**EXHIBIT
      4.6**





**PROMISSORY
      NOTE, SECURITY AGREEMENT**


**AND
      WARRANT AGREEMENT**





**LENDERS:**




**LENDERS**
            
            **AMT**
            
            **WARRANTS**ATVF
                II, LLC
            
            $
            600,000
            
            
            300,000Scott
                Crist
            
            
            100,000
            
            
            50,000Roderick
                P. Ciaccio
            
            
            50,000
            
            
            25,000Vencore
                Solutions, LLC
            
            
            100,000
            
            
            50,000**TOTAL**
            
            $
            850,000
            
            
            425,000





San
      Antonio, TX


Date:
      September 26, 2008




FOR
      VALUE
      RECEIVED, the undersigned ATSI COMMUNICATIONS, INC., a Nevada corporation
      (“ Company ),
      hereby
      promises to pay to (“ Lender ”),
      at
      such place as Lender may specify, in lawful money of the United States of
      America, the principal amount of $850,000 (the “ Principal
      Amount ”)
      on the
      earlier of: (i) a Mandatory Payment Event (as hereinafter defined), or (ii)
      According to the attached Payback Schedule (the “ Maturity
      Date ”),
      plus
      interest on the Principal Amount outstanding from time to time hereunder at
      a
      rate equal to the lesser of (i) the maximum lawful rate or (ii) ten percent
      (10%) per annum. Interest shall be calculated in arrears through the last day
      of
      each month and shall be due and payable on the first day of the each month,
      as
      more fully set forth below in Section
      1 .





1.  Advances;
      Payments .
      On the
      date of this Loan and Security Agreement (the “ Agreement ”)
      and
      subject to the accuracy of Company’s representations and the conditions set
      forth in Section
      3 herein,
      Lender will deliver to Company in immediately available funds the Principal
      Amount specified above (the “ Loan ”).
      All
      payments under this Agreement shall be applied first to fees and expenses,
      then
      to interest and then to reduction of the Principal Amount. Any Principal Amount
      outstanding after the occurrence and during the continuance of an Event of
      Default under this Agreement shall bear interest at a rate equal to the lesser
      of (i) the lawful legal rate or (ii) seven percent (7%) above the interest
      rate
      otherwise applicable under this Agreement.





2.  Secured
      Agreement .





2.1  General. To
      secure
      repayment and performance of all Obligations hereunder, Company grants Lender
      a
      security interest in the Company’s accounts receivable (other than accounts
      factored with Wells Fargo), $100,000 certificate of deposit and ATSI’s ownership
      in ATSICOM, whether now owned or hereafter acquired, or any value received
      in
      exchange for any of the foregoing including, without limitation, all proceeds
      of
      insurance covering the same and all tort claims in connection therewith
      (collectively, the “ Collateral ”).
      For
      purposes of this Agreement and the other Loan Documents, “ Obligations ”
means
      and includes all loans, debts, liabilities, obligations, covenants and duties
      owing by the Company to the Lender of any kind or nature, present or future,
      whether or not evidenced by any note, guaranty or other instrument, which may
      arise under, out of, or in connection with, this Agreement, the other Loan
      Documents or any other agreement executed in connection herewith or therewith,
      whether or not for the payment of money, whether arising by reason of a loan,
      guaranty, indemnification or in any other manner, whether direct or indirect
      (including those acquired by assignment, purchase, discount or otherwise),
      whether absolute or contingent, due or to become due, and however acquired.
      The
      term includes, without limitation, all interest, charges, expenses, reasonable
      attorneys’ fees, and any other sum properly chargeable to the Company under this
      Agreement, the Note, the other Loan Documents or any other agreement executed
      in
      connection herewith or therewith.





As
      further security for the Obligations, and to provide other assurances to the
      Lender, the Lender shall receive, among other things:





(a)  This
      Agreement shall constitute a security agreement for purposes of the
      UCC.








2.3  Recourse
      to Security .
      Recourse to security shall not be required for any Obligation hereunder and
      the
      Company hereby waives any requirement that the Lender exhausts any right or
      take
      any action against any of the Collateral before proceeding to enforce the
      Obligations against the Company.





2.4  Special
      Provisions Relating to Receivables .





(a)  Records,
      Collections, Etc .
      The
      Company shall report all customer credits, disputes and discrepancies in calls
      and minutes in each case with a value in excess of $100,000 to the Lender.
      Such
      report shall include a general description of each such dispute and resolution.
      The Company shall not settle or adjust any dispute or claim, or grant any
      discount (except ordinary trade discounts), credit or allowance or accept any
      disputes, except in the ordinary course of its business, without the Lender’s
      consent. Upon the occurrence and during the continuance of an Event of Default,
      the Lender may (i) settle or adjust disputes or claims directly with account
      debtors for amounts and upon terms which it considers advisable and (ii) notify
      account debtors on the Company’s receivables that such receivables have been
      assigned to the Lender, and that payments in respect thereof shall be made
      directly to the Lender. Where Company receives collateral of any kind or nature
      by reason of transactions between itself and its customers or account debtors,
      the Company will hold the same on the Lender’s behalf, subject to the Lender’s
      instructions, and as property forming part of the Company’s Receivables. If the
      Company sells goods or services to a customer which also sells goods or services
      to it or which may have other claims against it, the Company will so advise
      the
      Lender immediately to permit the Lender to establish a reserve
      therefore.




(b)  Receivables
      Covenants .
      During
      the term of this Agreement, the Company shall always maintain current unfactored
      receivables greater than or equal to the Principal Amount. The Company shall
      notify the Lender promptly of: any material delay in the Company’s performance
      of any of its obligations to any account debtor or the assertion of any claims,
      offsets, defenses or counterclaims by any account debtor or any disputes with
      account debtors or any settlement, adjustment or compromise thereof, all
      material adverse information relating to the financial condition of any account
      debtor and any event or circumstance which, to the Company’s knowledge, could be
      reasonably expected to cause an Event of Default. The Lender shall have the
      right at any time or times, in the Lender’s name or in the name of a nominee of
      Lender, to verify the validity, amount or any other matter relating to any
      account or other Collateral, by mail, telephone, facsimile transmission or
      otherwise.





2.5  Continuation
      of Liens, Etc .
      The
      Company shall defend the Collateral against all claims and demands of all
      persons at any time claiming any interest therein, other than claims relating
      to
      liens permitted by this Agreement and the other Loan Documents. The Company
      agrees to comply with the requirements of all state and federal laws to grant
      to
      the Lender valid and perfected security interests in the Collateral and shall
      obtain a Deposit Account Control Agreement or Control Agreement from any
      securities intermediary or depository bank in possession of any of the Company’s
      investment property or deposit accounts. The Lender is hereby authorized by
      the
      Company to sign the Company’s name on any document or instrument as may be
      necessary or desirable to establish and maintain the liens covering the
      Collateral and the priority and continued perfection thereof or file any
      financing or continuation statements or similar documents or instruments
      covering the Collateral whether or not the Company’s signature appears thereon.
      The Company agrees, from time to time, at the Lender’s request, to file notices
      of liens, financing statements, similar documents or instruments, and
      amendments, renewals and continuations thereof, and cooperate with the Lender’s
      representatives, in connection with the continued perfection (and the priority
      status thereof) and protection of the Collateral and the Lender’s liens thereon.
      The Company agrees that the Lender may file a carbon, photographic or other
      reproduction of this Agreement (or any financing statement related hereto)
      as a
      financing statement.








2.7  Power
      of Attorney .
      In
      addition to all of the powers granted to the Lender hereunder, the Company
      hereby irrevocably designates and appoints the Lender (and all persons
      designated by the Lender) as the Company’s true and lawful attorney-in-fact, and
      authorizes the Lender (and its designees), in the Company’s or the Lender’s
      name, to, at any time an Event of Default exists or has occurred and is
      continuing (i) demand payment on receivables or other Collateral, (ii) enforce
      payment of receivables by legal proceedings or otherwise, (iii) exercise all
      of
      the Company’s rights and remedies to collect any receivable or other Collateral,
      (iv) sell or assign any receivable or other Collateral upon such terms, for
      such
      amount and at such time or times as the Lender deems advisable, (v) settle,
      adjust, compromise, extend or renew any receivable, (vi) discharge and release
      any receivable, (vii) prepare, file and sign the Company’s name on any proof of
      claim in bankruptcy or other similar document against an account debtor or
      other
      obligor in respect of any receivables or other Collateral, (viii) notify the
      post office authorities to change the address for delivery of remittances from
      account debtors or other obligors in respect of receivables or other proceeds
      of
      Collateral to an address designated by the Lender, and open and dispose of
      all
      mail addressed to the Company and handle and store all mail relating to the
      Collateral; (ix) make any payment or take any action necessary or desirable
      to
      protect or preserve any Collateral; and (x) do all acts and things which are
      necessary, in the Lender’s determination, to fulfill the Company’s Obligations
      under this Agreement and the other Loan Documents. The Company hereby releases
      the Lender and each Lender and their respective officers, employees and
      designees from any liabilities arising from any act or acts under this power
      of
      attorney and in furtherance thereof, whether of omission or commission, except
      as a result of the Lender’s or any of its officer’s, employee’s or designee’s
      own gross negligence or willful misconduct as determined pursuant to a final
      non-appealable order of a court of competent jurisdiction. The Lender’s
      authority hereunder shall include, without limitation, the authority to execute
      and give receipt for any certificate of ownership or any document, to transfer
      title to any item of Collateral and to take any other actions arising from
      or
      incident to the powers granted to the Lender under this Agreement. This power
      of
      attorney is coupled with an interest and is irrevocable until the Obligations
      are repaid in full.





2.8  Perfection
      of Security Interests .





(a)  The
      Company irrevocably and unconditionally authorizes the Lender to file at any
      time and from time to time such financing statements and similar instruments
      with respect to the Collateral naming the Lender or its designee as the secured
      party and the Company as debtor, as the Lender may require, and including any
      other information with respect to the Company or otherwise required by the
      Uniform Commercial Code of such jurisdiction as the Lender may determine,
      together with any amendment and continuations with respect thereto, which
      authorization shall apply to all financing statements and similar instruments
      filed on, prior to or after the date hereof. The Company hereby ratifies and
      approves all financing statements naming the Lender or its designee as secured
      party and the Company as debtor with respect to the Collateral (and any
      amendments with respect to such financing statements and similar instruments)
      filed by or on behalf of the Lender prior to the date hereof and ratifies and
      confirms the authorization of the Lender to file such financing statements
      and
      similar instruments (and amendments, if any). The Company hereby authorizes
      the
      Lender to adopt on behalf of the Company any symbol required for authenticating
      any electronic filing. In no event shall the Company at any time file, or permit
      or cause to be filed, any correction statement or termination statement with
      respect to any financing statement or similar instrument (or amendment or
      continuation with respect thereto) naming the Lender or its designee as secured
      party and the Company as debtor, without the prior written consent of the
      Lender.





(b)  The
      Company does not have any chattel paper (whether tangible or electronic) or
      instruments as of the date hereof. In the event that any Company shall be
      entitled to or shall receive any chattel paper or instrument after the date
      hereof, the Company shall promptly notify the Lender thereof in writing.
      Promptly upon the receipt thereof, the Company shall deliver, or cause to be
      delivered to the Lender, all tangible chattel paper and instruments that the
      Company has or may at any time acquire, accompanied by such instruments of
      transfer or assignment duly executed in blank as the Lender may from time to
      time specify, in each case except as the Lender may otherwise agree. At the
      Lender’s option, the Company shall, or the Lender may at any time on behalf of
      the Company, cause the original of any such instrument or chattel paper to
      be
      conspicuously marked in a form and manner acceptable to the Lender with the
      following legend referring to chattel paper or instruments as applicable: “This
      [chattel paper][instrument] is subject to the security interest of Lender,
      and
      any sale, transfer, assignment or encumbrance of this [chattel
      paper][instrument] violates the rights of such secured party.”








(c)  The
      Company does not have any deposit accounts, except for Wells Fargo, as of the
      date hereof., The Company shall not, directly or indirectly, after the date
      hereof open, establish or maintain any deposit account unless each of the
      following conditions is satisfied: (i) the Lender shall have received not less
      than one (1) Business Days prior written notice of the intention of the Company
      to open or establish such account which notice shall specify in reasonable
      detail and specificity reasonably acceptable to the Lender the name of the
      account, the owner of the account, the name and address of the bank or other
      financial institution at which such account is to be opened or established,
      the
      individual at such bank or other financial institution with whom the Company
      is
      dealing and the purpose of the account and (ii) on or before the opening of
      such
      deposit account, the Company shall as the Lender may specify either (A) deliver
      to the Lender a Deposit Account Control Agreement with respect to such deposit
      account of the Company duly authorized, executed and delivered by the Company
      and the bank at which such deposit account is opened and maintained or (B)
      arrange for the Lender to become the customer of the bank with respect to such
      deposit account of the Company on terms and conditions acceptable to the Lender.
      The terms of this subsection (C) shall not apply to deposit accounts
      specifically and exclusively used for payroll, payroll taxes and other employee
      wage and benefit payments to or for the benefit of any Company’s salaried
      employees.





(d)  The
      Company shall take any other actions reasonably requested by the Lender from
      time to time to cause the attachment and perfection of, and the ability of
      the
      Lender to enforce, the security interest of the Lender in any and all of the
      Collateral, including, without limitation, (i) executing, delivering and, where
      appropriate, filing financing statements and similar instruments and amendments
      relating thereto under the UCC or other applicable law, to the extent, if any,
      that the Company’s signature thereon is required therefore, (ii) causing the
      Lender’s name to be noted as secured party on any certificate of title for a
      titled good if such notation is a condition to attachment, perfection or
      priority of, or ability of the Lender to enforce, the security interest of
      the
      Lender in such Collateral, (iii) complying with any provision of any statute,
      regulation or treaty of the United States as to any Collateral if compliance
      with such provision is a condition to attachment, perfection or priority of,
      or
      ability of the Lender to enforce, the security interest of the Lender in such
      Collateral, (iv) obtaining the consents and approvals of any Governmental Person
      or third party, including, without limitation, any consent of any licensor,
      lessor or other person obligated on Collateral, and taking all actions required
      by any earlier versions of the UCC or by other law, as applicable in any
      relevant jurisdiction.





2.9  Right
      to Cure .
      The
      Lender may, at its option, (a) upon notice to the Company, cure any default
      by
      the Company under any material agreement with a third party that affects the
      Collateral, its value or the ability of the Lender to collect, sell or otherwise
      dispose of the Collateral or the rights and remedies of the Lender therein
      or
      the ability of the Company to perform its Obligations hereunder or under the
      other Loan Documents, (b) pay or bond on appeal any judgment entered against
      the
      Company, (c) discharge taxes, liens, security interests or other encumbrances
      at
      any time levied on or existing with respect to the Collateral and (d) pay any
      amount, incur any expense or perform any act which, in the Lender’s good faith
      judgment, is necessary or appropriate to preserve, protect, insure or maintain
      the Collateral and the rights of the Lender with respect thereto. The Lender
      may
      add any amounts so expended to the Obligations, such amounts to be repayable
      by
      the Company on demand. The Lender shall be under no obligation to effect such
      cure, payment or bonding and shall not, by doing so, be deemed to have assumed
      any obligation or liability of the Company. Any payment made or other action
      taken by the Lender under this Section shall be without prejudice to any right
      to assert an Event of Default hereunder and to proceed accordingly.





3.  Representations,
      Warranties and Covenants of Company .





3.1  Corporate
      Existence and Authority .
      Company
      is and will continue to be duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or organization. Company
      is and will continue to be qualified and licensed to do business in all
      jurisdictions in which any failure to do so would have a material adverse effect
      on Company. Company has all requisite power to transact the business it
      transacts and proposes to transact, to execute and deliver this Agreement,
      and
      all other documents and agreements contemplated by this Agreement, and to
      perform the provisions of this Agreement and to consummate the transactions
      contemplated by this Agreement. The execution, delivery and performance of
      this
      Agreement, and all other documents and agreements contemplated by this
      Agreement, and the consummation of the transactions contemplated by this
      Agreement, have been duly authorized and approved by Company. This Agreement,
      and all other documents and agreements contemplated by this Agreement have
      each
      been duly authorized, executed and delivered by, and each is the valid and
      binding obligation of, Company enforceable against Company in accordance with
      its terms, except as may be limited by applicable bankruptcy, reorganization,
      insolvency, moratorium or other similar laws or by legal or equitable principles
      relating to or limiting creditors’ rights generally.








3.2  No
      Conflicts .
      The
      consummation of the transactions contemplated by this Agreement and the
      performance of the terms and provisions of this Agreement, and any other
      documents or agreements contemplated by this Agreement will not
      (i) contravene, result in any breach of, or constitute a default under any
      indenture, mortgage, deed of trust, bank loan or credit agreement, corporate
      charter, by-laws or other material agreement or instrument to which Company
      is a
      party or by which Company or any of its properties or the Collateral is bound,
      (ii) conflict with or result in a breach of any of the terms, conditions or
      provisions of any order of any court, arbitrator or Federal, State, municipal
      or
      other governmental department, commission, board, bureau, agency or
      instrumentality, domestic or foreign (collectively, “ Governmental
      Person ”)
      applicable to Company or (iii) violate any material provision of any statute
      or
      other rule or regulation of any Governmental Person applicable to Company,
      which
      could have a material adverse effect on Company.





3.3  Place
      of Business; Location of Collateral .
      The
      address set forth in Section
      9.3 of this
      Agreement is Company’s chief executive office and the Collateral is located only
      at such location and at such other location or locations listed herein. Company
      will give Lender prior written notice before opening any additional place of
      business, changing its chief executive office, or moving any of the Collateral
      to a location other than Company’s chief executive office.





3.4  Title
      to Collateral; Permitted Liens .
      Company
      is now, and will at all times in the future be, the sole owner of all the
      Collateral, except for items of equipment which are leased by Company. The
      Collateral now is and will remain free and clear of any and all liens, charges,
      security interests, encumbrances and adverse claims, other than Permitted Liens.
      Lender now has, and will continue to have, a perfected and enforceable security
      interest in all of the Collateral subject only to Permitted Liens, and Company
      will at all times defend Lender and the Collateral against all claims of others
      (subject to the rights of holders of the Permitted Liens). So long as the Loan
      is outstanding, none of the Collateral now is or will be affixed to any real
      property in such a manner, or with such intent, as to become a fixture. Company
      is not and will not become a lessee under any real property lease pursuant
      to
      which the lessor may obtain any rights in any of the Collateral and no such
      lease now prohibits, restrains, impairs or will prohibit, restrain or impair
      Company’s right to remove any Collateral from the leased premises (subject to
      statutory rights of landlords). Whenever any Collateral is located upon premises
      in which any third party has an interest (whether as owner, mortgagee,
      beneficiary under a deed of trust, lien or otherwise), Company shall, whenever
      requested by Lender, use its best efforts to cause such third party to execute
      and deliver to Lender, in form acceptable to Lender, such waivers and
      subordinations as Lender shall specify, so as to ensure that Lender’s rights in
      the Collateral are, and will continue to be, superior to the rights of any
      such
      third party. Company will keep in full force and effect, and will comply with
      all the terms of, any lease of real property where any of the Collateral now
      or
      in the future may be located.





As
      used
      in this Agreement, “ Permitted
      Liens ”
shall
      mean (a) the lien, charges, security interests in favor of the Lender (b) liens,
      charges, security interests, licenses, leases, and other encumbrances 4 attached
      hereto and made a part hereof, (c) liens, charges, security interests, and
      other
      encumbrances arising under or relating to the sale of accounts receivable under
      that certain Account Transfer Agreement with Wells Fargo Business Credit and
      any
      renewal, extension or replacement thereof; (d) liens for taxes or assessments
      or
      other charges by a Governmental Person that are not yet due and payable or,
      if
      due and payable, are being contested in good faith by appropriate proceedings
      and for which appropriate reserves are maintained; (e) mechanics’ materialmen’s,
      landlords’, warehousemen’s, carrier’s and other similar liens imposed by law and
      securing obligations incurred in the ordinary course of business which are
      not
      past due for more than thirty (30) days or which are being diligently contested
      in good faith by appropriate proceedings and for which appropriate reserves
      have
      been established; (f) liens under workers’ compensation, unemployment insurance,
      Social Security and other similar legislation’ (g) liens, deposits, or pledges
      securing the performance of contracts, leases, public or statutory obligations,
      surety, stay, appeal and performance bonds and other similar obligations
      incurred in the ordinary course of business; (h) liens securing capital lease
      obligations or the payment of the purchase price of any asset; and (i) with
      respect to real property, easements, restrictive covenants, rights-of-way and
      other similar liens and encumbrances that do not impair the continued use of
      such real property.





3.5  Maintenance
      of Collateral .
      Company
      will maintain the Collateral in good working condition, ordinary wear and tear
      excepted, and Company will not use the Collateral for any unlawful purposes.
      Company will immediately advise Lender in writing of any material loss or damage
      to the Collateral as more fully set forth in Section
      3.29(c) .
      The
      Company will not directly or indirectly, in any fiscal year, sell, transfer
      or
      otherwise dispose of any of the Collateral (other than sales of inventory in
      the
      ordinary course of business), or grant any option.








3.6  Books
      and Records .
      Company
      has maintained and will maintain at Company’s chief executive or chairman’s
      office at the address set forth in Section
      9.3 complete
      and accurate books and records, comprising an accounting system in accordance
      with generally accepted accounting principals. The Company shall, (i) maintain
      books and records (including computer records and programs) of account
      pertaining to the assets, liabilities and financial transactions of the Company
      in such detail, form and scope as is consistent with good business practice
      and
      (ii) provide the Lender access to the premises of the Company at any time and
      from time to time, during normal business hours and upon reasonable notice
      under
      the circumstances, but in all events at least one (1) Business Day notice,
      and
      at any time after the occurrence and during the continuance of an Event of
      Default, for the purposes of (A) inspecting and verifying the Collateral, (B)
      inspecting and copying (at the Company’ expense) any and all records pertaining
      thereto, and (C) discussing the affairs, finances and business of the Company
      with any officer or director thereof, all of whom are hereby authorized to
      disclose to the Lender all financial statements, work papers, and other
      information relating to such affairs, finances or business.





3.7  Financial
      Condition, Statements and Reports .
      All
      financial statements now or in the future delivered to Lender have been, and
      will be, prepared in conformity with generally accepted accounting principles
      (“ GAAP ”)
      and
      now and in the future will completely and fairly reflect the financial condition
      of Company, at the times and for the periods therein stated. Between the last
      date covered by any such statement provided to Lender and the date hereof,
      the
      Company represents that there has been no material adverse change in the
      financial condition or business of Company. The Company will not at any time
      make or permit any material change in accounting policies or reporting
      practices, except as required by GAAP.





3.8  Compliance
      with Law .
      Company
      has complied, and will comply, in all material respects, with all provisions
      of
      all applicable laws and regulations, including, but not limited to, those
      relating to Company’s ownership of real or personal property, the conduct and
      licensing of Company’s business, and all environmental matters.





3.9  Litigation .
      Except
      as disclosed, there is no claim, suit, litigation, proceeding or investigation
      pending or (to the best of Company’s knowledge) threatened by or against or
      affecting Company in any court or before any Governmental Person (or any basis
      therefore known to Company) which could normally or reasonably be expected
      to
      result, either separately or in the aggregate, in any material adverse change in
      the financial condition or business of Company, or in any material impairment
      in
      the ability of Company to carry on its business in substantially the same manner
      as it is now being conducted. Company will promptly inform Lender in writing
      of
      any claim, proceeding, litigation or investigation in the future threatened
      or
      instituted by or against Company.





3.10  Use
      of
      Proceeds . All
      proceeds of the Loan shall be used solely in accordance with this Agreement. In
      no
      event shall the Company (i) use any portion of the proceeds of the Loan for
      the
      purpose of purchasing or carrying any “margin stock” (as defined in Regulation U
      of the Federal Reserve Board) in any manner which violates the provisions of
      Regulation T, U or X of the Federal Reserve Board or for any other purpose
      in
      violation of any applicable statute or regulation, or of the terms and
      conditions of this Agreement, or (ii) take, or permit any person acting on
      its
      behalf to take, any action which could reasonably be expected to cause this
      Agreement or any document or instrument delivered pursuant hereto to violate
      any
      regulation of the Federal Reserve Board.




3.11  Intellectual
      Property .
      Company
      possesses all material licenses, permits, franchises, authorizations, patents,
      copyrights, trademarks and trade names and any other tangible or intangible
      or
      intellectual property rights, or rights thereto, required to conduct its
      business substantially as now conducted and as currently proposed to be
      conducted, and such rights do not infringe any material intellectual property
      rights of others in any material respect and no claim or litigation is pending,
      or, to the best of the Company’s knowledge, threatened against the Company that
      contests its right to sell or use any such product, process, method, substance,
      part or other material. The Company shall do and cause to be done all things
      necessary to preserve and keep in full force and affect all of its material
      registrations of intellectual property, including without limitation all
      trademarks, service marks and other marks, trade names and other trade
      rights.







3.12  Indebtedness .
      Except
      as set forth on the Debt Schedule, Company has no outstanding indebtedness
      of
      any kind.





3.13  Disclosure .
      No
      representation or other statement made by Company to Lender contains any untrue
      statement of a material fact or omits to state a material fact necessary to
      make
      any statements made to Lender not misleading.





3.14  No
      Actual or Pending Material Modification of Business .
      There
      exists no actual or, to the best of the Company’s knowledge after due inquiry,
      threatened termination, cancellation or limitation of, or any modification
      or
      change in, the business relationship of the Company with any customer or group
      of customers which individually or in the aggregate could reasonably be expected
      to have a material adverse effect.





3.15  No
      Broker’s or Finder’s Fees .
      No
      broker or finder brought about the obtaining, making or closing of the Loan
      or
      financial accommodations afforded hereunder or in connection herewith by the
      Lender or any of its affiliates.





3.16  Investment
      Company .
      Company
      is not an “investment company,” or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company,” as such terms are defined
      in the Investment Company Act of 1940, as amended. Neither the making of the
      Loan or the application of the proceeds or repayment thereof by the Company,
      nor
      the consummation of the other transactions contemplated by this Agreement or
      the
      other Loan Documents, will violate any provision of such Act or any rule,
      regulation or order of the Securities and Exchange Commission there
      under.





3.17  Solvency .
      Company
      is Solvent and will be Solvent upon the completion of all transactions
      contemplated to occur on or before the making of the Loan by the Lender. For
      purposes of this Agreement “ Solvent ”
means,
      that as of the date as to which the Company’s solvency is to be
      measured:





(a)  the
      present fair saleable value of its assets is in excess of (i) the total amount
      of its liabilities (including contingent, subordinated, absolute, fixed,
      matured, unmatured, liquidated and unliquidated liabilities) and (ii) the amount
      that will be required to pay the probable liability of the Company on its debts
      as such debts become absolute and matured;





(b)  it
      has
      sufficient capital to conduct its business; and





(c)  it
      is
      able to meet its debts as they mature.





3.18  Affiliate
      Transactions .
      Except
      as specified in herein ,
      the
      Company is not a party to or bound by any agreement or arrangement (whether
      oral
      or written) to which any affiliate of the Company is a party except (i) in
      the
      ordinary course of and pursuant to the reasonable requirements of the business
      of the Company and (ii) upon fair and reasonable terms no less favorable to
      the
      Company than it could obtain in a comparable arm’s-length transaction with an
      unaffiliated person.





3.19  Performance .
      Company
      shall pay the Principal Amount of, and interest on, the Loan evidenced by this
      Agreement in the manner provided in this Agreement. The obligation of Company
      described in the preceding sentence is absolute and unconditional, irrespective
      of any tax or accounting treatment of such obligation including without
      limitation any documentary stamp, transfer, ad valorem or other taxes assessed
      by any jurisdiction in connection with this transaction.








3.20  Stay,
      Extension and Usury Laws .
      Company
      agrees (to the extent it may lawfully do so) that it will not at any time insist
      upon, plead or in any manner whatsoever claim or take the benefit or advantage
      of, any stay or extension law or any usury law or other law that would prohibit
      or forgive Company from paying all or a portion of the Principal Amount of,
      finance fee, or interest on the Loan contemplated by this Agreement, wherever
      enacted, now or at any time hereinafter in force, or that may materially affect
      the covenants or the performance of this Agreement in any manner inconsistent
      with the provisions of this Agreement. Company expressly waives all benefit
      or
      advantage of any such law. If a court of competent jurisdiction prescribes
      that
      Company may not waive its rights to take the benefit or advantage of any stay
      or
      extension law or any usury law or other law in accordance with the prior
      sentence, then the obligation to pay interest on the Principal Amount shall
      be
      reduced to the maximum legal limit under applicable law governing the interest
      payable in connection with this Agreement, and any amount of interest paid
      by
      Company that is deemed illegal shall be deemed to have been a prepayment of
      the
      Principal Amount on the Loan.





3.21  Taxes .
      The
      Company has properly completed and timely filed all income tax returns it is
      required to file. The information filed within such tax returns is complete
      and
      accurate in all material respects. All deductions taken in such income tax
      returns are appropriate and in accordance with applicable laws and regulations,
      except deductions that may have been disallowed but are being challenged in
      good
      faith and for which adequate reserves have been established in accordance with
      GAAP. All taxes, assessments, fees and other governmental charges for periods
      beginning prior to the date hereof have been timely paid (or, if not yet due,
      adequate reserves therefore have been established) by it and the Company has
      no
      liability for taxes in excess of the amounts so paid or reserves so established.
      No deficiencies for taxes have been claimed, proposed or assessed by any taxing
      or other Governmental Person against the Company and no tax liens have been
      filed with respect thereto. There are no pending or threatened audits,
      investigations or claims for or relating to any liability of the Company for
      taxes and there are no matters under discussion with any Governmental Person
      which could result in an additional liability for taxes. No extension of a
      statute of limitations relating to taxes, assessments, fees or other
      governmental charges is in effect with respect to the Company. Company is not
      a
      party to, and has no obligations under, any written tax sharing agreement or
      agreement regarding payments in lieu of taxes. Until payment and satisfaction
      of
      all Obligations in full the Company shall pay, when due, (i) all tax
      assessments, and other governmental charges and levies imposed against it or
      any
      of its property and (ii) all lawful claims that, if unpaid, might by law become
      a lien upon its property; provided, however, that, unless such tax assessment,
      charge, levy or claim has become a lien on any of the property of the Company
      it
      need not be paid if it is being contested in good faith, by appropriate
      proceedings diligently conducted and an adequate reserve or other appropriate
      provision shall have been established therefore as required in accordance with
      GAAP.





3.22   Limitations
      on Indebtedness .
      Without
      Lender’s prior written consent, Company shall not, directly or indirectly,
      create, incur, assume, suffer to exist or otherwise in any manner become liable
      or commit to become liable for any indebtedness other than (a) indebtedness
      incurred under and in accordance with this Agreement; (b) indebtedness listed
      on
      Debt Schedule ,
      including any extension and renewals thereof; (c) indebtedness incurred in
      connection with the purchase (or the capitalized or capitalizable lease) of
      assets used in the business, which shall not exceed the purchase price (or
      aggregate lease obligations relating to) such assets; (d) indebtedness relating
      to or arising from the sale of accounts receivable under that certain Account
      Transfer Agreement with Wells Fargo Business Credit and any renewal, extension
      or replacement thereof; and (e) indebtedness incurred in the ordinary course
      of
      business not in excess of US $2 million in the aggregate.





3.23  Qualified
      Business .
      Company
      acknowledges and agrees that Lender is providing the Loan to the Company
      pursuant to the Texas CAPCO Law as a qualified business. The Company understands
      that in order for the Loan to be made by the Lender the following
      representations must be true and correct as of the date of this Agreement and
      as
      of the date that any Loan is outstanding by the Lender.





(a)
      The
      Company is headquartered in Texas, its principal business operations and books
      and records are in Texas and the Company at all times intends to remain in
      Texas. As of the date hereof, the Company does not and has not had more than
      100
      employees at any given time. At least 80% of the Company’s employees reside in
      Texas or the Company pays at least 80% of its payroll to Texas residents.




(b)
      The
      Company’s primary business is and will continue to remain in: (i) manufacturing,
      processing, or assembling products; (ii) conducting research and development;
      or
      (iii) providing services.




(c)
      The
      Company does not and will not incur more than 20% of its expenses and does
      not
      receive more than 20% of its income from:





(i)
      retail sales;





(ii)
      real
      estate development;





(iii)
      the
      business of financial services including insurance, banking, or lending; or




(iv)
      the
      provision of professional services provided by accountants, attorneys, or
      physicians.




(d)
      The
      Company was not formed or organized, directly or indirectly, by Aegis Texas
      Venture Fund, LP or an affiliate of Aegis Texas Venture Fund, LP, (ii) is not
      a
      franchisee of Aegis Texas Venture Fund, LP; (iii) is not an affiliate of Aegis
      Texas Venture Fund, LP; or (iv) did not have any financial relationship with
      Aegis Texas Venture Fund, LP before the date on which Lender made its first
      investment in the Company. The Company will not at any time make any material
      change in the lines of its business as carried on at the date hereof or enter
      into any new line of business, except reasonable extensions of the current
      business.





3.24  Corporate
      Changes .
      Company
      will not merge or consolidate with any person or entity, or make any
      investments, or dispose of any substantial portion of its assets, or amend,
      alter or modify its Articles of Incorporation or by-laws, its legal name,
      mailing address, chief executive office or principal places of business,
      structure, status or existence, or liquidate or dissolve itself (or suffer
      any
      liquidation or dissolution) or issue any capital stock or other equity interests
      without Lender’s prior written consent or Loan repayment.





3.25  Insurance .
      The
      Company shall at all times, maintain with financially sound and reputable
      insurers insurance with respect to the Collateral against loss or damage and
      all
      other insurance of the kinds and in the amounts customarily insured against
      or
      carried by corporations of established reputation engaged in the same or similar
      businesses and similarly situated. Such policies of insurance shall be
      reasonably satisfactory to the Lender as to form, amount and insurer. The
      Company shall furnish certificates, policies or endorsements to the Lender
      as
      the Lender shall request as proof of such insurance, and, if the Company fails
      to do so, the Lender is authorized, but not required, to obtain such insurance
      at the expense of the Company. All policies shall provide for at least thirty
      (30) days prior written notice to the Lender of any cancellation or reduction
      of
      coverage and that the Lender may act as attorney for the Company in obtaining,
      and at any time an Event of Default exists or has occurred and is continuing,
      adjusting, settling, amending and canceling such insurance. The Company shall
      cause the Lender to be named as a loss payee and an additional insured (but
      without any liability for any premiums) under such insurance policies and the
      Company shall obtain non-contributory lender’s loss payable endorsements to all
      insurance policies in form and substance satisfactory to the Lender. Such
      Lender’s loss payable endorsements shall specify that the proceeds of such
      insurance shall be payable to the Lender as its interests may appear and further
      specify that the Lender shall be paid regardless of any act or omission by
      a
      Company or any of its affiliates. In the event of a loss that results in a
      material adverse effect, at its option, the Lender may apply any insurance
      proceeds received by the Lender at any time to the cost of repairs or
      replacement of Collateral and/or to payment of the Obligations, whether or
      not
      then due, in any order and in such manner as the Lender may determine or hold
      such proceeds as cash collateral for the Obligations. In all other
      circumstances, the Company shall determine whether the insurance proceeds shall
      be applied to the cost of repairs or replacement of Collateral or to payment
      of
      the Obligations.





3.26   Investments .
      Until
      payment and satisfaction of all Obligations in full, the Company will not
      directly or indirectly, at any time make or hold any investment in any person
      (whether in cash, securities or other property of any kind) except the Company
      may make investments in cash and cash equivalents so long as the Lender has
      a
      perfected, lien on such cash and cash equivalents pursuant to a Control
      Agreement or a Deposit Account Control Agreement;





3.27  Financial
      Covenants .
      Until
      payment and satisfaction of all Obligations in full, the Company
      shall:





(a)
            maintain
                as of the end of each fiscal quarter during the term of this Agreement,
                Tangible Net Worth of at least $250,000, adjusted for non-cash expenses
                associated with warrants, stock options and stock grants;


(b)
            maintain
                as of the end of each fiscal quarter during the term of this Agreement,
                a
                minimum Debt Service Ratio of 1.X., adjusted for non-cash expenses
                associated with warrants, stock options and stock grants;


(c)
            to
                permit Lender to conduct on site due diligence and asset review with
                reasonable notice;


(d)
            properly
                identify all assets on Company’s books and records; and


(e)
            deliver
                to Lender unaudited financial statements within 45 days of month
                end,
                audited statements within 115 days of the fiscal year
                end.








For
      purposes of this Agreement





“ Tangible
      Net Worth ”
shall
      mean at any date of determination, an amount equal to (i) the total assets
      determined in accordance with GAAP, on a basis consistent with the latest
      audited financial statements of the Company but excluding such assets as are
      properly classified as intangible assets under GAAP, minus (ii) the total
      liabilities determined in accordance with GAAP, on a basis consistent with
      the
      latest audited financial statements of the Company, in each case as reported
      on
      the most recent quarterly or annual financial statements prepared by the
      Company.





“ Debt
      Service Ratio ”
shall
      mean at any date of determination, the ratio of (a) the EBITDA reported by
      the
      Company for the most recently completed fiscal quarter, to (b) all payments
      by
      the Company pursuant to Loan for the most recently completed four fiscal
      quarters (or lesser number if this Agreement has been in force for less than
      four fiscal quarters) divided by four (or such lesser number of fiscal quarters
      for which this Agreement has been in force..





“ EBITDA ”
shall
      mean, in any period, all earnings of the Company before all (i) interest and
      tax
      obligations, (ii) depreciation and (iii) amortization for said period, all
      determined in accordance with GAAP on a consistent basis with the latest audited
      financial statements of the Company, but excluding the effect of extraordinary
      and/or non-reoccurring gains or losses for such period and excluding all
      non-cash expenses deducted from earnings during such period.





3.29  Notification
      Requirements .
      The
      Company shall timely give the Lender the following notices and other
      documents:





(a)  Notice
      of Defaults .
      Promptly, and in any event within five (5) Business Days after becoming aware
      of
      the occurrence of an Event of Default, a certificate of a senior officer of
      the
      Company specifying the nature thereof and the Company’s proposed response
      thereto, each in reasonable detail.





(b)  Proceedings
      or Changes .
      Promptly, and in any event within five (5) Business Days after the Company
      becomes aware of (i) any proceeding being instituted or threatened to be
      instituted by or against Company in any federal, state, local or foreign court
      or before any commission or other regulatory body (federal, state, local or
      foreign) involving a sum, together with the sum involved in all other similar
      proceedings, in excess of $100,000 in the aggregate, (ii) any order, judgment
      or
      decree involving a sum, together with the sum of all other orders, judgments
      or
      decrees, in excess of $100,000 in the aggregate being entered against the
      Company or any of its property or assets, (iii) any material notice or
      correspondence issued to the Company thereof by a Governmental Person warning,
      threatening or advising of the commencement of any investigation involving
      the
      Company or its property or assets, (iv) any actual or prospective change,
      development or event which has had or could reasonably be expected to have
      a
      material adverse effect, (v) the cessation of the business relationship with
      any
      customer of a Company whose purchases have accounted for more than 10% of the
      sales of the Company in any year, (vi) a change in the location of any
      Collateral from the locations specified herein except for changes as otherwise
      permitted herein or (vii) a proposed or actual change of the name, identity,
      corporate structure or jurisdiction of organization or formation of the
      Company.





(c)  Casualty
      Loss .
      The
      Company shall (i) provide written notice to the Lender, within ten (10) Business
      Days, of any material damage to, the destruction of or any other material loss
      to any asset or property owned or used by the Company other than any such asset
      or property with a net book value (individually or in the aggregate) less than
      $100,000, or any condemnation, confiscation or other taking, in whole or in
      part, or any event that otherwise diminishes so as to render impracticable
      or
      unreasonable the use of such asset or property owned or used by the Company
      together with a statement of the amount of the damage, destruction, loss or
      diminution in value (a “ Casualty
      Loss ”)
      and
      (ii) diligently file and prosecute its claim for any award or payment in
      connection with a Casualty Loss.





(d)  Financial
      Reporting .
      The
      Company shall deliver to the Lender the following:








(i)  Annual
      financial statements. As soon as available, but not later than one hundred
      fifteen (115) days after the end of each fiscal year, beginning with the fiscal
      year ended July 31, 2008, audited financial statements for such fiscal year
      together with an Unqualified opinion of the Company’s auditors with respect
      thereto.





(ii)  Monthly
      financial statements. As soon as available, but not later than forty-five (45)
      days after the end of each month, commencing with the month in which this
      Agreement is executed, (A) interim financial statements as at the end of such
      month, for the most recently ended fiscal quarter and for the fiscal year to
      date and (B) a certification by the Chief Financial Officer that such financial
      statements have been prepared in accordance with GAAP and are fairly stated
      in
      all material respects (subject to normal year-end audit
      adjustments).





(iii)  Other
      Financial Information. Within ten (10) Business Days after the request by the
      Lender therefore, such additional financial statements, budgets, forecasts,
      projections and other related data and information as to the Collateral and
      the
      business, prospects, operations, results of operations, assets, liabilities
      or
      condition (financial or otherwise) of Company as the Lender may from time to
      time reasonably request, and the Company can produce without unreasonable effort
      or expense, including, without limitation, reports on sales and use tax
      collections, and sales and use tax accruals.





For
      purposes of this Agreement, “ Unqualified ”
shall
      mean without any material qualification (i) resulting from a limitation on
      the
      scope of examination of such financial statements or the underlying data, (ii)
      as to the capability of a Company to continue operations as a going concern
      or
      (iii) which could be eliminated by changes in financial statements or notes
      thereto covered by such report (such as by the creation of or increase in a
      reserve or a decrease in the carrying value of assets) and which if so
      eliminated by the making of any such change and after giving effect thereto
      would result in an Event of Default.





4.  Conditions
      to Funding The
      obligation of the Lender to make the Loan is subject to the satisfaction of
      the
      following conditions prior to or concurrent with the funding of such
      Loan.





4.1  Closing
      Documents .
      The
      Lender shall have received the following; each dated the date hereof or as
      of an
      earlier date acceptable to the Lender, in form and substance satisfactory to
      the
      Lender and its counsel:





(a) The
          Note,
          duly executed by the Company;





(b)  Acknowledgment
      copies of Uniform Commercial Code financing statements (naming the Lender as
      secured party and the Company as debtor) and duly authorized release or
      termination statements, in form and substance satisfactory to the Lender, duly
      filed in all jurisdictions that the Lender deems necessary or desirable to
      perfect and protect the liens created hereunder and under the Loan Documents;





(c)  Such
      other agreements, instruments, documents and evidence as the Lender in good
      faith deems necessary in its sole and absolute discretion in connection with
      the
      transactions contemplated hereby.





4.2  Perfection
      of Liens. The
      liens
      in favor of the Lender shall have been duly perfected, and the Collateral shall
      be free and clear of all liens other than Permitted Liens.




4.3  Representations
      and Warranties .
      All
      representations and warranties contained in this Agreement and the other Loan
      Documents shall be true and correct in all material respects on and as of the
      date of such Loan as if then made, other than representations and warranties
      that expressly relate solely to an earlier date, in which case they shall have
      been true and correct as of such earlier date.





5.  Prepayments .





5.1  Optional .
      Company
      may, from time to time, prepay the Loan evidenced hereby, in whole or in part,
      so long as each partial prepayment of the Principal Amount is equal to or
      greater than $50,000 and Company has given Lender two (2) or more Business
      Days’
notice of such optional prepayment. Any such optional prepayment of the
      Principal Amount shall be without premium or penalty. Any Principal Amount
      prepaid pursuant to this Section shall be in addition to, and not in lieu of,
      all payments otherwise required to be paid under this Agreement at the time
      of
      such prepayment.








5.2  Mandatory .
      Unless
      otherwise agreed to by Lender, Company shall prepay the Loan to the extent
      of
      the net proceeds actually received by Company from the following events (each,
      a
“ Mandatory
      Prepayment Event ”):




(a)
      a
      public offering or private placement of equity or debt securities having an
      aggregate market value in excess of $2,000,000; provided , however ,
      that
      the proceeds from the public offering or private placement of Excluded
      Securities shall not be subject to this provision and shall not be considered
      a
      Mandatory Prepayment Event; or





(b)
      the
      sale of all or a substantial amount of the Company’s assets in a single or group
      of related transactions.





As
      used
      in this Agreement, “ Excluded
      Securities ”
means
      (a) issuance and sale of equity securities pursuant to options, warrants,
      convertible securities or other rights to acquire such securities outstanding
      as
      of the date hereof; (b) issuance of equity securities pursuant to options,
      warrants, convertible securities or other rights to acquire such securities
      issued after the date hereof to employees or consultants of the Company pursuant
      to an equity compensation plan adopted by the Company; and (c) equity or debt
      securities issued in connection with the acquisition of any other company,
      whether in the form of a merger, consolidation, acquisition of assets, exchange
      of securities or otherwise.




6.  Warrant
      Consideration .





(a)
      As
      additional consideration for this Loan, Lender shall receive an option to
      purchase common stock in Company (the “ Warrants ”).




(b)
      Warrant shall have following characteristics:


-
      a term
      or expiration date of seven (7) years from the Funding Date,


-
      include
      standard “anti-dilution” protection,


-
      include
      a “put” option and “cashless exercise” provisions


-
      include
      a “call” provision





7.  Events
      of Default .





(a) Events
      of Default Defined; Acceleration of Maturity .
      If any
      of the following events (“ Events
      of Default ”)
      shall
      occur and be continuing (for any reason whatsoever and whether it shall be
      voluntary or involuntary or by operation of law or otherwise):





(i)
      default shall be made in the payment of the Principal Amount of, or interest
      on,
      the Loan or any other Obligation when and as the same shall become due and
      payable, whether at stated maturity, by acceleration, upon a Mandatory
      Prepayment Event or otherwise; or





(ii)
      default shall be made in the performance or observance of any covenant,
      agreement or condition contained in this Agreement or in any of the other Loan
      Documents, including but not limited to the failure of any financial covenant
      contained herein, and such default shall have continued for a period of ten
      (10)
      Business Days; provided,
      that ,
      such
      ten (10) Business Day period shall not apply in the case of: (A) any failure
      to
      observe any covenant which is not capable of being cured at all or within such
      ten (10) Business Day period or which has been the subject of a prior failure
      within a six (6) month period or (B) an intentional breach by the Company of
      any
      covenant; or





(iii)
      Company shall (1) apply for or consent to the appointment of, or the taking
      of
      possession by, a receiver, custodian, trustee or liquidator of itself or of
      all
      or a substantial part of its property and assets, (2) be generally unable to
      pay
      its debts as such debts become due, (3) make a general assignment for the
      benefit of its creditors, (4) commence a voluntary case under the United States
      Bankruptcy Code or similar law or regulation (as now or hereafter in effect),
      (5) file a petition seeking to take advantage of any other law providing for
      the
      relief of debtors, (6) fail to controvert in a timely or appropriate manner,
      or
      acquiesce in writing to, any petition filed against it in an involuntary case
      under the United States Bankruptcy Code or other law or regulation, (7)
      dissolve, (8) take any corporate action under any applicable law analogous
      to
      any of the foregoing, or (9) take any corporate action for the purpose of
      effecting any of the foregoing; or








(iv)
      a
      proceeding or case shall be commenced, without the application or consent of
      Company in any court of competent jurisdiction, seeking (1) the liquidation,
      reorganization, dissolution, winding up or composition or readjustment of its
      debts, (2) the appointment of a trustee, receiver, custodian, liquidator or
      the
      like of it or for all or any substantial part of its assets, or (3) similar
      relief in respect of Company, under any law providing for the relief of debtors,
      and such proceeding or case shall continue undismissed, or unstayed and in
      effect, for a period of sixty (60) days; or an order for relief shall be entered
      in an involuntary case under the United States Bankruptcy Code or other similar
      law or regulation, against Company; or action under the laws of any jurisdiction
      affecting Company analogous to any of the foregoing shall be taken with respect
      to Company and shall continue unstayed and in effect for any period of sixty
      (60) days; or





(v)
      final
      judgment for the payment of money shall be rendered by a court of competent
      jurisdiction against Company and Company shall not discharge the same or provide
      for its discharge in accordance with its terms, or procure a stay of execution
      thereof within sixty (60) days from the date of entry thereof and within said
      period of sixty (60) days, or such longer period during which execution of
      such
      judgment shall have been stayed, appeal therefrom and cause the execution
      thereof to be stayed during such appeal, and such judgment together with all
      other such judgments shall exceed in the aggregate US$100,000; or





(vi)
      any
      representation or warranty made by Company in this Agreement, Loan Document,
      or
      any other documents or agreements contemplated hereby and thereby or in any
      certificate or other instrument delivered hereunder or pursuant hereto or in
      connection with any provision hereof shall be false or incorrect in any material
      respect on the date as of which made; or





(vii)  the
      indictment by any Governmental Person under any criminal statute, or
      commencement or threatened commencement of criminal or civil proceedings against
      the Company, pursuant to which statute or proceedings the penalties or remedies
      sought or available include forfeiture of (i) any of the Collateral having
      a
      value in excess of $100,000 or (ii) any other property of the Company which
      is
      necessary or material to the conduct of its business; or





(viii)  (A)
      the
      acquisition by any person (or group of persons as defined by the Securities
      Exchange Act of 1934 and the regulations thereunder) of more than 20% of the
      outstanding voting securities of the Company, (B) the public offer by any person
      (or group of persons as defined by the Securities Exchange Act of 1934 and
      the
      regulations thereunder) to acquire more than 20% of the outstanding voting
      securities of the Company; (C) the election in a contested proxy solicitation
      of
      candidates nominated by a person other than the Company that represent more
      than
      a majority of the full board of directors; or (D) any other event or
      circumstance in which any person acquires the right or ability to direct the
      management or control of the Company who does not presently have the right
      or
      ability to direct the management or control of the Company without the prior
      approval of the Company’s board of directors.





(ix) the
          occurrence of any event or condition that has a material adverse
          effect.





then
      (x)
      upon the occurrence of any Event of Default described in Section
      7(a)(iii) or (iv) ,
      the
      unpaid Principal Amount of the Loan, together with the interest accrued thereon
      and all other amounts payable by Company under this Agreement, shall
      automatically become immediately due and payable, without presentment, demand,
      protest or other requirements of any kind, all of which are hereby expressly
      waived by Company or (y) upon the occurrence of any other Event of Default,
      Lender may, by notice to Company, declare the unpaid Principal Amount of the
      Loan to be, and the same shall forthwith become, due and payable, together
      with
      the interest accrued thereon and all other amounts payable by Company
      hereunder.








8.  Other
      Remedies .





8.1  General .





(a)  Upon
      the
      occurrence and during the continuance of an Event of Default, the Lender shall
      have all rights and remedies with respect to the Obligations and the Collateral
      under applicable law and the Loan Documents, an, subject to the rights of the
      holder of any Permitted Lien, the Lender may do any or all of the
      following:





(i)  remove
      for copying all documents, instruments, files and records (including the copying
      of any computer records) relating to the Company’s receivables or use (at the
      expense of the Company) such supplies or space of the Company at the Company’s
      places of business necessary to administer, enforce and collect such receivables
      and any supporting obligations;





(ii)  accelerate
      or extend the time of payment, compromise, issue credits, or bring suit on
      a the
      Company’s receivables (in the name of the Company or the Lender) and otherwise
      administer and collect such receivables;





(iii)  sell,
      assign and deliver a Company’s receivables with or without advertisement, at
      public or private sale, for cash, on credit or otherwise, subject to applicable
      law;





(iv)  foreclose
      the security interests created pursuant to the Loan Documents by any available
      procedure, or take possession of any or all of the Collateral, without judicial
      process and enter any premises where any Collateral may be located for the
      purpose of taking possession of or removing the same;





(v)  require
      the Company, at the Company’s expense, to assemble and make available to the
      Lender any part or all of the Collateral at any place and time designated by
      the
      Lender; or





(vi)  collect,
      foreclose, receive, appropriate, setoff and realize upon any and all Collateral;
      or





(vii)  remove
      any or all of the Collateral from any premises on or in which the same may
      be
      located for the purpose of effecting the sale, foreclosure or other disposition
      thereof or for any other purpose; or





(viii)  sell,
      lease, transfer, assign, deliver or otherwise dispose of any and all Collateral
      (including entering into contracts with respect thereto, public or private
      sales
      at any exchange, broker’s board, at any office of the Lender or elsewhere) at
      such prices or terms as the Lender may deem reasonable, for cash, upon credit
      or
      for future delivery, with the Lender having the right to purchase the whole
      or
      any part of the Collateral at any such public sale; or





(ix)  terminate
      this Agreement.





If
      any of
      the Collateral is sold or leased by the Lender upon credit terms or for future
      delivery, the Obligations shall not be reduced as a result thereof until payment
      therefore is finally collected by the Lender. In the event the Lender institutes
      an action to recover any Collateral or seeks recovery of any Collateral by
      way
      of prejudgment remedy, the Company waives the posting of any bond which might
      otherwise be required.





(b)  The
      Lender may bid or become a purchaser at any sale, free from any right of
      redemption, which right is expressly waived by the Company. If notice of
      intended disposition of any Collateral is required by law, it is agreed that
      ten
      (10) Business Days’ notice shall constitute reasonable notification. The Company
      will assemble the Collateral in its possession and make it available at such
      locations as the Lender may specify, whether at the premises of the Company
      or
      elsewhere, and will make available to the Lender the premises and facilities
      of
      the Company for the purpose of the Lender’s taking possession of or removing the
      Collateral or putting the Collateral in saleable form. The Lender may sell
      the
      Collateral or any part thereof in one or more parcels at public or private
      sale,
      at any exchange, broker’s board or at any of the Lender’s offices or elsewhere,
      for cash, on credit or for future delivery, and upon such other terms as the
      Lender may deem commercially reasonable. The Lender shall not be obligated
      to
      make any sale of Collateral regardless of notice of sale having been given.
      The
      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. The Company hereby
      grants the Lender a license to enter and occupy any of the Company’s leased or
      owned premises and facilities, without charge, to exercise any of the Lender’s
      rights or remedies.








(c)  The
      Lender may, at any time or times that an Event of Default has occurred and
      is
      continuing, enforce any Company’s rights against any account debtor or secondary
      obligor or other obligor in respect of any of the Company’s accounts or other
      receivables. Without limiting the generality of the foregoing, the Lender may
      at
      such time or times (i) notify any or all account debtors, secondary obligors
      or
      other obligors in respect thereof that the receivables have been assigned to
      the
      Lender and that the Lender has a security interest therein and the Lender may
      direct any or all accounts debtors, secondary obligors and other obligors to
      make payment of receivables directly to the Lender, extend the time of payment
      of, compromise, settle or adjust for cash, credit, return of merchandise or
      otherwise, and upon any terms or conditions, any and all receivables or other
      obligations included in the Collateral and thereby discharge or release the
      account debtor or any secondary obligors or other obligors in respect thereof
      without affecting any of the Obligations, demand, collect or enforce payment
      of
      any receivables or such other obligations, but without any duty to do so, and
      the Lender shall not be liable for its failure to collect or enforce the payment
      thereof nor for the negligence of the Lender or its attorneys with respect
      thereto and take whatever other action the Lender may deem necessary or
      desirable for the protection of its interests.





8.2  License
      for Use of Software and Other Intellectual Property .
      Upon
      the occurrence or during the continuance of an Event of Default, the Company
      hereby grants to the Lender an irrevocable, non-exclusive license or other
      right
      to use or sublicense, without charge or royalty, all computer software programs,
      data bases, processes, trademarks, trade names, copyrights, labels, trade
      secrets, service marks, copyrights, copyrightable material, advertising
      materials and other rights, assets and materials of Company, whether now owned
      or hereafter acquired, including in such license reasonable access to all media
      in which any of the foregoing may be stored or recorded and to all computer
      programs used for the compilation or printout thereof.





8.3  No
      Marshaling; Deficiencies; Remedies Cumulative .
      The
      Lender shall have no obligation to marshal any Collateral or to seek recourse
      against or satisfaction of any of the Obligations from one source before seeking
      recourse against or satisfaction from another source. The net cash proceeds
      resulting from the Lender’s exercise of any of the foregoing rights to liquidate
      Collateral shall be applied by the Lender to such of the Obligations and in
      such
      order as the Lender shall elect in its sole and absolute discretion, whether
      due
      or to become due. The Company shall remain liable to the Lender and the Lenders
      for any deficiency with interest at the highest rate applicable to Loan
      hereunder and the Lender agrees to remit to the Company or its successor or
      assign, any surplus resulting therefrom. All of the Lender’s remedies under the
      Loan Documents shall be cumulative, may be exercised simultaneously against
      any
      Collateral and the Company or in such order and with respect to such Collateral
      or the Company as the Lender may deem desirable, and are not intended to be
      exhaustive.





8.4  Waivers .
      Except
      as may be otherwise specifically provided herein or in any other Loan Document,
      the Company hereby waives any right to a judicial or other hearing with respect
      to any action or prejudgment remedy or proceeding by the Lender to take
      possession, exercise control over, or dispose of any item of Collateral in
      any
      instance (regardless of where the same may be located) where such action is
      permitted under the terms of this Agreement or any other Loan Document or by
      applicable law or of the time, place or terms of sale in connection with the
      exercise of the Lender’s rights hereunder and also waives any bonds, security or
      sureties required by any statute, rule or other law as an incident to any taking
      of possession by the Lender of any Collateral. The Company also waives any
      damages (direct, consequential or otherwise) occasioned by the enforcement
      of
      the Lender’s rights under this Agreement or any other Loan Document including
      the taking of possession of any Collateral or the giving of notice to any
      account debtor or the collection of any receivable of the Company. The Company
      also consents that upon the occurrence and during the continuance of an Event
      of
      Default, the Lender may enter upon any premises owned by or leased to it without
      obligations to pay rent or for use and occupancy, through self-help, without
      judicial process and without having first obtained an order of any court. These
      waivers and all other waivers provided for in this Agreement and the other
      Loan
      Documents have been negotiated by the parties, and the Company acknowledges
      that
      it has been represented by counsel of its own choice, has consulted such counsel
      with respect to its rights hereunder and has freely and voluntarily entered
      into
      this Agreement and the other Loan Documents as the result of arm’s-length
      negotiations.








8.5  Indemnification;
      Reimbursement of Expenses of Collection .
      Company
      hereby agrees that, whether or not any of the transactions contemplated by
      this
      Agreement or the other Loan Documents are consummated, the Company will
      indemnify, defend and hold harmless (on an after-tax basis) the Lender and
      its
      successors and assigns and its directors, officers, agents, employees, advisors,
      shareholders, attorneys and affiliates (each, an “ Indemnified
      Party ”)
      from
      and against any and all losses, claims, damages, liabilities, deficiencies,
      obligations, fines, penalties, actions (whether threatened or existing),
      judgments, suits (whether threatened or existing) or expenses (including,
      without limitation, reasonable fees and disbursements of counsel, experts,
      consultants and other professionals) imposed on, asserted against or incurred
      by
      any of them (collectively, “ Claims ”)
      (except, in the case of each Indemnified Party, to the extent that any Claim
      is
      determined in a final and non-appealable judgment by a court of competent
      jurisdiction to have directly resulted from such Indemnified Party’s gross
      negligence or willful misconduct) arising out of or by reason of (i) any
      litigation, investigation, claim or proceeding related to (A) this Agreement,
      any other Loan Document or the transactions contemplated hereby or thereby,
      (B)
      any actual or proposed use by the Company of the proceeds of the Loan, or (C)
      the Lender’s entering into this Agreement, the other Loan Documents or any other
      agreements and documents relating hereto (other than consequential damages
      and
      loss of anticipated profits or earnings), including, without limitation, amounts
      paid in settlement, court costs and the fees and disbursements of counsel
      incurred in connection with any such litigation, investigation, claim or
      proceeding, and (ii) any pending, threatened or actual action, claim, proceeding
      or suit by any shareholder or director of the Company or any actual or purported
      violation of a the Company’s governing documents or any other agreement or
      instrument to which the Company is a party or by which any of its properties
      is
      bound. In addition, the Company shall, upon demand, pay to the Lender all costs
      and expenses incurred by the Lender (including the reasonable fees and
      disbursements of counsel and other professionals) in connection with the
      preparation, execution, delivery, administration, modification and amendment
      of
      the Loan Documents, and pay to the Lender all costs and expenses (including
      the
      reasonable fees and disbursements of counsel and other professionals) paid
      or
      incurred by the Lender in (A) enforcing or defending its rights under or in
      respect of this Agreement, the other Loan Documents or any other document or
      instrument now or hereafter executed and delivered in connection herewith,
      (B)
      collecting the Obligations or otherwise administering this Agreement and (C)
      foreclosing or otherwise realizing upon the Collateral or any part thereof.
      If
      and to the extent that the obligations of the Company hereunder are
      unenforceable for any reason, the Company hereby agrees to make the maximum
      contribution to the payment and satisfaction of such obligations that is
      permissible under applicable law. The Company’s obligations hereunder shall
      survive any termination of this Agreement and the other Loan Documents and
      the
      payment in full of the Obligations, and are in addition to, and not in
      substitution of, any of the other Obligations.





8.6  Remedies
      Cumulative .
      No
      remedy herein conferred upon Lender is intended to be exclusive of any other
      remedy and each and every such remedy shall be cumulative and shall be in
      addition to every other remedy given hereunder or now or hereafter existing
      at
      law or in equity or by statute or otherwise.




9.  Miscellaneous .





9.1  Reliance
      on and Survival of Representations .
      All
      representations, warranties, covenants and agreements of Company herein shall
      be
      deemed to be material and to have been relied upon by Lender and shall survive
      the execution and delivery of this Agreement, for so long as the Loan remains
      outstanding.





9.2  Successors
      and Assigns .
      This
      Agreement shall bind and inure to the benefit of and be enforceable by Company,
      Lender and each of their respective successors and assigns, and, in addition,
      shall inure to the benefit of and be enforceable by each person who shall from
      time to time be a holder of the Loan.





9.3  Notices .
      All
      notices and other communications provided for in this Agreement shall be in
      writing and delivered by registered or certified mail, postage prepaid, or
      delivered by overnight courier (for next Business Day delivery) or telecopied,
      addressed as follows, or at such other address as any of the parties hereto
      may
      hereafter designate by notice to the other parties given in accordance with
      this
      Section:








1)
            if
                to the Company:


ATSI
      Communications, Inc.


Attn:
      Arthur L Smith, President & CEO


Antonio
      Estrada, Sr. VP of Finance


3201
      Cherry Ridge Road


San
      Antonio, TX 78230


Telephone:
      (210) 614-7240


Facsimile:
      (210) 614-7264





2)
            if
                to Lenders:





**ATVF
      II LLC**


5090
      Richmond Ave., Suite 319


Telephone:
      (713) 599-1300


Telecopy:
      (713) 599-1304





**Roderick
      P. Ciaccio**


5090
      Richmond Ave., Suite 319


Telephone:
      (713) 599-1300


Telecopy:
      (713) 599-1304





**Scott
      Crist**


5090
      Richmond Ave., Suite 319


Telephone:
      (713) 599-1300


Telecopy:
      (713) 599-1304





**Jim
      Johnson**


Vencore
      Solutions LLC.


4500
      SW
      Kruse Way, Suite 350


Lake
      Oswego, OR 97045


Telephone:
      (513) 675-3131


Telecopy:
      (513) 675-3136





Any
      such
      notice or communication shall be deemed to have been duly given on the fifth
      day
      after being so mailed, the next Business Day after delivery by overnight
      courier, when received when sent by telecopy or email, or upon receipt when
      delivered personally.





9.4   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. Signatures may be exchanged by telecopy, with original signatures
      to
      follow. Each of the parties hereto agrees that it will be bound by its own
      telecopied signature and that it accepts the telecopied signatures of the other
      parties to this Agreement. The original signature pages shall be forwarded
      to
      Lender or its counsel and Lender or its counsel will provide all of the parties
      hereto with a copy of the entire Agreement.





9.5  Amendments .
      This
      Agreement may only be amended by a writing duly executed by the parties
      hereto.





9.6  Severability .
      If any
      term or provision of this Agreement or any other document executed in connection
      herewith shall be determined to be illegal or unenforceable, all other terms
      and
      provisions hereof and thereof shall nevertheless remain effective and shall
      be
      enforced to the fullest extent permitted by applicable law.




9.7  Governing
      Law; Submission to Process .
      THIS
      AGREEMENT AND ALL AMENDMENTS, SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO
      OR THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
      THE
      STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY
      HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE
      STATE
      AND FEDERAL COURTS SITTING IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT
      SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS RELATING HERETO
      BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES,
      TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY
      NOW
      OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN
      SUCH
      COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
      BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY SHALL APPOINT AN AGENT FOR SERVICE
      OF PROCESS IN TEXAS AND SHALL NOTIFY HOLDER OF ANY FUTURE CHANGE THEREIN.








9.8   Entire
      Agreement .
      This
      Agreement contains the entire Agreement of the parties hereto with respect
      to
      the transactions contemplated hereby and supersedes all previous oral and
      written, and all previous contemporaneous oral negotiations, commitments and
      understandings.





9.9   Further
      Assurances .
      Company
      agrees promptly to execute and deliver such documents and to take such other
      acts as are reasonably necessary to effectuate the purposes of this
      Agreement.





9.10   Headings .
      The
      headings contained herein are for reference purposes only and shall not affect
      in any way the meaning or interpretation of this Agreement.





9.11   Assignments
      and Participations .
      Company
      may not assign its rights or obligations hereunder or under the Loan without
      the
      prior written consent of Lender. Lender may assign all or any portion of the
      Loan without the prior consent of Company. Lender may sell or agree to sell
      to
      one or more other persons a participation in all or any part of any of the
      Loan
      or Warrants without the prior consent of Company. Upon surrender of the Loan
      or
      Warrants, Company shall execute and deliver one or more substitute notes,
      warrants or other securities in such denominations and of a like aggregate
      unpaid Principal Amount or other amount issued to Lender and/or to Lender’s
      designated transferee or transferees. Lender may furnish any information in
      the
      possession of Lender concerning Company, or any of its respective subsidiaries,
      from time to time to assignees and participants (including prospective assignees
      and participants).





9.12   JURY
      WAIVER. HOLDER
      AND COMPANY EACH WAIVES ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
      ACTION ARISING OUT OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
      HEREIN.





IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      as
      of the day and year set forth above.





**COMPANY:**ATSI
                COMMUNICATIONS, INC.,a
                Nevada corporationBy:
            /S/
                Arthur L SmithName:
                Arthur L SmithTitle:
                President & CEO**HOLDERS:****ATVF
                II LLC**By:
            /s/
                Scott CristOfficer**Roderick
                P. Ciaccio**By:
            /s/
                Roderick P. Ciaccio******E.
                Scott Crist**By:
            /s/
                E. Scott CristOfficer**Vencore
                Solutions LLC**By:
            /s/
                Jim Paul JohnsonOfficer








**EXHIBIT
      A**





The
      Collateral shall consist of all right, title and interest of Company in and
      to
      the following:





(a)  Account
      Receivables other than accounts that have been sold to Wells Fargo under the
      Account Transfer Agreement dated December 6, 2007.




(b) Certificate
      of deposit at Wells Fargo for $100,000





(b) ownership
          interest in ATSICOM.





**WARRANT
      CERTIFICATE**




Warrant
                No. ____
            425,000
                Warrants




**WARRANT
      TO PURCHASE**


**COMMON
      STOCK OF**


**ATSI
      COMMUNICATIONS, , INC.**





THIS
      WARRANT IS SUBJECT TO RESTRICTIONS


ON
      TRANSFER SET FORTH IN THE


AGREEMENT
      REFERENCED BELOW.




The
      registered holder of the above indicated number of Warrants, each Warrant
      entitling such owner to purchase one (1) share of common stock, $0.001 par
      value
      (“ Common
      Stock ”),
      of
      ATSI Communications, Inc., a Nevada corporation, (hereinafter called the
“ Company ”)
      at the
      price per share of $0.19.




The
      registered holder may exercise all or a portion of the Warrants evidenced hereby
      by surrender, to the Company at its principal office, of this Warrant
      Certificate and the form of Notice to Exercise attached hereto, both duly filled
      in and signed, along with payment in full to the Company of the Exercise Price
      in cash or immediately available funds or pursuant to a cashless exercise,
      all
      as provided in the Warrant Agreement, as such term is defined below, and upon
      compliance with and subject to the conditions set forth herein and in the
      Warrant Agreement **.** According
      to the terms of the Warrant Agreement, the Warrants shall cease to be
      exercisable at 5:00 p.m. Texas time, on September 26, 2015.




The
      Warrant Certificate is issued under and in accordance with the Warrant Purchase
      Agreement dated as of September 26, 2008 (the “ Warrant
      Agreement ”),
      by
      and between the Company and holder and is subject to the terms and provisions
      of
      the Warrant Agreement, which terms and provisions are hereby incorporated by
      reference herein and made a part hereof. Each holder of this Warrant Certificate
      consents to all of the terms contained in the Warrant Agreement by acceptance
      hereof. A copy of the Warrant Agreement is available for inspection by the
      registered holder hereof at the principal office of the Company in San Antonio,
      Texas.







THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
      AND
      MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
      IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND IN
      ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE WARRANTS AND ANY
      SECURITIES ISSUED UPON EXERCISE THEREOF ARE ALSO SUBJECT TO THE PROVISIONS
      OF A
      CERTAIN WARRANT PURCHASE AGREEMENT DATED AS OF THE DATE HEREOF, INCLUDING
      CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. THE COMPANY WILL NOT
      TRANSFER SUCH SECURITIES EXCEPT UPON RECEIPT OF A FAVORABLE OPINION OF COUNSEL
      AND/OR EVIDENCE SATISFACTORY TO THE COMPANY THAT THE REGISTRATION PROVISIONS
      OF
      SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED
      AND
      THAT SUCH TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES LAWS. A
      COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT
      THE
      PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST
      AND
      WITHOUT CHARGE.




The
      Warrant Agreement and each Warrant Certificate, including this Warrant
      Certificate, shall be deemed a contract made under the laws of the State of
      Texas and for all purposes shall be construed in accordance with the laws of
      the
      State of Texas.




Dated:
      September 26, 2008




**ATSI
                COMMUNICATIONS, INC.**By:
            /s/
                Arthur L. SmithName:
            Arthur
                L. SmithTitle:
            Chief
                Executive Officer





**NOTICE
      OF EXERCISE**




(To
      be
      executed only upon exercise of warrant)




To
      _____________________




The
      undersigned registered holder of the attached Warrant Certificate hereby
      irrevocably exercises and surrenders to ATSI Communications, Inc. such Warrants
      for, and purchases thereunder, ________ *  shares
      of Common Stock, and herewith makes payment of $__________ therefor, in cash
      or
      immediately available funds or pursuant to a cashless exercise as requested
      below, and requests that the certificates for such shares (less any shares,
      if
      any, utilized pursuant to a cashless exercise) be issued in the name of, and
      delivered to ___________________________, whose address is
      _______________________________________________________________.




*Check
                one of the following boxes:*
            o
            Payment
                in cash or immediately available fundso
            Cashless
                Exercise


Dated:
      _________________




(Signature)(Street
                Address)(City)(State)(Zip
                Code)





* Insert
      here the number of shares called for on the face of this Warrant Certificate
      (or, in the case of a partial exercise, the portion thereof as to which this
      Warrant Certificate is being exercised), in either case without making any
      adjustment for additional shares of Common Stock or any other stock or other
      securities or property or cash which, pursuant to the adjustment provisions
      of
      the Warrant Agreement, may be delivered upon exercise. In the case of a partial
      exercise, a new Warrant Certificate will be issued and delivered, representing
      the unexercised portion of the warrants, to the holder surrendering the same.