Exhibit 10.1 


	
 


	






AMENDED AND RESTATED REVOLVING CREDIT AND
SECURITY AGREEMENT


By and Between


COMPASS BANK


and


UNIVERSAL POWER GROUP, INC.


JUNE 19, 2007










TABLE OF CONTENTS


	
 

	
 

	
 

	
 


	
SECTION 1.

	
Bank’s
  Agreement to Make Advances

	
1


	
 

	
 

	
 

	
 


	
1.1

	
 

	
Borrowing Base

	
1


	
1.2

	
 

	
Evidence of
  Advance Not Causing Excess of Borrowing Base

	
2


	
1.3

	
 

	
Borrower’s
  Loan Account

	
3


	
1.4

	
 

	
Exceeding
  Borrowing Base

	
3


	
1.5

	
 

	
Discretionary
  Advances

	
3


	
 

	
 

	
 

	
 


	
SECTION 2.

	
Borrower’s
  Representations and Warranties; Certain Covenants

	
4


	
 

	
 

	
 

	
 


	
2.1

	
 

	
Organization,
  Licenses, Qualifications, Etc

	
4


	
2.2

	
 

	
Power and
  Authority; Enforceability

	
4


	
2.3

	
 

	
Liens

	
4


	
2.4

	
 

	
Payment of
  Taxes, Charges, Etc

	
5


	
2.5

	
 

	
Restrictions
  on Transfer of Collateral

	
5


	
2.6

	
 

	
Reporting
  Requirements

	
5


	
2.7

	
 

	
Additional
  Representations Regarding Accounts

	
6


	
2.8

	
 

	
Additional
  Representations Regarding Instruments, Chattel Paper, Etc

	
7


	
2.9

	
 

	
Location of
  Collateral

	
7


	
2.10

	
 

	
Location of
  Records

	
7


	
2.11

	
 

	
Additional
  Representations Regarding Financial Statements

	
7


	
2.12

	
 

	
Possession
  of and Insurance on Equipment

	
7


	
2.13

	
 

	
Borrower’s
  Names and Offices

	
7


	
2.14

	
 

	
Additional
  Representations Regarding Absence of Defaults Under Other Agreements

	
8


	
2.15

	
 

	
Indemnification

	
8


	
2.16

	
 

	
Taxes,
  Charges and Expenses Incurred with Respect to Revolving Line

	
8


	
2.17

	
 

	
Patents,
  Copyrights, Trademarks and Licenses

	
8


	
2.18

	
 

	
Judgments/Actions

	
8


	
2.19

	
 

	
Margin Stock

	
9


	
2.20

	
 

	
No Untrue
  Statements or Omissions

	
9


	
2.21

	
 

	
Bankruptcy

	
9


	
2.22

	
 

	
Organizational
  Identification Number, Etc

	
9


	
 

	
 

	
 

	
 


	
SECTION 3.

	
Inspection
  of Records; Further Assurance

	
9


	
 

	
 

	
 

	
 


	
SECTION 4.

	
Security
  Interest of Bank in Collateral

	
10


	
 

	
 

	
 

	
 


	
4.1

	
 

	
Collateral

	
10


	
4.2

	
 

	
Security
  Interest in Collateral Created/Acquired Hereafter

	
11


	
4.3

	
 

	
Further
  Assurances

	
11


	
4.4

	
 

	
Additional
  Further Assurances

	
11


	
4.5

	
 

	
Restrictions
  on Pledging, Mortgaging Collateral

	
12


	
 

	
 

	
 

	
 


	
SECTION 5.

	
Collection
  of Accounts Receivable

	
12





i






	
 

	
 

	
 

	
 


	
5.1

	
 

	
Collection
  and Application of Proceeds; Notifying Account Debtors

	
12


	
5.2

	
 

	
Collection
  of Accounts

	
12


	
 

	
 

	
 

	
 


	
SECTION 6.

	
Additional
  Affirmative Covenants

	
13


	
 

	
 

	
 

	
 


	
6.1

	
 

	
Financial
  Statements

	
13


	
6.2

	
 

	
Insurance

	
13


	
6.3

	
 

	
Compliance
  with Laws

	
14


	
6.4

	
 

	
Fixed Charge
  Coverage Ratio

	
14


	
6.5

	
 

	
Funded Debt
  to EBITDA

	
15


	
6.6

	
 

	
Fees

	
15


	
6.7

	
 

	
Notification
  of Defaults, Suits, Etc

	
15


	
6.8

	
 

	
Deposit
  Account

	
16


	
 

	
 

	
 

	
 


	
SECTION 7.

	
Additional
  Negative Covenants

	
16


	
 

	
 

	
 

	
 


	
7.1

	
 

	
Liens

	
16


	
7.2

	
 

	
Borrowings;
  Permitted Indebtedness

	
16


	
7.3

	
 

	
Dividends

	
16


	
7.4

	
 

	
Capital
  Expenditures

	
16


	
7.5

	
 

	
Acquiring
  Assets, Etc. of Other Entities

	
16


	
7.6

	
 

	
Dissolution,
  Mergers, Change in Nature

	
17


	
7.7

	
 

	
Subordinated
  Debt

	
17


	
7.8

	
 

	
Loans to
  Related Parties and Affiliates

	
17


	
 

	
 

	
 

	
 


	
SECTION 8.

	
Conditions
  Precedent to Credit Extensions

	
17


	
 

	
 

	
 

	
 


	
8.1

	
 

	
Conditions
  of Initial Credit Extension

	
17


	
8.2

	
 

	
Conditions
  to all Credit Extensions

	
18


	
 

	
 

	
 

	
 


	
SECTION 9.

	
Events of Default;
  Acceleration

	
19


	
 

	
 

	
 

	
 


	
SECTION 10.

	
Power to Sell or Collect Collateral

	
21


	
 

	
 

	
 

	
 


	
SECTION 11.

	
Set Off

	
22


	
 

	
 

	
 

	
 


	
SECTION 12.

	
Waivers

	
22


	
 

	
 

	
 

	
 


	
SECTION 13.

	
Expenses; Proceeds of Collateral

	
23


	
 

	
 

	
 

	
 


	
SECTION 14.

	
Duration; Extension

	
23


	
 

	
 

	
 

	
 


	
SECTION 15.

	
General

	
24


	
 

	
 

	
 

	
 


	
SECTION 16.

	
 Miscellaneous

	
25


	
 

	
 

	
 

	
 


	
SECTION 17.


	
Compliance With Laws

	
26





ii






Addendum A –
Definitions 

Exhibit A –Reconciliation Report 

Exhibit B – Compliance Certificate 


iii








AMENDED AND RESTATED REVOLVING CREDIT AND
SECURITY AGREEMENT


          This
Amended and Restated Revolving Credit and Security Agreement (as may be
amended, this “Credit Agreement”) is executed and delivered effective as
of June 19, 2007 but executed as of this __ day of July, 2007, by and between UNIVERSAL POWER GROUP, INC., a Texas
corporation (“Borrower”), with its chief executive office and its
principal place of business at 1720 Hayden Drive, Carrollton, Texas 75006 and COMPASS BANK, an Alabama banking
corporation (“Bank”), with its principal place of business at 15 South
20th Street, Birmingham, Alabama 35233. Borrower has applied to Bank for a
revolving line of credit not to exceed an aggregate principal amount at any one
time outstanding the sum of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00)
(as may be amended, the “Revolving Line”) to be evidenced by a Master
Revolving Promissory Note (as may be amended, the “Note”) in such amount
and to be secured by a security interest in all of the Collateral (as defined
herein) on the terms hereinafter set forth. 


          Bank
is willing to extend the Revolving Line to Borrower up to an aggregate
principal amount not in excess of the amount set forth above upon the security
of the Collateral on the terms and subject to the conditions hereinafter set
forth to refinance some of Borrower’s existing indebtedness, provide Borrower
with ordinary working capital and provide financial support for capital
expenditures and acquisitions. 


          Accordingly,
Borrower and Bank, in consideration of the premises, the credit to be extended
hereunder, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agree as follows: 


          Capitalized
terms not otherwise defined herein shall have the meaning attributed to the
same in Addendum A hereto incorporated herein by reference as if fully set
forth. 


SECTION 1. Bank’s Agreement to Make Advances.



          1.1 Borrowing Base. From the date hereof
until July 5, 2012 (the “Maturity Date”), or such future date to which the
Maturity Date of the Revolving Line may be extended (any such extension to be
at Bank’s sole discretion and evidenced by a writing executed by Bank), subject
to the terms and conditions of this Credit Agreement and Borrower’s and each
guarantor’s (as applicable) performance of and compliance with each of the Loan
Documents, and so long as no event of default (including, without limitation,
the breach of any warranty or representation) hereunder or under any of the
other Loan Documents shall have occurred, be continuing or would result, Bank
agrees to extend to Borrower an open-end credit line (also referred to as the
Revolving Line) on the basis of the following advance formula (such advance
formula being hereinafter referred to as the “Borrowing Base”): (a)
eighty-five percent (85.0%) of the outstanding value of Borrower’s Eligible
Accounts Receivable, plus (b) fifty percent (50.0%) of the value of Borrower’s
Eligible Inventory, (which amount permitted under subsection (b) shall not
exceed one and one-half times the amount of Borrower’s Eligible Accounts
Receivable); provided, however, that in no event shall the aggregate sum
of all principal advances made by Bank to Borrower at any one time outstanding
hereunder exceed the sum of $30,000,000. Within such limits and subject to the
terms of this Credit Agreement, Borrower may borrow,  


1






repay without
penalty or premium, and reborrow hereunder, from the date of this Credit
Agreement until the Maturity Date. It is expressly understood and agreed that
Bank shall have no obligation to make an advance under the Revolving Line if
the amount of such advance together with the amount outstanding under the
Revolving Line exceeds or would exceed the lesser of (i) the sum of $30,000,000
or (ii) the Borrowing Base. 


          The
value of all Eligible Inventory shall be determined on the basis of any and all
factors and criteria as Bank (in its sole discretion) shall deem appropriate,
including, without limitation, that unless Bank shall determine that some other
basis is more appropriate, such value shall be determined on the basis of the
lower of cost, book or market value, net of all handling charges, taxes,
assessments, insurance, warranty, interest, finance and other charges. 


          If
at any time Borrower is not entitled to any advances by the terms of this
Credit Agreement, Bank may, in its sole discretion, make requested advances;
however, it is expressly acknowledged and agreed that, in such event, Bank
shall have the right, in its sole discretion, to decline to make any requested
advance and to require any payment required under the terms of the Credit
Agreement without prior notice to Borrower and the making of any such advances
shall not be construed as a waiver of such right by Bank. 


          It
is understood that Borrower may from time to time request and apply for and
Bank may, in its sole discretion, issue letters of credit for the benefit of
such parties and on such terms and conditions as Borrower may request and apply
for in written application(s) for letter(s) of credit in form and substance
satisfactory to Bank, as delivered to Bank along with such other documentation
as Bank may require. In no event shall Bank be required to issue any requested
letter of credit, although otherwise acceptable in form and substance if (i)
Borrower has not executed and delivered one or more promissory notes in form
and substance acceptable to Bank further evidencing Borrower’s agreement to
reimburse Bank for any advances or payments made or which could be made under
such letter of credit; (ii) the sum of the debit balance of Borrower’s Loan
Account, plus (a) the aggregate dollar amount of all issued and unexpired
letters of credit; plus (b) the dollar amount of the requested letter of credit
plus all outstanding advances under the Revolving Line reflected through
Borrower’s Loan Account exceeds the lesser of (c) the Borrowing Base or (d)
$30,000,000.00; (iii) Borrower has not paid to Bank all required fees and
executed and delivered such associated documentation as Bank shall request in
form and substance acceptable to Bank; (iv) the requested letter of credit is
not acceptable to Bank and does not provide for an expiration date acceptable
to Bank; or (v) any default or event of default shall have occurred, be
continuing or would result hereunder or under any of the other Loan Documents.
Notwithstanding anything herein to the contrary, in no event shall Bank be
required to issue letters of credit hereunder in excess of $1,000,000.00 in the
aggregate for all letters of credit requested by Borrower to be issued by Bank
hereunder. 


          1.2 Evidence of Advance Not Causing Excess of
Borrowing Base. If requested by Bank, prior to any request for an
advance hereunder, Borrower shall submit to Bank such information and documents
as Bank shall reasonably request to establish to Bank’s satisfaction that, if
approved, the requested advance will not cause the amount of funds outstanding
to Borrower hereunder plus the aggregate dollar amount of all issued and
unexpired letters of credit to exceed the lesser of (i) the Borrowing Base or
(ii) $30,000,000.00. Bank shall have no 


2






obligation to
make any advance for which Borrower is unable to establish such to Bank’s
satisfaction. 


          1.3 Borrower’s Loan Account. All
borrowings/advances under the Revolving Line shall be evidenced by the Note and
by entering such borrowings/advances as debits to Borrower’s Loan Account. Bank
shall also record in Borrower’s Loan Account all other charges, expenses and
items properly chargeable to Borrower hereunder (which shall also be evidenced
by the Note), all payments made by Borrower on account of indebtedness under
the Revolving Line and other appropriate debits (including, without limitation,
debits for advances made to honor drafts presented under letters of credit
(which advances Borrower hereby expressly authorize) and credits. The debit
balance of Borrower’s Loan Account shall also be evidenced by the Note and
shall reflect the amount of Borrower’s indebtedness to Bank from time to time
hereunder. 


          1.4 Exceeding Borrowing Base. If at any
time the outstanding balance of Borrower’s Loan Account plus the aggregate
dollar amount of all issued and unexpired letters of credit exceeds the lesser
of (i) the Borrowing Base, or (ii) $30,000,000.00, then Borrower shall not be
entitled to any additional advances under the Revolving Line while such excess
exists and shall immediately remit to Bank immediately available funds
sufficient to eliminate such excess and, if Bank requests, deliver to Bank
additional collateral of a value and character satisfactory to Bank. If the
Reconciliation Report (as defined in Section 2.6) indicates that Borrower’s
Loan Account or advances made to Borrower hereunder plus the aggregate dollar
amount of all issued and unexpired letters of credit exceeds the lesser of (x)
the Borrowing Base or (y) $30,000,000.00, then Borrower shall not be entitled
to any additional advances under the Revolving Line while such excess exists
and shall immediately remit to Bank (with the relevant Reconciliation Report)
immediately available funds in the amount sufficient to eliminate such excess. 


          1.5 Discretionary Advances. In the event
that the availability of the Revolving Line hereunder expires by the terms of
this Credit Agreement, or by the terms of any agreement extending the Maturity
Date of the Revolving Line, Bank may, in its sole discretion, make requested
advances; however, it is expressly acknowledged and agreed that, in such event,
Bank shall have the right, in its sole discretion, to decline to make any
requested advance and may require payment in full of Borrower’s Loan Account at
any time without prior notice to Borrower and the making of any such advances
shall not be construed as a waiver of such right by Bank. With regard to
advances to honor drafts under letters of credit, if, for any reason, any such
advances are made after the termination or expiration of the Revolving Line or
the occurrence or continuation of any default or event of default hereunder, or
when Bank otherwise has no obligation to make advances hereunder, Borrower
shall reimburse Bank for such advances in full upon demand by Bank and until
the time of such reimbursement, such advance shall bear interest at the rate of
interest set forth in the Note (unless otherwise agreed by Bank and Borrower in
writing) and be secured by the Collateral. 


          Bank’s
right to demand reimbursement with interest under this Section shall be in
addition to and cumulative of and not in lieu of any and all other rights and
remedies available to Bank under the Loan Documents or under any document
executed in connection with any letters of credit. Any such reimbursement
obligation shall be evidenced by the Note, or, at Bank’s 


3






option, by the
Borrower’s executing and delivering additional promissory notes to Bank in form
and substance acceptable to Bank. 


          1.6 Capital Expenditure Term Notes. To the
extent that new advances are borrowed under the Revolving Line for capital
expenditures, which advances are subject to the conditions set forth in Section
8.2(b) hereof, once such advances reach an aggregate amount of $3,000,000,
such advances shall be converted into a term promissory note (each, a “Capital
Expenditure Term Note”). Each Capital Expenditure Term Note shall be
included as an amount issued under the Revolving Line, so that the aggregate
amount of all advances under this Credit Agreement shall not exceed the lesser
of (i) the Borrowing Base or (ii) $30,000,000. As Capital Expenditure Term
Notes are issued, the payment and amortization terms shall be determined on an
individual basis as the Borrower and the Bank shall agree. 


          Nothing
in this Section 1 shall be deemed to extend the availability of the Revolving
Line beyond the time noted in Section 13 hereof. 


SECTION 2. Borrower’s Representations and
Warranties; Certain Covenants. 


          To
induce Bank to enter into this Credit Agreement, Borrower represents, warrants
and covenants as follows: 


          2.1 Organization, Licenses, Qualifications, Etc.
Borrower (a) is a duly organized corporation, validly existing, and in good
standing under the laws of the State of Texas; (b) has all necessary licenses
and corporate power and authority to own its assets and conduct its business as
now conducted or presently proposed to be conducted; (c) has no subsidiaries
other than those specifically disclosed on Schedule 2.1 of this Credit
Agreement; and (d) is duly qualified and in good standing (and will remain so
qualified and in good standing) in every jurisdiction in which it is or shall
be doing business or in which the failure to so qualify and remain in good
standing would or could have an adverse effect on its business or properties,
the Collateral or Bank. 


          2.2 Power and Authority; Enforceability.
The execution, delivery and performance hereof are within Borrower’s corporate
powers, have been duly and validly authorized and are not in contravention of
the law or the terms of Borrower’s charter, by-laws or other incorporation
papers, or of any indenture, agreement, or undertaking or any law, regulation
or order to which Borrower is a party or by which it or any of its properties
is or may be bound. Upon execution and delivery hereof, this Credit Agreement
will be a valid and binding obligation of Borrower enforceable in accordance
with its terms. This Credit Agreement, the Note and all other Loan Documents
executed by Borrower have been validly executed and delivered by Borrower and
constitute legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws at the time in effect affecting the rights of creditors generally. 


          2.3 Liens. Except for the Permitted Liens
and the security interests granted to Bank hereby or by any of the other Loan
Documents in favor of Bank, Borrower is and, as to Accounts Receivable,
Inventory and other Collateral arising or to be acquired after the date hereof,
shall be 


4






the sole and
exclusive owner of the Accounts, the Inventory and each and every other item of
Collateral free from any lien, claim, charge, security interest, mortgage,
secondary financing or encumbrance, and Borrower shall defend the Accounts, the
Inventory and each and every other item of Collateral and all Proceeds and
products thereof against all claims and demands of all persons at any time
claiming the same or any interest therein adverse to the interests of Bank. 


          2.4 Payment of Taxes, Charges, Etc.
Borrower will promptly pay all taxes or charges levied on or with respect to,
and will at all times keep the Accounts, the Inventory and each and every other
item of Collateral, free and clear of all liens, claims, charges, security
interests, mortgages, secondary financing and encumbrances whatsoever, other
than the Permitted Liens and the security interests granted to Bank hereby or
by any of the other Loan Documents. Borrower agrees to take all actions that
Bank may request to establish and maintain a valid title and security interest
in the Accounts, the Inventory and each and every other item of Collateral,
free and clear of all other liens, claims, charges, security interests,
mortgages, secondary financing and encumbrances whatsoever (other than the
Permitted Liens), including, without limitation, the payment of any amounts,
taxes, assessments, fees and/or charges necessary to perfect and note Bank’s
interest in the same. If such amounts, taxes, assessments, fees and/or charges
remain unpaid after the date fixed for the payment of same, or if any lien,
claim, charge, security interest, mortgage, secondary financing or encumbrance
shall arise, or be claimed or asserted with respect to the Accounts, the
Inventory or any other item of Collateral, Bank may, without notice to
Borrower, pay such taxes, assessments, charges or claims, or take any and all
other actions (including the payment of money) deemed desirable by Bank to
remove any such lien, claim, charge, security interest, mortgage, secondary
financing or encumbrance, and Borrower agrees that the amounts thereof, along
with any amounts necessary to perfect and note Bank’s interest in any
Collateral, shall be charged to Borrower’s Loan Account described herein and
shall bear interest at the rate of interest borne by Borrower’s obligations
under the Note. 


          2.5 Restrictions on Transfer of Collateral.
Borrower will not (and will not allow or suffer any other person or entity to)
sell (except for the sale of Inventory in the normal and ordinary course of
Borrower’s business), transfer, lease, convey or otherwise dispose of the
Collateral, any portion thereof, or any interest therein (or any of the
Proceeds thereof, including, without limitation, money, checks, money orders,
drafts, notes, instruments, documents, chattel paper, Accounts, returns or
repossessions) in an amount that exceeds $50,000 during any fiscal year,
without Bank’s prior written consent. 


          2.6 Reporting Requirements. Borrower will
deliver to Bank, so long as any of the Liabilities shall remain outstanding,
the following: 


	
 

	
 


	
 

	
          (a)
  Quarterly, within fifteen (15) days after the end of each fiscal quarter or
  more often as Bank shall request, (i) detailed reports in form acceptable to
  Bank of all Borrower’s Accounts Receivable (including the aggregate balance
  of all Accounts) and accounts payable as of the last day of the immediately
  preceding fiscal quarter (or such shorter applicable period), and the period
  of time which has elapsed with respect to such Accounts Receivable and
  accounts payable since the invoice date with respect thereto (together with
  Borrower’s certification as to any counterclaims, offsets or contra-accounts
  with respect to any of Borrower’s Accounts); (ii) summaries of all of
  Borrower’s 





5






	
 

	
 


	
 

	
Inventory
  as of the last day of the immediately preceding fiscal quarter (or such
  shorter applicable period), and the value thereof, and also accompanied by a
  completed and executed Accounts Receivable and Inventory Reconciliation
  Report substantially in accordance with Exhibit A hereto (herein
  referred to as a “Reconciliation Report”); and (iii) if requested by Bank, a
  copy of Borrower’s sales journal or invoice register for the immediately
  preceding calendar month (or such shorter applicable period) and the dates,
  amounts and Account Debtors with respect to such billings; provided, however,
  that all of the reports described in Sections 2.6(a)(i)(ii) and (iii) above
  and Section 2.6(b) below shall be delivered by Borrower to Bank within
  fifteen (15) days of the last day of each calendar month if at any time the
  Borrower’s excess availability under the Borrowing Base is less than
  $5,000,000 as calculated under the report attached hereto as Exhibit A; 


	
 

	
 


	
 

	
          (b)
  within 15 days after the end of each fiscal quarter, a duly completed
  Borrowing Base Certificate in form and substance acceptable to the Bank for
  the immediately preceding quarter; 


	
 

	
 


	
 

	
          (c)
  if requested by Bank, when and as generated by Borrower, copies of all of
  Borrower’s invoices (or similar documents relating to the sales and leasing
  of Inventory or the provision of services), which such invoices (or similar
  documents) shall be in form satisfactory to Bank and shall specify the
  location at which the goods or services related thereto are to be delivered,
  installed and/or performed; 


	
 

	
 


	
 

	
          (d)
  if requested by Bank, promptly (within one business day) upon any reduction
  or diminution in the face value of any Account Receivable greater than
  $5,000.00, Borrower shall advise Bank thereof and, if Bank requests, Borrower
  shall provide Bank with a signed writing explaining the circumstances
  resulting in such reduction; 


	
 

	
 


	
 

	
          (e)
  if requested by Bank, daily sales and invoice registers or journals
  reflecting, on a daily basis, the information described above; 


	
 

	
 


	
 

	
          (f)
  if requested by Bank, contemporaneously with each and every remittance with
  respect to the Accounts Receivable and upon each deposit of funds to the
  remittances account maintained by and in the name of Bank (the “Remittances
  Account”), Borrower shall provide to Bank a report reflecting the amount of
  all such remittances and the Accounts with respect to which such remittances
  were made, together with copies of Borrower’s cash receipts journal
  reflecting such remittances; and 


	
 

	
 


	
 

	
          (g)
  such other documents, instruments, data or information of any type requested
  by Bank with respect to the Accounts Receivable, Inventory and any other
  Collateral. 





          2.7 Additional Representations Regarding Accounts.
At the time any Account becomes subject to a security interest in favor of
Bank, said Account shall be a good and valid Account representing an
undisputed, bona fide indebtedness incurred by the Account Debtor named
therein, for merchandise held subject to delivery instructions or theretofore
shipped or delivered pursuant to a contract of sale; or for services
theretofore performed by Borrower with 


6






or for said
Account Debtor; there shall be no set-offs, counterclaims, or disputes against
any such Account except as indicated in some written list, statement or invoice
furnished to Bank with reference thereto; and Borrower shall be the lawful
owner of all such Accounts and shall have good right to subject the same to a
security interest in favor of Bank. No such Account shall be sold, assigned, or
transferred to any person other than Bank or in any way encumbered except to
Bank, and Borrower shall defend the same against the lawful claims and demands
of all persons other than Bank. If any Account shall be in violation of (a) any
one or more of the warranties expressed in this section or (b) any of the
requirements to be an Eligible Account Receivable, it shall not be deemed an
Eligible Account Receivable for purposes of this Credit Agreement. 


          2.8 Additional Representations Regarding Instruments,
Chattel Paper, Etc. At the time Borrower pledges, sells, assigns or
transfers to Bank any instrument, document of title, security, chattel paper or
other property, or any interest therein, Borrower shall be the lawful owner
thereof and shall have good right to pledge, sell, assign or transfer the same;
none of such property shall have been pledged, sold, assigned or transferred to
any person other than Bank or in any way encumbered (except for the Permitted
Liens), and Borrower shall defend the same against the lawful claims and
demands of all persons other than Bank. 


          2.9 Location of Collateral. Except for
Inventory sold in the ordinary course of business, all Inventory and other
tangible Collateral have always been, are and shall continue to be kept at
Borrower’s locations as reflected in Schedule 2.9 of this Credit Agreement,
unless Borrower shall have provided written notice to Bank within 10 days
following the establishment of any new location. 


          2.10 Location of Records. All records of
Borrower pertaining to Accounts Receivable, general intangibles and contract
rights have always been, are and shall continue to be kept at Borrower’s chief
executive office as noted on the first page of this Credit Agreement. 


          2.11 Additional Representations Regarding Financial
Statements. Subject to any limitations stated therein or in
connection therewith, all balance sheets, earnings statements and other
financial data which have been or may hereafter be furnished to Bank to induce
it to enter into this Credit Agreement, to extend credit from time to time
hereunder, or otherwise furnished in connection herewith, do or shall fairly
represent in all material respects the financial condition of Borrower (or
other persons or entities, as applicable) as of the dates and results of
operations for the periods for which the same are furnished in accordance with
GAAP consistently applied, and all other information, reports and other papers
and data furnished to Bank shall be accurate, as of the relevant date, and
correct in all material respects and complete insofar as completeness may be
necessary to give Bank a true and accurate knowledge of the subject matter. 


          2.12 Possession of and Insurance on Equipment.
With respect to any and all equipment which may now or hereafter constitute
Collateral hereunder, Borrower shall maintain possession of same, keep the same
in good repair, and maintain casualty insurance on the same naming Bank as
additional insured and lender loss payee under a lender loss payee endorsement.



          2.13 Borrower’s Names and Offices.
Borrower’s name, chief executive office and principal place of business are as
set forth on the first page of this Credit Agreement, except as otherwise
disclosed in writing to Bank. Borrower will promptly advise Bank in writing
sixty 


7








(60) days
prior to any change in Borrower’s name, place of organization, organizational
identification number, chief executive office or principal place of business.


          2.14  Additional Representations Regarding Absence
of Defaults Under Other Agreements. Borrower is not
now and will not be in default under any agreement evidencing an obligation for
the payment of money, performance of a service or delivery of goods, demand for
performance under which, or acceleration of the maturity of which would render
Borrower insolvent or unable to meet its other debts as they become due or
conduct its business as usual.


          2.15  Indemnification. In
the event (a) any of Borrower’s warranties or representations shall prove
to be false or misleading; (b) any Account Debtor in judicial proceeding,
shall assert against Bank or any of its officers, employees, directors,
managers or agents a claim or defense arising out of any transaction between
the Account Debtor and Borrower; or (c) Borrower or any other person or
entity shall assert against Bank or any of its officers, employees, directors,
managers or agents a claim or defense arising out of or relating to any of the
Collateral, the Liabilities or any of the Loan Documents, Borrower agrees to
indemnify and hold Bank harmless from and against any liability, judgment,
cost, attorneys’ fees or other expense whatsoever arising therefrom.


          2.16  Taxes,
Charges and Expenses Incurred with Respect to Revolving Line.
Borrower will pay any and all taxes (with the exception of taxes measured by
income), charges and expenses of every kind or description paid or incurred by
Bank under or with respect to the Revolving Line, the Loan Documents, any
advances hereunder or any Collateral therefor or the collection of or
realization upon the same. Borrower hereby authorizes Bank to debit such and
all other taxes, charges and expenses provided for in this Credit Agreement
(including, without limitation, those taxes, charges and expenses for which
Borrower is liable under Section 12) to Borrower’s Loan Account.


          2.17  Patents,
Copyrights, Trademarks and Licenses. With
exception to such items as are specified in Schedule 2.17 attached hereto and
made a part hereof, none of the Collateral is patented, copyrighted, copyrightable,
licensed or trademarked by Borrower or incorporates or is subject, in whole or
part, to any copyright, license, patent or trademark in favor of Borrower or
any of its affiliates. Prior to the time any Collateral is copyrighted,
licensed, patented or trademarked or incorporates or is subjected, in whole or
in part, to any copyright, license, patent or trademark, Borrower shall notify
Bank and shall take (or cause to be taken) all actions necessary to preserve
the perfection and priority of Bank’s security interest in such Collateral.


          2.18  Judgments/Actions.
There are no judgments, actions, suits, claims, proceedings or investigations
existing, outstanding, pending, or to the best of Borrower’s knowledge after
due inquiry, threatened or in prospect, before any court, agency or tribunal,
or governmental authority against or involving Borrower or any guarantor which
do or could materially affect the business, properties, prospects, financial
condition, earnings, results of operations or earnings capacity of Borrower or
any guarantor or which question the validity of the Revolving Line or any of
the Loan Documents, or any action or instrument contemplated by any of them,
except as specified in Schedule 2.18 attached hereto and made a part hereof for
all purposes.


8






          2.19  Margin Stock.
Borrower is not engaged in the business of extending credit for the purpose of
purchasing or carrying “margin” stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 221), as
amended from time to time (“Regulation U”). No part of the proceeds of
any advance under the Revolving Line shall be used directly or indirectly for
the purpose of purchasing, acquiring, carrying, financing or refinancing the
purchase of any “margin stock” as defined in and contemplated by Regulation U
or for any other purpose which would constitute “purpose credit” under
Regulation U. Borrower is not an “investment company” or a company “controlled”
by an “investment company” within the meaning of the Investment Company Act of
1940, as amended.


          2.20  No Untrue Statements or Omissions.
Neither this Credit Agreement, nor any document, certificate, or statement
furnished (or to be furnished) to Bank by or on behalf of Borrower pursuant to
or in connection with this Credit Agreement contains (or will contain) any
untrue statement of a material fact or omits (or will omit) to state a material
fact necessary to make the statements contained herein and therein not misleading.
There is no fact known to Borrower that materially and adversely affects, or
will materially and adversely affect, the assets, business, operations, or
condition of Borrower that has not been specifically set forth in this Credit
Agreement or otherwise disclosed by Borrower to Bank in writing.


          2.21  Bankruptcy.
Borrower is and at all times shall remain solvent as defined under applicable
Texas state law and the federal bankruptcy code and is not now and has not been
in the past three (3) years a debtor under any title of the United States
Bankruptcy Code, 11 U.S.C. §§ 101, et seq.


          2.22  Organizational Identification Number, Etc.
The number assigned by the State of Texas as Borrower’s organizational
identification number is 0024967800; and Borrower understands that the
organizational identification number above is not Borrower’s federal or state
tax or employer identification number. The Revolving Line is being obtained and
the Collateral is being used, held or acquired for business purposes.


Nothing in
this Section 2 shall be deemed to extend the availability of the Revolving Line
beyond the time noted in Section 13 hereof.


SECTION 3. Inspection of Records; Further
Assurance.


          Borrower
shall at reasonable times and from time to time allow Bank, by or through any
of its officers, managers, agents, employees, attorneys or accountants to
(i) examine, inspect and make extracts from Borrower’s books and records;
(ii) analyze Borrower’s financial statements; (iii) arrange for verification
of Borrower’s Accounts Receivable, Inventory, Eligible Accounts Receivable and
Eligible Inventory under reasonable procedures, directly with Account Debtors
or by other methods; and (iv) inspect, review and audit Borrower’s
Inventory and other Collateral at any time during normal business hours,
without prior notice to Borrower. Borrower shall allow, do, make, execute and
deliver all such additional and further acts, things, deeds, assurances,
agreements and instruments which Bank may require more completely to vest in
and assure to Bank its rights hereunder and in any Collateral and to assure
that Borrower’s Loan Account balance does not exceed Borrower’s availability
hereunder. 


9






Nothing in
this Section 3 shall be deemed to extend the availability of the Revolving Line
beyond the time noted in Section 13 hereof.


SECTION 4. Security Interest of Bank in
Collateral. 


          4.1  Collateral. As
security for the payment and performance of all Liabilities, Bank shall have
and Borrower hereby assigns to Bank and grants to Bank a continuing lien on,
security interest in and right of set-off against the following described
property and rights:


          All
of Borrower’s assets, including but not limited to:


	
 

	
 

	
 


	
 

	
          (a)
  Accounts and Accounts Receivable;


	
 

	
 

	
 


	
 

	
          (b)
  Inventory, equipment, machinery, furnishings and furniture, wheresoever the
  same may be located; 


	
 

	
 

	
 


	
 

	
          (c)
  contract rights, investment property, chattel paper, electronic chattel paper
  and software, commercial tort claims, deposit accounts, letter of credit
  rights, health-care-insurance receivables, documents, documents of title,
  warehouse receipts, bills of lading, notes, notes receivable, instruments,
  general intangibles and payment intangibles;


	
 

	
 

	
 


	
 

	
          (d)
  licenses, patents, tradenames, trademarks and copyrights and any and all
  licenses and other rights to use, incorporate, license, sell and/or assign
  any licenses, patents, tradenames, trademarks and copyrights and any property
  incorporating any of the foregoing, together with all applications for
  registration and registrations obtained for any of the foregoing, and all
  renewals and/or extensions thereof, rights to sue for infringements and all
  other rights corresponding thereto, and all related licenses and royalties,
  and all further or other property that pertains, incorporates or relates to
  or emanates or derives from any license, patent, tradename, trademark or
  copyright and/or the ownership, use, possession, transfer, or licensing
  thereof (whether as licensor or licensee) and any property which embodies or
  incorporates any of the foregoing, and all proceeds, products, rents, issues,
  royalties, profits and returns of and from any of the foregoing, and all
  related rights and property (collectively referred to as “Intellectual
  Property”);


	
 

	
 

	
 


	
 

	
          (e)
  goods, instruments, notes, notes receivable, documents, documents of title,
  warehouse receipts, bills of lading, certificates of title, policies and
  certificates of insurance, securities, investment property, chattel paper,
  deposits, cash and other property which are now or may hereafter be in the
  possession of or deposited with Bank, or which are otherwise assigned to
  Bank, or as to which Bank may now or hereafter control possession by
  documents of title or otherwise; and


	
 

	
 

	
 


	
 

	
          (f)
  substitutions, accessions, additions, parts, accessories, attachments,
  replacements, Proceeds and products of, for and to any and all of the
  foregoing, including, without limitation, any and all insurance and tort
  proceeds, and any and all such substitutions, accessions, additions, parts,
  accessories, attachments, replacements, Proceeds and products in the form of
  any of the property described or referenced in (a) through (e) above,





10






          whether
now or hereafter owned, existing, created, arising or acquired.


          4.2  Security Interest in Collateral
Created/Acquired Hereafter. No submission by Borrower
to Bank of any schedule or other particular identification of Collateral shall
be necessary to vest in Bank a security interest in each and every item of
Collateral now existing or hereafter created or acquired, but rather, such
security interest shall vest in Bank immediately upon the creation or
acquisition of any item of Collateral, without the necessity for any other or
further action by Borrower or Bank; provided, however, that Borrower shall
execute such other and additional documents, instruments and agreements as
requested by Bank to evidence the security interests contemplated hereby. In
addition to and without limiting any other rights and remedies of Bank arising
under this Credit Agreement and/or applicable law, Borrower hereby grants,
assigns and transfers to Bank a fully-paid, royalty-free, perpetual,
non-exclusive, unrestricted license to use, sell, assign, modify, reproduce,
distribute, license and sublicense any copyright, patent, tradename, trademark
or license and other Intellectual Property constituting Collateral and any
goods and other property incorporating any of the foregoing which Bank may
exercise at any time upon or after the occurrence of a default or event of
default under this Credit Agreement or any of the other Loan Documents without
further action, consent or approval of Borrower; unless the Borrower is not
permitted to assign such collateral under the terms and conditions governing
the Borrower’s use of such collateral.


          4.3  Further Assurances.
To the extent allowable under applicable law, the Uniform Commercial Code of
Texas shall govern the security interests provided for herein. In connection
therewith, Borrower (at Borrower’s expense) shall take such steps and execute,
deliver and file (as applicable) (or cause the execution, delivery and filing
(as applicable) of) such financing statements, continuation statements, agreements
(including, without limitation, security agreements and landlord, creditor and
mortgagee subordination agreements), documents, and papers (all in form and
substance acceptable to Bank) as Bank may from time to time request to perfect
or preserve the perfection and priority of Bank’s security interests granted
hereby or by any of the other Loan Documents. Borrower hereby appoints and
empowers Bank, or any employee of Bank which Bank may designate for the
purpose, as its attorney-in-fact, to execute and/or endorse (and file, as
appropriate) on its behalf any documents, agreements, papers, checks, financing
statements and other documents which, in Bank’s sole judgment, are necessary to
be executed, endorsed and/or filed in order to (i) perfect or preserve the
perfection and priority of Bank’s security interests granted hereby or by any
of the other Loan Documents and (ii) collect or realize upon the
Collateral or otherwise exercise its rights and remedies under any of the Loan
Documents or applicable law. Without limiting any of Bank’s rights and remedies
under law or any other provisions of this Credit Agreement or any of the other
Loan Documents, Borrower authorizes the filing by Bank of any and all financing
statements in any and all jurisdictions Bank deems necessary or appropriate to
perfect Bank’s security interest in the Collateral and/or any other property.


          4.4  Additional Further Assurances.
If, by reason of location of Borrower, the Collateral or otherwise, the
creation, validity, or perfection of security interests provided for herein are
governed by law other than the Uniform Commercial Code of Texas, Borrower shall
take such steps and execute and deliver such documents, agreements, papers and
financing statements as Bank may from time to time request to comply with the
Uniform Commercial Code, or other laws of Texas or other states or
jurisdictions, each as applicable. Borrower


11








hereby
appoints and empowers Bank, or any employee of Bank which Bank may designate
for the purpose, as its attorney-in-fact, to execute and/or endorse (and file,
as appropriate) on its behalf any documents, agreements, papers, checks,
financing statements and other documents which, in Bank’s sole judgment, are
necessary to be executed, endorsed and/or filed in order to (i) perfect or
preserve the perfection and priority of Bank’s security interests granted
hereby or by any of the other Loan Documents and (ii) collect or realize
upon the Collateral or otherwise exercise its rights and remedies under any of
the Loan Documents or applicable law.


          4.5
Restrictions on Pledging, Mortgaging Collateral.
Except for the Permitted Liens, Borrower shall not pledge, mortgage, or create
or suffer to exist a security interest in any of the Collateral or any Proceeds
or products thereof, or sell, assign, or create a security interest in any of
the Collateral or any Proceeds or products thereof in favor of any person other
than Bank unless such security interest is expressly subordinated to Bank’s
security interest therein and Bank has approved in writing the existence and
status of such security interest.


Nothing in this Section 4
shall be deemed to extend the availability of the Revolving Line beyond the
time noted in Section 13 hereof.


SECTION 5. Collection of Accounts Receivable.



          5.1
Collection and Application of Proceeds; Notifying Account Debtors.
Until Bank requests that Account Debtors on Accounts Receivable of Borrower be
notified of Bank’s security interest therein, Borrower shall continue to
collect such Accounts Receivable. Borrower shall notify Bank of any collections
received and shall hold the same in trust for Bank without commingling the same
with other funds of Borrower and shall turn the same over to Bank immediately
upon receipt in the identical form received. All Account payments and other
Proceeds transmitted to Bank via any lock-box, by Borrower or otherwise, will
be handled and administered in and through a remittance or special account; the
maintenance of any such account shall be solely for the convenience of Bank,
and Borrower shall not have any right, title, or interest in or to any such
account or in the amounts at any time appearing to the credit thereof. Bank may
apply and credit Account payments and other Proceeds transmitted to or
otherwise received by Bank via any lock-box, by Borrower or otherwise, against
the outstanding balance in Borrower’s Loan Account or any other Liabilities;
however, Bank shall not be required to credit Borrower’s Loan Account or any
other Liabilities with the amount of any check or other instrument constituting
provisional payment until Bank has received final payment thereof at its office
in cash or solvent credits accepted by Bank. In addition, Borrower shall notify
the Account Debtors of the security interest of Bank in any Account and shall
instruct Account Debtors to remit payments directly to Bank by way of a Compass
Bank lock-box (to be identified by Bank), and Bank may itself at any time so
notify and instruct Account Debtors. 


          5.2
Collection of Accounts. Borrower (i) shall
(a) deliver any instrument or chattel paper evidencing or constituting an
Account to Bank, and (b) use its best efforts to collect its Accounts in a
commercially reasonable manner; and (ii) agrees that no court action or
other legal proceeding or garnishment, attachment, repossession of property,
detinue, sequestration or any other attempt to repossess any merchandise covered
by an Account shall be attempted by Borrower except by or under the direction
of competent legal counsel. Borrower hereby agrees to indemnify and hold Bank
harmless for any loss or liability of any kind or character which may be
asserted against Bank by virtue of any suit filed, process issued, or any
repossession or


12






attempted
repossession done or attempted by Borrower or by virtue of any other actions or
endeavors which Borrower may make to collect any Accounts or repossess any such
merchandise, EXCEPT AS A RESULT OF BANK’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.


Nothing in this Section 5
shall be deemed to extend the availability of the Revolving Line beyond the
time noted in Section 13 hereof.


SECTION 6. Additional Affirmative Covenants.


          Until
all indebtedness of Borrower to Bank has been paid in full and all Liabilities
have been satisfied:


          6.1
Financial Statements and Other Information. Borrower
shall submit or cause to be submitted to Bank (i) Borrower’s internally
prepared quarterly financial statements on a consolidated and consolidating
basis within forty-five (45) days after the close of each fiscal quarter in
each fiscal year, including a balance sheet as of the close of such period, an
income statement, and such other statements containing financial information
which Bank reasonably may require, prepared in accordance with GAAP and
attested to by an authorized officer of Borrower; (ii) Borrower’s audited
fiscal year-end financial statements (in form, preparation and substance
acceptable to Bank) on a consolidated and consolidating basis within ninety
(90) days after the close of each of its fiscal years, including a balance
sheet as of the close of such period, an income statement, a reconciliation of
stockholders’ equity, and a statement of cash flows, all certified by
an independent certified public accountant acceptable to Bank and analyzed in
accordance with GAAP; (iii) each guarantor’s annual financial statements
within ninety (90) days after the close of each of Borrower’s fiscal years;
(iv) together with each delivery of financial statements required above,
the compliance certificate of Borrower substantially in the form of Exhibit
B hereto signed by a Responsible Officer of Borrower stating, among other
things, that no event has occurred which constitutes an event of default or
would constitute an event of default but for the requirement that notice be
given, or time elapse or both, under any loans, notes, debentures, bonds,
leases, or other obligations of Borrower then outstanding, including, but not
limited to, this Credit Agreement (such certificate shall publish the
accounting calculations used to determine compliance or noncompliance with
Borrower’s financial obligations and financial covenants, including those
provided in this Credit Agreement), or, if any such event of default or
defaults exists, specifying the nature thereof; (v) if requested by Bank,
copies of Borrower’s consolidated annual tax returns (and all related
schedules, forms and attachments) within thirty (30) days following the filing
thereof with the Internal Revenue Service; (vi) an annual budget of
Borrower, in a monthly format (in form and content satisfactory to Bank in its
sole discretion), consisting of a balance sheet and related statements of
income, retained earnings, and cash flow, to be provided within thirty (30)
days prior to the year end for the upcoming year; (vii) an annual capital
expenditure budget; and (viii) such other financial and related
information when and as requested by Bank regarding Borrower, the Collateral
and any endorser, guarantor or surety of any of the Liabilities of Borrower to
Bank.


          6.2
Insurance. Borrower shall (i) maintain insurance
(written by insurance companies acceptable to Bank) in form, amount and
substance acceptable to Bank, including, without limitation, extended
multi-peril hazard, worker’s compensation, general liability insurance and
insurance upon Borrower’s property, all facets of its businesses and all the


13






Collateral;
(ii) furnish to Bank, upon request, a statement of the insurance coverage;
(iii) use its best efforts to protect and preserve the Collateral and
shall obtain other or additional insurance promptly, upon request of Bank, to
the extent that such insurance may be available; and (iv) cause Bank to be
named as an additional insured and a lender loss payee as to all insurance
covering Collateral, pursuant to endorsements in form and substance acceptable
to Bank. All insurance proceeds, payments and other amounts paid to or received
by Bank under or in connection with any and all such policies may be retained
by Bank in whole or part as additional Collateral for the Liabilities and/or,
at Bank’s option, be applied in whole or part to the payment of such of the
Liabilities as shall then be due and/or, at Bank’s option, be held (in a
remittance or other special account in which neither Borrower nor any guarantor
shall have an interest) for application to Liabilities not yet due and be
applied to such Liabilities as and when the same shall come due, in such order
as Bank may determine in its sole discretion. All insurance policies shall
provide for a minimum of ten (10) days’ written cancellation notice to Bank
and, at Bank’s request, all such policies shall be delivered to and held by
Bank. In the event of failure to provide and maintain insurance required by
this Credit Agreement, Bank may, at its option, provide such insurance and
charge the costs and expenses incurred to Borrower’s Loan Account. Bank is
hereby made attorney-in-fact for Borrower to (i) obtain, adjust, and
settle, in its sole discretion, such insurance, and (ii) endorse any
drafts or checks issued in connection with such insurance.


          6.3
Compliance with Laws. Borrower does and shall at all
times while any Liabilities remain unsatisfied comply with all applicable laws,
ordinances, rules and regulations of any governmental authority or entity
governing or affecting Borrower, any of its property, the Collateral or any
part thereof, and shall immediately notify Bank of any and all actual, alleged
or asserted violations of any such laws, ordinances, rules or regulations.
Without limitation to the generality of the foregoing, Borrower shall comply,
and cause to be complied, with all laws, governmental standards and regulations
applicable to Borrower or any Collateral in respect of occupational health and
safety, toxic and hazardous waste and substances and environmental matters.
Borrower promptly shall notify Bank of receipt of any notice of any actual,
alleged or asserted violation of any such law, standard or regulation. Borrower
hereby agrees to indemnify, defend and hold Bank harmless from all loss, cost,
damage, claim and expense incurred by Bank on account of Borrower’s breach of
any representation, warranty or requirement of this Section, Borrower’s failure
to perform the obligations of this Section, and/or Borrower’s or any
Collateral’s violating any applicable laws, ordinances, rules or regulations,
including, without limitation, any environmental or occupational health and
safety laws or regulations. This indemnification shall survive the closing of
the Revolving Line, payment of the Revolving Line and the exercise of any right
or remedy under any of the Loan Documents. Borrower represents that there are no
pending claims or threats of claims by private or governmental or
administrative authorities relating to environmental impairment, conditions, or
regulatory requirements involving Borrower or any Collateral.


          6.4
Fixed Charge Coverage Ratio. Borrower shall maintain a
minimum Fixed Charge Coverage Ratio of 1.25 to 1.00, which ratio shall be
measured on a quarterly basis at the end of each fiscal quarter, or more
frequently if financial statements are required more frequently under Section
6.1 hereof. Borrower’s Fixed Charge Coverage Ratio shall be defined as the
quotient of (i) for the twelve month period then ending, the sum of
(a) (1) Borrower’s earnings before interest, tax, depreciation and
amortization expenses (“EBITDA”), plus (2) all non-cash


14






charges and
expenses as provided by GAAP standards plus (3) Borrower’s rent expenses paid, plus
(4) management fees paid to Zunicom, Inc. (“Zunicom”) less
(b) the sum of (1) Borrower’s dividends paid, plus (2) Borrower’s
cash taxes and distributions to Zunicom or other related parties plus (3)
non-financed capital expenditures; divided by (ii) the sum of
(a) Borrower’s regularly scheduled payments of principal to be paid during
the next twelve month period, plus (b) Borrower’s capital lease
obligations to be paid over the next twelve month period, plus
(c) Borrower’s interest expense paid during the twelve month period then
ending, plus (d) Borrower’s rent expenses paid during the twelve month
period then ending, plus (e) Management Fees paid to Zunicom during
the twelve month period then ending. Borrower shall provide Bank with full
cooperation with respect to all tests hereunder.


          6.5
Funded Debt to EBITDA. Borrower shall maintain a
Funded Debt to EBITDA Ratio of no more than 3.50 to 1.00, which ratio shall be
measured on quarterly basis at the end of each fiscal quarter, or more
frequently if financial statements are required more frequently under Section
6.1 hereof. Borrower’s Funded Debt to EBITDA Ratio shall be defined as the
quotient of Funded Debt divided by EBITDA. Borrower shall provide Bank with
full cooperation with respect to all tests hereunder. 


          6.6
Fees. In consideration of Bank’s commitment to make
advances on the Revolving Line and Bank’s incurring certain administrative expenses,
Borrower agrees to and shall pay to Bank (i) a non-refundable credit
facility fee in the amount of $17,500.00 due and payable at closing; and
(ii) a letter of credit fee equal to one and one half percent (1.50%) of
the amount of any letters of credit requested to be issued by Bank for the
benefit of Borrower hereunder, such amount(s) to be paid annually; and
(iii) quarterly (or more often as may be required by the terms below), in
arrears, an unused line fee (calculated as set forth below on the basis of a
360-day year) beginning to accrue on the date hereof with the first payment due
on September 30, 2007, and payments thereafter due on the last day of each
succeeding calendar quarter (and on the Maturity Date (or on any other date
when advances under the Revolving Line are terminated and the amount
outstanding under the Revolving Line is paid in full)) equal to the product of
(a) 0.25% of the average Unused Availability under the Revolving Line for
the calendar quarter or portion thereof preceding such payment and (b) the
number of days elapsed since the latter of the date hereof or the date of the
last such payment under this Section (if any), divided by 360. For purposes of
this Section, “Unused Availability” shall mean and refer to the amount by which
$30,000,000.00 exceeds the average balance of Borrower’s Loan Account for such
period. Borrower further agrees to pay any fee imposed by Bank pursuant to the
Loan Documents including, but not limited to the fees set forth in Section 11
or Section 12 herein.


          6.7
Notification of Defaults, Suits, Etc. Promptly after
the same shall have become known to Borrower, Borrower shall notify Bank in
writing of (i) any default or event of default under any of the Loan
Documents, (ii) any material change in Borrower’s financial condition
and/or prospects and/or (iii) any action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency which,
if adversely determined, might impair the ability of Borrower to perform its
obligations under the Loan Documents, impair the ability of Borrower to carry
on its business substantially as now conducted, or which might materially
affect the business, operations, properties, assets or condition, financial or
otherwise, of Borrower.


15






          6.8
Deposit Account. So long as any Liabilities are
outstanding, Borrower shall establish and maintain its primary deposit accounts
with Bank. 


          6.9
Lockbox Accounts. During the term of this Credit
Agreement, all of the Borrower’s Accounts Receivable shall continue to be
deposited into a lockbox account maintained with Bank.


Nothing in this Section 6
shall be deemed to extend the availability of the Revolving Line beyond the
time noted in Section 13 hereof.


SECTION 7. Additional Negative Covenants.


          Until all
indebtedness of Borrower to Bank has been paid in full and all Liabilities have
been satisfied:


          7.1
Liens. Borrower shall not create or permit the
creation of any lien upon any of the Collateral except for Permitted Liens and
the security interests granted to Bank under the Loan Documents.


          7.2
Borrowings; Permitted Indebtedness. Except for
borrowings under the Revolving Line, Borrower shall not borrow any money other
than (i) Subordinated Debt existing of this Credit Agreement (but only to
the extent such borrowings and loans shall be fully subordinated hereto) or
(ii) for trade credit in the ordinary course of business, without Bank’s
prior written consent. Except in favor of Bank, Borrower shall not guarantee,
endorse or assume, either directly or indirectly, any indebtedness of any other
corporation, person, or entity.


          7.3
Dividends. Borrower shall not pay, make or declare any
dividends, distributions, or other similar payments, or make any other advances
of any nature whatsoever, to Borrower’s directors, managers, officers,
employees, owners, parent, members, affiliates, subsidiaries or other related
persons or entities, without Bank’s prior written consent, except that the
Borrower shall be permitted to declare dividends to its shareholders in the
ordinary course of business. Unless dividends or distributions are made with
the Bank’s prior written consent and are made to all shareholders, no
additional dividends or distributions shall be made to Zunicom. Borrower shall
not redeem, purchase or in any manner acquire any of its outstanding shares
without Bank’s prior written consent.


          7.4
Capital Expenditures. Borrower and its subsidiaries,
on a consolidated basis, shall not make aggregate capital expenditures or
contracts for capital expenditures, unless financed under this Credit
Agreement.


          7.5
Acquiring Assets, Etc. of Other Entities. Borrower shall not
purchase or acquire, directly or indirectly, any shares of stock, any substantial
part of the assets of, any interest in, evidences of indebtedness, loans or
other securities of any person, corporation or other entity, without Bank’s
prior written consent; provided, however, that Borrower shall be permitted to
make acquisitions that do not exceed an amount of $7,500,000 for each
acquisition and an aggregate amount of $20,000,000 during the term of this
Credit Agreement. To the extent any such acquisitions are made, the acquired
entity’s EBITDA may be considered for purposes of calculating the financial
covenants contained in this Credit Agreement at the Bank’s 


16









discretion.
Both prior to and following any acquisition permitted by this Section 7.5, the
Borrower shall remain in compliance with this Credit Agreement, including all
financial covenants, and shall provide the Bank with pro forma information
demonstrating such compliance prior to any such acquisition.


          7.6
Dissolution, Mergers, Change in Nature. Borrower shall
not (i) liquidate, discontinue or materially reduce its normal operations
with intention to liquidate; (ii) cause, allow or suffer to occur
(a) the merger or consolidation of or involving Borrower with or into any
corporation, partnership, or other entity, or (b) the sale, lease,
transfer or other disposal of all or any substantial part of its assets, or any
of its Accounts Receivable; (iii) acquire any corporation, partnership or
other entity (or any interest therein), whether by stock or asset purchase or
acquisition or otherwise, without the prior written consent of Bank;
(iv) enter into any lease which could be characterized as a capitalized
lease; or (v) cause, allow, or suffer to occur any change in the
management, nature, control or corporate structure of Borrower without the
prior written consent of Bank.


          7.7 Subordinated Debt. Borrower shall not
(a) make any payment upon or (b) change any terms governing any Subordinated
Debt described in any subordination agreement delivered to Bank, except as
otherwise provided in such subordination agreement(s).


          7.8 Loans to Related Parties and Affiliates.
Except as otherwise specified herein or otherwise agreed and consented to by
Bank, Borrower shall not make, extend or allow to remain outstanding any loans
or advances to or investments in Borrower’s affiliates, parent, subsidiaries,
owners, directors, employees, members, officers, managers or other related
persons or entities that cause or would cause a violation or a further
violation of any of the covenants, terms or conditions of Section 6 or Section
7 of this Credit Agreement. No additional loans shall be made to Zunicom, and
the terms of all existing loans made to Zunicom shall not be changed without
the Bank’s prior written consent.


          7.9
Material Contract. Borrower shall not permit the
Brinks Home Security contract with Borrower to be cancelled or to fail to be
renewed, and shall not permit any modification of such contract without the
Bank’s prior written consent.


SECTION 8. Conditions Precedent to Credit
Extensions.


          8.1
Conditions of Initial Credit Extension. The obligation
of Bank to make its initial credit extension hereunder is subject to
satisfaction of the following conditions precedent:


	
 

	
 


	
 

	
          (a)
  Bank’s receipt of the following, each of which shall be originals or
  facsimiles (followed promptly by originals) unless otherwise specified, each
  properly executed by a Responsible Officer of the signing Loan Party, each
  dated the date hereof (or, in the case of certificates of governmental
  officials, a recent date before the date hereof) and each in form and
  substance satisfactory to Bank and its legal counsel:








	
 

	
 


	
 

	
          (i)
  executed counterparts of this Credit Agreement, sufficient in number for
  distribution to Bank and Borrower;


	
 

	
 


	
 

	
          (ii)
  the Note executed by Borrower;





17






	
 

	
 


	
 

	
          (iii)
  such certificates of resolutions or other action, incumbency certificates
  and/or other certificates of Responsible Officers of Borrower as Bank may
  require evidencing the identity, authority and capacity of each Responsible
  Officer thereof authorized to act as a Responsible Officer in connection with
  this Credit Agreement and the other Loan Documents to which Borrower is a
  party;


	
 

	
 


	
 

	
          (iv)
  such documents and certifications as Bank may reasonably require to evidence
  that Borrower is duly organized or formed, and that Borrower is validly existing,
  in good standing and qualified to engage in business in each jurisdiction
  where its ownership, lease or operation of properties or the conduct of its
  business requires such qualification;


	
 

	
 


	
 

	
          (v)
  a duly completed initial Reconciliation Report;


	
 

	
 


	
 

	
          (vi)
  evidence that all insurance required to be maintained pursuant to the Loan
  Documents has been obtained and is in effect;


	
 

	
 


	
 

	
          (vii)
  an executed Amended and Restated Creditors’ Subordination Agreement executed
  by Zunicom; and 


	
 

	
 


	
 

	
          (viii)
  such other assurances, certificates, documents, consents or opinions as Bank
  reasonably may require.








	
 

	
 


	
 

	
          (b)
  Any fees required to be paid on or before the closing date shall have been
  paid.


	
 

	
 


	
 

	
          (c)
  Borrower shall have paid all costs and expenses of Bank (including attorneys’
  fees) to the extent invoiced prior to or on the closing date, plus such
  additional amounts of costs and expenses as shall constitute its reasonable
  estimate of costs and expenses incurred or to be incurred by it through the
  closing proceedings (provided that such estimate shall not thereafter
  preclude a final settling of accounts between Borrower and Bank).





          8.2 Conditions to all Credit Extensions.
The obligation of Bank to make any credit extension is subject to the following
conditions precedent:


	
 

	
 


	
 

	
          (a)
  The representations and warranties of Borrower and each other Loan Party
  contained in Section 2 or any other Loan Document, or which are
  contained in any document furnished at any time under or in connection
  herewith or therewith, shall be true and correct on and as of the date of
  such credit extension, except to the extent that such representations and
  warranties specifically refer to an earlier date, in which case they shall be
  true and correct as of such earlier date, and except that for purposes of
  this Section 8.2, the representations and warranties contained in
  Section 2.11 shall be deemed to refer to the most recent statements
  furnished pursuant to Section 6.1.


	
 

	
 


	
 

	
          (b)
  For any advance that is an advance related to a capital expenditure,
  documentation regarding the use of such advance and the relevant capital
  expenditure shall have been provided to the Bank.





18






	
 

	
 


	
 

	
          (c)
  No Default shall exist, or would result from such proposed credit extension.





SECTION 9. Events of Default; Acceleration. 


          Any
or all of the obligations, indebtedness and liabilities of Borrower to Bank,
including, without limitation, the Liabilities, shall be, at the option of Bank
and notwithstanding any time or credit allowed by any of the Loan Documents or
any other document, agreement or instrument evidencing any of the Liabilities,
immediately due and payable without notice or demand, and the obligation of
Bank to make advances hereunder shall immediately cease and terminate upon and
after the occurrence of any of the following events of default:


	
 

	
 


	
 

	
          (a)
  default in the payment or performance, when due or payable, of any of the
  Liabilities of Borrower or any liability or obligation (whether now or
  hereafter existing, arising or incurred, direct or indirect, conditional or
  unconditional) of any endorser, guarantor, or surety for any of the
  Liabilities of Borrower to Bank;


	
 

	
 


	
 

	
          (b)
  failure by Borrower, any guarantor or any other person or entity, as
  applicable, to (i) pay or perform any act or obligation imposed hereby
  or by any of the other Loan Documents, or (ii) comply with any of the
  terms, conditions, warranties, covenants or requirements contained or
  referenced herein or in one or more of the other Loan Documents;


	
 

	
 


	
 

	
          (c)
  failure of Borrower or any other person or entity, as applicable, to pay when
  due (i) any tax or (ii) any premium on any (a) insurance
  policy assigned to Bank, or (b) any insurance covering any Collateral;


	
 

	
 


	
 

	
          (d)
  if any warranty or representation contained herein shall prove false or
  misleading or if Borrower or any endorser, guarantor or surety for any of the
  Liabilities of Borrower to Bank made or makes any other misrepresentation to
  Bank for the purpose of obtaining credit or any extension of credit;


	
 

	
 


	
 

	
          (e)
  failure of Borrower or any endorser, guarantor, or surety for any of the
  Liabilities of Borrower to Bank to furnish financial information or to permit
  the inspection of the books or records or Collateral of Borrower or of any
  endorser, guarantor or surety for any of the Liabilities of Borrower to Bank;


	
 

	
 


	
 

	
          (f)
  issuance of an injunction or attachment against property of, the general
  assignment by, judgment against or filing of a petition in bankruptcy by or
  against Borrower or any endorser, guarantor or surety for any of the
  Liabilities of Borrower to Bank; the filing of an application in any court
  for a receiver for Borrower or any endorser, guarantor or surety for any of
  the Liabilities of Borrower to Bank; or the death, dissolution, incapacity or
  liquidation of Borrower or of any endorser, guarantor or surety for any of
  the Liabilities of Borrower to Bank;


	
 

	
 


	
 

	
          (g)
  calling of a meeting of creditors, appointment of a committee of creditors or
  liquidation agents, or offering of a composition or extension to creditors
  by, for or of





19






          Borrower or by, for or of any
endorser, guarantor or surety for any of the Liabilities of Borrower to Bank;


	
 

	
 


	
 

	
          (h)
  bankruptcy or Insolvency of Borrower or of any of Borrower’s owners, or of
  any endorser, guarantor or surety for any of the Liabilities of Borrower to
  Bank;


	
 

	
 


	
 

	
          (i)
  any change in the management, nature, control or structure of Borrower
  without the prior written consent of Bank;


	
 

	
 


	
 

	
          (j)
  failure of Borrower or any other person or entity, as applicable, to maintain
  any insurance required hereunder and/or assigned or pledged to Bank in
  connection herewith;


	
 

	
 


	
 

	
          (k)
  occurrence or continuation of any default or event of default by or
  attributable to Borrower under or in connection with any mortgage, lease,
  security agreement, note, bond, indenture, loan agreement or similar
  instrument or agreement to which Borrower is now or may hereafter be a party
  or by which Borrower or any of its property (including, without limitation,
  the Collateral) is now or may hereafter be bound or affected;


	
 

	
 


	
 

	
          (l)
  fraud or misrepresentation by or on behalf of Borrower or any guarantor in
  its transactions with Bank;


	
 

	
 


	
 

	
          (m)
  such a change in the condition or affairs (financial or otherwise) of
  Borrower or of any endorser, guarantor or surety for any of the Liabilities
  of Borrower to Bank or of the Collateral or any other source of repayment of
  or security for any of the Liabilities which, in the opinion of Bank, impairs
  Bank’s security or increases its risk;


	
 

	
 


	
 

	
          (n)
  any breach or violation of or failure to abide by any warranty, covenant,
  term or provision of this Credit Agreement, the Note or any of the other Loan
  Documents; Bank’s not obtaining or maintaining a first perfected security
  interest in any of the Collateral; or the termination, cancellation or
  revocation of any of the Loan Documents without Bank’s consent or the
  determination by Bank that any of the Loan Documents is void, voidable or
  unenforceable; 


	
 

	
 


	
 

	
          (o)
  a judgment against Borrower remaining unpaid, unstayed or undismissed for a
  period of more than ten (10) days; 


	
 

	
 


	
 

	
          (p)
  Borrower discontinuing doing business for more than five (5) consecutive
  calendar days during any year for any reason, unless such discontinuation is
  caused by a force majeure or other significant disruption in the
  financial and business markets that is beyond the Borrower’s control; or


	
 

	
 


	
 

	
          (q)
  any default or event of default under the Note or any of the other Loan
  Documents.


	
 

	
 





          It
is expressly understood and agreed that neither (a) the provisions above
or any of the other terms of any of the Loan Documents nor (b) Borrower’s
or any other person’s compliance


20








or
non-compliance with this Credit Agreement or any of the other Loan Documents
shall abrogate or restrict Bank’s right to demand payment in full of the
Revolving Line and all other Liabilities at any time in Bank’s sole discretion.


SECTION 10. Power to Sell or Collect
Collateral. 


          Upon
the occurrence of any of the above events of default and at any time
thereafter, Bank shall have, in addition to all other rights and remedies, the
remedies of a secured party under the Uniform Commercial Code of Texas
(regardless of whether the Uniform Commercial Code has been enacted in the
jurisdiction where rights or remedies are asserted), including, without
limitation, the right to take possession and dispose of the Collateral, and for
that purpose Bank may, so far as Borrower can give authority therefor, enter
upon any premises on which the Collateral may be situated and remove the same
therefrom or take possession of same and/or store the same on such premises for
a reasonable time pending disposition under the terms of this Credit Agreement
or applicable law. Bank may require Borrower to assemble the Collateral and
make it available to Bank at a place designated by Bank which is reasonably
convenient to both parties. Unless the Collateral is perishable or is of a type
customarily sold on a recognized market, Bank shall give to Borrower at least
five (5) days’ prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. Bank may, at any time, in its discretion, transfer
any securities or other property constituting Collateral into its own name or
that of its nominee and receive the income therefrom and hold the same as
security for the Liabilities or apply it on principal, interest, charges or
expenses due on Liabilities in any manner deemed appropriate by Bank. Bank may
demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or
realize upon Collateral as Bank may determine, whether or not Liabilities or
Collateral are then due, and Bank may receive, open and dispose of mail
addressed to Borrower and sign and endorse notes, checks, drafts, money orders,
certificates and documents of title and related forms or other evidences of
payment, shipment or storage or any form of Collateral on behalf of and in the
name of Borrower as Borrower’s attorney-in-fact for such purpose. Bank may
apply Collateral and the Proceeds from any Collateral against the Liabilities
secured hereby in any manner deemed appropriate by Bank. The enumeration of the
foregoing rights is not intended to be exhaustive, and the exercise of any
right shall not preclude the exercise of any other rights, all of which shall
be cumulative. As against the obligations secured hereby, Borrower hereby
expressly waives all claims and all rights to claim any exemptions, both as to
personal and real property, allowed or allowable under the Constitution or laws
of the United States, the State of Texas or any other jurisdiction. Any notice to
Borrower of sale, disposition or other intended action by Bank, required by law
to be given to Borrower, sent to Borrower at the address of Borrower shown on
the first page of this Credit Agreement or at such other address of Borrower as
may from time to time be shown on Bank’s records, at least five (5) days prior
to such action, shall constitute reasonable notice to Borrower. Bank may resort
to any security given by this Credit Agreement or to any other security now
existing or hereafter given to secure the payment of Borrower’s Liabilities, in
whole or in part, and in such portions and in such order as may seem best to
Bank in its sole discretion, and any such action shall not in any way be
considered as a waiver of any of the rights, benefits, or security interests
evidenced by this Credit Agreement or any of the other Loan Documents. Bank
may, at all times, proceed directly against Borrower to enforce payment of
Borrower’s Liabilities and shall not be required first to enforce its rights in
the Collateral or any other security granted to it. Bank shall not be required
to take any action of 


21






any kind to
preserve, collect, or protect Bank’s or Borrower’s rights in the Collateral or
any other security granted to Bank.


SECTION 11. Set Off.


          Bank
and any participant and any holder of all or any part of the Liabilities are
given hereby as additional security for all Liabilities a continuing lien and
security interest in and upon any and all moneys, securities and other property
of Borrower and the Proceeds thereof, now or hereafter held or received by or
in transit to Bank (or such participant or holder) from or for Borrower,
whether for safekeeping, custody, pledge, transmission, collection or
otherwise, and also upon any and all deposit balances (general or special) and
credits of Borrower with, and any and all claims of Borrower against Bank (or
such participant or holder) at any time existing, and upon the occurrence of an
event of default hereunder, Bank (or such participant or holder) may apply or
set off the same against the Liabilities secured hereby or by any of the other
Loan Documents in any manner deemed appropriate by Bank (or such participant or
holder). Borrower agrees that any other person or entity purchasing a
participation from Bank may exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such person
or entity were the direct creditor of Borrower in the amount of such
participation.


SECTION 12. Waivers.


          Borrower
waives demand, presentment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of acceptance of this Credit
Agreement, and notice of advances and loans made, credit extended, Collateral
received or delivered or other action taken in reliance hereon and all other
demands and notices of any description. With respect both to the Liabilities
and Collateral, Borrower assents to any extension or postponement of the time
of payment or any other indulgence, to any substitution, exchange or release of
any or all of the Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments thereon
and the settlement, compromising or adjusting of any thereof, all in such
manner and at such time or times as Bank may deem advisable. Bank shall have no
duty as to the collection or protection of any or all of the Collateral or any
income therefrom, nor as to the preservation of any rights against prior
parties, nor as to the preservation of any rights pertaining thereto beyond the
safe custody of Collateral in its possession. Bank may exercise its rights with
respect to Collateral without resorting or regard to other Collateral or
sources of reimbursement for the Liabilities. Bank shall not be deemed to have
waived any of its rights upon or under any of the Liabilities or Collateral
unless such waiver be in writing and signed by Bank. No course of dealing and
no delay or omission on the part of Bank in exercising any right shall operate
as a waiver of such right or any other right. A waiver on any one occasion
shall not be construed as a bar to or waiver of any right on any future
occasion. All rights and remedies of Bank with respect to Liabilities or
Collateral, whether evidenced hereby, by any of the other Loan Documents or by
any other instrument or paper, shall be cumulative and may be exercised
singularly or concurrently. Bank reserves the right to assess and collect a fee
in connection with any agreement by Bank to waive the violation of any covenant
contained in the Loan Documents or to waive or forego its rights and remedies
upon the occurrence of an event of default. This section shall not in any
respect obligate Bank to waive the violation of any 


22






covenant or to
forego its rights and remedies upon the occurrence of an event of default,
which Bank may or may not do in its sole discretion.


SECTION 13. Expenses; Proceeds of Collateral.


          Irrespective
of whether the proceeds of the Revolving Line are disbursed, Borrower shall pay
all fees and expenses, including, without limitation, legal fees and expenses,
filing fees, insurance premiums and expenses, appraisal fees, recording costs
and taxes (except taxes measured by Bank’s income) incurred by Bank or Borrower
from time to time in connection with the preparation and closing, filing,
administration, amendment and modification of the Revolving Line, this Credit
Agreement, the Note, and the other Loan Documents and those documents and
instruments associated with the perfection and creation of the security
interests and other rights granted pursuant hereto or pursuant to any of the
other Loan Documents and Bank’s selling, negotiating, documenting and/or
enforcing participations in the Revolving Line and the Loan Documents. Borrower
shall pay to Bank on demand any and all such fees and expenses incurred or paid
by Bank, together with any and all fees, expenses and costs (a) of
collection or (b) otherwise incurred or paid by Bank in protecting, enforcing
or realizing its rights upon or with respect to any of the Liabilities, the
Loan Documents or the Collateral (including, without limitation, reasonable
counsel fees, including, without limitation, those incurred in connection with
any appeal or any bankruptcy proceedings). After deducting all of said fees and
expenses, the residue of any proceeds of collection or sale of Liabilities or
Collateral shall be applied to the Liabilities and interest, charges and
expenses constituting or related to the Liabilities in such order of preference
as Bank may determine, proper allowance for Liabilities not then due being
made, and, to the extent allowed by law, without limiting any of Borrower’s or
any guarantor’s obligations or any of Bank’s rights under the Loan Documents, Borrower
and guarantors shall remain liable for any deficiency. In addition and without
limiting the foregoing, Borrower shall pay and shall indemnify Bank for all
fees, losses, costs and expenses incurred by Bank in connection with the
letters of credit and/or the letters of credit documents, including, without
limitation, legal fees and expenses, arising from or related to the letters of
credit and/or the letters of credit documents.


SECTION 14. Duration; Extension. 


          The
Revolving Line shall terminate on the Maturity Date, at which time all
principal, interest, charges and expenses outstanding hereunder, under the Note
or under any of the other Loan Documents shall be due and payable in full
unless due sooner under the terms of the Note, this Credit Agreement or any of
the other Loan Documents. It is understood that any extension hereof may
require a revision of certain provisions of this Credit Agreement. No
modification or amendment of this Credit Agreement or extension of the Maturity
Date shall be effective unless placed in writing and duly executed by Bank and
Borrower. It is expressly agreed that this Credit Agreement shall survive the
maturity or termination of the Revolving Line in all respects necessary for
Bank to exercise its rights and remedies hereunder and with respect to the
Collateral. The maturity or termination of the Revolving Line shall in no way
affect any transactions entered into or rights created or obligations incurred
prior to such maturity or termination; rather, such rights and obligations
shall be fully operative until the same are fully disposed of, concluded and/or
liquidated. Without limitation to the generality of the foregoing, such
maturity or termination shall not release nor diminish any of (i) Borrower’s
obligations and


23






agreements, or
(ii) Bank’s rights and remedies arising hereunder or in connection
herewith until full and final payment and performance of all of the
Liabilities. This Credit Agreement shall be a continuing agreement in every
respect.


SECTION 15. General.


          Any
demand upon or notice to Borrower that Bank may elect to give shall be
effective (i) upon delivery if such notice is given personally, or
(ii) upon the third day following the date of dispatch if deposited in the
mails, addressed to Borrower at the address noted on the first page of this
Credit Agreement or, if Borrower has notified Bank in writing of a change of
address, to Borrower’s last address so notified, or (iii) upon receipt if
by facsimile, telecopy, or email. Demands or notices addressed to Borrower’s
address at which Bank customarily communicates with Borrower shall also be
effective. If at any time or times by assignment or otherwise Bank transfers
any of the Liabilities (either separately or together with the Collateral
therefor), such transfer shall carry with it Bank’s powers and rights under
this Credit Agreement and the other Loan Documents with respect to the
Liabilities and/or Collateral transferred, and the transferee shall become
vested with said powers and rights whether or not they are specifically
referred to in the transfer. If and to the extent Bank retains any of the
Liabilities or Collateral, Bank will continue to have the rights and powers
herein set forth with respect thereto. All notices provided to Bank by Borrower
under or related to any of the Loan Documents, the Liabilities or the
Collateral, including, without limitation, under any one or more Sections of
the Texas Uniform Commercial Code, shall be sent to the address of Bank noted
on the first page of this Credit Agreement, Attention: Structured Lending, with
a copy to Compass Bank, P.O. Box 11830, Birmingham, Alabama 35202; no notice
sent to Bank shall be effective until received by Bank. THE NOTE, THIS CREDIT
AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS, AND ALL RIGHTS AND OBLIGATIONS
HEREUNDER AND THEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT THAT ANY CONFLICT OF LAWS RULE OF SUCH
JURISDICTION THAT WOULD REQUIRE REFERENCE TO THE LAWS OF SOME OTHER
JURISDICTION SHALL BE DISREGARDED. ANY SUITS, CLAIMS OR CAUSES OF ACTION
ARISING DIRECTLY OR INDIRECTLY FROM THIS CREDIT AGREEMENT, THE NOTE, THE OTHER
LOAN DOCUMENTS OR ANY OTHER AGREEMENTS OR INSTRUMENTS BETWEEN BANK AND BORROWER
RELATING TO SUCH DOCUMENTS MAY BE BROUGHT IN A COURT OF APPROPRIATE
JURISDICTION IN DALLAS COUNTY, TEXAS AND OBJECTIONS TO VENUE AND PERSONAL
JURISDICTION IN SUCH FORUM ARE HEREBY EXPRESSLY WAIVED. THIS CREDIT AGREEMENT
HAS BEEN NEGOTIATED AND IS BEING EXECUTED AND DELIVERED IN THE STATE OF TEXAS,
OR IF EXECUTED BY BORROWER ELSEWHERE, SHALL BECOME EFFECTIVE UPON BANK’S
RECEIPT AND ACCEPTANCE OF THE EXECUTED ORIGINAL OF THIS CREDIT AGREEMENT IN THE
STATE OF TEXAS; PROVIDED, HOWEVER, THAT BANK SHALL HAVE NO OBLIGATION TO GIVE,
NOR SHALL BORROWER BE ENTITLED TO RECEIVE ANY NOTICE OF SUCH RECEIPT AND
ACCEPTANCE FOR THIS CREDIT AGREEMENT TO BECOME A BINDING OBLIGATION OF
BORROWER. IT IS INTENDED, AND BORROWER AND BANK SPECIFICALLY AGREE, THAT THE
LAWS OF THE STATE OF TEXAS 


24






GOVERNING
INTEREST SHALL APPLY TO THIS TRANSACTION. BORROWER HEREBY ACKNOWLEDGES THAT (I)
THE NEGOTIATION, EXECUTION, AND DELIVERY OF THE LOAN DOCUMENTS CONSTITUTE THE
TRANSACTION OF BUSINESS WITHIN THE STATE OF TEXAS, (II) ANY CAUSE OF ACTION
ARISING UNDER ANY OF SAID LOAN DOCUMENTS WILL BE A CAUSE OF ACTION ARISING FROM
SUCH TRANSACTION OF BUSINESS, AND (III) BORROWER UNDERSTANDS, ANTICIPATES, AND
FORESEES THAT ANY ACTION FOR ENFORCEMENT OF PAYMENT OF THE REVOLVING LINE OR
THE LOAN DOCUMENTS MAY BE BROUGHT AGAINST IT IN THE STATE OF TEXAS. TO THE
EXTENT ALLOWED BY LAW, BORROWER HEREBY SUBMITS TO JURISDICTION IN THE STATE OF
TEXAS FOR ANY ACTION OR CAUSE OF ACTION ARISING OUT OF OR IN CONNECTION WITH
THE REVOLVING LINE OR THE LOAN DOCUMENTS AND WAIVES ANY AND ALL RIGHTS UNDER
THE LAWS OF ANY STATE OR JURISDICTION TO OBJECT TO JURISDICTION OR VENUE WITHIN
DALLAS COUNTY, TEXAS; NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THIS
PARAGRAPH SHALL PREVENT BANK FROM BRINGING ANY ACTION OR EXERCISING ANY RIGHTS
AGAINST BORROWER, ANY GUARANTOR, ANY SECURITY FOR THE REVOLVING LINE, OR ANY OF
BORROWER’S OR ANY GUARANTOR’S PROPERTIES IN ANY OTHER COUNTY, STATE, OR
JURISDICTION. INITIATING SUCH ACTION OR PROCEEDING OR TAKING ANY SUCH ACTION IN
ANY OTHER STATE OR JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER BY BANK
OF ANY OF THE FOREGOING. Nothing contained herein, or in any of the documents
contemplated hereby, shall be deemed to render Bank on the one hand, and
Borrower on the other hand, partners or venturers for any purpose. This Credit
Agreement is intended to take effect as a sealed instrument.


SECTION 16. Miscellaneous.


          In
the event of actual conflict in the terms and provisions of this Credit
Agreement and any of the other Loan Documents or any other document, instrument
or agreement executed in connection with this Credit Agreement or described or
referred to in this Credit Agreement, the terms and provisions most favorable to
Bank shall control. No modification, consent, amendment or waiver of any
provision of this Credit Agreement or any of the other Loan Documents, nor
consent to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Bank, and then shall be effective only
in the specific instance and for the purpose for which given. This Credit
Agreement and each of the other Loan Documents are binding upon Borrower, its
successors and assigns, and inure to the benefit of Bank, its successors and
assigns. Borrower may not assign or delegate any of its rights or obligations
under the Revolving Line, this Credit Agreement or any of the other Loan
Documents. All representations and warranties of Borrower herein, and all covenants
and agreements of Borrower herein, in the other Loan Documents, or in any other
document delivered hereunder or in connection herewith, shall survive the
execution of this Credit Agreement and shall be deemed continuing
representations, warranties, covenants and agreements.


25






          This
Credit Agreement and each of the other Loan Documents shall be deemed to be
drafted by all parties hereto and shall not be construed against any party
hereto. In the event any one or more of the terms or provisions contained in
this Credit Agreement, in any of the other Loan Documents or in any other
instrument or agreement referred to herein or executed in connection with or as
security for the Liabilities, or any application thereof to any person or
circumstances, shall be declared prohibited, illegal, invalid or unenforceable
to any extent in any jurisdiction, as determined by a court of competent
jurisdiction, such term or provision, in that jurisdiction, shall be
ineffective only to the extent of such prohibition, illegality, invalidity or
unenforceability, or as applied to such persons or circumstances, without
invalidating or rendering unenforceable the remaining terms or provisions
hereof or thereof or affecting the validity or enforceability of such term or provision
in any other jurisdiction or as to other persons or circumstances in such
jurisdiction, unless such would effect a substantial deviation from the general
intent and purpose of the parties, make a significant change in the economic
effect of the transactions contemplated herein on Bank, or impair the validity
or perfection of Bank’s security interest in any Collateral or the validity of
any guaranty or other security for the Liabilities, in which event a substitute
provision shall be supplied by the court in order to provide Bank with the
benefits intended by such invalid term or provision. Borrower hereby expressly
acknowledges and agrees that Bank may share with and disclose to any
participant and any of Borrower’s other creditors information regarding
Borrower, the Liabilities and the Collateral as and when Bank determines is
necessary or convenient to establish and confirm to Bank’s and any
participant’s and any other creditor’s satisfaction Bank’s rights against
Borrower and rights and priority in the Collateral. The table of contents
hereto and the headings of the sections, paragraphs and subdivisions of this
Credit Agreement are for convenience of reference only, are not to be
considered a part hereof, and shall not limit or otherwise affect any of the
terms hereof.


SECTION 17. Compliance With Laws.


          It
is the intention of Bank and Borrower to conform strictly to any applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under any applicable law, then, in that event, notwithstanding
anything to the contrary in this Credit Agreement, the other Loan Documents, or
any other agreement entered into in connection with or as security for or
guaranteeing the Revolving Line, it is agreed as follows: (i) the aggregate
of all consideration which constitutes interest under applicable law that is
contracted for, taken, reserved, charged, or received by Bank under or in
connection with the Revolving Line shall under no circumstances exceed the
Highest Lawful Rate (as defined below), and any excess shall be canceled
automatically and, if theretofore paid, shall, at the option of Bank, be
credited by Bank on the principal amount of any indebtedness owed to Bank by
Borrower or refunded by Bank to Borrower, and (ii) in the event that the
payment of the Revolving Line is accelerated or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to Bank may never include more than the Highest Lawful Rate and excess
interest, if any, to Bank provided for in this Credit Agreement or the other
Loan Documents or otherwise with respect to the Revolving Line shall be
canceled automatically as of the date of such acceleration or prepayment and,
if theretofore paid, shall, at the option of Bank, be credited by Bank on the
principal amount of any indebtedness owed to Bank by Borrower or refunded by
Bank to Borrower.


26






          “Highest
Lawful Rate” means the maximum non-usurious interest rate that at any time or
from time to time may be contracted for, taken, reserved, charged, or received
on amounts due to Bank, under laws applicable to Bank with regard to the
Revolving Line that are presently in effect or, to the extent allowed by law,
under such applicable laws that allow a higher maximum non-usurious rate than
applicable laws now allow.


SECTION 18.       Amendment
and Restatement.


          This
Credit Agreement amends and restates that certain Revolving Credit and Security
Agreement dated as of December 14, 2004, as it may have been previously
amended, restated or modified.


          IN WITNESS WHEREOF, the parties hereto have
hereunder set their hands and seals on this ____ day of __________ , 2007.


[Remainder of Page Intentionally Omitted;
Signature Pages Follow]


27






	
 

	
 

	
 


	
 

	
BORROWER:


	
 


	
 

	
UNIVERSAL POWER GROUP, INC.,


	
 

	
a Texas corporation


	
 

	
 


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
Name:

	
 


	
 

	
 

	



	
 

	
Title:

	
 


	
 

	
 

	



	
 

	
 

	
 


	
 

	
BANK:


	
 

	
 


	
Witness:

	
COMPASS BANK 


	
 

	
 

	
 


	


	
By:

	
 


	
 

	
 

	



	
 

	
Name:

	
 


	
 

	
 

	



	
 

	
Title:

	
 


	
 

	
 

	






28







CORPORATE ACKNOWLEDGMENT


STATE OF
______________


COUNTY OF
____________


          I,
the undersigned, Notary Public in and for said County in said State, hereby
certify that _______________, whose name as _________________ of UNIVERSAL
POWER GROUP, INC., a Texas corporation, is signed to the foregoing
instrument and who is known to me, acknowledged before me on this day that,
being informed of the contents of the instrument, he, as such ___________ and
with full authority, executed the same voluntarily for and as the act of said
corporation.


          Given
under my hand this the _______day of __________, 2007.


	
 

	
 

	
 


	
 

	
___________________________________________


	
 

	
Notary
  Public


	
[NOTARIAL
  SEAL]

	
My
  commission


	
 

	
expires: _______________________





STATE OF
_______________


COUNTY OF
_____________


          I,
the undersigned, Notary Public in and for said County in said State, hereby
certify that _________________ whose name as _________________
of COMPASS
BANK, an Alabama
banking corporation, is signed to the foregoing instrument and who is known to
me, acknowledged before me on this day that, being informed of the contents of
the instrument, ___he, as such officer and with full authority, executed the
same voluntarily for and as the act of said corporation.


          Given
under my hand this the ________ day of __________, 2007.


	
 

	
 

	
 


	
 

	
___________________________________________


	
 

	
Notary
  Public


	
[NOTARIAL
  SEAL]

	
My
  commission


	
 

	
expires: _______________________












ADDENDUM A


DEFINITIONS


          1.
“Account” and “Account Receivable” shall mean and
include all accounts, accounts receivable, notes, notes receivable, contracts,
contract rights, retail installment sales contracts, drafts, documents,
documents of title, warehouse receipts, bills of lading, title retention and
lien instruments, security agreements, acceptances, instruments, conditional
sales contracts, chattel mortgages, chattel paper, general intangibles, and
other forms of obligation and rights to payment and receivables whether or not
yet earned by performance, including, without limitation, state and federal tax
refunds.  


          2.
“Account Debtor” shall mean the party who is obligated
on or under any Account Receivable.


          3.
“Borrower’s Loan Account” shall mean the account on
the books of Bank in which Bank will record loans and other advances made by
Bank to or on behalf of Borrower pursuant to the Credit Agreement, payments
received on such loans and advances and other appropriate debits and credits as
provided by the Credit Agreement or any of the other Loan Documents.  


          4.
“Collateral” shall mean any and all property in which
Bank acquired, now has, by this Credit Agreement or any of the other Loan
Documents (as defined herein) acquires, or hereafter acquires a security
interest or other rights or interests as security for the Liabilities (as
defined herein) and without limiting the foregoing expressly includes the
property described in Section 4 of the Credit Agreement.


          5.
An “Eligible Account Receivable” shall mean an Account
Receivable of Borrower in which Bank holds a first perfected security interest
which meets each of the following requirements and is otherwise acceptable to
Bank:




	
 

	
 


	
 

	
          (a)
  it arises from the sale or lease of goods or from services rendered, such
  goods have been shipped or delivered to the Account Debtor under such Account
  Receivable and such services have been fully performed and have been accepted
  by the Account Debtor, and Borrower’s full right to payment for all sums due
  from such Account Debtor with respect to such Account Receivable shall have
  been earned and then be due and payable;


	
 

	
 


	
 

	
          (b)
  it is a valid and legally enforceable obligation of the Account Debtor
  thereunder according to its express terms, and is not subject to any offset,
  counterclaim, crossclaim, or other defense on the part of such Account Debtor
  denying liability thereunder in whole or in part;


	
 

	
 


	
 

	
          (c)
  it is not subject to any mortgage, lien, security interest, right of a surety
  under a performance bond or otherwise or similar adverse rights or interests
  whatsoever other than the security interests granted to Bank hereunder;






1






	
 

	
 


	
 

	
          (d)
  it is evidenced by an invoice, dated the date of shipment (in the case of
  goods sold or leased) (other than with respect to an Approved Bill and Hold)
  or the date of performance (in the case of services rendered) and having
  payment terms acceptable to Bank, rendered to such Account Debtor, and is not
  evidenced by an instrument, note, draft, title retention and lien instrument,
  security agreement, acceptance, conditional sales contract, chattel mortgage
  or chattel paper and further, if requested by Bank, a copy of such invoice
  shall have been delivered to and received by Bank;


	
 

	
 


	
 

	
          (e)
  it is not owing by an Account Debtor whose obligations with respect to which
  Bank, acting in its discretion, shall have notified Borrower in writing are
  not deemed to constitute an Eligible Account Receivable;


	
 

	
 


	
 

	
          (f)
  it is not due from an affiliated or related corporation or entity, subsidiary
  corporation or entity, parent corporation or entity, or any owner, officer,
  director, manager or employee of Borrower or of any such affiliated, related,
  subsidiary, or parent corporation or entity, or any individual who is a
  relative of any one or more of the foregoing by blood or marriage;


	
 

	
 


	
 

	
          (g)
  it does not constitute, require or provide for progress billings, retainages
  or deferred payments under a contract not fully performed;


	
 

	
 


	
 

	
          (h)
  it does not constitute, in whole or in part, interest or finance charges on
  outstanding balances, any amount received as a down payment or prepayment or
  other principal reduction or similar payment, any chargebacks or contra
  amounts or accounts;


	
 

	
 


	
 

	
          (i)
  it is an Account Receivable with respect to which no return, repossession,
  rejection, cancellation, or repudiation shall have occurred or have been
  threatened;


	
 

	
 


	
 

	
          (j)
  it is an Account Receivable with respect to which Borrower continues to be in
  full conformity with the representations, warranties and covenants of
  Borrower made with respect thereto;


	
 

	
 


	
 

	
          (k)
  it is not subject to any sales terms, trial terms, sales-or-return terms,
  consignment terms, guaranteed sales or performance terms, minimum sales
  terms, C.O.D. terms, cash terms, or similar terms or conditions;


	
 

	
 


	
 

	
          (l)
  it is not owed by an Account Debtor that is not an individual residing in the
  United States or Canada or a corporation or partnership organized and validly
  existing under the laws of a state within the United States unless
  the payment of such Account is supported by a letter of credit in form and
  substance and issued by an issuer acceptable to Bank;


	
 

	
 


	
 

	
          (m)
  it is not an Account Receivable subject, in whole or in part, to any “bill
  and hold” or similar arrangement pursuant to which the invoice is delivered
  prior to the actual delivery of the sold or leased goods or the performance
  of the services; 






2






	
 

	
 


	
 

	
 


	
 

	
          (n)
  it is not an Account Receivable which remains unpaid after the earlier of (i) the
  passage of ninety (90) days or more since the relevant invoice date, or (ii) the
  passage of sixty (60) days since the relevant due date;


	
 

	
 


	
 

	
          (o)
  it is not owed by any Account Debtor with respect to which ten percent (10%)
  or more of its total Accounts owing to Borrower remain unpaid after the
  earlier of (i) ninety (90) days from invoice or earlier due date, or (ii) sixty
  (60) days since the relevant due date;


	
 

	
 


	
 

	
          (p) it
  is not an Account owed by an Account Debtor whose aggregate Account balance
  with Borrower exceeds ten percent (10%) of the total value of Borrower’s
  total Accounts (the portion over ten percent [10%] to be considered
  ineligible); provided, however, that on a case-by-case basis throughout the
  term of the Revolving Line, exceptions to the ten percent (10%) threshold
  adjustments set forth herein to those Accounts set above ten percent (10%)
  shall be considered by Bank, in its sole and absolute discretion, based on
  credit worthiness, historical performance, and other factors deemed relevant
  to Bank in its sole discretion.  The
  following exceptions are hereby noted, but may be subject to revision and/or
  removal subsequent to the date hereof: (i) Brinks Home Security (45%),
  and (ii) Radio Shack, Inc. (20%); however, Brinks Home Security shall be
  reduced to 25% and Radio Shack, Inc. shall be reduced to 10% automatically
  upon the reduction by Standard & Poor’s or Moody’s ratings and investment
  services of the senior unstructured debt rating of the aforementioned
  companies to a rating below investment grade; and


	
 

	
 


	
 

	
          (q)
  it is not an Account owed by the United States Government or any other
  governmental body, agency, entity or authority unless such Account arises
  from a government contract that is a United States Government contract in
  form and substance acceptable to Bank (“Government Contract”) and
  Borrower and Bank have completed and executed a Notice of Assignment and an
  Assignment form and all other forms and documents necessary to assign  Borrower’s right, title and interest in
  such Government Contract and all Accounts and other rights arising thereunder
  to Bank and Borrower shall have provided to Bank a copy of the relevant
  Government Contract; and furthermore a Government Contract shall only be an
  Eligible Account to the extent Borrower has invoiced the United States
  Government for payment for amounts then due and owing thereunder and Bank has
  received the United States Government’s acknowledgment of the relevant Notice
  of Assignment.






          6.
“Eligible Inventory” shall mean Borrower’s
finished-goods Inventory in which Bank holds a first perfected security
interest, and which meets each of the following requirements and is otherwise
acceptable to Bank:


	
 

	
 


	
 

	
          (a)
  it is not private label or styled type or otherwise subject to special
  marketing conditions or marketability limitations judged by Bank, in its sole
  discretion, to be unacceptable;


	
 

	
 


	
 

	
          (b)
  it is not parts, supplies, raw materials, nor work in process, nor does it
  include any shipping or packaging materials;






3






	
 

	
 


	
 

	
          (c)
  it is not materials or supplies used or to be used, or consumed or to be
  consumed in the normal course of business of Borrower;


	
 

	
 


	
 

	
          (d)
  it is new and unused; 


	
 

	
 


	
 

	
          (e)
  it is owned by Borrower and is not subject to any lien or security interest
  whatsoever other than the security interest granted to Bank hereunder;


	
 

	
 


	
 

	
          (f)
  it is held for sale in the normal and ordinary course of Borrower’s business;


	
 

	
 


	
 

	
          (g)
  it is located at one of Borrower’s places of business in (i) Dallas,
  Texas, (ii) Oklahoma City, Oklahoma, (iii) Columbus, Georgia or
  (iv) Las Vegas, Nevada;


	
 

	
 


	
 

	
          (h)
  it is not of a type of inventory that is subject to any recall, class action
  litigation, governmental action, order, inquiry or investigation; 


	
 

	
 


	
 

	
          (i)
  it is not located on any leased premises unless Bank has a signed landlord
  subordination agreement from the relevant landlord in form and substance
  acceptable to Bank; 


	
 

	
 


	
 

	
          (j)
  it is not on consignment and no warehouse receipt or document of title is or
  shall have been issued in respect of such Inventory; 


	
 

	
 


	
 

	
          (k)
  it is not Inventory that Bank, in its reasonable discretion, has determined
  to be unmarketable or unacceptable; and


	
 

	
 


	
 

	
          (l)
  it is not an item, type, or class of inventory which turns less than once
  each 365 days.






          Notwithstanding
the foregoing, Borrower and Bank acknowledge and agree that, for purposes of
calculating the Borrower’s Borrowing Base hereunder, a ten percent (10%) slow
moving reserve will be withheld from the value of Eligible Inventory (the “SM
Reserve”).  The SM Reserve will be
re-evaluated during each field exam by the Bank.


          7.
“Funded Debt” shall mean the sum of (a) all
obligations for borrowed money that are required to be shown as a liability
under GAAP standards, plus (b) all of Borrower’s capital lease obligations as listed
on Borrower’s balance sheet as capitalized obligations; provided, however, that
with respect to subsection (a) of this definition, the calculation shall only
include the current portion of the obligations owed to Zunicom according to
GAAP standards rather than the entire loan balance owed to Zunicom.


          8.
“GAAP” means generally accepted accounting principles in the
United States set forth 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
such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the
circumstances as of the date of determination, consistently applied.


4






          9.
“Insolvency” of Borrower or any other person or entity
shall mean that there shall have occurred with respect to Borrower or such
other person or entity one or more of the following events:  dissolution, termination of existence,
liquidation, insolvency, business failure, appointment of a receiver of any
part of the property of, assignment for the benefit of creditors by or against
Borrower or such other person or entity, or institution of any action or
proceeding with respect to Borrower or such other person or entity under or
pursuant to any insolvency laws relating to the relief of debtors by or against
Borrower or such other person or entity, institution of proceedings in
bankruptcy or with respect to the readjustment of indebtedness, reorganization,
composition or extension by or against Borrower or such other person or entity
(including, without limitation, under or pursuant to the United States
Bankruptcy Code, as amended, or under any similar law at any time enacted), or
if any action shall be taken for the purpose of effecting any of the foregoing.


          10.
“Inventory” shall mean all of Borrower’s (or any other
entity’s, as applicable) inventory (as defined in the Uniform Commercial Code
as enacted in the State of Texas, or in any other jurisdiction) and all
finished goods, other goods, merchandise and other personal property now owned
or hereafter acquired by Borrower which are held for sale, lease, or rental or
are furnished or to be furnished under a contract of service and all raw
materials, work in process, component parts, materials or supplies used or to
be used, or consumed or to be consumed, in Borrower’s business, and related
products and all goods represented thereby, wherever located, and all such
goods that may be reclaimed or repossessed from or returned by Borrower’s
customers, and all shipping and packaging materials relating to any of the
foregoing.  


          11.
“Liabilities” shall mean any and all obligations,
indebtedness and liabilities of Borrower to Bank or any affiliate of Bank of
every kind and description, whether direct or indirect, absolute or contingent,
joint or several, due or to become due, liquidated or unliquidated, now
existing or hereafter arising, and all extensions, modifications, renewals, and
refinancings thereof, regardless of how such Liabilities arise or by what
agreement or instrument (if any) they may be evidenced and include obligations
to perform acts and refrain from taking actions as well as obligations to pay
money.  Without limiting the foregoing,
Liabilities shall specifically include all liabilities and obligations of
Borrower hereunder and the obligation to repay the indebtedness evidenced by
the Note.  Without limiting the
foregoing, Liabilities also shall include all obligations heretofore, now or
hereafter incurred by Borrower under any agreement between Borrower and Bank or
any affiliate of Bank, whether now existing or hereafter entered into,
including, without limitation, any agreement which provides for an interest
rate, currency, equity, credit or commodity swap, cap, floor or collar, spot or
foreign currency exchange transaction, cross currency rate swap, currency
option, any combination of, or option with respect to, any of the foregoing or
similar transactions, for the purpose of hedging Borrower’s exposure to
fluctuations in interest rates, exchange rates, currency, stock, portfolio or
loan valuations or commodity prices.  Without limiting the foregoing, Liabilities
shall specifically include all liabilities and obligations of Borrower
evidenced by or arising under or in connection with (a) this Credit
Agreement; (b) the Note; and (c) any letters of credit heretofore,
now or hereafter issued by Bank at Borrower’s request (the “letters of
credit”) and any related promissory notes, documents, instruments and
agreements. 


          12.
“Loan Documents” shall mean and include the Note, the Credit
Agreement,
any letter of credit documents,
and any subordination agreements, intercreditor agreements and other


5






agreements,
documents and instruments now or hereafter evidencing, securing, guaranteeing
or relating to the Revolving Line or any of the other Liabilities, obligations
or indebtedness of Borrower to Bank, as the same may be amended.


          13.
“Loan Party” shall mean the Borrower and any
subsidiary or other Person executing a guaranty or a security agreement with
respect to the Liabilities.


          14.
“Permitted Liens” shall mean any of the following (but
only to the extent the same do not or could not, in Bank’s reasonable opinion,
jeopardize Bank’s rights or priority in or to any Collateral):



	
 

	
 


	
 

	
          (a)
  liens of carriers, warehousemen, landlords, mechanics, laborers and
  materialmen arising by law for sums which are (i) not yet due or (ii) being
  diligently contested in good faith and with respect to which Borrower has set
  aside sufficient reserves with Bank; 


	
 

	
 


	
 

	
          (b)
  liens for taxes which are (i) not yet due or (ii) being diligently
  contested in good faith by appropriate proceedings and with respect to which
  Borrower has set aside sufficient reserves with Bank;


	
 

	
 


	
 

	
          (c)
  security interests in Borrower’s equipment provided that they are limited to
  those securing a portion of the purchase price of said equipment.






          15.
“Proceeds” shall mean all cash proceeds, non-cash
proceeds and all forms of payment and other property received or due from the
sale, lease, rental, transfer, disposition, licensing, collection, use or
exchange of property constituting Collateral hereunder and any and all claims
against any third party for loss of or damage to any Collateral, including
insurance, contract and tort claims, and further, without limiting the
generality of the foregoing, Proceeds shall include all Accounts, checks, cash,
money orders, drafts, chattel paper, general intangibles, instruments, notes
and other documents evidencing payment and payment obligations to Borrower for
the sale, lease, rental, transfer, disposition, licensing, collection, use or
exchange of Collateral.


          16.
“Responsible Officer” means the chief executive
officer, president, chief financial officer, treasurer or assistant treasurer
of any Loan Party.  Any document
delivered hereunder that is signed by a Responsible Officer of each such Loan
Party shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Loan Party and
such Responsible Officer shall be conclusively presumed to have acted on behalf
of such Loan Party.


          17.
“Subordinated Debt” shall mean all such debts,
obligations or indebtedness owing from Borrower to others which have been and
remain subordinated to all Liabilities owing from Borrower to Bank pursuant to
an Amended and Restated Creditor’s Subordination Agreement(s) in form and
substance acceptable to Bank.


          18.
Any terms used to describe Bank’s security interest
under the Credit Agreement not specifically defined in the Credit Agreement
shall have the meanings and definitions given those terms under the Uniform
Commercial Code of Texas as may be amended. 


6








EXHIBIT A


ACCOUNTS RECEIVABLE AND INVENTORY
RECONCILIATION


Number:_____________


Borrower:___________________
Date:________________


ACCOUNTS
RECEIVABLE AND INVENTORY REPORT


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
1.

	
Accounts Receivable

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
a.

	
Balance Last Report

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
b.

	
Add: New Accounts Receivable

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
c.

	
Less: Sales Returns

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
d.

	
Other Adjustments

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
e.

	
Net New Receivables

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
f.

	
Less: Customer Remittances (No(s). _______)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
g.

	
Total Value of Accounts Receivable

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
h.

	
Less: Ineligible Receivables

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
i.

	
Net Eligible Accounts Receivable for this Period (not
  to exceed $__________)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
2.

	
Inventory

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
a.

	
Inventory Last Report (Line 2d)

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
b.

	
Add: Purchases

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
c.

	
Less: Outgoing Inventory

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
d.

	
Total Inventory

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
e.

	
Less: Ineligible Inventory

	
 

	
 

	
 

	
 

	
$

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
f.

	
Total Eligible Inventory for this
  Period

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
LOAN REQUEST


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
3.

	
Loan Value of Above Collateral

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
a.

	
Receivables    % of Line 1(i) above

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
b.

	
Inventory    % of Line 2(f) above

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
c.

	
Total Collateral Loan Value this Period (not to
  exceed $________)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
4.

	
Loan Balance

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
a.

	
Loan Balance Last Report (line 4d)

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
b.

	
Add: Draws

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
c.

	
Less: Payments

	
 

	
$

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	


	


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
d.

	
Loan Balance for this Period

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	




	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
5.

	
Excess (Deficit)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
6.

	
A Listing of Ineligible Accounts Receivable and
  Ineligible Inventory is attached hereto

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 





- BORROWER CERTIFICATION -


The
undersigned hereby warrants that (i) the foregoing is a correct statement
regarding new accounts receivable, collection of accounts receivable and/or
certification of inventory and that the reconciliation figures are fully and
correctly set forth and (ii) there has been no change in Borrower’s state of
organization, chief executive office or organizational identification number.


Authorized

Signature ______________________________________ Title ________________________________________________






EXHIBIT B


COMPLIANCE CERTIFICATE


          Reference
is made to that certain Revolving Credit and Security Agreement (the “Credit
Agreement”) executed by UNIVERSAL POWER GROUP, INC., a Texas
corporation (“Borrower”) in favor of COMPASS BANK (“Bank”), dated as June 19, 2007 and
executed
as of July __, 2007. Capitalized terms used but not defined herein shall have
the meaning attributed to the same in the Credit Agreement. Borrower hereby
represents, warrants and covenants to and in favor of Bank as follows:


	
 

	
 


	
 

	
          (1)
  no default or event of default (or any event that would constitute an event
  of default but for the requirement that notice be given or time elapse or
  both) has occurred or is continuing under the Credit Agreement or any of the
  other Loan Documents or under any other loans, notes, debentures, bonds,
  leases or other obligations of Borrower now outstanding;


	
 

	
 


	
 

	
          (2)
  all representations, warranties and covenants contained in the Credit
  Agreement and the other Loan Documents are expressly reaffirmed and restated
  as of the date hereof;


	
 

	
 


	
 

	
          (3)
  neither Borrower nor, to the best of Borrower’s knowledge, any other party
  has any matured or unmatured claim, offset or cause of action against Bank or
  its officers, agents or affiliates arising under or in connection with the
  Loan Documents or the Liabilities;


	
 

	
 


	
 

	
          (4)
  all financial statements, reports and other documents delivered to Bank on or
  before the date hereof under or in connection with the Loan Documents are, as
  of the relevant date, complete and accurate and may be relied upon by Bank;
  and


	
 

	
 


	
 

	
          (5)
  the Borrower is in compliance with the financial covenants contained in
  Section 6 of the Credit Agreement as set forth on Annex A attached
  hereto.








	
 

	
 

	
 


	
 

	
UNIVERSAL POWER GROUP, INC.,


	
 

	
a Texas
  corporation


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
Name:

	
 


	
 

	
 

	



	
 

	
Title:

	
 


	
 

	
 

	



	
 

	
Date:

	
 


	
 

	
 

	






1






ACKNOWLEDGEMENT


STATE
OF______________


COUNTY
OF____________


          I,
the undersigned, Notary Public in and for said County in said State, hereby
certify that _____________________, whose name as __________________ of UNIVERSAL POWER GROUP, INC., a Texas
corporation, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of the
instrument, he, as such __________________ and with full authority, executed
the same voluntarily for and as the act of said corporation.


          Given
under my hand this the _____ day of _______________, ______.


	
 

	
 

	
 


	
 

	
___________________________________________________


	
 

	
Notary
  Public


	
[NOTARIAL
  SEAL]

	
 


	
 

	
My
  Commission Expires: _____________________________





2






Schedule 2.1


Subsidiaries


None






Schedule 2.9


Places of Business


	
 


	
Corporate Office


	
1720 Hayden Drive


	
Carrollton, TX 75006


	
 


	
Oklahoma Branch


	
11605-B N Santa Fe


	
Oklahoma City, OK 73114


	
 


	
Nevada Branch


	
5480 S Valley View Blvd


	
Las Vegas, NV 89118


	
 


	
Georgia Branch


	
5224 Miller
  Road, Ste 3B


	
Columbus, GA
  31909










Schedule
2.17


Patents,
Copyrights, Trademarks, and Licenses


	
 


	
Patents


	
 


	
None


	
 


	
Copyrights


	
 


	
None


	
 


	
Trademarks


	
 


	
Adventure
  Power 


	
Charge ‘n
  Start (3,146,881)


	
UB Scootin’


	
UNILOK
  (3,192,234)


	
 


	
Licenses


	
 


	
None










Schedule 2.18


Judgments and Actions


	
 

	
 

	
 


	
No Judgments


	
 

	
 

	
 


	
Lawsuits


	
 

	
 

	
 


	
 

	
1.

	
Energizer
  Holdings, Inc. and Eveready Battery Company, Inc. (collectively “Eveready”) see comments in
Universal Power Group, Inc. 2006 10K and 2007 1st Qtr 10Q filings

	
 


	
 

	
2.

	
A.J. Gilson
  see comments in Universal Power Group, Inc. 2006 10K and 2007 1st
  Qtr 10Q filings
















AMENDED AND RESTATED MASTER REVOLVING
PROMISSORY

NOTE


	
 

	
 

	
 


	
$30,000,000.00

	
Dallas, Texas

	
June 19, 2007





FOR VALUE
RECEIVED, the undersigned, UNIVERSAL POWER
GROUP, INC., a Texas corporation (“Maker”),
promises to pay to the order of COMPASS BANK
(“Payee”), on July 5, 2012 (the “Maturity Date”), the principal
sum of THIRTY MILLION AND NO/100 DOLLARS
($30,000,000.00), or, if less than such amount, the aggregate unpaid
principal amount of all Advances (as defined below) made by Payee to Maker
hereunder, on the terms herein stated, with interest thereon from this date on
the unpaid principal amount hereof from time to time outstanding at the rate of
interest provided below, both principal and interest payable as provided below
in lawful money of the United States of America at the address of Payee set
forth below or at such other place within Dallas County, Texas, as from time to
time may be designated by the holder of this Amended and Restated Master
Revolving Promissory Note (this “Note”).


SECTION 19. terms.


The unpaid
principal of this Note from time to time outstanding shall bear interest prior
to maturity at the rate of interest per annum equal to the lesser of
(a) the Maximum Rate and (b) the LIBOR Index Rate (as hereinafter
defined) for such Interest Period plus the Applicable Margin (the sum
being, the “LIBOR Floating Rate”). The rate of interest on the unpaid
balance of principal of this Note prior to maturity shall be increased or
decreased as the case may be, from time to time as of the effective date of each
change in the LIBOR Index Rate, but at no time greater than the Maximum Rate.
If applicable law provides for a ceiling, that ceiling shall be the indicated
rate ceiling. All interest accruing under this Note shall be calculated on the
basis of a 360-day year applied to the actual number of days elapsed.


Payee may
disburse the principal of this Note to Maker in one or more Advances (herein so
called) from time to time, pursuant to the terms of this Note and the Credit
Agreement (defined below). Maker shall be entitled to receive disbursements of
Advances hereunder when Payee is delivered requests for advances by Maker in
accordance with and pursuant to, and otherwise in compliance with, the terms
and conditions of, that certain Amended and Restated Revolving Credit and
Security Agreement (the “Credit Agreement”), executed by and among Maker
and Payee, dated of even date herewith; provided, however, that at no time
shall the total principal amount outstanding hereunder exceed the face value of
this Note. Each guarantor and any other liable party with respect to the
indebtedness and obligations evidenced hereby are hereinafter referred to
collectively as, the “Guarantors.”


If Payee
determines in good faith (which determination shall be conclusive and binding upon
Maker) that by reason of circumstances affecting the relevant market or for any
other reason, adequate and reasonable means do not exist for ascertaining the
LIBOR Floating Rate for such Interest Period, such Advances shall be made at
the Compass Bank Prime Index Rate (as hereinafter defined)..


Maker shall be
entitled, and in certain instances may be required, to prepay the principal of
the Note from time to time. Maker may borrow, repay, and reborrow up to the 






principal face
amount of this Note. It is contemplated that by reason of prepayments hereon
there may be times when no indebtedness is owing hereunder; but notwithstanding
such occurrences, this Note shall remain valid and shall be in full force and
effect subsequent to each such occurrence until the Maturity Date.
Notwithstanding the foregoing, Maker acknowledges and agrees that, with respect
to letters of credit issued by Payee for the benefit of Maker, at no time
hereunder shall Payee be obligated to issue letters of credit or make advances
thereunder in excess of $1,000,000.00 in the aggregate at any given time
hereunder.


Accrued
interest on the outstanding principal balance that exists from time to time
shall be due and payable monthly in arrears commencing on the 1st day of
August, 2007and continue to
be payable on the same day of each successive calendar month thereafter until
Maturity Date, when all accrued but unpaid interest and all principal amounts
outstanding shall be due and payable in full. Any payment received later than
ten (10) days from the due date thereof must be accompanied by a late fee
payment in the amount of five percent (5%) of the amount of such monthly
payment. Maker shall be entitled to notice of, as well as any applicable grace
period with respect to, any default hereunder as provided in the Credit
Agreement.


SECTION 20. definitions.


“Applicable
Margin” shall mean, on any day, the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Funded Debt to EBITDA ratio on the most recent Determination Date:


	
 

	
 

	
 


	
Funded Debt to EBITDA ratio

	
Applicable

  Margin

	
 


	


	


	
 


	
Less than
  1.25 to 1.00

	
1.25%

	
 


	
Greater than
  or equal to 1.25 to 1.00 but less than 1.75 to 1.00

	
1.50%

	
 


	
Greater than
  or equal to 1.75 to 1.00 but less than 2.25 to 1.00

	
1.75%

	
 


	
Greater than
  or equal to 2.25 to 1.00 but less than 2.75 to 1.00

	
2.00%

	
 


	
Greater than
  or equal to 2.75 to 1.00 but less than 3.25 to 1.00

	
2.25%

	
 


	
Greater than
  or equal to 3.25 to 1.00

	
2.50%

	
 





The Applicable
Margin shall
be established as of the last day of each fiscal quarter (each, a “Determination
Date”), beginning on September 30, 2007 (the “Initial Determination
Date”). Any change in the Applicable Margin following each Determination
Date shall be determined based upon the information and computations set forth
in the financial statements and compliance certificate furnished to Payee
pursuant to the Credit Agreement, subject to review and approval of such
computations by the Payee. Each change in the Applicable Margin shall be
effective as of the first day of the fiscal quarter following each
Determination Date, and shall remain in effect until the date that is the first
day of the fiscal quarter following the next Determination Date for which a
change in the Applicable Margin occurs. Notwithstanding the foregoing, during
the period beginning on the date hereof and ending on the Initial Determination
Date, the Applicable Margin shall be 2.0%.


“Compass Bank Prime Index
Rate” shall equal the Compass Bank Index rate announced from time to time
and automatically fluctuating upward and downward with each announcement
without notice to Maker or any other person, which shall be a rate of 






interest per annum equal to
the highest prime rate (or base rate) reported in the Money Rates column or
section of The Wall Street Journal
(or another similar publication selected by Payee, in the event the Wall
Street Journal is no longer published) as announced from time to time by Payee, automatically fluctuating
upward and downward with each announcement without notice to Maker or any other
person, provided that notwithstanding anything contained herein to the
contrary, in no event shall any rate of interest which this Note bears ever
exceed the Maximum Rate.


“LIBOR
Index Rate” shall
mean the rate determined by Payee (rounded upward, if necessary, to the nearest
1/16th of 1%) to be equal to the offered rate (and not the bid rate) in the
London interbank market for deposits in U.S. dollars of amounts comparable to
the principal amount hereof for a period of one (1) month, as reported on the
Telerate Information System on the applicable determination date (or in the
event no such quotation is available on such date on the day most immediately
preceding the determination date on which such a quotation was available). In
the event the Telerate Information Service ceases to be available to Payee or
ceases to provide information sufficient to determine the London interbank
offered rate for periods of one (1) month, the“LIBOR Index Rate” shall mean the London Interbank Offered Rate for
a period of one (1) month as published in the “Money Rates” table of The
Wall Street Journal on the applicable determination date (or in the event
no such quotation is available on such date, as quoted on the day most
immediately preceding the determination date on which such a quotation was
available). In the event the London Interbank Offered Rate for a period of one
(1) month is no longer published in the “Money Rates” table, then Payee will
choose a substitute rate as the LIBOR Index Rate based on comparable
information, which may include quotations from such services as Reuters Monitor
Money Rates Service or Knight Ridder News Service. Each change in the rate
charged hereunder shall become effective without notice to Maker as of the first
(1st) day of each calendar month during the term hereof, but in no
event shall the rate charged hereunder exceed the Maximum Rate (as hereinafter
defined). Maker understands and acknowledges that Payee may from time to time
make various loans at rates of interest having no relationship to the LIBOR
Index Rate, and that the LIBOR Index Rate may not be the lowest interest rate
charged for loans by Payee.


“Maximum
Rate,” as used
herein, shall mean, with respect to each holder hereof (any holder of this Note
shall be referred to herein as a “holder”), the maximum nonusurious interest
rate, if any, that at any time, or from time to time, may under applicable law
be contracted for, taken, reserved, charged or received on the indebtedness
evidenced by this Note under the laws which are presently in effect of the
United States and the State of Texas applicable to such holder and such
indebtedness or, to the extent allowed by law under such applicable laws of the
United States of America and State of Texas which may hereafter be in effect,
which allow a higher maximum non-usurious interest rate than applicable laws
now allow; provided, that in determining the Maximum Rate, due regard shall be
given, to the extent required by applicable law, to any and all relevant payments,
fees, charges, deposits, balances, agreements and calculations which may
constitute or be deemed to constitute interest, or be deducted from principal
to calculate the interest rate or otherwise affect interest rate
determinations, so that in no event shall the Payee contract for, charge,
receive, take, collect, reserve or apply, on the Note, any amount in excess of
the maximum non-usurious rate of interest permitted by applicable law. To the 






extent that Texas law
determines the Maximum Rate, the Maximum Rate shall be determined by utilizing
the “indicated rate ceiling”
from time to time in effect pursuant to the Texas Finance Code (V.T.C.A.
Finance Code Section 303.001 et seq.) (the “Texas Finance Code”) or such successor statute, as then in
effect, governing usury. The Maximum Rate shall not be limited to the
applicable rate ceiling in the Texas Finance Code or such successor statute if
Federal laws or other state laws now or hereafter in effect and applicable to
this Note (and the interest contracted for, charged and collected hereunder)
shall permit a higher rate of interest.


SECTION 21. miscellaneous.


All principal
and interest under this Note which remains in arrears five (5) or more
consecutive days after their respective due dates shall bear interest at the
rate of interest per annum equal to Eighteen Percent (18%) (the “Default
Rate”); provided, however, that in no event shall such Default Rate exceed
the Maximum Rate. Further, in the event Maker shall be in default hereunder or
under the Credit Agreement beyond any applicable notice, grace, and/or cure
periods, Payee may, at its election, accelerate the indebtedness evidenced
hereby, and it shall at once become due and payable, as the holder may elect.
It is further agreed that if this Note is placed in the hands of an attorney
for collection or if collected by suit or through probate or bankruptcy
proceedings, Maker agrees to pay reasonable attorneys’ fees in addition to the
principal and interest then due hereon, together with all costs of collection.


This Note is
secured by the Credit Agreement, to which Credit Agreement reference is made
for a description of the properties covered thereby and the nature and extent
of the rights and powers of the holder of this Note in respect of such properties.
This Note, the Credit Agreement and any other documents or instruments securing
or evidencing this Note are sometimes referred to herein collectively as, the “Loan
Documents.”


Maker and any
other party who is or becomes liable to pay all or any part of this Note, or
who grants any lien or security interest to secure all or any part of this Note
(each called an “other liable party”
below), including but not limited to the Guarantors, and any drawer, acceptor,
endorser, guarantor, surety or accommodation party, severally waive presentment
for payment, demand, notice of demand and of dishonor and nonpayment of this
Note, notice of intention to accelerate the maturity of this Note, notice of
acceleration, protest and notice of protest, diligence in collecting, and the
bringing of suit against any other party.


Further, Maker and any other
liable party severally waive any notice of or defense based upon any agreement
or consent of the holder of this Note made or given from time to time, before
or after maturity, to any of the following: the acceleration, renewal or
extension of this Note; a change in the time or manner of payments required by
this Note; a change in the rates of interest specified in this Note; acceptance
or surrender of security; a substitution of security or subordination,
amendment or release of security; an addition or release of any other liable
party; changes of any sort whatever in the terms of payment of this Note or in
the manner of doing business with Maker; and any settlement or compromise with
Maker or any other liable party on such terms as the holder of this Note may
deem appropriate in its sole and absolute discretion; provided, however, that
the terms of this paragraph shall not apply to any written agreement or consent
of the holder of this Note that is in writing and signed by the holder of this
Note and Maker and/or the Guarantors, including, but not limited to, the Loan
Documents, any documents








on file as
public records, and compromise settlement agreements between the holder of this
Note and Maker and/or the Guarantors.


The holder of
this Note may apply all moneys received from Maker or others, or from any
security (whether held under a security instrument or not), in such manner upon
the indebtedness evidenced or secured by any Loan Documents (whether then due
or not) as such holder may determine to be in its best interest, without in any
way being required to marshal assets or to apply all or any part of such moneys
upon any particular part of such indebtedness. The holder of this Note is not
required to retain, hold, protect, exercise due care with respect to, perfect
security interests in or otherwise assure or safeguard any security for this Note,
and no failure by the holder of this Note to do any of the foregoing and no
exercise or failure to exercise by such holder of any other right or remedy
shall in any way affect any of Maker’s or any other liable party’s obligations
hereunder or under other Loan Documents or affect any security or give Maker or
any other liable party any recourse against the holder of this Note.


It is the
intent of Maker and Payee in the execution of this Note and all other Loan
Documents to contract in strict compliance with applicable usury law. In
furtherance thereof, Maker and Payee stipulate and agree that none of the terms
and provisions contained in this Note, or in any other instrument executed in
connection herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money, interest at a rate in excess of the
Maximum Rate. Neither Maker nor any guarantors, endorsers or other parties now
or hereafter becoming liable for payment of this Note shall ever be obligated
or required to pay interest on this Note at a rate in excess of the Maximum
Rate, and the provisions of this paragraph shall control over all other
provisions of this Note and any other Loan Documents now or hereafter executed
which may be in apparent conflict herewith. Payee expressly disavows any
intention to charge or collect excessive unearned interest or finance charges
in the event the maturity of this Note is accelerated. If the maturity of this
Note shall be accelerated for any reason or if the principal of this Note is
paid prior to the end of the term of this Note, and as a result thereof the
interest received for the actual period of existence of the loan evidenced by
this Note exceeds the applicable maximum lawful rate, the holder of this Note
shall credit the amount of such excess against the principal balance of this
Note then outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of such excess
interest; provided, however, that if the principal hereof has been paid in
full, such excess shall be refunded to Maker. If the holder of this Note shall
receive money (or anything else) which is determined to constitute interest and
which would increase the effective interest rate on this Note or the other
indebtedness secured by the Loan Documents to a rate in excess of that
permitted by applicable law, the amount determined to constitute interest in
excess of the lawful rate shall be credited against the principal balance of
this Note then outstanding or, if the principal balance has been paid in full,
refunded to Maker, in which event any and all penalties of any kind under
applicable law as a result of such excess interest shall be inapplicable. If
the holder of this Note shall not actually receive, but shall contract for,
request or demand, a payment of money (or anything else) which is determined to
constitute interest and which would increase the effective interest rate
contracted for or charged on this Note or the other indebtedness evidenced or
secured by the Loan Documents to a rate in excess of that permitted by
applicable law, the holder of this Note shall be entitled, following such






determination,
to waive or rescind the contractual claim, request or demand for the amount
determined to constitute interest in excess of the lawful rate, in which event
any and all penalties of any kind under applicable law as a result of such
excess interest shall be inapplicable. By execution of this Note Maker
acknowledges that Maker believes the loan evidenced by this Note to be
non-usurious and agrees that if, at any time, Maker should have reason to
believe that such loan is in fact usurious, Maker will give the holder of this
Note notice of such condition and Maker agrees that the holder shall have sixty
(60) days after receipt of such notice in which to make appropriate refund or
other adjustment in order to correct such condition if in fact such exists.
Additionally, if, from any circumstance whatsoever, fulfillment of any
provision hereof or of the Credit Agreement or any other Loan Documents shall,
at the time fulfillment of such provision be due, involve transcending the
Maximum Rate then, ipso facto,
the obligation to be fulfilled shall be reduced to the Maximum Rate. The term “applicable law” as used in this
Note shall mean the laws of the State of Texas or the laws of the United
States, whichever laws allow the greater rate of interest, as such laws now
exist or may be changed or amended or come into effect in the future.


Should the
indebtedness represented by this Note or any part thereof be collected at law
or in equity or through any bankruptcy, receivership, probate or other court
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Maker and all endorsers, guarantors and sureties of this Note
jointly and severally agree to pay to the holder of this Note in addition to
the principal and interest due and payable hereon all the costs and expenses of
the holder in enforcing this Note including, without limitation, reasonable
attorneys’ fees and legal expenses.


This Note and
the rights, duties and liabilities of the parties hereunder or arising from or
relating in any way to the indebtedness evidenced by this Note or the
transaction of which such indebtedness is a part shall be governed by and
construed in accordance with the law of the State of Texas and the law of the
United States applicable to transactions within such State.


No amendment
of this Note shall be binding unless expressed in a writing executed by Maker
and the holder of this Note.


This Note
amends, supersedes and restates the Master Revolving Promissory Note dated as
of December 14, 2004, as it has been previously amended, extended and modified. MAKER IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY TEXAS OR FEDERAL COURT SITTING IN DALLAS
COUNTY, TEXAS OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY OF THE LOAN DOCUMENTS, AND MAKER HEREBY AGREES AND CONSENTS THAT, IN
ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE
LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY TEXAS
OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE ADDRESS
INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE FIVE DAYS AFTER THE SAME
SHALL HAVE BEEN SO MAILED.


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]






Dated
effective as of June 19, 2007 but executed as of this the __ day of July,
2007.


	
 

	
 

	
 


	
Maker’s Address:

	
MAKER:


	
 

	
 


	
1720 Hayden Drive

	
UNIVERSAL POWER GROUP, INC., a


	
Carrollton, Texas 75006

	
Texas corporation


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
Name:

	
 


	
 

	
 

	



	
 

	
Title:

	
 


	
 

	
 

	



	
 

	
 

	
 


	
Payee’s Address:

	
 

	
 


	
 

	
 

	
 


	
COMPASS BANK

	
 

	
 


	
8080 N. Central Expressway, Ste. 250

	
 

	
 


	
Dallas, Texas 75206

	
 

	
 


	
Attn: Key Coker

	
 

	
 












AMENDED AND RESTATED CREDITORS’

SUBORDINATION AGREEMENT


This Amended
and Restated Creditors’ Subordination Agreement (the “Agreement”) is
made and entered into by ZUNICOM, INC.,
a Texas corporation (the “Creditor”), for the benefit of COMPASS BANK
and its successors and assigns (“Bank”).


WHEREAS, Universal Power Group, Inc., a Texas
corporation (“Borrower”) has applied to Bank for an increased
revolving line of credit in the principal amount of $30,000,000.00 (the “Loan”);
and


WHEREAS, Creditor
has heretofore loaned Borrower sums of money, has agreed to forebear collection
of sums owed by Borrower to Creditor, and/or may hereafter grant further loans
or forbearances to Borrower; and


WHEREAS, Creditor
has previously executed that certain Creditors’ Subordination Agreement dated
as of December 14, 2004 in favor of Bank; and


WHEREAS, as a
condition to making the Loan, Bank has required that Creditor continue to
subordinate any and all loans and indebtedness heretofore, now or hereafter
owed or owing by Borrower to Creditor to any loan or indebtedness heretofore,
now or hereafter owed or owing from Borrower to Bank, including, without
limitation, any amounts now or hereafter owed or owing under or in connection
with the Loan, as well as execute, deliver and perform this Agreement.


NOW, THEREFORE, in
consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
Borrower and Creditor do hereby covenant and agree with Bank as follows:


          SECTION 22. Certain
Definitions. Unless otherwise defined herein, the following terms
have the following meanings:


“Bank
Indebtedness” means the principal of all loans from time to time owing from
Borrower to Bank, all interest, whether now or hereafter accrued (including,
without limitation, interest accrued subsequent to the filing of any petition
under any bankruptcy, insolvency or similar law), on such principal amounts of
such loans and all other indebtedness, obligations and liabilities (including,
without limitation, principal, interest and fees), whether now existing or
hereafter incurred, of Borrower to Bank, including without limitation to the
generality of the foregoing, under or with respect to the Loan or any documents
or instruments executed or delivered in connection therewith.


“Bank Security Documents”
means each and all of the mortgages, loan and security agreements, revolving
credit and security agreements, pledges, assignments, security agreements and
other documents and instruments at any time securing any of the Bank
Indebtedness.


“Subordinated Obligations”
means all indebtedness, obligations and liabilities , whether now or hereafter
existing or incurred, owing from time to time by Borrower to Creditor (plus any
interest heretofore, now or hereafter included therein or accrued thereon,
including, without limitation, any interest accrued subsequent to the filing of
any petition under any bankruptcy, insolvency or similar law). The Subordinated
Obligations shall include the obligations represented by the promissory notes
referenced on the attached Schedule 1.






“Subordinated
Security Documents” means each and all of the mortgages, security
agreements, pledges, assignments and other documents and instruments at any
time securing any of the Subordinated Obligations, subject, however, to Bank’s
consent in accordance with Section 2(d) of this Agreement.


          SECTION
23. Subordination of Subordinated Obligations.


	
 

	
 

	
 


	
 

	
          23.1
  Creditor covenants and agrees that anything in any
  agreement or instrument creating, evidencing or relating to the Subordinated
  Obligations to the contrary notwithstanding, the Subordinated Obligations
  shall be subordinate and junior in right of payment, distribution and lien to
  the Bank Indebtedness, and without limiting the generality of the foregoing:


	
 

	
 

	
 


	
 

	
 

	
          (a)
  Upon payment or distribution of all or any of the assets or securities of
  Borrower of any kind or character, whether in cash, property or securities,
  upon any dissolution, winding up, or total or partial liquidation,
  reorganization, arrangement, adjustment, protection, relief or composition of
  Borrower or its debts, whether voluntary or involuntary or in bankruptcy,
  insolvency, receivership, arrangement, reorganization, relief or other
  proceeding or upon an assignment for the benefit of creditors or any other
  marshalling of the assets and liabilities of Borrower or otherwise, all Bank
  Indebtedness shall first be paid in full in cash before any payment or
  distribution may be made in respect of the Subordinated Obligations, subject
  to any applicable exceptions contained within the Bank Security Documents;
  and


	
 

	
 

	
 


	
 

	
 

	
          (b)
  Subject to any applicable exceptions contained within the Bank Security
  Documents, no direct or indirect payment shall be made in respect of the
  Subordinated Obligations if, at the time of such payment, any Bank
  Indebtedness is outstanding or unpaid or Bank has any obligation to advance
  funds to or for the account of Borrower under any instrument or document.


	
 

	
 


	
 

	
Notwithstanding
  anything to the contrary contained in the foregoing Section 2(a), the parties
  hereto agree that so long as no default exists under the Bank Indebtedness,
  the Creditor may receive all regularly scheduled payments, but not
  prepayments, of principal and interest under the Subordinated Indebtedness.


	
 

	
 


	
 

	
          23.2
  If, notwithstanding the foregoing provisions,
  Creditor shall receive any payment or distribution in respect of the
  Subordinated Obligations at a time when any Bank Indebtedness is outstanding
  or unpaid or Bank has any obligation to advance funds to or for the account
  of Borrower under any instrument or document, then such payment or
  distribution shall be received and held in trust by Creditor apart from
  Creditor’s assets and shall be promptly paid over or delivered to Bank for
  application (in the case of cash) or as collateral for (in the case of
  non-cash property or securities) the payment or prepayment of the Bank
  Indebtedness.


	
 

	
 


	
 

	
          23.3
  Without notice to or assent by Creditor:










	
 

	
 

	
 


	
 

	
 

	
          (a)
  the Bank Indebtedness and the obligations or liabilities of any other party
  or parties (including without limitation any guarantor, endorser or
  co-obligor) in respect of the Bank Indebtedness may, from time to time, in
  whole or in part, be renewed, extended, modified, accelerated, restated,
  compromised or released; and


	
 

	
 

	
 


	
 

	
 

	
          (b)
  any and all mortgages, pledges, assignments, encumbrances, liens or security
  interests (legal or equitable) at any time, present or future, held, given or
  intended to be given for the Bank Indebtedness, and any rights or remedies in
  respect thereof, may, from time to time, in whole or in part, be exchanged,
  sold, surrendered, released, modified, waived, restated or extended by Bank,
  and Bank may permit or consent to any such action or the result of any such
  action;





all as Bank may deem
advisable and all without impairing, abridging, diminishing, releasing or
affecting the subordination provided for herein to the Bank Indebtedness. All
rights and interests of Bank hereunder shall remain in full force and effect
irrespective of any circumstance that might constitute a defense available to,
or a discharge of, Borrower, or any lack of validity or enforceability of any
document or instrument.


	
 

	
 


	
 

	
          23.4
  Creditor hereby represents and warrants to Bank that
  none of the Subordinated Obligations or any other obligations of Borrower to
  Creditor are secured by any assets of Borrower or any other person or
  entity, and covenants and agrees that, unless otherwise consented to in
  writing by Bank, none of the Subordinated Obligations or any other
  obligations of Borrower to Creditor will be secured, directly or indirectly,
  by any of the assets of Borrower or any other person or entity. Without
  limitation to the generality of the foregoing, or any of the other provisions
  hereof, in the event at any time any of the Subordinated Obligations or any
  other obligations of Borrower to Creditor are secured, it is further hereby
  agreed and acknowledged that all rights, titles, liens, estates, interest and
  remedies accruing to Creditor or its successors, assigns, designees,
  transferees, purchasers at foreclosure and/or other purchasers, whether as
  mortgagee, secured party, landlord, owner or otherwise, and whether consensual
  or arising by operation of law or in equity or otherwise, are and shall be
  subject and subordinate in all respects to all mortgages, security
  agreements, security interests, assignments, pledges, rights, titles,
  interests, estates and remedies of Bank and its successors, assigns,
  designees, transferees, purchasers at foreclosure and/or other purchasers,
  arising in connection with any of the Bank Indebtedness, whether consensual
  or arising by operation of law or in equity or otherwise. For so long as any
  of the Bank Security Documents and any modifications, consolidations,
  replacements or extensions thereof shall remain in effect, the mortgages,
  security agreements, security interests, rights, titles, interests, estates
  and remedies arising under any Subordinated Security Documents shall be
  superior to any mortgages, security agreements, security interests, rights,
  titles, liens, interest and estate in favor of any person or entity other
  than Bank, its successors or assigns, with respect to any collateral under
  the Bank Security Documents, and Creditor agrees that it shall not
  voluntarily subordinate any Subordinated Security Document or other lien or
  interest to any mortgage, lease,










	
 

	
 


	
 

	
security
  agreement, indenture, agreement, contract or encumbrance in favor of any
  person or entity other than Bank, its successors or assigns, respecting any
  such collateral under the Bank Security Documents.





Creditor
further agrees that, for so long as any Bank Indebtedness remains outstanding,
Creditor shall take no action to enforce collection of the Subordinated
Obligations (or any other obligations of Borrower to Creditor) against
Borrower or any guarantor of such Subordinated Obligations; nor shall the
Creditor take any action to foreclose or enforce its rights as a secured
creditor or lienholder or to establish its status as a lienholder under any
Subordinated Security Documents or otherwise against any assets of Borrower or
any guarantor of such Subordinated Obligations, except in accord with Section 4
below. In addition, so long as the Bank Indebtedness remains outstanding,
neither the Creditor nor the Borrower shall amend, modify, restate the terms of
the Subordinated Indebtedness without the Bank’s prior written consent.


          SECTION
24. Subordination Absolute. Neither the subordination provided for herein
nor the rights of Bank hereunder shall be affected, modified or impaired by (a)
any extension, renewal, modification, restatement, forbearance or waiver of any
terms of any Bank Security Documents or any other instrument or document
executed in connection herewith nor (b) any release, modification or
substitution of any collateral therefor.


          SECTION
25. Further Assurances. Creditor agrees to take promptly such actions as
Bank may reasonably request to (i) collect the Subordinated Obligations for
account of Bank and to file appropriate claims or proofs of claim in respect of
the Subordinated Obligations, (ii) execute and deliver to Bank such powers of
attorney, assignments or other instruments as Bank may reasonably request in
order to enable it to enforce any and all claims with respect to, and any
security interests and other liens securing payment of, the Subordinated
Obligations, and (iii) collect and receive any and all payments or distributions
that may be payable or deliverable upon or with respect to the Subordinated
Obligations.


          SECTION
26. Reinstatement. The provisions of this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Bank Indebtedness is rescinded or must otherwise be returned by Bank
upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, all
as though such payment had not been made.


          SECTION
27. Enforcement. Creditor agrees to pay to Bank on demand all costs and
expenses of any kind, including, without limitation, attorneys’ fees, expenses
and disbursements which Bank may incur in enforcing any of its rights under
this Agreement.


          SECTION 28. Cumulative Rights; No Waiver;
Modification. Nothing herein contained or arising shall limit or restrict
any of the obligations or agreements of Creditor or Borrower under any other
document or instrument with or in favor of Bank. Each and every right granted
to Bank hereunder or in






connection herewith, or allowed by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of Bank to exercise, and no delay in exercising, any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise by Bank of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. No amendment or modification of any provision of this Agreement or
any waiver thereof shall in any event be effective unless made by an instrument
in writing signed by Bank and the party to be charged therewith.


          SECTION
29. Legends. Any instrument evidencing any of the Subordinated
Obligations, or any portion thereof, shall be inscribed with a legend, or
otherwise include a reference, conspicuously indicating that payment thereof is
subordinated pursuant to the terms of this Agreement, and a copy thereof shall
be delivered to Bank. Any such instrument shall also provide in substance that
any transferee thereof shall, by acceptance thereof, assume, agree to and
accept the terms of this Agreement.


          SECTION
30. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of Texas.


          SECTION
31. Termination. This Agreement is a continuing agreement and shall
remain in full force and effect until the final indefeasible payment in full of
all of the Bank Indebtedness, expiration of all commitments by Bank to make
advances to Borrower under any document or instrument and the termination of
all documents and instruments evidencing and/or securing any Bank Indebtedness.


          SECTION
32. Descriptive Headings. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.


          SECTION
33. Binding Effect. Wherever in this Agreement one of the parties hereto
is named or referred to, the heirs, administrators, executors, successors,
assigns, distributees and legal and personal representatives of such party
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Creditor and/or Borrower or by or on behalf of Bank shall
bind and inure to the benefit of their respective heirs, administrators,
executors, successors, assigns, distributees, and legal and personal
representatives, whether so expressed or not. Notwithstanding the foregoing,
neither Creditor nor Borrower shall be entitled to assign any of their
respective rights, titles, and interest hereunder, delegate any of their
respective obligations, liabilities, duties, or responsibilities hereunder, or
permit any such assignment or delegation to occur (voluntarily or
involuntarily, or directly or indirectly), without the prior written consent of
Bank.






          SECTION
34. Severability. If any provision of this Agreement shall be held or
deemed to be or shall, in fact, be inoperative or unenforceable as applied in
any particular case in any jurisdiction or jurisdictions or in all
jurisdictions, or in all cases because it conflicts with any other provision or
provisions hereof or any constitution or statute or rule of public policy, or
for any other reason, such circumstances shall not have the effect of rendering
the provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever.


          SECTION
35. Amendment and Restatement. This Agreement amends and restates that
certain Creditors’ Subordination Agreement executed by the parties hereto dated
as of _____, 200__.


IN WITNESS WHEREOF,
the undersigned have caused this Agreement to be executed as of the 19th
day of June, 2007.


	
 

	
 

	
 

	
 


	
 

	
BORROWER:


	
 

	
 

	
 


	
 

	
UNIVERSAL POWER GROUP, INC.,
  a Texas corporation


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
 

	
Its:


	
 

	
 

	
 

	



	
 

	
 

	
 


	
 

	
CREDITOR:


	
 

	
 

	
 

	
 


	
 

	
ZUNICOM, INC., a
  Texas corporation


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
 

	
Its:


	
 

	
 

	
 

	



	
 

	
 

	
 


	
 

	
BANK:


	
 

	
 

	
 


	
 

	
COMPASS BANK


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	



	
 

	
 

	
Its:


	
 

	
 

	
 

	













STATE OF TEXAS


COUNTY OF
DALLAS


I, the
undersigned, Notary Public in and for said County in said State, hereby certify
that _________________, whose name as _________________ of Universal Power Group, Inc.,
a Texas corporation, is signed to the foregoing instrument and who is known to
me, acknowledged before me on this day that, being informed of the contents of
the instrument, _ he, as such and with full authority, executed the same
voluntarily for and as the act of said corporation.


Given under my hand this the ________ day of _______________, 2007.


	
 

	
 


	
 

	
______________________________________


	
 

	
Notary
  Public


	
[NOTARIAL
  SEAL]

	
My
  Commission Expires:_________________


	
 

	
 





STATE OF TEXAS


COUNTY OF
DALLAS


I, the
undersigned, Notary Public in and for said County in said State, hereby certify
that _______________________, whose name as ________________ of Zunicom, Inc., a Texas corporation, is
signed to the foregoing instrument and who is known to me, acknowledged before
me on this day that, being informed of the contents of the instrument, _he, as
such and with full authority, executed the same voluntarily for and as the act
of said corporation.


Given under my
hand this the ________ day of _______________, 2007.


	
 

	
 


	
 

	
______________________________________


	
 

	
Notary Public


	
[NOTARIAL
  SEAL]

	
My
  Commission Expires:_________________





STATE OF TEXAS


COUNTY OF
DALLAS


I, the
undersigned, Notary Public in and for said County in said State, hereby certify
that _____________________, whose name as _______________ of COMPASS BANK, an Alabama banking
corporation, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of the
instrument, _he, as such and with full authority, executed the same voluntarily
for and as the act of said corporation.


Given under my hand this the ________ day of _______________, 2007.


	
 

	
 


	
 

	
______________________________________


	
 

	
Notary
  Public


	
[NOTARIAL
  SEAL]

	
My
  Commission Expires:_________________










Schedule 1

Subordinated Indebtedness


Payee is
Zunicom, Inc. on two Unsecured notes 


	
 

	
 

	
 


	
 

	
1.

	
Note in the
  amount of $2,850,000 originated on December 20, 2006 and due June 20, 2012


	
 

	
 

	
 


	
 

	
2.

	
Note in the
  amount of $3,000,000 originated on December 20, 2006 and due June 20, 2012





Copies of both
notes payable to Zunicom, Inc. attached.






Dated as of June 19, 2007


	
 

	
 


	
SECTION
  36.

	
NOTICE OF
  FINAL AGREEMENT








	
 

	
 


	
To:

	
Borrower and
  All Other Obligors with Respect to the Loan Which is Identified below:


	
 

	
 


	
1.

	
THE WRITTEN
  LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
  BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
  AGREEMENTS OF THE PARTIES.


	
 

	
 


	
 

	
THERE ARE NO
  UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


	
 

	
 


	
2.

	
As used in this Notice:


	
 

	
 


	
 

	
“Borrower” means the Borrower identified in the signature blocks below in this
  Notice.


	
 

	
 


	
 

	
“Lender” means Compass Bank.


	
 

	
 


	
 

	
“Loan” means the prospective loan by Lender to be evidenced by the
  promissory note or other evidence of indebtedness dated as of June 19, 2007
  executed by Borrower, payable to the order of Lender, in the original
  principal face amount of $30,000,000.


	
 

	
 


	
 

	
“Loan Agreement” means one or more promises, promissory
  notes, agreements, guarantees, undertakings, security agreements, pledge
  agreements, deeds of trust or other documents, or commitments, or any
  combination of those actions or documents, relating to the Loan.


	
 

	
 


	
3.

	
This Notice is given by
  Lender with respect to the Loan, pursuant to Section 26.02 of the Texas
  Business and Commerce Code. Borrower and each other obligor with respect to
  the Loan who signs below acknowledges, represents and warrants to Lender that
  Lender has given and such party has received and retained a copy of this
  Notice on the Date of this Notice stated above.


	
 

	
 


	
4.

	
This Notice may be
  executed in one or more counterparts, each of which will be deemed to be an
  original copy of this Notice and all of which, when taken together, will be
  deemed to constitute one and the same Notice.








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
LENDER

	
BORROWER


	
 

	
 


	
COMPASS BANK

	
UNIVERSAL POWER GROUP, INC.


	
 

	
 


	
By: 

	
 

	
By:

	
 


	
 

	


	
 

	



	
 

	
Name:

	
 

	
 

	
 

	
Name:

	
 

	
 


	
 

	
 

	
 

	


	
 

	
 

	
 

	



	
 

	
Title:

	
 

	
 

	
 

	
Title:

	
 

	
 


	
 

	
 

	


	


	
 

	
 

	


	






Current as of 8/4/2007