UNCONDITIONAL CONTINUING GUARANTY

Execution Copy   UNCONDITIONAL CONTINUING GUARANTY
This UNCONDITIONAL CONTINUING GUARANTY (“Guaranty”) is executed as of January 8, 2009, by ARGYLE SECURITY, INC., a Delaware corporation, (“Guarantor”), for the benefit of THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (“Bank”).   R E C I T A L S
A.           ISI Security Group, Inc., a Delaware corporation (“Borrower”) and Bank have entered into that certain Loan and Security Agreement dated October 3, 2008, (the “Loan Agreement”), pursuant to which the Bank has agreed to make two (2) revolving loans and a term loan in the original aggregate amount of twenty-five million and no/100 dollars ($25,000,000.00) (the “Loans”). All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Loan Agreement.   B.           The Borrower has requested that the Bank agree to certain amendments to the Loan Agreement set forth in Amendment No. 1 to Loan and Security Agreement, dated as of January 8, 2009 (the “Amendment”).   C.           The Bank is willing to agree to the Amendment only if the Guarantor unconditionally guarantees payment and performance to Bank of the Obligations; and   D.           The Guarantor is an affiliate of the Borrower, and the Guarantor will directly benefit from the Amendment.   NOW THEREFORE, as an inducement to the Bank to make the Amendment, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Guarantor agrees with Bank, as follows:   A G R E E M E N T:

  Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Bank the payment and performance of the obligations, as defined in the Loan Agreement (the “Obligations”), as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby absolutely, irrevocably and unconditionally covenants and agrees that it is liable, jointly and severally, for the Obligations as a primary obligor, and that Guarantor shall fully perform each and every term and provision hereof. This Guaranty is a guaranty of payment and not of collection only. Bank shall not be required to exhaust any right or remedy or take any action against Borrower or any other person or entity or any collateral. Guarantor agrees that, as between the Guarantor and Bank, the Obligations may be declared to be due and payable for the purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any declaration as regards Borrower and that in the event of a declaration or attempted declaration, the Obligations shall immediately become due and payable by Guarantors for the purposes of this Guaranty.  

  Guarantor guarantees that the Obligations shall be paid strictly in accordance with the terms of the Loan Documents. The liability of the Guarantor under this Guaranty is absolute and unconditional irrespective of: (a) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any of the terms of any Loan Document, including any increase or decrease in the rate of interest thereon; (b) any release or amendment or waiver of, or consent to departure from, or failure to act by Bank with respect to, any other guaranty or support document, or any exchange, release or non-perfection of, or failure to act by Bank with respect to, any Collateral, for all or any of the Obligations; (c) any present or future law, regulation or order of any jurisdiction (whether of right or in fact) or of any agency thereof purporting to reduce, amend, restructure or otherwise affect any term of the Obligations or any Loan Document; (d) any change in the corporate existence, structure, or ownership of Borrower; (e) without being limited by the foregoing, any lack of validity or enforceability of any Loan Document; and (f) any other setoff, recoupment, defense or counterclaim whatsoever (in any case, whether based on contract, tort or any other theory) with respect to the Loan Documents or the transactions contemplated thereby which might constitute a legal or equitable defense available to, or discharge of, Borrower or a Guarantor.  

  This Guaranty is a continuing guaranty of the payment of all Obligations now or hereafter existing and shall remain in full force and effect until payment in full of all Obligations and other amounts payable under this Guaranty and until the Loan Documents are no longer in effect.  

  This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Bank on the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though the payment had not been made, whether or not Bank is in possession of the Guaranty.  

  Guarantor shall not exercise any rights which it may acquire by way of subrogation, by any payment made under this Guaranty or otherwise, until all the Obligations have been paid in full and the Loan Documents are no longer in effect. If any amount is paid to Guarantor on account of subrogation rights under this Guaranty at any time when all the Obligations have not been paid in full, the amount shall be held in trust for the benefit of the Bank and shall be promptly paid to Bank to be credited and applied to the Obligations, whether matured or unmatured or absolute or contingent, in accordance with the terms of the Loan Documents. If Guarantors make payment to Bank of all or any part of the Obligations and all the Obligations are paid in full and the Loan Documents are no longer in effect, Bank shall, at Guarantor's request, execute and deliver to Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of the interest in the Obligations resulting from the payment.   2

  Without limiting Bank’s rights under any other agreement, any liabilities owed by Borrower to Guarantor in connection with any extension of credit or financial accommodation by Guarantor to or for the account of Borrower, including but not limited to interest accruing at the agreed contract rate after the commencement of a bankruptcy or similar proceeding, are hereby subordinated to the Obligations, and such liabilities of Borrower to Guarantor, if Bank so requests, shall be collected, enforced and received by a Guarantor as trustee for the Bank and shall be paid over to Bank on account of the Obligations but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.  

  Guarantor represents and warrants that: (a) this Guaranty (i) has been authorized by all necessary action; (ii) does not violate any agreement, instrument, law, regulation or order applicable to any Guarantor; (iii) does not require the consent or approval of any person or entity, including but not limited to any governmental authority, or any filing or registration of any kind; and (iv) is the legal, valid and binding obligation of Guarantors enforceable against Guarantors, jointly and severally, in accordance with its terms, except to the extent that enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally; and (b) in executing and delivering this Guaranty, Guarantor has (i) without reliance on Bank or any information received from Bank and based upon such documents and information it deems appropriate, made an independent investigation of the transactions contemplated hereby and Borrower, Borrower’s business, assets, operations, prospects and condition, financial or otherwi