SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of January 22, 2008, is made by Red Moon,
Inc., a Delaware corporation (the “Borrower”), in favor of Zoom Technologies,
Inc., a Delaware corporation (the “Lender”).

RECITALS

WHEREAS, on the date hereof the Lender will make a loan in the amount of Three
Hundred Thousand Dollars ($300,000.00) to the Borrower, which loan is evidenced
by a Promissory Note of even date hereof (the “Initial Note”). After the date of
this Agreement, the Lender may make further loans to the Borrower pursuant to
the terms of a Convertible Note Purchase Agreement, of even date hereof, and by
and between the Borrower and the Lender, which loans shall be evidenced by one
of more additional promissory notes (the “Additional Notes” and, together with
the Initial Note, the “Notes”). The obligation of the Borrower under the Notes,
including the payment of the outstanding principal and accrued but unpaid
interest thereunder is secured as set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
to induce the Lender to make such loans to the Borrower, the Borrower hereby
agrees with the Lender as follows:

1. Defined Terms. Unless otherwise defined herein, terms which are defined in
the Notes and used herein are so used as so defined, and terms which are defined
in the Uniform Commercial Code in effect in the State of Texas on the date
hereof are used herein as therein defined, and the following terms shall have
the following meanings:

“Code” means the Uniform Commercial Code as from time to time in effect in the
State of Texas.

“Collateral” shall have the meaning assigned to it in Section 2 of this Security
Agreement.

“Default” and “Event of Default” shall have the meanings assigned to such terms
in the Notes and shall include any breach of the Borrower’s obligations under
this Agreement.

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, charge, claim or other
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest) and any agreement to give or refrain from giving a lien,
mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, charge, claim or other encumbrance of any kind.

“Permitted Liens” means: (i) Liens imposed by law, such as carriers’,
warehousemen’s, materialmen’s and mechanics’ liens, or Liens arising out of
judgments or awards against Borrower with respect to which Borrower at the time
shall currently be prosecuting an appeal or proceedings for review, (ii) Liens
for taxes not yet subject to penalties for nonpayment and Liens for taxes the
payment of which is being contested in good faith and by appropriate proceedings
and for which, to the extent required by generally accepted accounting
principles then in effect, proper and adequate book reserves relating thereto
are established by Borrower, (iii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (iv) Liens to which the Lender has
expressly consented in writing; and (v) Liens in favor of the Lender.
 

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“Obligations” means the unpaid principal amount of, and interest on, the Notes
and any additional costs and expenses incurred by the Lender pursuant to the
Notes.

“Security Agreement” means this Security Agreement, as amended or restated from
time to time.

2. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, the Borrower hereby grants to the
Lender a security interest in and a Lien on all right, title and interest of the
Borrower in all of the property set forth on Schedule A hereto (collectively,
the “Collateral”) now owned or at any time hereafter acquired by the Borrower or
in which the Borrower now has or at any time in the future may acquire any
right, title or interest. The Borrower represents and warrants to the Lender
that it has good title to all of the Collateral, free and clear of all liens,
security interests and adverse interests, in favor of any person or entity other
than the Lender.

3. Covenants. The Borrower covenants and agrees with the Lender that, from and
after the date of this Security Agreement until the principal and any interest
under the Notes are paid in full:

(a) Further Documentation; Pledge of Instruments and Chattel Paper. At any time
and from time to time, upon the written request of the Lender, and at the sole
expense of the Borrower, the Borrower will promptly and duly execute and deliver
such instruments and documents and take such action as the Lender may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests and liens created hereby. The Borrower also hereby authorizes
the Lender to file any such financing or continuation statement without the
signature of the Borrower to the fullest extent permitted by applicable law. A
carbon, photographic or other reproduction of this Security Agreement shall be
sufficient as a financing statement for filing in any jurisdiction. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall be immediately delivered to the Lender, duly endorsed in a manner
satisfactory to the Lender, to be held as Collateral pursuant to this Security
Agreement.

(b) Indemnification. The Borrower agrees to pay, and to save the Lender harmless
from, any and all liabilities, reasonable costs and expenses (including, without
limitation, reasonable legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral; (ii) with respect to, or resulting from, any delay in complying with
any law, rule, regulation or order of any court, arbitrator or governmental
entity, jurisdiction or authority applicable to any of the Collateral or
(iii) in connection with any of the transactions contemplated by this Security
Agreement. In any suit, proceeding or action brought by the Lender under any
Account for any sum owing thereunder, or to enforce any provisions of any
Account, the Borrower will save, indemnify and keep the Lender harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of the account
debtor or obligor thereunder, arising out of a breach by the Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or obligor or
its successors from the Borrower. The foregoing indemnification shall not apply
to any liabilities, costs or expenses resulting directly from the gross
negligence, actual willful misconduct or bad faith of the Lender.
 

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(c) Maintenance of Records. The Borrower will keep and maintain at its own cost
and expense satisfactory and complete records of the Collateral. For the
Lender’s further security, the Borrower hereby grants to the Lender a security
interest in all of the Borrower’s books and records pertaining to the
Collateral, and upon the occurrence and during the continuance of an Event of
Default, the Borrower shall turn over any such books and records to the Lender
or to its representatives during normal business hours at the request of the
Lender.

(d) Compliance with Laws, etc. The Borrower will comply in all material respects
with all laws, rules, regulations and orders of any court, arbitrator or
governmental entity, jurisdiction or authority applicable to the Collateral or
any part thereof or to the operation of the Borrower’s business; provided,
however, that the Borrower may contest any such law, rule, regulation or order
in any reasonable manner which shall not, in the reasonable opinion of the
Lender, adversely affect the Lender’s rights or the priority of their liens on
the Collateral.

(e) Payment of Obligations. The Borrower will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such charge need be
paid if (i) the validity thereof is being contested in good faith by appropriate
proceedings; (ii) such proceedings do not involve any material danger of the
sale, forfeiture or loss of any of the Collateral or any interest therein and
(iii) such charge is adequately reserved against on the Borrower’s books in
accordance with GAAP.

(f) Limitation on Liens on Collateral. The Borrower will not create or permit to
be created or suffer to exist any Lien, except Permitted Liens, of any kind on
any of the Collateral.

(g) Limitations on Dispositions of Collateral. The Borrower will not sell,
transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer
or contract to do so, except for sales and non-exclusive licenses of Collateral
in the ordinary course of business.

(h) Further Identification of Collateral. The Borrower will furnish to the
Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable detail.
Furthermore, the Borrower will notify the Lender of any material claim made or
asserted against the Collateral by any person or entity and of any change in the
composition of the Collateral or other event which could materially adversely
affect the value of the Collateral or the Lender's Lien thereon.
 

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4. Lender’s Appointment as Attorney-in-Fact.

(a) Powers. The Borrower hereby irrevocably constitutes and appoints the Lender
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Borrower and in the name of the Borrower or in its own
name, from time to time in the Lender’s discretion, for the purpose of carrying
out the terms of this Security Agreement, to take any and all appropriate action
and to execute any and all instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement, and, without limiting the
generality of the foregoing, the Borrower hereby gives the Lender the power and
right, on behalf of the Borrower, without notice to or assent by the Borrower,
to do the following:

(i)
to pay or discharge taxes and liens levied or placed on or threatened against
the Collateral, to effect any repairs or any insurance called for the terms of
this Security Agreement and to pay all or any part of the premiums therefor and
the costs thereof; and

(ii)
Upon the occurrence and during the continuance of any Event of Default, (A) to
direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the
Lender, or as the Lender shall direct; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out of any Collateral;
(C) to sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
collateral; (D) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against the
Borrower with respect to any Collateral; (F) to settle, compromise or adjust any
suit, action or proceeding described in clause (E) above and, in connection
therewith, to give such discharges or releases as the Lender may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Lender was the absolute owner thereof for all purposes,
and to do, at the Lender’s option and the Borrower’s expense, at any time, or
from time to time, all acts and things which the Lender deem necessary to
protect, preserve or realize upon the Collateral and the Lender’ liens thereon
and to effect the intent of this Security Agreement, all as fully and
effectively as the Borrower might do.

At the reasonable request of the Lender, the Borrower shall deliver to the
Lender, one or more further documents ratifying any and all actions that said
attorneys shall lawfully take or do or cause to be taken or done by virtue
hereof. This power of attorney is a power coupled with an interest and shall be
irrevocable.

(b) Other Powers. The Borrower also authorizes the Lender, at any time and from
time to time, to execute, in connection with the sales provided for in Section 7
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.

(c) No Duty on Lender’s Part. The powers conferred on the Lender hereunder are
solely to protect the Lender’s interests in the Collateral and shall not impose
any duty upon it to exercise any such powers. The Lender shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or Lender
shall be responsible to the Borrower for any act or failure to act hereunder,
except for its own gross negligence or willful misconduct.
 

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5. Performance by Lender of Borrower’s Obligations. If the Borrower fails to
perform or comply with any of its agreements contained herein and the Lender, as
provided for by the terms of this Security Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
reasonable expenses of the Lender incurred in connection with such performance
or compliance shall be payable by the Borrower to the Lender on demand and shall
constitute obligations secured hereby.

6. Remedies. If an Event of Default shall occur and be continuing, the Lender
may exercise, in addition to all other rights and remedies granted to it in this
Security Agreement, the Notes and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Lender, without demand of performance or other demand, presentment, protest, or
notice of any kind (except any notice required by law referred to below) to or
upon the Borrower or any other person or entity (all and each of which are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker’s board or office of the Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity or redemption in the Borrower, which right or equity is hereby waived or
released. The Borrower further agrees, at the Lender’s request, to assemble the
Collateral and make it available to the Lender at places which the Lender shall
reasonably select, whether at the Borrower’s premises or elsewhere. The Lender
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Lender hereunder, including, without limitation, reasonable attorneys’
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Lender may elect, and only after such application and after
the payment by the Lender of any other amount required by any provision of law,
including, without limitation, Section 9-615 of the Code, need the agent account
for the surplus, if any, to the Borrower. To the extent permitted by applicable
law, the Borrower waives all claims, damages and demands it may acquire against
the Lender arising out of the exercise by the Lender of any of its rights
hereunder, provided that such release shall not apply to any claim, damage or
demand resulting directly from the gross negligence, actual willful misconduct
or bad faith of the Lender. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least seven days before such sale or other
disposition. The Borrower shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency. Any sale, whether under any power of sale
hereby given or by virtue of judicial proceedings, shall operate to divest all
Borrower’s right, title, interest, claim and demand whatsoever, either at law or
in equity, in and to the Collateral sold, and shall be a perpetual bar, both at
law and in equity, against Borrower, its successors and assigns, and against all
persons and entities claiming the Collateral sold or any part thereof under, by
or through Borrower, its successors or assigns.
 

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7. Limitation on Duties Regarding Preservation of Collateral. The Lender’s sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Lender deals with similar
property for its own account. Neither the Lender nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Borrower or otherwise.

8. Powers Coupled with an Interest. All authorizations and agencies herein
contained with respect to the Collateral are irrevocable and powers coupled with
an interest.

9. Severability. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

10. Paragraph Headings. The paragraph headings used in this Security Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.

11. No Waiver; Cumulative Remedies. The Lender shall not by any act (except by a
written instrument pursuant to Section 12 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.

12. Waivers and Amendments; Successors and Assigns. None of the terms or
provisions of this Security Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Borrower and
the Lender, provided that any provision of this Security Agreement may be waived
by the Lender in a written letter or agreement executed by the Lender or by
e-mail or facsimile transmission from the Lender. This Security Agreement shall
be binding upon the successors and assigns of the Borrower and shall inure to
the benefit of the Lender and its successors and assigns.

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

14. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
 

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15. Waiver of Jury Trial. TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY
HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS
AGREEMENT, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE
DEALING OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE.
TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY HERETO HEREBY AGREES THAT ANY
SUCH CLAIM, DEMAND, ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL
WITHOUT A JURY AND THAT EITHER PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
ANY OTHER PARTY HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 

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IN WITNESS WHEREOF, the Borrower has caused this Security Agreement to be duly
executed and delivered in favor of the Lender as of the date first above
written.
 
BORROWER:
 
RED MOON, INC.
   
By:
   /s/Bryan Thompson
Name:
Bryan Thompson
Title:
President
   
LENDER:
 
ZOOM TECHNOLOGIES, INC.
   
By:
   /s/Frank Manning
Name:
Frank Manning
Title:
President

 

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Schedule A
 
Redmoon Colo
Equipment List
 
Server Farm Rack
       
Device
 
Description
 
Serial
Catalyst 2924 XL
 
Server Farm Switch
 
FAB0430NOR5
Catalyst 2924 XL
 
Private Switch
   
Barracuda 400
 
Email Firewall
 
L14804A5080405
MBX 3U Server
 
MySQL
 
S6023P815A03098 / 150262-1
SuperMicro SuperServer 5010E
 
Graphs
 
SE5011099
MBX 3U Server
 
MSSQL 2005
 
S6023P8253043291 144216-2
MBX 3U Server
 
Tropos-EMS
 
S6023P825302271 1144216-1
Compaq Proliant DL38OR01
 
Redmoon-Web
 
D012DKN1L187
1U Server
 
Colo-Sensor
 
1MC203502479 AA A09188-301
Sun Netra T1 105
 
NS1
 
O24COFBF
Sun Netra Ti 105,
 
NS2
 
024C0F7B
VA Linux System 501
 
WebMD
 
SXO81 1 9921 37
1U Rackable Server
 
IDS
 
29022
Dell PowerEdge 750
 
Addison
 
J24WS71
VA Linux System 501
 
Rad1
 
SX0921993200
SonicWall Pro 3060
 
Firewall
 
USM511031 H
SuperMicro SuperServer 6041
 
Mail
 
S60410335
SuperMicro SuperServer 6041
 
MSSQL 2000 / Rodopi
 
$60410336

 
Hosting Rack
       
Cisco RPS
 
Server Farm and Hosting RPS
 
CAH03520228
Philips 15inch monitor
     
63519850
Master View Plus
 
Top 8 port KVM
 
IALEAO74001 G
(SSD Iview
 
Bottom 8 port KVM
 
NA0117DE00031
3U Rackable System
 
DotNet -1
 
29023
1U Rackable Server
 
Win-1
 
29024

 
Communications Rack
       
Catalyst 3512 XL
 
Edge Switch
 
FAA0446Y17P
Catalyst 2912 XL
 
ColoCustomer Master Switch
 
FABO523YOV7
Allot NetEnforcer AC-201
     
992635
Cisco 3640 Router
 
Core Router
 
JABO524816H
SuperMicro SuperSery 5012E-E
 
Dyband
 
E51201906
Cisco 7206 VXR Router
 
Distro
 
72794892
Cisco 1841 Router
 
Emdeon Router
 
FTXO951W2WO
Cisco RPS
 
Comm Rack RPS
 
CAH03520544
3Comm Total Control
 
Redmoon Dial up
 
1261 B80908G

 
ColoCustomer Rack #1
       
Catalyst 2924 XL Switch
 
CaloCust 1 Switch
 
FAB0447T323
MBX 1U Server
 
GinGon Solutions Dedicated Server
Hosting
 
155099-1

ColoCustomer Rack #2
       
Catalyst 2924 XL Switch
 
ColoCust 2 Switch
 
FABO6O2Y2UM
MBX 1U Server
 
Cshore-Mail Dedicated Server Hosting
 
228 1 153949-1
MBX 1 U Server
 
Cshore-Newsvues Dedicated Server Hosting
 
155049-1

 
oloCustomer Rack #3
       
Catalyst 2924 XL Switch
 
ColoCust 3 Switch
 
FABO411VOEG
Cisco RPS
 
ColoCust 2 and 3 RPS
 
CAH03320275

 

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