Exhibit 10.40

 

LOAN NUMBER   LOAN NAME   ACCT. NUMBER   NOTE DATE   INITIALS   RF Monolithics,
Inc.     11/30/09   PB NOTE AMOUNT   INDEX (w/Margin)   FLOOR RATE   MATURITY
DATE   LOAN PURPOSE $5,000,000.00   Wall Street Journal   7.0%   11/30/10  
Commercial   Prime plus 2%      

Creditor Use Only

COMMERCIAL LOAN AND SECURITY AGREEMENT

(Revolving Draw Loan)

DATE AND PARTIES. This Commercial Loan and Security Agreement (Revolving Draw
Loan) (this “Agreement”) is dated as of November 30, 2009. The parties and their
addresses are as follows:

 

LENDER:   

VIEWPOINT BANK,

a federal savings bank

1201 W. 15th St., MSC 210

Plano, Texas 75075

BORROWER:   

RF MONOLITHICS, INC.,

a Delaware corporation

4441 Sigma Road

Dallas, Texas 75244

Telephone: 972/233-2903

 

and

  

CIRRONET INC.,

a Georgia corporation

3079 Premiere Parkway, Suite 140

Duluth, Georgia 30097

1. DEFINITIONS. For the purposes of this Agreement, the following terms shall
have the meanings set forth hereinbelow:

A. Accounting Terms. Any accounting terms that are not specifically defined in
this Agreement will have their customary meanings under generally accepted
accounting principles.

 

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B. Accounts Receivable. “Accounts Receivable” means all accounts receivable
owned by Borrower at the time in question.

C. All Other Assets. “All Other Assets” means all other assets of Borrower which
are not included in Accounts Receivable, Equipment, Finished Goods, Patents,
Real Property, Raw Materials and Work in Progress, including, by way of example
and not limitation, cash, cash equivalents, deposit accounts, accounts, letter
of credit rights, investment properties, certificated securities, contracts,
contract rights, documents, chattel paper, instruments, negotiable instruments,
inventory, goods, products, furniture, fixtures, furnishings, software, personal
property and general intangibles.

D. Approved A/R Insurance. “Approved A/R Insurance” means insurance insuring
Accounts Receivable of Borrower issued by an insurance company acceptable to
Lender on terms acceptable to Lender.

E. Borrowing Base Limitation. “Borrowing Base Limitation” means at the time in
question the total of (x) 80% of Eligible Accounts Receivable, plus (y) the
lesser of 50% of the value of Finished Goods or $250,000.00.

F. Current Assets. “Current Assets” means at the time in question all cash, cash
equivalents, accounts receivable, inventory and prepaid assets owned by Borrower
and classified as “current” on Borrower’s balance sheet in accordance with
generally accepted accounting principles then in effect.

G. Current Liabilities. “Current Liabilities” means at the time in question all
liabilities owed by Borrower on Borrower’s balance sheet in accordance with
generally accepted accounting principles then in effect.

H. Eligible Accounts Receivable. “Eligible Accounts Receivable” means all
accounts receivable of Borrower which are insured under the Approved A/R
Insurance, provided that if more than 25% of accounts receivable of any customer
are past due according to their terms for more than 60 days, all of the accounts
receivable of that customer shall be excluded when calculating Eligible Accounts
Receivable.

I. Equipment. “Equipment” means all equipment of Borrower.

J. Existing Loan. “Existing Loan” means that certain $900,000.00 loan from
Lender to Borrower secured by a first lien on the Real Property.

K. Finished Goods. “Finished Goods” means items where the manufacture/production
process has been completed and said items are ready for sale/use.

L. Insiders. “Insiders” means and includes those defined as insiders by the
United States Bankruptcy Code, as amended, or, to the extent left undefined,
include, without limitation, any officer, director or any immediate family
member of any of the foregoing,

 

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or any person or entity which, directly or indirectly, controls, is controlled
by or is under common control with Borrower.

M. Loan. “Loan” means the lending transaction evidenced in part by this
Agreement, including obligations and duties arising from the terms of the Loan
Documents.

N. Loan Documents. “Loan Documents” means this Agreement and all other documents
evidencing, securing or pertaining in any way to this Agreement and the Loan.

O. Patents. “Patents” means those certain trademarks, rights and patents owned
by Borrower referenced and described on attached Schedule 1, together with any
future trademarks, rights or patents obtained by Borrower.

P. Proceeds. “Proceeds” means and includes anything acquired upon the sale,
lease, license, exchange or other disposition of the Property, any rights and
claims arising from the Property and any collections and distributions on
account of the Property.

Q. Property. “Property” means Accounts Receivable, Equipment, Finished Goods,
Patents, Real Property, Raw Materials, Work in Progress and All Other Assets,
together with all additions, replacements and accessions thereto and all
products and Proceeds thereof.

R. Purchase Money Financing. “Purchase Money Financing” means financing obtained
by Borrower to purchase tangible personal property in an amount not to exceed
$250,000.

S. Raw Materials. “Raw Materials” means all materials owned by Borrower at the
time in question which are to be used in the manufacture/production of Finished
Goods which have not yet been incorporated in whole or in part in Work in
Progress or Finished Goods.

T. Real Property. “Real Property” means that certain office building and related
improvements located at 4441 Sigma Road, Farmers Branch, Dallas County, Texas,
which is occupied by Borrower.

U. Second Lien Deed of Trust. “Second Lien Deed of Trust” means that certain
Deed of Trust of even date herewith from Borrower to Mark E. Hord, Trustee for
Lender, covering the Real Property, which is partial collateral for the Loan.

V. Stockholders’ Equity. “Stockholders’ Equity” means the total assets of
Borrower minus liabilities and any preferred stock.

 

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W. Work in Progress. “Work in Progress” means items of Raw Materials which have
been partially but not completely turned into Finished Goods.

2. ADVANCES. Advances under this Agreement will be made pursuant to the
following terms and conditions:

A. Multiple Advances-Revolving. In accordance with the terms and conditions
contained in this Agreement and in the other Loan Documents, Lender will advance
to Borrower, and Borrower may from time to time borrow, repay and re-borrow, one
or more advances of principal. Borrower shall not be entitled to any advance
when the outstanding principal balance of advances equals or exceeds
$5,000,000.00.

B. Monthly Accounting. By the end of each calendar month, Borrower shall provide
Lender with the following: (i) a balance sheet and income statement for Borrower
for the prior calendar month; (ii) an Accounts Receivable aging report covering
the period through the end of the prior calendar month; (iii) an accounts
payable report reflecting all accounts payable of Borrower as of the end of the
prior calendar month; (iv) a completed Borrowing Base Certificate (herein so
called) on the form attached hereto as Schedule 2 or on another form acceptable
to Lender; and (v) any other financial information reasonably requested by
Lender. All the foregoing statements, reports and the Borrowing Base Certificate
shall be executed and certified by either the Chief Financial Officer of
Borrower or by both the Controller and the Assistant Controller of Borrower.

C. Availability Determination. After Lender receives the last of the information
required under subsection B of this Section 2, Lender shall determine whether
Borrower is entitled to receive an advance under the Loan and advise Borrower of
the amount that Borrower may request be advanced under the Loan, and until the
earlier of the date during the next calendar month that Borrower provides Lender
with the last of the information required under subsection B of this Section 2
or the end of the next calendar month, Borrower may request advances under the
Loan not to exceed such amount so long as Borrower is otherwise entitled to
receive advances under the Loan under the other provisions contained in this
Agreement and in the other Loan Documents. If, after Lender receives the last of
the information required under subsection B of this Section 2, Lender determines
that the outstanding principal balance of the Loan exceeds the Borrowing Base
Limitation, Borrower shall be required to reduce the outstanding principal
balance of the Loan to an amount equal to or less than the Borrowing Base
Limitation within five business days after Lender notifies Borrower thereof.

D. Requests for Advances. Any requests for an advance by Borrower constitutes a
warranty by Borrower to Lender that Borrower is in compliance with all the terms
and conditions contained in this Agreement and in the other Loan Documents. In
connection with requests for advances by Borrower, Borrower must comply with all
requirements of Lender to obtain the requested advance, including providing
copies of any agreements, documents or other instruments requested by Lender.
Any advance under the Loan by

 

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Lender will be made in United States dollars. Lender shall be entitled to rely
upon any requests for an advance by Borrower that Lender reasonably believes to
be genuine. To the extent permitted by law, Borrower agrees to indemnify and
hold Lender harmless from any loss or claim arising or resulting from any person
making a request for an advance under the Loan if such person is unauthorized or
such person’s signature is not genuine. All requests for advances under the Loan
must be in writing on a form approved by Lender, executed by a duly authorized
officer of Borrower.

E. Advance Limitations. In addition to any other terms and conditions, requests
for, and access to, advances are subject to the following limitations:

(1) Advance Amount. Subject to the other terms and conditions contained in this
Agreement and in the other Loan Documents, advances will be made to Borrower
only in the amount then-available to Borrower under the terms of this Agreement.

(2) Advance Limitation. Borrower shall not be entitled to any advance under the
Loan which exceeds (x) the lesser of $5,000,000.00 or the amount of the
Borrowing Base Limitation at the time in question, minus (y) the outstanding
principal balance of the Loan at the time in question.

(3) Disbursement of Advances. On Borrower’s compliance with all of the terms and
conditions contained in this Agreement and in the other Loan Documents for an
advance under the Loan, Lender will disburse such advance into an account
established with Lender by Borrower to receive such disbursement.

(4) Credit Limit. Although Lender is not required to make any advance that would
cause the unpaid principal balance of the Loan to be in excess of $5,000,000.00,
Lender may at Lender’s option make such an advance without obligating Lender to
do so in the future. Borrower agrees to repay any advance of principal in excess
of $5,000,000.00 made by Lender to Borrower within ten days after Lender
requests Borrower to make such repayment.

(5) Records. In the absence of manifest error, Lender’s records will be
conclusive evidence as to the amount of advances under the Loan, the unpaid
principal balance of the Loan and the accrued interest on the Loan.

F. Conditions. Borrower must satisfy all of the following conditions before
Lender is required to make any advance on the Loan pursuant to this Agreement:

(1) No Default. There is no outstanding default under this Agreement or under
any of the other Loan Documents or under the Existing Loan and no such default
will result from making the requested advance.

 

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(2) Information. Lender has been provided with all documents, certifications,
warranties and other information reasonably required by Lender in connection
with the requested advance in form and substance acceptable to Lender.

(3) Inspections. Lender has made all inspections that Lender considers necessary
in connection with the requested advance and Lender is satisfied with the result
of such inspections.

(4) Conditions and Covenants. Borrower has performed and complied with all
terms, conditions and covenants required for an advance under this Agreement and
under any other applicable Loan Documents.

(5) Warranties and Representations. All Borrower’s warranties and
representations contained in this Agreement and in the other Loan Documents are
true and correct at the time Borrower makes a request for an advance.

(6) Financial Statements. All of Borrower’s most recent financial statements and
other financial reports delivered to Lender are current, complete, true and
accurate in all material respects and fairly represent Borrower’s financial
condition on the date of the requested advance.

(7) Bankruptcy Proceedings. No proceeding under the United States Bankruptcy
Code has been commenced by or against Borrower or any of Borrower’s affiliates
on the date of the requested advance and is then undismissed.

(8) Disbursement Account. Borrower must establish and maintain an account with
Lender to receive disbursements from Lender pursuant to this Agreement and the
other Loan Documents.

3. MATURITY DATE. Borrower agrees to fully repay the Loan by November 30, 2010.

4. SECURITY AGREEMENT.

A. Secured Debts. The security interest granted in this Agreement secures the
following debts, together with all extensions, renewals, refinancings,
modifications and replacements thereof (the “Secured Debts”):

(1) Sums Advanced. All sums advanced and expenses incurred by Lender under the
terms and conditions contained in this Agreement and under the other Loan
Documents.

(2) All Debts. All present (including the Existing Loan) and future debts of
Borrower to Lender even if (i) this Agreement does not specifically reference

 

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such debts, (ii) such debts also are secured by other collateral or (iii) such
debts are unrelated to or are of a different type than the Loan. Nothing
contained in this Agreement constitutes a commitment to make additional or
future loans or advances to Borrower except as expressly provided for in this
Agreement.

B. Security Interest. To secure the payment and performance of the Secured
Debts, Borrower hereby grants to Lender a security interest in all of the
Property. The Property is all of the collateral given as security for the
Secured Debts and described in this Agreement and in the Second Lien Deed of
Trust and includes all obligations that support the payment or performance of
the Property. The foregoing security interest covering the Property remains in
effect until terminated in writing by Lender, even if the Secured Debts are paid
and Lender is no longer obligated to advance funds to Borrower under any loan or
credit agreement.

C. Duties Toward Property.

(1) Protection of Secured Party’s Interest. Borrower will defend the Property
against all other claims. Borrower agrees to do whatever Lender requires to
perfect and protect Lender’s security interest covering the Property, including
all actions necessary to maintain Lender’s security interest covering the
Property as a first lien security interest (except with respect to the Real
Property). Borrower will maintain books, records and accounts pertaining to the
Property and Borrower’s business in general in a manner consistent with records
normally kept concerning property like the Property and a business like
Borrower’s business, and Lender shall have the right to examine and make copies
of Borrower’s books, records and accounts pertaining to the Property at any
reasonable time. Borrower will cause the preparation of any report or accounting
pertaining to the Property reasonably requested by Lender from time to time.

(2) Use, Location and Protection of the Property. Borrower will keep the
Property in Borrower’s possession and in good repair, where applicable. Borrower
will use the Property only for commercial purposes. Borrower agrees that Lender
shall have the right to inspect the Property at all reasonable times. Borrower
immediately will inform Lender of any loss or damage to any item over $50,000 of
the Property. Borrower will not cause or permit waste with respect to any item
of the Property over $50,000. Borrower, at Borrower’s expense, will perform all
reasonable acts necessary to preserve and protect the Property. Where
applicable, Borrower will prepare the Property for market and, when the Property
is ready for market, promptly notify Lender and follow any instructions Lender
may have regarding holding, shipping, storing and marketing the Property.
Borrower will keep the items of the Property over $50,000 at Borrower’s Dallas
address listed hereinabove, at Borrower’s leased sites in Duluth, Georgia, at
Borrower’s manufacturing sites or at Borrower’s other customary sites for
storage of inventory, unless Lender agrees that the Property may be kept at
another location. If any items of the Property worth over $50,000 are to be used
in other

 

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states or countries, Borrower will give Lender a list of such locations. The
location of the Property is given to aid in the identification of the Property
but does not in any way limit the scope of the security interest granted to
Lender. Borrower will notify Lender in writing and obtain Lender’s prior written
consent to any change in location of any items of the Property worth over
$50,000 to any additional location. Borrower will not use the Property in
violation of any law. Borrower will notify Lender in writing prior to any change
in Borrower’s address, name, identity or structure. Until the Secured Debts are
fully paid and the security interest granted in this Agreement is terminated,
Borrower will not grant a security interest covering any of the Property without
the prior written consent of Lender except for Purchase Money Financing.
Borrower will pay all taxes and assessments levied or assessed against Borrower
or the Property and provide timely proof of payment of these taxes and
assessments to Lender upon Lender’s request.

(3) Selling, Leasing or Encumbering the Property. Except for Purchase Money
Financing, Borrower will not sell, offer to sell, lease or otherwise transfer or
encumber items of the Property worth over $50,000 not in the ordinary course of
business without Lender’s prior written permission. Lender’s permission to sell
the Property may be reasonably withheld without regard to the creditworthiness
of any buyer or transferee. Borrower will not permit the Property to be the
subject of any court order affecting Borrower’s rights to the Property in any
action by anyone other than Lender. If the Property includes chattel paper or
instruments, either as original collateral or as proceeds of the Property,
Borrower will note Lender’s security interest on the face of the chattel paper
or instruments. If Borrower determines to obtain Purchase Money Financing,
Borrower first will request such Purchase Money Financing from Lender, and only
if Lender declines to provide the requested Purchase Money Financing will
Borrower obtain Purchase Money Financing from another Lender. If Borrower
obtains Purchase Money Financing from another Lender, Borrower will provide
Lender with copies of the Purchase Money Financing documentation.

(4) Sale of Finished Goods. Notwithstanding any other provisions of this
Agreement, so long as Borrower is not in default under this Agreement and Lender
has not notified Borrower of any acceleration of the Loan, Borrower shall have
the right to sell Finished Goods, fixtures, equipment and other personal
property to third parties, provided that all such sales and replacements are in
the ordinary course of business.

(5) Patents. Prior to or concurrently with the execution of this Agreement,
Borrower has executed and delivered to Lender all documentation required by
Lender to transfer all or some of the Patents to Lender, including, without
limitation, documentation necessary to transfer ownership of the applicable
Patents to Lender at the United States Patent Office. So long as the Loan
remains outstanding, Borrower agrees to execute and deliver to Lender any
additional

 

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documentation necessary to transfer ownership of any of the Patents to Lender.
Lender agrees that Lender will hold such patent transfer documentation in escrow
until there is an event of default by Borrower under this Agreement. After any
default by Borrower under this Agreement, Lender shall have the right to file
such patent transfer documentation and transfer ownership of all Patents covered
thereby to Lender. So long as the Loan remains outstanding, Borrower covenants
and agrees to pay all fees and charges and undertake all actions necessary to
maintain all of the Patents in effect.

D. Authority to Perform. Borrower authorizes Lender to do anything Lender deems
reasonably necessary to protect the Property and perfect and continue Lender’s
security interest in the Property. If Borrower fails to pay perform any of
Borrower’s duties or obligations under this Agreement or any of the other Loan
Documents, Lender is authorized, without notice to Borrower, to pay or perform
the duties or obligations or to cause the duties or obligations to be paid or
performed. Among the duties and obligations Lender is authorized to pay or
perform pursuant to the preceding sentence are the following: (i) pay and
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on the Property; (ii) pay any rents or other charges under any
lease affecting the Property; (iii) order and pay for the repair, maintenance
and preservation of the Property; (iv) file any financing statements on
Borrower’s behalf and pay for filing and recording fees pertaining to the
Property; (v) place a note on any chattel paper indicating Lender’s interest in
the Property; (vi) take any action Lender deems necessary to realize on the
Property, including performing any part of a contract or endorsing such contract
in Borrower’s name; (vii) handle any suits or other proceedings involving the
Property in Borrower’s name; (viii) prepare, file and sign Borrower’s name to
any necessary reports or accountings pertaining to the Property; and (ix) make
an entry on Borrower’s books and records showing the existence of this
Agreement.

E. Reasonable Care. If Lender exercises any of the rights granted to Lender in
subsection D of this Section 4, Lender agrees to use reasonable care with
respect thereto. If Lender exercises the care and follows the procedures that
are customary in the asset-based lending industry, Lender will be deemed to be
using reasonable care. Borrower agrees that reasonable care does not include:
(i) any steps necessary to preserve rights against third parties; (ii) the duty
to send notices, perform services or take any other action in connection with
the management of the Property; or (iii) the duty to protect, preserve or
maintain any security interest given to third parties by Borrower or by other
parties. Lender’s authorization to exercise any of the rights granted to Lender
in subsection D of this Section 4 does not create any obligation to perform by
Lender, and Lender’s failure/refusal to perform will not preclude Lender from
exercising any other rights under this Agreement or under any of the other Loan
Documents or available at law or in equity. Lender may apply any cash and/or
non-cash proceeds of the Property received by Lender against the Secured Debts,
matured or unmatured, as Lender may determine in Lender’s sole discretion.

 

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F. Lender Possession. If Lender comes into actual or constructive possession of
any items of the Property, Lender will use reasonable efforts to preserve and
protect such items of the Property, provided that, if Borrower is in default
under this Agreement or under any of the other Loan Documents, Lender shall be
entitled to apply such items of the Property or proceeds from the sale thereof
to payment of the Secured Debts, matured or unmatured, as Lender may determine
in Lender’s sole discretion. For purposes of this subsection F of this
Section 4, Lender will be in actual possession of items of the Property only
when Lender has physical and exclusive control over such items of the Property
and Lender has affirmatively accepted that control. Lender will be in
constructive possession of items of the Property only when Lender has both the
power and the intent to exercise control over such items of the Property.

G. Name and Location. The name of Borrower set forth in this Agreement is
Borrower’s exact legal name. Borrower is duly qualified to transact business in
Texas as a foreign corporation. Borrower’s chief executive office and principal
place of business is 4441 Sigma Road, Dallas, Texas 75244. Borrower must provide
Lender with at least 30 days written notice prior to any change in Borrower’s
name, chief executive office, principal place of business, state of organization
or registration.

H. Perfection of Security Interest. Borrower authorizes Lender to file one or
more financing statement(s) covering the Property. Borrower will comply with,
facilitate and otherwise assist Lender in connection with obtaining perfection
or control over the Property for purposes of perfecting Lender’s security
interest under the Texas Business and Commerce Code (UCC). Borrower agrees to
pay all actual costs of terminating Lender’s security interest in the Property.

5. WARRANTIES AND REPRESENTATIONS. Borrower makes the following warranties and
representations to Lender which will continue as long as the Loan is in effect,
except when this Agreement provides otherwise.

A. Power. Borrower is duly organized, validly existing and in good standing in
all jurisdictions in which Borrower operates. Borrower has the power and
authority to enter into the Loan and to carry on Borrower’s business and
activities as now being conducted and, as applicable, Borrower is qualified to
do so in each jurisdiction in which Borrower operates.

B. Authority. The execution, delivery and performance of the Loan and the duties
and obligations evidenced by the Loan Documents are within Borrower’s powers,
have been duly authorized, have received all necessary governmental approval,
will not violate any provision of law or order of court or governmental agency,
and will not violate any agreement to which Borrower is a party or to which
Borrower or any of Borrower’s property is subject.

C. Name and Place of Business. Borrower has not changed Borrower’s name or
principal place of business within the last ten years and has not used any other
trade or

 

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fictitious name. Without Lender’s prior written consent, Borrower does not and
will not use any other name and will preserve Borrower’s existing name, trade
names and franchises.

D. Loan Purpose. The purpose of the Loan is to provide working capital for use
in the operation of Borrower’s business.

E. No Other Liens. Borrower owns or leases all property that Borrower needs to
conduct Borrower’s business and activities. Borrower has good and marketable
title to all property that Borrower owns or leases. The Property is free and
clear of all liens, security interests, encumbrances and other adverse claims
and interests, except: (i) those of Lender; (ii) those disclosed to and
consented to by Lender in writing; (iii) inchoate liens (not yet due and
payable); (iv) depositary accounts existing on the date hereof which are being
wound up; and (v) other depositary accounts disclosed to and approved by Lender.

F. Compliance With Laws. Borrower is not violating any laws, regulations, rules,
orders, judgments or decrees applicable to Borrower or Borrower’s property,
except for those which Borrower is challenging in good faith through proper
proceedings after providing adequate reserves to fully pay the claim should
Borrower lose the challenge.

G. Legal Dispute. There are no pending or threatened lawsuits, arbitrations or
other proceedings against Borrower or Borrower’s property that singly or
together may materially and adversely affect Borrower’s property, operations,
financial condition or business.

H. Adverse Agreements. Borrower is not a party to, nor is Borrower bound by, any
agreement that is now or is likely to become materially adverse to Borrower’s
business, the Property or Borrower’s operations.

I. Other Claims. There are no outstanding claims or rights that would conflict
with the execution, delivery or performance by Borrower of the terms and
conditions of this Agreement or the other Loan Documents. No outstanding claims
or rights exist that may result in a lien on the Property, the Property’s
proceeds and the proceeds of proceeds, except liens that were disclosed to and
agreed to by Lender in writing.

J. Solvency. Borrower is able to pay Borrower’s debts as they mature. Borrower’s
assets exceed Borrower’s liabilities. Borrower has sufficient capital for
Borrower’s current and planned business and other activities. Borrower will not
become insolvent by the execution or performance of the Loan Documents.

6. FINANCIAL STATEMENTS. Borrower will prepare and maintain Borrower’s financial
records using consistently applied generally accepted accounting principles then
in effect. Borrower will provide Lender with financial information in a form
that Lender accepts and under the following terms.

 

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A. Certification. Borrower represents and warrants that any financial statements
that Borrower provides Lender fairly represent Borrower’s financial condition
for the stated periods are current, complete, true and accurate in all material
respects, and include all of Borrower’s direct or contingent liabilities, and
there has been no material adverse change in Borrower’s financial condition,
operations or business since the date the financial information was prepared.

B. Frequency. In addition to the financial statements provided to Lender prior
to closing, Borrower will provide Lender with current auditor-reviewed financial
statements within 45 days after the end of each fiscal quarter of Borrower and
with an audited financial statement within 90 days after the end of each fiscal
year of Borrower until Borrower has performed all of Borrower’s obligations
under the Loan.

C. SEC Reports. Borrower will provide Lender with true and correct copies of all
reports, notices or statements that Borrower provides to the Securities and
Exchange Commission, any securities exchange or Borrower’s stockholders, owners
or the holders of any material indebtedness as soon as available or at least
within ten days after issuance.

D. Requested Information. Borrower will provide Lender with any other
information about Borrower’s operations, financial affairs and condition
reasonably requested as soon as practicable and in any event within 60 days
after Lender’s request.

7. FINANCIAL COVENANTS. At each fiscal quarter end while the Loan is
outstanding, Borrower covenants and agrees to: (i) maintain Stockholders’ Equity
of at least $4,800,000.00; and (ii) maintain a ratio of Current Assets to
Current Liabilities of at least 1 to 1 (i.e., Current Assets must equal or
exceed Current Liabilities. Within 30 days after the end of each of the first
three fiscal quarters, and within 60 days after the end of each fourth fiscal
quarter, of Borrower, Borrower must furnish evidence satisfactory to Lender that
Borrower is in compliance with the foregoing financial covenants. If Borrower is
unable to provide such evidence to Lender, such failure shall constitute a
default by Borrower under this Agreement unless a delay is approved by Lender in
writing and in advance.

8. COVENANTS. Until the Loan and all related debts, liabilities and obligations
are paid and discharged, Borrower will comply with the following terms, unless
Lender waives compliance in writing.

A. Participation. Borrower consents to Lender participating or syndicating the
Loan and sharing any information that Lender decides is necessary about Borrower
and the Loan with the other participants or syndicators subject to undertakings
by the recipients to keep such non-public information confidential and not to
use it for purposes unrelated to the Loan.

 

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B. Inspection. Following Lender’s written request, Borrower will immediately pay
for all one-time and recurring reasonable out-of-pocket costs that are related
to the inspection of Borrower’s records, business or the Property. Upon
reasonable notice, Borrower will permit Lender or Lender’s agents to enter any
of Borrower’s premises and any location where the Property is located during
regular business hours to do the following:

(1) Lender may inspect, audit, check, review and obtain copies from Borrower’s
books, records, journals, orders, receipts and any correspondence and other
business related data.

(2) Lender may discuss Borrower’s affairs, finances and business with anyone who
provides Lender with evidence that they are a creditor of Borrower, the
sufficiency of which will be subject to Lender’s sole discretion.

(3) Lender may inspect the Property, audit for the use and disposition of the
Property’s proceeds and proceeds of proceeds, or do whatever Lender reasonably
decides is necessary to preserve and protect the Property and Lender’s interest
in the Property.

After prior notice to Borrower, Lender may discuss Borrower’s financial
condition and business operations with Borrower’s independent accountants, if
any, or Borrower’s chief financial officer, and Borrower may be present during
these discussions. As long as the Loan is outstanding, Borrower will allow all
of Borrower’s accountants and auditors to permit Lender to examine Borrower’s
records and to make copies of these records. Lender will use Lender’s best
efforts to maintain the confidentiality of the information Lender or Lender’s
agents obtain and not to use such information for any purpose unrelated to the
Loan except Lender may provide Lender’s regulator, if any, with required
information about Borrower’s financial condition, operation and business or that
of Borrower’s subsidiaries.

C. Business Requirements. Borrower will preserve and maintain Borrower’s present
existence and good standing in the jurisdiction where Borrower is organized and
all of Borrower’s rights, privileges and franchises. Borrower will do all that
is needed or required to continue Borrower’s business or activities as presently
conducted by obtaining licenses, permits and bonds everywhere Borrower engages
in business or activities or owns or leases Borrower’s property. Borrower will
obtain Lender’s prior written consent before Borrower ceases Borrower’s business
or before Borrower engages in any new line of business that is materially
different from Borrower’s present business.

D. Compliance with Laws. Borrower will not violate any laws, regulations, rules,
orders, judgments or decrees applicable to Borrower or Borrower’s property,
except for those which Borrower challenges in good faith through proper
proceedings after providing adequate reserves to fully pay the claim should
Borrower lose. Laws include, without limitation, the Federal Fair Labor
Standards Act requirements for producing

 

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goods, the federal Employee Retirement Income Security Act of 1974’s
requirements for the establishment, funding and management of qualified deferred
compensation plans for employees, health and safety laws, environmental laws,
tax laws, licensing and permit laws. On Lender’s request, Borrower will provide
Lender with written evidence that Borrower has fully and timely paid Borrower’s
taxes, assessments and other governmental charges levied or imposed on Borrower,
Borrower’s income or profits and Borrower’s property. Taxes include, without
limitation, sales taxes, use taxes, personal property taxes, documentary stamp
taxes, recordation taxes, franchise taxes, income taxes, withholding taxes, FICA
taxes and unemployment taxes. Borrower will adequately provide for the payment
of these taxes, assessments and other charges that have accrued but are not yet
due and payable.

E. New Organizations. Borrower will obtain Lender’s written consent (which
consent shall not be unreasonably withheld) before organizing, merging into or
consolidating with an entity, acquiring all or substantially all of the assets
of another, materially changing the legal structure, management, ownership or
financial condition, or effecting or entering into a domestication, conversion
or interest exchange.

F. Dealings with Insiders. Borrower will not purchase, acquire or lease any
property or services from, or sell, provide or lease any property or services
to, or permit any outstanding loans or credit extensions to, or otherwise deal
with, any Insiders except as required under contracts existing at the time
Borrower applied for the Loan and approved by Lender, equity compensation
transactions consistent with past practice, or as this Agreement otherwise
permits. Borrower will not change or breach these contracts existing at Loan
application so as to cause an acceleration of or an increase in any payments
due.

G. Other Debts. Borrower will pay when due any other debts owed or guaranteed by
Borrower other than those that are disputed for valid reasons by Borrower and
will faithfully perform or comply with all the conditions and obligations
imposed on Borrower concerning the debt or guaranty.

H. Other Liabilities. Except for Purchase Money Financing, Borrower will not
incur, assume or permit any debt evidenced by notes, bonds or similar
obligations secured by a lien on the Property except subordinated in payment to
Lender on conditions and terms acceptable to Lender.

I. Notice to Lender. Borrower will promptly notify Lender of any material change
in Borrower’s financial condition, of the occurrence of a default under the
terms of this Agreement or any other Loan Document, or a default by Borrower
under any agreement between Borrower and any third party which materially and
adversely affects Borrower’s property, operations, financial condition or
business.

J. Certification of No Default. On Lender’s request, Borrower’s chief financial
officer will provide Lender with a written certification that, to the best of
his/her

 

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knowledge, no event of default exists under the terms of this Agreement or the
other Loan Documents, and that there exists no other action, condition or event
which, with the giving of notice or lapse of time or both, would constitute a
default. As requested, Borrower’s chief financial officer will also provide
Lender with computations demonstrating compliance with any financial covenants
and ratios contained in this Agreement. If an action, condition or event of
default does exist, the certificate must accurately and fully disclose the
extent and nature of this action, condition or event and state what must be done
to correct it.

K. Use of Loan Proceeds. Borrower will not permit the loan proceeds to be used
to purchase, carry, reduce or retire any loan originally incurred to purchase or
carry any margin stock or otherwise cause the Loan to violate Federal Reserve
Board Regulations U or X, or Section 8 of the Securities and Exchange Act of
1934 and its regulations, as amended.

L. Disposition of Assets. Without Lender’s prior written consent or as the Loan
Documents permit, Borrower will not sell, lease, assign, transfer, dispose of or
otherwise distribute all or substantially all of Borrower’s assets to any person
other than in the ordinary course of business.

M. No Other Liens. Except for Purchase Money Financing, Borrower will not
create, permit or suffer any lien or encumbrance upon the Property for or by
anyone, other than Lender, except for nonconsensual liens imposed by law arising
out of the ordinary course of business on obligations that are not overdue or
which Borrower is contesting in good faith after making appropriate reserves, or
any other liens specifically agreed to by Lender in writing.

N. Guaranties. Borrower will not guaranty or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments in the ordinary
course of business) or accommodation endorser or otherwise for the debt or
obligations of any other person or entity, except to Lender or as Lender
otherwise specifically agree in writing.

O. No Default under Other Agreements. Borrower will not allow to occur, or to
continue unremedied, any act, event or condition which constitutes a default or
which, with the passage of time or giving of notice, or both, would constitute a
default under any agreement, document, instrument or undertaking to which
Borrower is a party or by which Borrower may be bound.

P. Legal Disputes. Borrower will promptly notify Lender in writing of any
threatened or pending lawsuit, arbitration or other proceeding against Borrower
or any of Borrower’s property not identified in Borrower’s financial statements
or filings with the SEC that are provided to Lender, that singly or together
with other proceedings may materially and adversely affect Borrower’s property,
operations, financial condition or business and pose a risk of liability to
Borrower of at least $250,000. Borrower will use

 

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Borrower’s best efforts to bring about a favorable and speedy result of any of
these lawsuits, arbitrations or other proceedings.

Q. Other Notices. Borrower will immediately provide Lender with any information
that may materially and adversely affect Borrower’s ability to perform this
Agreement and of its anticipated effect.

R. No Change in Capital. Borrower will not release, redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower’s capital stock or
other equity security, provided, however, that this covenant shall not apply to
forfeitures of Borrower’s common stock or rights under equity incentives granted
to employees, directors or consultants.

S. Loan Obligations. Borrower will make full and timely payment of all principal
and interest obligations and comply with the other terms and agreements
contained in this Agreement and in the other Loan Documents.

T. Insurance. Borrower will maintain the Approved A/R Insurance in effect at all
times which the Loan remains outstanding. Borrower also will obtain and maintain
insurance on the Property with insurers in amounts and coverages that are
acceptable to Lender and are customary, industry practice. This may include,
without limitation, insurance policies for public liability, fire, hazard and
extended risk, workers’ compensation and, at Lender’s request, business
interruption insurance. At Lender’s request, Borrower will deliver to Lender
certified copies of all of these insurance policies, binders or certificates.
Borrower will obtain and maintain a mortgagee or lender loss payee endorsement
for Lender when these endorsements are available. Borrower will immediately
notify Lender of cancellation or termination of insurance. Borrower will require
all insurance policies on the Property to provide Lender with at least ten days
prior written notice to Lender of cancellation or modification. Borrower
consents to Lender using or disclosing information relative to any contract of
insurance required by the Loan for the purpose of replacing this insurance.
Borrower also authorizes Borrower’s insurer and Lender to exchange all relevant
information related to any contract of insurance on the Property required by any
of the Loan Documents.

U. Property Maintenance. Borrower will keep all tangible and intangible property
that Borrower consider necessary in Borrower’s business in good working
condition by making all needed repairs, replacements and improvements and by
making all rental, lease or other payments due on this property.

V. Property Loss. Borrower will immediately notify Lender, and the insurance
company when appropriate, of any material casualty, loss or depreciation to the
Property or to Borrower’s other property that affects Borrower’s business.

W. Reserves. Lender may set aside and reserve Loan proceeds for Lender, fees and
expenses, taxes and insurance accruing and due not later than 60 days after the
date such

 

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reserve is established. Borrower grants Lender a security interest in the
reserves. No interest will accrue on any reserve Loan proceeds. Disbursement of
reserves is disbursement of the Loan’s proceeds. At Borrower’s request, Lender
will disburse the reserves for the purpose they were set aside for, as long as
Borrower is not in default under this Agreement. Lender may directly pay these
reserved items, reimburse Borrower for payments Borrower made or reduce the
reserves and increase the Loan proceeds available for disbursement.

X. Additional Costs/Fees. Borrower will pay all filing and recording costs and
fees, including any recordation, documentary or transfer taxes or stamps, that
are required to be paid with respect to the Loan and any Loan Documents.
Borrower will pay or reimburse Lender for all reasonable attorneys’ fees
incurred by Lender in negotiating or documenting the Loan.

9. DEFAULT. Borrower will be in default if any of the following occur:

A. Payments. Borrower fails to make a payment in full when due under the Loan
provided that Borrower shall not be in default for failing to pay any interest
on the Loan unless such interest is more than three (3) days past due.

B. Insolvency or Bankruptcy. The death, dissolution or insolvency of,
appointment of a receiver by or on behalf of, application of any debtor relief
law, the assignment for the benefit of creditors by or on behalf of, the
voluntary or involuntary termination of existence by, or the commencement of any
proceeding under any present or future federal or state insolvency, bankruptcy,
reorganization, composition or debtor relief law by or against Borrower or any
co-signer, endorser, surety or guarantor of this Agreement or any other
obligations Borrower has with Lender.

C. Business Termination. Borrower merges, dissolves, reorganizes or ends
Borrower’s business or existence.

D. Failure to Perform. Borrower fails to perform any condition or to keep any
promise or covenant of this Agreement within 15 days after written notice of
such failure is delivered by Lender to Borrower.

E. Other Documents. A default occurs under the terms of any other Loan Documents
or under the Existing Loan.

F. Other Agreements. Borrower is in default on any other debt or agreement
Borrower has with Lender.

G. Misrepresentation. Borrower makes any verbal or written statement or provides
any financial information that is materially untrue or inaccurate or conceals a
material fact at the time it is made or provided.

 

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H. Judgment. Borrower fails to satisfy or appeal any judgment against Borrower.

I. Forfeiture. The Property is used in a manner or for a purpose that threatens
confiscation by a legal authority.

J. Name Change. Borrower changes Borrower’s name or assumes an additional legal
name without notifying Lender before making such a change.

K. Property Transfer. Borrower transfers all or substantially all of Borrower’s
tangible property.

L. Location Change. Borrower changes the location of all or substantially all of
the tangible personal property comprising a part of the Property without
Lender’s prior written consent.

M. Material Change. There is a material adverse change in Borrower’s business,
including ownership, management and financial conditions, and Borrower does not
notify Lender thereof within three business days after Borrower becomes aware of
such material adverse change.

N. Insecurity. Lender determines in good faith that a material adverse change
has occurred in Borrower’s financial condition from the conditions set forth in
Borrower’s most recent financial statement before the date of this Agreement
with the result that the prospect for payment or performance of the Loan is
materially impaired for any reason.

10. REMEDIES. After Borrower defaults, Lender may at Lender’s option do any one
or more of the following:

A. Acceleration. Lender may make all or any part of the amount owing by the
terms of the Loan immediately due. If Borrower is a debtor in a bankruptcy
petition or in an application filed under Section 5(a)(3) of the Securities
Investor Protection Act, the Loan is automatically accelerated and immediately
due and payable without notice or demand upon filing of the petition or
application.

B. Sources. Lender may use any and all remedies Lender has under state or
federal law or in any Loan Document.

C. Insurance Benefits. Lender may make a claim for any and all insurance
benefits or refunds that may be available on Borrower’s default.

D. Payments Made on Borrower’s Behalf. Amounts advanced on Borrower’s behalf
will be immediately due and may be added to the balance owing under the terms of
the Loan and accrue interest at the highest post-maturity interest rate.

 

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E. Termination. Lender may terminate Borrower’s right to obtain advances under
the Loan, and Lender may refuse to make any further extensions of credit to
Borrower.

F. Set-Off. Lender may use the right of set-off. This means Lender may set-off
any amount due and payable under the terms of the Loan against any right
Borrower has to receive money from Lender. Borrower’s right to receive money
from Lender includes any deposit or share account balance Borrower has with
Lender, any money owed to Borrower on an item presented to Lender or in Lender’s
possession for collection or exchange, and any repurchase agreement or other
non-deposit obligation. “Any amount due and payable under the terms of the Loan”
means the total amount to which Lender is entitled to demand payment under the
terms of the Loan at the time Lender set-off. Subject to any other written
contract, if Borrower’s right to receive money from Lender is also owned by
someone who has not agreed to pay the Loan, Lender’s right of set-off will apply
to Borrower’s interest in the obligation and to any other amounts Borrower could
withdraw on Borrower’s sole request or endorsement. Lender’s right of set-off
does not apply to an account or other obligation where Borrower’s rights arise
only in a representative capacity. It also does not apply to any Individual
Retirement Account or other tax-deferred retirement account. Lender will not be
liable for the dishonor of any check when the dishonor occurs because Lender
set-off against any of Borrower’s accounts. Borrower agrees to hold Lender
harmless from any such claims arising as a result of Lender’s exercise of
Lender’s right of set-off.

G. Assembly of Property. Lender may require Borrower to assemble the Property
and make the Property available to Lender in a reasonable fashion.

H. Possession. Lender may take possession of the Property so long as such taking
of possession does not involve a breach of the peace. Lender may sell, lease or
otherwise dispose of the Property in accordance with applicable legal
requirements. Lender may apply what Lender receives from the disposition of the
Property to Lender’s expenses, Lender’s attorneys’ fees and legal expenses,
where not prohibited by law, and to the Secured Debts. If proceeds received by
Lender from the disposition of the Property do not satisfy the Secured Debts,
Borrower shall remain liable for the deficiency (where permitted by law). In
some cases, Lender may keep the Property to satisfy the Secured Debts. Where a
notice is required, Borrower agrees that ten days prior written notice sent by
first class mail to Borrower’s address listed in this Agreement will be
reasonable notice to Borrower under the Texas Business and Commerce Code (UCC).
If the Property is perishable or threatens to decline speedily in value, Lender
may, without notice to Borrower, dispose of any or all of the Property in a
commercially reasonable manner at Borrower’s expense following any commercially
reasonable preparation or processing. If any items not otherwise subject to this
Agreement are contained in the Property when Lender takes possession, Lender may
hold such items for Borrower’s account and Borrower’s risk, and Lender will not
be liable for taking possession of such items.

 

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I. Transfer of Patents. Lender may exercise the rights to transfer ownership of
all or some of the Patents to Lender described in Section 4C(5) of this
Agreement.

J. Use and Operation. Lender may enter upon any premises upon or within which
the Property is located and take possession of all or any part of the Property
for the purpose of preserving the Property or the Property’s value, so long as
Lender does not breach the peace. Lender may use and operate the Property for
the length of time Lender feels is necessary to protect Lender’s interest, all
without payment or compensation to Borrower, or, at Lender’s option and without
notice to Borrower, Lender may appoint an ex parte receiver for the purposes of
preparing or processing items of the Property at Borrower’s expense and for the
additional purposes of selling and disposing of items of the Property.

K. Waiver. Except as otherwise required by law, by choosing any one or more of
these remedies Lender does not give up Lender’s right to use any other remedy.
Lender does not waive a default if Lender chooses not to use a remedy. By
electing not to use any remedy, Lender does not waive Lender’s right to later
consider the event a default and to use any remedies if the default continues or
occurs again.

11. COLLECTION EXPENSES AND ATTORNEYS’ FEES. On or after any default, to the
extent permitted by law, Borrower agrees to pay all expenses of collection,
enforcement or protection of Lender’s rights and remedies under this Agreement
or any other Loan Document. Expenses include, but are not limited to, reasonable
attorneys’ fees, court costs and other legal expenses. These expenses are due
and payable immediately. If not paid immediately, these expenses will bear
interest from the date of payment by Lender until repayment by Borrower to
Lender in full at the highest interest rate in effect as provided for in the
terms of the Loan. All fees and expenses will be secured by the Property
Borrower has granted to Lender, if any. In addition to the extent permitted by
the United States Bankruptcy Code, Borrower agrees to pay the reasonable
attorneys’ fees incurred by Lender to protect Lender’s rights and interests in
connection with any bankruptcy proceedings initiated by or against Borrower.

12. APPLICABLE LAW. This Agreement is governed by the laws of Texas, the United
States of America and, to the extent required, by the laws of the jurisdiction
where the Property is located, except to the extent such state laws are
preempted by federal law.

13. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. Borrower’s obligation to pay
the Loan is independent of the obligation of any other party who has also agreed
to pay the Loan. If more than one party executes this Agreement as Borrower, all
of the duties and obligations of Borrower under this Agreement and under all of
the other Loan Documents shall be the joint and several obligations of such
parties. Lender may sue Borrower alone, or anyone else who is obligated on the
Loan, or Borrower and any other such parties together, to collect the Loan.
Extending the Loan or new obligations under the Loan will not affect Borrower’s
duty under the Loan, and Borrower still will be obligated to pay the Loan.
Lender may assign all or part of Lender’s rights or duties under this Agreement
or the other Loan Documents without Borrower’s consent. If Lender assigns this
Agreement, all of Borrower’s

 

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covenants, agreements, representations and warranties contained in this
Agreement and the other Loan Documents will benefit Lender’s successors and
assigns. Borrower may not assign this Agreement or any of Borrower’s rights
under this Agreement without Lender’s prior written consent. The duties and
obligations of Borrower under the Loan Documents will bind Borrower’s successors
and assigns.

14. AMENDMENT, INTEGRATION AND SEVERABILITY. This Agreement may not be amended
or modified by oral agreement. No amendment or modification of this Agreement is
effective unless made in writing and executed by Lender and Borrower. This
Agreement and the other Loan Documents are the complete and final expression of
the understanding between Lender and Borrower. If any provision of this
Agreement is unenforceable, then the unenforceable provision will be severed and
the remaining provisions will still be enforceable.

15. INTERPRETATION. Whenever used, the singular includes the plural and the
plural includes the singular. The section headings are for convenience only and
are not to be used to interpret or define the terms of this Agreement.

16. NOTICE, FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS. Unless otherwise
required by law, any notice will be given by delivering such notice or mailing
such notice by first class mail to the appropriate party’s address listed in the
DATE AND PARTIES section hereinabove, or to any other address designated in
writing by one party to the other. Borrower will inform Lender in writing of any
change in Borrower’s name, address or other application information. Borrower
will provide to Lender any financial statement or information Lender reasonably
requests. All financial statements and information Borrower gives Lender will be
correct and complete in all material respects. Borrower agrees to sign, deliver
and file any additional documents or certifications that Lender may consider
necessary to perfect, continue, preserve and confirm the status of Lender’s
liens and security interests covering the Property. Lender and Borrower
expressly agree that time is of the essence in the payment and performance of
all duties and obligations contained in this Agreement and the other Loan
Documents.

17. AGREEMENT TO ARBITRATE.

A. Submission. Lender or Borrower may submit to binding arbitration any dispute,
claim or other matter in question between Lender and Borrower that arises out of
or relates to the Loan (a “Dispute”), except as otherwise indicated in this
Section or as Lender and Borrower otherwise agree in writing. For purposes of
this Section, the Loan includes this Agreement and all of the other Loan
Documents, and any proposed loans or extensions of credit that relate to this
Agreement. Lender and Borrower will not arbitrate any Dispute within any “core
proceedings” under the United States bankruptcy laws.

B. Foreclosure. Lender and Borrower must consent to arbitrate any Dispute
concerning a debt secured by real estate at the time of the proposed
arbitration. Lender may foreclose or exercise any powers of sale against real
property securing a debt underlying any Dispute before, during or after any
arbitration. Lender also may enforce a

 

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debt secured by real estate and underlying the Dispute before, during or after
any arbitration.

C. Self-Help. Lender and Borrower may, whether or not any arbitration has begun:
pursue any self-help or similar remedies, including taking property or
exercising other rights under applicable laws; seek attachment, garnishment,
receivership or other provisional remedies from a court having jurisdiction to
preserve the rights of or to prevent irreparable injury to Lender or Borrower;
or foreclose against any property by any method or take legal action to recover
any property. Foreclosing or exercising a power of sale, beginning and
continuing a judicial action or pursuing self-help remedies will not constitute
a waiver of the right to complete arbitration.

D. Arbitrator’s Authority. The arbitrator will determine whether a Dispute is
arbitrable. A single arbitrator will resolve any Dispute, whether individual or
joint in nature, or whether based on contract, tort or any other matter at law
or in equity. The arbitrator may consolidate any Dispute with any related
disputes, claims or other matters in question not arising out of the Loan. Any
court having jurisdiction may enter a judgment or decree on the arbitrator’s
award. The judgment or decree will be enforced as any other judgment or decree.

E. Interstate Commerce. Lender and Borrower acknowledge that the agreements,
transactions or the relationships which result from the agreements or
transactions between Lender and Borrower involve interstate commerce. The United
States Arbitration Act will govern the interpretation and enforcement of this
Section.

F. AAA Rules. The American Arbitration Association’s Commercial Arbitration
Rules in effect on the date of this Agreement will govern the selection of the
arbitrator and the arbitration process, unless otherwise agreed to in this
Agreement or in another written agreement.

G. Waiver of Trial for Arbitration. Lender and Borrower understand that the
Lender and Borrower have the right or opportunity to litigate any Dispute
through a trial by judge or jury but that Lender and Borrower parties prefer to
resolve any Dispute through arbitration instead of litigation. If any Dispute is
arbitrated, Lender and Borrower voluntarily and knowingly waive the right to
have a trial by jury or judge during the arbitration.

H. Injunctive Relief. Notwithstanding anything in this Section 17 to the
contrary, either party shall have the right to seek injunctive relief in any
court having jurisdiction over the parties.

18. CONTEST OF CERTAIN CLAIMS. Notwithstanding any provisions contained in this
Agreement or in any of the other Loan Documents, Borrower shall not be in
default for failure to pay or discharge any mechanic’s or materialman’s lien
asserted against the Property if, and so long as: (i) Borrower shall have
notified Lender of same within five (5) days of obtaining

 

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knowledge thereof; (ii) Borrower shall diligently and in good faith contest the
same by appropriate legal proceedings which shall operate to prevent the
enforcement or collection of the same and the sale of the Property, or any part
thereof, to satisfy the same; (iii) if the asserted lien is more than $250,000,
Borrower shall have furnished to Lender a cash deposit, or an indemnity bond
satisfactory to Lender with a surety satisfactory to Lender, in the amount of
the mechanic’s or materialman’s lien claim, plus a reasonable additional sum to
pay all costs, interest and penalties that may be imposed or incurred in
connection therewith, to assure payment of the matters under contest and to
prevent any sale or forfeiture of the Property, or any part thereof;
(iv) Borrower shall promptly upon final determination thereof pay the amount of
any such claim so determined, together with all costs, interest and penalties
which may be payable in connection therewith; (v) the failure to pay the
mechanic’s or materialman’s lien claim does not constitute a default under any
other deed of trust, mortgage or security interest covering or affecting any
part of the Property; and (vi) notwithstanding the foregoing, Borrower
immediately shall, upon request of Lender, pay (and if Borrower shall fail so to
do, Lender may, but shall not be required to, pay or cause to be discharged or
bonded against) any such claim notwithstanding such contest, if in the
reasonable opinion of Lender the Property shall be in jeopardy or in danger of
being forfeited or foreclosed. Lender may pay over any such cash deposit or part
thereof to the claimant entitled thereto at any time when, in the sole judgment
of Lender, the entitlement of such claimant is established.

19. CHANGE OF CONTROL. If effective control of Borrower (meaning the ability to
elect directors of Borrower) becomes vested in foreign individuals and/or in
foreign legal entities, Borrower shall be required to: (i) pay Lender a $15,000
early termination fee; and (ii) repay the entire outstanding principal balance
of the Loan after which Lender shall have no further obligation to fund any
advance on the Loan.

20. NEW CAPITAL. Within 270 calendar days after the date of this Agreement must
furnish Lender with satisfactory evidence that Borrower has raised a minimum of
$700,000.00 in new capital in a manner acceptable to Lender. If Borrower
furnishes Lender with satisfactory evidence that Borrower has raised a minimum
of $700,000 in new capital in a manner acceptable to Lender, thereafter the
limitation on the value of Finished Goods contained in the Borrower Base
Limitation definition shall be increased from $250,000 to $1,000,000.

21. EARLY TERMINATION FEE. If Borrower requests Lender to release the Property
from the liens and security interests held by Lender prior to the first
anniversary of the date of this Agreement, Borrower agrees to pay Lender $15,000
as a fee for the early payoff of the Loan and the termination of the liens and
security interests held by Lender, provided that if such release of the liens
and security interests held by Lender referred to in this Section are in
connection with the payoff and termination of the Loan pursuant to Section 19,
only one $15,000 early termination fee shall be payable.

22. EXISTING LOAN. Lender agrees that the Loan shall not be considered part of
the “Secured Debts” as such term is used in the Deed of Trust securing the
Existing Loan.

 

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23. ACCOUNTS WIND-DOWN. The Loan is replacing an existing line of credit to
Borrower from Wells Fargo Bank, National Association (“Wells Fargo”). In
connection with such existing line of credit, Borrower has established certain
depository accounts with Wells Fargo which will continue to be used until
Borrower is able to complete all necessary actions to cause third parties not to
continue deliver funds into such depository accounts at Wells Fargo. Borrower
agrees that Borrower will undertake to wind down and close such depository
accounts at Wells Fargo as soon as reasonably possible, and in any event, within
180 calendar days after the date of this Agreement. Borrower further agrees that
Borrower will not deposit any funds into such depository accounts at Wells Fargo
and will undertake to transfer funds from such depository accounts at Wells
Fargo in the ordinary course of business. In consideration of the foregoing
agreements of Borrower, Lender agrees that the existence of security interests
held by Wells Fargo upon such depository accounts at Wells Fargo shall not
constitute an event of default by Borrower under the Loan Documents.

24. SIGNATURES. By signing, Borrower agrees to the terms contained in this
Agreement. Borrower also acknowledges receipt of a copy of this Agreement.

BORROWER:

 

RF MONOLITHICS, INC.,     CIRRONET INC., a Delaware corporation     a Georgia
corporation By   /s/ Harley E Barnes III     By   /s/ Harley E Barnes III  

Harley E Barnes, III

Chief Financial Officer

     

Harley E Barnes, III

Vice President

 

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