SECURITY AGREEMENT

This SECURITY AGREEMENT dated as of October 3, 2008 (the “Security Agreement”),
is executed by and between ISI SECURITY GROUP, INC., a Delaware corporation
(f/k/a ISI DETENTION CONTRACTING GROUP, INC.) (“Borrower”), DETENTION
CONTRACTING GROUP, LTD, a Texas limited partnership, ISI DETENTION CONTRACTING
GROUP, INC., a Texas corporation, ISI DETENTION CONTRACTING GROUP, INC., a
California corporation, ISI DETENTION CONTRACTING GROUP, INC., a New Mexico
corporation, ISI DETENTION SYSTEMS, INC., a Texas corporation, ISI SYSTEMS,
LTD., a Texas limited partnership, METROPLEX CONTROL SYSTEMS, INC., a Texas
corporation, ISI CONTROLS, LTD., a Texas limited partnership, METROPLEX
COMMERCIAL FIRE AND SECURITY ALARMS, INC., a Texas corporation and MCFSA, LTD.,
a Texas limited partnership, COM-TEC SECURITY, LLC, a Wisconsin limited
liability company, and COM-TEC CALIFORNIA LIMITED PARTNERSHIP, a limited
partnership (collectively, the “Guarantors”), which have their chief executive
located at 12903 Delivery Drive, San Antonio, Texas 78247, and THE PRIVATEBANK
AND TRUST COMPANY, an Illinois banking corporation (the “Bank”), whose address
is 70 W. Madison, 2nd Floor, Chicago, Illinois 60602 (the Borrower and the
Guarantors are collectively referred to herein as the “Debtor”).
 
RECITALS:

A. ISI Security Group, Inc., a Delaware corporation (“Borrower”) and Bank have
entered into that certain Loan and Security Agreement of even date herewith (the
“Loan Agreement”), pursuant to which the Bank has agreed to make two (2)
revolving loans and a term loan in the original aggregate amount of twenty-five
million and no/100 dollars ($25,000,000.00) (the “Loans”).
 
B. As a condition to the Bank’s loaning funds or providing new additional
financial accommodations to the Borrower, the Bank requires that the Debtor
enter into this Security Agreement in order to secure the obligations and
performance of the Borrower under such loans or financial accommodations.
 
NOW THEREFORE, in consideration of the premises, and the mutual covenants and
agreements set forth herein, the Debtor and the Bank hereby agree as follows:
 
AGREEMENT:

Section 1. DEFINITIONS.
 
1.1 Defined Terms. For the purposes of this Security Agreement, in addition to
the definitions included in the Preamble and Recitals above, the following
capitalized words and phrases shall have the meanings set forth below. In
addition, any additional defined terms used herein shall have the meaning
ascribed to them in the Loan Agreement.
 
“Affiliate” of the Bank shall mean (a) any entity which, directly or indirectly,
controls or is controlled by or is under common control with the Bank, and
(b) any entity administered or managed by the Bank, or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding
or otherwise investing in commercial loans. An entity shall be deemed to be
“controlled by” another entity if such other entity possesses, directly or
indirectly, power to direct or cause the direction of the management and
policies of such entity whether by contract, ownership of voting securities,
membership interests or otherwise.
 

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“Bank Product Agreements” shall mean those certain cash management service
agreements entered into from time to time by an Obligor or any Subsidiary with
the Bank or any Affiliate of the Bank concerning Bank Products.
 
“Bank Product Obligations” shall mean all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by an Obligor or any
Subsidiary to the Bank or any Affiliate of the Bank pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising.
 
“Bank Products” shall mean any service or facility extended to an Obligor or any
Subsidiary by the Bank or any Affiliate of the Bank, including: (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase cards,
(e) cash management, including controlled disbursement, accounts or services, or
(f) Hedging Agreements.
 
“Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing
or hereafter amended.
 
“Borrower” shall have the meaning set forth in Recital A hereof. The Borrower
may be the same Person as the Debtor.
 
“Business Day” shall mean any day other than a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois.
 
“Capital Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should be, in accordance with
Financial Accounting Standards Board Statement No. 13, as amended from time to
time, or, if such statement is not then in effect, such statement of GAAP as may
be applicable, recorded as a “capital lease” on the financial statements of such
Person prepared in accordance with GAAP.
 
“Capital Securities” shall mean, with respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.
 
“Capitalized Lease Obligations” shall mean, as to any Person, all rental
obligations of such Person, as lessee under a Capital Lease which are or will be
required to be capitalized on the books of such Person.
 
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“Collateral” shall have the meaning set forth in Section 2.1 hereof.
 
“Default Rate” shall mean a per annum rate of interest equal to the Prime Rate
plus two percent (2.00%).
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
 
“Event of Default” shall have the mean set forth in Section 5 hereof.
 
“GAAP” shall mean generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination, provided, however, that interim financial statements or reports
shall be deemed in compliance with GAAP despite the absence of footnotes and
fiscal year-end adjustments as required by GAAP.
 
“Hedging Agreements” shall mean any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.
 
“Hedging Obligation” shall mean, with respect to any Person, any liability of
such Person under any Hedging Agreement.
 
“Landlord Waiver” shall mean an agreement in form and substance reasonably
satisfactory to the Bank pursuant to which a mortgagee or lessor of real
property on which Collateral is stored or otherwise located, or a warehouseman,
processor or other bailee of Inventory or other property owned by the Debtor of
any Subsidiary, acknowledges the Liens of the Bank and waives any Liens held by
such Person on such property, and, in the case of any such agreement with a
mortgagee or lessor, permits the Bank reasonable access to and use of such real
property following the occurrence and during the continuance of an Event of
Default to assemble, complete and sell any collateral stored or otherwise
located thereon.
 
“Letter of Credit” and “Letters of Credit” shall mean, respectively, a letter of
credit and all such letters of credit issued by the Bank, in its sole
discretion, for the account of an Obligor.
 
“Lien” shall mean, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person (including an interest in respect of a
Capital Lease) which secures payment or performance of any obligation and shall
include any mortgage, lien, encumbrance, title retention lien, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
 
“Loan Documents” shall mean the Loan Agreement and each of the agreements,
documents, instruments and certificates from time to time executed and delivered
by an Obligor or any of their Subsidiaries for the benefit of the Bank in
connection with the Obligations, and all amendments, restatements, supplements
and other modifications thereto.
 
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“Material Adverse Effect” shall mean (a) a material adverse change in, or a
material adverse effect upon, the assets, business, properties, prospects,
condition (financial or otherwise) or results of operations of an Obligor taken
as a whole, (b) a material impairment of the ability of an Obligor to perform
any of the Obligations under any of the Loan Documents, or (c) a material
adverse effect on (i) any substantial portion of the Collateral, (ii) the
legality, validity, binding effect or enforceability against an Obligor and its
Subsidiaries of any of the Loan Documents, (iii) the perfection or priority of
any Lien granted to the Bank under any Loan Document, or (iv) the rights or
remedies of the Bank under any Loan Document.
 
“Obligations” shall mean all loans, advances and other financial accommodations,
all interest accrued thereon (including interest which would be payable as
post-petition in connection with any bankruptcy or similar proceeding, whether
or not permitted as a claim thereunder), any fees due the Bank under the Loan
Documents, any expenses incurred by the Bank under the Loan Documents and any
and all other liabilities and obligations of an Obligor to the Bank, including
any reimbursement obligations of an Obligor in respect of Letters of Credit and
surety bonds, all Hedging Obligations of an Obligor which are owed to the Bank
or any Affiliate of the Bank, and all Bank Product Obligations of an Obligor,
all in each case howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become
due, together with any and all renewals or extensions thereof.
 
“Obligor” shall mean the Borrower, any Subsidiary of the Debtor, the Debtor, any
guarantor, accommodation endorser, third party pledgor, or any other party
liable with respect to the Obligations.
 
“Organizational Identification Number” means, with respect to Debtor, the
organizational identification number assigned to Debtor by the applicable
governmental unit or agency of the jurisdiction of organization of the Debtor.
 
“Permitted Liens” shall mean have the meaning set forth in the Loan Agreement.
 
“Person” shall mean any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
 
“Subsidiary” and “Subsidiaries” shall mean, respectively, with respect to any
Person, each and all such corporations, partnerships, limited partnerships,
limited liability companies, limited liability partnerships, joint ventures or
other entities of which or in which such Person owns, directly or indirectly,
such number of outstanding Capital Securities as have more than fifty percent
(50.00%) of the ordinary voting power for the election of directors or other
managers of such corporation, partnership, limited liability company or other
entity. Unless the context otherwise requires, each reference to Subsidiaries
herein shall be a reference to Subsidiaries of the Borrower.
 
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“Taxes” shall mean any and all present and future taxes, duties, levies,
imposts, deductions, assessments, charges or withholdings, and any and all
liabilities (including interest and penalties and other additions to taxes) with
respect to the foregoing.
 
“UCC” shall mean the Uniform Commercial Code in effect in the state of Illinois
from time to time.
 
“Unmatured Event of Default” shall mean any event which, with the giving of
notice, the passage of time or both, would constitute an Event of Default.
 
1.2 Other Terms Defined in UCC. All other capitalized words and phrases used
herein and not otherwise specifically defined herein shall have the respective
meanings assigned to such terms in the UCC, to the extent the same are used or
defined therein.
 
1.3 Other Interpretive Provisions.
 
(a) The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms. Whenever the context so requires, the neuter
gender includes the masculine and feminine, the single number includes the
plural, and vice versa, and in particular the word “Debtor” shall be so
construed.
 
(b) Section and Schedule references are to this Security Agreement unless
otherwise specified. The words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Security Agreement shall refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement
 
(c) The term “including” is not limiting, and means “including, without
limitation.”
 
(d) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including”; the words “to” and
“until” each mean “to but excluding,” and the word “through” means “to and
including.”
 
(e) Unless otherwise expressly provided herein, (i) references to agreements
(including this Security Agreement and the other Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, supplements and other modifications thereto, but only to the
extent such amendments, restatements, supplements and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation shall be construed as including all statutory and
regulatory provisions amending, replacing, supplementing or interpreting such
statute or regulation.
 
(f) To the extent any of the provisions of the other Loan Documents are
inconsistent with the terms of this Security Agreement, the provisions of this
Security Agreement shall govern.
 
(g) This Security Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and each
shall be performed in accordance with its terms.
 
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Section 2. SECURITY FOR THE OBLIGATIONS.
 
2.1 Security for Obligations. As security for the payment and performance of the
Obligations, the Debtor does hereby pledge, assign, transfer, deliver and grant
to the Bank, for its own benefit and as agent for its Affiliates, a continuing
and unconditional first priority security interest in and to any and all
property of the Debtor, of any kind or description, tangible or intangible,
wheresoever located and whether now existing or hereafter arising or acquired,
including the following (all of which property, along with the products and
proceeds therefrom, are individually and collectively referred to as the
“Collateral”):
 
(a) all property of, or for the account of, the Debtor now or hereafter coming
into the possession, control or custody of, or in transit to, the Bank or any
agent or bailee for the Bank or any parent, affiliate or subsidiary of the Bank
or any participant with the Bank in the Obligations (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise), including all
earnings, dividends, interest, or other rights in connection therewith and the
products and proceeds therefrom, including the proceeds of insurance thereon;
and
 
(b) the additional property of the Debtor, whether now existing or hereafter
arising or acquired, and wherever now or hereafter located, together with all
additions and accessions thereto, substitutions, betterments and replacements
therefor, products and Proceeds therefrom, and all of the Debtor’s books and
records and recorded data relating thereto (regardless of the medium of
recording or storage), together with all of the Debtor’s right, title and
interest in and to all computer software required to utilize, create, maintain
and process any such records or data on electronic media, identified and set
forth as follows:
 
(i) All Accounts and all Goods whose sale, lease or other disposition by the
Debtor has given rise to Accounts and have been returned to, or repossessed or
stopped in transit by, the Debtor, or rejected or refused by an Account Debtor;
 
(ii) All Inventory, including raw materials, work-in-process and finished goods;
 
(iii) All Goods (other than Inventory), including embedded software, Equipment,
vehicles, furniture and Fixtures;
 
(iv) All Software and computer programs;
 
(v) All Securities, Investment Property, Financial Assets and Deposit Accounts;
 
(vi) All Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter
of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance
Receivables, Supporting Obligations, notes secured by real estate, Commercial
Tort Claims and General Intangibles, including Payment Intangibles; and
 
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(vii) All Proceeds (whether Cash Proceeds or Non-cash Proceeds) of the foregoing
property, including all insurance policies and proceeds of insurance payable by
reason of loss or damage to the foregoing property, including unearned premiums,
and of eminent domain or condemnation awards.
 
2.2 Possession and Transfer of Collateral. Until an Event of Default has
occurred hereunder, the Debtor shall be entitled to possession or use of the
Collateral (other than Instruments or Documents with an individual value in
excess of $10,000.00 (including Tangible Chattel Paper and Investment Property
consisting of certificated securities) and other Collateral required to be
delivered to the Bank pursuant to this Section 2. The cancellation or surrender
of any promissory note evidencing an Obligation, upon payment or otherwise,
shall not affect the right of the Bank to retain the Collateral for any other of
the Obligations. The Debtor shall not sell, assign (by operation of law or
otherwise), license, lease or otherwise dispose of, or grant any option with
respect to any of the Collateral, except that the Debtor may sell Inventory in
the ordinary course of business.
 
2.3 Financing Statements. The Debtor shall, at the Bank’s request, at any time
and from time to time, execute and deliver to the Bank such financing
statements, amendments and other documents and do such acts as the Bank deems
necessary in order to establish and maintain valid, attached and perfected first
priority security interests in the Collateral in favor of the Bank, for its own
benefit and as agent for its Affiliates, free and clear of all Liens and claims
and rights of third parties whatsoever, except Permitted Liens. The Debtor
hereby irrevocably authorizes the Bank at any time, and from time to time, to
file in any jurisdiction any initial financing statements and amendments thereto
without the signature of the Debtor that (a) indicate the Collateral (i) is
comprised of all assets of the Debtor or words of similar effect, regardless of
whether any particular asset comprising a part of the Collateral falls within
the scope of Article 9 of the Uniform Commercial Code of the jurisdiction
wherein such financing statement or amendment is filed, or (ii) as being of an
equal or lesser scope or within greater detail as the grant of the security
interest set forth herein, and (b) contain any other information required by
Section 5 of Article 9 of the Uniform Commercial Code of the jurisdiction
wherein such financing statement or amendment is filed regarding the sufficiency
or filing office acceptance of any financing statement or amendment, including
(i) whether the Debtor is an organization, the type of organization and any
Organizational Identification Number issued to the Debtor, and (ii) in the case
of a financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of the
real property to which the Collateral relates. The Debtor hereby agrees that a
photogenic or other reproduction of this Security Agreement is sufficient for
filing as a financing statement and the Debtor authorizes the Bank to file this
Security Agreement as a financing statement in any jurisdiction. The Debtor
agrees to furnish any such information to the Bank promptly upon request. The
Debtor further ratifies and affirms its authorization for any financing
statements and/or amendments thereto, executed and filed by the Bank in any
jurisdiction prior to the date of this Security Agreement. In addition, the
Debtor shall make appropriate entries on its books and records disclosing the
security interests of the Bank, for its own benefit and as agent for its
Affiliates, in the Collateral.
 
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2.4 Preservation of the Collateral. The Bank may, but is not required, to take
such actions from time to time as the Bank deems appropriate to maintain or
protect the Collateral. The Bank shall have exercised reasonable care in the
custody and preservation of the Collateral if the Bank takes such action as the
Debtor shall reasonably request in writing which is not inconsistent with the
Bank’s status as a secured party, but the failure of the Bank to comply with any
such request shall not be deemed a failure to exercise reasonable care;
provided, however, the Bank’s responsibility for the safekeeping of the
Collateral shall (i) be deemed reasonable if such Collateral is accorded
treatment substantially equal to that which the Bank accords its own property,
and (ii) not extend to matters beyond the control of the Bank, including acts of
God, war, insurrection, riot or governmental actions. In addition, any failure
of the Bank to preserve or protect any rights with respect to the Collateral
against prior or third parties, or to do any act with respect to preservation of
the Collateral, not so requested by the Debtor, shall not be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral. The
Debtor shall have the sole responsibility for taking such action as may be
necessary, from time to time, to preserve all rights of the Debtor and the Bank
in the Collateral against prior or third parties. Without limiting the
generality of the foregoing, where Collateral consists in whole or in part of
securities, the Debtor represents to, and covenants with, the Bank that the
Debtor has made arrangements for keeping informed of changes or potential
changes affecting the securities (including rights to convert or subscribe,
payment of dividends, reorganization or other exchanges, tender offers and
voting rights), and the Debtor agrees that the Bank shall have no responsibility
or liability for informing the Debtor of any such or other changes or potential
changes or for taking any action or omitting to take any action with respect
thereto.
 
2.5 Other Actions as to any and all Collateral. The Debtor further agrees to
take any other action reasonably requested by the Bank to ensure the attachment,
perfection and first priority of, and the ability of the Bank to enforce, the
security interest of the Bank, for its own benefit and as agent for its
Affiliates, in any and all of the Collateral including (a) causing the Bank’s
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of the bank to enforce, the security interest of the Bank, for its own
benefit and as agent for its Affiliates, in such Collateral, (c) complying with
any provision of any statute, regulation or treaty of the United States as to
any Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of the Bank to enforce, the security
interest of the Bank, for its own benefit and as agent for its Affiliates, in
such Collateral, (d) obtaining governmental and other third party consents and
approvals, including any consent of any licensor, lessor or other Person
obligated on Collateral, (e) obtaining waivers from mortgagees and landlords in
form and substance satisfactory to the Bank, and (f) taking all actions required
by the UCC in effect from time to time or by other law, as applicable in any
relevant UCC jurisdiction, or by other law as applicable in any foreign
jurisdiction. The Debtor further agrees to indemnify and hold the Bank harmless
against claims of any Persons not a party to this Security Agreement concerning
disputes arising over the Collateral.
 
2.6 Collateral in the Possession of a Warehouseman or Bailee. If any of the
Collateral with an aggregate value in excess of $25,000.00 at any time is in the
possession of a warehouseman or bailee, the Debtor shall promptly notify the
Bank thereof, and shall promptly obtain a Landlord Waiver.
 
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2.7 Letter-of-Credit Rights. If the Debtor at any time is a beneficiary under a
letter of credit now or hereafter issued in favor of the Debtor, the Debtor
shall promptly notify the Bank thereof and, at the request and option of the
Bank, the Debtor shall, pursuant to an agreement in form and substance
satisfactory to the Bank, either (i) arrange for the issuer and any confirmer of
such letter of credit to consent to an assignment to the Bank, for its own
benefit and as agent for its Affiliates, of the proceeds of any drawing under
the letter of credit, or (ii) arrange for the Bank, for its own benefit and as
agent for its Affiliates, to become the transferee beneficiary of the letter of
credit, with the Bank agreeing, in each case, that the proceeds of any drawing
under the letter to credit are to be applied as provided in this Security
Agreement.
 
2.8 Commercial Tort Claims. If the Debtor shall at any time hold or acquire a
Commercial Tort Claim, the Debtor shall immediately notify the Bank in writing
signed by the Debtor of the details thereof and grant to the Bank, for its own
benefit and as agent for its Affiliates, in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Security
Agreement, in each case in form and substance satisfactory to the Bank, and
shall execute any amendments hereto deemed reasonably necessary by the Bank to
perfect the security interest of the Bank, for its own benefit and as agent for
its Affiliates, in such Commercial Tort Claim.
 
2.9 Electronic Chattel Paper and Transferable Records. If the Debtor at any time
holds or acquires an interest in any electronic chattel paper or any
“transferable record,” as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, the Debtor shall promptly notify the Bank thereof and, at the
request of the Bank, shall take such action as the Bank may reasonably request
to vest in the Bank control under Section 9-105 of the UCC of such electronic
chattel paper or control under Section 201 of the federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, §16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record. The Bank agrees with the Debtor that the Bank will arrange,
pursuant to procedures satisfactory to the Bank and so long as such procedures
will not result in the Bank’s loss of control, for the Debtor to make
alterations to the electronic chattel paper or transferable record permitted
under Section 9-105 of the UCC or, as the case may be, Section 201 of the
federal Electronic Signatures in Global and National Commerce Act or Section 16
of the Uniform Electronic Transactions Act for a party in control to make
without loss of control.
 
Section 3. REPRESENTATIONS AND WARRANTIES.
 
The Debtor makes the following representations and warranties to the Bank:
 
3.1 Borrower Organization and Name. The Borrower is a corporation duly
organized, existing and in good standing under the laws of the State of
Delaware, with full and adequate power to carry on and conduct its business as
presently conducted  and each Subsidiary is validly existing and in good
standing under the laws of the jurisdiction of its organization. The Debtor and
each Subsidiary is duly licensed or qualified in all foreign jurisdictions
wherein the nature of its activities requires such qualification or licensing.
Except as otherwise disclosed in the Schedules attached to the Loan Agreement,
the exact legal name of the Debtor is as set forth in the first paragraph of
this Security Agreement, and the Debtor currently does not conduct, nor has it
during the last five (5) years conducted, business under any other name or trade
name.
 
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3.2 Authorization. The Debtor has full right, power and authority to enter into
this Security Agreement and to perform all of its duties and obligations under
this Security Agreement. The execution and delivery of this Security Agreement
and the other Loan Documents will not, nor will the observance or performance of
any of the matters and things herein or therein set forth, violate or contravene
any provision of law or of the articles/certificate of incorporation or
bylaws/partnership agreement, Operating Agreement or other organizational
documents of the Debtor. All necessary and appropriate action has been taken on
the part of the Debtor to authorize the execution and delivery of this Security
Agreement.
 
3.3 Validity and Binding Nature. This Security Agreement is the legal, valid and
binding obligation of the Debtor, enforceable against the Debtor in accordance
with its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally and to general principles of
equity.
 
3.4 Consent; Absence of Breach. The execution, delivery and performance of this
Security Agreement and any other documents or instruments to be executed and
delivered by the Debtor in connection herewith, do not and will not (a) require
any consent, approval, authorization, or filings with, notice to or other act by
or in respect of, any governmental authority or any other Person (other than any
consent or approval which has been obtained and is in full force and effect);
(b) conflict with (i) any provision of law or any applicable regulation, order,
writ, injunction or decree of any court or governmental authority, (ii) the
articles of incorporation or bylaws, partnership agreement, articles of
organization, operating agreement or other organizational documents of the
Debtor  or any of their Subsidiaries, or (iii) any material agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is binding upon the Debtor or any of their Subsidiaries or any of their
respective properties or assets; or (c) require, or result in, the creation or
imposition of any Lien on any asset of Debtor or any of its Subsidiaries, other
than Liens in favor of the Bank created pursuant to this Security Agreement.
 
3.5 Ownership of Collateral; Liens. The Debtor is the sole owner or has other
rights in all of the Collateral, free and clear of all Liens, charges and claims
(including infringement claims with respect to patents, trademarks, service
marks, copyrights and the like), other than Permitted Liens.
 
3.6 Adverse Circumstances. No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which (a) would have a
Material Adverse Effect upon the Debtor, or (b) would constitute an Event of
Default or an Unmatured Event of Default.
 
3.7 Security Interest. This Security Agreement creates a valid security interest
in favor of the Bank in the Collateral and, when properly perfected by filing in
the appropriate jurisdictions, or by possession or Control of such Collateral by
the Bank or delivery of such Collateral to the Bank, shall constitute a valid,
perfected, first-priority security interest in such Collateral.
 
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3.8 Place of Business. The principal place of business and books and records of
the Debtor is set forth in the preamble to this Security Agreement, and the
location of all Collateral, if other than at such principal place of business,
is as set forth on Schedule 7.23 of the Loan Agreement, and the Debtor shall
promptly notify the Bank of any change in such locations. The Debtor will not
remove or permit the Collateral to be removed from such locations without the
prior written consent of the Bank, except for dispositions of assets permitted
under Section 9.4 of the Loan Agreement.
 
3.9 Complete Information. This Security Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials and information heretofore or contemporaneously herewith furnished in
writing by the Debtor to the Bank for purposes of, or in connection with, this
Security Agreement and the transactions contemplated hereby is, and all written
information hereafter furnished by or on behalf of the Debtor to the Bank
pursuant hereto or in connection herewith will be, true and accurate in every
material respect on the date as of which such information is dated or certified,
and none of such information is or will be incomplete by omitting to state any
material fact necessary to make such information not misleading in light of the
circumstances under which made (it being recognized by the Bank that any
projections and forecasts provided by the Debtor are based on good faith
estimates and assumptions believed by the Debtor to be reasonable as of the date
of the applicable projections or assumptions and that actual results during the
period or periods covered by any such projections and forecasts may differ from
projected or forecasted results).
 
Section 4. AFFIRMATIVE COVENANTS.
 
4.1 Debtor Existence. The Debtor shall at all times preserve and maintain its
(a) its existence and good standing in the jurisdiction of its organization, and
(b) its qualification to do business and good standing in each jurisdiction
where the nature of its business makes such qualification necessary (other than
such jurisdictions in which the failure to be qualified or in good standing
could not reasonably be expected to have a Material Adverse Effect), and shall
at all times continue as a going concern in the business which the Debtor is
presently conducting. If the Debtor does not have an Organizational
Identification Number and later obtains one, the Debtor shall promptly notify
the Bank of such Organizational Identification Number.
 
4.2 Compliance With Laws. The Debtor shall comply, and cause each Subsidiary to
comply, in all respects, including the conduct of its business and operations
and the use of the Collateral, with all applicable laws, rules, regulations,
decrees, orders, judgments, licenses and permits, except where failure to comply
could not reasonably be expected to have a Material Adverse Effect.
 
4.3 Payment of Taxes and Liabilities. The Debtor shall pay, and cause each
Subsidiary to pay, and discharge, prior to delinquency and before penalties
accrue thereon, all property and other taxes, and all governmental charges or
levies against it or any of the Collateral, as well as claims of any kind which,
if unpaid, could become a Lien on any of its property; provided that the
foregoing shall not require the Debtor or any Subsidiary to pay any such tax or
charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP and, in the case of a claim which could
become a Lien on any of the Collateral, such contest proceedings stay the
foreclosure of such Lien or the sale of any portion of the Collateral to satisfy
such claim.
 
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4.4 Maintain Property. The Debtor shall at all times maintain, preserve and keep
the Collateral, in good repair, working order and condition, normal wear and
tear excepted, and shall from time to time make all needful and proper repairs,
renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained as is customary in
Debtor’s industry and as deemed appropriate by Debtor in its reasonable business
judgment. The Debtor shall permit the Bank to examine and inspect such
Collateral, at all reasonable times and upon reasonable notice.
 
4.5 Maintain Insurance. The Debtor shall at all times maintain, and cause each
Subsidiary to maintain, with Borrower’s current insurers or such other insurance
companies reasonably acceptable to the Bank, such insurance coverage as may be
required by any law or governmental regulation or court decree or order
applicable to it and such other insurance, to such extent and against such
hazards and liabilities, including employers’, public and professional liability
risks, as is customarily maintained by companies similarly situated, and shall
have insured amounts no less than, and deductibles no higher than, the amounts
in effect as of the date hereof or such other limits that may hereafter be
reasonably requested by, or are reasonably acceptable to the Bank. The Debtor
shall furnish to the Bank a certificate setting forth in reasonable detail the
nature and extent of all insurance maintained by the Debtor, which shall be
reasonably acceptable in all respects to the Bank. The Debtor shall cause each
issuer of an insurance policy to provide the Bank with an endorsement
(i) showing the Bank as loss payee with respect to each policy of property or
casualty insurance; and (ii) providing that thirty (30) days notice will be
given to the Bank prior to any cancellation of, material reduction or change in
coverage provided by or other material modification to such policy.
 
In the event the Debtor either fails to provide the Bank with evidence of the
insurance coverage required by this Section or at any time hereafter shall fail
to obtain or maintain any of the policies of insurance required above, or to pay
any premium in whole or in part relating thereto, then the Bank, without waiving
or releasing any obligation or default by the Debtor hereunder, may at any time
(but shall be under no obligation to so act), obtain and maintain such policies
of insurance and pay such premiums and take any other action with respect
thereto, which the Bank deems advisable. This insurance coverage (a) may, but
need not, protect the Debtor’s interests in such property, including the
Collateral, and (b) may not pay any claim made by, or against, the Debtor in
connection with such property, including the Collateral. The Debtor may later
cancel any such insurance purchased by the Bank, but only after providing the
Bank with evidence that the Debtor has obtained the insurance coverage required
by this Section. If the Bank purchases insurance for the Collateral, the Debtor
will be responsible for the costs of that insurance, including interest and any
other charges that may be imposed with the placement of the insurance, until the
effective date of the cancellation or expiration of the insurance. The costs of
the insurance may be added to the principal amount of the Loans owing hereunder.
The costs of the insurance may be more than the cost of the insurance the Debtor
may be able to obtain on its own.
 
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4.6 Field Audits. The Debtor shall permit the Bank to inspect the Inventory and
other Collateral, to perform appraisals of the Equipment of the Debtor, and to
inspect, audit, check and make copies of, and extracts from, the books, records,
computer data, computer programs, journals, orders, receipts, correspondence and
other data relating to Inventory, Accounts and any other Collateral, the results
of which must be satisfactory to the Bank in the Bank’s sole and absolute
discretion. All such inspections or audits by the Bank shall be at reasonable
times, upon reasonable notice, and at the Debtor’s sole expense, provided,
however, that so long as no Event of Default or Unmatured Event of Default
exists, the Debtor shall not be required to reimburse the Bank for inspections
or audits more frequently than once each Fiscal Year.
 
4.7 Collateral Records. The Debtor shall keep full and accurate books and
records relating to the Collateral and shall mark such books and records to
indicate the Bank’s Lien in the Collateral including placing a legend, in form
and content acceptable to the Bank, on all Chattel Paper created by the Debtor
indicating that the Bank has a Lien in such Chattel Paper.
 
Section 5. REMEDIES.
 
Upon the occurrence of an event of default under any of the Obligations or any
default in the payment or performance of any of the covenants, conditions and
agreements contained in this Security Agreement (an “Event of Default”), the
Bank shall have all rights, powers and remedies set forth in this Security
Agreement or the other Loan Documents or in any other written agreement or
instrument relating to any of the Obligations or any security therefor, as a
secured party under the UCC or as otherwise provided at law or in equity.
Without limiting the generality of the foregoing, the Bank may, at its option
upon the occurrence of an Event of Default, declare its commitments to the
Borrower or the Debtor to be terminated and all Obligations to be immediately
due and payable, or, if provided in the Loan Documents, all commitments of the
Bank to the Borrower or the Debtor shall immediately terminate and all
Obligations shall be automatically due and payable, all without demand, notice
or further action of any kind required on the part of the Bank. The Debtor
hereby waives any and all presentment, demand, notice of dishonor, protest, and
all other notices and demands in connection with the enforcement of Bank’s
rights under the Loan Documents, and hereby consents to, and waives notice of
release, with or without consideration, of any Collateral, notwithstanding
anything contained herein or in the Loan Documents to the contrary. In addition
to the foregoing:
 
5.1 Possession and Assembly of Collateral. The Bank may, without notice, demand
or legal process of any kind, take possession of any or all of the Collateral
(in addition to Collateral of which the Bank already has possession), wherever
it may be found, and for that purpose may pursue the same wherever it may be
found, and may at any time enter into any of the Debtor’s premises where any of
the Collateral may be or is supposed to be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of and the Bank shall have the right to store and conduct a
sale of the same in any of the Debtor’s premises without cost to the Bank. At
the Bank’s request, the Debtor will, at the Debtor’s sole expense, assemble the
Collateral and make it available to the Bank at a place or places to be
designated by the Bank which is reasonably convenient to the Bank and the
Debtor.
 
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5.2 Sale of Collateral. The Bank may sell any or all of the Collateral at public
or private sale, upon such terms and conditions as the Bank may deem proper, and
the Bank may purchase any or all of the Collateral at any such sale. The Debtor
acknowledges that the Bank may be unable to effect a public sale of all or any
portion of the Collateral because of certain legal and/or practical restrictions
and provisions which may be applicable to the Collateral and, therefore, may be
compelled to resort to one or more private sales to a restricted group of
offerees and purchasers. The Debtor consents to any such private sale so made
even though at places and upon terms less favorable than if the Collateral were
sold at public sale. The Bank shall have no obligation to clean-up or otherwise
prepare the Collateral for sale. The Bank may apply the net proceeds, after
deducting all costs, expenses, attorneys’ and paralegals’ fees incurred or paid
at any time in the collection, protection and sale of the Collateral and the
Obligations, to the payment of the Obligations, returning the excess proceeds,
if any, to the Debtor. The Debtor and/or the Borrower shall remain liable for
any amount remaining unpaid after such application, with interest at the Default
Rate. Any notification of intended disposition of the Collateral required by law
shall be conclusively deemed reasonably and properly given if given by the Bank
at least ten (10) calendar days before the date of such disposition. The Debtor
hereby confirms, approves and ratifies all acts and deeds of the Bank relating
to the foregoing, and each part thereof, and expressly waives any and all claims
of any nature, kind or description which it has or may hereafter have against
the Bank or its representatives, by reason of taking, selling or collecting any
portion of the Collateral. The Debtor consents to releases of the Collateral at
any time (including prior to default) and to sales of the Collateral in groups,
parcels or portions, or as an entirety, as the Bank shall deem appropriate. The
Debtor expressly absolves the Bank from any loss or decline in market value of
any Collateral by reason of delay in the enforcement or assertion or
nonenforcement of any rights or remedies under this Security Agreement.
 
5.3 Standards for Exercising Remedies. To the extent that applicable law imposes
duties on the Bank to exercise remedies in a commercially reasonable manner, the
Debtor acknowledges and agrees that it is not commercially unreasonable for the
Bank (a) to fail to incur expenses reasonably deemed significant by the Bank to
prepare Collateral for disposition or otherwise to complete raw material or
work-in-process into finished goods or other finished products for disposition,
(b) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against Account Debtors or other Persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (d) to
exercise collection remedies against Account Debtors and other Persons obligated
on Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (f) to contact other Persons, whether or not in the
same business as the Debtor, for expressions of interest in acquiring all or any
portion of the Collateral, (g) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the collateral is of a
specialized nature, (h) to dispose of Collateral by utilizing internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, including any warranties of
title, (k) to purchase insurance or credit enhancements to insure the Bank
against risks of loss, collection or disposition of Collateral or to provide to
the Bank a guaranteed return from the collection or disposition of Collateral,
or (l) to the extent deemed appropriate by the Bank, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Bank in the collection or disposition of any of the Collateral. The Debtor
acknowledges that the purpose of this section is to provide non-exhaustive
indications of what actions or omissions by the Bank would not be commercially
unreasonable in the Bank’s exercise of remedies against the Collateral and that
other actions or omissions by the Bank shall not be deemed commercially
unreasonable solely on account of not being indicated in this section. Without
limitation upon the foregoing, nothing contained in this section shall be
construed to grant any rights to the Debtor or to impose any duties on the Bank
that would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this section.
 
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5.4 UCC and Offset Rights. The Bank may exercise, from time to time, any and all
rights and remedies available to it under the UCC or under any other applicable
law in addition to, and not in lieu of, any rights and remedies expressly
granted in this Security Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
unmatured, including costs of collection and attorneys’ and paralegals’ fees,
and in such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including
balances, credits, deposits, accounts or moneys of such Obligor in the
possession, control or custody of, or in transit to the Bank. The Debtor, on
behalf of itself and each Obligor, hereby waives the benefit of any law that
would otherwise restrict or limit the Bank in the exercise of its right, which
is hereby acknowledged, to appropriate at any time hereafter any such
indebtedness owing from the Bank to any Obligor.
 
5.5 Additional Remedies. Upon the occurrence of an Event of Default, the Bank
shall have the right and power to:
 
(a) instruct the Debtor, at its own expense, to notify any parties obligated on
any of the Collateral, including any Account Debtors, to make payment directly
to the Bank of any amounts due or to become due thereunder, or the Bank may
directly notify such obligors of the security interest of the Bank, and/or of
the assignment to the Bank of the Collateral and direct such obligors to make
payment to the Bank of any amounts due or to become due with respect thereto,
and thereafter, collect any such amounts due on the Collateral directly from
such Persons obligated thereon;
 
(b) enforce collection of any of the Collateral, including any Accounts, by suit
or otherwise, or make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof, or
compromise, extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder;
 
(c) take control and receive and retain all payments, distributions, proceeds,
and products of any kind with respect to any and all of the Collateral,
including the proceeds of insurance thereon;
 
(d) grant releases, compromises or indulgences with respect to the Obligations,
any extension or renewal of any of the Obligations, any security therefor, or to
any other obligor with respect to the Obligations;
 
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(e) transfer the whole or any part of securities which may constitute Collateral
into the name of the Bank or the Bank’s nominee without disclosing, if the Bank
so desires, that such securities so transferred are subject to the security
interest of the Bank, and any corporation, association, or any of the managers
or trustees of any trust issuing any of such securities, or any transfer agent,
shall not be bound to inquire, in the event that the Bank or such nominee makes
any further transfer of such securities, or any portion thereof, as to whether
the Bank or such nominee has the right to make such further transfer, and shall
not be liable for transferring the same;
 
(f) exercise any voting, consent, enforcement or other right, power, privilege,
remedy or interest of the Borrower pertaining to any item of Collateral to the
same extent as if the Bank were the outright owner thereof;
 
(g) make an election with respect to the Collateral under Section 1111 of the
Bankruptcy Code or take action under Section 364 or any other section of the
Bankruptcy Code; provided, however, that any such action of the Bank as set
forth herein shall not, in any manner whatsoever, impair or affect the liability
of the Debtor hereunder, nor prejudice, waive, nor be construed to impair,
affect, prejudice or waive the Bank’s rights and remedies at law, in equity or
by statute, nor release, discharge, nor be construed to release or discharge,
the Debtor, any guarantor or other Person liable to the Bank for the
Obligations;
 
(h) at any time, and from time to time, accept additions to, releases,
reductions, exchanges or substitution of the Collateral, without in any way
altering, impairing, diminishing or affecting the provisions of this Security
Agreement, the Loan Documents, or any of the other Obligations, or the Bank’s
rights hereunder, under the Obligations;
 
(i) enter any premises where any item of Collateral may be located, with or
without permission or process of law but without breach of the peace, and seize
and remove such Collateral or remain upon such premises and use or dispose of
such Collateral as contemplated under this Security Agreement;
 
(j) pay, purchase, contest, or compromise any encumbrance, charge, or Lien that,
in the opinion of Bank, appears to be prior or superior to its Lien and pay all
expenses incurred in connection therewith; and
 
(k) request the judicial appointment of a receiver respecting the Collateral or
any portion thereof in any action, suit or proceeding in which claims are
asserted against the Collateral by the Bank or its designee, irrespective of the
solvency of the Borrower or any other person or the adequacy of any Collateral,
and without notice to or the approval of the Borrower, which receiver shall have
the power to manufacture, operate, sell, lease or rent such items of Collateral
pending the sale of all of the Collateral and to collect the rent, issues and
profits therefrom, together with such other powers as may have been requested by
the Bank and shall apply the amounts received (net of all proper charges and
expenses) to the Obligations as provided in this Security Agreement. Such a
receiver may serve without bond or under such minimal bond as may be required by
applicable law.
 
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The Debtor hereby ratifies and confirms whatever the Bank may do with respect to
the Collateral and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law with respect to actions taken in connection
with the Collateral.
 
5.6 Attorney-in-Fact. The Debtor hereby irrevocably makes, constitutes and
appoints the Bank (and any officer of the Bank or any Person designated by the
Bank for that purpose) as the Debtor’s true and lawful proxy and
attorney-in-fact (and agent-in-fact) in the Debtor’s name, place and stead, with
full power of substitution, to (i) take such actions as are permitted in this
Security Agreement, (ii) execute such financing statements and other documents
and to do such other acts as the Bank may require to perfect and preserve the
Bank’s security interest in, and to enforce such interests in the Collateral,
and (iii) upon an Event of Default, carry out any remedy provided for in this
Security Agreement, including endorsing the Debtor’s name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States Post
Office serving the address of the Debtor, changing the address of the Debtor to
that of the Bank, opening all envelopes addressed to the Debtor and applying any
payments contained therein to the Obligations. The Debtor hereby acknowledges
that the constitution and appointment of such proxy and attorney-in-fact are
coupled with an interest and are irrevocable. The Debtor hereby ratifies and
confirms all that such attorney-in-fact may do or cause to be done by virtue of
any provision of this Security Agreement.
 
5.7 No Marshaling. The Bank shall not be required to marshal any present or
future collateral security (including this Security Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order. To the extent that it lawfully may, the Debtor hereby
agrees that it will not invoke any law relating to the marshaling of collateral
which might cause delay in or impede the enforcement of the Bank’s rights under
this Security Agreement or under any other instrument creating or evidencing any
of the Obligations or under which any of the Obligations is outstanding or by
which any of the Obligations is secured or payment thereof is otherwise assured,
and, to the extent that it lawfully may, the Debtor hereby irrevocably waives
the benefits of all such laws.
 
5.8 Application of Proceeds. The Bank will within three (3) Business Days after
receipt of cash or solvent credits from collection of items of payment, proceeds
of Collateral or any other source, apply the whole or any part thereof against
the Obligations secured hereby. The Bank shall further have the exclusive right
to determine how, when and what application of such payments and such credits
shall be made on the Obligations, and such determination shall be conclusive
upon the Obligors. Any proceeds of any disposition by the Bank of all or any
part of the Collateral may be first applied by the Bank to the payment of
expenses incurred by the Bank in connection with the Collateral, including
attorneys’ fees and legal expenses as provided for in Section 7 hereof.
 
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5.9 No Waiver. No Event of Default shall be waived by the Bank except in
writing. No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Bank to exercise any remedy available
to the Bank in any order. The remedies provided for herein are cumulative and
not exclusive of any remedies provided at law or in equity. The Debtor agrees
that in the event that the Debtor fails to perform, observe or discharge any of
its Obligations or liabilities under this Security Agreement or any other
agreements with the Bank, no remedy of law will provide adequate relief to the
Bank, and further agrees that the Bank shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
 
5.10 License. Bank is hereby granted a license or other right to use, without
charge, Borrower’s patents, copyrights, trade secrets, technical processes,
rights of use of any name, trade names, trademarks, labels, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral.
Borrower’s rights under all such licenses shall inure to Bank’s benefit.
 
5.11 Equitable Relief. The Borrower acknowledges that it will be impossible to
measure in money the damages to the Bank in the event of a breach of any of the
terms and provisions of this Security Agreement, and the Borrower agrees that,
in the event of any such breach, the Bank will not have an adequate remedy at
law, although the foregoing shall not constitute a waiver of any of the Bank’s
rights, powers, privileges and remedies against or in respect of a breaching
party, any Collateral or any other person or thing under this Security Agreement
or applicable law. It is therefore agreed that the Bank, in addition to all
other such rights, powers, privileges and remedies that it may have, shall be
entitled to injunctive relief, specific performance or such other equitable
relief as the Bank may request to exercise or otherwise enforce any of the terms
and provisions of this Security Agreement and to enjoin or otherwise restrain
any act prohibited thereby, and the Borrower will not urge and hereby waives any
defense that there is an adequate remedy of law.
 
Section 6. MISCELLANEOUS.
 
6.1 Entire Agreement. This Security Agreement and the other Loan Documents
(i) are valid, binding and enforceable against the Debtor and the Bank in
accordance with their respective provisions and no conditions exist as to their
legal effectiveness; (ii) constitute the entire agreement between the parties
with respect to the subject matter hereof and thereof; and (iii) are the final
expression of the intentions of the Debtor and the Bank. No promises, either
expressed or implied, exist between the Debtor and the Bank, unless contained
herein or therein. This Security Agreement, together with the other Loan
Documents, supersedes all negotiations, representations, warranties,
commitments, term sheets, discussions, negotiations, offers or contracts (of any
kind or nature, whether oral or written) prior to or contemporaneous with the
execution hereof with respect to any matter, directly or indirectly related to
the terms of this Security Agreement and the other Loan Documents. This Security
Agreement and the other Loan Documents are the result of negotiations among the
Bank, the Debtor and the other parties thereto, and have been reviewed (or have
had the opportunity to be reviewed) by counsel to all such parties, and are the
products of all parties. Accordingly, this Security Agreement and the other Loan
Documents shall not be construed more strictly against the Bank merely because
of the Bank’s involvement in their preparation.
 
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6.2 Amendments; Waivers. No delay on the part of the Bank in the exercise of any
right, power or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise by the Bank of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Security Agreement or the other Loan Documents shall in any
event be effective unless the same shall be in writing and acknowledged by the
Bank, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
 
6.3 WAIVER OF DEFENSES. THE DEBTOR, ON BEHALF OF ITSELF AND ANY GUARANTOR OF ANY
OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION,
COUNTERCLAIM OR SETOFF WHICH THE DEBTOR MAY NOW HAVE OR HEREAFTER MAY HAVE TO
ANY ACTION BY THE BANK IN ENFORCING THIS SECURITY AGREEMENT. PROVIDED THE BANK
ACTS IN GOOD FAITH, THE DEBTOR RATIFIES AND CONFIRMS WHATEVER THE BANK MAY DO
PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE DEBTOR.
 
6.4 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING IN THIS SECURITY AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION. THE DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS  FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
 
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6.5 WAIVER OF JURY TRIAL. THE BANK AND THE DEBTOR, AFTER CONSULTING OR HAVING
HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT, ANY
NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND THE DEBTOR ARE
ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE DEBTOR.
 
6.6 Assignability. The Bank may at any time assign the Bank’s rights in this
Security Agreement, the other Loan Documents, the Obligations, or any part
thereof and transfer the Bank’s rights in any or all of the Collateral, and the
Bank thereafter shall be relieved from all liability with respect to such
Collateral. This Security Agreement shall be binding upon the Bank and the
Debtor and their respective legal representatives and successors. All references
herein to the Debtor shall be deemed to include any successors, whether
immediate or remote. In the case of a joint venture or partnership, the term
“Debtor” shall be deemed to include all joint venturers or partners thereof, who
shall be jointly and severally liable hereunder.
 
6.7 Binding Effect. This Security Agreement shall become effective upon
execution by the Debtor and the Bank. If this Security Agreement is not dated or
contains any blanks when executed by the Debtor, the Bank is hereby authorized,
without notice to the Debtor, to date this Security Agreement as of the date
when it was executed by the Debtor, and to complete any such blanks according to
the terms upon which this Security Agreement is executed.
 
6.8 Governing Law. This Security Agreement shall be delivered and accepted in
and shall be deemed to be a contract made under and governed by the internal
laws of the State of Illinois (but giving effect to federal laws applicable to
national banks) applicable to contracts made and to be performed entirely within
such state, without regard to conflict of laws principles.
 
6.9 Enforceability. Wherever possible, each provision of this Security Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by, unenforceable or invalid under any jurisdiction, such provision
shall as to such jurisdiction, be severable and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
this Security Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
 
6.10 Time of Essence. Time is of the essence in making payments of all amounts
due the Bank under this Security Agreement and in the performance and observance
by the Debtor of each covenant, agreement, provision and term of this Security
Agreement.
 
6.11 Counterparts; Facsimile Signatures. This Security Agreement may be executed
in any number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Security
Agreement. Receipt of an executed signature page to this Security Agreement by
facsimile or other electronic transmission shall constitute effective delivery
thereof. Electronic records of executed Loan Documents maintained by the Bank
shall be deemed to be originals thereof.
 
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6.12 Notices. Except as otherwise provided herein, the Debtor waives all notices
and demands in connection with the enforcement of the Bank’s rights hereunder.
All notices, requests, demands and other communications provided for hereunder
shall be in writing and addressed as follows:
 
To the Guarantor:
ISI Security Group, Inc.
12903 Delivery Drive
San Antonio, Texas 78247
Attention: Sam Youngblood
 
 
With a copy to:
K&L Gates LLP
111 Congress Avenue, Suite 900
Austin, Texas 78701
Attention: Hull Youngblood, Esq.
 
 
To the Lender:
The PrivateBank and Trust Company
70 W. Madison, 2nd Floor
Chicago, Illinois 60602
 
 
With copy to:
Davis Graham & Stubbs LLP
Ted Sikora
1550 17th Street, Suite 500
Denver, CO 80202

or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. All notices addressed as above shall be deemed to have been
properly given (i) if served in person, upon acceptance or refusal of delivery;
(ii) if mailed by certified or registered mail, return receipt requested,
postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by
recognized overnight courier, on the first (1st) day following the day such
notice is delivered to such carrier. No notice to or demand on the Debtor in any
case shall entitle the Debtor to any other or further notice or demand in
similar or other circumstances.
 
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6.13 Costs, Fees and Expenses. The Debtor shall pay or reimburse the Bank for
all reasonable costs, fees and expenses incurred by the Bank or for which the
Bank becomes obligated in connection with the enforcement of this Security
Agreement, including reasonable attorneys’ fees and time charges of counsel to
the Bank, which shall also include attorneys’ fees and time charges of attorneys
who may be employees of the Bank or any Affiliate of the Bank, plus costs and
expenses of such attorneys or of the Bank; search fees, costs and expenses; and
all taxes payable in connection with this Security Agreement. In furtherance of
the foregoing, the Debtor shall pay any and all stamp and other taxes, UCC
search fees, filing fees and other costs and expenses in connection with the
execution and delivery of this Security Agreement and the other Loan Documents
to be delivered hereunder, and agrees to save and hold the Bank harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such costs and expenses. That portion of the
Obligations consisting of costs, expenses or advances to be reimbursed by the
Debtor to the Bank pursuant to this Security Agreement or the other Loan
Documents which are not paid on or prior to the date hereof shall be payable by
the Debtor to the Bank on demand. If at any time or times hereafter the Bank:
(a) employs counsel for advice or other representation (i) with respect to this
Security Agreement or the other Loan Documents, (ii) to represent the Bank in
any litigation, contest, dispute, suit or proceeding or to commence, defend, or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit, or proceeding (whether instituted by the Bank, the
Debtor, or any other Person) in any way or respect relating to this Security
Agreement, or (iii) to enforce any rights of the Bank against the Debtor or any
other Person under of this Security Agreement; (b) takes any action to protect,
collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or
(c) attempts to or enforces any of the Bank’s rights or remedies under this
Security Agreement, the costs and expenses incurred by the Bank in any manner or
way with respect to the foregoing, shall be part of the Obligations, payable by
the Debtor to the Bank on demand.
 
[Signature pages follow]
 
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IN WITNESS WHEREOF, the Debtor and the Bank have executed this Security
Agreement as of the date first above written.
 
GUARANTORS:

ISI SECURITY GROUP, INC.,
a Delaware corporation

By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
President
       
DETENTION CONTRACTING GROUP, LTD.,
a Texas limited partnership
     
By:
ISI DETENTION CONTRACTING
 
GROUP, INC., a Texas corporation,
 
its general partner
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
ISI DETENTION CONTRACTING GROUP, INC., a
Texas corporation
       
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
ISI DETENTION CONTRACTING GROUP, INC., a
California corporation
       
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
 

 
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ISI DETENTION CONTRACTING GROUP, INC.,
a New Mexico corporation
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
ISI DETENTION SYSTEMS, INC.,
a Texas corporation
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
ISI SYSTEMS, LTD.,
a Texas limited partnership
       
By:
ISI DETENTION SYSTEMS, INC.,
 
a Texas corporation, its general partner
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
METROPLEX CONTROL SYSTEMS, INC.,
a Texas corporation, (f/k/a ISI Metroplex Controls, Inc.)
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
 

 
ISI CONTROLS, LTD.,
a Texas limited partnership
   
By:
METROPLEX CONTROL SYSTEMS, INC.,
 
a Texas corporation, its general partner
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
 

 
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METROPLEX COMMERCIAL FIRE AND
SECURITY ALARMS, INC.,
a Texas corporation
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
MCFSA, LTD.,
a Texas limited partnership
     
By:
METROPLEX COMMERCIAL FIRE AND
 
SECURITY ALARMS, INC.,
 
a Texas corporation, its general partner
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
COM-TEC SECURITY, LLC
a Wisconsin limited liability company
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
       
COM-TEC CALIFORNIA LIMITED PARTNERSHIP
a Wisconsin limited partnership
     
By:
METROPLEX CONTROL SYSTEMS, INC.,
 
a Texas corporation, its general partner
     
By:
/s/ Sam Youngblood
 
Name:
Sam Youngblood
 
Title:
CEO
 

 
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Agreed and accepted:
   
BANK:
   
THE PRIVATEBANK AND TRUST
COMPANY, an Illinois banking corporation
   
By:
/s/ Nate Palmer  
Name:
Nate Palmer
 
Title:
Associate Managing Director  

 
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