Document:

Unassociated Document

    

      SECURITY
        AGREEMENT

      

      

      THIS
        SECURITY AGREEMENT,
        dated
        as of August 25, 2005, is between BSI2000, Inc., a Delaware Corporation
        ("BSI2000") and The New Sytron, Inc., a Colorado corporation ("New
        Sytron").

      

      RECITALS

      

      WHEREAS,
        New
        Sytron has sold to BSI2000 all right, title and interest which New Sytron
        and/or
        DPI International Group, as debtor ("Debtor"), has or may have in the future
        to
        certain assets comprising the access control system commonly known as MAXX-NET,
        MAXX-Net, Maxx-Net or any variation thereof (the "Maxx-Net System") pursuant
        to
        a private foreclosure sale conducted by New Sytron in its capacity as a secured
        creditor of Debtor under and in full compliance with the Colorado Uniform
        Commercial Code—Secured Transactions;

      

      WHEREAS,
        a
        portion of the consideration paid by BSI2000 is in the form of a Promissory
        Note
        in the stated principal amount of $500,000 (the "Note") from BSI2000 payable
        to
        the order of New Sytron;

      

      WHEREAS,
        BSI2000
        has agreed to grant New Sytron a security interest in certain of the Maxx-Net
        System related assets owed by BSI2000 as collateral for its payment obligations
        under the Note;

      

      AGREEMENTS

      

      NOW
        THEREFORE,
        in
        consideration of the Recitals, and for other good and valuable consideration,
        receipt of which is hereby acknowledged by BSI2000, it is hereby agreed as
        follows:

      

      1 
Grant
        of Security Interest; Intellectual Property Escrow.
        As
        security for the Secured Obligations (as defined below), BSI2000 hereby grants
        to New Sytron a first security interest and lien on the property described
        below
        (collectively, the "Collateral"):

      

      (a) 
All
        right, title and interest of BSI2000 in and to (a) any and all rights
        to
        possession, use and/or ownership of the Maxx-Net System and any and all assets
        comprising components thereof, including any and all related software (source
        and object code), algorithms, computer processing systems, techniques,
        methodologies, formulae, processes, compilations of information, documentation,
        drawings, proposals, recommendations, job notes, reports, records,
        specifications, customer lists, customer contact information, trade names,
        trademarks, and any goodwill associated therewith, along with the right to
        apply
        for registration of the copyright in any related software, the right to create
        derivative works and the right to sue for past infringement of the copyright,
        trademark or any intellectual property right relating to the Maxx-Net System,
        whether patentable or not (collectively, the "Assets"), including without
        limitation all of the Maxx-Net System software/technology being transferred
        by
        New Sytron plus all of the core Maxx-Net System software/technology which
        BSI2000 has heretofore acquired or will hereafter acquire from Cyber Country
        Systems, LLC and/or any of its members or affiliates, or from any other source,
        (b) any contracts existing between BSI2000 and any customers relating
        to
        the Maxx-Net System software, whether relating to the sale of products,
        maintenance or service and (c) any accounts receivable owing to BSI2000
        from any such customers relating to maintenance or service contracts
        (collectively, the "Collateral"). Any copyrights or patents which have been
        or
        may be applied for or issued with respect to the Collateral shall also be
        a part
        of the Collateral. 

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) 
Any
        modifications, improvements, or enhancements to the core Maxx-Net System
        software/technology (specifically excluding any biometrics enhancements
        thereto)(to the extent of BSI2000's rights thereto).

      

      All
        of the software
        (source and object code), gerber files, algorithms, computer processing systems,
        compilations of information, documentation, drawings, proposals,
        recommendations, job notes, reports, records, and specifications related
        to the
        Maxx-Net System shall be deposited within ninety (90) days of the execution
        of
        this Agreement into a software escrow established with Iron Mountain
        Intellectual Property Management Inc. pursuant to a Three-Party Escrow Service
        Agreement reasonably acceptable to the parties, and the initial deposit of
        such
        intellectual property shall be verified as to its completeness and accuracy
        by
        New Sytron in its reasonable discretion. BSI2000 covenants further that all
        modifications, improvements and enhancements to the Maxx-Net System shall
        be
        timely deposited into the escrow as and when they are developed. 

      

      2 
Secured
        Obligations.
        The
        security interest hereby granted shall secure payment of all liabilities
        and
        obligations of BSI2000 to New Sytron under the Note and the performance by
        BSI2000 of its representations, warranties and covenants contained herein
        (collectively, the "Secured Obligations"):

      

      3 
Representations,
        Warranties and Covenants.
        BSI2000
        hereby represents, warrants and covenants to New Sytron that:

      

      (a) 
Organization
        and Continuation of Business.
        BSI2000
        is duly organized, validly existing, and in good standing under the laws
        of the
        state of its incorporation, and shall do, or cause to be done, all things
        reasonably necessary to continue its business.

      

      (b) 
Authority
        and No Violations.
        BSI2000
        has taken all necessary action, corporate or otherwise, to authorize the
        execution, delivery and performance of this Agreement. The execution and
        delivery of the Agreement by BSI2000 hereunder will not violate any provisions
        of law and will not result in a breach of any order, injunction, or similar
        document or instrument of any court or governmental authority or BSI2000's
        articles of incorporation or by-laws, or any agreement, contract or indenture
        to
        which BSI2000 is a party. 

      

      (c) 
Enforceability.
        This
        Agreement constitutes the valid and legally binding obligation of BSI2000,
        enforceable in accordance with its terms. 

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (d) 
Priority
        of Liens.
        The
        Collateral is free and clear of any security interest, lien or encumbrance
        of
        any nature whatsoever, except for a security interest granted in favor of
        Cornell Capital Partners, LP. The security interest hereby granted to New
        Sytron
        shall be superior to and take precedence over any and all liens, charges
        and
        encumbrances which may exist on the Collateral, including without limitation
        any
        such lien, charge or encumbrance held by Cornell Capital Partners, LP.

      

      (e) 
Judgments,
        Actions, Proceedings.
        There
        are no outstanding judgments, or actions or proceedings pending before any
        court
        or governmental authority with respect to or, to the best of BSI2000's
        knowledge, threatened against or affecting BSI2000 or the Collateral, nor,
        to
        the best of BSI2000's knowledge, is there any reasonable basis for the
        institution of any such action or proceeding which is probable of
        assertion.

      

      (f) 
Claims.
        BSI2000
        shall promptly notify New Sytron of any claim against any of the
        Collateral.

      

      (g) 
Compliance
        With Laws.
        BSI2000
        is in material compliance with and shall continue to be in material compliance
        with all applicable laws and regulations.

      

      (h) 
Taxes.
        BSI2000
        has filed and will continue to file all federal, state and local tax returns
        required to be filed by it and has paid and will continue to pay all taxes
        owed
        by it on or before the applicable due dates.

      

      (i) 
State
        of Incorporation and Name.
        BSI2000's place of business, the office where it keeps its records concerning,
        and the location of, the Collateral is set forth below. BSI2000 will give
        thirty
        days prior written notice to New Sytron of any change in its state of
        incorporation, change of its name or merger with another
        corporation.

      

      (j) 
Financing
        Statements.
        BSI2000
        hereby authorizes New Sytron to file such financing statements, amendments,
        certificates and other documents or instruments as may be necessary to enable
        New Sytron to perfect or from time to time renew the security interest granted
        hereby in the Collateral.

      

      4 
Events
        of Default.
        The
        occurrence of any one or more of the following events or conditions shall
        constitute an "Event of Default":

      

      (a) 
A
        default
        by BSI2000 of its obligations under the Note and an acceleration by New Sytron
        of all amounts due under the Note; or

      

      (b) 
Material
        failure of BSI2000 to comply with any covenant contained herein within twenty
        (20) days after notice from New Sytron of such failure; or

      

      (c) 
Any
        representation or warranty made by BSI2000 herein shall have been false or
        misleading in any material respect when made; or

      

      (d) 
BSI2000
        shall make an assignment for the benefit of creditors, file a petition in
        bankruptcy, be adjudicated insolvent, or shall commence any proceeding under
        any
        bankruptcy, reorganization or dissolution.

      
 

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      5 
Rights
        of New Sytron.
        Upon the
        occurrence of any Event of Default, New Sytron may declare all of the Secured
        Obligations immediately due and payable and shall then have the rights and
        remedies of a creditor under the Uniform Commercial Code or under any other
        applicable law. New Sytron will give BSI2000 at least ten (10) days prior
        written notice at the address of BSI2000 set forth below (or at such other
        address as BSI2000 shall specify in writing to New Sytron) of the time and
        place
        of any public sale thereof or of the time after which any private sale or
        any
        other intended disposition thereof is to be made. Any such notice shall be
        deemed to meet any requirement hereunder or under any applicable law (including
        the Uniform Commercial Code) that reasonable notification be given of the
        time
        and place of such sale or other disposition. After deducting all costs and
        expenses of collection, storage, custody, sale or other disposition and delivery
        (including reasonable costs and reasonable attorneys' fees) and all other
        charges against the Collateral, the residue of the proceeds of any such sale
        or
        disposition shall be applied to the payment of the Secured Obligations in
        such
        order as New Sytron shall determine. In the event the proceeds of any sale
        or
        other disposition of the Collateral hereunder are insufficient to pay all
        of the
        Secured Obligations in full, BSI2000 will be liable for the deficiency, together
        with interest thereon, at the lesser of 18% per annum or the maximum rate
        permitted by law, and the cost and expenses of collection of such deficiency,
        including (to the extent permitted by law), without limitation, reasonable
        attorneys' fees, expenses and disbursements. The powers conferred on New
        Sytron
        under this Agreement are solely to protect its interest in the Collateral
        and
        shall not impose any duty upon it to exercise any such powers.

      

      6 
Collection
        of Accounts Receivable.
        Upon the
        occurrence of any Event of Default, New Sytron may notify or require BSI2000
        to
        notify account debtors on any or all of BSI2000's accounts receivable
        constituting part of the Collateral, whether now existing or hereafter arising,
        to make payment directly to New Sytron, and may take possession of all proceeds
        of any accounts in BSI2000's possession, and may take any other steps which
        New
        Sytron deems necessary or advisable to collect any or all such accounts
        receivable or other Collateral or proceeds thereof, including the delivery
        to
        New Sytron of a complete account receivables list with the names and addresses
        of all debtors noted thereon. BSI2000 hereby irrevocably appoints New Sytron
        as
        its attorney-in-fact, with full authority in the place, name and stead of
        BSI2000 from time to time in New Sytron's discretion, to take any action
        and to
        execute any instrument which New Sytron may deem necessary or advisable to
        accomplish the purposes of this Security Agreement. BSI2000 hereby ratifies
        all
        that New Sytron may do by virtue hereof.

      

      7 
Notices,
        etc.
        All
        notices and other communications pursuant to this Security Agreement shall
        be in
        writing, either by letter (delivered by hand or commercial messenger services
        or
        sent by registered or certified mail, return receipt requested) or telecopy,
        addressed as set forth below. Any notice or other communication hereunder
        shall
        be deemed to have been given on: (i) the day on which it is sent by facsimile
        to
        such party at its facsimile number specified above (provided such notice
        shall
        be effective only if followed by one of the other methods of delivery set
        forth
        herein) or delivered by receipted hand or such commercial messenger service
        to
        such party at its address specified above, or (ii) on the day received if
        sent
        by mail. Any party may change the person, address or facsimile number to
        whom or
        which notices are to be given hereunder, by notice duly given hereunder;
        provided, however, that any such notice shall be deemed to have been given
        hereunder only when actually received by the party to which it is
        addressed.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      8 
Survival.
        This
        Security Agreement shall inure to the benefit of and be binding upon BSI2000
        and
        New Sytron and their respective heirs, successors and assigns, including
        any
        subsequent holder or holders of any Secured Obligation.

      

      9 
Captions.
        The
        captions used in this Agreement have been inserted for convenience only and
        shall not be deemed to limit or otherwise affect the construction of any
        provision hereof.

      

      10 
Reinstatement.
        This
        Security Agreement shall continue to be effective, or be reinstated, as the
        case
        may be, if at any time any amount received by New Sytron hereunder is rescinded
        or must otherwise be restored or returned by New Sytron upon the insolvency,
        bankruptcy, dissolution, liquidation or reorganization of BSI2000 or upon
        the
        appointment of any intervenor or conservator of, or trustee or similar official
        for, BSI2000 or any substantial part of their respective properties, or
        otherwise, all as though such payments had not been made.

      

      11 
Counterparts.
        This
        Security Agreement may be executed in any number of counterparts and by the
        different parties hereto on separate counterparts, each of which when so
        executed and delivered shall be an original, but all of which shall together
        constitute one and the same instrument.

      

      12 
Governing
        Law; Jurisdiction.
        The
        respective rights and obligations of the parties hereto shall be governed
        by and
        construed and enforced in accordance with the laws of the State of Colorado
        applicable to contracts made and to be performed wholly within such state.
        Each
        party hereto consents to the jurisdiction of the courts of Colorado and the
        United States District Court for the District of Colorado, over such persons,
        and waives any claim that any such court is an inconvenient forum or has
        no
        personal jurisdiction over the same.

      

      IN
        WITNESS WHEREOF,
        BSI2000
        and New Sytron have executed this Security Agreement as of the date set forth
        above.

      

      
        	Address:	 	 
	11959
                Discovery Court	The
                New Sytron, Inc., a Colorado corporation
	
                Moorpark,
                  CA 93021

                
                  
                    Facsimile No.: (805)
                      532-2860

                  

                

              	 
 	 
 
	
                 

              	By:  	 
	 	
                
                  

                

                Ahmad Ibrahim

              
	 	
                President

              

      

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	Address: 	 	 
	12600
                West Colfax Ave.	BSI2000,
                Inc.,
                a
                Delaware corporation
	Suite
                B410
Lakewood, CO 80215	 
 	 
 
	Facsimile
                No.: 303-231-9002	By:  	 
	 	
                
Jack
                Harper
	 	President

      

       

       

      
        
          
          

        

        
          6Unassociated Document

     

    PROMISSORY
      NOTE

    

    

    $500,000.00                                              
                                                         August 25,
      2005

    

    

    FOR
      VALUE
      RECEIVED, BSI2000, Inc., a Delaware corporation ("BSI2000"), hereby promises
      to
      pay to the order of The New Sytron, Inc., a Colorado corporation, on or before
      September 1, 2009, the principal sum of Five Hundred Thousand and no/100
      Dollars ($500,000.00), at its office located at 11959 Discovery Court, Moorpark,
      California 93021, or at such other place as the legal holder hereof may from
      time to time designate, together with interest thereon at an annual rate of
      6%,
      with payments to be in forty-eight (48) equal monthly installments of
      $11,743.00, commencing October 1, 2005 and continuing on the same day
      of
      each successive month thereafter until paid in full.

    

    If
      any
      installment of principal or interest is not paid within ten (10) business days
      of the time and place specified herein, the entire amount unpaid shall be due
      and payable forthwith at the election of the legal holder of this Note upon
      notice to BSI2000. In the event of such acceleration of the Note by the legal
      holder, interest shall thereupon commence to accrue at the lesser of 18% per
      annum or the maximum rate permitted by law. The acceptance of any payment by
      the
      legal holder hereof after the time when it becomes due as herein set forth
      shall
      not be held to establish a custom or to waive any rights of the holder, whether
      to enforce prompt payment of any future installment or otherwise. BSI2000 shall
      have the right to prepay any and all amounts due hereunder without penalty
      or
      prejudice. 

    

    The
      obligations of BSI2000 under this Note are secured by that certain Security
      Agreement dated as of even date herewith between BSI2000 and The New Sytron,
      Inc. Upon the occurrence of any Event of Default under said Security Agreement,
      the entire amount unpaid under this Note shall be due and payable forthwith
      at
      the election of the legal holder of this Note upon notice to BSI2000. BSI2000
      agrees to pay all reasonable costs of collection, including reasonable attorneys
      fees if suit is brought on the Note. BSI2000 waives presentment, notice of
      dishonor, and protest, and assents to any substitution or release of collateral.
      No waiver of any payment or other rights under this Note shall operate as a
      waiver of any other payment or rights. No delay or failure of the holder of
      this
      Note in the exercise of any rights or remedy hereunder shall be deemed a waiver
      of such rights by the holder and no exercise of any rights or remedies shall
      be
      deemed a waiver of any other rights or remedy. 

    

    This
      Note
      shall be construed under and governed by the laws of the State of Colorado,
      and
      all of the rights of the legal holder hereunder shall inure to the benefit
      of
      its successors, assigns and personal representatives, and all obligations of
      BSI2000 hereunder shall bind the successors and assigns of BSI2000.

     

    
      
        	 	 	 
	 	BSI2000,
          INC., a Delaware corporation
	 
 	 
 	 
 
	Date: 	By:  	 
	 	
                

                Jack
                  Harper

                Chief
                  Executive Officer

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