Document:

Exhibit
      10.16

     

    August
      28, 2006

     

    AJW
      Partners, LLC

    AJW
      Qualified Partners, LLC

    AJW
      Offshore, Ltd.

    New
      Millennium Capital Partners, II, LLC

    c/o
      NIR
      Group, Inc.

    1044
      Northern Boulevard

    Roslyn,
      New York 11576

    

    Gentlemen:

    

    This
      letter is intended to amend the Registration Rights Agreement (the “Agreement”)
      dated July 31, 2006 by and among Itronics, Inc. (the “Company”), AJW Qualified
      Partners, LLC (“Qualified”), New Millennium Capital Partners II, LLC (“NMC”),
      AJW Offshore, Ltd. (“Offshore”) and AJW Partners, LLC (“AJW”) (Qualified, NMC,
      Offshore and AJW are collectively referred to as the “Investors”). The Agreement
      provides that the Company is required to register all of the shares underlying
      the Warrants as well as a certain percentage of shares underlying the Notes.
      It
      is hereby agreed that the Company will be required to file a registration
      statement including 75,000,000 shares of common stock underlying the Notes
      and
      will not be required to register any shares issuable upon exercise of the
      warrants. Further, it is agreed, that provided the Company complies with the
      time requirements set forth in the Agreement on the registration statement
      for
      75,000,000 shares, the Company will not be subject to liquidated damages. All
      other terms of the Agreement will remain unchanged.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    To
      indicate your acceptance, please sign in the indicated space.

     

    
      	 	 	 
	 	
              Sincerely,

               

              Itronics, Inc.

            
	 
 	 
 	 
 
	 	By:  	/s/
              John
              W. Whitney
	 	
              
Dr.
              John W. Whitney,
              President

    

     

    
      	 	 	 
	Agreed
              and Accepted	 
	 	 
	AJW Offshore, Ltd.	 
	 	 
	
              /s/Corey
                S. Ribotsky

            	 
	
              

            	 
	 	 
	AJW Partners, LLC	 
	 	 
	
              /s/Corey
                S. Ribotsky

            	 
	
              

            	 
	 	 
	New Millennium Capital Partners II, LLC	 
	 	 
	
              /s/Corey
                S. Ribotsky

            	 	 
	
              

            	 	 
	 	 	 
	AJW Qualified Partners, LLC	 	 
	 	 	 
	
              /s/Corey
                S. RibotskyEXHIBIT 10.2
                                                                    ------------

                          2002 JOINT VENTURE AGREEMENT

This 2002 Joint Venture Agreement (the "Agreement") is made on this 22nd day of
October 2002, by and between Universal Security Instruments, Inc. ("Universal")
of 7-A Gwynns Mill Court, Owings Mills, Maryland 21117-3586, United States of
America ("USA"), a corporation organized and existing under the laws of the
State of Maryland, USA, and Lai Kwan Limited ("Lai Kwan") of B2, 3/F., Fortune
Factory Building, 40 Lee Chung Street, Chai Wan, the Hong Kong Special
Administrative Region of the People's Republic of China ("Hong Kong"), a limited
liability company organized and existing under the laws of Hong Kong.

                                     WHEREAS

A.    The parties hereto (the "Parties") are parties to a Joint Venture
      Agreement dated 23 October 1989 as supplemented by a Supplementary
      Agreement dated 21 August 2001 and a memorandum letter dated 8 October
      2001 (collectively referred to as the "1989-2001 Agreements") relating to
      the business, management and operation of Eyston Company Limited
      ("Eyston"), a limited liability company organized and existing under the
      laws of Hong Kong.

B.    The Parties have concluded that certain provisions of the 1989-2001
      Agreements are redundant, obsolete and no longer appropriate.

C.    The Parties are also considering a listing of Eyston or its business on
      The Stock Exchange of Hong Kong Limited or another stock exchanges of
      equivalent international standing (the "Stock Exchange").

D.    In view of these considerations, the Parties have agreed to enter into
      this Agreement and thereby to terminate the 1989-2001 Agreements.

NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, IT IS HEREBY AGREED AS
FOLLOWS:

                                   ARTICLE ONE
                      ESTABLISHMENT AND OPERATION OF HOLDCO

1.1   Establishment of Holdco. The Parties shall promptly purchase one shelf
      company ("Holdco"), a private company limited by shares, duly organized,
      validly existing and properly registered in Hong Kong. The Parties shall
      share equally all costs with regard to the purchase of the Holdco. The
      initial capital of Holdco shall be the normal minimums permissible in Hong
      Kong.

1.2   Holdco Memorandum and Articles of Association. It is recognized that, upon
      the acquisition of Holdco, there will be inconsistencies between this
      Agreement and the Memorandum and Articles of Association of Holdco. The
      Parties agree promptly, with the assistance of counsel, to cause the
      Memorandum and Articles of Association of Holdco to be amended so that
      they will be consistent with terms and conditions of this Agreement. In
      all cases, before and after the amendment of the Memorandum and Articles
      of Association, in the event of conflict between the provisions of this
      Agreement and the Memorandum and Articles of Association of Holdco, the
      provisions of this Agreement shall prevail.

<PAGE>

1.3   Transfer of Eyston Shares to Holdco. The Parties are the beneficial owners
      of fifty percent (50%) each of the share capital of Eyston. Upon the
      formation of Holdco, each of the Parties shall promptly transfer all of
      their shares in Eyston to Holdco in exchange for fully paid-up shares of
      Holdco. The transfer of the Eyston shares of the Parties shall be
      completed simultaneously, and each Party (or its nominees) shall receive
      fifty percent (50%) of the share capital of Holdco immediately upon
      completion of the transaction. The Eyston shares transferred shall be free
      from all encumbrances, liens and third party rights. Neither Party shall
      be obligated to carry out the transfer of its interest in Eyston unless
      the other Party demonstrates that it can fully comply with its obligations
      with respect to this transfer.

1.4   Stamp Duty. Any stamp duty or similar excise taxes imposed in Hong Kong as
      a result of the transactions stated in Paragraph 1.3 shall be shared
      equally by the Parties.

1.5   Right of First Refusal. Each Holdco shareholder shall have a right of
      first refusal for the purchase of any or all shares in Holdco proposed to
      be transferred by the other shareholder. This right of first refusal shall
      be exercised within thirty (30) days of notice to the other shareholder of
      the proposed transfer of shares.

1.6   Transferee to Accept This Agreement. In addition to the requirements of
      Paragraph 1.5, in the event either Holdco shareholder proposes to transfer
      any of its shares in Holdco to a third party, such transferring Party
      shall not transfer such shares until it has secured the written agreement
      of the proposed transferee to assume all the rights and obligations of a
      Party to this Agreement.

1.7   No Pledge. Neither Holdco shareholder may pledge or encumber its shares in
      Holdco without prior written consent of the other Holdco shareholder.

1.8   Holdco Board. The board of directors of Holdco (the "Holdco Board") shall
      consist of four (4) members, two (2) to be nominated by Universal and two
      (2) to be nominated by Lai Kwan. The Parties shall vote their shares for
      the nominees. The nominating Party shall have the right to remove and
      replace its directors. The quorum required for a meeting of the Holdco
      Board shall be two (2) members, provided that at least one director
      nominated by Lai Kwan and at least one director nominated by Universal is
      present.

                                       2
<PAGE>

1.9   Holdco Chairman. The chairman of the Holdco Board (the "Holdco Chairman")
      shall be nominated by Lai Kwan. The Holdco Board shall appoint such Holdco
      Board member nominated by Lai Kwan as the Holdco Chairman. For as long as
      Lai Kwan provides operations and management services to Holdco, the Holdco
      Chairman shall have a casting vote on all matters, except for the matters
      specifically set out in Paragraph 1.11, presented to the Holdco Board.

1.10  Management of Holdco. Day-to-day operations and management of Holdco,
      Eyston and its subsidiaries, if any, and companies controlled directly or
      indirectly by Holdco shall be under the control of Lai Kwan, save as
      specifically set out in Paragraph 1.11 below.

1.11  Holdco Major Decisions. The following matters shall require approval of
      the Holdco Board: (i) approval of annual financial statements/reports of
      Holdco; (ii) determination on remuneration of Lai Kwan for providing
      operations and management services to Holdco; (iii) declaration of
      dividends of Holdco; (iv) the merger of Holdco with any other entity or
      the acquisition of any other entity by Holdco; (v) the sale, lease or
      disposal of the whole or a substantial part of the business or assets of
      Holdco; (vi) any capital increase or any request for shareholder
      contribution to provide additional funding to Holdco, including additional
      capital or shareholder loans; (vii) capital investment of Holdco in excess
      of One Million Hong Kong Dollars (HKD1,000,000); (viii) any amendment to
      the Memorandum and Articles of Association of Holdco; (ix) any mortgage of
      the assets of Holdco; (x) change of the company auditor; and (xi) any
      business transaction, excluding the sales transactions of the products of
      Holdco which are the subject of Appendix I and II hereof, between Holdco
      and any company owned or controlled, directly or indirectly, by one of the
      shareholders of Holdco.

1.12  Lai Kwan's Management Obligations. Lai Kwan shall not be obligated to
      provide operations and management services to Holdco and its subsidiaries
      specified in Paragraph 1.10 above, in the event that Lai Kwan ceases to be
      a shareholder of Holdco or the composition or procedures of the Holdco
      Board as set forth in this Agreement are changed so as to be less
      favorable to Lai Kwan.

1.13  Fiscal Year. Holdco shall have a fiscal year ending March 31.

1.14  Financial Statements. Holdco shall, at its expense, have its financial
      statements audited once a year by an independent auditor. Until otherwise
      determined by the Holdco Board, Ernst and Young shall remain the company
      auditor of Holdco. Holdco shall also produce unaudited monthly financial
      statements to be promptly distributed to the shareholders.

                                       3
<PAGE>

                                   ARTICLE TWO
                         PRODUCT DISTRIBUTION AGREEMENTS

Immediately upon the signing of this Agreement, Universal and Eyston shall enter
into a product distribution agreement with terms and conditions identical to
Appendix I of this Agreement, and Lai Kwan and Eyston shall enter into a product
distribution agreement with terms and conditions identical to Appendix II of
this Agreement.

                                  ARTICLE THREE
                                     LISTING

3.1   Potential Listing. It is the intention of the Parties that, provided both
      Parties agree the prevailing conditions are suitable and confirm this
      agreement in writing, Eyston will seek the listing of Eyston's shares or,
      where appropriate, a listing of a special purpose vehicle formed to become
      the holding company of Eyston or its business on the Stock Exchange (the
      "Listing").

3.2   Listco. Eyston, or a specially formed holding company of Eyston or its
      business, is referred to herein as "Listco." Listco and its subsidiaries
      are collectively referred to herein as the "Group." Listco shall be set up
      as a subsidiary of Holdco. The rules applicable to the Listing of Listco
      on the Stock Exchange are herein referred to as the "Listing Rules."

3.3   Listco Board. Prior to the Listing, Listco shall be structured or its
      structure amended so that the board of directors of Listco (the "Listco
      Board") shall consist of three types of directors: Executive Directors,
      Non-Executive Directors, and Independent (Non-Executive) Directors. Two
      (2) Non-executive Directors and one (1) Independent (Non-Executive)
      Director shall be nominated by Universal. Subject to the ability of the
      post-Listing public shareholders to elect one or more directors, all the
      remaining directors shall be nominated by Lai Kwan so that Lai Kwan shall
      be able at all times to nominate one more director than Universal. The
      number of directors shall be determined by the Parties according to the
      need of operations from time to time, and the agreements set forth in this
      Paragraph 3.3. Holdco shall vote its shares for the nominees determined in
      accordance with this Paragraph 3.3. The nominating Party shall have the
      right to remove and replace its directors subject to any applicable laws
      and Listing Rules.

3.4   Listco Major Decisions. Prior to a Listing, no board resolution on the
      following matters shall be passed by the Listco Board unless approved by
      at least one Non-executive Director of the Listco Board nominated by
      Universal and at least one Executive Director of the Listco Board
      nominated by Lai Kwan: (i) approval of annual financial statements/reports
      of Listco; (ii) determination on remuneration of Lai Kwan for providing
      operations and management services to Listco; (iii) declaration of
      dividends of Listco; (iv) the merger of Listco with any other entity or
      the acquisition of any other entity by Listco; (v) the sale, lease or
      disposal of the whole or a substantial part of the business or assets of
      Listco; (vi) any capital increase or any request for shareholder
      contribution to provide additional funding to Listco, including additional
      capital or shareholder loans; (vii) capital investment of Listco in excess
      of One Million Hong Kong Dollars (HKD1,000,000); (viii) any amendment to
      the Memorandum and Articles of Association of Listco; (ix) any mortgage of
      the assets of Listco; (x) appointment or change of the company auditor;
      and (xi) any business transaction, excluding the sales transactions of the
      products of Listco, which are the subject of Appendix I and II hereof,
      between Listco and any company owned or controlled, directly or
      indirectly, by one of the shareholders of Holdco.

                                       4
<PAGE>

3.5   Listco Dividends. Listco shall, to the extent permissible under applicable
      law, pay quarterly dividends to Holdco with a total amount equal to at
      least fifty percent (50%) of the quarterly after-tax net profit determined
      after the quarterly review of the unaudited quarterly financial statements
      by the Listco Board.

3.6   Holdco Dividends. Holdco shall, to the extent permissible under applicable
      law, pay as quarterly dividends to its shareholders all of the dividends
      received from Listco less any normal and customary deductions necessary to
      cover the operational expenses of Holdco.

3.7   Management of the Listing. The Listing shall be managed by Lai Kwan, which
      shall be responsible for all negotiations and determinations, including,
      without limitation determining the overall policy, structure, manner and
      arrangements of the Listing and in carrying out the application for the
      Listing, including, but not limited, to:

      (a)   the appointment of sponsor(s), legal advisers, reporting
            accountants, valuers and other professional advisers of Eyston
            and/or Listco incidental to the Listing;

      (b)   all liaison with the Stock Exchange;

      (c)   allowing for the disclosure of all relevant information about the
            Group to the public and the Stock Exchange as required by the
            applicable laws, regulations and rules incidental to the Listing,
            and to all professional parties to facilitate their provision of
            advice and service to Eyston and/or Listco for the purpose of the
            Listing, including without limitation, its corporate and
            shareholders information, financial, business and customers
            information and material contracts;

      (d)   amending and/or restructuring the Group's and/or Listco's
            memorandum, article of association, corporate structure and business
            arrangements to comply with the applicable Listing Rules or
            otherwise to facilitate the Listing and/or public issue and/or
            placing of shares of Listco incidental to the Listing as the
            sponsor(s) and/or other professional advisers appointed under
            sub-clause (a) above may advise to be necessary or desirable.

                                       5
<PAGE>

      The Parties hereby acknowledge that the restructuring of the Group in
      preparation for the Listing may involve inter-company transfer of assets,
      merger and acquisition of new intermediary holding vehicle(s).

3.8   Final Approval. Notwithstanding the provisions of Paragraph 3.7, the
      arrangements for the offering and the timing of the Listing application
      shall be subject to the prior written approval of each of the Parties.

                                  ARTICLE FOUR
                                SHAREHOLDER SALES

4.1   Request for Sale. After the expiration of any lock-up period required by
      the Listing Rules or agreed with the Stock Exchange, Holdco shall, at any
      time after the Listing, upon written request from either of the Parties,
      use its reasonable endeavors to dispose of such number of shares in Listco
      as the requesting Party may request, provided that:

      (a)   Holdco shall not dispose more than five percent (5%) of the issued
            share capital of Listco under any request at any time;

      (b)   Holdco shall not made any disposal if it has disposed of any
            interest in shares in Listco in the ten (10) weeks immediately
            preceding the date of the request;

      (c)   Holdco shall not dispose any shares if, immediately following the
            disposal, Holdco would cease to hold at least fifty point one
            percent (50.1%) of the issued share capital of Listco;

      (d)   Holdco shall not make any disposal to the extent and at any time
            where it is prohibited or restricted by law or applicable rules and
            regulations from making such disposal and shall comply with all
            applicable laws, rules and regulations in making such disposal;

      (e)   Holdco shall dispose of such shares in the manner set out in
            Paragraph 4.2 below; and

      (f)   Holdco shall exercise its best endeavors to make such disposal in a
            manner so as to maintain an orderly market for the shares of Listco.

4.2   First Offer. Provided that it raises no issues under the Takeover Code of
      Hong Kong, Holdco shall dispose of shares in Listco under Paragraph 4.1
      above by:

      (a)   first offering (the "First Offer") such shares to the Party which
            did not request the sale pursuant to Clause 4.1 above (the
            "Non-Requesting Party");

                                       6
<PAGE>

      (b)   the First Offer shall be made to the Non-Requesting Party at a price
            equivalent to the average closing price less five percent (5%) for
            such shares on the Stock Exchange on which they are primarily listed
            for the ten (10) consecutive trading days ending on the trading day
            immediately preceding the date of the request and on which there was
            trading in the shares (the "Sale Price"). Such offer shall remain
            open for a minimum of three (3) working days for acceptance (the
            "Offer Period") and can be accepted in whole or in part;

      (c)   Holdco shall only offer to sell and make arrangements for the
            disposal of such shares to third parties (the "Open Offer") if and
            to the extent the Non-Requesting Party does not accept or reply to
            the First Offer made in subparagraph (b) above prior to the expiry
            of the Offer Period;

      (d)   the Open Offer shall be made at a price no less than the Sale Price;
            and

      (e)   the Open Offer shall remain open for a period of fifteen (15)
            trading days (the "Open Offer Period"). If Holdco fails to conclude
            any definite agreement for the sale or placing of all or any part of
            such shares during the Open Offer Period, the request in the above
            Paragraph 4.1 and the Open Offer in respect of all or such part of
            the shares, as the case may be, shall both be deemed to have lapsed.

      4.3 Sales Proceeds. The net proceeds arising from the disposal of shares
in Listco under Paragraphs 4.1 and 4.2 above shall, to the extent distributable
under applicable law, be distributed to the shareholders of Holdco as dividends
as soon as practicable.

                                  ARTICLE FIVE
                         1989-2001 AGREEMENTS SUPERSEDED

Upon being duly signed by both Parties, this Agreement shall supersede the
1989-2001 Agreements and the 1989-2001 Agreements shall cease to have legal
effect. The Parties hereby waive and release against each other and forever
discharge any claims arising out of or in connection with the 1989-2001
Agreements.

                                   ARTICLE SIX
                               GENERAL PROVISIONS

6.1   Term. This Agreement shall be of unlimited duration unless terminated by
      mutual agreement. Termination does not release either Party from liability
      already accrued.

6.2   Breach. This Agreement may be terminated for breach. In the event of
      termination for breach, the non-breaching Party shall have all rights and
      remedies available at law.

                                       7
<PAGE>

6.3   Disputes. Any dispute or difference arising out of or in connection with
      this Agreement shall be referred to and determined by arbitration in Hong
      Kong in accordance with the UNCITRAL Arbitration Rules in force at the
      date of this Agreement. In the event of arbitration, the appointing
      authority shall be the Hong Kong International Arbitration Centre (the
      "HKIAC"). The place of arbitration shall be in Hong Kong at the HKIAC. The
      language to be used in the arbitral proceedings shall be English. Any such
      arbitration shall be administered by HKIAC in accordance with HKIAC
      Procedures for Arbitration. The Parties agree to exclude any right of
      application or appeal to any courts in connection with any question of law
      arising in the course of the arbitration or with respect to any award
      made.

6.4   Entire Agreement; Amendment; Waiver. This Agreement constitutes the entire
      agreement between the Parties pertaining to the subject matter hereof and
      supersedes all prior and contemporaneous agreements, representations, and
      understandings of the Parties. No supplement, modification, or amendment
      of this Agreement shall be binding unless executed by both Parties in
      writing. No waiver of any of the provisions of this Agreement shall be
      deemed, or shall constitute, a waiver of any other provisions, whether or
      not similar, nor shall any waiver constitute a continuing waiver. No
      waiver shall be binding unless executed in writing by the Party making the
      waiver.

6.5   Assignment. This Agreement may not be assigned or transferred without the
      prior written approval of the other Party and shall be binding on, and
      shall inure to the benefit of, the Parties and their respective heirs,
      legal representatives, successors, and assigns.

6.6   Assignment. All notices, request, demands, and other communications under
      this Agreement shall be in writing, in English, and shall be deemed to
      have been duly given to a Party when received, addressed as below. A Party
      may change its address for purposes of this Paragraph by giving the other
      Party its written notice of the new address in the manner set forth above.

      To Universal:

       Universal Security Instruments, Inc.
       7-A Gwynns Mill Court
       Owings Mills, Maryland 21117, U.S.A.
       Telephone:        1 410 363 3000
       Facsimile:        1 410 363 2218

                                       8
<PAGE>

       To Lai Kwan:

       Lai Kwan Limited
       B2, 3/F., Fortune Factory Building
       40 Lee Chung Street, Chai Wan
       Hong Kong
       Telephone:        852 2557 3135
       Facsimile:        852 2897 0249

6.7   Savings. Should any provision of this Agreement be judicially declared
      invalid, unenforceable, or void, in whole or in part, such decision shall
      not have the effect of invalidating or voiding the remainder of this
      Agreement, and the Parties agree that the provision of this Agreement so
      held to be invalid, unenforceable, or void shall be deemed to have been
      stricken herefrom, and the remainder shall have the same force and effect
      as if such provision had never been included herein. With respect to any
      provision of this Agreement declared invalid, unenforceable or void, the
      Parties agree to negotiate in good faith for the purpose of replacing such
      clause, sentence or paragraph with a provision which is as near in
      substance as possible to that declared invalid, unenforceable or void
      without itself being so declared.

6.8   Time of the Essence. Time is of the essence with respect to all matters
      related to this Agreement.

6.9   Counterparts This Agreement may be executed by the Parties in any number
      of counterparts, each of which when so executed and delivered shall be an
      original but all counterparts together shall constitute one and the same
      instrument.

6.10  Applicable Law. This Agreement shall be governed by and construed in
      accordance with the laws of Hong Kong.

6.11  Headings. The titles and headings used in this Agreement are for the
      convenience of the Parties only and shall not be used in interpreting or
      construing this Agreement.

IN WITNESS WHEREOF, this Agreement has been duly entered into by the Parties the
day and year first above written.

UNIVERSAL SECURITY INSTRUMENTS, INC.           LAI KWAN LIMITED

By:/s/ Stephen Knepper                         By: /s/ Wai Wing Malcom Lam
   -----------------------------                  ------------------------------
Stephen Knepper                                   Wai Wing Malcolm Lam
Chairman and Chief Executive Officer              Director

                                       9
<PAGE>

                                                                      APPENDIX I

                         PRODUCT DISTRIBUTION AGREEMENT

This Product Distribution Agreement is made on this _____ day of October 2002,
by and between Universal Security Instruments, Inc. ("Universal") of 7-A Gwynns
Mill Court, Owings Mills, Maryland 21117-3586, United States of America ("USA"),
a corporation organized and existing under the laws of the State of Maryland,
USA, and Eyston Company Limited ("Eyston") of B2, 3/F., Fortune Factory
Building, 40 Lee Chung Street, Chai Wan, Hong Kong, a limited liability company
organized and existing under the laws of the Hong Kong Special Administrative
Region of the People's Republic of China ("Hong Kong").

WHEREAS, Universal is experienced in the distribution of electronic, electrical
and consumer products in North America; and

WHEREAS, Eyston is experienced in the design, technique, development, and
manufacturing of electronic, electrical and consumer products; and

NOW, THEREFORE, THE PARTIES HERETO MUTUALLY AGREE AS FOLLOW:

1.    Universal and its subsidiaries and affiliated companies and any companies
      controlled directly or indirectly by Universal (hereafter collectively
      referred to as the "Universal Group") shall purchase all of their demand
      of Smoke Alarms/ Detectors and Carbon Monoxide Alarms/Detectors from
      Eyston provided that the most favorable prices as defined in Paragraph 3
      are offered and those prices and other terms are reasonably competitive
      with other sources.

2.    The Universal Group will buy products from Eyston at the most favorable
      prices.

3.    The most favorable price of a specific product shall mean the lower of (i)
      the lowest price that Eyston sells to other customers for the product
      having substantially the same make and materials and (ii) the indicative
      price for each of the product as stated herein.

4.    The following are the indicative unit prices (F.O.B. Hong Kong, at sight)
      for existing smoke alarms and carbon monoxide alarms: (i) DC battery
      operated ionization smoke alarm with a 9V carbon-zinc UL approved battery
      in gift-box packaging: USD2.00; (ii) DC battery operated photoelectric
      smoke alarm with a 9V carbon-zinc UL approved battery in gift-box
      packaging: USD3.50; (iii) AC hardwired ionization smoke alarm with a 9V
      carbon-zinc UL approved battery in gift-box packaging: USD3.826; (iv) DC
      battery operated carbon monoxide alarm using QUANTUM chemical sensor with
      a 9V Energizer 522 alkaline battery in gift-box packaging: USD12.00. The
      indicative prices are subject to change as agreed by both Parties from
      time to time.

                                       10
<PAGE>

5.    The indicative prices for all other products and models are subject to
      negotiation.

6.    Subject to actual material and production costs variation, the indicative
      prices shall be adjusted to reflect such costs changes.

7.    The sales from Eyston to the markets in the USA, Canada, Mexico, U.S.
      Territories, U.S. overseas possessions and other North American countries
      and regions, as illustrated in Exhibit A, shall be to or through
      Universal, or a party designated by Universal from time to time, on an
      exclusive basis.

8.    In the event of referrals of new customers by Eyston to Universal,
      Universal shall pay a commission of five percent (5%) of the F.O.B. sales
      values on such customers to Eyston provided that the referred customers
      and Universal have never engaged in any business contacts prior to the
      referral by Eyston. Commissions shall be payable within thirty (30) days
      after shipment.

9.    In the event of referrals of new customers by Universal to Eyston, Eyston
      shall pay a commission of five percent (5%) of the F.O.B. sales values on
      such customers to Universal provided that the referred customers and
      Eyston have never engaged in any business contacts prior to the referral
      by Universal. Commissions shall be payable within thirty (30) days after
      shipment.

10.   The three agreements signed by both Parties, one dated April 23, 2002
      regarding Sunbeam Corp./First Alert, Inc./BRK Brands, Inc., one dated
      January 15, 2002 regarding Salesmakers Inc./Salesmakers Asia Limited, and
      the one dated June 21, 2002 regarding Wal-Mart Stores, Inc., shall remain
      in full effect and shall not be affected by this Agreement.

11.   This Agreement shall be governed by and construed in accordance with the
      laws of Hong Kong.

IN WITNESS WHEREOF, the Parties to this Agreement have duly executed it on the
date and year first above written.

UNIVERSAL SECURITY INSTRUMENTS, INC.        EYSTON COMPANY LIMITED

By:                                         By:
----------------------------------          ------------------------------------
Stephen Knepper                             Wai Wing Malcolm Lam
Chairman & Chief Executive Officer          Co-Chief Executive

                                       11
<PAGE>

                                                                     APPENDIX II
                                                                     -----------

                         PRODUCT DISTRIBUTION AGREEMENT
                         ------------------------------

This Product Distribution Agreement is made on this ______ day of October 2002,
by and between Lai Kwan Limited ("Lai Kwan") of B2, 3/F., Fortune Factory
Building, 40 Lee Chung Street, Chai Wan, Hong Kong, a company organized and
existing under the laws of the Hong Kong Special Administrative Region of the
People's Republic of China ("Hong Kong"), and Eyston Company Limited ("Eyston")
of B2, 3/F., Fortune Factory Building, 40 Lee Chung Street, Chai Wan, Hong Kong,
a company organized and existing under the laws of Hong Kong.

WHEREAS, Lai Kwan is experienced in managing manufacturing and distribution of
electronic, electrical and consumer products in the People's Republic of China;
and

WHEREAS, Eyston is experienced in the design, technique, development, and
manufacturing of electronic, electrical and consumer products; and

NOW, THEREFORE, THE PARTIES HERETO MUTUALLY AGREE AS FOLLOW:

1.    Lai Kwan and its subsidiaries and affiliated companies and any companies
      controlled directly or indirectly by Lai Kwan (hereafter collectively
      referred to as the "Lai Kwan Group") shall purchase all of their demand of
      Smoke Alarms/ Detectors and Carbon Monoxide Alarms/Detectors from Eyston
      provided that the most favorable prices as defined in Paragraph 3 are
      offered and those prices and other terms are reasonably competitive with
      other sources.

2.    The Lai Kwan Group will buy products from Eyston at the most favorable
      prices.

3.    The most favorable price of a specific product shall mean the lower of (i)
      the lowest price that Eyston sells to other customers for the product
      having substantially the same make and materials and (ii) the indicative
      price for each of the product as stated herein.

4.    The following are the indicative unit prices (F.O.B. Hong Kong, at sight)
      for existing smoke alarms and carbon monoxide alarms: (i) DC battery
      operated ionization smoke alarm with a 9V carbon-zinc UL approved battery
      in gift-box packaging: USD2.00; (ii) DC battery operated photoelectric
      smoke alarm with a 9V carbon-zinc UL approved battery in gift-box
      packaging: USD3.50; (iii) AC hardwired ionization smoke alarm with a 9V
      carbon-zinc UL approved battery in gift-box packaging: USD3.826; (iv) DC
      battery operated carbon monoxide alarm using QUANTUM chemical sensor with
      a 9V Energizer 522 alkaline battery in gift-box packaging: USD12.00. The
      indicative prices are subject to change as agreed by both Parties from
      time to time.

5.    The indicative prices for all other products and models are subject to
      negotiation.

6.    Subject to actual material and production costs variation, the indicative
      prices shall be adjusted to reflect such costs changes.

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<PAGE>

7.    The sales from Eyston to the markets in the People's Republic of China
      shall be to or through Lai Kwan, or a party designated by Lai Kwan from
      time to time, on an exclusive basis.

8.    This Agreement shall be governed by and construed in accordance with the
      laws of Hong Kong.

IN WITNESS WHEREOF, the Parties to this Agreement have duly executed it on the
date and year first above written.

LAI KWAN LIMITED                            EYSTON COMPANY LIMITED

By:                                         By:
------------------------------------        ------------------------------------
Wai Shuen Shiman Lam                        Wai Wing Malcolm Lam
Director                                    Co-Chief Executive

                                       13

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