FORBEARANCE AND AMENDMENT AGREEMENT

Debtors’ Acknowledgement. Each of the Debtors hereby confirms, acknowledges and agrees that each of the Loan Agreement, the Share Pledge and the Guarantee (collectively, the “Existing Security”) is fully enforceable by the Lender against each party thereto in accordance with its terms unaltered, that the Borrower is in default and that the Lender is entitled to exercise all of its rights and remedies. Each of the Debtors hereby further acknowledges and agrees that the Lender has provided reasonable notice to all of the Debtors in respect of the exercise of all such rights and remedies and that no further notice shall be required prior to such exercise at any time in the future. To the extent permitted by law, each of the Debtors hereby waives all defences and claims now held against the Lender in connection with the exercise of the said rights and remedies by or on behalf of the Lender.

Debtors’ Representations. Each of the Debtors hereby jointly and severally represents and warrants to the Lender, and acknowledges that the Lender is relying upon all of such representations and warranties in entering into this Agreement, as follows:

(a)     

the recitals to this Agreement are true and correct;

(b)     

all corporate action on their part necessary for the authorization, execution, delivery and performance of this Agreement by the Borrower has been duly authorized and taken;

(c)     

this Agreement, when duly executed and delivered by the Debtors will constitute a legal, valid and binding obligation, enforceable against each of the Debtors in accordance with its terms;

(d)     

there is no charter or by-law provision or directors’ or shareholders’ resolution of the Borrower or XLR which would be contravened by the execution and delivery of this Agreement, or by the performance of any provision, condition, covenant or other term hereof; and

(e)     

there is no provision of any indenture or agreement, written or oral, to which any of the Debtors is a party or under which any of the Debtors is obligated and, to the knowledge of each Debtor, there is no statute, rule, regulation, judgment, decree or order of any court or agency binding any of the Debtors, which would be

contravened by the execution and delivery of this Agreement, or by the performance of any provision, condition, covenant or other term hereof.

Forbearance. Except as otherwise specifically provided herein, the Lender hereby covenants and agrees to refrain, during the Forbearance Period, from further enforcing its rights and remedies against any of the Debtors. In this Agreement, “Forbearance Period” shall mean the period commencing upon the execution and delivery of this Agreement by the Lender and all of the Debtors and ending upon the earlier of March 31, 2005 and the termination of the Forbearance Period by the Lender in accordance with this Agreement. Upon and after the expiration or termination of the Forbearance Period, the Lender shall have no obligations whatsoever pursuant to this Agreement but in all other respects this Agreement and all of the obligations of the Debtors hereunder shall survive and continue in full force and effect.

No Waiver. None of the covenants and agreements of the Lender in this Agreement, nor the performance thereof at any time, shall constitute, or be deemed or implied to be, a waiver by the Lender of any default, either hereunder or under the Existing Security, that has occurred to the date hereof or any other subsequent or similar default.

Amendments.

Section 2.2 of the Loan Agreement is amended by deleting the final sentence thereof and amending the second sentence thereof to read as follows:

In addition, the Promissory Note dated March 8, 2004 made by the Borrower in the principal amount of U.S. $500,000 is hereby amended by inserting a period after the word “demand” in the second paragraph and deleting the remainder of such paragraph.

Such amendments shall be effective retroactively. It is acknowledged that as a result of such amendments, the Borrower’s obligations on account of principal and accrued interest in respect of the U.S. $500,000 loan forming part of the Obligations were U.S. $549,662.23 as at December 17, 2004.

The Promissory Note dated the 8^th day of March, 2004 made by the Borrower in the principal amount of U.S. $80,000 is hereby amended by replacing the words “2% per month” in the second paragraph with the words “24% per annum”. It is acknowledged that the Borrower’s obligations on account of principal and accrued interest in respect of such Promissory Note were U.S. $89,182.25 as at December 17, 2004.

Debtors’ General Covenants. Each of the Debtors hereby further jointly and severally covenants and agrees with the Lender, and acknowledges that the Lender is relying upon all of such covenants in entering into this Agreement, which covenants shall be separate and cumulative and in addition to all other covenants in this Agreement, that at all times from and after the date hereof and until the payment and performance of all of the Obligations in full, each of the Debtors shall:

(a)     

not provide any financial assistance or make any payment or transfer any asset to any person not at arm’s length (within the meaning of the Income Tax Act (Canada)) other than regular consulting fees paid under presently existing arrangements as set out in the Schedule to this Agreement or reimbursements of reasonable expenses incurred on behalf of the Debtors;

(b)     

pay or cause to be paid, and shall indemnify and save the Lender harmless against, all fees, costs and expenses (including legal fees on a solicitor and client basis, but excluding all costs, fees and expenses incurred by the Lender in the preparation and execution of this Agreement) incurred with respect to: advice to the Lender in respect of the Indebtedness and in the preparation and execution of any amendment to this Agreement and all other documentation required hereunder or under the Existing Security and any financing statements, financing change statements and notices of security interest filed with respect thereto; the exercising of any or all of the rights, remedies and powers of the Lender under this Agreement or the Existing Security; the taking, recovering or possessing of any or all of the assets of the Debtors, and of any other proceedings taken for the purpose of enforcing the remedies provided herein or therein or by reason of non- payment of the Obligations; and all other fees, costs, expenses and interest obligations constituting the Obligations, as they accrue; and all of the foregoing amounts shall bear interest at an annual rate equal to the highest rate borne by any of the Obligations and shall be payable on demand;