EXHIBIT 10.A AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ---------------------------

EXHIBIT 10.A

AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------

between

NAPCO SECURITY SYSTEMS, INC.
("Debtor")

With a place of business at:

▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

(Suffolk County)

and

HSBC BANK USA, NATIONAL ASSOCIATION,
SUCCESSOR BY MERGER TO HSBC BANK USA,
FORMERLY KNOWN AS MARINE MIDLAND BANK
("Secured Party")

With a place of business at:

▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Dated as of September 7, 2007

TABLE OF CONTENTS
-----------------

1. DEFINITIONS.................................................
1.1. CERTAIN SPECIFIC TERMS.........................
1.2. SINGULARS AND PLURALS..........................
1.3. U.C.C. DEFINITIONS.............................
1.4. ACCOUNTING TERMS...............................

2. ADVANCES..............................................
2.1. REQUESTS FOR AN ADVANCE........................
2.2. PROCEEDS OF AN ADVANCE.........................
2.3. INTENTIONALLY DELETED PRIOR TO EXECUTION.......
2.4. INTENTIONALLY DELETED PRIOR TO EXECUTION.......

3. COLLATERAL AND INDEBTEDNESS SECURED...................
3.1. SECURITY INTEREST..............................
3.2. OTHER COLLATERAL...............................
3.3. INDEBTEDNESS SECURED...........................

4. REPRESENTATIONS AND WARRANTIES........................
4.1. CORPORATE EXISTENCE............................
4.2. CORPORATE CAPACITY.............................
4.3. VALIDITY OF RECEIVABLES........................
4.4. INVENTORY......................................
4.5. TITLE TO COLLATERAL............................
4.6. DEBTOR'S TAX PAYER ID AND ORGANIZATION NUMBER..
4.7. CERTAIN OTHER REPRESENTATIONS WITH
RESPECT TO THE COLLATERAL......................
4.8. PLACE OF BUSINESS..............................
4.9. FINANCIAL CONDITION............................
4.10. TAXES..........................................
4.11. LITIGATION.....................................
4.12. ERISA MATTERS..................................
4.13. ENVIRONMENTAL MATTERS..........................
4.14. VALIDITY OF TRANSACTION DOCUMENTS..............
4.15. NO CONSENT OR FILING...........................
4.16. NO VIOLATIONS..................................
4.17. TRADEMARKS AND PATENTS.........................
4.18. CONTINGENT LIABILITIES.........................
4.19. COMPLIANCE WITH LAWS...........................
4.20. LICENSES, PERMITS, ETC.........................
4.21. LABOR CONTRACTS................................
4.22. CONSOLIDATED SUBSIDIARIES......................
4.23. AUTHORIZED SHARES..............................

4.24. LABOR MATTERS..................................
4.25. MATERIALITY....................................
4.26 NAPCO EXPORTRADORA.............................

5. INTENTIONALLY DELETED.......................................

6. REVOLVING CREDIT FACILITY...................................
6.1. COMMITMENT TO MAKE ADVANCES....................
6.2. ADVANCES.......................................
6.3. INTEREST RATE..................................
6.4. DEFAULT........................................
6.5. METHOD AND PLACE OF PAYMENT....................
6.6. REVOLVING CREDIT NOTE..........................

7. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND
EXPENSES..............................................
7.1. PROMISE TO PAY PRINCIPAL.......................
7.2. PROMISE TO PAY INTEREST........................
7.3. PROMISE TO PAY FEES............................
7.4. PROMISE TO PAY COSTS AND EXPENSES..............
7.5. COMMITMENT FEE/ORIGINATION FEE.......
7.6. ACCOUNT STATED.................................

8. INTENTIONALLY DELETED PRIOR TO EXECUTION....................

9. AFFIRMATIVE COVENANTS.......................................
9.1. FINANCIAL STATEMENTS...........................
9.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES.......
9.3. INTENTIONALLY DELETED PRIOR TO EXECUTION.......
9.4. BOOKS AND RECORDS..............................
9.5. INVENTORY IN POSSESSION OF THIRD PARTIES.......
9.6. EXAMINATIONS...................................
9.7. VERIFICATION OF COLLATERAL.....................
9.8. RESPONSIBLE PARTIES............................
9.9. TAXES..........................................
9.10. LITIGATION.....................................
9.11. INSURANCE......................................
9.12. GOOD STANDING; BUSINESS........................
9.13. PENSION REPORTS................................
9.14. NOTICE OF NON-COMPLIANCE.......................
9.15. COMPLIANCE WITH ENVIRONMENTAL LAWS.............
9.16. DEFEND COLLATERAL..............................
9.17. USE OF PROCEEDS................................
9.18. COMPLIANCE WITH LAWS...........................

9.19. MAINTENANCE OF PROPERTY........................
9.20. LICENSES, PERMITS, ETC.........................
9.21. TRADEMARKS AND PATENTS.........................
9.22. ERISA..........................................
9.23. MAINTENANCE OF OWNERSHIP.......................
9.24. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES........
9.25. LABOR DISPUTES.................................
9.26. FINANCIAL COVENANTS............................
9.27. CONTROL OF CERTAIN COLLATERAL..................

10. NEGATIVE COVENANTS.........................................
10.1. LOCATION OF INVENTORY, EQUIPMENT, AND
BUSINESS RECORDS...............................
10.2. BORROWED MONEY.................................
10.3. SECURITY INTEREST AND OTHER ENCUMBRANCES.......
10.4. STORING AND USE OF COLLATERAL..................
10.5. MERGERS, CONSOLIDATIONS OR SALES...............
10.6. CAPITAL STOCK..................................
10.7. DIVIDENDS OR DISTRIBUTIONS.....................
10.8. INVESTMENTS AND ADVANCES.......................
10.9. GUARANTIES.....................................
10.10. LEASES.........................................
10.11. CAPITAL EXPENDITURES...........................
10.12. FINANCIAL STATEMENTS..................
10.13. NAME CHANGE....................................
10.14. DISPOSITION OF COLLATERAL......................
10.15. FINANCIAL COVENANTS............................
10.16. NEGATIVE PLEDGE................................
10.17 GUARANTY, SECURITY AGREEMENT OF NAPCO GULF SECURITY
GROUP, LLC.
10.18 PLEDGE OF ASSETS, NEGATIVE PLEDGE OF FUTURE NON DOMESTIC
CONSOLIDATED SUBSIDIARIES
10.19. GUARANTY, SECURITY AGREEMENT OF FUTURE DOMESTIC
CONSOLIDATED SUBSIDIARIES OR ACQUIRED COMPANIES.
10.20 PLEDGE OF ASSETS, NEGATIVE PLEDGE OF NAPCO CAYMAN ISLANDS
and NAPCO ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇

▇▇. EVENTS OF DEFAULT...........................................
11.1. EVENTS OF DEFAULT..............................
11.2. EFFECTS OF AN EVENT OF DEFAULT.................

12. SECURED PARTY'S RIGHTS AND REMEDIES.........................
12.1. GENERALLY......................................
12.2. INTENTIONALLY DELETED PRIOR TO EXECUTION.......

iii

12.3. POSSESSION OF COLLATERAL.......................
12.4. COLLECTION OF RECEIVABLES......................
12.5. INTENTIONALLY DELETED PRIOR TO EXECUTION.......
12.6. LICENSE TO USE PATENTS, TRADEMARKS, AND
TRADENAMES....................................

13. MISCELLANEOUS...............................................
13.1. PERFECTING THE SECURITY INTEREST;
PROTECTING THE COLLATERAL...................
13.2. PERFORMANCE OF DEBTOR'S DUTIES.................
13.3. NOTICE OF SALE.................................
13.4. WAIVER BY SECURED PARTY........................
13.5. WAIVER BY DEBTOR...............................
13.6. SETOFF.........................................
13.7. ASSIGNMENT.....................................
13.8. SUCCESSORS AND ASSIGNS.........................
13.9. MODIFICATION...................................
13.10. COUNTERPARTS...................................
13.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.......
13.12. INDEMNIFICATION................................
13.13. TERMINATION; PREPAYMENT PREMIUM................
13.14. FURTHER ASSURANCE..............................
13.15. HEADINGS.......................................
13.16. CUMULATIVE SECURITY INTEREST, ETC..............
13.17. SECURED PARTY'S DUTIES.........................
13.18. NOTICES GENERALLY..............................
13.19. SEVERABILITY...................................
13.20. INCONSISTENT PROVISIONS........................
13.21. ENTIRE AGREEMENT...............................
13.22. APPLICABLE LAW.................................
13.23. CONSENT TO JURISDICTION........................
13.24. JURY TRIAL WAIVER..............................

EXHIBITS
"A" --- Trademarks and Patents....................
"B" --- Consolidated Subsidiaries.................
"C" --- Authorized Shares.........................
"D" --- Compliance Certificate....................
"E" --- Request for Advance and Notice of Interest Rate Section....
"F" --- Financial Statement Certification
"G" --- Names and Tradenames
"H" --- Schedule of Litigation

DEBTOR AND SECURED PARTY AGREE AS FOLLOWS:

1. DEFINITIONS:

1.1. CERTAIN SPECIFIC TERMS. For purposes of this Agreement, the
following terms shall have the following meanings:

(a) ACCEPTABLE ACQUISITION means "any stock and/or
cash acquisition of an equity interest in, or assets
of, a corporation, partnership or other entity engaged in a similar line of
business of the Debtor and its Consolidated Subsidiaries, which in the case of a
corporation, has been either (a) approved by the board of directors of such
corporation which is the subject of such acquisition or (b) recommended for
approval by such board to the shareholders of such corporation and subsequently
approved by such shareholders as required under applicable law or by the by-laws
or the certificate of incorporation of such corporation; provided, however, that
unless approved by the Secured Party:

o No acquisition shall be an "acceptable acquisition" if after
giving effect thereto (as evidenced in a pro-forma covenant
compliance certificate, in form and substance approved by
Secured Party, furnished by the Debtor), a Default or Event
of Default under the Transaction Documents shall have
occurred and be continuing.

o The "Acceptable Acquisition Purchase Price" (defined below),
either singly or in the aggregate, of an Acceptable
Acquisition(s) shall not exceed $15 million.

o In the case of an acquisition of a non-domestic Consolidated
Subsidiary, the business to be acquired shall be acquired by
the Debtor or Guarantor.

(b) ACCEPTABLE ACQUISITION PURCHASE PRICE" means, with respect
to any Acceptable Acquisition, collectively, without duplication, (i) all cash
paid by the Debtor and any of its Consolidated Subsidiaries in connection with
such Acceptable Acquisition, including in respect of transaction costs, fees and
other expenses incurred by the Debtor or any of its Consolidated Subsidiaries in
connection with such Acceptable Acquisition, (ii) all Indebtedness created, and
all Indebtedness assumed, by the Debtor or any of its Consolidated Subsidiaries
in connection with such Acceptable Acquisition, including, without limitation,
the maximum amount of any purchase price to be paid pursuant to any "earn out"
provision contained in the agreements related to any Acceptable Acquisition
(iii) the value of all capital stock issued by the Debtor or any of its
Consolidated Subsidiaries in connection with such Acceptable Acquisition and
(iv) any deferred portion of the purchase price or any other costs paid by the
Debtor or any of its Consolidated Subsidiaries in connection with such
Acceptable Acquisition, including but not limited to consulting agreements and
non-compete agreements. For purposes of this definition, if any "earn out"
provision does not provide for a maximum payment, the maximum amount of any
purchase price to be paid pursuant to any "earn out" provision shall be
determined by the Secured Party on a reasonable basis, on the basis of the
Debtor's projections.

(d) ADJUSTED LIBOR RATE means a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product arrived at
by multiplying the Base LIBOR Rate (as hereinafter defined) with respect to the
applicable Interest Period (as hereinafter defined) by a fraction (expressed as
a decimal); the numerator of which shall be the number one and the denominator
of which shall be the number one minus the aggregate reserve percentages
(expressed as a decimal) from time to time established by the Board of Governors
of the Federal Reserve System of the United States and other banking authority
to which the Secured Party is now or hereafter subject, including, but not
limited to, any Reserve Eurocurrency Liabilities as defined in Regulation D of
the Board of Governors of the Federal Reserve System of the United States at the
ratios provided in such Regulation, from time to time, it being agreed that any
portion of the Indebtedness (as hereinafter defined) bearing interest at a LIBOR
Rate shall be deemed to constitute Eurocurrency Liabilities, as defined by such
Regulation, and it being further agreed that such Eurocurrency Liabilities shall
be deemed to be subject to such reserve requirements without benefit of or
credit for prorations, exceptions or offsets that may be available to the
Secured Party from time to time under such Regulation and irrespective of
whether the Secured Party actually maintains all or any portion of such reserve.

(e) ADVANCE means a loan made to Debtor by Secured Party,
pursuant to this Agreement.

(f) AGREEMENT or LOAN AGREEMENT means this Amended and
Restated Loan and Security Agreement including all exhibits hereto, as the same
may be extended, amended, modified and/or restated from time to time; the terms
"herein", "hereunder" and like terms shall be taken as referring to this
Agreement in its entirety and shall not be limited to any particular section or
provision thereof.

(g) BASE LIBOR RATE applicable to a particular Interest Period
means a rate per annum (rounded upwards, if necessary, to the next 1/16th of 1%)
equal to the rate at which dollars approximately equal in principal amount to
the applicable portion of the Indebtedness and for a maturity equal to the
applicable Interest Period are offered in immediately available funds to the
Secured Party by leading banks in the London Interbank Market for Eurodollars at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period.

(h) BORROWING means the incurrence of an Advance on a given
date.

(i) BORROWING CAPACITY means, at the time of computation,
$25,000,000.

(j) BUSINESS DAY means a day other than a Saturday, Sunday, or
other day on which banks are authorized or required to close under the laws of
New York or the State.

(k) CASH FLOW means Cash Flow of the Debtor and its
Consolidated Subsidiaries, on a consolidated basis, net income, plus
depreciation plus amortization, minus capital expenditures, plus or minus
non-operating and non-cash losses or gains, net of tax, with accounting terms
defined in accordance with GAAP, based upon receipt of the quarterly and/or
annual financial statements, 10-K's and 10-Q's of the Debtor and its
Consolidated Subsidiaries required to be submitted to Secured Party pursuant to
the terms hereof. To be clear, non-operating and non-cash losses must occur
together to be added to the equation, and non-operating and non-cash gains must
occur together to be subtracted from the equation.

(l) CLAIMS means each "claim" as that term is defined under
Section 101(5) of the United States Bankruptcy Code, and any amendments thereto
(Title 11, United States Code).

(m) COLLATERAL means collectively all of the property of
Debtor subject to the Security Interest and described in Sections 3.1 and 3.2.

(n) COMMITMENT or COMMITMENTS means Secured Party's
obligations, pursuant to the terms of this Agreement, to make Advances under the
Revolving Credit Facility.

(o) CONSOLIDATED SUBSIDIARY means Alarm Lock Systems, Inc.
("Alarm"), Continental Instruments LLC, f/k/a Continental Instruments Systems,
LLC ("Continental"), NAPCO/Alarm Lock Grupo Internacional, S.A. ("NAPCO/Alarm
Lock"), NAPCO/Alarm Lock Exportadora , S.A. ("NAPCO Exportadora"), NAPCO Gulf
Security Group, LLC, ("NAPCO Gulf"), NAPCO Group Europe Limited ("NAPCO
Europe"), NAPCO Americas ("NAPCO Cayman Islands"), NAPCO DR, S.A. ("NAPCO
Dominican Republic"), and any other Person of which more than 50% of the voting
stock or membership interest, as the case may be, is owned by Debtor directly,
or indirectly, through one or more Consolidated Subsidiaries, and each of their
respective successors and/or assigns.

(p) intentionally deleted prior to execution.

(q) intentionally deleted prior to execution.

(r) CURRENT ASSETS shall be determined in accordance with
GAAP.

(s) CURRENT LIABILITIES shall be determined in accordance with
GAAP.

(t) DEBTOR means the person or entity defined on the cover
page to this Agreement.

(u) DEBT SERVICE COVERAGE RATIO means earnings before
interest, taxes, depreciation and amortization, less distributions, all divided
by current portion of long term debt as of the prior fiscal year end plus
interest expense.

(v) DISPOSAL means the intentional or unintentional
abandonment, discharge, deposit, injection, dumping, spilling, leaking, burning,
thermal destruction, or placing of any Hazardous Substance so that it or any of
its constituents may enter the environment.

(w) ENVIRONMENT means any water including, but not limited to,
surface water and ground water or water vapor; any land including land surface
or subsurface; stream sediments; air, fish, wildlife, plants; and all other
natural resources or environmental media.

(x) ENVIRONMENTAL LAWS means all federal, state, and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances, regulations, codes, and rules relating to the
protection of the Environment and/or governing the use, storage, treatment,
generation, transportation, processing, handling, production, or disposal of
Hazardous Substances and the policies, guidelines, procedures, interpretations,
decisions, orders, and directives of federal, state, and local governmental
agencies and authorities with respect thereto.

(y) ENVIRONMENTAL PERMITS means all licenses, permits,
approvals, authorizations, consents or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders in
connection with ownership, lease, purchase, transfer, closure, use, and/or
operation of any property owned, leased or operated by Debtor or any
Consolidated Subsidiary and/or as may be required for the storage, treatment,
generation, transportation, processing, handling, production, or disposal of
Hazardous Substances.

(z) ENVIRONMENTAL QUESTIONNAIRE means a questionnaire and all
attachments thereto concerning (i) activities and conditions affecting the
Environment at any property of Debtor or any Consolidated Subsidiary or (ii) the
enforcement or possible enforcement of any Environmental Law against Debtor or
any Consolidated Subsidiary.

(aa) ENVIRONMENTAL REPORT means a written report prepared for
Secured Party by an environmental consulting or environmental engineering firm.

(bb) ERISA means the Employee Retirement Income Security Act
of 1974, as amended from time to time.

(cc) EVENT OF DEFAULT or EVENTS OF DEFAULT means an Event
of Default or Events of Default as defined in Section 11.1.

(dd) FEDERAL BANKRUPTCY CODE means Title 11 of the United
States Code, entitled "Bankruptcy," as amended, or any successor federal
bankruptcy law.

(ee) FUNDED DEBT means all interest bearing debt.

(ff) GAAP means Generally Accepted Accounting Principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other

statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable in the circumstances as of the
date in question, consistently applied within a period and from period to
period, provided, however, that if employment of more than one principle shall
be permissible at such time in respect to a particular accounting matter, "GAAP"
shall refer to the principle which is then employed by Debtor with the
concurrence of the independent certified public accountants of Debtor.

(gg) HAZARDOUS SUBSTANCES means, without limitation, any
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances,
and any other material defined as a hazardous substance in Section 101(14) of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(14).

(hh) IMPORTED INVENTORY means all Inventory of Obligor of
every description imported from outside of the United States, including but not
limited to Inventory consisting of parts or components produced in whole or in
part in the United States and sent outside of the United States for assembly,
completion or packaging.

(ii) INDEBTEDNESS means the indebtedness secured by the
Security Interest and described in Section 3.3.

(jj) INTANGIBLE ASSETS means (1) all loans or advances to, and
other receivable owing from, any officers, employees, subsidiaries and other
affiliates, (2) goodwill, and (3) any other assets deemed intangible under GAAP.

(kk) INTEREST PERIOD means the period of time during which a
particular LIBOR Rate Option (as hereinafter defined) will be applicable to a
portion of the Indebtedness, it being agreed that (i) each Interest Period shall
be of a duration of, at the option of the Borrower, one month, two months, three
months, four months, six months, nine months or twelve months (ii) no Interest
Period shall extend beyond the Term, (iii) the principal balance with respect to
which a particular Interest Period is applicable will bear interest at the LIBOR
Rate Option pertaining to such Interest Period from and including the first day
of such Interest Period to, but not including, the last day of such Interest
Period.

(ll) INTERNAL REVENUE CODE means the Internal Revenue Code of
1986, as amended from time to time.

(mm) INVENTORY means inventory, as defined in the Uniform
Commercial Code as in effect in the State as of the date of this Agreement, and
in any event shall include returned or repossessed Goods.

(nn) LIBOR RATE OPTION or LIBOR INTEREST RATE means a rate per
annum equal to the Adjusted LIBOR Rate with respect to the applicable Interest

Period plus the applicable LIBOR Margin, as described and defined based upon the
ratio of Funded Debt to Cash Flow, all as more specifically described in Section
7.2.(h) hereinbelow.

(oo) LIEN means any lien, security interest, pledge,
hypothecation, encumbrance or other claim in or with respect to any property.

(pp) PENSION EVENT means, with respect to any Pension Plan,
the occurrence of (i) any prohibited transaction described in Section 406 of
ERISA or in Section 4975 of the Internal Revenue Code; (ii) any Reportable
Event; (iii) any complete or partial withdrawal, or proposed complete or partial
withdrawal, of Debtor or any Consolidated Subsidiary from such Pension Plan;
(iv) any complete or partial termination, or proposed complete or partial
termination, of such Pension Plan; or (v) any accumulated funding deficiency
(whether or not waived), as defined in Section 302 of ERISA or in Section 412 of
the Internal Revenue Code.

(qq) PENSION PLAN means any pension plan, as defined in
Section 3(2) or ERISA, which is a multiemployer plan or a single employer plan,
as defined in Section 4001 of ERISA, and subject to Title IV of ERISA and which
is (i) a plan maintained by Debtor or any Consolidated Subsidiary for employees
or former employees of Debtor or of any Consolidated Subsidiary; (ii) a plan to
which Debtor or any Consolidated Subsidiary contributes or is required to
contribute; (iii) a plan to which Debtor or any Consolidated Subsidiary was
required to make contributions at any time during the five (5) calendar years
preceding the date of this Agreement; or (iv) any other plan with respect to
which Debtor or any Consolidated Subsidiary has incurred or may incur liability,
including, without limitation, contingent liability, under Title IV of ERISA
either to such plan or to the Pension Benefit Guaranty Corporation. For purposes
of this definition, and for purposes of Sections 1.1(cc), 4.12, and 11.1(i),
Debtor shall include any trade or business (whether or not incorporated) which,
together with Debtor or any Consolidated Subsidiary, is deemed to be a "single
employer" within the meaning of Section 4001(b)(1) of ERISA.

(rr) PERSON means any natural person, corporation, limited
liability company, partnership, trust, government or other association or legal
entity.

(ss) intentionally deleted prior to execution;

(tt) PRIME RATE means the rate of interest publicly announced
by Secured Party from time to time as its prime rate and is a base rate for
calculating interest on certain loans. The rate announced by Secured Party as
its prime rate may or may not be the most favorable rate charged by Secured
Party to its customers.

(uu) RECEIVABLE or ACCOUNT shall have the meaning given to
Account under the U.C.C, including without limiting the foregoing, the right to
payment for Goods sold or leased or services rendered by the Debtor, whether or
not earned by performance, and may, without limitation, in whole or in part be
in the form of any Account, Chattel Paper, Document, or Instrument.

(vv) RELEASE means "release", as defined in Section 101(22) of
the Comprehensive, Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(22), and the regulations promulgated thereunder.

(ww) REPORTABLE EVENT means any event described in Section
4043(b) of ERISA or in regulations issued thereunder with regard to a Pension
Plan.

(xx) RESPONSIBLE PARTIES includes all Debtor and all makers,
endorsors, acceptors, sureties and guarantors of, and all other parties to, the
Indebtedness or the Collateral.

(yy) REVOLVING CREDIT FACILITY means the Advances made or to
be made available to Debtor by Secured Party pursuant to the terms of this
Agreement, and as evidenced by the Revolving Credit Note.

(zz) REVOLVING CREDIT NOTE or NOTE means, individually,
jointly, severally, and collectively, REVOLVING CREDIT NOTE or NOTE means,
individually, jointly, severally, and collectively, the revolving credit note #1
dated May 12, 1997, in the aggregate sum not to exceed $1,000,000, as
reaffirmed, extended, modified, amended and/or restated from time to time and as
may be further reaffirmed, extended, modified, amended and/or restated from time
to time ("Note #1") and the revolving credit note # 2 dated May 12, 1997, in the
original aggregate sum not to exceed $15,000,000, as increased (so that such
note is in the aggregate sum not to exceed $24,000,000, as the same may have
been otherwise reaffirmed, extended, modified, amended and/or restated from time
to time, as the same may be further extended, amended, reaffirmed and/or
otherwise modified from time to time ("Note #2")).

(aaa) RESPONSIBLE PARTY means an Account Debtor, a general
partner of an Account Debtor, or any party otherwise in any way directly or
indirectly liable for the payment of a Receivable.

(bbb) SECURED PARTY means the person or entity defined on the
cover page of this Agreement and any successors or assigns of Secured Party.

(ccc) SECURITY INTEREST means the security interest granted to
Secured Party by Debtor as described in Section 3.1.

(ddd) STATE means New York State.

(eee) TANGIBLE NET WORTH means total stockholders'
equity minus Intangible Assets, all to be determined in
accordance with GAAP.

(fff) TERM or LOAN PERIOD means the period from the date
hereof until the Termination Date.

(ggg) TERMINATION DATE means the earlier to occur of (a)
September 1, 2011 or if such day shall not be a Business Day, the next
succeeding Business Day, or (b) upon the occurrence of an Event of Default, at
the option of Secured Party, in its sole discretion.

(hhh) THIRD PARTY means any person or entity who has executed
and delivered, or who in the future may execute and deliver, to Secured Party
any agreement, instrument, or document, pursuant to which such person or entity
has guarantied to Secured Party the payment of the Indebtedness or has granted
Secured Party a security interest in or lien on some or all of such person's or
entity's real or personal property to secure the payment of the Indebtedness.

(iii) TOTAL LIABILITIES shall be determined in accordance with
GAAP, but, in any event, shall exclude the principal balance of any debt that is
subordinated to Secured Party in a manner satisfactory to Secured Party.

(jjj) TRANSACTION DOCUMENTS mean individually, jointly,
severally and collectively, the Agreement (including all amendments to date),
and all documents, instruments, notes and agreements by Debtor or any other
Third Party or any Responsible Party in favor of Secured Party, whether in
existence now or hereinafter created, executed and delivered to Secured Party,
as the same may be extended, re-executed, modified or otherwise amended from
time to time, including, without limitation, the Note, collateral documents,
letter of credit agreements, notes, acceptance credit agreements, security
agreements, pledges, guaranties, mortgages, title insurance, assignments, and
subordination agreements required to be executed by Debtor, any other Third
Party, or any Responsible Party pursuant hereto or in connection herewith, or in
connection with a letter of credit application and reimbursement agreement, each
dated as of May 12, 1997, as may be reaffirmed or restated from time to time, a
certain uncommitted trade line established by Secured Party in favor of Debtor
to provide for commercial and standby letters of credit, evidenced by, among
other documents, a continuing letter of credit agreement, and a continuing
indemnity agreement, each dated as of May 12, 1997, as may be re-executed,
amended, extended or otherwise modified from time to time, and the obligations
thereunder, as may be extended or otherwise modified from time to time, and
uncommitted line of credit facility to be used by Debtor to finance certain
acquisitions, as may be executed and delivered to Secured Party from time to
time to evidence and secure the obligations under such facilities pursuant to
the terms that the Secured Party shall request, and all other documents,
agreements, reaffirmations, certificates and resolutions related thereto, and
amendments or supplements thereto, all such other agreements, resolutions,
certificates, resolutions and opinion letters executed and/or issued as a
condition precedent to or in connection with the Agreement, the Note and all
such other documents, agreements, and instruments delivered hereunder or as a
supplement or amendment thereto or as Secured Party may reasonably require from
time to time in order to evidence, guaranty and/or secure any and all
indebtedness of Debtor to Secured Party or to create, perfect, continue the
perfection or protect the Secured Party's security interest in the Collateral or
any of the other collateral specified in the other Transaction Documents.

(kkk) VARIABLE RATE OPTION means a fluctuating annual rate
equal to the Prime Rate minus 1/4 of 1%.

1.2. SINGULARS AND PLURALS. Unless the context otherwise
requires, words in the singular number include the plural, and in the plural
include the singular.

1.3. U.C.C. DEFINITIONS. Unless otherwise defined in Section 1.1 or
elsewhere in this Agreement, capitalized words shall have the meanings set forth
in the Uniform Commercial Code as in effect in the State from time to time
("U.C.C." or "UCC"). Without limiting the foregoing, "Accessions," "Account,"
"Chattel Paper," "Commodity Accounts," "Commodity Contracts," "Control," ,
"Deposit Account", "Document," "Electronic Chattel Paper," "Entitlement Holder,"
"Entitlement Order," "Equipment," "Financial Assets," "Fixtures," "General
Intangibles," "Goods," "Health-Care-Insurance Receivables," "Instrument,"
"Inventory," "Investment Property," "Payment Intangibles," "Proceeds,"
"Promissory Notes," "Securities," "Securities Account," "Securities
Entitlements," "Securities Intermediary" and "Supporting Obligations" have the
meanings assigned to those terms by the UCC.

1.4. ACCOUNTING TERMS. All other financial and accounting terms used
herein or in the other Transaction Documents not specifically defined shall have
the meanings defined under GAAP.

2. ADVANCES.

2.1. REQUESTS FOR AN ADVANCE. From time to time, Debtor may make a
written or oral request for an Advance, so long as the sum of the aggregate
principal balance of outstanding advances and the requested Advance does not
exceed the Borrowing Capacity as then computed; and Secured Party shall make
such requested Advance, provided that (i) the Borrowing Capacity would not be so
exceeded; (ii) there has not occurred an Event of Default for which a waiver
signed by a duly authorized Officer of Secured Party was not obtained, or an
event which, with notice or lapse of time or both, would constitute an Event of
Default; and (iii) all representations and warranties contained in this
Agreement and in the other Transaction Documents are true and correct on the
date such requested Advance is made as though made on and as of such date. Each
oral request for an Advance shall be conclusively presumed to be made by a
person authorized by Debtor to do so, and the making of the Advance to Debtor as
hereinafter provided shall conclusively establish Debtor's obligation to repay
the Advance.

2.2. PROCEEDS OF AN ADVANCE. Proceeds of Advances shall be paid in the
manner agreed by Debtor and Secured Party in writing or, absent any such
agreement, as determined by Secured Party. Without limiting the foregoing, the
proceeds of the Revolving Credit Facility will be useable by the Debtor, (i) to
make Acceptable Acquisition(s); (ii) to permit the Debtor to purchase up to one
million shares, in the aggregate, of its own common voting stock, and (iii) to
provide for the Debtor's working capital needs and for such other legal and
proper corporate purposes as are consistent with all applicable laws, the
Debtor's governance documents and the terms of the Transaction Documents.

2.3. INTENTIONALLY DELETED PRIOR TO EXECUTION.

2.4. INTENTIONALLY DELETED PRIOR TO EXECUTION.

3. COLLATERAL AND INDEBTEDNESS SECURED.

3.1. SECURITY INTEREST. Debtor hereby grants to Secured Party a
security interest in, and a lien on, all right, title and interest of Debtor in
all of the following property, whether now or hereafter existing or acquired and
wherever located, and all products and Proceeds (including but not limited to
insurance proceeds) of such property, wherever located and in whatever form, and
all books and records pertaining to such property and all other property of
Debtor in which Secured Party now or hereafter is granted a security interest
pursuant to this Agreement or otherwise:

(a) a first priority perfected security interest in all assets and
property of every description including, without limitation, all Accounts,
General Intangibles, Chattel Paper (whether tangible or electronic),
Instruments, Letter-of-Credit Rights, Investment Property, Deposit Accounts,
Documents, and Goods (including Inventory, Equipment and Fixtures and embedded
software, and all Accessions to any Goods).

(b) a first priority perfected security interest in all of the
corporate stock of Alarm Lock Systems, Inc., and any other Consolidated
Subsidiary of the Debtor organized under the laws of any state of the United
States of America.

(c) a first priority perfected security interest in sixty-five percent
(65%) of the corporate stock of NAPCO/Alarm Lock, NAPCO Europe, NAPCO Cayman
Islands, NAPCO Dominican Republic, and any other Consolidated Subsidiary, now or
in the future, of the Debtor that is not organized under the laws of any state
of the United States of America.

(d) A first mortgage lien in the principal sum of $1,000,000.00 on the
fee ownership interest of the Debtor in favor of the Secured Party on the
premises and improvements located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Mortgaged Premises" or "Mortgaged Property") and further secured by
an assignment of all present and future leases covering the Mortgaged Premises
and UCC-1 financing statements covering all fixtures and personal property to be
attached to the Mortgaged Premises, present and future (the "Mortgage"), which
Mortgage and assignment of leases and rents were executed and delivered to Bank
on May 12, 1997, and which documents are still in full force and effect.

3.2. OTHER COLLATERAL. Nothing contained in this Agreement shall limit
the rights of Secured Party in and to any other collateral securing the
Indebtedness which may have been, or may hereafter be, granted to Secured Party
by Debtor or any Third Party, pursuant to any other agreement.

3.3. INDEBTEDNESS SECURED. The Security Interest secures payment of any
and all indebtedness, and performance of all obligations and agreements, of
Debtor to Secured Party, whether now existing or hereafter incurred or arising,
of every kind and character, primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, and whether such indebtedness is from
time to time reduced and thereafter increased, or entirely extinguished and

thereafter reincurred, including, without limitation: (a) all Advances; (b) all
interest which accrues on any such indebtedness, until payment of such
indebtedness in full, including, without limitation, all interest provided for
under this Agreement; (c) all other monies payable by Debtor, and all
obligations and agreements of Debtor to Secured Party, pursuant to the
Transaction Documents; (d) all debts owed, or to be owed, by Debtor to others
which Secured Party has obtained, or may obtain, by assignment or otherwise; (e)
all monies payable by any Third Party, and all obligations and agreements of any
Third Party to Secured Party, pursuant to any of the Transaction Documents; and
(f) all monies due, and to become due, pursuant to Section 7.3.

4. REPRESENTATIONS AND WARRANTIES. To induce Secured Party to enter into this
Agreement, and make Advances to Debtor from time to time as herein provided,
Debtor represents and warrants, to the best of its knowledge, and, so long as
any Indebtedness remains unpaid or this Agreement remains in effect, shall be
deemed continuously to represent and warrant as follows:

4.1. CORPORATE EXISTENCE. Debtor and Alarm each is duly organized and
existing and in good standing under the laws of the state of Delaware and is
duly licensed or qualified to do business and in good standing in every state in
which the nature of its business or ownership of its property requires such
licensing or qualification. Each other domestic Consolidated Subsidiary is duly
organized or formed, as the case may be, and existing and in good standing under
the laws of the State and is duly licensed or qualified to do business and in
good standing in every state in which the nature of its business or ownership of
its property requires such licensing or qualification.

4.2 CORPORATE CAPACITY. The execution, delivery and performance of the
Transaction Documents are within Debtor's corporate powers, have been duly
authorized by all necessary and appropriate corporate and shareholder action,
and are not in contravention of any law or the terms of Debtor's articles or
certificate of incorporation or by-laws or any amendment thereto, or of any
indenture, agreement, undertaking, or other document to which Debtor is a party
or by which Debtor or any of Debtor's property is bound or affected.

4.3. VALIDITY OF RECEIVABLES. (a) each copy of each invoice is a true
and genuine copy of the original invoice sent to the account debtor named
therein and accurately evidences the transaction from which the underlying
Receivable arose, and the date payment is due as stated on each Invoice or
computed based on the information set forth on each such Invoice is correct; (b)
all Chattel Paper, and all promissory notes, drafts, trade acceptances, and
other instruments for the payment of money relating to or evidencing each
Receivable, and each endorsement thereon, are true and genuine and in all
respects what they purport to be, and are the valid and binding obligation of
all parties thereto, and the date or dates stated on all such items as the date
on which payment in whole or in part is due is correct; (c) all Inventory
described in each Invoice has been delivered to the Account Debtor named in such
Invoice or placed for such delivery in the possession of a carrier not owned or
controlled directly or indirectly by Debtor; (d) all evidence of the delivery or
shipment of Inventory is true and genuine; (e) all services to be performed by
Debtor in connection with each Receivable have been performed by Debtor; and (f)
all evidence of the performance of such services by Debtor is true and genuine.

4.4. INVENTORY. (a) All representations made by Debtor to Secured
Party, and all documents and schedules given by Debtor to Secured Party,
relating to the description, quantity, quality, condition, and valuation of the
Inventory are true and correct; (b) Inventory is located only at the address or
addresses of Debtor set forth at the beginning of this Agreement, or such other
place or places as approved by Secured Party in writing; (however Debtor has
signed a lease for a location at ▇/▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
where it will house Inventory) (c) all Inventory is insured as required by
Section 9.11, pursuant to policies in full compliance with the requirements of
such Section; and (d) all domesticly manufactured or produced Inventory has been
produced by Debtor in accordance with the Federal Fair Labor Standards Act of
1938, as amended, and all rules, regulations and orders promulgated thereunder.

4.5. TITLE TO COLLATERAL. (a) Debtor is the owner of the Collateral
free of all security interests, liens, and other encumbrances, except the
Security Interest; (b) Debtor has the unconditional authority to grant the
Security Interest to Secured Party; and (c) assuming that all necessary Uniform
Commercial Code filings have been made and, if applicable, assuming compliance
with the Federal Assignment of Claims Act of 1940, as amended, Secured Party has
an enforceable first lien on all Collateral.

4.6. DEBTOR'S TAX PAYER ID AND ORGANIZATION NUMBER. Debtor's taxpayer
identification number is as follows: ▇▇-▇▇▇▇▇▇▇ and Debtor's Organization number
is as follows: Delaware File No. 0776899.

4.7. CERTAIN OTHER REPRESENTATIONS WITH RESPECT TO THE COLLATERAL. (a)
no financing statement or other filing listing any of the Collateral as
collateral is on file in any jurisdiction (other than any financing statement
filed on behalf of Secured Party, as secured party) and Debtor has not entered
into control agreements in favor of any party except Secured Party with respect
to Collateral constituting Deposit Accounts or Investment Property, nor has
Debtor executed in favor of any party except Secured Party an assignment of the
proceeds of any Collateral constituting Letter-of-Credit Rights or granted to
any party except Secured Party control (pursuant to Section 9-105 of the UCC) of
any Collateral constituting Electronic Chattel Paper; (b) Debtor has rights in
or the power to transfer the Collateral or is the legal and beneficial owner of
the Collateral and the Collateral is free and clear of all Liens, other than the
Lien created by this Agreement in favor of Secured Party; and (c) Debtor did not
have or conduct business under any name or trade name in any jurisdiction during
the past six years other than its name and trade names, if any, as set forth in
Exhibit G attached hereto, and Debtor is entitled to use such name and trade
names.

4.8. PLACE OF BUSINESS. (a) Debtor is engaged in business operations
which are in whole, or in part, carried on at the address or addresses specified
at the beginning of this Agreement and at no other address or addresses; (b) if
Debtor has more than one place of business, its chief executive office is at the
address specified as such at the beginning of this Agreement; and (c) Debtor's
records concerning the Collateral are kept at the address specified at the
beginning of this Agreement.

4.9. FINANCIAL CONDITION. Debtor has furnished to Secured Party
Debtor's most current financial statements, including, without limiting the
foregoing, the most recent interim statements of Debtor, which statements
represent correctly and fairly the results of the operations and transactions of
Debtor and the Consolidated Subsidiaries as of the dates, and for the period
referred to, and have been prepared in accordance with GAAP applied during each
interval involved and from interval to interval. Since the date of such
financial statements, there have not been any materially adverse changes in the
financial condition reflected in such financial statements, except as disclosed
in writing by Debtor to Secured Party.

4.10. TAXES. Except as disclosed in writing by Debtor to Secured Party
including Debtor's financial statements provided to Secured Party: (a) all
federal and other tax returns required to be filed by Debtor and each
Consolidated Subsidiary have been filed, and all taxes required by such returns
have been paid; and (b) neither Debtor nor any Consolidated Subsidiary has
received any notice from the Internal Revenue Service or any other taxing
authority proposing additional taxes.

4.11. LITIGATION. Except as set forth in Schedule H attached hereto and
incorporated by reference, there are no actions, suits, proceedings, or
investigations pending or, to the knowledge of Debtor, threatened against Debtor
or any of its Consolidated Subsidiaries or any basis therefor which, if
adversely determined, would, in any case or in the aggregate, materially
adversely affect the property, assets, financial condition, or business of
Debtor or any of its Consolidated Subsidiaries or materially impair the right or
ability of Debtor or any of its Consolidated Subsidiaries to carry on its
operations substantially as conducted on the date of this Agreement.

4.12. ERISA MATTERS. (a) No Pension Plan has been terminated, or
partially terminated, or is insolvent, or in reorganization, nor have any
proceedings been instituted to terminate or reorganize any Pension Plan; (b)
neither Debtor nor any Consolidated Subsidiary has withdrawn from any Pension
Plan in a complete or partial withdrawal, nor has a condition occurred which, if
continued, would result in a complete or partial withdrawal; (c) neither Debtor
nor any Consolidated Subsidiary has incurred any withdrawal liability,
including, without limitation, contingent withdrawal liability, to any Pension
Plan, pursuant to Title IV of ERISA; (d) neither Debtor nor any Consolidated
Subsidiary has incurred any liability to the Pension Benefit Guaranty
Corporation other than for required insurance premiums which have been paid when
due; (e) no Reportable Event has occurred; (f) no Pension Plan or other
"employee pension benefit plan" as defined in Section 3(2) of ERISA, to which
Debtor or any Consolidated Subsidiary is a party has an "accumulated funding
deficiency" (whether or not waived), as defined in Section 302 of ERISA or in
Section 412 of the Internal Revenue Code; (g) the present value of all benefits
vested under any Pension Plan does not exceed the value of the assets of such
Pension Plan allocable to such vested benefits; (h) each Pension Plan and each
other "employee benefit plan", as defined in Section 3(3) of ERISA, to which
Debtor or any Consolidated Subsidiary is a party is in substantial compliance
with ERISA, and no such plan or any administrator, trustee, or fiduciary thereof
has engaged in a prohibited transaction described in Section 406 of ERISA or in
Section 4975 of the Internal Revenue Code; (i) each Pension Plan and each other
"employee benefit plan" as defined in Section 3(2) of ERISA, to which Debtor or
any Consolidated Subsidiary is a party has received a favorable determination by
the Internal Revenue Service with respect to qualification under Section 401(a)
of the Internal Revenue Code; and (j) neither Debtor nor any Consolidated

Subsidiary has incurred any liability to a trustee or trust established pursuant
to Section 4049 of ERISA or to a trustee appointed pursuant to Section 4042(b)
or (c) of ERISA.

4.13. ENVIRONMENTAL MATTERS.

(a) Any Environmental Questionnaire previously provided to
Secured Party was and is accurate and complete and does not omit any material
fact the omission of which would make the information contained therein
materially misleading.

(b) No above ground or underground storage tanks containing
Hazardous Substances are, or have been located on, any property owned, leased,
or operated by Debtor or any domestic Consolidated Subsidiary.

(c) No property owned, leased, or operated by Debtor or any
domestic Consolidated Subsidiary is, or has been, used for the Disposal of any
Hazardous Substance or for the treatment, storage, or Disposal of Hazardous
Substances.

(d) No Release of a Hazardous Substance has occurred, or is
threatened on, at, from, or near any property owned, leased, or operated by
Debtor or any domestic Consolidated Subsidiary.

(e) Neither Debtor nor any domestic Consolidated Subsidiary is
subject to any existing, pending, or threatened suit, claim, notice of
violation, or request for information under any Environmental Law nor has Debtor
or any domestic Consolidated Subsidiary provided any notice or information under
any Environmental Law.

(f) Debtor and each domestic Consolidated Subsidiary are in
compliance with, and have obtained all Environmental Permits required by, all
Environmental Laws.

4.14. VALIDITY OF TRANSACTION DOCUMENTS. The Transaction Documents
constitute the legal, valid, and binding obligations of Debtor and each
Consolidated Subsidiary and any Third Parties thereto, enforceable in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy and insolvency laws and laws affecting creditors' rights
generally.

4.15. NO CONSENT OR FILING. No consent, license, approval, or
authorization of, or registration, declaration, or filing with, any court,
governmental body or authority, or other person or entity is required in
connection with the valid execution, delivery, or performance of the Transaction
Documents or for the conduct of Debtor's business as now conducted, other than
filings and recordings to perfect security interests in or liens on the
Collateral in connection with the Transaction Documents.

4.16. NO VIOLATIONS. Neither Debtor nor any Consolidated Subsidiary is
in violation of any term of its articles, or Certificate of Incorporation, or

by-laws, or of any mortgage, borrowing agreement, or other instrument or
agreement pertaining to indebtedness for borrowed money. Neither Debtor nor any
Consolidated Subsidiary is in violation of any term of any other indenture,
instrument, or agreement to which it is a party or by which it or its property
may be bound, resulting, or which might reasonably be expected to result, in a
material and adverse effect upon its business or assets. Neither Debtor nor any
Consolidated Subsidiary is in violation of any order, writ, judgment,
injunction, or decree of any court of competent jurisdiction or of any statute,
rule or regulation of any governmental authority. The execution and delivery of
the Transaction Documents and the performance of all of the same, is, and will
be, in compliance with the foregoing and will not result in any violation
thereof, or result in the creation of any mortgage, lien, security interest,
charge, or encumbrance upon, any properties or assets except in favor of Secured
Party. There exists no fact or circumstance (whether or not disclosed in the
Transaction Documents) which materially adversely affects, or in the future (so
far as Debtor can now foresee) may materially adversely affect, the condition,
business, or operations of Debtor or any Consolidated Subsidiary.

4.17. TRADEMARKS AND PATENTS. Debtor and each Consolidated Subsidiary
possess all trademarks, trademark rights, patents, patent rights, tradenames,
tradename rights and copyrights that are required to conduct its business as now
conducted without conflict with the rights or claimed rights of others. A list
of the foregoing as set forth in Exhibit A attached hereto.

4.18. CONTINGENT LIABILITIES. There are no suretyship agreements,
guaranties, or other contingent liabilities of Debtor or any Consolidated
Subsidiary which are not disclosed by the financial statements described in
Section 4.9.

4.19. COMPLIANCE WITH LAWS. Debtor is in compliance with all applicable
laws, rules, regulations, and other legal requirements with respect to its
business and the use, maintenance and operations of the real and personal
property owned or leased by it in the conduct of its business.

4.20. LICENSES, PERMITS, ETC. Each franchise, grant, approval,
authorization, license, permit, easement, consent, certificate, and order of and
registration, declaration, and filing with, any court, governmental body or
authority, or other person or entity required for or in connection with the
conduct of Debtor's and each Consolidated Subsidiary's business as now conducted
is in full force and effect.

4.21. LABOR CONTRACTS. Neither Debtor nor any Consolidated Subsidiary
is a party to any collective bargaining agreement or to any existing or
threatened labor dispute or controversies.

4.22. CONSOLIDATED SUBSIDIARIES. Debtor has no Consolidated
Subsidiaries other than those listed in Exhibit B attached hereto and the
percentage ownership of Debtor in each such Consolidated Subsidiary is specified
in such Exhibit B.

4.23. AUTHORIZED SHARES. Debtor's total authorized common shares, the
par value of such shares, and the number of such shares issued and outstanding,
are set forth in Exhibit C. All of such shares are of one class and have been
validly issued in full compliance with all applicable federal and state laws,

and are fully paid and non-assessable. No other shares of the Debtor of any
class or type are authorized or outstanding.

4.24. LABOR MATTERS.

(a) Debtor is not engaged in any unfair labor practice. Debtor
is in compliance in all material respects with all applicable federal, state and
local laws, regulations, rules, orders or other requirements respecting terms
and conditions of employment, employment practices, and wages and hours,

(b) No strike, walkout or similar business interruption
resulting from any labor dispute has been suffered by Debtor during the last
five years nor is any state of facts known to Debtor which would indicate that
such event or circumstance is likely to occur in the next twelve months.

(c) There is no pending, or to the knowledge of Debtor,
threatened unfair labor practice complaint against Debtor, before the National
Labor Relations Board.

(d) There is no strike, labor dispute, slowdown or stoppage
actually pending or, to the knowledge of Debtor, threatened against them.

(e) No union representation question exists respecting the
employees, or any group of employees, of Debtor.

(f) No grievance which might have a material adverse effect on
Debtor or the conduct of their business nor any arbitration proceeding arising
out of or under collective bargaining agreements is pending, and no claims
therefor exist.

(g) No collective bargaining agreement which is binding on
Debtor restricts Debtor from relocating or closing any office, warehouse or any
other facility presently being used by Debtor.

(h) Debtor has not experienced any material work stoppage or
other material labor difficulty at any office, warehouse or other facility.

(i) There are no claims, complaints or charges pending before
any state or federal agency concerning employment penalties, including without
limitation, employment discrimination, retaliatory discharge and wage and hour
claims.

4.25 MATERIALITY. Notwithstanding anything to the contrary contained in
Section 4 hereof, no representation or warranty contained in Section 4 shall be
deemed false or cause an Event of Default to the extent that the falsity of such
representation or warranty is not material, would not have a material adverse
effect on Debtor and/or any domestic Consolidated Subsidiary, would not cause an

untrue statement of material fact, and/or would not result in an omission to
state a material fact in order to make the statements contained herein not
misleading, and/or would not materially adversely affect the financial and/or
business condition of Debtor and/or any domestic Consolidated Subsidiary.

4.26 NAPCO EXPORTRADORA. NAPCO Exportadora, although duly formed, is an
inactive corporation and does not and will not hold any assets without the
Secured Party's prior written consent.

5. INTENTIONALLY DELETED PRIOR TO EXECUTION.

6. REVOLVING CREDIT FACILITY.

6.1. COMMITMENT TO MAKE ADVANCES.

(a) Secured Party agrees, subject to the terms and conditions contained
herein, to make Advances from the date hereof until but not including the
Termination Date (the "Commitment Period"), provided that (i) each request for
an Advance be in writing and specify the Interest Rate Option selected, as more
specifically described in Section 7.2. herein and shall be accompanied by a
Compliance Certificate, in the form attached hereto as Exhibit D; (ii) all
representations and warranties contained in this Agreement are true and correct
in all respects on the date of the Advance; (iii) all covenants and agreements
contained in this Agreement and the other Loan Documents have been complied
with; and (iv) no Event of Default has occurred and be continuing under the
Transaction Documents.

6.2. ADVANCES. Debtor's obligation to pay the principal, and interest
on, the obligations under the Revolving Credit Loan Credit Facility shall be
evidenced by the Revolving Credit Note. Availability under the Revolving Credit
Loan Credit Facility is subject to the terms and conditions contained herein,
including but not limited to, those set forth herein.

6.3. INTEREST RATE. For each Advance, the Interest Rate shall be as set
forth in Section 7 herein and be evidenced by the Revolving Credit Note.

6.4. DEFAULT. The Note shall provide that upon the happening of any
"Event of Default" hereunder and/or under the Transaction Documents, the
principal sum hereof, together with accrued interest and all other expenses,
including, but not limited to reasonable attorneys' fees for legal services
incurred by the holder hereof in connection with the collection of the Note
and/or the enforcement of payment hereof whether or not suit is brought, and if
suit is brought, then through all appellate actions, shall immediately become
due and payable at the option of the holder of the Note, notwithstanding the
Termination Date set forth herein. In the Event of Default, whether the Secured
Party exercises any of its rights and remedies contained herein, including the
right to declare all Indebtedness hereunder to be immediately due and payable,
the Borrower shall pay interest on the unpaid principal balance hereunder at a
rate equal to the Default Rate. The unpaid principal balance under the Note
shall bear the Default Rate of Interest until the first to occur of the

following: (i) all Indebtedness under the Note are paid in full; (ii) Debtor has
cured said Event of Default to the satisfaction of the Secured Party; or (iii)
the Secured Party, in writing, has waived said Event of Default. Without
limiting the foregoing, or any provision contained in the Note, in the event a
representation or warranty contained in Article 4 proves to be materially false
or misleading when made, the unpaid principal balance under the Note shall bear
the Default Rate of Interest from the date such representation or warranty was
made and the Default Rate of Interest shall continue until the first to occur of
the following: (i) all Indebtedness under this Note are paid in full; (ii)
Debtor, to the satisfaction of the Secured Party, has taken such remedies
necessary to make such representation or warranty true in all material respects;
or (iii) the Secured Party, in writing, has waived said misrepresentation or
warranty. Notwithstanding anything to the contrary contained in the Revolving
Credit Note, the Revolving Credit Note is subject to the express condition that
at no time shall Debtor be obligated to be required to pay interest on the
principal balance of the Revolving Credit Note at a rate which could subject
Secured Party either to civil or criminal penalty as a result of being in excess
of the maximum rate which Debtor is permitted by law to contract or agree to
pay. If by the terms of the Revolving Credit Note, Debtor at any time are
required or obligated to pay interest on the principal balance of such note at a
rate in excess of such maximum rate then the rate of interest under such note
shall be deemed to be immediately reduced to such maximum rate and interest
payable hereunder shall be computed at such maximum rate and any prior interest
payments made in excess of such maximum rate shall be applied and shall be
deemed to have been payments made in reduction of the principal balance of such
note.

6.5. METHOD AND PLACE OF PAYMENT. All payments under the Revolving
Credit Note and this Agreement shall be made by debiting the checking account of
Debtor required to be maintained with Secured Party pursuant to the terms
hereof.

6.6. REVOLVING CREDIT NOTE. The amount of Indebtedness under the
Revolving Credit Facility may increase and decrease from time to time as Secured
Party advances, Debtor repays, and Secured Party readvances, sums on account of
the Revolving Credit Facility. It is hereby agreed that all Advances, first,
shall be deemed evidenced by Note #1 up to the principal amount of $1,000,000.,
so that the first sums advanced by Secured Party shall be evidenced by Note #1.
Note #1, and the Indebtedness evidenced by Note #1, shall be reduced only by the
last and final sums that Debtor repays with respect to the Revolving Credit
Facility and shall not be reduced by any intervening repayments of Advances by
Secured Party until all Indebtedness under Note #2 has been repaid. All Advances
(including readvances) shall first be deemed borrowed under Note #1 (to the
extent of $1,000,000.) and all repayments of Advances shall first be applied to
Note #2.

7. PAYMENT OF PRINCIPAL, INTEREST, FEES AND COSTS AND EXPENSES- Revolving Credit
Facility.

7.1. PROMISE TO PAY PRINCIPAL. Debtor promises to pay to Secured Party
the outstanding principal of Advances in full upon termination of the Revolving
Credit Facility pursuant to Section 13.13, or acceleration of the time for

payment of the Indebtedness, pursuant to Section 11.2. Whenever the outstanding
principal balance of Advances exceeds the Borrowing Capacity, Debtor shall
immediately pay to Secured Party the excess of the outstanding principal balance
of Advances over the Borrowing Capacity.

7.2. PROMISE TO PAY INTEREST.

(a) Debtor promises to pay to Secured Party interest on the
outstanding principal of Advances from time to time unpaid at either (a) the
Variable Rate Option, or (b) the LIBOR Rate Option for the Interest Period
selected by Debtor. The amount of principal based upon the LIBOR Rate Option
shall be minimum amounts of $50,000.00 for the Interest Period selected by
Debtor. From the date of the occurrence of, and during the continuance of, an
Event of Default, Debtor, as additional compensation to Secured Party for its
increased credit risk promises to pay interest on (i) the principal of Advances,
whether or not past due; and (ii) past due interest and any other amount past
due under the Transaction Documents, at a per annum rate equal to the Prime Rate
plus three percent per annum ("Default Rate" or "Default Rate of Interest").

(b) Interest shall be paid (i) on the first day of each month
in arrears, (ii) on the Termination Date, (iii) on acceleration of the time for
payment of the Indebtedness, pursuant to Section 11.2, and (iv) on the date the
Indebtedness is paid in full.

(c) Any change in the interest rate resulting from a change in
the Prime Rate shall take effect simultaneously with such change in the Prime
Rate. Whether the Variable Rate Option or LIBOR Rate Option is in effect,
interest shall be computed on the daily unpaid principal balance of Advances.
Interest shall be calculated for each calendar day at 1/360th of the applicable
per annum rate which will result in an effective per annum rate higher than the
rate specified herein. In no event shall the rate of interest exceed the maximum
rate permitted by applicable law. If Debtor pays to Secured Party interest in
excess of the amount permitted by applicable law, such excess shall be applied
in reduction of the principal of Advances under the Revolving Credit Facility
made pursuant to this Agreement, and any remaining excess interest, after
application thereof to the principal of Advances, shall be refunded to Debtor.

(d) At Debtor's option, Debtor may elect to pay interest on
one or more Advances for one or more Interest Periods or for the term of this
Note, or any period of time, so long as such period is made available by Secured
Party and does not extend beyond the Term, subject to the provisions contained
herein, by giving notice of such election to the Secured Party by 11:00 a.m. at
least three (3) Business Days before the first day of such Advance. If the
Debtor does not elect an Interest Rate Option for an Advance, or prior to the
expiration of an Interest Period, the Variable Rate Option shall be deemed to
have been chosen by Debtor.

(e) At the option of Debtor, Debtor may elect to pay interest
on the Indebtedness herein or portion(s) thereof, in minimum amounts of
$50,000.00 at the LIBOR Rate Option for the Interest Period selected by the
Debtor by giving notice of such election by the Secured Party by 11:00 a.m. at
least three (3) Business Days before the first day of such Interest Period.

(f) All written notices of Interest Rate Selection and/or
Requests for Advances shall be substantially in the form annexed hereto as
Exhibit E, attached hereto and incorporated herein by this reference.

(g) At any time while the LIBOR Rate Option is in effect,
Debtor agrees to pay to Secured Party and hold Secured Party harmless from any
loss or expense ("breakage fees" or "breakage costs") which Secured Party may
sustain or incur as a consequence of such prepayment. Such breakage fees shall
equal the amount of the Indebtedness being prepaid, multiplied by a per annum
interest rate equal to the difference between the then applicable Base LIBOR
Rate and the 360-day equivalent interest yield (hereinafter the "Bank Bid Rate")
reasonably selected by the Secured Party in its sole and absolute discretion,
for an aggregate amount comparable to the then remaining principal balance of
the Indebtedness, and with maturities comparable to the Rollover Date (as
hereinafter defined) applicable to the principal balance of the Indebtedness,
calculated over a period of time from and including the date of prepayment to,
but not including, the Rollover Date applicable to the then remaining principal
balance of the Indebtedness being prepaid. If the Base LIBOR Rate applicable to
the principal balance of the portion of the Indebtedness being prepaid is equal
to or less than the Bank Bid Rate, no LIBOR Rate breakage fee shall be due. The
term "Rollover Date" applicable to a particular LIBOR Interest Period shall mean
the last day of LIBOR Interest Period. The Secured Party shall submit a
certificate to the Debtor setting forth in reasonable detail the amount of the
breakage costs, which certificate shall be conclusive in the absence of manifest
error. The breakage costs shall also apply to prepayments due as a result of a
default. There shall be no breakage costs for any portion of the indebtedness
being prepaid bearing interest at the Variable Rate Option.

(h) At any time while the LIBOR Rate Option is in effect, the
applicable LIBOR Interest Rate will equal the Adjusted LIBOR Rate plus the LIBOR
Margin, based upon the ratio of Funded Debt to Cash Flow, as described herein
with respect to the applicable Interest Period. Each determination of a LIBOR
Interest Rate shall be made by Secured Party 60 days after the end of Borrower's
first, second and third fiscal quarters, and 120 days after the end of Borrowers
fiscal year end (provided however that the financial statements required to be
delivered to Secured Party has in fact been timely delivered, with time being of
the essence), and shall be conclusive and binding upon the Debtor absent
manifest error. Secured Party will adjust the LIBOR Margin, and the resulting
LIBOR Interest Rate quarterly, with Funded Debt to Cash Flow tested by Secured
Party quarterly based upon a rolling four quarter ratio of "Funded Debt" to
"Cash Flow" of the Debtor and its Consolidated Subsidiaries, as follows:

"Funded Debt" to "Cash Flow" "LIBOR Margin"
---------------------------- --------------
< 5:1 1.25%
> 5:1 1.50%
-

Secured Party will make its determination of the LIBOR Margin based upon the
quarterly and/or annual financial statements, 10-K's and 10-Q's of the Debtor
and its Consolidated Subsidiaries required to be submitted to Secured Party
pursuant to the terms of Section 9.1. hereinbelow. If the Debtor shall fail to

deliver to Secured Party the required financial statements and other required
reports, the Revolving Credit Facility shall bear interest at the Variable Rate
Option until such statements and reports have been received, provided that no
Event of Default has occurred and is continuing, in which case, the Default Rate
shall apply.

7.3. PROMISE TO PAY FEES. Debtor promises to pay to Secured Party
monthly, on the first day of each calendar month, an unused fee equal to one
quarter of one percent (.25%) of $25,000,000.00 less the aggregate average
principal balance of all Advances outstanding during the calendar month just
ended under the Revolving Credit Facility, calculated for each calendar day at
1/360th of the applicable per annum rate which will result in an effective per
annum rate higher than the rate specified herein.

7.4. PROMISE TO PAY COSTS AND EXPENSES.

(a) Debtor agrees to pay to Secured Party, on demand, all
costs and expenses as provided in this Agreement, and all costs and expenses
incurred by Secured Party from time to time in connection with this Agreement,
including, without limitation, those incurred in: (i) preparing, negotiating,
amending, waiving, or granting consent with respect to the terms of any or all
of the Transaction Documents; (ii) enforcing the Transaction Documents; (iii)
performing, pursuant to Section 13.2, Debtor's duties under the Transaction
Documents upon Debtor's failure to perform them; (iv) filing financing
statements, assignments, or other documents relating to the Collateral (e.g.,
filing fees, recording taxes, and documentary stamp taxes); (v) realizing upon
or protecting any Collateral; (vi) enforcing or collecting any Indebtedness or
guaranty thereof; and (vii) upon the occurrence of an Event of Default,
employing collection agencies or other agents to collect any or all of the
Receivable.

(b) Without limiting Section 7.4(a), Debtor also agrees to pay
to Secured Party, on demand, the actual reasonable fees and disbursements
incurred by Secured Party for attorneys retained by Secured Party for advice,
suit, appeal, or insolvency or other proceedings under the Federal Bankruptcy
Code or otherwise upon the occurrence of an Event of Default specified in
Section 13.13.

7.5. COMMITMENT FEE. Without limiting any other provision of this
Article 7, as a condition to Secured Party extending the Termination Date and
increasing the aggregate principal amount of Advances under the Revolving Credit
Facility, Debtor will have paid a commitment fee of Twenty Five Thousand
($25,000.00) Dollars, plus such other costs and expenses incurred by Secured
Party or attributable to the Revolving Credit facility, including reasonable
legal fees of Secured Party's counsel and disbursements thereof;

7.6. ACCOUNT STATED. Debtor agrees that each monthly or other statement
of account mailed or delivered by Secured Party to Debtor pertaining to the
outstanding balance of Advances, the amount of interest due thereon, fees, and
costs and expenses shall be final, conclusive, and binding on Debtor and shall
constitute an "account stated" with respect to the matters contained therein
unless, within thirty (30) calendar days from when such statement is mailed or,

if not mailed, delivered to Debtor, Debtor shall deliver to Secured Party
written notice of any objections which it may have as to such statement of
account, and in such event, only the items to which objection is expressly made
in such notice shall be considered to be disputed by Debtor.

7.7. ARRANGER FEE. Without limiting any other provision of this Article
7, as a condition to Secured Party extending the Termination Date and increasing
the aggregate principal amount of Advances under the Revolving Credit Facility,
Debtor will have paid an arranger fee of Fifty Thousand ($50,000.00) Dollars.

8. INTENTIONALLY DELETED PRIOR TO EXECUTION.

9. AFFIRMATIVE COVENANTS. So long as any part of the Indebtedness remains
unpaid, or this Agreement remains in effect, Debtor shall comply with the
covenants contained elsewhere in this Agreement, and with the covenants listed
below:

9.1. FINANCIAL STATEMENTS. Debtor shall furnish to Secured Party:

(a) Annual Audited Financial Statements of Debtor. Within one
hundred twenty (120) days after the end of each fiscal year, audited
consolidated financial statements of Debtor and its Consolidated Subsidiaries as
of the end of such year, fairly presenting Debtor's and its Consolidated
Subsidiaries' financial position, which statements shall consist of a balance
sheet and related statements of income, retained earnings, and cash flow
covering the period of Debtor's immediately preceding fiscal year, and which
shall be prepared by Debtor and audited by independent certified public
accountants satisfactory to Secured Party in the form submitted to the
Securities and Exchange Commission, and in accordance with GAAP. At the same
time, Debtor shall deliver to Secured Party (i) a copy of the Form 10-K filed
with the Securities and Exchange Commission, and internally prepared
consolidating financial statements of Debtor and its Consolidated Subsidiaries,
and (ii) a covenant compliance certificate certifying that there are no defaults
to the Transaction Documents in the form of Exhibit D attached hereto and made a
part hereof and otherwise in form and substance reasonably satisfactory to
Secured Party, executed by the chairman, president or chief financial officer of
Debtor or other financial officer satisfactory to Secured Party. in the form of
Exhibit E attached hereto and made a part hereof. All such financial statements
and other documents delivered to Secured Party are to be certified as accurate
by the chief financial officer of Debtor.

(b) Quarterly 10-Q Reports. Within sixty (60) days of each
first, second and third fiscal quarter of each fiscal year, consolidated 10-Q
report filed with the Securities and Exchange Commission of Debtor and its
Consolidated Subsidiaries as of the end of such period, fairly presenting
Debtor's and its Consolidated Subsidiaries' financial position, and internally
prepared consolidating financial statements of Debtor and its Consolidated
Subsidiaries. At the same time, the Debtor shall deliver to the Secured Party a
covenant compliance certificate certifying that there are no defaults to the
Transaction Documents in the form of Exhibit D attached hereto and made a part
hereof and otherwise in form and substance reasonably satisfactory to Secured
Party, executed by the chairman, president or chief financial officer of Debtor
or other financial officer satisfactory to Secured Party. All such reports shall

be in such detail as the Securities and Exchange Commission shall request and in
accordance with GAAP and shall be signed and certified to be correct by the
chief financial officer of Debtor or such other financial officer satisfactory
to Secured Party.

(c) Management Letters. In addition, Debtor shall deliver to
Secured Party, as soon as available, a true copy of any "Management Letter" or
other communication to Debtor, from its certified public accountants regarding
matters which arose or were ascertained during the course of their review and
which such accountants determined ought to be brought to management's attention.

(d) Other Reporting. Within forty five days of each fiscal
quarter of each fiscal year concerning Debtor and all Consolidated Subsidiaries,
all such reports to be in form and substance satisfactory to Secured Party in
its reasonable discretion:

(i) accounts receivable aging reports; and

(ii) inventory designation reports.

(e) Other Information. Copies of any and all proxy statements,
financial statements, and reports which Debtor sends to its shareholders, and
copies of any and all periodic and special reports and registration statements
which Debtor files with the Securities and Exchange Commission, and such
additional information as Secured Party may from time to time reasonably request
regarding the financial and business affairs of Debtor or any Consolidated
Subsidiary.

9.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES. Debtor shall promptly
notify Secured Party in writing of the existence of any Receivable as to which
the perfection, enforceability, or validity of Secured Party's Security Interest
in such Receivable, or Secured Party's right or ability to obtain direct payment
to Secured Party of the Proceeds of such Receivable, is governed by any federal
or state statutory requirements other than those of the Uniform Commercial Code,
including, without limitation, any Receivable subject to the Federal Assignment
of Claims Act of 1940, as amended.

9.3. INTENTIONALLY DELETED PRIOR TO EXECUTION.

9.4. BOOKS AND RECORDS. Debtor shall maintain, at its own cost and
expense, accurate and complete books and records with respect to the Collateral,
in form satisfactory to Secured Party, and including, without limitation,
records of all payments received and all Credits and Extensions granted with
respect to the Receivables, of the return, rejection, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory, and of all other
dealings affecting the Collateral. Debtor shall deliver such books and records
to Secured Party or its representative upon reasonable request. At Secured
Party's request, Debtor shall ▇▇▇▇ all or any records to indicate the Security
Interest. Debtor shall further indicate the Security Interest on all financial
statements issued by it or shall cause the Security Interest to be so indicated
by its accountants.

9.5. INVENTORY IN POSSESSION OF THIRD PARTIES. If any Inventory remains
in the hands or control of any of Debtor's agents, finishers, contractors, or
processors, or any other third party, Debtor, if requested by Secured Party,
shall notify such party of Secured Party's Security Interest in the Inventory
and shall instruct such party to hold such Inventory for the account of Secured
Party and subject to the instructions of Secured Party.

9.6. EXAMINATIONS. Debtor shall at all reasonable times and from time
to time permit Secured Party or its agents upon reasonable advance notice to
Debtor to inspect the Collateral and to examine and make extracts from, or
copies of, any of Debtor's books, ledgers, reports, correspondence, and other
records.

9.7. VERIFICATION OF COLLATERAL. Secured Party shall have the right to
verify all or any Collateral in any manner and through any medium Secured Party
may consider appropriate and Debtor agrees to furnish all assistance and
information and perform any acts which Secured Party may require in connection
therewith.

9.8. RESPONSIBLE PARTIES. Debtor shall notify Secured Party of the
occurrence of any event specified in Section 11.1(v)(iv) with respect to any
Responsible Party promptly after receiving notice thereof.

9.9. TAXES. Debtor shall promptly pay and discharge all of its taxes,
assessments, and other governmental charges prior to the date on which penalties
are attached thereto, establish adequate reserves for the payment of such taxes,
assessments, and other governmental charges, make all required withholding and
other tax deposits, and, upon request, provide Secured Party with receipts or
other proof that such taxes, assessments, and other governmental charges have
been paid in a timely fashion; provided, however, that nothing contained herein
shall require the payment of any tax, assessment, or other governmental charge
so long as its validity is being contested in good faith, and by appropriate
proceedings diligently conducted, and adequate reserves for the payment thereof
have been established.

9.10. LITIGATION.

(a) Debtor shall promptly notify Secured Party in writing of
any litigation, proceeding, or counterclaim against, or of any investigation of,
Debtor or any Consolidated Subsidiary if: (i) the outcome of such litigation,
proceeding, counterclaim, or investigation may materially and adversely affect
the finances or operations of Debtor or any Consolidated Subsidiary or title to,
or the value of, any Collateral; or (ii) such litigation, proceeding,
counterclaim, or investigation questions the validity of any Transaction
Document or any action taken, or to be taken, pursuant to any Transaction
Document.

(b) Debtor shall furnish to Secured Party such information
regarding any such litigation, proceeding, counterclaim, or investigation as
Secured Party shall request.

9.11. INSURANCE.

(a) Debtor shall at all times carry and maintain in full force
and effect such insurance as Secured Party may from time to time reasonably
require, in coverage, form, and amount, and issued by insurers, satisfactory to
Debtor and Secured Party, including, without limitation: workers' compensation
or similar insurance; public liability insurance; business interruption
insurance; and insurance against such other risks as are usually insured against
by business entities of established reputation engaged in the same or similar
businesses as Debtor and similarly situated.

(b) Debtor shall deliver to Secured Party the policies of
insurance required by Secured Party, with appropriate endorsements designating
Secured Party as an additional insured, mortgagee and loss payee as requested by
Secured Party. Each policy of insurance shall provide that if such policy is
cancelled for any reason whatsoever, if any substantial change is made in the
coverage which affects Secured Party, or if such policy is allowed to lapse for
nonpayment of premium, such cancellation, change, or lapse shall not be
effective as to Secured Party until thirty (30) days after receipt by Secured
Party of written notice thereof from the insurer issuing such policy.

9.12. GOOD STANDING; BUSINESS.

Debtor shall take all necessary steps to preserve its
corporate existence and its right to conduct business in all states in which the
nature of its business or ownership of its property requires such qualification.
Debtor shall take all necessary steps to preserve the legal existence of each of
its Consolidated Subsidiaries and each of their respective rights to conduct
business in all states in which the nature of their respective businesses or
ownership of properties requires such qualification.

9.13. PENSION REPORTS. Upon the occurrence of any Pension Event, Debtor
shall furnish to Secured Party, as soon as possible and, in any event, within
thirty (30) days after Debtor knows, or has reason to know, of such occurrence,
the statement of the president or chief financial officer of Debtor setting
forth the details of such Pension Event and the action which Debtor proposes to
take with respect thereto.

9.14. NOTICE OF NON-COMPLIANCE. Debtor shall notify Secured Party in
writing of any failure by Debtor or any Third Party to comply with any provision
of any Transaction Document within ten (10) days of learning of such
non-compliance, or if any representation or warranty contained in any
Transaction Document is no longer true.

9.15. COMPLIANCE WITH ENVIRONMENTAL LAWS.

(a) Debtor shall comply with all Environmental Laws.

(b) Debtor shall not suffer, cause, or permit the Disposal of
Hazardous Substances at any property owned, leased, or operated by it or any
domestic Consolidated Subsidiary.

(c) Debtor shall promptly notify Secured Party in the event of
the Disposal of any domestic Hazardous Substance at any property owned, leased,

or operated by Debtor or any domestic Consolidated Subsidiary, or in the event
of any Release, or threatened Release, of a Hazardous Substance, from any such
property.

(d) Debtor shall, at Secured Party's request, provide, at
Debtor's expense, updated Environmental Questionnaires concerning any property
owned, leased, or operated by Debtor or any domestic Consolidated Subsidiary.

(e) Debtor shall deliver promptly to Secured Party (i) copies
of any documents received from the United States Environmental Protection Agency
or any state, county, or municipal environmental or health agency concerning
Debtor's or any domestic Consolidated Subsidiary's operations and (ii) copies of
any documents submitted by Debtor or any domestic Consolidated Subsidiary to the
United States Environmental Protection Agency or any state, county, or municipal
environmental or health agency concerning its operations.

9.16. DEFEND COLLATERAL. Debtor shall defend the Collateral against the
claims and demands of all other parties (other than Secured Party), including,
without limitation, defenses, setoffs, and counterclaims asserted by any Account
Debtor against Debtor or Secured Party.

9.17. USE OF PROCEEDS. Debtor shall use the proceeds of Advances solely
for Debtor's working capital and for such other legal and proper corporate
purposes as are consistent with all applicable laws, Debtor's articles or
certificate of incorporation and by-laws, resolutions of Debtor's Board of
Directors, and the terms of this Agreement.

9.18. COMPLIANCE WITH LAWS. Debtor shall comply with all applicable
laws, rules, regulations, and other legal requirements with respect to its
business and the use, maintenance, and operations of the real and personal
property owned or leased by it in the conduct of its business.

9.19. MAINTENANCE OF PROPERTY. Debtor shall maintain its property,
including, without limitation, the Collateral, in good condition and repair and
shall prevent the Collateral, or any part thereof, from being or becoming an
accession to other goods not constituting Collateral.

9.20 LICENSES, PERMITS, ETC. Debtor shall maintain all of its
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, and orders, if any, in full force and effect until their
respective expiration dates.

9.21. TRADEMARKS AND PATENTS. Debtor shall maintain all of its
trademarks, trademark rights, patents, patent rights, licenses, permits,
tradenames, tradename rights, and approvals, if any, in full force and effect
until their respective expiration dates.

9.22. ERISA. Debtor shall comply with the provisions of ERISA and the
Internal Revenue Code with respect to each Pension Plan.

9.23. MAINTENANCE OF OWNERSHIP. Debtor shall at all times maintain
ownership of the percentages of issued and outstanding capital stock of each

Consolidated Subsidiary set forth in Exhibit B and notify Secured Party in
writing prior to the incorporation of any new Consolidated Subsidiary.

9.24. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES. Unless the provisions of
this Section 9.24 are expressly waived by Secured Party in writing, Debtor shall
cause each domestic Consolidated Subsidiary to comply with Sections 9.1, 9.9,
9.11, 9.12, 9.15, 9.26 and 9.18 through 9.22, inclusive, and any of the
provisions contained in Schedule, and shall cause each domestic Consolidated
Subsidiary to refrain from doing any of the acts proscribed by Sections 10.2,
10.3, and 10.5 through 10.14, inclusive.

9.25. LABOR DISPUTES. Debtor shall notify the Secured Party promptly
upon Debtor's learning of any material labor dispute to which Debtor may become
a party to, any strikes or walkouts relating to any of its plants or any of its
facilities and/or the expiration of any labor contract to which Debtor is a
party to or by which Debtor is bound.

9.26. FINANCIAL COVENANTS. The financial covenants to include the
following:

(a) The Debtor and its Consolidated Subsidiaries shall maintain, on a
consolidated basis, a ratio of Total Liabilities to Tangible Net Worth of not
greater than 1.5 to 1 (to be tested quarterly based upon the financial
statements required to be presented to Secured Party pursuant to the terms
hereof).

(b) The Debtor and its Consolidated Subsidiaries shall maintain, on a
consolidated basis, a minimum Tangible Net Worth (to be tested quarterly based
upon the financial statements required to be presented to Secured Party pursuant
to the terms hereof) of not less than:

(i) at June 30, 2007, the actual Tangible Net Worth
at June 30, 2006 plus $1,000,000, and

(ii) at June 30, 2008, the actual Tangible Net Worth
at June 30, 2007 plus $1,000,000, and

(iii) at June 30, 2009, the actual Tangible Net Worth
at June 30, 2008 plus $1,000,000, and

(iv) at June 30, 2010, the actual Tangible Net Worth
at June 30, 2009 plus $1,000,000, and

(v) at June 30, 2011, the actual Tangible Net Worth
at June 30, 2010 plus $1,000,000.

(c) At all times, the Debtor and its Consolidated Subsidiaries shall
maintain, on a consolidated basis, a ratio of Current Assets to Current
Liabilities of not less than 4.00 to 1, to be tested each fiscal quarter end of

each fiscal year, based upon the financial statements required to be presented
to Secured Party pursuant to Section 9.1. hereinabove.

(d) The Debtor and its Consolidated Subsidiaries shall maintain, on a
consolidated basis, a minimum "Debt Service Coverage Ratio" of 1.25 to 1, to be
tested at the end of each fiscal year, based upon the financial statements
required to be presented to Secured Party pursuant to Section 9.1 hereinabove.
"Debt Service Coverage Ratio" shall mean earnings before interest, taxes,
depreciation and amortization, less distributions, all divided by current
portion of long term debt as of the prior fiscal year end plus interest expense.

(e) At all times, the Debtor and its Consolidated Subsidiaries shall
maintain, on a consolidated basis, a ratio of the aggregate of cash plus
Receivables to Current Liabilities of not less than 1.25 to 1, to be tested each
fiscal quarter end of each fiscal year, based upon the financial statements
required to be presented to Secured Party pursuant to Section 9.1. hereinabove.

(f) At all times, the Debtor and its Consolidated Subsidiaries shall
maintain, on a consolidated basis, not less than forty (40%) of the value of all
of their identifiable assets (as disclosed in the 10K statement) in the United
States, to be tested at each fiscal year end.

(g) The above ratios of this Section 9.26. are being calculated
assuming that in the last year of the Loan Agreement, the Advances under the
Revolving Credit Facility are viewed as long term debt, unless there is an event
of default which is continuing under the Revolving Credit Facility.

9.27. Control of Certain Collateral. In respect of any security
interest granted under this Agreement by Debtor in any Collateral which
constitutes Investment Property, or Deposit Accounts, Debtor shall enter into
one or more control agreements ("Control Agreement") among Debtor, Secured Party
and the Securities Intermediary with respect to any Investment Property and
among Debtor, Secured Party and the depository bank with respect to each Deposit
Account, on terms satisfactory to Bank, giving Control over such property to
Secured Party. With respect to such property constituting Securities Accounts,
Debtor may at any time make a request to Secured Party to permit trades of
certain specified Investment Property held in such Securities Account for other
specified Investment Property which shall be held in such Securities Account.
Secured Party shall be under no obligation whatsoever to honor such request or
to permit or effect, through the Securities Intermediary, or otherwise, any such
trades and Secured Party may in its sole and absolute discretion refuse to do
so. In no event is Debtor permitted to, and Debtor agrees that Debtor shall not,
withdraw any money or property from such Securities Account or modify or
terminate any Control Agreement or any customer agreement with the Securities
Intermediary under which such Securities Account was established. If any of the
Collateral constitutes Letter-of-Credit Rights, Debtor shall at Secured Party's
request, enter into an assignment in favor of Secured Party of the proceeds of
the letters of credit involved, on terms satisfactory to Secured Party, and
cause the issuer of each such letter of credit now existing or hereafter issued
to consent to such assignment. If any of the Collateral constitutes Electronic
Chattel Paper, Debtor shall, at Secured Party's request, grant control of such
Electronic Chattel Paper to Secured Party in accordance with Section 9-105 of

the UCC. Debtor agrees that all items of income, gain, expense and loss
recognized in any such Securities Account or Deposit Account, or any Securities
Account holding Collateral or in respect of any other Investment Property
constituting Collateral, shall be reported to the Internal Revenue Service and
all state and local taxing authorities under the name and taxpayer
identification number of Debtor.

9.28. GUARANTIES. All future domestic Consolidated Subsidiaries shall
execute and deliver to Secured Party payment guaranties, general security
agreements and such other Transaction Documents that current domestic
Consolidated Subsidiaries have heretofore delivered to Secured Party, all in
form and substance comparable to what has previously been delivered to Secured
Party by existing domestic Consolidated Subsidiaries.

10. NEGATIVE COVENANTS. So long as any part of the Indebtedness remains
unpaid or this Agreement remains in effect, Debtor and its Consolidated
Subsidiaries, without the written consent of Secured Party, shall not violate
any covenant contained otherwise herein and shall not, and Debtor shall not
permit its Consolidated Subsidiaries to:

10.1. LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS RECORDS. Move the
Inventory, Equipment or the records concerning the Collateral from the location
where they are kept as specified herein, except in the ordinary course of
business.

10.2. BORROWED MONEY. Create, incur, assume, or suffer to exist any
liability for borrowed money, except to Secured Party and except for permitted
Capital Expenditures.

10.3. SECURITY INTEREST AND OTHER ENCUMBRANCES. Create, incur, assume,
or suffer to exist any mortgage, security interest, other encumbrance or other
Lien upon any of its properties or assets, whether now owned or hereafter
acquired (a) except in favor of Secured Party, (b) except all existing liens,
mortgages, or encumbrances, and (c) except in connection with the grant of a
security interest in Equipment in connection with financing the purchase of
Equipment or in connection with the leasing of Equipment in an aggregate amount
not to exceed $500,000.00 per fiscal year, so long as Debtor is in compliance
with Sections 10.10 and 10.11. herein.

10.4. STORING AND USE OF COLLATERAL. Place the Collateral in any
warehouse which may issue a negotiable Document with respect thereto or use the
Collateral in violation of any provision of the Transaction Documents, of any
applicable statute, regulation, or ordinance, or of any policy insuring the
Collateral.

10.5. MERGERS, CONSOLIDATIONS, OR SALES.

(a) Merge or consolidate with or into any corporation; (b)
enter into any joint venture or partnership with any person, firm, or
corporation; (c) convey, lease, or sell all or any material portion of its
property or assets or business to any other person, firm, or corporation except
for the sale of Inventory in the ordinary course of its business and in

accordance with the terms of this Agreement; or (d) convey, lease, or sell any
of its assets to any person, firm or corporation for less than the fair market
value thereof.

10.6. CAPITAL STOCK. Purchase or retire any of its capital stock or
issue any capital stock, except (1) in connection with its employee stock option
plan and its non-employee stock option plan and (2) pro rata to its present
stockholders, or otherwise change the capital structure of Debtor or change the
relative rights, preferences, or limitations relating to any of its capital
stock, and (iii) Debtor may purchase up to one million shares, in the aggregate,
of its own common voting stock, as expressly permitted in Section 2.2
hereinabove.

10.7. DIVIDENDS OR DISTRIBUTIONS. Pay or declare any cash or other
dividends or distributions (other than stock dividends or stock distributions)
on any of its corporate stock, or permit a Consolidated Subsidiary to pay or
declare any cash or other dividends or distributions (other than stock dividends
or stock distribution) on any of the corporate stock of any Consolidated
Subsidiary other than cash or other dividends or other distributions to Debtor
or any other Consolidated Subsidiary.

10.8. INVESTMENTS AND ADVANCES. Make any investment in, or advances to,
any other person, firm, or corporation, except (a) advance payments or deposits
against purchases made in the ordinary course of Debtor's regular business; (b)
direct obligations of the United States of America, money-market funds or
certificates of deposit; or (c) any existing investments in, or existing
advances to, the Consolidated Subsidiaries.

10.9. GUARANTIES. Become a guarantor, a surety, or otherwise liable for
the debts or other obligations of any other person, firm, or corporation,
whether by guaranty or suretyship agreement, agreement to purchase indebtedness,
agreement for furnishing funds through the purchase of goods, supplies, or
services (or by way of stock purchase, capital contribution, advance, or loan)
for the purpose of paying or discharging indebtedness, or otherwise, except as
an endorser of instruments for the payment of money deposited to its bank
account for collection in the ordinary course of business.

10.10. LEASES. Enter, as lessee, into any lease of real or personal
property (whether such lease is classified on Debtor's financial statements as a
capital lease or operating lease) in excess of $500,000 per fiscal year.

10.11. CAPITAL EXPENDITURES. During any fiscal year during the Loan
Period, cause the Capital Expenditures of Debtor and its Consolidated
Subsidiaries to exceed, on a combined basis, $2,500,000.

10.12. FINANCIAL STATEMENTS. Fail to deliver the financial statements
and reports set forth in Section 9.1. hereof within the time frames specified.

10.13. NAME CHANGE. Change its name without giving at least thirty (30)
days prior written notice of its proposed new name to Secured Party, together

with delivery to Secured Party of UCC-1 Financing Statements reflecting Debtor's
new name, all in form and substance satisfactory to Secured Party.

10.14. DISPOSITION OF COLLATERAL. Sell, assign, or otherwise transfer,
dispose of, or encumber the Collateral or any interest therein, or grant a
security interest therein, or license thereof, except to Secured Party and
except the sale or lease of Inventory in the ordinary course of business of
Debtor and in accordance with the terms of this Agreement.

10.15. FINANCIAL COVENANTS. Fail to comply with the financial covenants
set forth in Section 9.26. hereinabove.

10.16. NEGATIVE PLEDGE. Encumber or cause to encumber the assets
(personal property, fixtures or real property) of NAPCO/Alarm Lock, NAPCO
Europe, NAPCO Cayman Islands, NAPCO Dominican Republic or any other non domestic
Consolidated Subsidiary.

10.17. GUARANTY, SECURITY AGREEMENT OF NAPCO GULF SECURITY GROUP, LLC.
Fail to execute and deliver to Secured Party the unlimited continuing guaranty
and continuing general security agreement of NAPCO Gulf, in the same format as
those guaranties and security agreements of Alarm Lock and Continental in favor
of Secured Party upon such time as NAPCO Gulf's sales or assets exceeds 10% of
the Debtor's consolidated sales or assets, as the case may be.

10.18 PLEDGE OF ASSETS, NEGATIVE PLEDGE OF FUTURE NON DOMESTIC
CONSOLIDATED SUBSIDIARIES. Except with respect to NAPCO Cayman Islands and NAPCO
Dominican Republic, the obligations as to which are set forth in Section 10.20
hereof, fail to (i) execute and deliver to Secured Party the pledge of 65% of
the stock of any future acquired non domestic Consolidated Subsidiary, along
with the negative pledge of such non domestic Consolidated Subsidiary, in the
same format as those pledge agreements and negative pledge agreements of
NAPCO/Alarm Lock and NAPCO Europe, and (ii) deliver to Secured Party the stock
pledges and original stock certificates, and such other documents as may be
necessary to perfect the pledge of stock in favor of Secured Party.

10.19. GUARANTY, SECURITY AGREEMENT OF FUTURE DOMESTIC CONSOLIDATED
SUBSIDIARIES OR ACQUIRED COMPANIES. Fail to execute and deliver to Secured Party
the unlimited continuing guaranty and continuing general security agreement of
any future acquired domestic Consolidated Subsidiary, in the same format as
those guaranties and security agreements of Alarm Lock and Continental in favor
of Secured Party.

10.20 PLEDGE OF ASSETS, NEGATIVE PLEDGE OF NAPCO Cayman Islands and
NAPCO Dominican Republic. Fail to, prior to the transfer of assets or the
funding of NAPCO Cayman Islands and/or NAPCO Dominican Republic, (i) notify the
Secured Party in writing of such transfer and/or funding, (ii) execute and
deliver to the Secured Party the pledge of 65% of the stock of NAPCO Cayman
Islands and/or NAPCO Dominican Republic, along with the negative pledge of such
non domestic Consolidated Subsidiary, in the same format and on the same terms
as the documents presented to Debtor prior to the date hereof, and (iii) deliver

to Secured Party the stock pledges and original stock certificates to Secured
Party in the same format in the same format as those pledge agreements and
negative pledge agreements of NAPCO/Alarm Lock and NAPCO Europe, and such other
documents as may be necessary to perfect the pledge of stock in favor of Secured
Party.

11. EVENTS OF DEFAULT.

11.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an Event of
Default and, collectively, Events of Default):

(a) Nonpayment. Nonpayment when due of any principal,
interest, premium, fee, cost, or expense due under the Transaction Documents,
and such nonpayment is not cured within ten (10) days after notice thereof by
Secured Party to Debtor.

(b) Negative Covenants. Default in the observance of any
covenant or agreement of Debtor contained in Article 10, and any such default is
not cured by Debtor or waived by Secured Party within ten (10) days after notice
thereof by Secured Party to Debtor.

(d) Other Covenants. Default in the observance of any of the
covenants or agreements of Debtor contained in the Transaction Documents, other
than in Article 10 or Sections 7.1, 7.2, 7.3, or 7.4, or in any other agreement
with Secured Party which is not remedied within the earlier of thirty (30) days
after (i) notice thereof by Secured Party to Debtor, or (ii) ten (10) days after
date Debtor was required to give notice to Secured Party under Section 9.14.

(e) Cessation of Business or Voluntary Insolvency Proceedings.
The (i) cessation of operations of Debtor's business as conducted on the date of
this Agreement; (ii) filing by Debtor of a petition or request for liquidation,
reorganization, arrangement, adjudication as a bankrupt, relief as a debtor, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States of America or any state or territory thereof or any foreign jurisdiction
now or hereafter in effect; (iii) making by Debtor of a general assignment for
the benefit of creditors; (iv) consent by the Debtor to the appointment of a
receiver or trustee, including, without limitation, a "custodian," as defined in
the Federal Bankruptcy Code, for Debtor or any of Debtor's assets; (v) making of
any, or sending of any, notice of any intended bulk sale by Debtor; or (vi)
execution by Debtor of a consent to any other type of insolvency proceeding
(under the Federal Bankruptcy Code or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of, or settlement of, claims
against or winding up of affairs of, Debtor.

(f) Involuntary Insolvency Proceedings. (i) The appointment of
a receiver, trustee, custodian, or officer performing similar functions,
including, without limitation, a "custodian," as defined in the Federal
Bankruptcy Code, for Debtor or any of Debtors assets; or the filing against
Debtor of a request or petition for liquidation, reorganization, arrangement,

adjudication as a bankrupt, or other relief under the bankruptcy, insolvency, or
similar laws of the United States of America, any state or territory thereof, or
any foreign jurisdiction now or hereafter in effect; or of any other type of
insolvency proceeding (under the Federal Bankruptcy Code or otherwise) or any
formal or informal proceeding for the dissolution or liquidation of, settlement
of claims against, or winding up of affairs of Debtor shall be instituted
against Debtor; and (ii) such appointment shall not be vacated, or such petition
or proceeding shall not be dismissed, within sixty (60) days after such
appointment, filing, or institution.

(g) Other Indebtedness and Agreements. Failure by Debtor to
pay, when due, (or, if permitted by the terms of any applicable documentation,
within any applicable grace period) any indebtedness owing by Debtor to Secured
Party or any other person or entity (other than the Indebtedness incurred,
pursuant to this Agreement, and including, without limitation, indebtedness
evidencing a deferred purchase price), whether such indebtedness shall become
due by scheduled maturity, by required prepayment, by acceleration, by demand,
or otherwise, or failure by the Debtor to perform any term, covenant, or
agreement on its part to be performed under any agreement or instrument (other
than a Transaction Document) evidencing or securing or relating to any
indebtedness owing by Debtor when required to be performed if the effect of such
failure is to permit the holder to accelerate the maturity of such indebtedness,
and such failure is not cured within thirty (30) days after such failure to pay
when due.

(h) Judgments. Any judgment or judgments against Debtor (other
than any judgment for which Debtor is fully insured) shall remain unpaid,
unstayed on appeal, undischarged, unbonded, or undismissed for a period of
thirty (30) days.

(i) Pension Default. Any Reportable Event which Secured Party
shall determine in good faith constitutes grounds for the termination of any
Pension Plan by the Pension Benefit Guaranty Corporation, or for the appointment
by an appropriate United States district court of a trustee to administer any
Pension Plan, shall occur and shall continue thirty (30) days after written
notice thereof to Debtor by Secured Party; or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Pension Plan or to
appoint a trustee to administer any Pension Plan; or a trustee shall be
appointed by an appropriate United States district court to administer any
Pension Plan; or any Pension Plan shall be terminated; or Debtor or any
Consolidated Subsidiary shall withdraw from a Pension Plan in a complete
withdrawal or a partial withdrawal; or there shall arise vested unfunded
liabilities under any Pension Plan that, in the good faith opinion of Secured
Party, have or will or might have a material adverse effect on the finances or
operations of Debtor; or Debtor or any Consolidated Subsidiary shall fail to pay
to any Pension Plan any contribution which it is obligated to pay under the
terms of such plan or any agreement or which is required to meet statutory
minimum funding standards, and such pension default is not remedied within
thirty (30) days of default;

(j) Collateral; Impairment. There shall occur with respect to
the Collateral any (i) misappropriation, conversion, diversion, or fraud; (ii)
levy, seizure, or attachment; or (iii) material loss, theft, or damage, and such
impairment is not cured to the reasonable satisfaction of Secured Party within
ten (10) days of written notice by Secured Party to Debtor.

(k) Insecurity; Change. Secured Party shall reasonably believe
in good faith that the prospect of payment of all, or any part, of the
Indebtedness or performance of Debtor's obligations under the Transaction
Documents or any other agreement between Secured Party and Debtor is impaired;
or there shall occur any materially adverse change in the business or financial
condition of Debtor.

(l) Third Party Default. There shall occur with respect to any
Third Party or any Consolidated Subsidiary, including, without limitation, any
guarantor or Consolidated Subsidiary (i) any event described in Section 11.1(e),
11.1(f), 11.1(g), or 11.1(h); (ii) any pension default event such as described
in Section 11.1(i) with respect to any pension plan maintained by such Third
Party or such Consolidated Subsidiary; or (iii) any failure by Third Party or
such Consolidated Subsidiary to perform in accordance with the terms of any
agreement between such Third Party and Secured Party, and such Third Party
default remains unremedied within thirty (30) days of default.

(m) Representations. Any certificate, statement,
representation, warranty, or financial statement furnished by, or on behalf of,
Debtor or any Third Party, pursuant to, or in connection with, this Agreement
(including, without limitation, representations and warranties contained herein)
or as an inducement to Secured Party to enter into this Agreement or any other
lending agreement with Debtor shall prove to have been false in any material
respect at the time as of which the facts therein set forth were certified or to
have omitted any substantial contingent or unliquidated liability or claim
against Debtor or any such Third Party, or if on the date of the execution of
this Agreement there shall have been any materially adverse change in any of the
facts disclosed by any such statement or certificate which shall not have been
disclosed in writing to Secured Party at, or prior to, the time of such
execution.

(n) Challenge to Validity. Debtor or any Third Party commences
any action or proceeding to contest the validity or enforceability of any
Transaction Document or any lien or security interest granted or obligations
evidenced by any Transaction Document.

(o) Death or Incapacity; Termination. Any Third Party dies or
becomes incapacitated, or terminates or attempts to terminate, in accordance
with its terms or otherwise, any guaranty or other Transaction Document executed
by such Third Party.

(p) Control Agreements/Letters of Credit. If a Control
Agreement has been entered into with respect to Investment Property or Deposit
Accounts, or Secured Party has control of Electronic Chattel Paper or
Letter-of-Credit Rights, the termination or purported termination of such
Control Agreement without the consent of Secured Party, or the Securities
Intermediary thereto or the custodian or issuer of the property subject to the
Control Agreement or the issuer of a letter of credit that has been assigned to
Secured Party or the custodian of Electronic Chattel Paper in which Secured
Party has been granted a security interest hereunder challenges the validity of
or its liability under the Control Agreement, or any default occurs thereunder
or disputes the assignment of such property to Secured Party or Secured Party's
control of such property.

(q) Location of Collateral within the United States. If, at
any time during the Loan Period, Debtor and its Consolidated Subsidiaries shall
fail to maintain, on a consolidated basis, not less than fifty (50%) of the
value of all of their identifiable assets (as disclosed in the 10K statement) in
the United States, to be tested at each fiscal year end.

(r) The occurrence of any of the following events with respect
to Debtor or any Responsible Party, or any guarantor of the Indebtedness: (i)
the occurrence of an event of default in respect of any other liabilities,
obligations or agreements, present future, absolute or contingent, secured or
unsecured, matured or unmatured, several or joint, original or acquired, of any
of the Responsible Parties to or with Secured Party; (ii) suspension of the
usual business activities of any member of any partnership or limited liability
company included in the term "the Responsible Parties"; (iii) making, or sending
a notice of, an intended bulk transfer; (iv) granting a security interest to
anyone other than Secured Party in any property including, without limitation,
the rights of any of the Responsible Parties in the Collateral or permitting
such security interest to exist; (iv) suspension of payment; (v) the whole or
partial suspension or liquidation of its usual business; (vi) commencement
against any of the Responsible Parties of any proceeding for enforcement of a
money judgment under Article 52 of the New York Civil Practice Law and Rules or
amendments thereto; (vii) if any of the Responsible Parties or if any of the
Indebtedness or Collateral at any time fails to comply with Regulation U of the
Federal Reserve Board or any amendments thereto; (viii) the issuance of any
warrant, process or order of attachment, garnishment or lien, and/or the filing
of a Lien as a result thereof against any of the property of Debtor or any
Responsible Party whether or not Collateral; (ix) any of the Responsible Parties
challenges or institutes any proceeding, or any proceedings are instituted,
which challenge the validity, binding effect or enforceability of this
Agreement; (x) any of the Responsible Parties makes, receives or retains any
payment on account of indebtedness subordinated to the Indebtedness in violation
of the terms of such subordination; or(xi) any of the Responsible Parties or any
partnership or limited liability company of which any of the Responsible Parties
is a member is expelled from or suspended by any stock or securities exchange or
other exchange.

11.2. EFFECTS OF AN EVENT OF DEFAULT.

(a) Upon the happening of one or more Events of Default
(except an Event of Default under either Section 11.1(e) or 11.1(f)), Secured
Party may declare any obligations it may have hereunder to be cancelled, and the
principal of the Indebtedness then outstanding to be immediately due and
payable, together with all interest thereon and costs and expenses accruing
under the Transaction Documents. Upon such declaration, any obligations Secured
Party may have hereunder shall be immediately cancelled, and the Indebtedness
then outstanding shall become immediately due and payable without presentation,
demand, or further notice of any kind to Debtor.

(b) Upon the happening of one or more Events of Default under
Section 11.1(e) or 11.1(f), Secured Party's obligations hereunder shall be
cancelled immediately, automatically, and without notice, and the Indebtedness
then outstanding shall become immediately due and payable without presentation,
demand, or notice of any kind to the Debtor.

12. SECURED PARTY'S RIGHTS AND REMEDIES.

12.1. GENERALLY. Secured Party's rights and remedies with respect to
the Collateral, in addition to those rights granted herein and in any other
agreement between Debtor and Secured Party now or hereafter in effect, shall be
those of a secured party under the Uniform Commercial Code as in effect in the
State and under any other applicable law.

12.2. INTENTIONALLY DELETED PRIOR TO EXECUTION.

12.3. POSSESSION OF COLLATERAL. Whenever Secured Party may take
possession of the Collateral, pursuant to Section 12.1, Secured Party may take
possession of the Collateral on Debtor's premises or may remove the Collateral,
or any part thereof, to such other places as the Secured Party may, in its sole
discretion, determine. If requested by Secured Party, Debtor shall assemble the
Collateral and deliver it to Secured Party at such place as may be designated by
Secured Party.

12.4. COLLECTION OF RECEIVABLES. Upon the occurrence of an Event of
Default or an event which with notice or lapse of time, or both, would
constitute an Event of Default, Secured Party may demand, collect, and ▇▇▇ for
all monies and proceeds due, or to become due, on the Receivables (in either
Debtor's or Secured Party's name at the latter's option) with the right to
enforce, compromise, settle, or discharge any or all Receivables. If Secured
Party takes any action contemplated by this Section with respect to any
Receivable, Debtor shall not exercise any right that Debtor would otherwise have
had to take such action with respect to such Receivable.

12.5. INTENTIONALLY DELETED PRIOR TO EXECUTION

12.6. LICENSE TO USE PATENTS, TRADEMARKS AND TRADENAMES. Debtor grants
to Secured Party a royalty-free license to use any and all patents, trademarks,
and tradenames now or hereafter owned by, or licensed to, Debtor for the
purposes of manufacturing and disposing of Inventory after the occurrence of an
Event of Default. All Inventory shall at least meet quality standards maintained
by Debtor prior to such Event of Default.

13. MISCELLANEOUS.

13.1. PERFECTING THE SECURITY INTEREST; PROTECTING THE COLLATERAL.
Debtor hereby authorizes Secured Party to file such financing statements
relating to the Collateral without Debtor's signature thereon as Secured Party
may deem appropriate, and appoints Secured Party as Debtor's attorney-in-fact
(without requiring Secured Party) to execute any such financing statement or
statements in Debtor's name and to perform all other acts which Secured Party
deems appropriate to perfect and continue the Security Interest and to protect,
preserve, and realize upon the Collateral.

13.2. PERFORMANCE OF DEBTOR'S DUTIES. Upon Debtor's failure to perform
any of its duties under the Transaction Documents, including, without

limitation, the duty to obtain insurance as specified in Section 9.11, Secured
Party may, but shall not be obligated to, perform any or all such duties.

13.3. NOTICE OF SALE. Without in any way requiring notice to be given
in the following manner, Debtor agrees that any notice by Secured Party of sale,
disposition, or other intended action hereunder, or in connection herewith,
whether required by the Uniform Commercial Code as in effect in the State or
otherwise, shall constitute reasonable notice to Debtor if such notice is mailed
by regular or certified mail, postage prepaid, at least five (5) days prior to
such action, to Debtor's address or addresses specified above or to any other
address which Debtor has specified in writing to Secured Party as the address to
which notices hereunder shall be given to Debtor.

13.4. WAIVER BY SECURED PARTY. No course of dealing between Debtor and
Secured Party and no delay or omission by Secured Party in exercising any right
or remedy under the Transaction Documents or with respect to any Indebtedness
shall operate as a waiver thereof or of any other right or remedy, and no single
or partial exercise thereof shall preclude any other or further exercise thereof
or the exercise of any other right or remedy. All rights and remedies of Secured
Party are cumulative.

13.5. WAIVER BY DEBTOR. Secured Party shall have no obligation to take,
and Debtor shall have the sole responsibility for taking, any and all steps to
preserve rights against any and all Account Debtors and against any and all
prior parties to any note, Chattel Paper, draft, trade acceptance or other
instrument for the payment of money covered by the Security Interest, whether or
not in Secured Party's possession. Secured Party shall not be responsible to
Debtor for loss or damage resulting from Secured Party's failure to enforce any
Receivables or to collect any moneys due, or to become due, thereunder or other
Proceeds constituting Collateral hereunder. Debtor waives protest of any note,
check, draft, trade acceptance, or other instrument for the payment of money
constituting Collateral at any time held by Secured Party on which Debtor is in
any way liable and waives notice of any other action taken by Secured Party,
including, without limitation, notice of Secured Party's intent to accelerate
the Indebtedness or any part thereof.

13.6. SETOFF. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable (whether or not it has so declared), Secured Party,
at its sole election, may setoff against the Indebtedness any and all monies
then or thereafter owed to Debtor by Secured Party in any capacity, whether or
not the Indebtedness or the obligation to pay such monies owed by Secured Party
is then due, and Secured Party shall be deemed to have exercised such right of
setoff immediately at the time of such election even though any charge therefor
is made or entered on Secured Party's records subsequent thereto.

13.7. ASSIGNMENT. The rights and benefits of Secured Party hereunder
shall, if Secured Party so agrees, inure to any party acquiring any interest in
the Indebtedness or any part thereof. Prior to the occurrence of an Event of
Default hereunder, Secured Party shall give Debtor ninety (90) days prior
written notice of an assignment in full of its interest in the Indebtedness,
with the exception of assignments of its interest in the Indebtedness due to
acquisition, merger, consolidation, takeover or such other like activity.

13.8. SUCCESSORS AND ASSIGNS. Secured Party and Debtor, as used herein,
shall include the successors or assigns of those parties, except that Debtor
shall not have the right to assign its rights hereunder or any interest herein.

13.9. MODIFICATION. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement shall be made, except as may be
provided in a written agreement signed by Debtor and a duly authorized officer
of Secured Party.

13.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by Secured Party and Debtor on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all of which
shall together constitute one and the same Agreement.

13.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial
calculation to be made, all financial statements and other financial information
to be provided, and all books and records to be kept in connection with the
provision of this Agreement, shall be in accordance with GAAP consistently
applied during each interval and from interval to interval; provided, however,
that in the event changes in GAAP shall be mandated by the Financial Accounting
Standards Board or any similar accounting body of comparable standing, or should
be recommended by Debtor's certified public accountants, to the extent such
changes would affect any financial calculations to be made in connection
herewith, such changes shall be implemented in making such calculations only
from and after such date as Debtor and Secured Party shall have amended this
Agreement to the extent necessary to reflect such changes in the financial and
other covenants to which such calculations relate.

13.12. INDEMNIFICATION.

(a) If after receipt of any payment of all, or any part of,
the Indebtedness, Secured Party is, for any reason, compelled to surrender such
payment to any person or entity because such payment is determined to be void or
voidable as a preference, an impermissible setoff, or a diversion of trust
funds, or for any other reason, the Transaction Documents shall continue in full
force and Debtor shall be liable, and shall indemnify and hold Secured Party
harmless for, the amount of such payment surrendered. The provisions of this
Section shall be and remain effective notwithstanding any contrary action which
may have been taken by Secured Party in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to Secured Party's rights
under the Transaction Documents and shall be deemed to have been conditioned
upon such payment having become final and irrevocable. The provisions of this
Section 13.12(a) shall survive the termination of this Agreement and the
Transaction Documents.

(b) Debtor agrees to indemnify, defend and hold harmless
Secured Party from, and against, any and all liabilities, claims, damages,
penalties, expenditures, losses, or charges, including, but not limited to, all
costs of investigation, monitoring, legal representations, remedial response,
removal, restoration or permit acquisition, which may now, or in the future, be
undertaken, suffered, paid, awarded, assessed, or otherwise incurred by Secured

Party or any other person or entity as a result of the presence of, Release of,
or threatened Release of Hazardous Substances on, in, under, or near the
property owned, leased or operated by Debtor or any Consolidated Subsidiary. The
liability of Debtor under the covenants of this Section 13.12(b) is not limited
by any exculpatory provisions in this Agreement or any other documents securing
the Indebtedness and shall survive repayment of the Indebtedness or any transfer
or termination of this Agreement regardless of the means of such transfer or
termination. Debtor agrees that Secured Party shall not be liable in any way for
the completeness or accuracy of any Environmental Report or the information
contained therein. Debtor further agrees that Secured Party has no duty to warn
Debtor or any other person or entity about any actual or potential environmental
contamination or other problem that may have become apparent, or will become
apparent, to Secured Party.

(c) Debtor agrees to pay, indemnify, and hold Secured Party
harmless from, and against, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever (including, without limitation, counsel and
special counsel fees and disbursements in connection with any litigation,
investigation, hearing, or other proceeding) with respect, or in any way
related, to the existence, execution, delivery, enforcement, performance, and
administration of this Agreement and any other Transaction Document (all of the
foregoing, collectively, the "Indemnified Liabilities"). The agreements in this
Section 13.12(c) shall survive repayment of the Indebtedness.

13.13. TERMINATION.

This Agreement is, and is intended to be, a continuing
Agreement and shall remain in full force and effect for the Term and for any
renewal term, if any; provided, however, that Secured Party may terminate this
Agreement by giving Debtor notice to terminate in writing at least one hundred
twenty (120) days prior to the end of the Term whereupon at the end of the Term
all Indebtedness shall be due and payable in full without presentation, demand,
or further notice of any kind, whether or not all or any part of such
Indebtedness is otherwise due and payable pursuant to the agreement or
instrument evidencing same. Notwithstanding the above, Secured Party may
terminate this Agreement immediately and without further notice (except as
specifically provided for herein or in the other Transaction Documents) upon the
occurrence of an uncured or unremedied Event of Default herein or under any of
the Transaction Documents. In addition, the one hundred twenty (120) day prior
notice provision contained in this Section 13.13. does not apply and shall not
be enforceable in the event that an uncured default has occurred and is
continuing under the Transaction Documents with respect to payment covenants,
bankruptcy covenants or bankruptcy events of default, financial covenants
contained in Section 9.26. herein, the negative covenants contained in Sections
10.11, 10.15 and 10.16 herein, the cross-default with other creditors covenants,
and the event of default specified in Section 11.1. (q). Notwithstanding the
foregoing or anything in this Agreement or elsewhere to the contrary, the
Security Interest, Secured Party's rights and remedies under the Transaction
Documents and Debtor's obligations and liabilities under the Transaction
Documents, shall survive any termination of this Agreement and shall remain in
full force and effect until all of the Indebtedness outstanding, or contracted
or committed for (whether or not outstanding), before the receipt of such notice
by Secured Party, and any extensions or renewals thereof (whether made before or
after receipt of such notice), together with interest accruing thereon after

such notice, shall be finally and irrevocably paid in full. No Collateral shall
be released or financing statement terminated until: (i) such final and
irrevocable payment in full of the Indebtedness as described in the preceding
sentence; and (ii) Debtor and Secured Party execute a mutual general release,
subject to Section 13.12 of this Agreement, in form and substance satisfactory
to the Secured Party and Debtor and their counsel.

13.14. FURTHER ASSURANCES. From time to time, Debtor shall take such
action and execute and deliver to Secured Party such additional documents,
instruments, certificates, and agreements as Secured Party may reasonably
request to effectuate the purposes of the Transaction Documents.

13.15. HEADINGS. Article and Section headings used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.

13.16. CUMULATIVE SECURITY INTEREST, ETC. The execution and delivery of
this Agreement shall in no manner impair or affect any other security (by
endorsement or otherwise) for payment or performance of the Indebtedness, and no
security taken hereafter as security for payment or performance of the
Indebtedness shall impair in any manner or affect this Agreement, or the
security interest granted hereby, all such present and future additional
security to be considered as cumulative security.

13.17. SECURED PARTY'S DUTIES. Without limiting any other provision of
this Agreement: (a) the powers conferred on Secured Party hereunder are solely
to protect its interests and shall not impose any duty to exercise any such
powers; and (b) except as may be required by applicable law, Secured Party shall
not have any duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral.

13.18. NOTICE GENERALLY. All notices and other communications hereunder
shall be made by telegram, telex, electronic transmitter, overnight air courier,
or certified or registered mail, return receipt requested, and shall be deemed
to be received by the party to whom sent one Business Day after sending, if sent
by telegram, telex, electronic transmitter or overnight air courier, and three
Business Days after mailing, if sent by certified or registered mail. All such
notices and other communications to a party hereto shall be addressed to such
party at the address set forth on the cover page hereof or to such other address
as such party may designate for itself in a notice to the other party given in
accordance with this Section 13.18. Notices to Debtor shall be sent to the
attention of the Senior Vice President for Operations and Finance. As of this
date the Senior Vice President for Operations and Finance is ▇▇▇▇▇ ▇▇▇▇▇▇.

13.19. SEVERABILITY. The provisions of this Agreement are independent
of, and separable from, each other, and no such provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other such provision may be invalid or unenforceable in whole or in part. If any
provision of this Agreement is prohibited or unenforceable in any jurisdiction,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition or unenforceability, and such prohibition or unenforceability

shall not invalidate the balance of such provision to the extent it is not
prohibited or unenforceable nor render prohibited or unenforceable such
provision in any other jurisdiction.

13.20. INCONSISTENT PROVISIONS. The terms of this Agreement and the
other Transaction Documents shall be cumulative except to the extent that they
are specifically inconsistent with each other, in which case the terms of this
Agreement shall prevail.

13.21. ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents constitute the entire agreement and understanding between the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior negotiations, understandings, and agreements between such parties with
respect to such transactions, including, without limitation, those expressed in
any commitment letter delivered by Secured Party to Debtor.

13.22. APPLICABLE LAW. THIS AGREEMENT, AND THE TRANSACTIONS EVIDENCED
HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE INTERNAL LAWS OF THE
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, AS THE SAME MAY FROM
TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM COMMERCIAL
CODE AS IN EFFECT IN THE STATE.

13.23. CONSENT TO JURISDICTION. DEBTOR AND SECURED PARTY AGREE THAT ANY
ACTION OR PROCEEDING TO ENFORCE, OR ARISING OUT OF, THE TRANSACTION DOCUMENTS
MAY BE COMMENCED IN ANY COURT OF THE STATE IN ANY COUNTY, OR IN ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ IN ANY DISTRICT, IN WHICH SECURED PARTY HAS AN
OFFICE, AND DEBTOR WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS
AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE
PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED
OR CERTIFIED MAIL TO DEBTOR, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE
OR THE UNITED STATES.

13.24. JURY TRIAL WAIVER. DEBTOR AND SECURED PARTY HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY DEBTOR OR
SECURED PARTY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN
CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
DEBTOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF SECURED PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY WILL NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. DEBTOR
ACKNOWLEDGES THAT SECURED PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION 13.24.

Accepted at Garden City, New York by:

NAPCO SECURITY SYSTEMS, INC.

By:
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President

HSBC BANK USA, NATIONAL ASSOCIATION,
SUCCESSOR BY MERGER TO HSBC BANK USA,
FORMERLY KNOWN AS MARINE MIDLAND BANK

By:
----------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
First Vice President

STATE OF NEW YORK )
) SS:
COUNTY OF NASSAU )

On this ____ day of ___________, 2007, before me, the
undersigned, a Notary Public in and for said State, personally came ▇▇▇▇▇
▇▇▇▇▇▇, personally known to me or proved to me on the basis of satisfactory
evidence to be the person, whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity and that by his
signature on the instrument, the person or entity upon behalf of which the
person acted executed the instrument.

---------------------------
NOTARY PUBLIC

STATE OF NEW YORK )
) SS:
COUNTY OF NASSAU )

On this ____ day of _______, 2007, before me, the undersigned,
a Notary Public in and for said State, personally came ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, personally known to me or proved to me on the basis of satisfactory
evidence to be the person, whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity and that by his
signature on the instrument, the person or entity upon behalf of which the
person acted executed the instrument.

---------------------------
NOTARY PUBLIC

As of September 7, 2007

HSBC Bank USA, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇

Re: Revolving Credit Note #1 by NAPCO Security Systems, Inc. (the
"Borrower") to Marine Midland Bank, now known as HSBC Bank USA, National
Association, successor by merger to HSBC Bank USA ("Lender") in the
aggregate principal sum of up to $1,000,000.00, dated May 12, 1997, as
the same may be extended or otherwise modified from time to time ("Note
#1" or "Revolving Credit Note #1")

Ladies and Gentlemen:

The undersigned hereby reaffirms and ratifies all the terms, conditions,
representations and covenants contained in Note #1 and certifies that (i)no
default, nor events which with notice and/or passage of time would constitute a
default, has occurred and is continuing under Note #1 or any of the other
instruments executed and delivered to evidence and/or secure the revolving
credit facility or under any other note, loan or security agreement to which the
Borrower is a party, (ii) there are no offsets, defenses or counterclaims to the
Borrower's obligations under Note #1 and the other Transaction Documents and
(iii) the Borrower has not entered into any agreement with creditors that
expressly or otherwise prohibit the Borrower from entering into any extension or
modification of Note #1 as of the date hereof.

The undersigned further covenants and agrees that Lender has agreed to
extend the Termination Date pursuant to and in accordance with the amended and
restated loan and security agreement dated as of even date hereof, by and
between the Borrower and Lender, as may be amended, extended, or otherwise
modified or restated from time to time (the "Agreement" or the "Loan
Agreement"). Note #1 is governed by the terms of the Agreement, with the terms
of the Agreement incorporated herein by this reference.

Note # 1 continues to be secured by and the parties hereto are entitled
to the benefits of that certain Second Mortgage and Security Agreement in the
principal amount of $1,000,000, dated as May 12, 1997, as the same may be
extended or otherwise modified from time to time (the "Mortgage"), made by the
Borrower to the Lender, encumbering, among other things, certain real property
and improvements now or hereafter located on said real property, situate at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, a/k/a ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Amityville, in the Town of Babylon,
County of Suffolk, State of New York, as more particularly described in the
Mortgage ("Mortgaged Premises" or "Mortgaged Property") and the Assignment of
Leases and Rents dated as of May 12, 1997 by the Borrower in favor of the Lender
covering the Mortgaged Property, as the same may be modified from time to time
(the "Assignment of Leases and Rents"). The Mortgage and the Assignment of

Leases were each executed and delivered pursuant to the Loan Agreement, with all
of the covenants, conditions and agreements of the Mortgage and the Assignment
of Leases and Rents being made a part of Note # 1 by the references contained in
Note # 1 and herein to the Mortgage and other Transaction Documents. The
Borrower hereby reaffirms and ratifies all the terms, conditions,
representations and covenants contained in the Mortgage and the Assignment of
Leases and Rents, hereby reaffirms and ratifies the grant of the mortgage on and
security interest in the Mortgaged Property pursuant to the terms of the
Mortgage, hereby reaffirms and ratifies the assignment of leases and rents
pursuant to the terms of the Assignment of Leases and Rents, and hereby
certifies that there are no defenses, offsets or counterclaims to the Mortgage
and/or the Assignment of Leases and Rents of the date hereof.

Note # 1 also is secured by the Collateral of the Borrower described in
the Loan Agreement, the pledged collateral described in certain pledge
agreements dated as of May 17, 1997, July 27, 2000, and/or as of even date
hereof, as the case may be, as may have been reaffirmed from time to time, and
the collateral of the domestic Consolidated Subsidiaries described in the
amended and restated continuing general security agreements executed and
delivered to the Lender by each of the domestic Consolidated Subsidiaries as of
even date hereof, as the same may be reaffirmed, modified or restated from time
to time, and the Lender is entitled to the benefits of all of the collateral
described therein and the collateral described in the other Transaction
Documents.

Note # 1 is the Note # 1 referred to in the Loan Agreement, and the
Lender shall be entitled to the benefit of all of the provisions contained
therein and in the other Transaction Documents. The Loan Agreement, among other
things, contains provisions for payment of principal, interest, fees and charges
in connection with the Revolving Credit Facility as well as provisions for
acceleration of Note # 1 upon the happening of certain stated events. The Loan
Agreement also contains representations, warranties, covenants and conditions
precedent to Advances under the Revolving Credit Facility, all of which are
hereby made part of Note # 1 to the same extent and with the same effect as if
set forth herein at length. The Loan Agreement, among other provisions, extends
the Termination Date, which extension is expressly made part of Note # 1 by this
reference.

Each of the Transaction Documents remain in full force and effect. All
capitalized terms not otherwise specifically defined herein or in Note #1 shall
have the meanings ascribed to such terms in the Loan Agreement.

Very truly yours,

NAPCO Security Systems, Inc.

By:
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President

Accepted and Agreed:

HSBC Bank USA, National Association

By:
-------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
First Vice President

As of September 7, 2007

HSBC Bank USA, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇

Re: Revolving Credit Note #2 by NAPCO Security Systems, Inc. (the
"Borrower") to Marine Midland Bank, now known as HSBC Bank USA, National
Association, successor by merger to HSBC Bank USA ("Lender") in the
original aggregate principal sum of up to $15,000,000.00, dated May 12,
1997, as the same may be increased, extended or otherwise modified from
time to time ("Note #2" or "Revolving Credit Note #2")

Ladies and Gentlemen:

The undersigned hereby reaffirms and ratifies all the terms, conditions,
representations and covenants contained in Note #2 and certifies that (i)no
default, nor events which with notice and/or passage of time would constitute a
default, has occurred and is continuing under Note #2 or any of the other
instruments executed and delivered to evidence and/or secure the revolving
credit facility or under any other note, loan or security agreement to which the
Borrower is a party, (ii) there are no offsets, defenses or counterclaims to the
Borrower's obligations under Note #2 and the other Transaction Documents and
(iii) the Borrower has not entered into any agreement with creditors that
expressly or otherwise prohibit the Borrower from entering into any extension or
modification of Note #2 as of the date hereof.

The first paragraph of Note #2 contained at page 2 of Note #2, and all
amendments of such first paragraph, the first paragraph of Note #2 contained at
page 2 is herein replaced in its entirety as follows:

FOR VALUE RECEIVED, the Borrower does hereby covenant
and promise to pay to the order of the Lender at its office at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇; ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other
place or places as the Lender may designate to the Borrower in
writing from time to time, in check, coin or currency of the
United States which is then legal tender for the payment of
public or private debts, in immediately available funds, the
lesser of (a) the principal amount of Twenty-Four Million
($24,000,000.00) Dollars; or (b) the aggregate unpaid principal
amount of all loans (or Advances) made by the Lender to the
Borrower from time to time hereunder (collectively the "Loans",
or if used in the singular, the "Loan").

The undersigned further covenants and agrees that Lender has agreed to
extend the Termination Date pursuant to and in accordance with the amended and
restated loan and security agreement dated as of even date hereof by and between
the Borrower and Lender, as may be amended, extended, or otherwise modified or
restated from time to time (the "Agreement" or the "Loan Agreement"). Note #2 is
governed by the terms of the Agreement, with the terms of the Agreement
incorporated herein by this reference.

Note #2 also is secured by the Collateral of the Borrower described in
the Loan Agreement, the pledged collateral described in certain pledge
agreements dated as of May 17, 1997, July 27, 2000, and/or as of even date
hereof, as the case may be, as may have been reaffirmed from time to time, and
the collateral of the domestic Consolidated Subsidiaries described in the
amended and restated continuing general security agreements executed and
delivered to the Lender by each of the domestic Consolidated Subsidiaries as of
even date hereof, as the same may be reaffirmed, modified or restated from time
to time, and the Lender is entitled to the benefits of all of the collateral
described therein and the collateral described in the other Transaction
Documents.

Note #2 is the Note #2 referred to in the Loan Agreement, and the Lender
shall be entitled to the benefit of all of the provisions contained therein and
in the other Transaction Documents. The Loan Agreement, among other things,
contains provisions for payment of principal, interest, fees and charges in
connection with the Revolving Credit Facility as well as provisions for
acceleration of Note #2 upon the happening of certain stated events. The Loan
Agreement also contains representations, warranties, covenants and conditions
precedent to Advances under the Revolving Credit Facility, all of which are
hereby made part of Note #2 to the same extent and with the same effect as if
set forth herein at length. The Loan Agreement, among other provisions, extends
the Termination Date, which extension is expressly made part of Note # 2 by this
reference.