the terms hereof or any Ancillary  Agreement,  (c) the value of
the Collateral,  the Liens on the Collateral or the priority of any such Lien or
(d) the  practical  realization  of the benefits of Laurus'  rights and remedies
under this Agreement and the Ancillary Agreements.

"Material  Taxes" means taxes in excess of US$25,000 unless such amount is being
bone fide disputed and a reserve is being held in regard to that amount.

                                      -5-
<PAGE>

"Mortgage"  means the mortgage in the form attached  hereto as Exhibit "M" given
by the Consumer  Borrower in favour of the Trustee securing the amount specified
thereunder  and  registered  against  the  Mortgaged  Property  of the  Consumer
Borrower.

"Mortgage  Availability"  means the amount of Loans against  Eligible  Mortgages
that Laurus may from time to time make  available to the Company to a maximum of
ninety-eight percent (98%) of the net face amount of Eligible Mortgages.

"Mortgage  Loan" means a loan given by Reliant  Canada to the Consumer  Borrower
and includes the Mortgage and Mortgage Loan  Documents and the  indebtedness  of
the Consumer Borrower thereunder.

"Mortgage Loan Documents" means all  documentation  (other than the Mortgage) in
connection  with the Mortgage Loan and which are included in the Sample  Closing
Documents.

"Mortgaged  Property"  means the real  property  owned by the Consumer  Borrower
secured by the Mortgage.

 "Obligations" means all Loans,  Advances,  Overadvances,  all advances,  debts,
liabilities,  obligations, covenants and duties owing by the Company and Reliant
Canada to Laurus (or any corporation that directly or indirectly  controls or is
controlled  by or is  under  common  control  with  Laurus)  of  every  kind and
description  (whether  or not  evidenced  by any  note or other  instrument  and
whether or not for the payment of money or the performance or non-performance of
any act),  direct or  indirect,  absolute or  contingent,  due or to become due,
contractual  or  tortious,  liquidated  or  unliquidated,  whether  existing  by
operation of law or otherwise  now existing or hereafter  arising  including any
debt,  liability or obligation owing from the Company to others which Laurus may
have  obtained by  assignment  or otherwise  and further  including all interest
(including  interest  accruing  at the then  applicable  rate  provided  in this
Agreement  after the  maturity  of the Loans and  interest  accruing at the then
applicable  rate provided in this Agreement  after the filing of any petition in
bankruptcy,  or the  commencement  of any  insolvency,  reorganization  or  like
proceeding,  whether or not a claim for post-filing or post-petition interest is
allowed or  allowable  in such  proceeding),  charges or any other  payments the
Company is required to make by law or otherwise  arising under or as a result of
this  Agreement,  the  Ancillary  Agreements  or  otherwise,  together  with all
reasonable  expenses and reasonable  attorneys' fees chargeable to the Company's
accounts or incurred by Laurus in connection therewith.

"Overadvance  Side Letter" means the overadvance  side letter entered into as of
the  date  hereof  between  the  Company  and  Laurus   evidencing  the  Initial
Overadvance.

"Permitted Encumbrances" has the meaning given to in Section 11(c).

 "Permitted Liens" means (a) Liens of carriers, warehousemen, artisans, bailees,
mechanics and materialmen  incurred in the ordinary course of business  securing
sums not  overdue;  (b) Liens  incurred  in the  ordinary  course of business in
connection with worker's compensation,  unemployment insurance or other forms of

                                      -6-
<PAGE>

governmental insurance or benefits, relating to employees, securing sums (i) not
overdue or (ii) being diligently  contested in good faith provided that adequate
reserves  with  respect  thereto are  maintained  on the books of the Company in
conformity with GAAP; (c) Liens in favour of Laurus; (d) Liens for taxes (i) not
yet  due or  (ii)  being  diligently  contested  in good  faith  by  appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of the Company in conformity with GAAP; and which have no effect on
the  priority  of Liens in favour of Laurus or the value of the  assets in which
Laurus has a Lien; (e) Purchase Money Liens securing Purchase Money Indebtedness
to the extent  permitted  in this  Agreement;  and (f) Liens on any research and
development tax credits;

"Person"  means  any  individual,  sole  proprietorship,   partnership,  limited
liability  partnership,   joint  venture,  trust,  unincorporated  organization,
association, corporation, limited liability company, institution, public benefit
corporation,  entity  or  government  (whether  federal,  state,  county,  city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.

"Principal  Market"  means  the NASD Over the  Counter  Bulletin  Board,  NASDAQ
Capital Market,  the NASDAQ National Market,  the American Stock Exchange or the
New York Stock Exchange;

"Proceeds"  means  the  proceeds  of sale,  lease or  disposition  of any of the
Collateral,  including,  without  limitation:  (a) any and all  proceeds  of any
insurance,  indemnity,  warranty  or  guaranty  payable to the  Company or to an
Eligible  Subsidiary from time to time with respect to any  Collateral;  (b) any
and all payments (in any form whatsoever) made or due and payable to the Company
or  to an  Eligible  Subsidiary  from  time  to  time  in  connection  with  any
requisition, confiscation, condemnation, seizure or forfeiture of any Collateral
by any  governmental  body,  governmental  authority,  bureau or agency  (or any
person  acting  under  color of  governmental  authority);  (c) any claim of the
Company or an Eligible Subsidiary against third parties (i) for past, present or
future  infringement of any Intellectual  Property or (ii) for past,  present or
future  infringement  or dilution of any  trademark or trademark  license or for
injury to the goodwill associated with any trademark,  trademark registration or
trademark  licensed  under any  trademark  License;  (d) any  recoveries  by the
Company or by an Eligible  Subsidiary  against third parties with respect to any
litigation or dispute concerning any Collateral, including claims arising out of
the loss or  nonconformity  of,  interference  with the use of,  defects  in, or
infringement of rights in, or damage to,  Collateral;  (e) all amounts collected
on, or  distributed  on  account  of,  other  Collateral,  including  dividends,
interest, distributions; and (f) any and all other amounts, rights to payment or
other  property  acquired  upon the  sale,  lease,  license,  exchange  or other
disposition of Collateral and all rights arising out of Collateral.

"Purchase  Money  Indebtedness"  means  (a) any  indebtedness  incurred  for the
payment of all or any part of the purchase  price of any fixed asset,  including
indebtedness  under capitalized  leases,  (b) any indebtedness  incurred for the
sole purpose of financing or  refinancing  all or any part of the purchase price
of any fixed asset,  and (c) any renewals,  extensions or  refinancings  thereof
(but not any  increases in the principal  amounts  thereof  outstanding  at that
time).

                                      -7-
<PAGE>

"Purchase  Money  Lien" means any Lien upon any fixed  assets  that  secures the
Purchase Money  Indebtedness  related thereto but only if such Lien shall at all
times be confined  solely to the asset the purchase  price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness  secured
by  such  Lien  and  only  if  such  Lien  secures  only  such  Purchase   Money
Indebtedness.

"Re-Assignment" has the meaning given to such term in Section 27.

 "Risk  Management  Certificate"  has the meaning  given to such term in Section
9(c).

"Sample Closing Documents" has the meaning given to such term in Section 11(v);

"SEC" means the Securities and Exchange Commission.

 "Secured Revolving Note" means the Secured Revolving Note issued by the Company
in favour of Laurus in connection with the transactions  contemplated hereby, as
the same may be amended,  supplemented,  restated and/or otherwise modified from
time to time.

"Securities"  means the  Warrant  and the  shares of Common  Stock  which may be
issued upon exercise of such Warrant.

"Security Documents" means all security agreements,  mortgages,  cash collateral
deposit letters, pledges and other agreements which are executed by the Company,
the Eligible  Subsidiary  and/or their  respective its Subsidiaries in favour of
Laurus including,  without limitation,  the Security and Purchase Agreement, the
Share Pledge Agreement and Beneficial Assignment.

"Servicer" means with respect to the  securitization of the Mortgage Loans which
servicer shall be Dundee Securities  Company or such other servicer as consented
to by Laurus in its sole discretion.

"Share Pledge  Agreement"  means that certain Share Pledge Agreement dated as of
the  Closing  Date made by the  Company in favour of Laurus,  as the same may be
amended, restated, modified and/or supplemented from time to time;

"Software"  means all software  now owned or  hereafter  acquired by any Person,
including  all computer  programs  and all  supporting  information  provided in
connection with a transaction related to any program.

"Stock" means all certificated and  uncertificated  shares,  options,  warrants,
membership interests, general or limited partnership interests, participation or
other  equivalents  (regardless  of  how  designated)  of or  in a  corporation,
partnership,  limited  liability  company or equivalent entity whether voting or
nonvoting,  including  common  stock,  preferred  stock,  or any  other  "equity
security"  (as such term is  defined  in Rule  3a11-1 of the  General  Rules and
Regulations promulgated by the OSC under the Securities Exchange Act of 1934)."

                                      -8-
<PAGE>

"Subsidiary"  means,  with  respect to any Person,  (i) any other  Person  whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership  interests having such power only by reason of the
happening  of a  contingency)  to elect a  majority  of the  directors  or other
governing body of such other Person, are owned, directly or indirectly,  by such
Person  or (ii) any  other  Person  in  which  such  Person  owns,  directly  or
indirectly, more than 50% of the equity interests at such time.

"Subsidiary  Guaranty"  means that certain  Subsidiary  Guaranty dated as of the
Closing Date made by the Eligible  Subsidiaries in favour of Laurus, as the same
may be amended, restated, modified and/or supplemented from time to time.

"Title Policy" has the meaning given to in Section 11(d).

"Trustee" means Computershare Trust Company of Canada

"Warrant"  means that certain  Common  Stock  Purchase  Warrant  dated as of the
Closing Date made by the Company in favour of Laurus and each other warrant made
by the Company in favour Laurus,  as each of the same may be amended,  restated,
modified and/or supplemented from time to time.

"Warrant Shares" has the meaning given such term in Section 2(c).

                                      -9-

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