BUSINESS LOAN AGREEMENT (ASSET BASED)

BUSINESS LOAN AGREEMENT (ASSET BASED)

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BUSINESS LOAN AGREEMENT (ASSET BASED)


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated August 16, 2008, is made and executed between Costar Video Systems, LLC ("Borrower") and Bank of Texas, N.A. ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Xxxxxxxx understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender Is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sale judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

TERM. This Agreement shall be effective as of August 16, 2008, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until August 16, 2009.

LINE OF CREDIT. Xxxxxx agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows:

Conditions Precedent to Each Advance. Xxxxxx's obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender:

(1) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by Xxxxxxxx to Lender.

(2) Lender shall have received such opinions of counsel, supplemental opinions, and documents as Xxxxxx may request.

(3) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect.

(4) All guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect.

(5) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower's Accounts, Inventory, books, records, and operations, and Lender shall be satisfied as to their condition.

(6) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.

(7) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled "Compliance Certificate."

Making Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower's accounts, may be requested orally or In writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1) when credited to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on the next succeeding Business Day.

Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid.

Loan Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Xxxxxxxx's account, which statements shall be considered to be correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Xxxxxxxx's receipt of any such statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require. Lender's Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Xxxxxxxx agrees and represents and warrants to Xxxxxx:

Perfection of Security Interests. Xxxxxxxx agrees to execute all documents perfecting Xxxxxx's Security Interest and to take whatever actions are requested by Xxxxxx to perfect and continue Xxxxxx's Security Interests in the Collateral. Upon request of Xxxxxx, Xxxxxxxx will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Xxxxxx's interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Xxxxxx. Contemporaneous with the execution of this Agreement, Xxxxxxxx will execute one or more UCC financing statements and any similar statements as may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate location or locations. Borrower hereby appoints Xxxxxx as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any


	BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No. 1085945	(Continued)	Page 2

Security Interest. Lender may at any time, and without further authorization from Borrower, file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Xxxxxx's security interest in the Collateral. Borrower promptly will notify Lender before any change in Xxxxxxxx's name including any change to the assumed business names of Xxxxxxxx. Borrower also promptly will notify Lender before any change in Borrower's Social Security Number or Employer Identification Number. Xxxxxxxx further agrees to notify Xxxxxx in writing prior to any change in address or location of Xxxxxxxx's principal governance office or should Borrower merge or consolidate with any other entity.

Collateral Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Lender or Xxxxxx's representative upon demand for inspection and copying at any reasonable time. With respect to the Accounts, Xxxxxxxx agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Accounts and Account balances and agings. Records related to Accounts (Receivables) are or will be located at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxx 00000. With respect to the Inventory, Xxxxxxxx agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Inventory and records itemizing and describing the kind, type, quality, and quantity of Inventory, Borrower's Inventory costs and selling prices, and the daily withdrawals and additions to Inventory. Records related to Inventory are or will be located at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxx 00000. The above is an accurate and complete list of all locations at which Borrower keeps or maintains business records concerning Xxxxxxxx's collateral.

Collateral Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules of Accounts and Inventory and schedules of Eligible Accounts and Eligible Inventory in form and substance satisfactory to the Lender. Thereafter supplemental schedules shall be delivered according to the following schedule: With respect to Eligible Accounts, schedules shall be delivered within 30 days of month end. With respect to Eligible Inventory, schedules shall be delivered within 30 days of month end.

Representations and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (1) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (3) Lender, its assigns, or agents shell have the right at any time and at Borrower's expense to inspect, examine, and audit Xxxxxxxx's records and to confirm with Account Debtors the accuracy of such Accounts.

Representations and Warranties Concerning Inventory. With respect to the Inventory, Borrower represents and warrants to Lender: (1) All Inventory represented by Borrower to be Eligible Inventory for purposes of this Agreement conforms to the requirements of the definition of Eligible Inventory; (2) All Inventory values listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; (3) The value of the Inventory will be determined on a consistent accounting basis; (4) Except as agreed to the contrary by Xxxxxx in writing, all Eligible Inventory is now and at all times hereafter will be in Borrower's physical possession and shall not be held by others on consignment, sale on approval, or sale or return; (5) Except as reflected in the Inventory schedules delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable quality, free from defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similar party without Lender's prior written consent, and, in such event, Borrower will concurrently at the time of bailment cause any such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse receipts In Lender name evidencing the storage of Inventory; and (7) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect and examine the Inventory and to check and test the same as to quality, quantity, value, and condition.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Xxxxxx's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests In the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Xxxxxx's counsel.

Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

Fees and Expenses Under This Agreement. Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any indebtedness exists:

Organization. Borrower is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of New Jersey. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Xxxxxxxx has the full power and authority to own its properties and to transact the business in which it Is presently engaged or presently proposes to engage. Borrower maintains an office at 0000 Xxxxxxxxx Xx. Xxxxx 000, Xxxxxxxxxx, XX 00000. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Xxxxxxxx's state of organization or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Xxxxxxxx's business activities.

Assumed Business Names. Xxxxxxxx has filed or recorded all documents or filings required by law relating to all assumed business names used by Xxxxxxxx. Excluding the name of Xxxxxxxx, the following is a complete list of all assumed business names under which Borrower does business: None.


	BUSINESS LOAN AGREEMENT (ASSET BASED)
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Authorization. Xxxxxxxx's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of organization or membership agreements, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties.

Financial Information. Each of Xxxxxxxx's financial statements supplied to Xxxxxx truly and completely disclosed Xxxxxxxx's financial condition as of the date of the statement, and there has been no material adverse change in Xxxxxxxx's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

Properties. Except as contemplated by this Agreement or as previously disclosed In Xxxxxxxx's financial statements or in writing to Lender and as accepted by Xxxxxx, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Xxxxxxxx's properties are titled in Borrower's legal name, and Xxxxxxxx has not used or filed a financing statement under any other name for at least the last five (5) years.

Hazardous Substances. Except as disclosed to and acknowledged by Xxxxxx in writing, Borrower represents and warrants that: (1) During the period of Borrower's ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Xxxxxx in writing.

Taxes. To the best of Xxxxxxxx's knowledge, all of Xxxxxxxx's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

Lien Priority. Unless otherwise previously disclosed to Lender in writing, Xxxxxxxx has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security interests and rights in and to such Collateral.

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and, all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Xxxxxx that, so long as this Agreement remains in effect, Borrower will:

Notices of Claims and Litigation. Promptly inform Xxxxxx in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Xxxxxx to examine and audit Xxxxxxxx's books and records at all reasonable times.

Financial Statements. Furnish Lender with the following:

Annual Statements. As soon as available, but in no event later than one-hundred-twenty (120) days after the end of each fiscal year, Xxxxxxxx's balance sheet and income statement for the year ended, prepared by Borrower in form satisfactory to Lender.

Additional Requirements.

Xxxxxxxx's Interim Financial Statements

As soon as available but in no event later than thirty (30) days after the end of each month, Xxxxxxxx's balance sheet and profit and loss statement for the period ended including year- to-date, prepared by Borrower in form satisfactory to Lender.

Corporate Guarantor's Annual Financial Statements.

As soon as available but in no event later than one-hundred-twenty (120) days after the end of each fiscal year, balance sheet and profit and loss statement for the period ended, audited by CPA.

Monthly borrowing base statements due within ten (10) days of month-end (including A/R Aging and Inventory Listing)

Quarterly covenant compliance certificate due within thirty (30) days of quarter-end.

Annual Accounts Receivable and Inventory audits performed by Bank of Texas, N.A


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Loan No. 1085945	(Continued)	Page 4

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

Additional Information. Furnish such additional information and statements, as Xxxxxx may request from time to time.

Additional Requirements. Minimum Debt Service Coverage Ratio: Borrower will maintain, for the 12-month period ending on the last day of each quarter, a fixed charge coverage ratio of not less than 1.25 to 1.0. Debt Service coverage ratio means (a) the aggregate of Earnings Before Interest Taxes Depreciation and Amortization minus non-financed Capital Expenditures, minus all distributions including but not limited to earn-out pay divided by (b) the aggregate of interest and scheduled principal payments on all debt obligations.

Minimum Debt/Tangible Net Worth Ratio: Borrower will maintain, for the quarter ending on the last day of each quarter, a Debt/Tangible Net Worth Ratio of not more than 3.0 to 1.0.

Restrictions will apply to: changes in the nature of Borrower's business; sale of all or a substantial or material part of its assets; mergers, acquisitions, reorganizations, and recapitalization; liens; guarantees; debt; leases; dividends and other distributions; investments; debt prepayments; sale-leasebacks; capital expenditures; lease expenditures; and transactions with affiliates.

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, and coverages reasonably acceptable to Lender and by insurance companies authorized to transact business in Texas. BORROWER MAY FURNISH THE INSURANCE REQUIRED BY THIS AGREEMENT WHETHER THROUGH EXISTING POLICIES OWNED OR CONTROLLED BY BORROWER OR THROUGH EQUIVALENT COVERAGE FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS. Borrower, upon request of Xxxxxx, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require.

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Xxxxxx, executed by the guarantor named below, on Xxxxxx's forms, and in the amount and under the conditions set forth in those guaranties.


	Name of Guarantor		Amount
	Sielox, Inc.		Unlimited

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

Loan Proceeds. Use all Loan proceeds solely for Xxxxxxxx's business operations, unless specifically consented to the contrary by Xxxxxx in writing.

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Xxxxxxxx will not be required to pay and discharge any such assessment, tax, charge, xxxx, xxxx or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower's books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Xxxxxx immediately in writing of any default in connection with any agreement.

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Xxxxxx's sole opinion, Xxxxxx's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Xxxxxx's interest.

Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Xxxxxxxx's other properties and to examine or audit Xxxxxxxx's books, accounts, and records and to make copies and memoranda of Xxxxxxxx's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Xxxxxx, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense.


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Compliance Certificates. Unless waived in writing by Xxxxxx, provide Lender within thirty (30) days after the end of each fiscal quarter, with a certificate executed by Xxxxxxxx's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower's part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

XXXXXX'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Xxxxxx's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for Insuring, maintaining and preserving any Collateral. All such expenditures paid by Lender for such purposes will then bear interest at the Note rate from the date paid by Lender to the date of repayment by Xxxxxxxx. To the extent permitted by applicable law, all such expenses will become a part of the indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Xxxxxx.

Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) make any distribution with respect to any capital account, whether by reduction of capital or otherwise.

Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business.

Agreements. Borrower will not enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower's obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor Is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or Is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in good xxxxx xxxxx itself insecure, even though no Event of Default shall have occurred.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrowers accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Xxxxx accounts, or any trust accounts for which setoff would be prohibited by law. Xxxxxxxx authorizes Xxxxxx, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts.

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

Payment Default. Xxxxxxxx fails to make any payment when due under the Loan.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination of Borrower's existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Xxxxxxxx's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.


	BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No. 1085945	(Continued)	Page 6

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Xxxxxxxx's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Xxxxxxxx as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Xxxxxx written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

Adverse Change. A material adverse change occurs in Borrower's financial condition, or Xxxxxx believes the prospect of payment or performance of the Loan is impaired.

Insecurity. Lender in good faith believes itself insecure.

Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (1) cure the default within twenty (20) days; or (2) if the cure requires more than twenty (20) days, immediately initiate steps which Xxxxxx deems in Xxxxxx's sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency' subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Xxxxxx to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Xxxxxx's right to declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Attorneys' Fees; Expenses. Xxxxxxxx agrees to pay upon demand all of Xxxxxx's costs and expenses, including Xxxxxx's reasonable attorneys' fees and Xxxxxx's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Xxxxxx's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including Xxxxxx's reasonable attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Consent to Loan Participation. Xxxxxxxx agrees and consents to Xxxxxx's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Xxxxxxxx also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Xxxxxxxx's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Xxxxxxxx further agrees that the purchaser of any such participation interests may enforce Its interests irrespective of any personal claims or defenses that Borrower may have against Xxxxxx.

Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Texas without regard to its conflicts of law provisions. This Agreement has been accepted by Xxxxxx in the State of Texas.

Choice of Venue. If there is a lawsuit, and if the transaction evidenced by this Agreement occurred in Dallas County, Xxxxxxxx agrees upon Xxxxxx's request to submit to the jurisdiction of the courts of Dallas County, State of Texas.

No Waiver by Xxxxxx. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Xxxxxx. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Xxxxxx of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Xxxxxx, nor any course of dealing between Xxxxxx and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mall postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Xxxxxxxx agrees to keep Xxxxxx informed at all times of Xxxxxxxx's current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.


	BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No. 1085945	(Continued)	Page 7

Payment of Interest and Fees. Notwithstanding any other provision of this Agreement or any provision of any Related Document, Borrower does not agree or intend to pay, and Lender does not agree or intend to charge, collect, take, reserve or receive (collectively referred to herein as "charge or collect"), any amount in the nature of interest or in the nature of a fee for the Loan which would in any way or event (including demand, prepayment, or acceleration) cause Lender to contract for, charge or collect more for the Loan than the maximum Lender would be permitted to charge or collect by any applicable federal or Texas state law. Any such excess interest or unauthorized fee will, instead of anything stated to the contrary, be applied first to reduce the unpaid principal balance of the Loan, and when the principal has been paid in full, be refunded to Borrower.

Severability. If a court of competent Jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates.

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shell bind Xxxxxxxx's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Xxxxxxxx's rights under this Agreement or any interest therein, without the prior written consent of Lender.

Survival of Representations and Warranties. Xxxxxxxx understands and agrees that in extending Loan Advances, Xxxxxx is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Xxxxxx, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Xxxxxxxx at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

Time is of the Essence. Time is of the essence in the performance of this Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

Account. The word "Account" means a trade account, account receivable, other receivable, or other right to payment for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender).

Account Debtor. The words "Account Debtor" mean the person or entity obligated upon an Account.

Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf under the terms and conditions of this Agreement.

Agreement. The word "Agreement" means this Business Loan Agreement (Asset Based), as this Business Loan Agreement (Asset Based) may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement (Asset Based) from time to time.

Borrower. The word "Borrower" means Costar Video Systems, LLC and includes all co-signers and co-makers signing the Note and all their successors and assigns.

Borrowing Base. The words "Borrowing Base" mean as determined by Lender from time to time, the lesser of (1) $4,000,000.00 or (2) the sum of (a) 80.000% of the aggregate amount of Eligible Accounts, plus (b) 50.000% of the aggregate amount of Eligible inventory. At no time will Inventory be allowed to comprise more than 50% of the Borrowing Base.

Business Day. The words "Business Day" mean a day on which commercial banks are open in the State of Texas.

Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word Collateral also includes without limitation all collateral described in the Collateral section of this Agreement.

Eligible Accounts. The words "Eligible Accounts" mean at any time, all of Borrower's Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Xxxxxx in writing, Eligible Accounts do not include:

(1) Accounts with respect to which the Account Debtor is a member, employee or agent of Xxxxxxxx.

(2) Accounts with respect to which the Account Debtor is affiliated with Borrower.

(3) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional.

(4) Accounts with respect to which the Account Debtor is not a resident of the United States, except to the extent such Accounts are supported by insurance, bonds or other assurances satisfactory to Lender.


	BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No. 1085945	(Continued)	Page 8

(5) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower.

(6) Accounts which are subject to dispute, counterclaim, or setoff.

(7) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor.

(8) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory.

(9) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, Insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due.

(10) Accounts which have not been paid in full within 90 days from the invoice date. The entire balance of any Account of any single Account Debtor will be ineligible whenever the portion of the Account which has not been paid within 90 days from the invoice date is in excess of 10.000% of the total amount outstanding on the Account.

(11) That portion of the Accounts of any single Account Debtor which exceeds 20.000% of all of Borrower's Accounts.

(12) GOVERNMENT RECEIVABLES MAY CONSTITUTE NO MORE THAN 20% OF THE TOTAL ELIGIBLE RECEIVABLES. Government receivables are defined as the account debtor being the United States or any department agency, instrumentality of the United States, or any city, town, municipality, or division thereof.

Eligible Inventory. The words "Eligible Inventory" mean, at any time, all of Borrower's Inventory as defined below, except:

(1) Inventory which Is not owned by Borrower free and clear of all security interests, liens, encumbrances, and claims of third parties.

(2) Inventory which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing.

(3) Work in progress.

Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("XXXX"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement.

Expiration Date. The words "Expiration Date" mean the date of termination of Xxxxxx's commitment to lend under this Agreement.

GAAP. The word "GAAP" means generally accepted accounting principles.

Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan.

Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

Inventory. The word "Inventory" means all of Borrower's raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower now has or hereafter acquires any right, whether held by Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of Xxxxxxxx's custody or possession and all returns on Accounts.

Lender. The word "Lender" means Bank of Texas, N.A., its successors and assigns.

Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

Note. The word "Note" means the Note executed by Xxxxxx Video Systems, LIG in the principal amount of $4,000,000.00 dated August 16, 2008, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.

Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested In good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Xxxxxxxx's assets.


	BUSINESS LOAN AGREEMENT (ASSET BASED)
Loan No. 1085945	(Continued)	Page 9

Primary Credit Facility. The words "Primary Credit Facility" mean the credit facility described in the Line of Credit section of this Agreement.

Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other Instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

XXXXXXXX ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND XXXXXXXX AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED AUGUST 16, 2008.

BORROWER:

COSTAR VIDEO SYSTEMS, LLC

SIELOX, INC. Member of Costar Video Systems, LLC

By:	/s/ Xxxxxxxxx X. Xxxxxxxx		By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.			Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

LENDER:

BANK OF TEXAS, N.A.

By:	/s/ Xxxxx X. Xxxxxxx
	Xxxxx X. Xxxxxxx, Vice President

PROMISSORY NOTE


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.


Principal Amount: $4,000,000.00	Date of Note: August 16, 2008

PROMISE TO PAY. Costar Video Systems, LLC ("Borrower") promises to pay to Bank of Texas, N.A. ("Lender"), or order, In lawful money of the United States of America, the principal amount of Four Million & 00/100 Dollars ($4,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance or maturity, whichever occurs first.

CHOICE OF USURY CEILING AND INTEREST RATE. The interest rate on this Note has been implemented under the "Quarterly Ceiling" as referred to in Section 303.006 of the Texas Finance Code. The terms, including the rate, or index, formula, or provision of law used to compute the rate on the Note, will be subject to revision as to current and future balances, from time to time by notice from Lender in compliance with Section 303.103 of the Texas Finance Code.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on August 18, 2009. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning September 16, 2008, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; and then to any unpaid collection costs. Borrower will pay Lender at Xxxxxx's address shown above or at such other place as Lender may designate in writing. Notwithstanding any other provision of this Note, Xxxxxx will not charge interest on any undisbursed loan proceeds. No scheduled payment, whether of principal or interest or both, will be due unless sufficient loan funds have been disbursed by the scheduled payment date to justify the payment.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes In an index which is the BOKF National Prime Rate, described as the rate of interest set by BOK Financial Corporation, In its sole discretion, on a daily basis as published by BOK Financial Corporation ("BOKF') from time to time (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender In Its sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Xxxxxxxx's request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The index currently is 5.000% per annum. The Interest rate to be applied prior to maturity to the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate equal to the Index, resulting in an initial rate of 5.000% per annum based on a year of 360 days. NOTICE: Under no circumstances will the interest rate on this Note be more than (except for any higher default rate or Post Maturity Rate shown below) the lesser of 18.000% per annum or the maximum rate allowed by applicable law. For purposes of this Note, the "maximum rate allowed by applicable law' means the greater of (A) the maximum rate of Interest permitted under federal or other law applicable to the indebtedness evidenced by this Note, or (B) the "Quarterly Ceiling" as referred to In Section 303.006 of the Texas Finance Code.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the Interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding, unless such calculation would result in a usurious rate, in which case interest shall be calculated on a per diem basis of a year of 365 or 366 days, as the case may be. All interest payable under WS Note is computed using this method.

PREPAYMENT. Xxxxxxxx agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than It is due. Prepayment In full shall consist of payment of the remaining unpaid principal balance together with all accrued and unpaid interest and all other amounts, costs end expenses for which Borrower is responsible under this Note or any other agreement with Lender pertaining to this loan, and in no event will Borrower ever be required to pay any unearned interest. Early payments will not, unless agreed to by Xxxxxx in writing, relieve Xxxxxxxx of Xxxxxxxx's obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Xxxxxxxx agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Xxxxxx may accept it without losing any of Xxxxxx's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that Indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Bank of Texas, N.A., P.O. Box 248818 Oklahoma City, OK 73124-8818.

POST MATURITY RATE. The Post Maturity Rate on this Note is the lesser of (A) the maximum rate allowed by law or (B) 18.000% per annum based on a year of 360 days. Borrower will pay interest on all sums due after final maturity, whether by acceleration or otherwise, at that rate.

DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:

Payment Default. Borrower falls to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or In any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default In Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading In any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter,

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Xxxxxxxx's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Xxxxxxxx as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Xxxxxxxx gives Xxxxxx written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in Its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.

Adverse Change. A material adverse change occurs in Borrower's financial condition, or Xxxxxx believes the prospect of payment or performance of this Note is Impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within twenty (20) days; or (2) If the cure requires more than twenty (20) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.


	PROMOSSORY NOTE
Loan No. 1085945	(Continued)	Page 2

LENDER'S RIGHTS. Upon default, Xxxxxx may declare the entire indebtedness, including the unpaid principal balance under this Note, all accrued unpaid interest, and all other amounts, costs and expenses for which Borrower is responsible under this Note or any other agreement with Lender pertaining to this loan, Immediately due, without notice, and than Borrower will pay that amount,

ATTORNEYS' FEES; EXPENSES. Xxxxxx may hire an attorney to help collect this Note if Borrower does not pay, and Borrower will pay Xxxxxx's reasonable attorneys' fees. Borrower also will pay Lender all other amounts Lender actually incurs as court costs, lawful fees for filing, recording, releasing to any public office any instrument securing this Note; the reasonable cost actually expended for repossessing, storing, preparing for sale, and selling any security; and fees for noting a lien on or transferring a certificate of title to any motor vehicle offered as security for this Note, or premiums or identifiable charges received in connection with the sale of authorized insurance.

JURY WAIVER. Xxxxxx and Xxxxxxxx hereby waive the right to any jury trial In any action, proceeding, or counterclaim brought by either Xxxxxx or Borrower against the other.

GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Texas without regard to its conflicts of law provisions. This Note has been accepted by Lender In the State of Texas.

CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced by this Note occurred in Dallas County, Xxxxxxxx agrees upon Xxxxxx's request to submit to the jurisdiction of the courts of Dallas County, State of Texas.

DISHONORED CHECK CHARGE. Borrower will pay a processing fee of $23.00 if any check given by Borrower to Lender as a payment on this loan is dishonored.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff In all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else end all accounts Borrower may open in the future. However, this does not include any IRA or Xxxxx accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Xxxxxx, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note, as well as directions for payment from Xxxxxxxx's accounts, may be requested orally or in writing by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. Xxxxxxxx agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Xxxxxxxx's accounts with Xxxxxx. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Xxxxxx's Internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure. This revolving line of credit shall not be subject to Ch. 346 of the Texas Finance Code.

PAYMENTS. PAYMENTS SHOULD BE REMITTED TO: Bank of Texas, NA., P.O. Box 248818, Oklahoma City, OK 73124-8818.

RENEWAL STATEMENT. This Promissory Note is an extension, renewal and/or modification of the Promissory Note dated August 16, 2007 in the principal amount of S4,000,000.00 from the Borrower to Lender and is not a novation and shall be deemed effective as of the date sat forth as the date such Promissory Note would have matured if not otherwise renewed or extended hereby.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Xxxxxxxx, and upon Xxxxxxxx's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: Bank of Texas, N.A. P.O. Box 22117 Tulsa, OK 74121-2117.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Borrower does not agree or intend to pay, and Xxxxxx does not agree or intend to contract for, charge, collect, take, reserve or receive (collectively referred to herein as "charge or collect"), any amount in the nature of interest or In the nature of a fee for this loan, which would in any way or event (including demand, prepayment, or acceleration) cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to charge or collect by federal law or the law of the State of Texas (as applicable). Any such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be applied first to reduce the principal balance of this loan, and when the principal has been paid in full, be refunded to Borrower. The right to accelerate maturity of sums due under this Note does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to charge or collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the loan evidenced by this Note until payment in full so that the rate or amount of interest on account of the loan evidenced hereby does not exceed the applicable usury ceiling. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, notice of dishonor, notice of Intent to accelerate the maturity of this Note, and notice of acceleration of the maturity of this Note. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Xxxxxx's security interest in the collateral without the consent of or notice to anyone. All such parties also agree that Xxxxxx may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, XXXXXXXX READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. XXXXXXXX AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER:

BORROWER:

COSTAR VIDEO SYSTEMS, LLC

SIELOX, INC. Member of Costar Video Systems, LLC


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

RETURN ORDER FOR BOARDING DOCUMENTS (INTERNAL DOCUMENT)


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

TO FACILITATE LOAN IMAGING AND BOARDING RETURN DOCUMENTS IN ORDER

BUSINESS LINE RETURN ORDER:

1. Boarding Virtual Loan Folder Transmittal Form

2. Funding tickets / copy of REGIS entries

3. Legal documents executed by customer - note, loan agreement, and security agreement on top

4. External collateral documents - title, appraisal, environmental survey, etc.

5. Credit Documents (If not supplied with the Commitment Report)

6. Entity verification and borrowing authority (articles of incorporation, certificate of good standing, corporate resolution, etc.)

7. Executed Participation Agreement ( if applicable)

8. All documents should be secured with an appropriately sized binderclip; if package is too large for a single clip, then multiple clips may be used and entire package then secured with a large binderclip.

IMAGE LAB:

1. Collateral Virtual Loan Folder Transmittal form placed on top of each loan package.

2. Scan all documents.

3. Separate unrecorded UCCs, mortgages, deeds of trust, modifications, etc. and forward the originals to Records for recording.

4. Secure entire package with a binderclip and place the package in the Retention Box.

AGREEMENT TO PROVIDE INSURANCE


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

INSURANCE REQUIREMENTS. Grantor, Costar Video Systems, LLC ("Grantor"), understands that insurance coverage is required In connection with the extending of a loan or the providing of other financial accommodations to Grantor by Xxxxxx. These requirements are set forth in the security documents for the loan. The following minimum Insurance coverages must be provided on the following described collateral (the "Collateral"):

Collateral: All Inventory and Equipment.

Type: All risks, including fire, theft and liability.

Amount: Full Insurable Value.

Basis: Replacement value.

Endorsements: Lender loss payable clause with stipulation that coverage will not be cancelled or diminished without a minimum of thirty (30) days prior written notice to Lender.

Latest Delivery Date: By the loan closing date.

INSURANCE COMPANY. Grantor may obtain insurance from any insurance company authorized to do business in Texas. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER THROUGH EXISTING POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH EQUIVALENT INSURANCE FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN THE STATE OF TEXAS. THE PREMIUM OR RATE OF CHARGE FOR THE INSURANCE LENDER IS SELLING OR PROCURING FOR THIS LOAN IS NOT FIXED OR APPROVED BY THE STATE COMMISSIONER OF INSURANCE. Xxxxxxx understands that credit may not be denied solely because insurance was not purchased through Lender.

FAILURE TO PROVIDE INSURANCE. Xxxxxxx agrees to deliver to Lender, on the latest delivery date stated above, proof of the required insurance as provided above, with en effective data of August 16, 2008, or earlier, Grantor acknowledges and agrees that if Grantor fails to provide any required insurance or fails to continue such insurance in force, Lender may do so at Grantor's expense as provided in the applicable security document. The cost of any such insurance, at the option of Lender, shall be added to the Indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO AN AMOUNT EQUAL TO THE LESSER OF (1) THE UNPAID BALANCE OF THE DEBT, EXCLUDING ANY UNEARNED FINANCE CHARGES, OR (2) THE VALUE OF THE COLLATERAL; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS,

If such insurance purchased by Lender is procured at a rate or charge not fixed or approved by the State Board of Insurance, Grantor will be so notified, and Grantor may at any time cause the cancellation of collateral protection insurance by providing proper evidence to Lender that Grantor has obtained insurance as required by the security document.

Texas Creditor-Placed Insurance Notice: Grantor is required to keep the Collateral insured against damage in the amount specified by Lender. Grantor will purchase the insurance from an insurer that is authorized to do business in Texas or an eligible surplus lines insurer. Xxxxxx shall be named as the person to he paid under such policy in the event of loss. If required by Xxxxxx, Grantor must deliver a copy of the policy and proof of the payment of premiums to Lender. If Grantor fails to meet any of these requirements, Lender may, but does not have to, obtain collateral protection insurance on Grantor's behalf at Grantor's expense.

AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor authorizes Lender to provide to any person (Including any insurance agent or company) all information Lender deems appropriate, whether regarding the Collateral, the loan or other financial accommodations, or both.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 16, 2008.

GRANTOR:

COSTAR VIDEO SYSTEMS, LLC

SIELOX, INC. Member of Costar Video Systems, LLC


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.


FOR LENDER USE ONLY
INSURANCE VERIFICATION
DATE:		PHONE:
AGENT’S NAME:
AGENCY:
ADDRESS:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:

DISBURSEMENT REQUEST AND AUTHORIZATION


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

LOAN TYPE. This is a non-precomputed Variable Rate Nondisclosable Revolving Line of Credit Loan to a Limited Liability Company for $4,000,000.00 due on August 18, 2009. The reference rate (BOKF National Prime Rate, described as the rate of interest set by BOK Financial Corporation, in its sole discretion, on a daily basis as published by BOK Financial Corporation ("BOKF") from time to time, with an interest rate calling of 18.000%, currently 5.000%), resulting In an initial rate of 5.000. This is a secured renewal loan.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

[ ] Personal, Family or Household Purposes.

[ ] Personal Investment.

[ X ] Business, Agricultural and All Other.

SPECIFIC PURPOSE. The specific purpose of this loan is: Renewal/Finance working capital needs of the company.

DISBURSEMENT INSTRUCTIONS. Xxxxxxxx understands that no loan proceeds will be disbursed until all of Xxxxxx's conditions for making the loan have been satisfied. Please disburse the loan proceeds of $4,000,000.00 as follows:


Undisbursed Funds:	$	2,691,157.47

Other Disbursements:	$	1,298,842.53
$1,298,842.53 Balance as if 08/18/2008

Total Financed Prepaid Finance Charges:	$	10,000.00
$10,000.00 Commitment Fee

Note Principal:	$	4,000,000.00

CHARGES PAID IN CASH, Xxxxxxxx has paid or will pay in cash as agreed the following charges:


Prepaid Finance Charges Paid In Cash:	$	0.00

Other Charges Paid In Cash:	$	9,883.84
$9,883.84 Interest due as of 08/16/2008


Total Charges Paid in Cash:	$	9,883.84

AUTOMATIC PAYMENTS. Borrower hereby authorizes Xxxxxx automatically to deduct from Xxxxxxxx's Demand Deposit - Checking account, numbered 8091061720, the amount of any loan payment. If the funds in the account are insufficient to cover any payment, Lender shall not be obligated to advance funds to cover the payment. At any time and for any reason, Borrower or Lender may voluntarily terminate Automatic Payments.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, XXXXXXXX REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO XXXXXX. THIS AUTHORIZATION IS DATED AUGUST 16, 2008.

BORROWER:

COSTAR VIDEO SYSTEMS, LLC

SIELOX, INC. Member of Costar Video Systems, LLC


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

NOTICE OF FINAL AGREEMENT


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.


THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

As used in this Notice, the following terms have the following meanings:

Loan. The term "Loan" means the following described loan: a non-precomputed Variable Rate Nondisclosable Revolving Line of Credit Loan to a Limited Liability Company for $4,000,000.00 due on August 16, 2009. The reference rate (BOKF National Prime Rate, described as the rate of interest set by BOK Financial Corporation, in its sole discretion, on a daily basis as published by BOK Financial Corporation ("BOKF") from time to time, with an interest rate ,ceiling of , 8.000%, currently 5.000%), resulting in an initial rate of 5.000. This is a secured renewal loan.
Loan Agreement. The term "Loan Agreement" means one or more promises, promissory notes, agreements, undertakings, security agreements, deeds of trust or other documents, or commitments, or any combination of those actions or documents, relating to the Loan, including without limitation the following:
LOAN DOCUMENTS
Business Loan Agreement (Asset Based)		Promissory Note
TX Commercial Guaranty: Sielox, Inc.		TX Commercial Security Agreement: All Inventory, Chattel
TX National UCG Financing Statement (Rev. 05/22/02):		Paper, Accounts, Equipment and General Intangibles; owned by
All Inventory, Chattel Paper, Accounts, Equipm		Costar Video Systems, LLC
Return Order for Boarding - Return Order for Boarding		Agreement to Provide Insurance: All Inventory, Chattel Paper,
Documents (Internal Document)		Accounts, Equipment and General Intangibles; owned by Costar
Disbursement Request and Authorization		Video Systems, LLC
Notice of Final Agreement
UCC and Security Agreement are executed and maintained in file.		Guaranty Agreements are maintained in file.

Parties. The term "Parties" means Bank of Texas, N.A. and any and all entities or individuals who are obligated to repay the loan or have pledged property's as security for the Loan, including without limitation the following:

Borrower:	Costar Video Systems, LLC
Grantor(s):	Costar Video Systems, LLC
Guarantor(s):	Sielox, Inc.

This Notice of Final Agreement is given by Bank of Texas, N.A. pursuant to Section 26.02 of the Texas Business and Commerce Code. Each Party who signs below, other than Bank of Texas, N.A., acknowledges, represents, and warrants to Bank of Texas, N.A. that it has received, read and understood this Notice of Final Agreement. This Notice is dated August 16, 2008.

BORROWER:

COSTAR VIDEO SYSTEMS, LLC

SIELOX, INC. Member of Costar Video Systems, LLC


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

GUARANTOR:

SIELOX, INC.


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

LENDER:

BANK OF TEXAS, N.A.


/s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Vice President

NOTICE OF FINAL AGREEMENT


Principal $4,000,000.00	Loan Date 08-16-2008	Maturity 08-16-2009	Loan No 0000000	Call / Coll 04A0 / 803 - STX	Account	Officer 020	Initials
References in the boxes above are for Xxxxxx's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.


THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

As used in this Notice, the following terms have the following meanings:

Loan. The term "Loan" means the following described loan: a non-precomputed Variable Rate Nondisclosable Revolving Line of Credit Loan to a Limited Liability Company for $4,000,000.00 due on August 16, 2009. The reference rate (BOKF National Prime Rate, described as the rate of interest set by BOK Financial Corporation, in its sole discretion, on a daily basis as published by BOK Financial Corporation ("BOKF") from time to time, with an interest rate ,ceiling of , 8.000%, currently 5.000%), resulting in an initial rate of 5.000. This is a secured renewal loan.
Loan Agreement. The term "Loan Agreement" means one or more promises, promissory notes, agreements, undertakings, security agreements, deeds of trust or other documents, or commitments, or any combination of those actions or documents, relating to the Loan, including without limitation the following:
LOAN DOCUMENTS
Business Loan Agreement (Asset Based)		Promissory Note
TX Commercial Guaranty: Sielox, Inc.		TX Commercial Security Agreement: All Inventory, Chattel
TX National UCG Financing Statement (Rev. 05/22/02):		Paper, Accounts, Equipment and General Intangibles; owned by
All Inventory, Chattel Paper, Accounts, Equipm		Costar Video Systems, LLC
Return Order for Boarding - Return Order for Boarding		Agreement to Provide Insurance: All Inventory, Chattel Paper,
Documents (Internal Document)		Accounts, Equipment and General Intangibles; owned by Costar
Disbursement Request and Authorization		Video Systems, LLC
Notice of Final Agreement
UCC and Security Agreement are executed and maintained in file.		Guaranty Agreements are maintained in file.

Parties. The term "Parties" means Bank of Texas, N.A. and any and all entities or individuals who are obligated to repay the loan or have pledged property's as security for the Loan, including without limitation the following:

Borrower:	Costar Video Systems, LLC
Grantor(s):	Costar Video Systems, LLC
Guarantor(s):	Sielox, Inc.

BORROWER:

COSTAR VIDEO SYSTEMS, LLC

SIELOX, INC. Member of Costar Video Systems, LLC


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

GUARANTOR:

SIELOX, INC.


By:	/s/ Xxxxxxxxx X. Xxxxxxxx	By:	/s/ Xxxxxx Xxxxx
	Xxxxxxxxx X. Xxxxxxxx, President of Sielox, Inc.		Xxxxxx Xxxxx, Chief Financial Officer of Sielox, Inc.

LENDER:

BANK OF TEXAS, N.A.


/s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Vice President

Borrower:

Costar Video Systems, LLC
(TIN: 00-0000000)

Lender:

Bank of Texas, N.A.

0000 Xxxxxxxxx Xx. Xxxxx 000

P.O. Box 29775

Carrollton, TX 75007

Dallas, TX 75229-9775