ISI CONTROLS, LTD.
(A TEXAS LIMITED PARTNERSHIP)
 
SUBORDINATED PROMISSORY NOTE

$3,515,000.00
January 31, 2008

 
San Antonio, Texas
 
FOR VALUE RECEIVED, ISI Controls, Ltd. (the “Maker”) promises to pay to JEFFREY
E. CORCORAN and JANELL D. CORCORAN at N100 Craftsmen Drive, Greenville,
Wisconsin, 54942 (“Holder”), owners of all of issued and outstanding units of
ownership of COM-TEC SECURITY, LLC (“COM-TEC”) in lawful money of the United
States of America the principal sum of THREE MILLION FIVE HUNDRED FIFTEEN
THOUSAND DOLLARS ($3,515,000.00), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of
this Note on the unpaid principal balance at a rate equal to 7.0% per annum,
computed on the basis of the actual number of days elapsed and a year of 365
days. All unpaid principal, together with any then unpaid and accrued interest
and other amounts payable hereunder, shall be due and payable on the earlier of
(i) April 1, 2011 (the “Maturity Date”), or (ii) when, upon or after the
occurrence of an Event of Default (as defined below), such amounts are declared
due and payable by Holder or made automatically due and payable in accordance
with the terms hereof. Until the Maturity Date, payments shall be due and
payable in accordance with the Payment Schedule attached hereto as Schedule A.
This Note is issued pursuant to the Unit Purchase Agreement effective January
31, 2008 (as previously or hereafter amended, modified or supplemented, the
“Purchase Agreement”) between the Maker and COM-TEC, and is guaranteed by
affiliates of the Maker pursuant to Guaranty Agreements of even date herewith.
Notwithstanding anything to the contrary contained herein, the Note and all
principal and accrued interest shall be due and payable on the Maturity Date.
Unpaid principal and interest bear interest after maturity until paid (whether
by acceleration or lapse of time) at the rate which would otherwise be
applicable, plus five (5) percentage points.
 
The following is a statement of the rights of Holder and the conditions to which
this Note is subject, and to which Holder, by the acceptance of this Note,
agrees:
 
1. Definitions. As used in this Note, the following capitalized terms have the
following meanings:
 
(a) “Maker” includes the limited partnership initially executing this Note and
any Person which shall succeed to or assume the obligations of the Maker under
this Note.
 
(b) “Event of Default” has the meaning given in Section 5 hereof.

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(c) “Holder” shall mean the Person specified in the introductory paragraph of
this Note or any Person who shall, at the time, be the registered holder of this
Note.
 
(d) “Purchase Agreement” has the meaning given in the introductory paragraph
hereof.
 
(e) “Obligations” shall mean and include all loans, advances, debts, liabilities
and obligations, howsoever arising, owed by the Maker to Holder of every kind
and description (whether or not evidenced by any note or instrument and whether
or not for the payment of money), now existing or hereafter arising under or
pursuant to the terms of this Note, including, all interest, fees, charges,
expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable
to and payable by the Maker hereunder, in each case, whether direct or indirect,
absolute or contingent, due or to become due, and whether or not arising after
the commencement of a proceeding under Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended from time to time (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
 
(f) “Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock Maker, a limited liability Maker, an
unincorporated association, a joint venture or other entity or a governmental
authority.
 
(g) “Securities Act” shall mean the Securities Act of 1933, as amended.
 
(h) Senior Indebtedness” means, all principal of (and premium, if any) and
interest on all indebtedness of Maker, whether outstanding on the date of this
Note or thereafter created, incurred or assumed, arising only under (i) that
certain Amended and Restated Loan and Security Agreement by and between LaSalle
Bank, NA, and ISI Security Group, Inc. dated as of January 23, 2008, as it has
been and may be amended from time to time, and (ii) that certain Note and
Warrant Purchase Agreement (the “Blair Indebtedness”) by and among William Blair
Mezzanine Capital Fund III, L.P., a Delaware limited partnership, Maker, and
affiliates of Maker party thereto dated as of October 22, 2004, as it has been
and may be amended from time to time (collectively, the “Senior Indebtedness”).
Senior Indebtedness shall include any such indebtedness or any notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness, or any
indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor. No other indebtedness of the Maker shall be considered Senior
Indebtedness.
 
(i) “Subsidiary” shall mean (a) any corporation of which more than 50% of the
issued and outstanding equity securities having ordinary voting power to elect a
majority of the Board of Directors of such corporation is at the time directly
or indirectly owned or controlled by the Maker, (b) any partnership, joint
venture, or other association of which more than 50% of the equity interest
having the power to vote, direct or control the management of such partnership,
joint venture or other association is at the time directly or indirectly owned
and controlled by the Maker, (c) any other entity included in the financial
statements of the Maker on a consolidated basis.

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2. Interest. Accrued interest on this Note shall be payable in accordance with
Schedule A until the outstanding principal amount hereof shall be paid in full.
Any accrued but unpaid interest on this Note shall be payable at the time this
Note is paid in full.
 
3. Prepayment. Full or partial prepayment of this Note is permitted at any time
without penalty. Unless otherwise agreed to by Lender at the time of payment,
any payment shall be applied first against interest accrued to the date of such
payment and then to principal. In the event of prepayment by Maker, such
principal amounts being paid shall be applied to principal installments due
under this Note in the inverse order in which they are due, and shall not defer
any succeeding installments of principal or interest due hereunder. Maker agrees
not to send Lender payments marked “paid in full,” “without recourse,” or
similar language. If Maker sends such a payment, Lender may accept it without
losing any of Lender’s rights under this Note, and Maker will remain obligated
to pay any further amount owed to Lender.
 
4. Subordination. The indebtedness evidenced by this Note is hereby expressly
subordinated in right of payment to the prior payment in full of all of the
Maker’s Senior Indebtedness, whether now or hereafter existing. Holder hereby
agrees to execute and deliver such documents as may be reasonably requested from
time to time by the Maker or a holder of any Senior Indebtedness, including
customary forms of subordination agreement requested from time to time by a
holder of Senior Indebtedness, in order to implement Section 4 hereof. The Maker
may require that the Holder execute such documents as a condition to the
Holder’s rights hereunder.
 
5. Events of Default. Upon the occurrence of any one or more of the following
events of default:
A. Maker fails to pay any amount when due and such default remains uncured for a
period of five (5) days after written or telephonic (promptly confirmed in
writing) notice thereof has been given to Maker by Lender;
 
B. Any representation or warranty made under this Note or in the Unit Purchase
Agreement, or information provided by Maker to Lender in connection with this
Note or the Unit Purchase Agreement is or was false or fraudulent in any
material respect;
 
C. A material adverse change occurs in Maker’s financial condition;
 
D. Maker fails to timely observe or perform any of the non-monetary covenants or
duties contained in this Note or the Unit Purchase Agreement, and such event
shall remain uncured for a period of fourteen (14) days after written or
telephonic (promptly confirmed in writing) notice thereof has been given to
Maker by Lender;
 
E. Maker fails to timely observe or perform any of the covenants or duties
contained in the Lease Agreement, executed on even date herewith (the “Lease”)
by and between Lender and Maker, which such default shall occur on or before the
second anniversary of the Commencement Date, as defined in the Lease, and such
default under the Lease shall remain uncured for a period fourteen (14) days
after written or telephonic (promptly confirmed in writing) notice thereof has
been given to Maker by Lender;

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F. Any guaranty of Maker’s obligations under this Note is revoked or becomes
unenforceable for any reason; or
 
G. Maker or a surety or guarantor of this Note ceases to exist;
 
H. An event of default occurs under any agreement securing this Note, and such
event shall remain uncured for a period of fourteen (14) days after written or
telephonic (promptly confirmed in writing) notice thereof has been given to
Maker by Lender;
 
then the unpaid balance and all accrued interest shall, at the option of Lender,
without notice, mature and become immediately payable. The unpaid balance shall
automatically mature and become immediately payable in the event any Maker,
surety, endorser or guarantor becomes the subject of bankruptcy or other
insolvency proceedings. Lender’s receipt of any payment on this Note after the
occurrence of an event of default shall not constitute a waiver of the default
or the Lender’s rights and remedies upon such default.
 
6. Rights of Holder upon Default. Upon the occurrence or existence of any Event
of Default (other than an Event of Default described in Sections 5(b) or 5(c))
and at any time thereafter during the continuance of such Event of Default,
Holder may, by written notice to the Maker, declare all outstanding Obligations
payable by the Maker hereunder to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived. Upon the occurrence or existence of any Event of
Default described in Sections 5(b) and 5(c), immediately and without notice, all
outstanding Obligations payable by the Maker hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived. In addition
to the foregoing remedies, upon the occurrence or existence of any Event of
Default, Holder may exercise any other right power or remedy permitted to it by
law, either by suit in equity or by action at law, or both, and shall be
entitled to recover all costs, fees and expenses incurred as a result of such
Event of Default, including but not limited to all reasonable attorneys fees.
 
7. Successors and Assigns. Subject to the restrictions on transfer described in
Sections 10 and 11 below, the rights and obligations of the Maker and Holder
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.
 
8. Waiver and Amendment. Any provision of this Note may be amended, waived or
modified upon the written consent of the Maker and Holder.

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9. Assignment. With respect to any offer, sale or other disposition of this Note
Holder will give written notice to the Maker prior thereto, describing briefly
the manner thereof, together with, a written opinion of Holder’s counsel, or
other evidence reasonably satisfactory to the Maker, to the effect that such
offer, sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Upon receiving
such written notice and reasonably satisfactory opinion, if so requested, or
other reasonably satisfactory evidence, the Maker, as promptly as practicable,
shall notify Holder that Holder may sell or otherwise dispose of this Note, in
accordance with the terms of the notice delivered to the Maker. If a
determination has been made pursuant to this Section 9 that the opinion of
counsel for Holder, or other evidence, is not reasonably satisfactory to the
Maker, the Maker shall so notify Holder promptly after such determination has
been made, stating with reasonable specificity the reason(s) for such
determination. The Note shall bear the following legend (or a substantially
similar legend) unless in the opinion of counsel for the Maker, such legend is
not required in order to ensure compliance with the Securities Act:

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE MAKER THAT SUCH REGISTRATION IS NOT
REQUIRED.
 
10. The Maker or Argyle may issue stop transfer instructions to its transfer
agent in connection with such restrictions. Notwithstanding the forgoing, Holder
(or any assignee of the Holder permitted pursuant to the Section 10) may, after
the expiration of six months following the Closing Date of the Purchase
Agreement, transfer or assign all or any portion of this Note, upon 5 days
advance written notice to the Maker, to any of the following entities, without
securing prior approval from the Maker: (i) the Maker; (ii) any affiliate of the
Holder; or (iii) any Immediate Family Member of Holder's assignee. As used
herein the term "Immediate Family Member" shall mean, with respect to a natural
person, any spouse, sibling, or child of such natural person, and any trust,
custodianship, guardianship, family limited partnership or similar entity
created for the primary benefit of one or more of the forgoing individuals..
 
11. Notices. All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall in writing and faxed,
mailed or delivered to each party at the respective addresses of the parties as
set forth below, or at such other address or facsimile number as shall have been
furnished to the receiving party in writing. All such notices and communications
will be deemed effectively given the earlier of (i) when received, (ii) when
delivered personally, (iii) one business day after being delivered by facsimile
or by email (with evidence of delivery or confirmation), (iv) one business day
after being deposited with a reliable overnight courier service, or (v) four
days after being deposited in the U.S. mail, first class with postage prepaid.
 
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If to the Maker:
ISI Controls, Ltd.
 
12903 Delivery Drive
 
San Antonio, TX 78247
 
Attention: Sam Youngblood
 
Facsimile: (210) 495-5613
 
email: syoungblood@isidet.com
   
with a copy to:
K&L Gates
 
111 Congress Avenue, Suite 900
 
Austin, Texas 78701
 
Attention: D. Hull Youngblood, Jr.
 
Facsimile: (512) 482-6859
 
email: hull.youngblood@klgates.com
   
If to Holder:
c/o Corcoran Glass & Paint, Inc.
 
N100 Craftsmen Drive
 
Greenville, WI 54942
 
Attn: Jeffrey E. Corcoran
 
Facsimile: (920) 757-9902
   
with a copy to:
Metzler, Timm, Treleven & Hermes, S.C.
 
222 Cherry Street
 
Green Bay, WI 54301-4223
 
Attn: David J. Timm
 
Facsimile: (920)435-8866

 
12. Usury. In the event any interest is paid on this Note which is deemed to be
in excess of the then legal maximum rate, then that portion of the interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of this Note.
 
13. Waivers. The Maker hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.
 
14. Governing Law. This Note shall be governed by and construed in accordance
with the internal laws of the State of Wisconsin. Any proceeding brought
herewith shall be brought in state or federal Court located in Brown County,
Wisconsin, and all parties waive any objections to venue in Brown County,
Wisconsin.

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15. Subordination Legends.
 
The obligations evidenced hereby are subordinate in the manner and to the extent
set forth in that certain Subordination Agreement (the “Subordination
Agreement”) created as of January 31, 2008, among, without limitation, Jeffrey
Corcoran and Janell Corcoran (“Subordinated Lender”), ISI Controls, Ltd., a
Texas limited partnership and LaSalle Bank National Association, a national
banking association (“Senior Lender”) to the obligations (including interest)
owed by ISI Security Group, Inc., a Delaware corporation, to the holders of all
of the notes issued pursuant to that certain Amended and Restated Loan and
Security Agreement dated as of January 23, 2008, between ISI Security Group,
Inc. and Senior Lender, as such Agreement may be supplemented, modified,
restated or amended from time to time; and each holder hereof, by its acceptance
hereof, shall be bound by the provisions of the Subordination Agreement.
 
The obligations evidenced hereby are subordinate to the obligations (including
interest) owed by Maker and affiliates of Maker to the holders of all of the
notes issued pursuant to that certain Note and Warrant Purchase Agreement by and
among William Blair Mezzanine Capital Fund III, L.P., a Delaware limited
partnership, Maker and affiliates of Maker party thereto dated as of October 22,
2004, as such Agreement may be supplemented, modified, restated or amended from
time to time.
 
[Signature Page Follows]
 
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The Maker has caused this Note to be issued as of the date first written above.

MAKER:
ISI Controls, Ltd.
By:
Metroplex Control Systems, Inc.
Its:
Sole General Partner
       
By:
/s/ Sam Youngblood
Name:
Sam Youngblood
Title:
CEO

AGREED AND ACCEPTED BY:
 
HOLDER:
 
/s/ Jeffrey E. Corcoran
Jeffrey E. Corcoran
 
/s/ Janell D. Corcoran
Janell D. Corcoran

[Signature Page to Subordinated Promissory Note]

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Schedule A
 
Payment Schedule
 
1. Interest only payments made for each three-month period beginning on May 1,
2008, and August 1, 2008 as follows:

Due Date
 
Amount
 
Ending Prin Bal
 
May 1, 2008
 
$
59,995.75
 
$
3,515,000
 
August 1, 2008
 
$
62,018.08
 
$
3,515,000
 

 
2. A single principal payment of One Hundred Thousand Dollars ($100,000.00)
shall be due and payable on December 15, 2008; and
 
3. Level principal and interest payments in the cumulative amount of $128,058.00
due monthly beginning on the 1st day of August 2008 and continuing monthly
thereafter on the first day of each month for 5 consecutive months, through
December 1, 2008; then level principal and interest payments in the cumulative
amount of $123,748 due monthly beginning on the 1st day of January 2009 and
continuing monthly thereafter on the first day of each month through December 1,
2008, then for 25 consecutive months. The payment schedule for 30 consecutive
months shall be as follows:

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Due Date
 
Beginning Balance
 
Interest
 
Payment
 
End Balance
 
8-1-2008
 
$
3,515,000
 
$
20,504
 
$
128,058
 
$
3,407,446
 
9-1-2008
   
3,407,446
   
19,877
   
128,058
   
3,299,265
 
10-1-2008
   
3,299,265
   
19,246
   
128,058
   
3,190,452
 
11-1-2008
   
3,190,452
   
18,611
   
128,058
   
3,081,005
 
12-1-2008
   
3,081,005
   
17,973
   
128,058
   
2,970,919
 
12-15-2008*
   
2,970,919
   
0
   
100,000
   
2,870,919
 
1-1-2009
   
2,870,919
   
16,747
   
123,748
 
$
2,763,918
 
2-1-2009
   
2,763,918
   
16,123
   
123,748
   
2,656,293
 
3-1-2009
   
2,656,293
   
15,495
   
123,748
   
2,548,041
 
4-1-2009
   
2,548,041
   
14,864
   
123,748
   
2,439,157
 
5-1-2009
   
2,439,157
   
14,228
   
123,748
   
2,329,637
 
6-1-2009
   
2,329,637
   
13,590
   
123,748
   
2,219,479
 
7-1-2009
   
2,219,479
   
12,947
   
123,748
   
2,108,678
 
8-1-2009
   
2,108,678
   
12,301
   
123,748
   
1,997,231
 
9-1-2009
   
1,997,231
   
11,651
   
123,748
   
1,885,134
 
10-1-2009
   
1,885,134
   
10,997
   
123,748
   
1,772,383
 
11-1-2009
   
1,772,383
   
10,339
   
123,748
   
1,658,974
 
12-1-2009
   
1,658,974
   
9,677
   
123,748
   
1,544,903
 
1-1-2010
   
1,544,903
   
9,012
   
123,748
   
1,430,168
 
2-1-2010
   
1,430,168
   
8,343
   
123,748
   
1,314,763
 
3-1-2010
   
1,314,763
   
7,669
   
123,748
   
1,198,684
 
4-1-2010
   
1,198,684
   
6,992
   
123,748
   
1,081,929
 
5-1-2010
   
1,081,929
   
6,311
   
123,748
   
964,492
 
6-1-2010
   
964,492
   
5,626
   
123,748
   
846,371
 
7-1-2010
   
846,371
   
4,937
   
123,748
   
727,560
 
8-1-2010
   
727,560
   
4,244
   
123,748
   
608,056
 
9-1-2010
   
608,056
   
3,547
   
123,748
   
487,856
 
10-1-2010
   
487,856
   
2,846
   
123,748
   
366,954
 
11-1-2010
   
366,954
   
2,141
   
123,748
   
245,347
 
12-1-2010
   
245,347
   
1,431
   
123,748
   
123,030
 
1-1-2011
   
123,030
   
718
   
123,748
   
0
 

 
1. * Special one-time payment of $100,000 toward principal
 
The final payment has been adjusted to account for the remaining indebtedness.
 
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