Document:

Exhibit 10.2

LOAN AND SECURITY AGREEMENT

          THIS LOAN AND SECURITY AGREEMENT dated as of the Closing Date (as amended, modified or restated from time to time, this “Agreement”), will serve to set forth the terms of the Credit Facility by and among PLAINSCAPITAL BANK, a Texas state bank (together with its successors and assigns, “Lender”) and AVATAR SYSTEMS, INC., a Texas corporation (“Debtor”).

RECITALS

          WHEREAS, Debtor has requested that Lender extend the Credit Facility to Debtor on the terms described in this Agreement;  

          WHEREAS, Lender is willing to make the Credit Facility available to Debtor upon and subject to the provisions, terms and conditions set forth in the Loan Documents;

NOW THEREFORE, the parties hereto, intending to be legally bound, agree as follows:

          1.        Definitions. 
As used in this Agreement, all exhibits, appendices and schedules hereto, and in
any other Loan Documents made or delivered pursuant to this Agreement, the
following terms will have the meanings given such terms in this Section 1
or in the provisions, sections or recitals herein:

	
  
 
  	
  
          (a)          “Affiliate”   means, with respect to a specified Person, another Person that directly or   indirectly through one or more intermediaries, Controls or is Controlled by   or is under common Control with the Person specified.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (b)          “Business
Day” means any day other than a Saturday, Sunday, or any other day
on which the Federal Reserve Bank of Dallas, Texas, is closed.
 
	
  
 
  	
  
 
  
	
  
 
  	
  
          (c)          “Code”   means the Uniform Commercial Code as the same may, from time to time, be   enacted and in effect in the State of Texas; provided, that to the extent   that the Code is used to define any term herein or in any Loan Document and such   term is defined differently in different articles or divisions of the Code,   the definition of such term contained in Article 9 shall govern; provided   further, that in the event that, by reason of mandatory provisions of law,   any or all of the attachment, perfection or priority of, or remedies with   respect to, Lender’s lien on any Collateral is governed by the Uniform   Commercial Code as enacted and in effect in a jurisdiction other than the   State of Texas, the term “Code” shall mean the Uniform   Commercial Code as enacted and in effect in
such other jurisdiction solely   for purposes of the provisions thereof relating to such attachment,   perfection, priority or remedies and for purposes of definitions related to   such provisions.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (d)          “Collateral”   means:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                        (i)          All   present and future accounts, chattel paper (including electronic chattel   paper), commercial tort claims, commodity accounts, commodity contracts,   deposit accounts, documents, financial assets, general intangibles, health   care insurance receivables, instruments, investment property, letters of   credit, letter of credit rights, payment intangibles, securities, security   accounts, and security entitlements now or hereafter owned, held, or acquired.
  

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                           (ii)          All present   and hereafter acquired inventory and goods (including without limitation, all   raw materials, work in process and finished goods) held, possessed, owned,   held on consignment, or held for sale, lease, return or to be furnished under   contracts of services, in whole or in part, wherever located.
  
	
   
  	
  
 
  
	
  
 
  	
  
                           (iii)          All   equipment and fixtures of whatsoever kind and character now or hereafter   possessed, held, acquired, leased or owned, together with all replacements,   accessories, additions, substitutions and accessions to all of the foregoing,   all records relating in any way to the foregoing.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                           (iv)          All   Intellectual Property or rights now or hereafter owned, held, or acquired   (including without limitation, the Intellectual Property, set forth on Schedule   1(d)(iv) attached hereto, if any.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
The term “Collateral,”   as used herein, shall also include (i) any other Property, real or personal,   tangible or intangible, now existing or hereafter acquired, of Debtor that   may at any time be or become subject to a security interest or lien in favor   of Lender, and (ii) all SUPPORT OBLIGATIONS, PRODUCTS and PROCEEDS of all of   the foregoing (including without limitation, insurance payable by reason of   loss or damage to the foregoing property) and any Property, securities,   guaranties or monies of Debtor which may at any time come into the possession   of Lender.  The designation of   proceeds does not authorize Debtor to sell, transfer or otherwise convey any   of the foregoing property except in the ordinary course of Debtor’s business   or as otherwise provided herein.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (e)          “Constituent   Documents” means (i) in the case of a corporation, its   articles or certificate of incorporation and bylaws; (ii) in the case of   a general partnership, its partnership agreement; (iii) in the case of a   limited partnership, its certificate of limited partnership and partnership   agreement; (iv) in the case of a trust, its trust agreement; (v) in   the case of a joint venture, its joint venture agreement; (vi) in the   case of a limited liability company, its articles of organization and   operating agreement or regulations; and (vii) in the case of any other   entity, its organizational and governance documents and agreements.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (f)          “Control”   means the possession, directly or indirectly, of the power to direct or cause   the direction of the management or policies of a Person, whether through the   ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”   have meanings correlative thereto.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (g)          “Copyright   Licenses” means any and all agreements (written or oral)   naming Debtor as licensor or licensee (including, without limitation, those   listed in Schedule 1(d)(iv)), providing for the granting of any right   in, to or under any Copyright, including, without limitation, the granting of   rights in all derivative works based upon any Copyright, and all renewals and   extensions thereof.
  

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          (h)          “Copyrights”   means (1) all United States and foreign copyrights, whether or not the   underlying works of authorship have been published, including but not limited   to copyrights in software and databases, all Mask Works (as defined in 17   U.S.C. 901 of the U.S. Copyright Act) and all works of authorship and other   intellectual property rights therein, all copyrights of works based on,   incorporated in, derived from or relating to works covered by such   copyrights, all right, title and interest to make and exploit all derivative   works based on or adopted from works covered by such copyrights, and all   United States and foreign copyright registrations and applications for   copyright, and any renewals or extensions thereof, including, without   limitation, each registration and application identified in
Schedule   1(d)(iv), (2) the rights to print, publish and distribute any of the   foregoing, (3) the right to sue or otherwise recover for any and all past,   present and future infringements and misappropriations of any of the   foregoing, (4) all income, royalties, damages and other payments now and   hereafter due and/or payable with respect to any of the foregoing (including,   without limitation, payments under all Copyright Licenses entered into in   connection therewith, payments arising out of any other sale, lease, license   or other disposition thereof and damages and payments for past, present or   future infringements thereof), and (5) all other rights of any kind   whatsoever accruing.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (i)          “Debt”   means as to any Person at any time (without duplication) all items of   indebtedness, obligation or liability of a Person, whether mature or   unmatured, liquidated or unliquidated, direct or indirect, absolute or   contingent, joint or several, that should be classified as liabilities in   accordance with GAAP.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (j)          “GAAP”   means generally accepted accounting principles, applied on a consistent   basis, as set forth in Opinions of the Accounting Principles Board of the   American Institute of Certified Public Accountants and/or in statements of   the Financial Accounting Standards Board and/or their respective successors   and which are applicable in the circumstances as of the date in   question.  Accounting principles are   applied on a “consistent basis” when the accounting principles applied in a   current period are comparable in all material respects to those accounting   principles applied in a preceding period.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (k)          “Governmental   Authority” means the government of the United States of   America, any other nation or any political subdivision thereof, whether state   or local, and any agency, authority, instrumentality, regulatory body, court,   central bank or other entity exercising executive, legislative, judicial,   taxing, regulatory or administrative powers or functions of or pertaining to   government.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (l)          “Guarantor”   means any Person, whether one or more, who from time to time guarantees all   or any part of the Indebtedness.
  

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          (m)          “Guaranty”   means a GUARANTY   AGREEMENT, whether one or more,executed by Guarantor (as   the same may be amended, restated or modified from time to time).
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (n)          “Indebtedness”   means (i) all indebtedness, obligations and liabilities of Debtor to Lender   of any kind or character, now existing or hereafter arising, whether direct,   indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,   joint, several or joint and several, and regardless of whether such   indebtedness, obligations and liabilities may, prior to their acquisition by   Lender, be or have been payable to or in favor of a third party and   subsequently acquired by Lender (it being contemplated that Lender may make   such acquisitions from third parties), including without limitation all   indebtedness, obligations and liabilities of Debtor to Lender now existing or   hereafter arising under the Notes, this Agreement, the other Loan Documents   or any draft, acceptance, guaranty, endorsement,
letter of credit,   assignment, purchase, overdraft, discount, indemnity agreement or otherwise,   (ii) all accrued but unpaid interest on any of the indebtedness described in   (i) above, (iii) all obligations of Obligors to Lender under the Loan   Documents, (iv) all costs and expenses incurred by Lender in connection with   the collection and administration of all or any part of the indebtedness and   obligations described in (i), (ii) and (iii) above or the protection or   preservation of, or realization upon, the collateral securing all or any part   of such indebtedness and obligations, including without limitation all   reasonable attorneys’ fees, and (v) all renewals, extensions, modifications   and rearrangements of the indebtedness and obligations described in (i),   (ii), (iii) and (iv) above.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (o)          “Intellectual   Property” means the collective reference to all rights,   priorities and privileges relating to intellectual property, whether arising   under United States, multinational or foreign laws or otherwise, including,   without limitation, the Copyrights, the Licenses, the Patents, the   Trademarks, the Trade Secrets, and internet domain names, and all rights to   sue at law or in equity for any infringement or other impairment thereof,   including the right to receive all proceeds and damages therefrom.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (p)          “Licenses”   means the Patent Licenses, Trademark Licenses or Copyright Licenses of a   Person as any of the same may from time to time be amended or supplemented   and those licenses which are hereafter obtained or acquired by such Person.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (q)          “Loan   Documents” means this Agreement, the Notes, the Guaranty and   the other agreements, instruments and documents evidencing, securing,   governing, guaranteeing or pertaining to the Loans.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (r)          “Loans”   means all advances under the Credit Facility as established pursuant to the   Loan Documents from time to time.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (s)          “Material   Adverse Effect” means a material adverse effect on   (i) the business, assets, property, operations, condition (financial or   otherwise) or prospects, of an Obligor (individually or taken as a whole),   (ii) the ability of an Obligor to pay or perform the Indebtedness, (iii)    the rights of or benefits available to Lender under the Loan Documents, or   (iv) the validity or enforceability of the Loan Documents.
  

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          (t)          “Notes”   means, collectively, any promissory note evidencing all or part of the   Indebtedness from time to time (as any such Note may be amended, modified or   restated from time to time).
  
	
   
  	
  
 
  
	
  
 
  	
  
          (u)          “Obligors”   means Debtor, Guarantor or any other Person who guaranteed or is otherwise   obligated to pay or perform all or any portion of Indebtedness.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (v)          “Patent   Licenses” means all agreements, whether written or oral,   providing for the grant by or to Debtor of any right to make, manufacture,   use, sell, offer to sell, or import any invention covered in whole or in part   by a Patent, including, without limitation, those listed on Schedule 1(d)(iv),   and all extensions and renewals thereof.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (w)          “Patents”   means (1) all United States and foreign patents, patent applications and   patentable inventions, including, without limitation, each patent and patent   application identified in Schedule 1 (d)(iv), all certificates of   invention or similar property rights, (2) all inventions and improvements   described and claimed therein, (3) the right to sue or otherwise recover for   any and all past, present and future infringements and misappropriations of   any of the foregoing, (4) all income, royalties, damages and other payments   now and hereafter due and/or payable with respect thereto (including, without   limitation, payments under all Patent Licenses entered into in connection   therewith, payments arising out of any other sale, lease, license or other   disposition thereof and damages and
payments for past, present or future   infringement thereof), and (5) all reissues, divisions, continuations,   continuations-in-part, substitutes, renewals, and extensions thereof, all   improvements thereon and all other rights of any kind whatsoever accruing thereunder   or pertaining thereto.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (x)          “Permitted   Encumbrances” means the following encumbrances: (i) liens   for taxes, assessments or governmental charges or levies not yet due and   payable or liens for taxes, assessments or governmental charges or levies   being contested in good faith and by appropriate proceedings for which   adequate reserves have been established in accordance with GAAP;   (ii) liens in respect of Property of a Person imposed by law which were   incurred in the ordinary course of business and which have not arisen to   secure Debt for borrowed money, such as carriers’, materialmen’s,   warehousemen’s and mechanics’ liens, statutory and common law landlord’s   liens, and other similar liens arising in the ordinary course of business,   and which either (1) do not in the aggregate materially detract
from the   value of such Property or materially impair the use thereof in the operation   of the business of a Person, or (2) are being contested in good faith by   appropriate proceedings, which proceedings have the effect of preventing the   forfeiture or sale of the Property subject to such lien; (iii) liens created   by or pursuant to the Loan Documents; (iv) liens in existence on the Closing   Date which are listed, and the Property subject thereto described, on Schedule   1(x), without giving effect to any extensions or renewals thereof; (v)   liens arising from judgments, decrees, awards or attachments in circumstances   not constituting an Event of Default; (vi) liens (1) incurred or deposits 
  

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made in the   ordinary course of business in connection with general insurance maintained   by a Person, (2) incurred or deposits made in the ordinary course of business   of a Person in connection with workers’ compensation, unemployment insurance   and other types of social security, (3) to secure the performance by any   Person of tenders, statutory obligations (other than excise taxes), surety,   stay, customs and appeal bonds, statutory bonds, bids, leases, government   contracts, trade contracts, performance and return of money bonds and other   similar obligations (exclusive of obligations for the payment of borrowed   money) to the extent incurred in the ordinary course of business, and (4) to   secure the performance by a Person of leases of real property, to the extent   incurred or made in the ordinary course of business consistent with past   practices; and (vii) licenses, sublicenses, leases or subleases granted to   third Persons in the
ordinary course of business not interfering in any   material respect with the business of a Person.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (y)          “Person”   means any individual, corporation, limited liability company, business trust,   association, company, partnership, joint venture, Governmental Authority, or   other entity, and shall include such Person’s heirs, administrators, personal   representatives, executors, successors and assigns.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (z)          “Property”   of a Person means any and all property, whether real, personal, tangible,   intangible or mixed, of such Person, or any other assets owned, operated or   leased by such Person.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (aa)        “Subsidiary”   means any entity (i) of which at least a majority of the ownership,   equity or voting interest is at the time directly or indirectly owned or   controlled by a Person and/or its Subsidiaries, and (ii) which is   treated as a subsidiary in accordance with GAAP.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (bb)       “Trade   Secrets” means all confidential and proprietary information,   including, without limitation, know-how, trade secrets, manufacturing and   production processes and techniques, inventions, research and development   information, databases and data, including, without limitation, technical   data, financial, marketing and business data, pricing and cost information,   business and marketing plans and customer and supplier lists and information.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (cc)          “Trademark Licenses”   means all agreements, whether written or oral, providing for the grant by or   to Debtor of any right in or to any Trademark, including, without limitation,   those listed on Schedule 1(d)(iv) and all renewals and extensions   thereof.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (dd)          “Trademarks” means   (1) all United States and foreign trademarks, trade names, corporate names,   company names, business names, fictitious business names, service marks,   logos, trade dress, trade styles, designs, know-how, slogans, words, terms,   names, symbols and devices and all combinations thereof, and all other source   or business identifiers, and all goodwill of the business connected with the   use thereof as symbolized thereby, all registrations and recordings thereof,   and all applications therefore or  in   connection therewith, whether in the United States Patent and Trademark   Office or 
  
 
  

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in any   similar office or agency of the United States, any state thereof or any other   country or any political subdivision thereof, or otherwise, and all   common-law rights related thereto, including, without limitation, those   listed on Schedule 1(d)(iv), and any and all extensions and   renewals of any of the foregoing, (2) the right to sue or otherwise recover   for any and all past, present and future infringements, misappropriations and   dilutions of any of the foregoing, (3) all income, royalties, damages and   other payments now and hereafter due and/or payable with respect to any of   the foregoing (including, without limitation, payments under all Trademark Licenses   entered into in connection therewith, and damages and payments for past,   present or future infringements thereof), and (iv) all other rights of any   kind whatsoever accruing thereunder or pertaining thereto, together in each   case with all of the goodwill of the
business connected with the use of, and   symbolized by, each of the above.
  

All words and phrases used herein shall have the meaning specified in the Code except to the extent such meaning is inconsistent with this Agreement. All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined.  The words “hereof”, “herein”, and “hereunder” and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Any accounting term used in the Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP consistently applied; provided, that all financial covenants and calculations in the Loan Documents shall be made in accordance with GAAP as in effect on the
Closing Date unless Debtor and Lender shall otherwise specifically agree in writing.  That certain items or computations are explicitly modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing.

          2.        Credit Facility.  Subject to the terms and conditions set forth in this Agreement and the other Loan Documents, Lender agrees to make available a Revolving Credit Facility and a Term Loan Facility (collectively, the “Credit Facility”) to Debtor on the terms and conditions set forth herein:

	
  
 
  	
  
          (a)          Revolving   Credit Facility.  Subject   to the terms and conditions set forth in this Agreement and the other Loan   Documents, Lender hereby agrees to lend to Debtor an aggregate sum not to   exceed TWO   HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) (the “Revolving   Credit Facility”), on a revolving basis from time to time   during the period commencing on the date hereof and continuing until: (i) the   acceleration of the Indebtedness pursuant to the terms of the Loan Documents;   (ii) AUGUST 5, 2008, or (iii) such other date as may be   established by a written instrument between Debtor and Lender from time to   time (the “Revolving Credit Maturity Date”).  If at any time the sum of the aggregate   principal amount of Loans outstanding hereunder
exceeds the Revolving Credit   Facility, such amounts shall be deemed an “Overadvance.”  Debtor shall immediately repay the amount   of such Overadvance plus all accrued and unpaid interest thereon upon written   demand from Lender.  Notwithstanding   anything contained herein to the contrary, an Overadvance shall be considered   a Loan and shall bear interest at the Default Rate as set forth in the   Revolving Credit Note and be secured by this Agreement.  Subject to the terms and conditions   hereof, Debtor may borrow, repay and reborrow funds under the Revolving   Credit Facility.
  

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          (b)          Term   Loan Facility.  Subject to the terms and conditions   set forth in this Agreement and the other Loan Documents, Lender hereby   agrees to lend to Debtor in a single advance an aggregate sum of FOUR   HUNDRED SEVENTY-SIX THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($476,000.00)   (the “Term   Loan Facility”), from the date hereof and continuing until:   (i) the acceleration of the Indebtedness pursuant to the terms of the Loan   Documents; (ii) AUGUST 5, 2011, or (iii) such other date   as may be established by a written instrument between Debtor and Lender from   time to time (the “Term Maturity Date”).
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (c)          Funding.  Lender reserves the right to require not   less than one (1) Business Day prior notice of each Loan under the Revolving   Credit Facility, specifying the aggregate amount of such Loan.  Debtor shall give Lender notice of each   Loan under the Revolving Credit Facility by no later than 1:00 p.m.  (Dallas, Texas time) on the date provided   herein.  Lender at its option may   accept telephonic requests for such Loan, provided that such acceptance shall   not constitute a waiver of Lender’s right to require delivery of a written   request in connection with subsequent Loans.    Lender shall have no liability to Debtor for any loss or damage   suffered by Debtor as a result of Lender’s honoring of any requests,   execution of any instructions, authorizations or agreements or reliance on
any reports communicated to it telephonically, by facsimile or electronically   and purporting to have been sent to Lender by Debtor and Lender shall have no   duty to verify the origin of any such communication or the identity or   authority of the Person sending it.    Subject to the terms and conditions of this Agreement, each Loan under   this section shall be made available to Debtor by depositing the same, in   immediately available funds, in an account of Debtor designated by Debtor or   by paying the proceeds of such Loan to a third party designated by Debtor.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (d)          Use of   Proceeds.  The Loans   under the Revolving Credit Facility shall be used by Debtor for working   capital in the ordinary course of business.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (e)          Fees.  Debtor agrees to pay to Lender a   commitment fee equal to TEN THOUSAND ONE HUNDRED FORTY-EIGHT AND NO/100   DOLLARS ($10,148.00) for the establishment of the Credit Facility.  The commitment fee shall be due and   payable on the Closing Date and shall be deemed fully earned as of the   Closing Date.  The commitment fee   shall be to compensate Lender for its costs and expenses in the structuring   of the Credit Facility.
  

          3.        Notes, Rate and Computation of Interest.  The Revolving Credit Facility shall be evidenced by a promissory note (together with any amendments, modifications, replacements, substitutions, restatements, renewals, extensions and increases thereof, the “Revolving Credit Note”) duly executed by Debtor and payable to the order of Lender, in form and substance acceptable to Lender.  The Term Loan Facility shall be evidenced by a promissory note (together with any amendments, modifications, replacements, substitutions, restatements, renewals, 

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extensions and increases thereof, the
“Term Note”) duly executed by Debtor and payable to the
order of Lender, in form and substance acceptable to Lender.  Interest on
the Notes shall accrue at the rates set forth therein.  The principal of
and interest on the Notes shall be due and payable in accordance with the
respective terms and conditions set forth in the Notes and in this
Agreement.    

	
  
 
  	
  
4.          Collateral.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
             (a)          Grant   of Security Interest.    As collateral security for the prompt payment in full when due   (whether at stated maturity, by acceleration or otherwise) of the   Indebtedness, Debtor hereby pledges to and grants Lender, a security interest   in, all of Debtor’s right, title and interest in the Collateral, whether now   owned by Debtor or hereafter acquired and whether now existing or hereafter   coming into existence.  If Debtor at   any time holds or acquires a commercial tort claim, Debtor shall notify   Lender in writing within five (5) Business Days of such occurrence with the   details thereof and grant to Lender a security interest therein or lien   thereon and in the proceeds thereof, in form and substance satisfactory to   Lender.
  
	
   
  	
  
 
  
	
  
 
  	
  
                (b)          Additional   Documents.  To secure   full and complete payment and performance of the Indebtedness, Debtor shall   execute and deliver or cause to be executed and delivered all of the Loan   Documents reasonably required by Lender covering the Collateral.  Debtor shall execute and cause to be   executed such further documents and instruments, as Lender, in its reasonable   discretion, deems necessary or desirable to create, evidence, preserve, and   perfect its liens and security interests in the Collateral.  In the event any of the Loan Documents   evidencing or securing the Indebtedness misrepresents or inaccurately   reflects the correct terms and/or provisions of the Indebtedness, each   Obligor shall upon request by Lender and in order to correct such mistake,   execute such new documents
or initial corrected, original documents as Lender   may deem necessary to remedy said errors or mistakes.  Each Obligor shall execute such other   documents as Lender shall deem reasonably necessary to correct any defects or   deficiencies in the Loan Documents.    Any Obligor’s failure to execute such documents as requested shall   constitute an Event of Default under this Agreement.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                (c)          Setoff.  If an Event of Default shall have occurred   and be continuing, Lender shall have the right to set off and apply against   the Indebtedness in such manner as Lender may determine, at any time and   without notice to Debtor, any and all deposits (general or special, time or   demand, provisional or final) or other sums at any time credited by or owing   from Lender to Debtor whether or not the Indebtedness is then due.  As further security for the Indebtedness,   Debtor hereby grants to the Lender a security interest in all money,   instruments, and other Property of Debtor now or hereafter held by Lender,   including, without limitation, Property held in safekeeping.  In addition to the Lender’s right of   setoff and as further security for the Indebtedness, Debtor hereby grants
to   Lender a security interest in all deposits (general or special, time or   demand, provisional or final) and other accounts of Debtor now or hereafter   on deposit with or held by Lender and all other sums at any time credited by   or owing from Lender to Debtor.  The   rights and remedies of Lender hereunder are in addition to any other rights   and remedies (including, without limitation, other rights of setoff) which   Lender may have.
  

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                (d)          Satisfaction   of Indebtedness.  Until   the Indebtedness has been indefeasibly paid and fully satisfied (other than   contingent indemnification obligations to the extent no unsatisfied claim has   been asserted) and the commitments to lender under the Credit Facility have   been terminated, Lender shall be entitled to retain the security interests in   the Collateral granted under the Loan Documents and the ability to exercise   all rights and remedies available to Lender under the Loan Documents and   applicable laws.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
5.          Conditions   Precedent.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
             
(a)          Initial
Loans.  The obligation of Lender to make the initial Loan under the
Credit Facility, is subject to the condition precedent that Lender shall have
received on or before the day of such advance all of the following, each dated
(unless otherwise indicated) as of the Closing Date, in form and substance
satisfactory to Lender:
 
	
   
  	
  
 
  
	
  
 
  	
  
                             (i)          Resolutions.  Resolutions of the governing body of each   Obligor that is not a natural Person certified by an authorized officer or   representative of such Obligor which authorize the execution, delivery, and   performance of the Loan Documents that such Obligor is a party to;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (ii)          Incumbency   Certificate.  A   certificate of incumbency certified by an authorized officer or   representative of an Obligor certifying the names of the individuals or other   Persons authorized to sign the Loan Documents to which any Obligor that is   not a natural Person is to be a party (including the certificates   contemplated herein) together with specimen signatures of such Persons;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (iii)          Constituent   Documents.  The Constituent   Documents of each Obligor that is not a natural Person certified to Lender as   being true and correct as of the date of this Agreement;
  
	
   
  	
  
 
  
	
  
 
  	
  
                             (iv)          Governmental   Certificates.    Certificates of the appropriate government officials of the state of   organization of each Obligor that is not a natural Person and any state such   Obligor is currently doing business as to the existence, qualification and   good standing of such Obligor, dated within ten (10) days of the date of this   Agreement;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (v)          Loan   Documents.  The Loan   Documents executed by each Obligor party thereto;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (vi)          Financing   Statements.  Code   financing statements covering the Collateral shall have been filed with such   filing officers as Lender may request;
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 10

	
  
 
  	
  
                             (vii)          Insurance   Matters.  Copies of insurance   certificates describing all insurance policies as may be required by Lender   from time-to-time, together with loss payable and lender endorsements in   favor of Lender with respect to all insurance policies covering the   Collateral;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (viii)          Uniform   Commercial Code Search.  The results of a Code search showing all financing statements   and other documents or instruments on file against Debtor in such locations   as Lender may reasonably request, such search to be as of a date no more than   ten (10) days prior the Closing Date;
  
	
  
 
  	
  
 
  
	
   
  	
  
                             (ix)          Fees   and Expenses.  Evidence   that the costs and expenses of Lender (including reasonable attorneys’ fees)   and all fees owing to Lender, shall have been paid in full by Debtor;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (x)          Subordination   Agreement.  Debtor   shall have delivered fully executed subordination agreement agreement   relating to certain indebtedness of Debtor to TIM ALLEN and GREGG   ALLEN.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (xi)          Other   Matters.  Such other   documents and agreements as may be required by Lender in its reasonable   discretion.
  
	
  
 
  	
  
 
  
	
   
  	
  
             (b)          All
Loans.  The obligation of Lender to make any Loan shall be subject
to the following additional conditions precedent:
 
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (i)          Request   for Loan.  Lender shall   have received in accordance with this Agreement, a request for a Loan in form   and content satisfactory to Lender in its reasonable discretion dated as of   the date of request and executed by an authorized officer of Debtor;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                             (ii)          No   Event of Default, Etc.    No Event of Default, event which with the passage of time and/or notice   would be an Event of Default, or event which could have a Material Adverse   Effect shall have occurred and be continuing, or would result from or after   giving effect to such Loan;  and
  
	
   
  	
  
 
  
	
  
 
  	
  
                             (iii)          Representations   and Warranties.  All of   the representations and warranties contained in the Loan Documents shall be   true and correct in material respects on and as of the date of such Loan with   the same force and effect as if such representations and warranties had been   made on and as of such date.
  

          6.        Representations and Warranties.  Each Obligor hereby represents and warrants, and upon each request for a Loan represents and warrants to Lender as follows:

	
  
 
  	
  
          (a)          Existence.  Debtor (i) is duly organized, validly   existing, and in good standing under the laws of the jurisdiction of its   organization; (ii) has all requisite power and authority to own its   assets and carry on its business as now being or as proposed to be conducted;   and (iii) is qualified to do business in all jurisdictions in which the   nature of 
  
 
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 11

	
  
 
  	
  
its business   makes such qualification necessary and where failure to so qualify would have   a Material Adverse Effect. Debtor has the power and authority to execute,   deliver, and perform its obligations under the Loan Documents to which it is   or may become a party.  The federal   tax identification number and state organizational number for Debtor are set   forth below:
  

	
  
Federal Tax   Identification Number
  	
  
State Filing   Number
  
	
  
75-2796037
  	
  
150061000
  

	
  
 
  	
  
          (b)          Binding   Obligations.  The   execution, delivery, and performance of the Loan Documents by each Obligor   have been duly authorized by all necessary action by such Obligor, and   constitute legal, valid and binding obligations of such Obligor, enforceable   in accordance with their respective terms, except as limited by bankruptcy,   insolvency or similar laws of general application relating to the enforcement   of creditors’ rights and except to the extent specific remedies may generally   be limited by equitable principles.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (c)          No   Consent.  The   execution, delivery and performance of the Loan Documents, and the   consummation of the transactions contemplated thereby, do not   (i) conflict with, result in a violation of, or constitute a default   under (1) any provision of the Constituent Documents (if any) or other   instrument binding upon any Obligor,    (2) any law, governmental regulation, court decree or order applicable   to any Obligor, or (3) any contractual obligation, agreement, judgment,   license, order or permit applicable to or binding upon any Obligor, (ii)   require the consent, approval or authorization of any third party, or (iii)   result in or require the creation of any lien, charge or encumbrance upon any   Property of any Obligor except as may be expressly contemplated in the Loan   Documents.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Financial   Condition.  Each   financial statement of each Obligor supplied to Lender truly discloses and   fairly presents such Person’s financial condition as of the date of each such   statement.  There has been no material   adverse change in such financial condition or results of operations of any   Obligor subsequent to the date of the most recent financial statement   supplied to Lender.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (e)          Operation   of Business.  Debtor   possesses all contracts, licenses, permits, franchises, patents, copyrights,   trademarks, and tradenames, or rights thereto, necessary to conduct its   businesses substantially as now conducted and as presently proposed to be   conducted, and Debtor and is not in violation of any valid rights of others   with respect to any of the foregoing, except any violations that could not   reasonably be expected to have a Material Adverse Effect.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (f)          Litigation   and Judgments.  There   is no action, suit, investigation, or proceeding before or by any   Governmental Authority or arbitrator pending, or to the knowledge of Debtor,   threatened against or affecting any Obligor that would, if adversely   determined, have a Material Adverse Effect.    There are no outstanding judgments against any Obligor.
  

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 LOAN AND SECURITY AGREEMENT - PAGE 12

	
  
 
  	
  
          (g)          Rights   in Properties; Liens.    Debtor has good and indefeasible title to or valid leasehold interests   in its Properties, including the Properties reflected in the financial   statements provided to Lender, and none of the Properties of Debtor is   subject to any lien, except Permitted Encumbrances.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (h)          Debt.  Debtor has no Debt other than the   Permitted Indebtedness.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (i)          Disclosure.  No statement, information, report,   representation, or warranty made by any Obligor in the Loan Documents or   furnished to Lender in connection with the Loan Documents or any of the   transactions contemplated hereby contains any untrue statement of a material   fact or omits to state any material fact necessary to make the statements   herein or therein not misleading.    There is no fact known to any Obligor which could reasonably be   expected to have a Material Adverse Effect on the business, condition   (financial or otherwise), operations, prospects, or properties of any Obligor   that has not been disclosed in writing to Lender.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (j)          Subsidiaries,   Ventures, Etc.  Debtor   has no Subsidiaries, Affiliates or joint ventures or partnerships.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (k)          Agreements.  Debtor is not a party to any indenture,   loan, or credit agreement, or to any lease or other agreement or instrument,   or subject to any charter or corporate or other organizational restriction   which could reasonably be expected to have a Material Adverse Effect on the   business, condition (financial or otherwise), operations, prospects, or   properties of Debtor, or the ability of Debtor to pay and perform its   obligations under the Loan Documents.    Debtor is not in default in any material respect in the performance,   observance, or fulfillment of any of the obligations, covenants, or   conditions contained in any agreement or instrument material to its business.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (l)          Compliance   with Laws.  Debtor is   not in violation of any law, rule, regulation, order, or decree of any   Governmental Authority or arbitrator, the violation of which could reasonably   be expected to have a Material Adverse Effect.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (m)         Taxes;   Governmental Charges.    Each Obligor has filed all federal, state and local tax reports and   returns required by any law or regulation to be filed by it and has either   duly paid all taxes, duties and charges indicated due on the basis of such   returns and reports, or made adequate provision for the payment thereof, and   the assessment of any material amount of additional taxes in excess of those   paid and reported is not reasonably expected.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (n)          Security   Interest.  Debtor has   and will have at all times full right, power and authority to grant a   security interest in the Collateral to Lender in the manner provided herein,   free and clear of any lien, security interest or other charge or encumbrance   other than for the Permitted Encumbrances.    
  

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 LOAN AND SECURITY AGREEMENT - PAGE 13

	
  
 
  	
  
This   Agreement creates a legal, valid and binding first priority security interest   (subject to Permitted Encumbrances) in favor of Lender in the Collateral   securing the Indebtedness.  Possession   by Lender of certain types of Collateral from time to time or the filing of   the financing statements delivered prior hereto or concurrently herewith by   Debtor to Lender will perfect and establish the first priority of Lender’s   security interest hereunder in the Collateral (to the extent that perfection   can be accomplished through the filing of a financing statement or the   possession of such Collateral) other than for the Permitted Encumbrances.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (o)          Location.  Debtor’s chief executive office and the   office where the records concerning the Collateral are kept are at its   address set forth on the signature page hereof.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (p)          Solvency.  On the Closing Date and on the date of   each Loan, Debtor will be and after giving effect to the requested Loan, will   be, solvent.
  

          7.        Affirmative Covenants.  Until all Indebtedness of Debtor under the Loan Documents is indefeasibly paid or performed, and Lender has no further commitment to lend under the Credit Facility, Debtor agrees and covenants as follows:

	
  
 
  	
  
          (a)          Compliance   with Laws.  Debtor will   conduct its business in an orderly and efficient manner consistent with good   business practices, and perform and comply with all applicable statutes, rules,   regulations or ordinances imposed by any Governmental Authority upon Debtor   and its businesses, operations and Properties (including without limitation,   all applicable environmental statutes, rules, regulations and ordinances)   where the failure to perform or comply could have a Material Adverse Effect   on the business, operations or properties of Debtor.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (b)          Payment   of Obligations.  Debtor   will pay its obligations, including tax liabilities, that, if not paid, could   become a lien on any of its Property, before the same shall become delinquent   or in default, except where (i) the validity or amount thereof is being   contested in good faith by appropriate proceedings, and (ii) Debtor has   set aside on its books adequate reserves with respect thereto in accordance   with GAAP.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (c)          Maintenance   and Conduct of Business.    Debtor will (i) keep, maintain and preserve all Property (tangible and   intangible) material to the conduct of its business in good working order and   condition, ordinary wear and tear excepted, (ii) do or cause to be done all   things necessary to preserve, renew and keep in full force and effect its   legal existence and the rights, licenses, permits, privileges, agreements and   franchises material to the conduct of its business, and (iii) engage in an   efficient and economical manner in a business of the same general type and   within Debtor’s powers under Constituent Documents.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Books   and Records; Inspection Rights.  Debtor will keep proper books of record and account in which   full, true and correct entries are made of all dealings and transactions in   relation to its business and activities.    
  

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 LOAN AND SECURITY AGREEMENT - PAGE 14

	
  
 
  	
  
Debtor will   permit any representatives designated by Lender, upon reasonable prior   notice, to visit and inspect its Properties, to examine and make extracts   from its books and records, and to discuss its affairs, finances and   condition with its officers and independent accountants, all at such   reasonable times and as often as reasonably requested.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (e)          Insurance.  Debtor will maintain insurance, including   but not limited to, fire insurance, comprehensive property damage, public liability,   worker’s compensation, business interruption and other insurance deemed   reasonably necessary.  Debtor will, at   its own expense, maintain insurance with respect to all Collateral in such   amounts, against such risks, in such form and with such insurers, as shall be   satisfactory to Lender from time to time.    Each policy of insurance maintained by Debtor shall (i) name Debtor   and Lender as insured parties thereunder (without any representation or   warranty by or obligation upon Lender) as their interests may appear, (ii)   contain the agreement by the insurer that any loss thereunder shall be   payable to Lender notwithstanding any action, inaction or breach of
  representation or warranty by Debtor, (iii) provide that there shall be no   recourse against Lender for payment of premiums or other amounts with respect   thereto, and (iv) provide prior written notice of cancellation or of lapse   shall be given to Lender by the insurer in accordance with the insurer’s   commercial practices as adopted from time to time.  Debtor will deliver to Lender original or duplicate policies of   such insurance.  Debtor will also, at   the request of Lender, duly execute and deliver instruments of assignment of   such insurance policies and cause the respective insurers to acknowledge notice   of such assignment. All insurance payments in respect of loss of or damage to   any Collateral shall be paid to Lender and applied by Lender in accordance   with the Loan Documents, provided, however, that so long as no Event of   Default or event which with notice and/or the passage of time would be an   Event of Default exists, Debtor may use such insurance payments
for the   repair or replacement of such lost or damaged property.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (f)          Compliance   with Laws.  Debtor will   comply with all laws, rules, regulations and orders of any Governmental   Authority applicable to it or its property, except where the failure to do   so, individually or in the aggregate, could not reasonably be expected to   result in a Material Adverse Effect.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (g)          Compliance   with Agreements.    Debtor will comply, in all material respects with all material   agreements, contracts, and instruments binding on it or affecting its   Properties or business.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (h)          Additional   Subsidiaries.  If any   Subsidiary of Debtor is formed or acquired after the Closing Date, Debtor   will notify Lender thereof and (i) Debtor will (if requested by Lender)   cause such Subsidiary to become a Guarantor or Debtor within five (5)   Business Days after such Subsidiary is formed or acquired and promptly take   such actions to create and perfect liens on such Subsidiary’s assets to   secure the Indebtedness as Lender shall reasonably request, and (ii)    cause the equity interests in such Subsidiary to be pledged to Lender within   five (5) Business Days after such Subsidiary is formed or acquired.
  

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 LOAN AND SECURITY AGREEMENT - PAGE 15

	
  
 
  	
  
          (i)          Notice   of Indebtedness.    Debtor will promptly inform Lender of the creation, incurrence or   assumption by Debtor of any actual or contingent liabilities not permitted   under this Agreement.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (j)          Notices   of Material Events.    Debtor will furnish to Lender prompt written notice of the following:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                        (i)          the   occurrence of any Event of Default;
  
	
  
 
  	
  
 
  
	
   
  	
  
                        (ii)         the   filing or commencement of any action, suit or proceeding by or before any   arbitrator or Governmental Authority against or affecting Debtor, its   Subsidiaries or any Affiliate thereof that, if adversely determined, could   reasonably be expected to result in a Material Adverse Effect;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                        (iii)        any   and all material adverse changes in any Obligor’s financial condition and all   claims made against any Obligor that could materially affect the financial   condition of such Obligor.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
Each notice   delivered under this Section shall be accompanied by a statement of an   executive officer of Debtor setting forth the details of the event or   development requiring such notice and any action taken or proposed to be   taken with respect thereto.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (k)          Ownership   and Liens.  Debtor will   maintain good and indefeasible title to the Collateral free and clear of all   liens, security interests, encumbrances or adverse claims, except for   Permitted Encumbrances.  Debtor will   cause any financing statement or other security instrument with respect to   the Collateral to be terminated, except for Permitted Encumbrances.  Debtor will defend at its expense Lender’s   right, title and security interest in and to the Collateral against the   claims of any third party.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (l)          Accounts   and General Intangibles.    Debtor will, except as otherwise provided herein, collect, at Debtor’s   own expense, all amounts due or to become due under each of the accounts and   general intangibles.  In connection   with such collections, Debtor may and, at Lender’s direction, will take such   action not otherwise forbidden herein as Debtor or Lender may deem reasonably   necessary or advisable to enforce collection or performance of each of the   accounts and general intangibles.    Debtor will also duly perform and cause to be performed all of its   material obligations with respect to the goods or services, the sale or lease   or rendition of which gave rise or will give rise to each account and all of   its obligations to be performed under or with respect to the general
intangibles.  Debtor also covenants and   agrees to take any action and/or execute any documents that Lender may   reasonably request in order to comply with law relating to the assignment of   the accounts.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (m)          Waivers   and Consents Relating to Real Property Interests.  Upon the request of Lender, Debtor shall   cause each mortgagee of real property owned by Debtor and each landlord of   real property leased by Debtor to execute and deliver agreements satisfactory   in form and substance to Lender by which such mortgagee or landlord (i)   waives or subordinates any rights it may have in the Collateral, or (ii)   consents to the mortgage or other encumbrance of Debtor’s interest in such   real property.
  

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 LOAN AND SECURITY AGREEMENT - PAGE 16

	
  
 
  	
  
          (n)          Lockbox   and Accounts.  To   induce Lender to establish the interest rates provided for in the Notes and   in order to enable Lender to more fully monitor Debtor’s financial condition,   Debtor will use Lender as its depository bank for the maintenance of   business, cash management, operating and administrative accounts.
  

          8.        Negative Covenants.  Until all Indebtedness of Debtor under the Loan Documents is indefeasibly paid or performed, and Lender has no further commitment to lend under the Credit Facility, Debtor agrees and covenants as follows:

	
  
 
  	
  
          (a)          Fundamental   Change.  Debtor will   not (i) make any material change in the nature of its business as   carried on as of the date hereof, (ii) liquidate, merge or consolidate with   or into any other Person, or (iii) make a change in organizational structure   or the jurisdiction in which it is organized.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (b)          Indebtedness.  Debtor will not create, incur, assume or   permit to exist any Debt except for the following (“Permitted Indebtedness”):
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (i)          The   Indebtedness created hereunder;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (ii)         The   Subordinated Debt;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (iii)        Other   Debt existing on the date hereof and set forth in Schedule 8(b).
  
	
   
  	
  
 
  
	
  
 
  	
  
          (c)          Loans.  Debtor will not make loans or guarantee   any obligation of any other Person or entity other (i) than loans or advances   to employees of Debtor not to exceed FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)   in the aggregate outstanding at any time, including such loans and advances   outstanding on the Closing Date,  and   (ii) accounts receivable for sales of inventory and other products and   services provided by Debtor to its respective customers in the ordinary   course of business of Debtor
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Transactions   With Affiliates.    Debtor will not enter into any transaction, including, without   limitation, the purchase, sale or exchange of property or the rendering of   any service, with any Affiliate of Debtor, except in the ordinary course of   and pursuant to the reasonable requirements of Debtor’s business (upon prior   written notice to Lender) and upon fair and reasonable terms no less   favorable to Debtor than would be obtained in a comparable arm’s-length   transaction with a Person or entity not an Affiliate of Debtor.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (e)          Dividends   or Distribution.    Following the occurrence of an Event of Default or event which with   notice and/or the passage of time would be an event of Default, Debtor will   not declare or pay any dividends or distributions on any equity interest of   Debtor.
  

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          (f)          Transfer   or Encumbrance.  Debtor   will not (i) sell, assign (by operation of law or otherwise), transfer,   exchange, lease or otherwise dispose of any of the Collateral or its   Property, (ii) grant a lien or security interest in or execute, file or   record any financing statement or other security instrument with respect to   the Collateral or its Property other than the Permitted Encumbrances, or   (iii) deliver actual or constructive possession of any of the Collateral or   its Property to any party other than Lender, except for (1) transfers   previously disclosed to Lender, (2) the sale or lease of inventory in the   ordinary course of business, or (3) the sale or other disposal of any item of   equipment which is worn out or obsolete.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (g)          Impairment   of Security Interest.    Debtor will not take any action that would in any manner impair the   enforceability of Lender’s security interest in any Collateral.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (h)          Compromise   of Collateral. Debtor will not adjust, settle, compromise,   amend or modify any Collateral, except an adjustment, settlement, compromise,   amendment or modification in good faith and in the ordinary course of   business.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (i)          Financing   Statement Filings.    Debtor will not cause or permit any change (i) in the location of any   Collateral, (ii) in the location of any records concerning any Collateral,   (iii) Debtor’s legal name, or (iv) the state of Debtor’s organization to a   jurisdiction other than as represented herein unless Debtor shall have   notified Lender in writing of such change at least thirty (30) days prior to   the effective date of such change, and shall have first taken all action   required by Lender for the purpose of further perfecting or protecting the   security interest in favor of Lender in the Collateral.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (j)          Investments.  Debtor will not purchase any stock, equity   interests or debt obligations (except obligations of the U.S. government)   unless such investments are made on behalf of Debtor through Lender or its   Affiliates.
  

          9.        Financial Covenants.  Until all Indebtedness of Debtor under the Loan Documents is indefeasibly paid or satisfied and Lender has no further commitment to lend under the Credit Facility, Debtor agrees and covenants that it will, unless Lender shall otherwise consent in writing: 

	
  
 
  	
  
          (a)          Capital   Expenditures.  Debtor   will not make capital expenditures in excess of ONE HUNDRED THOUSAND AND NO/100   DOLLARS ($100,000.00) from the Closing Date until the first (1st)  anniversary of the Closing Date.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (b)          Adjusted   Debt/Tangible Net Worth.    Debtor will maintain (i) as of December 31, 2006, a ratio of (1)   Adjusted Debt, to (2) Tangible Net Worth of not greater than 2.50 to 1.00,   and (ii) as of December 31, 2007, a ratio of (1) Adjusted Debt, to (2)   Tangible Net Worth of not greater than 2.25 to 1.00.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (c)          Minimum   Free Cash Flow to Certain Fixed Cost.  Debtor will maintain as of the end of each   calendar quarter a ratio of (i) Free Cash Flow, to (ii) Current Maturities of   Long-Term Indebtedness plus interest expense and rent payments for   such period (“Fixed Costs”) equal to or greater   than 1.50 to 1.00.
  

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          (d)          Current   Ratio.  Debtor will   maintain as of the end of each calendar quarter a ratio of (i) current   assets, to (ii) current liabilities of not less than 1:25 to 1.00.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (e)          Defined   Terms.
  
	
  
 
  	
  
 
  
	
   
  	
  
                         (i)          “Adjusted   Debt”  means the total   Debt of Debtor minus the Subordinate Debt.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (ii)         “Current   Maturities of Long-Term Indebtedness” shall mean, in respect   of a Person and as of any applicable date of determination thereof, that   portion of long-term indebtedness that should be classified as current in   accordance with GAAP.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (iii)        “EBITDAR”   means, for any Person for any period of determination, an amount equal to (a)   net income plus (b) the sum of the following to the extent   deducted from net income: (i) interest expense; plus (ii) income   taxes; plus (iii) depreciation; plus   (iv) amortization; plus (v) rent payments.
  
	
   
  	
  
 
  
	
  
 
  	
  
                         (iv)        “Free   Cash Flow” means, for any Person for any period of   determination, an amount equal to EBITDAR minus software development   cost and capital expenditures.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (v)         “Subordinate   Debt” means all indebtedness of Debtor subordinated in right   of payment to the Indebtedness pursuant to documents containing maturities,   amortization schedules, covenants, defaults, remedies, subordination   provisions and other material terms in form and substance satisfactory to   Lender.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (vi)        “Tangible   Net Worth” means, all amounts which, in conformity with GAAP,   would be included as equity on a balance sheet of such Person plus   (without duplication) the Subordinated Debt; provided, however, there shall   be excluded therefrom: (1) any amount at which the equity of such Person   appears as an asset on such Person’s balance sheet, (2) goodwill, (3)   software development costs, and (4) all other assets which are properly   classified as intangible assets.
  

          10.      Covenants Relating to Intellectual Property.  Until all Indebtedness of Debtor under the Loan Documents is indefeasibly paid or satisfied and Lender has no further commitment to lend under the Credit Facility, Debtor agrees and covenants that it will, unless Lender shall otherwise consent in writing: 

	
  
 
  	
  
          (a)          Use of   Certain Intellectual Property.  Debtor (either itself or through licensees) will, consistent   with its good business practices and in its reasonable discretion, (i) use   each Trademark on each and every trademark class of goods applicable to its   current line as reflected in its current catalogs, brochures and price lists   in order to maintain such Trademark in full force and effect free from any   claim of abandonment for non-use, 
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 19

	
  
 
  	
  
(ii)   maintain as in the past the quality of products and services offered under   such Trademark, (iii) use such Trademark with the appropriate notice of   registration and all other notices and legends required by applicable   requirements of law, and (iv) not adopt or use any mark that is confusingly   similar or a colorable imitation of such Trademark unless Lender shall obtain   a perfected security interest in such mark pursuant to this Agreement.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (b)          Lapse   of Trademarks.  Debtor   (either itself or through licensees) will not do any act, or omit to do any   act, whereby any material Trademark or other Intellectual Property of Debtor   may lapse or become forfeited, abandoned, dedicated to the public, or   unenforceable; provided, however, Debtor may from time to time voluntary   abandon pending applications for the registration of Trademarks, which have   not and/or will not be used by Debtor due to changes in its business plans   specific to such Trademark.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (c)          Copyrights.   Debtor, consistent with its good business practices and in its reasonable   discretion (either itself or through licensees), (i) will employ each   Copyright and (ii) will not (and will not permit any licensee or sublicensee   thereof to) do any act or omit to do any act whereby any portion of the   Copyrights may become invalidated or otherwise impaired.  Debtor will not (either itself or through   licensees) do any act whereby any portion of the Copyrights may fall into the   public domain.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Infringement.  Debtor (either itself or through   licensees) will not use or permit any Intellectual Property owned by it to   infringe the intellectual property rights of any other Person.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (e)          Notices   Relating to Intellectual Property.  Debtor will promptly notify Lender if it knows, or has reason   to know, that any application or registration relating to any Intellectual   Property owned by it that may become forfeited, abandoned or dedicated to the   public, invalid or unenforceable, or of any adverse determination or   development (including, without limitation, the institution of, or any such   determination or development in, any proceeding in the United States Patent   and Trademark Office, the United States Copyright Office or any other   Governmental Authority in any country) regarding Debtor’s ownership of, or   the validity or enforceability of, any Intellectual Property owned by it or   Debtor’s right to register the same or to own and maintain the same.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (f)          Maintenance   of Intellectual Property.    Debtor will take, at its expense, all reasonable and necessary steps   consistent with its business plan, including, without limitation, in any   proceeding before the United States Patent and Trademark Office, the United   States Copyright Office or any similar Governmental Authority in any other   country or any political subdivision thereof, to maintain the validity and   enforceability of all of its Intellectual Property owned by it and to pursue   each application (and to obtain the relevant registration) and to maintain   each registration of all of its Intellectual Property, including, without   limitation, filing of applications for renewal, affidavits of use and   affidavits of incontestability. Lender understands and acknowledges that   registration may not be sought for
all of Debtor’s potential trademarks or   copyrightable materials
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 20

	
  
 
  	
  
          (g)          Infringement.  In the event that any Intellectual   Property is infringed, misappropriated, diluted or otherwise violated by a   third party, Debtor shall promptly notify Lender thereof and shall take such   actions as Debtor or Lender shall reasonably deem appropriate under the   circumstances to protect or enforce such Intellectual Property including   suing third parties for infringement, misappropriation, dilution, or such   violation, seeking injunctive relief where appropriate and recovering any and   all damages for such infringement, misappropriation, dilution or violation.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (h)          Discontinuance.  Debtor (either itself or through   licensees) will not, without ten (10) Business Days prior written notice to   Lender, discontinue use of or otherwise abandon any Intellectual Property, or   abandon any application or any right to file an application for letters   patent, trademark, or copyright.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (i)          Intellectual   Property Security Agreement. With respect to its Intellectual   Property, Debtor agrees to execute and deliver to Lender from time to time an   agreement, in substantially the form set forth in Annex I hereto or   otherwise in form and substance satisfactory to Lender an intellectual   property security agreement (an “Intellectual Property Security Agreement”),   for recording the security interest granted hereunder to Lender in such   Intellectual Property with the United States Patent and Trademark Office, the   United States Copyright Office and any other domestic or foreign Governmental   Authorities requested by Lender to perfect the security interest hereunder in   such Intellectual Property.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (j)          Trade   Secrets.  Debtor shall   take all steps reasonably necessary to protect the secrecy of all material   Trade Secrets.
  

          11.        Reporting Requirements.  Until all Indebtedness of Debtor under the Loan Documents is indefeasibly paid and satisfied, and Lender has no further commitment to lend under the Credit Facility, Debtor agrees and covenants that it will furnish or cause to be furnished the following:

	
   
  	
  
          (a)          Interim   Financial Statements.    As soon as available, and in any event within forty-five (45) days   after the end of each calendar quarter, financial statements to include a   balance sheet, income statement and cash flow statement of Debtor, as of the   end of such calendar month all in form and substance and in reasonable detail   satisfactory to Lender and duly certified (subject to year-end review   adjustments) by an appropriate officer of Debtor (i) as being true and   correct in all material aspects to the best of such officer’s knowledge   (subject to year end adjustments), and (ii) as having been prepared in   accordance with GAAP.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (b)          Annual   Financial Statements and Tax Returns.  As soon as available and in any event   within ninety (90) days after the end of each fiscal year, a financial   statement to include a balance sheet, income statement and cash flow   statement of Debtor, as of the end of such fiscal year, audited by   independent certified public accountants of recognized standing satisfactory   to the Lender, and  within thirty (30)   days of filing, annual income tax returns for Debtor.
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 21

	
   
  	
  
          (c)          Compliance   Certificate.    Concurrently with the delivery of each of the financial statements of   Debtor referred to in Sections 11(a) and (b), a certificate of an officer   of Debtor (i) stating that to such officer’s knowledge, no Event of Default   has occurred and is continuing, or if an Event of Default has occurred and is   continuing, a statement as to the nature thereof and the action which is   proposed to be taken with respect thereto, and (ii) showing in reasonable   detail the calculations demonstrating compliance with the financial covenants   set forth in Section 10f this Agreement.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Notice   of Default and Events of Default.  As soon as possible and in any event within five (5) Business   Days after the occurrence of each Event of Default, a written notice setting   forth the details of such Event of Default and the action which is proposed   to be taken by Parent with respect thereto.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (e)          Guarantor   Financial Statement.  As   soon as available and in any event (i) before October 31 of each calendar   year, an annual financial statement as of December 31 of the immediately   preceding calendar year for each Guarantor, in such form and detail as Lender   shall reasonably require (i.e., financial statements as of December 31, 2005   would be due as of October 31, 2006), and (ii) within thirty (30) days of the   day it is filed with the Internal Revenue Service or other applicable taxing   entity, a copy of each Guarantor’s filed tax return.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (f)          General   Information.  Debtor   shall promptly deliver such other information concerning Debtor or Guarantor   as Lender may request.
  

          12.        Rights of Lender.  Lender shall have the rights contained in this Section at all times that this Agreement is effective.

	
  
 
  	
  
          (a)          Financing   Statements.  Debtor   hereby authorizes Lender to file, without the signature of Debtor, one or   more financing or continuation statements, and amendments thereto, relating   to the Collateral.  Debtor hereby   irrevocably authorizes Lender at any time and from time to time to file in   any Code jurisdiction any initial financing statements and amendments thereto   that (i) indicate the Collateral (1) as all assets of Debtor or   words of similar effect; regardless of whether any particular asset comprised   in the Collateral falls within the scope of Article 9 of the Code, or   (2) as being of an equal or lesser scope or with greater detail, and (ii) contain   any other information required by Article 9 of the Code for the sufficiency   or filing office acceptance of any financing
statement or amendment.
  
	 
 	 

	
   
  	
  
          (b)          Performance   by Lender.  If any   Obligor fails to perform any agreement or obligation provided for in any Loan   Document, Lender may itself perform, or cause performance of, such agreement   or obligation, and the expenses of Lender incurred in connection therewith   shall be a part of the Indebtedness, secured by the Collateral and payable by   Debtor on demand.
  

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 LOAN AND SECURITY AGREEMENT - PAGE 22

	
  
 
  	
  
          (c)          Debtor’s   Receipt of Proceeds.    Upon the occurrence and during the continuation of an Event of   Default, all amounts and proceeds (including instruments and writings)   received by Debtor in respect of the Collateral shall be received in trust   for the benefit of Lender hereunder and, upon the written request of Lender,   shall be segregated from other Property of Debtor and shall be forthwith   delivered to Lender in the same form as so received (with any necessary   endorsement) and applied to the Indebtedness in accordance with the Loan   Documents.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Notification   of Account Debtors.    Lender may at its reasonable discretion from time to time during the   continuation of an Event of Default notify any or all obligors under any   accounts or general intangibles (i) of Lender’s security interest in such   accounts or general intangibles and direct such obligors to make payment of   all amounts due or to become due to Debtor thereunder directly to Lender, and   (ii) to verify the accounts or general intangibles with such obligors.  Lender shall have the right, at the expense   of Debtor, to enforce collection of any such accounts or general intangibles   and to adjust, settle or compromise the amount or payment thereof, in the   same manner and to the same extent as Debtor.
  

          13.        Events of Default.  Each of the following shall constitute an “Event of Default” under this Agreement:

	
  
 
  	
  
          (a)          Payment   Default.  The failure,   refusal or neglect of Debtor to pay when due any part of the principal of, or   interest on the Indebtedness owing to Lender by Debtor from time to time and   such failure, refusal or neglect shall continue unremedied for a period of   ten (10) Business Days from the date such payment is due.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (b)          Performance   or Warranty Default.    The failure of any Obligor to timely and properly observe, keep or   perform any covenant, agreement, warranty or condition required herein or in   any of the other Loan Documents (other than with respect to a payment default   as set forth in Section 12(a) or covenants set forth in Section 8)   which is not cured within ten (10) Business Days following written notice   from Lender to such Obligor; provided, that (i) if such default cannot be   cured within ten (10) Business Days, (ii) such Obligor has, within such   period, taken such actions as deemed reasonably necessary and appropriate by   Lender to cure such default, and (iii) such Obligor shall continue to   diligently pursue such actions, such cure period shall be extended for a   period of thirty (30)
days.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (c)          Representations.  Any representation contained herein or in   any of the other Loan Documents made by an Obligor is false or misleading in   any material respect.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          Default   Under Other Indebtedness.    The occurrence of any event which results the acceleration of the   maturity of any indebtedness for borrowed money in an aggregate principal   amount in excess of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS   ($500,000.00) owing by any Obligor to any third party under any   agreement or understanding.
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 23

	
  
 
  	
  
          (e)          Insolvency.  If any Obligor (i) becomes insolvent, or   makes a transfer in fraud of creditors, or makes an assignment for the   benefit of creditors, or admits in writing its inability to pay its debts as   they become due; (ii) generally is not paying its debts as such debts become   due; (iii) has a receiver, trustee or custodian appointed for, or take   possession of, all or substantially all of its assets, either in a proceeding   brought by it or in a proceeding brought against it and such appointment is   not discharged or such possession is not terminated within sixty (60) days   after the effective date thereof or it consents to or acquiesces in such   appointment or possession; (iv) files a petition for relief under the United   States Bankruptcy Code or any other present or future federal or state   insolvency,
Bankruptcy or similar laws (all of the foregoing hereinafter   collectively called “Applicable Bankruptcy Law”) or an   involuntary petition for relief is filed against it under any Applicable   Bankruptcy Law and such involuntary petition is not dismissed within sixty   (60) days after the filing thereof, or an order for relief naming it is   entered under any Applicable Bankruptcy Law, or any composition,   rearrangement, extension, reorganization or other relief of debtors now or   hereafter existing is requested or consented to by it; or (v) fails to have   discharged within a period of sixty (60) days any attachment, sequestration   or similar writ levied upon any property of it.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (f)          Judgment.  The entry of any judgment against any   Obligor or the issuance or entry of any attachments or other liens against   any of the Property of such Obligor or its Subsidiaries for an amount in   excess of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) (individually   or in the aggregate) if uninsured, undischarged, unbonded or undismissed on   the date on which such judgment could be executed upon.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (g)          Action   Against Collateral.    The Collateral or any portion thereof is taken on execution or other   process of law in any action.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (h)          Death   or Incompetence of a Guarantor.  Any Obligor that is a natural Person shall have died or have   been declared incompetent by a court of proper jurisdiction.
  
	
  
 
  	
  
 
  
	
   
  	
  
          (i)          Action   of Lien Holder.  The   holder of any lien or security interest on any of the assets of any Obligor,   including without limitation, the Collateral (without hereby implying the   consent of Lender to the existence or creation of any such lien or security   interest on the Collateral), declares a default thereunder or institutes   foreclosure or other proceedings for the enforcement of its remedies   thereunder.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (j)          Material   Adverse Effect.  Any   event shall have occurred or is continuing which shall have had a Material   Adverse Effect.
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 24

	
  
 
  	
  
          (k)          Loan   Documents.  The Loan   Documents shall at any time after their execution and delivery and for any   reason cease (i) to create a valid and perfected first priority security   interest (subject to Permitted Encumbrances) in and to the Property purported   to be subject to the Loan Documents; or (ii) to be in full force and effect   or shall be declared null and void, or the validity of enforceability hereof   shall be contested by any Obligor or any other Person party thereto, or any   Obligor shall deny it has any further liability or obligation under this   Agreement or the other Loan Documents.
  

Nothing contained in this Agreement shall be construed to limit the events of default enumerated in any of the other Loan Documents and all such events of default shall be cumulative.

          14.        Remedies and Related Rights.  If an Event of Default shall have occurred, and without limiting any other rights and remedies provided herein, under any of the Loan Documents or otherwise available to Lender, Lender may exercise one or more of the rights and remedies provided in this Section. 

	
  
 
  	
  
          (a)          Remedies.  Upon the occurrence of any one or more of   the foregoing Events of Default, (i) the entire unpaid balance of principal   of the Notes, together with all accrued but unpaid interest thereon, and all   other Indebtedness owing to Lender by Debtor at such time shall, at the   option of Lender, become immediately due and payable without further notice,   demand, presentation, notice of dishonor, notice of intent to accelerate,   notice of acceleration, protest or notice of protest of any kind, all of   which are expressly waived by Debtor, and (ii) Lender may, at its option,   cease further advances under the Notes and this Agreement; provided, however,   concurrently and automatically with the occurrence of an Event of Default   under Subsection 13(e) (Insolvency) further advances under the Loan
  Documents shall automatically cease, the Indebtedness at such time shall,   without any action by Lender, become due and payable, without further notice,   demand, presentation, notice of dishonor, notice of acceleration, notice of   intent to accelerate, protest or notice of protest of any kind, all of which   are expressly waived by Debtor.  All   rights and remedies of Lender set forth in this Agreement and in any of the   other Loan Documents may also be exercised by Lender, at its option to be   exercised in its sole discretion, upon the occurrence of an Event of Default,   and not in substitution or diminution of any rights now or hereafter held by   Lender under the terms of any other agreement.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (b)          Other   Remedies.  Lender may   from time to time at its discretion, without limitation and without notice   except as expressly provided in any of the Loan Documents:
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (i)          Exercise   in respect of the Collateral all the rights and remedies of a secured party   under the Code (whether or not the Code applies to the affected Collateral);
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (ii)         Require   Debtor to, and Debtor hereby agrees that it will at its expense and upon   request of Lender, assemble the Collateral as directed by Lender and make it   available to Lender at a place to be designated by Lender which is reasonably   convenient to both parties;
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 25

	
  
 
  	
  
                         (iii)        Reduce   its claim to judgment or foreclose or otherwise enforce, in whole or in part,   the security interest granted hereunder by any available judicial procedure;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (iv)        Sell   or otherwise dispose of, at its office, on the premises of Debtor or   elsewhere, the Collateral, as a unit or in parcels, by public or private   proceedings, and by way of one or more contracts (it being agreed that the   sale or other disposition of any part of the Collateral shall not exhaust   Lender’s power of sale, but sales or other dispositions may be made from time   to time until all of the Collateral has been sold or disposed of or until the   Indebtedness has been paid and performed in full), and at any such sale or   other disposition it shall not be necessary to exhibit any of the Collateral;
  
	
  
 
  	
  
 
  
	
   
  	
  
                         (v)         Buy   the Collateral, or any portion thereof, at any public sale;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (vi)        Buy   the Collateral, or any portion thereof, at any private sale if the Collateral   is of a type customarily sold in a recognized market or is of a type which is   the subject of widely distributed standard price quotations;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (vii)       Apply   for the appointment of a receiver for the Collateral, and Debtor hereby   consents to any such appointment; and
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                         (viii)      At   its option, retain the Collateral in satisfaction of the Indebtedness   whenever the circumstances are such that Lender is entitled to do so under   the Code or otherwise.
  
	
   
  	
  
 
  
	
  
 
  	
  
Debtor   agrees that in the event Debtor is entitled to receive any notice under the   Code, as it exists in the state governing any such notice, of the sale or   other disposition of any Collateral, reasonable notice shall be deemed given   when such notice is deposited in a depository receptacle under the care and   custody of the United States Postal Service, postage prepaid, at Debtor’s   address set forth on the signature page hereof, ten (10) days prior to the   date of any public sale, or after which a private sale, of any of such   Collateral is to be held.  Lender   shall not be obligated to make any sale of Collateral regardless of notice of   sale having been given.  Lender may   adjourn any public or private sale from time to time by announcement at the   time and place fixed therefor, and such sale may, without further notice, be   made at the time and place to which it was so adjourned.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (c)          Application   of Proceeds.  If any   Event of Default shall have occurred, Lender may at its discretion apply or   use any cash held by Lender as Collateral, and any cash proceeds received by   Lender in respect of any sale or other disposition of, collection from, or   other realization upon, all or any part of the Collateral as follows in such   order and manner as Lender may elect:
  
	
  
 
  	
  
 
  
	
   
  	
  
                        (i)          to   the repayment or reimbursement of the reasonable costs and expenses   (including, without limitation, reasonable attorneys’ fees and expenses)   incurred by Lender in connection with (1) the administration of the Loan   Documents, (2) the custody, preservation, use or operation of, or the   sale of, collection from, or other realization upon, the Collateral, and (3)   the exercise or enforcement of any of the rights and remedies of Lender   hereunder;
  

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 LOAN AND SECURITY AGREEMENT - PAGE 26

	
  
 
  	
  
                        (ii)         to   the payment or other satisfaction of any liens and other encumbrances upon   the Collateral;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                        (iii)        to   the satisfaction of the Indebtedness;
  
	
   
  	
  
 
  
	
  
 
  	
  
                        (iv)        by   holding such cash and proceeds as Collateral;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                        (v)         to   the payment of any other amounts required by applicable law; and
  
	
  
 
  	
  
 
  
	
  
 
  	
  
                        (vi)        by   delivery to Debtor or any other party lawfully entitled to receive such cash   or proceeds whether by direction of a court of competent jurisdiction or   otherwise.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          License.  Lender is hereby granted a license or   other right to use, following the occurrence and during the continuance of an   Event of Default, without charge, Debtor’s labels, patents, copyrights,   rights of use of any name, trade secrets, trade names, trademarks, service   marks, customer lists and advertising matter, or any property of a similar   nature, as it pertains to the Collateral, in completing production of, advertising   for sale, and selling any Collateral, and, following the occurrence and   during the continuance of an Event of Default, Debtor’s rights under all   licenses and all franchise agreements shall inure to Lender’s benefit.  In addition, Debtor hereby irrevocably   agrees that Lender may, following the occurrence and during the continuance   of an Event of Default, sell any
of Debtor’s inventory directly to any   Person, including without limitation Persons who have previously purchased   Debtor’s inventory from Debtor and in connection with any such sale or other   enforcement of Lender’s rights under this Agreement, may sell inventory which   bears any trademark owned by or licensed to Debtor and any inventory that is   covered by any copyright owned by or licensed to Debtor and Lender may finish   any work in process and affix any trademark owned by or licensed to Debtor   and sell such inventory as provided herein.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (e)          Deficiency.  In the event that the proceeds of any sale   of, collection from, or other realization upon, all or any part of the   Collateral by Lender are insufficient to pay all amounts to which Lender is   legally entitled, each Obligor (unless otherwise provided) shall be liable   for the deficiency, together with interest thereon as provided in the Loan   Documents.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (f)          Non-Judicial   Remedies.  In granting   to Lender the power to enforce its rights hereunder without prior judicial   process or judicial hearing, Debtor expressly waives, renounces and knowingly   relinquishes any legal right which might otherwise require Lender to enforce   its rights by judicial process.    Debtor recognizes and concedes that non-judicial remedies are   consistent with the usage of trade, are responsive to commercial necessity   and are the result of a bargain at arm’s length.  Nothing herein is intended to prevent Lender or Debtor from   resorting to judicial process at either party’s option.
  

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          (g)          Other   Recourse.  Each Obligor   waives any right to require Lender to proceed against any third party,   exhaust any Collateral or other security for the Indebtedness, or to have any   third party joined with Debtor in any suit arising out of the Indebtedness or   any of the Loan Documents, or pursue any other remedy available to   Lender.  Each Obligor further waives   any and all notice of acceptance of this Agreement and of the creation,   modification, rearrangement, renewal or extension of the Indebtedness.  Each Obligor further waives any defense   arising by reason of any disability or other defense of any third party or by   reason of the cessation from any cause whatsoever of the liability of any   third party.  Until all of the   Indebtedness shall have been paid in full, no Obligor shall have no
right of   subrogation and each Obligor waives the right to enforce any remedy which   Lender has or may hereafter have against any third party, and waives any   benefit of and any right to participate in any other security whatsoever now   or hereafter held by Lender.  Each   Obligor authorizes Lender, and without notice or demand and without any   reservation of rights against such Obligor and without affecting such   Obligor’s liability hereunder or on the Indebtedness to (i) take or hold any   other property of any type from any third party as security for the   Indebtedness, and exchange, enforce, waive and release any or all of such   other property, (ii) apply such other property and direct the order or manner   of sale thereof as Lender may in its discretion determine, (iii) renew,   extend, accelerate, modify, compromise, settle or release any of the   Indebtedness or other security for the Indebtedness, (iv) waive, enforce or   modify any of the provisions of any of the Loan
Documents executed by any   third party, and (v) release or substitute any third party.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (h)          No   Waiver; Cumulative Remedies.    No failure on the part of Lender to exercise and no delay in   exercising, and no course of dealing with respect to, any right, power, or   privilege under this Agreement shall operate as a waiver thereof, nor shall   any single or partial exercise of any right, power, or privilege under this   Agreement preclude any other or further exercise thereof or the exercise of   any other right, power, or privilege. The rights and remedies provided for in   this Agreement and the other Loan Documents are cumulative and not exclusive   of any rights and remedies provided by law.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (i)          Equitable   Relief.  Debtor   recognizes that in the event Debtor fails to pay, perform, observe, or   discharge any or all of the Indebtedness, any remedy at law may prove to be   inadequate relief to Lender.  Debtor   therefore agrees that Lender, if Lender so requests, shall be entitled to   temporary and permanent injunctive relief in any such case without the   necessity of proving actual damages.
  

          15.          Indemnity.  Debtor hereby indemnifies and agrees to hold harmless Lender, and its officers, directors, employees, agents and representatives (each an “Indemnified Person”) from and against any and all liabilities, obligations, claims, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature (collectively, the “Claims”) which may be imposed on, incurred by, or asserted against, any Indemnified Person arising in connection with the Loan Documents, the Indebtedness or the Collateral 

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 28

(including without limitation, the enforcement of the Loan Documents and the defense of any Indemnified Person’s actions and/or inactions in connection with the Loan Documents).  WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER INDEMNIFIED PERSON, except to the limited extent the Claims against an Indemnified Person are proximately caused by such Indemnified Person’s gross negligence or willful misconduct.  If Debtor or any third party ever alleges such gross negligence or willful misconduct by any Indemnified Person, the indemnification provided for in this Section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement, until such time as (a) a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross
negligence or willful misconduct, or (b) Lender has expressly agrees in writing with Debtor that such Claim is proximately caused by such Indemnified Person’s gross negligence or willful misconduct.  The indemnification provided for in this Section shall survive the termination of this Agreement and shall extend and continue to benefit each individual or entity that is or has at any time been an Indemnified Person hereunder.

          16.          No Duty.  All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any Obligor or any of any Obligor’s equity holders or any other Person.

          17.          Lender Not Fiduciary.  The relationship between Obligors and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with any Obligor, and no term or condition of any of the Loan Documents shall be construed so as to deem the relationship between any Obligor and Lender to be other than that of debtor and creditor.

          18.          Waiver and Agreement.  Neither the failure nor any delay on the part of Lender to exercise any right, power or privilege herein or under any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  No waiver of any provision in this Agreement or in any of the other Loan Documents and no departure by any Obligor therefrom shall be effective unless the same shall be in writing and signed by Lender, and then shall be effective only in the specific instance and for the purpose for which given and to the extent specified in such writing.  No modification or amendment to this Agreement or to any of the other Loan Documents shall be
valid or effective unless the same is signed by the party against whom it is sought to be enforced.

          19.          Benefits.  This Agreement shall be binding upon and inure to the benefit of Lender and Obligors, and their respective successors and assigns, provided, however, that no Obligor may, without the prior written consent of Lender, assign any rights, powers, duties or obligations under this Agreement or any of the other Loan Documents.

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 29

          20.          Notices.  All notices, requests, demands or other communications required or permitted to be given pursuant to this Agreement shall be in writing and given by (a) personal delivery, (b) expedited delivery service with proof of delivery, or (c) United States mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address set forth on the signature page hereof and shall be deemed to have been received either, in the case of personal delivery, as of the time of personal delivery, in the case of expedited delivery service, as of the time of the expedited delivery and in the manner provided herein, or in the case of mail, upon the third day after deposit in a depository receptacle under the care and custody of the United States Postal Service.  Any party shall have
the right to change its address for notice hereunder to any other location within the continental United States by notice to the other party of such new address. 

          21.          Construction; Venue; Service of Process.  The Loan Documents have been executed and delivered in the State of Texas, shall be governed by and construed in accordance with the laws of the State of Texas, and shall be performable by the parties hereto in the county in Texas where Lender’s address set forth on the signature page hereof is located (the (“Venue Site”).  Any action or proceeding against any Obligor under or in connection with any of the Loan Documents may be brought in any state or federal court within the Venue Site.  Each Obligor hereby irrevocably (a) submits to the nonexclusive jurisdiction of such courts, and (b) waives any objection it may now or hereafter have as to the venue of any such action or proceeding brought in any such court or that any such court is an
inconvenient forum.  Each Obligor agrees that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions this Agreement.  Nothing in any of the other Loan Documents shall affect the right of Lender to serve process in any other manner permitted by law or shall limit the right of Lender to bring any action or proceeding against any Obligor or with respect to any of its property in courts in other jurisdictions.  Any action or proceeding by any Obligor against Lender shall be brought only in a court located in the Venue Site.

          22.          Invalid Provisions.  If any provision of the Loan Documents are held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and the remaining provisions of the Loan Documents shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance.

          23.          Expenses.  Debtor shall pay all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees) in connection with (a) the drafting and execution of the Loan Documents and the transactions contemplated therein, (b) any action required in the course of administration of the indebtedness and obligations evidenced by the Loan Documents, and (c) any action in the enforcement of Lender’s rights upon the occurrence of an Event of Default.

          24.          Participation of the Loans and Purchase of Loans.  Debtor agrees that Lender may, at its option, sell interests in the Loans and its rights under this Agreement to a financial institution or institutions and, in connection with each such sale, Lender may disclose any financial and other information available to Lender concerning Debtor to each perspective purchaser subject to obtaining a confidentiality agreement with each prospective purchaser prior 

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 30

to disclosing Debtor’s confidential information.  Guarantors may, at any time and from time to time, purchase the Indebtedness (without recourse, representation or warranty other than the warranty of title) upon payment of the outstanding principal balance of the Indebtedness plus all accrued and unpaid interests, fees and charges as may be due under the Loan Documents.

          25.          Conflicts.  Except as otherwise expressly provided in the Notes, in the event any term or provision of this Agreement is inconsistent with or conflicts with any provision of the other Loan Documents, the terms and provisions contained in this Agreement shall be controlling.  

          26.          Counterparts.  The Loan Documents may be separately executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same instrument.

          27.          Survival.  All representations and warranties made in the Loan Documents or in any document, statement, or certificate furnished in connection with this Agreement shall survive the execution and delivery of the Loan Documents, and no investigation by Lender or any closing shall affect the representations and warranties or the right of Lender to rely upon them. 

          28.          Waiver of Right to Trial by Jury.  THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF THE LOAN DOCUMENTS OR THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THE LOAN DOCUMENTS.

          29.          Patriot Act Notice.  Lender hereby notifies each Obligor that pursuant to the requirements of Section 326 of the USA Patriot Act of 2001, 31 U.S.C. § 5318  (the “Act”), that Lender is required to obtain, verify and record information that identifies such Obligor, which information includes the name and address of such Obligor and other information that will allow such Lender to identify such Obligor in accordance with the Act. 

          30.          Confidentiality.  Lender agrees to keep confidential any non-public information delivered pursuant to the Loan Documents and not to disclose such information to any Person other than to Persons employed by or engaged, by Lender or Lender’s assignees including attorneys, auditors, professional consultants, rating agencies, insurance industry associations and portfolio management services and such individuals shall agree to be bound by similar confidentiality terms.  The confidentiality provisions contained herein shall not apply to disclosures (a) required to be made by Lender to any regulatory or governmental agency or pursuant to law, rule, regulations or legal process, or (b) consisting of general portfolio information that does not specifically identify Debtor or any other Obligor. 

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 31

          31.          Disclosure Relating to Collateral Protection Insurance.  As of the date of this disclosure, Debtor and Lender have or shall have consummated a transaction pursuant to which Lender has agreed to make Loans to Debtor.  Debtor has pledged Collateral to secure the Indebtedness in accordance with the Loan Documents.  This notice relates to Debtor’s obligations with respect to insuring the Collateral against damage.  To this end, Debtor must do the following:

	
  
 
  	
  
              (a)          Keep   the Collateral insured against damage in the amount equal to the Indebtedness   or as otherwise required by the Loan Documents;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
              (b)          Purchase   the insurance from an insurer that is authorized to do business in Texas or   an eligible surplus lines insurer;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
              (c)          Name   Lender the person to be paid under the policy in the event of loss; and
  
	
  
 
  	
  
 
  
	
   
  	
  
              (d)          Deliver   to Lender a copy of the policy and proof of the payment of premiums.
  

Lender may obtain collateral protection insurance on behalf of Debtor at Debtor’s expense if Debtor fails to meet any of the foregoing requirements.

          32.          Notice of Final Agreement.  It is the intention of each Obligor and Lender that the following NOTICE OF FINAL AGREEMENT be incorporated by reference into each of the Loan Documents (as the same may be amended, modified or restated from time to time).  Each Obligor and Lender warrant and represent that the entire agreement made and existing by or among each Obligor and Lender with respect to the Loans is and shall be contained within the Loan Documents, and that no agreements or promises exist or shall exist by or among, any Obligor and Lender that are not reflected in the Loan Documents. 

NOTICE OF FINAL AGREEMENT

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 32

          AGREED as of the Closing Date.

	
  
LENDER:
  	
  
 
  	
  
ADDRESS:
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
PLAINSCAPITAL   BANK
  	
  
 
  	
  
2911 Turtle   Creek Boulevard
  
	
  
 
  	
  
 
  	
  
Suite 1300
  
	
  
 
  	
  
 
  	
  
 
  	
  
Dallas,   TX  75219
  
	
  By:
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  	
  
 
  
	
  
Name:
  	
  
Brian P.   Riordan
  	
  
 
  	
  
 
  
	
  
Title:
  	
  
Vice   President
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  With copies of notices to:
  	
  
 
  	
  
Gardere   Wynne Sewell LLP
  
	
  
 
  	
  
 
  	
  
 
  	
  
1601 Elm   Street, Suite 3000
  
	
  
 
  	
  
 
  	
  
 
  	
  
Dallas,   TX  75201-4761
  
	
  
 
  	
  
 
  	
  
 
  	
  
Attention:          Steven   S. Camp
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
  DEBTOR:
  	
  
 
  	
  
ADDRESS:
  
	
  
 
  	
  
 
  	
  
 
  
	
  
AVATAR   SYSTEMS, INC.
  	
  
 
  	
  
2801 Network   Drive, Suite 210
  
	
  
 
  	
  
 
  	
  
 
  	
  
Frisco,   TX  75034
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
By:
  	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  

  	
  
 
  	
  
 
  
	
  
Name:
  	
  
Robert C.   Shreve, Jr.
  	
  
 
  	
  
 
  
	
  
Title:
  	
  
President
  	
  
 
  	
  
 
  

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 33

JOINDER OF GUARANTOR

          GUARANTOR hereby agrees and consents to the provisions of this Agreement and agrees to be bound by the terms and conditions set forth therein.  All representations and warranties applicable to Guarantor contained in the Agreement are true and correct on and as of the date hereof.

	
  GUARANTOR:
  	
  
 
  	
  
ADDRESS:
  
	
  
 
  	
  
 
  	
  
 
  
	
  

  	
  
 
  	
  
5154   Carnegie Drive
  
	
  
Robert C.   Shreve, Jr.
  	
  
 
  	
  
Frisco,   TX  75034
  

Documents Prepared By:

Steven S. Camp
 Gardere Wynne Sewell LLP
 1601 Elm Street, Suite 3000
 Dallas, TX  75201
 214-999-4354

PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.
 LOAN AND SECURITY AGREEMENT - PAGE 34

SCHEDULE 1(d)(iv)
 TO
 LOAN AND SECURITY AGREEMENT

Intellectual Property

SCHEDULE 1(x)
 TO
 LOAN AND SECURITY AGREEMENT

Existing Liens

See Attached

SCHEDULE 8(b)
 TO
 LOAN AND SECURITY AGREEMENT

Other Debt

ANNEX I
INTELLECTUAL PROPERTY SECURITY AGREEMENT

          THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, the “IP Security Agreement”) dated as of __________, is made by AVATAR SYSTEMS, INC. (“Debtor”) in favor of PLAINSCAPITAL BANK, a Texas state bank (together with its successors and assigns, “Lender”).

RECITALS

          WHEREAS, Debtor, has entered into a LOAN AND SECURITY AGREEMENT dated AUGUST 00, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), with Lender.  Terms defined in the Loan Agreement and not otherwise defined herein are used herein as defined in the Loan Agreement.

          WHEREAS, under the terms of Loan Agreement, Debtor has granted to Lender, a security interest in, among other property, all Intellectual Property of Debtor, and have agreed as a condition thereof to execute this IP Security Agreement for recording with the United States Patent and Trademark Office, the United States Copyright Office and other Governmental Authorities.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:

          1.          Grant of Security.  Debtor hereby grants to Lender, a security interest in all of Debtor right, title and interest in and to the following (the “Intellectual Property Collateral”):

                       (i)          the patents and patent applications set forth in Schedule A hereto (the “Patents”);

                       (ii)         the trademark and service mark registrations and applications set forth in Schedule B hereto, together with the goodwill symbolized thereby (the “Trademarks”);

                       (iii)        all copyrights, whether registered or unregistered, now owned or hereafter acquired by Debtor, including, without limitation, the copyright registrations and applications and copyright licenses set forth in Schedule C hereto (the “Copyrights”);

                       (iv)        all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of Debtor accruing thereunder or pertaining thereto;

                       (v)         any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages; and

                       (vi)        any and all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral of or arising from any of the foregoing.

          2.          Security for Indebtedness.  The grant of a security interest in, the Collateral by Debtor under this IP Security Agreement secures the prompt and complete payment and performance when due of all Indebtedness of Debtor, whether direct or indirect, now existing or hereafter arising, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, guarantee obligations, indemnifications, contract causes of action, costs, expenses or otherwise. 

          3.          Recordation.  Debtor authorizes and requests that the Register of Copyrights, the Commissioner for Patents and the Commissioner for Trademarks and any other applicable Governmental Authority record this IP Security Agreement.

          4.          Execution in Counterparts.  This IP Security Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

          5.          Grants, Rights and Remedies.  This IP Security Agreement has been entered into in conjunction with the provisions of the Loan Agreement.  Debtor does hereby acknowledge and confirm that the grant of the security interest hereunder to, and the rights and remedies of, Lender with respect to the Collateral are more fully set forth in the Loan Agreement, the terms and provisions of which are incorporated herein by reference as if fully set forth herein.

          6.          Governing Law.  This IP Security Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

          IN WITNESS WHEREOF, Debtor has caused this IP Security Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

	
  
DEBTOR:
  	
  
 
  	
  
ADDRESS:
  
	
  
 
  	
  
 
  	
  
 
  
	
  
AVATAR   SYSTEMS, INC.
  	
  
 
  	
  
2801 Network   Drive, Suite 210
  
	
  
 
  	
  
 
  	
  
Frisco,   TX  75034
  
	
  By:
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  	
  
 
  
	
  
Name:
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  	
  
 
  
	
  
Title:
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  	
  
 
  
	
   
  	
  
 
  	
  
 
  	
  
 
  
	
  

  

	
  
STATE OF   __________________________________
  	
  
§
  
	
  
COUNTY OF   ________________________________
  	
  
§
  

          THIS INSTRUMENT was acknowledged before me on August __, 2006, by _________________, the ______________ of AVATAR SYSTEMS, INC., an Texas limited corporation, on behalf of said corporation.

	
  
[SEAL]
  	
  

  
	
  
 
  	
  
Notary   Public
  
	
   
  	
  
 
  
	
  

  

EXHIBIT A

U.S. Patents Issued:

	
  
Patent No.
  	
   
 	
  
Issue Date
  	
   
 	
  
Title
  	
   
 	
  
Inventor(s)
  
	
  

  	
   
 	
  

  	
   
 	
  

  	
   
 	
  

  

U.S. Patents Pending:

	 Date Filed
	 
	 Application Number
	 
	 Title
	 
	 Inventor(s)

	

    	 
	

    	 
	

    	 
	

    

EXHIBIT B

U.S. Trademarks:

	
  Registered   Owner
  	
   
 	
  
Trademark   Description
  	
   
 	
  
Registration   Number
  	
   
 	
  
Registration   Date
  
	
  

  	
   
 	
  

  	
   
 	
  

  	
   
 	
  

  

EXHIBIT C

U.S. Copyright Registrations:

	
  
Title
  	
   
 	
  
Registration   No.
  	
   
 	
  
Date of   Issue
  	
   
 	
  
Registered   Owner
  
	
  

  	
   
 	
  

  	
   
 	
  

  	
   
 	
  

  

Pending U.S. Copyright Registration Applications:

	
  
Title
  	
   
 	
  
Appl. No.
  	
   
 	
  
Date of   Application
  	
   
 	
  
Copyright   Claimant
  
	
  

  	
   
  	
  

  	
   
  	
  

  	
   
  	
  

  

LOAN AND SECURITY AGREEMENT

PLAINSCAPITAL BANK,
 a Texas state bank (“Lender”)

and

AVATAR SYSTEMS, INC.
 a Texas corporation (“Debtor”)

AUGUST 16, 2006
(“Closing Date”)Exhibit 10.3

PROMISSORY NOTE
 TERM CREDIT FACILITY

	
  
$476,500.00
  	
  
AUGUST 16, 2006
  

          FOR VALUE RECEIVED, AVATAR SYSTEMS, INC., a Texas corporation (“Debtor”) unconditionally promises to pay to the order of PLAINSCAPITAL BANK, a Texas state bank (together with its successors and assigns, “Lender”), without setoff, at its offices at 2911 Turtle Creek Boulevard, Suite 1300, Dallas (Dallas County), TX 75219, or at such other place as may be designated by Lender, the principal amount of FOUR HUNDRED SEVENTY-SIX THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($476,500.00), or so much thereof as may be advanced from time to time in immediately available funds, together with interest computed daily on the outstanding principal balance hereunder, at an annual interest rate (the “Rate”), and in accordance with the payment schedule, indicated below.  This PROMISSORY NOTE (this
“Note”) is executed pursuant to and evidences the Loan funded and to be funded by Lender under that certain LOAN AND SECURITY AGREEMENT between Debtor and Lender of even date herewith (as the same may be amended, supplemented, renewed or extended from time to time, the “Loan Agreement”), to which reference is made for a statement of the collateral, rights and obligations of Debtor and Lender in relation thereto; but neither this reference to the Loan Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of Debtor to pay unpaid principal of and interest on this Note when due.  Terms not otherwise defined herein shall have the same meanings as in the Loan Agreement.

          1.          Rate.  The Rate shall be the greater of (a) the PRIME RATE, plus THREE QUARTERS OF ONE PERCENT (0.75%), or NINE PERCENT (9.00%).  The term “Prime Rate” means a variable rate of interest per annum equal to the prime rate as published from time to time in the “Money Rates” table of The Wall Street Journal (Southwest Edition).  If the prime rate is no longer published in the “Money Rates” table of The Wall Street Journal (Southwest Edition), then Lender will choose and notify Debtor of a substitute index that is based upon comparable information.  Notwithstanding any provision of this Note or any other agreement or commitment between Debtor and Lender, whether written or oral, express or implied,
Lender shall never be entitled to charge, receive, or collect, nor shall amounts received hereunder be credited so that Lender shall be paid, as interest a sum greater than interest at the Maximum Rate. It is the intention of the parties that this Note, and all instruments securing the payment of this Note or executed or delivered in connection therewith, shall comply with applicable law.  If Lender ever contracts for, charges, receives or collects anything of value which is deemed to be interest under applicable law, and if the occurrence of any circumstance or contingency, whether acceleration of maturity of this Note, prepayment of this Note, delay in advancing proceeds of this Note, or any other event, should cause such interest to exceed the maximum lawful amount, any amount which exceeds interest at the Maximum Rate shall be applied to the reduction of the unpaid principal balance of this Note or any other indebtedness owed to Lender by Debtor, and if this Note and such other indebtedness
are paid in full, any remaining excess shall be paid to Debtor.

PROMISSORY NOTE (TERM CREDIT FACILITY) – PAGE 1
 PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.

In determining whether the interest exceeds interest at the Maximum Rate, the total amount of interest shall be spread, prorated and amortized throughout the entire term of this Note until its payment in full. The term “Maximum Rate” as used in this Note means the maximum nonusurious rate of interest per annum permitted by whichever of applicable United States federal law or Texas law permits the higher interest rate, including to the extent permitted by applicable law, any amendments thereof hereafter or any new law hereafter coming into effect to the extent a higher Maximum Rate is permitted thereby.   If at any time the Rate shall exceed the Maximum Rate, the Rate shall be automatically limited to the Maximum Rate until the total amount of interest accrued hereunder equals the amount of interest which would have accrued if there had been no limitation to the Maximum Rate.   To the extent, if any, that Chapter 303 of
the Texas Finance Code, as amended, (the “Act”) is relevant to Lender for purposes of determining the Maximum Rate, the parties elect to determine the Maximum Rate under the Act pursuant to the “weekly ceiling” from time to time in effect, as referred to and defined in §303.001-303.016 of the Act; subject, however, to any right Lender subsequently may have under applicable law to change the method of determining the Maximum Rate.

          2.          Accrual Method. Interest at the Rate set forth above will be calculated by the 365/360 day method (a daily amount of interest is computed for a hypothetical year of 360 days; that amount is multiplied by the actual number of days for which any principal is outstanding hereunder). 

          3.          Rate Change Date.    The Rate will change each time and as of the date that the Prime Rate changes.  

          4.          Payment Schedule.  All payments received hereunder shall be applied: FIRST, to the payment of any expense or charges payable under any of the Loan Documents, SECOND, to interest due and payable, and FINALLY, the balance applied to principal, or in such other order as Lender shall determine at its option following the occurrence of an Event of Default.  If any payment of principal or interest on this Note shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in computing interest in connection with such payment.  The outstanding principal balance of this Note shall be paid as follows:

	
  
 
  	
  
           (a)           FIFTY-THREE   (53) payments in an amount equal to SEVEN THOUSAND NINE HUNDRED FOURTY-ONE   AND 66/100 DOLLARS ($7,941,66) shall be due and payable monthly   commencing on MARCH 5, 2007 and continuing on the SAME day of each successive   month; and
  
	
   
  	
  
 
  
	
  
 
  	
  
           (b)          ONE (1)   final payment of the outstanding principal balance of this Note shall be due   and payable on the TERM MATURITY DATE.
  

PROMISSORY NOTE (TERM CREDIT FACILITY) – PAGE 2
 PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.

Interest on the outstanding principal balance of this Note shall be paid monthly, commencing on SEPTEMBER 5, 2006 and continuing on the SAME day of each successive month, with a final payment of all unpaid interest the TERM MATURITY DATE.  Debtor may borrow, repay and reborrow hereunder at any time, up to a maximum aggregate amount outstanding at any one time equal to the principal amount of this Note, provided that Debtor is not in default under any provision of this Note, any other documents executed in connection with this Note, or any other Loan Documents now or hereafter executed in connection with any other obligation of Debtor to Lender.  Debtor acknowledges and agrees that, notwithstanding any provisions of this Note or any other documents executed in connection with this Note, Lender has no obligation to make any advance, and that all advances are at the sole discretion of Lender.  Lender and Debtor expressly agree that
Chapter 346 (“Chapter 346”) of the Texas Finance Code shall not apply to this Note or to any advances under this Note and that neither this Note or any such advances shall be governed by or subject to the provisions of Chapter 346 in any manner whatsoever.

          5.          Delinquency Charge.  To the extent permitted by law, a delinquency charge will be imposed in an amount not to exceed FIVE PERCENT (5.00%) of any payment that is more than TEN (10) days late.

          6.          Waivers, Consents and Covenants.  Debtor, any indorser or guarantor hereof, or any other party hereto (individually an “Obligor” and collectively “Obligors”) and each of them jointly and severally: (a) waive presentment, demand, protest, notice of demand, notice of intent to accelerate, notice of acceleration of maturity, notice of protest, notice of nonpayment, notice of dishonor, and any other notice required to be given under the law to any Obligor in connection with the delivery, acceptance, performance, default or enforcement of this Note, any indorsement or guaranty of this Note, or any other documents executed in connection with this Note or any other Loan Documents now or hereafter executed in connection with any obligation of Debtor to Lender; (b) consent to all
delays, extensions, renewals or other modifications of this Note or the Loan Documents, or waivers of any term hereof or of the Loan Documents, or release or discharge by Lender of any of Obligors, or release, substitution or exchange of any security for the payment hereof, or the failure to act on the part of Lender, or any indulgence shown by Lender (without notice to or further assent from any of Obligors),  and agree that no such action, failure to act or failure to exercise any right or remedy by Lender shall in any way affect or impair the obligations of any Obligors or be construed as a waiver by Lender of, or otherwise affect, any of Lender’s rights under this Note, under any indorsement or guaranty of this Note or under any of the Loan Documents; and (c) agree to pay, on demand, all costs and expenses of collection or defense of this Note or of any indorsement or guaranty hereof and/or the enforcement or defense of Lender’s rights with respect to, or the administration,
supervision, preservation, or protection of, or realization upon, any property securing payment hereof, including, without limitation, reasonable attorney’s fees, including fees related to any suit, mediation or arbitration proceeding, out of court payment agreement, trial, appeal, bankruptcy proceedings or other proceeding, in such amount as may be determined reasonable by any arbitrator or court, whichever is applicable.

          7.          Prepayments.  Prepayments may be made in whole or in part at any time in whole or in part without premium or penalty. 

PROMISSORY NOTE (TERM CREDIT FACILITY) – PAGE 3
 PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.

          8.          Remedies Upon Default.  Whenever there is a Event of Default under the Loan Documents (a) the entire balance outstanding hereunder and all other obligations of any Obligor to Lender (however acquired or evidenced) shall, at the option of Lender, become immediately due and payable and any obligation of Lender to permit further borrowing under this Note shall immediately cease and terminate, and/or (b) to the extent permitted by law, the Rate of interest on the unpaid principal shall be increased at Lender’s discretion up to the Maximum Rate, or if none, EIGHTEEN PERCENT (18.00%) per annum (the “Default Rate”).  The provisions herein for a Default Rate shall not be deemed to extend the time for any payment hereunder or to constitute a “grace period” giving  Obligors a
right to cure any default.  At Lender’s option, any accrued and unpaid interest, fees or charges may, for purposes of computing and accruing interest on a daily basis after the due date of this Note or any installment thereof, be deemed to be a part of the principal balance, and interest shall accrue on a daily compounded basis after such date at the Default Rate provided in this Note until the entire outstanding balance of principal and interest is paid in full.  Upon an Event of Default, Lender is hereby authorized at any time, at its option and without notice or demand, to set off and charge against any deposit accounts of any Obligor (as well as any money, instruments, securities, documents, chattel paper, credits, claims, demands, income and any other property, rights and interests of any Obligor), which at any time shall come into the possession or custody or under the control of Lender or any of its agents, affiliates or correspondents, any and all obligations due
hereunder.  Additionally, Lender shall have all rights and remedies available under each of the Loan Documents, as well as all rights and remedies available at law or in equity.

          9.          Waiver.  The failure at any time of Lender to exercise any of its options or any other rights hereunder shall not constitute a waiver thereof, nor shall it be a bar to the exercise of any of its options or rights at a later date.  All rights and remedies of Lender shall be cumulative and may be pursued singly, successively or together, at the option of Lender.  The acceptance by Lender of any partial payment shall not constitute a waiver of any default or of any of Lender’s rights under this Note.  No waiver of any of its rights hereunder, and no modification or amendment of this Note, shall be deemed to be made by Lender unless the same shall be in writing, duly signed on behalf of Lender; each such waiver shall apply only with respect to the specific instance involved, and shall in no way impair the
rights of Lender or the obligations of Obligors to Lender in any other respect at any other time. 

          10.         Applicable Law, Venue and Jurisdiction.  Debtor agrees that this Note shall be deemed to have been made in the State of Texas at Lender’s address indicated at the beginning of this Note and shall be governed by, and construed in accordance with, the laws of the State of Texas and is performable in the City and County of Texas indicated at the beginning of this Note.  In any litigation in connection with or to enforce this Note or any indorsement or guaranty of this Note or any Loan Documents, Obligors, and each of them, irrevocably consent to and confer personal jurisdiction on the courts of the State of Texas or the United States courts located within the State of Texas.  Nothing contained herein shall, however, prevent Lender from bringing any action or exercising any rights within any other state or jurisdiction
or from obtaining personal jurisdiction by any other means available under applicable law. 

PROMISSORY NOTE (TERM CREDIT FACILITY) – PAGE 4
 PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.

          11.         Partial Invalidity.  The unenforceability or invalidity of any provision of this Note shall not affect the enforceability or validity of any other provision herein and the invalidity or unenforceability of any provision of this Note or of the Loan Documents to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances.

          12.         Binding Effect.  This Note shall be binding upon and inure to the benefit of Debtor, Obligors and Lender and their respective successors, assigns, heirs and personal representatives, provided, however, that no obligations of Debtor or Obligors hereunder can be assigned without prior written consent of Lender.

          13.         Controlling Document.  To the extent that this Note conflicts with or is in any way incompatible with any other document related specifically to the loan evidenced by this Note, this Note shall control over any other such document, and if this Note does not address an issue, then each other such document shall control to the extent that it deals most specifically with an issue.

          14.         Commercial Purpose.   DEBTOR REPRESENTS TO LENDER THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES.  DEBTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS AND CONDITIONS OF THIS NOTE.

          15.         Collection.   If this Note is placed in the hands of an attorney for collection, or if it is collected through any legal proceeding at law or in equity or in bankruptcy, receivership or other court proceedings, Debtor agrees to pay all costs of collection, including, but not limited to, court costs and reasonable attorneys’ fees.

          16.         Notice of Balloon Payment.  At maturity (whether by acceleration or otherwise), Debtor must repay the entire principal balance of this Note and unpaid interest then due.  Lender is under no obligation to refinance the outstanding principal balance of this Note (if any) at that time.  Debtor will, therefore, be required to make payment out of other assets Debtor may own; or Debtor will have to find a lender willing to lend Debtor the money at prevailing market rates, which may be higher than the interest rate on the outstanding principal balance of this Note.  If Obligors have guarantied payment of this Note, Obligors may be required to perform under such guaranty.

          17.         Waiver
Of Jury Trial.  DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR
COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF THIS NOTE OR ANY OF THE LOAN
DOCUMENTS OR THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF
ANY OF THE TERMS OR PROVISIONS OF THIS NOTE OR THE OTHER LOAN
DOCUMENTS.

PROMISSORY NOTE (TERM CREDIT FACILITY) – PAGE 5
 PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.

          EXECUTED as of the date first written above.

	
  
DEBTOR:
  	
  
 
  	
  
ADDRESS:
  
	
   
  	
  
 
  	
  
 
  
	
  
AVATAR SYSTEMS, INC.
  	
  
 
  	
  
2801 Network Drive, Suite 210
  
	
  
 
  	
  
 
  	
  
 
  	
  
Frisco, TX    75034
  
	
  
By:
  	
  
/s/ Robert C. Shreve, Jr.
  	
  
 
  	
  
 
  
	
  
 
  	
  

  	
  
 
  	
  
 
  
	
  
Name:
  	
  
Robert C. Shreve, Jr.
  	
  
 
  	
  
 
  
	
  Title:
  	
  President
  	
   
  	
   
  

PROMISSORY NOTE (TERM CREDIT FACILITY) – PAGE 6
 PLAINSCAPITAL BANK – AVATAR SYSTEMS, INC.

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